-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J2hxrEuD8L6YZUhCsUtkaL49JqLA5Dr4opk1vCb81FSzIjaXI4Ps6wjyDy6R+2MU e2XVYt1RmPVDafxYw/Wmjw== 0000071932-98-000029.txt : 19980518 0000071932-98-000029.hdr.sgml : 19980518 ACCESSION NUMBER: 0000071932-98-000029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NIAGARA MOHAWK POWER CORP /NY/ CENTRAL INDEX KEY: 0000071932 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 150265555 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02987 FILM NUMBER: 98624811 BUSINESS ADDRESS: STREET 1: 300 ERIE BLVD W CITY: SYRACUSE STATE: NY ZIP: 13202 BUSINESS PHONE: 3154741511 MAIL ADDRESS: STREET 1: 300 ERIE BLVD W CITY: SYRACUSE STATE: NY ZIP: 13202 FORMER COMPANY: FORMER CONFORMED NAME: CENTRAL NEW YORK POWER CORP DATE OF NAME CHANGE: 19710419 10-Q 1 10-Q 3 MONTHS 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-2987 NIAGARA MOHAWK POWER CORPORATION (Exact name of registrant as specified in its charter) STATE OF NEW YORK 15-0265555 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 ERIE BOULEVARD WEST SYRACUSE, NEW YORK 13202 (Address of principal executive offices) (Zip Code) (315) 474-1511 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, $1 PAR VALUE, OUTSTANDING AT APRIL 30, 1998 - 144,419,351 NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES FORM 10-Q - For the Quarter Ended March 31, 1998 INDEX PART I. FINANCIAL INFORMATION - ---------------------------------- Glossary of Terms Item 1. Financial Statements. a) Consolidated Statements of Income - Three Months Ended March 31, 1998 and 1997 b) Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 c) Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 d) Notes to Consolidated Financial Statements e) Review by Independent Accountants f) Independent Accountants' Report on the Limited Review of the Interim Financial Information Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION - ------------------------------- Item 1. Legal Proceedings. Item 6. Exhibits and Reports on Form 8-K. Signature Exhibit Index NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES - --------------------------------------------------------- GLOSSARY OF TERMS - ----------------- TERM DEFINITION - ---- ---------- Dth Dekatherm: one thousand cubic feet of gas with a heat content of 1,000 British Thermal Units per cubic foot EBITDA Earnings before interest charges, interest income, income taxes,depreciation and amortization, amortization of nuclear fuel,allowance for funds used during construction, the POWERCHOICE charge,non-cash regulatory deferrals and other amortizations, and extraordinary items. FAC Fuel Adjustment Clause: a clause in a rate schedule that provides for an adjustment to the customer's bill if the cost of fuel varies from a specified unit cost GAAP Generally Accepted Accounting Principles GWh Gigawatt-hours: one gigawatt equals one billion watt-hours IPP Independent Power Producer: any person that owns or operates, in whole or part, one or more Independent Power Facilities IPP Party Independent Power Producers that are a party to the MRA KWh Kilowatt-hour: a unit of electrical energy equal to one kilowatt of power supplied or taken from and electric circuit steadily for one hour MRA Master Restructuring Agreement - an agreement to terminate, restate or amend IPP Party power purchase agreements, including amendments thereto MRA Reg- Recoverable costs to terminate, restate or amend IPP Party ulatory contracts, which will be deferred and amortized Asset under POWERCHOICE POWERCHOICE Company's five-year electric rate agreement, which agreement incorporates the MRA, approved by the PSC in an order dated March 20, 1998 PPA Power Purchase Agreement: long-term contracts under which a utility is obligated to purchase electricity from an IPP at specified rates NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES - --------------------------------------------------------- GLOSSARY OF TERMS - ----------------- TERM DEFINITION - ---- ---------- PRP Potentially Responsible Party PSC New York State Public Service Commission SFAS Statement of Financial Accounting Standards No. 71 No. 71 "Accounting for the Effects of Certain Types of Regulation" SFAS Statement of Financial Accounting Standards No. 121 No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" Unit 1 Nine Mile Point Nuclear Station Unit No. 1 Unit 2 Nine Mile Point Nuclear Station Unit No. 2 PART I - FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended March 31, 1998 1997 ---- ---- (In thousands of dollars) OPERATING REVENUES: Electric $ 863,169 $ 877,369 Gas 235,235 286,463 ---------- ---------- 1,098,404 1,163,832 ---------- ---------- OPERATING EXPENSES: Fuel for electric generation 47,198 37,465 Electricity purchased 324,350 328,803 Gas purchased 115,452 148,631 Other operation and maintenance expenses 262,362 206,665 Depreciation and amortization 87,950 84,222 Other taxes 126,795 126,109 ---------- ---------- 964,107 931,895 ---------- ---------- OPERATING INCOME 134,297 231,937 Other income 4,225 7,100 ---------- ---------- INCOME BEFORE INTEREST CHARGES 138,522 239,037 Interest charges 65,590 67,538 ---------- ---------- INCOME BEFORE FEDERAL AND FOREIGN INCOME TAXES 72,932 171,499 Federal and foreign income taxes 52,569 68,477 ---------- ---------- NET INCOME (Note 1) 20,363 103,022 Dividends on preferred stock 9,223 9,399 ---------- ---------- BALANCE AVAILABLE FOR COMMON STOCK $ 11,140 $ 93,623 ========== ========== Average number of shares of common stock outstanding (in thousands) 144,419 144,389 BASIC AND DILUTED EARNINGS PER AVERAGE SHARE OF COMMON STOCK $ 0.08 $ 0.65 The accompanying notes are an integral part of these financial statements
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
ASSETS MARCH 31, - ------ 1998 December 31, (UNAUDITED) 1997 ----------- ----------- (In thousands of dollars) UTILITY PLANT: Electric plant $ 8,751,846 $ 8,752,865 Nuclear fuel 583,639 577,409 Gas plant 1,131,482 1,131,541 Common plant 319,146 319,409 Construction work in progress 420,299 294,650 ----------- ----------- Total utility plant 11,206,412 11,075,874 Less - Accumulated depreciation and amortization 4,308,748 4,207,830 ----------- ----------- Net utility plant 6,897,664 6,868,044 ---------- ----------- OTHER PROPERTY AND INVESTMENTS 296,976 371,709 ----------- ----------- CURRENT ASSETS: Cash, including temporary cash investments of $379,920 and $315,708, respectively 436,256 378,232 Accounts Receivable (less allowance for doubtful accounts of $64,500 and $62,500 respectively) 578,488 492,244 Materials and supplies, at average cost: Coal and oil for production of electricity 22,440 27,642 Gas storage 14,367 39,447 Other 124,923 118,308 Prepaid taxes 78,921 15,518 Other 10,733 20,309 ----------- ----------- 1,266,128 1,091,700 ----------- ----------- REGULATORY ASSETS (NOTE 3): Regulatory tax asset 405,624 399,119 Deferred finance charges 239,880 239,880 Deferred environmental restoration costs (Note 2) 220,000 220,000 Unamortized debt expense 55,314 57,312 Postretirement benefits other than pensions 55,524 56,464 Other 198,228 204,049 ----------- ----------- 1,174,570 1,176,824 ----------- ----------- OTHER ASSETS 72,245 75,864 ----------- ----------- $ 9,707,583 $ 9,584,141 =========== =========== The accompanying notes are an integral part of these financial statements
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 December 31, (UNAUDITED) 1997 ----------- ----------- (In thousands of dollars) CAPITALIZATION: COMMON STOCKHOLDERS' EQUITY: Common stock - $1 par value; authorized 185,000,000 shares; issued 144,419,351 $ 144,419 $ 144,419 Capital stock premium and expense 1,780,978 1,779,688 Retained earnings 691,060 679,920 ---------- ---------- 2,616,457 2,604,027 ---------- ---------- CUMULATIVE PREFERRED STOCK, AUTHORIZED 3,400,000 SHARES, $100 PAR VALUE: Non-redeemable (optionally redeemable), issued 2,100,000 shares 210,000 210,000 Redeemable (mandatorily redeemable), issued 222,000 shares 20,400 20,400 CUMULATIVE PREFERRED STOCK, AUTHORIZED 19,600,000 SHARES, $25 PAR VALUE: Non-redeemable (optionally redeemable), issued 9,200,000 shares 230,000 230,000 Redeemable (mandatorily redeemable), issued 2,581,204 shares 56,210 56,210 -------- ---------- 516,610 516,610 Long-term debt 3,418,299 3,417,381 ---------- ---------- TOTAL CAPITALIZATION 6,551,366 6,538,018 ---------- ---------- CURRENT LIABILITIES: Long-term debt due within one year 67,065 67,095 Sinking fund requirements on redeemable perferred stock 10,120 10,120 Accounts payable 227,564 263,095 Payable on outstanding bank checks 17,380 23,720 Customers' deposits 18,689 18,372 Accrued taxes 39,055 9,005 Accrued interest 76,573 62,643 Accrued vacation pay 37,081 36,532 Other 119,997 64,756 ---------- ---------- 613,524 555,338 ---------- ---------- REGULATORY LIABILITIES (NOTE 3): Deferred finance charges 239,880 239,880 ---------- ---------- OTHER LIABILITIES: Accumulated deferred income taxes 1,381,900 1,320,532 Employee pension and other benefits 240,526 240,211 Deferred pension settlement gain 10,142 12,438 Unbilled revenues 28,881 43,281 Other 421,364 414,443 ---------- ---------- 2,082,813 2,030,905 ---------- ---------- COMMITMENTS AND CONTINGENCIES (NOTES 2 AND 3): Liability for environmental restoration 220,000 220,000 ---------- ---------- $9,707,583 $9,584,141 ========== ========== The accompanying notes are an integral part of these financial statements
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 1997 ---- ---- (In thousands of dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 20,363 $103,022 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 87,950 84,222 Amortization of nuclear fuel 8,461 7,526 Provision for deferred income taxes 54,863 21,288 Net accounts receivable (100,644) (30,895) Materials and supplies 26,313 37,626 Accounts payable and accrued expenses (31,949) (58,066) Accrued interest and taxes 43,980 86,568 Changes in other assets and liabilities 17,886 (20,173) ---------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 127,223 231,118 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction additions (123,518) (49,668) Nuclear fuel (6,230) (2,445) ---------- --------- Acquisition of utility plant (129,748) (52,113) Materials and supplies related to construction (2,646) 68 Accounts payable and accrued expenses related to construction (7,987) (14,517) Other investments 75,124 (6,258) Other 6,070 (3,290) ---------- --------- NET CASH USED IN INVESTING ACTIVITIES (59,187) (76,110) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Reductions in long-term debt - (3,300) Dividends paid (9,223) (9,399) Other (789) (203) ---------- --------- NET CASH USED IN FINANCING ACTIVITIES (10,012) (12,902) ---------- --------- NET INCREASE IN CASH 58,024 142,106 Cash at beginning of period 378,232 325,398 ---------- --------- CASH AT END OF PERIOD $ 436,256 $467,504 ========== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 54,774 $ 59,074 Income taxes paid $ 304 $ 11,470 The accompanying notes are an integral part of these financial statements
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. Niagara Mohawk Power Corporation and subsidiary companies (the "Company"), in the opinion of management, has included all adjustments (which include normal recurring adjustments) necessary for a fair statement of the results of operations for the interim periods presented. The consolidated financial statements for 1998 are subject to adjustment at the end of the year when they will be audited by independent accountants. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended December 31, 1997, 1996 and 1995 included in the Company's 1997 Annual Report on Form 10-K. The Company's electric sales tend to be substantially higher in summer and winter months as related to weather patterns in its service territory; gas sales tend to peak in the winter. Notwithstanding other factors, the Company's quarterly net income will generally fluctuate accordingly. Therefore, the earnings for the three-month period ended March 31, 1998, should not be taken as an indication of earnings for all or any part of the balance of the year. It is expected that the closing of the MRA and implementation of POWERCHOICE will result in substantially depressed earnings during its five-year term, but will substantially improve operating cash flows. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income", which establishes standards for reporting comprehensive income. Comprehensive income is the change in the equity of a company, not including those changes that result from shareholder transactions. The Company's components of other comprehensive income relate to foreign currency translation adjustments and unrealized gains and losses associated with certain investments held as available for sale. Total comprehensive income for the three months ended March 31, 1998 and 1997 was $21.4 million and $100.5 million, respectively. Certain amounts have been reclassified on the accompanying Consolidated Financial Statements to conform with the 1998 presentation. NOTE 2. CONTINGENCIES ENVIRONMENTAL ISSUES: The public utility industry typically utilizes and/or generates in its operations a broad range of hazardous and potentially hazardous wastes and by-products. The Company believes it is handling identified wastes and by-products in a manner consistent with federal, state and local requirements and has implemented an environmental audit program to identify any potential areas of concern and aid in compliance with such requirements. The Company is also currently conducting a program to investigate and restore, as necessary to meet current environmental standards, certain properties associated with its former gas manufacturing process and other properties which the Company has learned may be contaminated with industrial waste, as well as investigating identified industrial waste sites as to which it may be determined that the Company contributed. The Company has also been advised that various federal, state or local agencies believe certain properties require investigation and has prioritized the sites based on available information in order to enhance the management of investigation and remediation, if necessary. The Company is currently aware of 126 sites with which it has been or may be associated, including 78 which are Company-owned. The number of owned sites increased as the Company has established a program to identify and actively manage potential areas of concern at its electric substations. This effort resulted in identifying an additional 32 sites. With respect to non-owned sites, the Company may be required to contribute some proportionate share of remedial costs. Although one party can, as a matter of law, be held liable for all of the remedial costs at a site, regardless of fault, in practice costs are usually allocated among PRPs. Investigations at each of the Company-owned sites are designed to (1) determine if environmental contamination problems exist, (2) if necessary, determine the appropriate remedial actions and (3) where appropriate, identify other parties who should bear some or all of the cost of remediation. Legal action against such other parties will be initiated where appropriate. After site investigations are completed, the Company expects to determine site-specific remedial actions and to estimate the attendant costs for restoration. However, since investigations are ongoing for most sites, the estimated cost of remedial action is subject to change. Estimates of the cost of remediation and post-remedial monitoring are based upon a variety of factors, including identified or potential contaminants; location, size and use of the site; proximity to sensitive resources; status of regulatory investigation and knowledge of activities at similarly situated sites. Additionally, the Company's estimating process includes an initiative where these factors are developed and reviewed using direct input and support obtained from the New York State Department of Environmental Conservation ("DEC"). Actual Company expenditures are dependent upon the total cost of investigation and remediation and the ultimate determination of the Company's share of responsibility for such costs, as well as the financial viability of other identified responsible parties since clean-up obligations are joint and several. The Company has denied any responsibility at certain of these PRP sites and is contesting liability accordingly. As a consequence of site characterizations and assessments completed to date and negotiations with PRPs, the Company has accrued a liability in the amount of $220 million, which is reflected in the Company's Consolidated Balance Sheets at March 31, 1998 and December 31, 1997. The potential high end of the range is presently estimated at approximately $650 million, including approximately $285 million in the unlikely event the Company is required to assume 100% responsibility at non-owned sites. The amount accrued at March 31, 1998 and December 31, 1997 incorporates the additional electric substations, previously mentioned, and a change in the method used to estimate the liability for 27 of the Company's largest sites to rely upon a decision analysis approach. This method includes developing several remediation approaches for each of the 27 sites, using the factors previously described, and then assigning a probability to each approach. The probability represents the Company's best estimate of the likelihood of the approach occurring using input received directly from the DEC. The probable costs for each approach are then calculated to arrive at an expected value. While this approach calculates a range of outcomes for each site, the Company has accrued the sum of the expected values for these sites. The amount accrued for the Company's remaining sites is determined through feasibility studies or engineering estimates, the Company's estimated share of a PRP allocation or where no better estimate is available, the low end of a range of possible outcomes. In addition, the Company has recorded a regulatory asset representing the remediation obligations to be recovered from ratepayers. POWERCHOICE provides for the continued application of deferral accounting for cost differences resulting from this effort. In October 1997, the Company submitted a draft feasibility study to the DEC, which included the Company's Harbor Point site and five surrounding non-owned sites. The study indicates a range of viable remedial approaches, however, a final determination has not been made concerning the remedial approach to be taken. This range consists of a low end of $22 million and a high end of $230 million, with an expected value calculation of $51 million, which is included in the amounts accrued at March 31, 1998 and December 31, 1997. The range represents the total costs to remediate the properties and does not consider contributions from other PRPs. The Company anticipates receiving comments from the DEC on the draft feasibility study by the summer of 1999. At this time, the Company cannot definitively predict the nature of the DEC proposed remedial action plan or the range of remediation costs it will require. While the Company does not expect to be responsible for the entire cost to remediate these properties, it is not possible at this time to determine its share of the cost of remediation. In May 1995, the Company filed a complaint, pursuant to applicable Federal and New York State law, in the U.S. District Court for the Northern District of New York against several defendants seeking recovery of past and future costs associated with the investigation and remediation of the Harbor Point and surrounding sites. The New York State Attorney General moved to dismiss the Company's claims against the State of New York, the New York State Department of Transportation and the Thruway Authority and Canal Corporation under the Comprehensive Environmental Response, Compensation and Liability Act. The Company opposed this motion. On April 3, 1998, the Court denied the New York State Attorney General's motion as it pertains to the Thruway Authority and Canal Corporation, and granted the motion relative to the State of New York and the Department of Transportation. The case management order presently calls for the close of discovery on December 31, 1998. As a result, the Company cannot predict the outcome of the pending litigation against other PRPs or the allocation of the Company's share of the costs to remediate the Harbor Point and surrounding sites. Where appropriate, the Company has provided notices of insurance claims to carriers with respect to the investigation and remediation costs for manufactured gas plant, industrial waste sites and sites for which the Company has been identified as a PRP. To date, the Company has reached settlements with a number of insurance carriers, resulting in payments to the Company of approximately $36 million, net of costs incurred in pursuing recoveries. Under POWERCHOICE the electric portion or approximately $32 million will be amortized over 10 years. The remaining portion relates to the gas business and is being amortized over the three year settlement period. TAX ASSESSMENTS: The Internal Revenue Service ("IRS") has conducted an examination of the Company's federal income tax returns for the years 1989 and 1990 and issued a Revenue Agents' Report. The IRS has raised an issue concerning the deductibility of payments made to IPPs in accordance with certain contracts that include a provision for a tracking account. A tracking account represents amounts that these mandated contracts required the Company to pay IPPs in excess of the Company's avoided costs, including a carrying charge. The IRS proposes to disallow a current deduction for amounts paid in excess of the avoided costs of the Company. Although the Company believes that any such disallowances for the years 1989 and 1990 will not have a material impact on its financial position or results of operations, it believes that a disallowance for these above-market payments for the years subsequent to 1990 could have a material adverse affect on its cash flows. To the extent that contracts involving tracking accounts are terminated or restated or amended under the MRA with IPP Parties as described in Note 3, the effects of any proposed disallowance would be mitigated with respect to the IPP Parties covered under the MRA. The Company is vigorously defending its position on this issue. The IRS is currently conducting its examination of the Company's federal income tax returns for the years 1991 through 1993. NOTE 3. RATE AND REGULATORY ISSUES AND CONTINGENCIES The Company's financial statements conform to GAAP, including the accounting principles for rate-regulated entities with respect to its regulated operations. As discussed below, the Company discontinued application of regulatory accounting principles to the Company's fossil and hydro generation business. Substantively, SFAS No. 71 permits a public utility, regulated on a cost-of-service basis, to defer certain costs which would otherwise be charged to expense, when authorized to do so by the regulator. These deferred costs are known as regulatory assets, which in the case of the Company are approximately $935 million, net of approximately $240 million of regulatory liabilities at March 31, 1998. These regulatory assets are probable of recovery. The portion of the $935 million which has been allocated to the nuclear generation and electric transmission and distribution business is approximately $811 million, which is net of approximately $240 million of regulatory liabilities. Regulatory assets allocated to the rate-regulated gas distribution business are $124 million. Generally, regulatory assets and liabilities were allocated to the portion of the business that incurred the underlying transaction that resulted in the recognition of the regulatory asset or liability. The allocation methods used between electric and gas are consistent with those used in prior regulatory proceedings. The Company concluded as of December 31, 1996, that the termination, restatement or amendment of IPP contracts and implementation of POWERCHOICE was the probable outcome of negotiations that had taken place since the POWERCHOICE announcement. Under POWERCHOICE, the separated non-nuclear generation business would no longer be rate-regulated on a cost-of-service basis and, accordingly, regulatory assets related to the non-nuclear power generation business, amounting to approximately $103.6 million ($67.4 million after tax or 47 cents per share) were charged against 1996 income as an extraordinary non-cash charge. The PSC, in its written order issued March 20, 1998 approving POWERCHOICE, determined to limit the estimated value of the MRA Regulatory Asset that can be recovered from customers to approximately $4 billion. The ultimate amount of the MRA Regulatory Asset to be established may vary based on certain events related to the closing of the MRA. The estimated value of the MRA Regulatory Asset includes the issuance of 42.9 million shares of common stock, which the PSC, in determining the recoverable amount of such asset, valued at $8 per share. Because the value of the consideration to be paid to the IPP Parties can only be determined at the MRA closing, the value of the limitation on the recoverability of the MRA Regulatory Asset was estimated at $190 million (85 cents per share) which was charged to 1997 earnings. The charge to expense was determined as the difference between $8 per share and the Company's closing common stock price on March 26, 1998 of $12 7/16 per share, multiplied by 42.9 million shares. Any variance from the estimate used in determining the charge to expense in 1997, including changes to the common stock price at closing, will be reflected in results of operations in 1998. As a result of amendments to the MRA dated April 22 and May 7, 1998, the amount of cash compensation to be paid to the IPP Parties was increased a net amount of approximately $15 million to $3.631 billion. The net increase in cash compensation was partly in exchange for net reductions in future payment obligations. The Company proposes, subject to PSC approval, to adjust the MRA Regulatory Asset as a consequence of the amendments. The amortization periods related to components of changes to the cash compensation will generally correspond to the changes in cash flow resulting from the amendments. The Company expects the net amount of annual MRA Regulatory Asset amortization to be slightly higher in the period beyond POWERCHOICE. Under POWERCHOICE, the Company's remaining electric business (nuclear generation and electric transmission and distribution business) will continue to be rate-regulated on a cost-of-service basis and, accordingly, the Company continues to apply SFAS No. 71 to these businesses. Also, the Company's IPP contracts, including those restructured under the MRA, will continue to be the obligations of the regulated business. SFAS No. 71 does not require the Company to earn a return on the regulatory assets in assessing its applicability. The Company believes that the prices it will charge for electric service over the next 10 years, including the Competitive Transition Charge ("CTC") assuming no reduction in demand or bypass of the CTC or exit fees, will be sufficient to recover the MRA Regulatory Asset and to provide recovery of and a return on the remainder of its assets, as appropriate. In the event the Company could no longer apply SFAS No. 71 in the future, it would be required to record an after-tax non-cash charge against income for any remaining unamortized regulatory assets and liabilities. Depending on when SFAS No. 71 was required to be discontinued, such charge would likely be material to the Company's reported financial condition and results of operations and adversely affect the Company's ability to pay dividends. It is expected that the POWERCHOICE agreement, while having the effect of substantially depressing earnings during its five-year term, will substantially improve operating cash flows. With the implementation of POWERCHOICE, specifically the separation of non-nuclear generation as an entity that would no longer be cost-of-service regulated, the Company is required to assess the carrying amounts of its long-lived assets in accordance with SFAS No. 121. SFAS No. 121 requires long-lived assets and certain identifiable intangibles held and used by an entity to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or when assets are to be disposed of. In performing the review for recoverability, the Company is required to estimate future undiscounted cash flows expected to result from the use of the asset and/or its disposition. The Company has determined that there is no impairment of its fossil and hydro generating assets. To the extent the proceeds resulting from the sale of the fossil and hydro assets are not sufficient to avoid a loss, the Company would be able to recover such loss through the CTC. The POWERCHOICE agreement provides for deferral and future recovery of losses, if any, resulting from the sale of the non-nuclear generating assets. The Company's fossil and hydro generation plant assets had a net book value of approximately $1.1 billion at March 31, 1998. As described in Form 10-K for fiscal year ended December 31, 1997, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Master Restructuring Agreement and the POWERCHOICE Agreement," the conclusion of the termination, restatement or amendment of IPP contracts, and closing of the financing necessary to implement such termination, restatement or amendment, as well as implementation of POWERCHOICE, is subject to a number of contingencies. In the event the Company is unable to successfully bring these events to conclusion, it is likely that application of SFAS No. 71 would be discontinued. The resulting non-cash after-tax charges against income, based on regulatory assets and liabilities associated with the nuclear generation and electric transmission and distribution businesses as of March 31, 1998, would be approximately $527 million or $3.65 per share. Various requirements under applicable law and regulations and under corporate instruments, including those with respect to issuance of debt and equity securities, payment of common and preferred dividends and certain types of transfers of assets could be adversely impacted by any such write-downs. NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES REVIEW BY INDEPENDENT ACCOUNTANTS The Company's independent accountants, Price Waterhouse LLP, have made limited reviews (based on procedures adopted by the American Institute of Certified Public Accountants) of the unaudited Consolidated Balance Sheet of Niagara Mohawk Power Corporation and Subsidiary Companies as of March 31, 1998 and the unaudited Consolidated Statements of Income and Cash Flows for the three-month periods ended March 31, 1998 and 1997. The accountants' report regarding their limited reviews of the Form 10-Q of Niagara Mohawk Power Corporation and its subsidiaries appears on the next page. That report does not express an opinion on the interim unaudited consolidated financial information. Price Waterhouse LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, such report is not a "report" or "part of the Registration Statement" within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11 of such Act do not apply. PRICE WATERHOUSE LLP ONE MONY PLAZA SYRACUSE NY 13202 TELEPHONE 315-474-6571 REPORT OF INDEPENDENT ACCOUNTANTS May 14, 1998 To the Stockholders and Board of Directors of Niagara Mohawk Power Corporation 300 Erie Boulevard West Syracuse, NY 13202 We have reviewed the condensed consolidated balance sheet of Niagara Mohawk Power Corporation and its subsidiaries as of March 31, 1998 and the related condensed consolidated statements of income and of cash flows for the three-month periods ended March 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1997, and the related consolidated statements of income, of retained earnings and of cash flows for the year then ended (not presented herein), and in our report dated March 26, 1998, we expressed an unqualified opinion (containing explanatory paragraphs with respect to the Company's application of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" [SFAS No. 71] for its nuclear generation, electric transmission and distribution and gas businesses and discontinuation of SFAS No. 71 for its non-nuclear generation business in 1996). In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. As discussed in Note 3, the Company believes that it continues to meet the requirements for application of SFAS No. 71 for its nuclear generation, electric transmission and distribution and gas businesses. In the event that the Company is unable to complete the termination, restatement or amendment of independent power producer contracts, this conclusion could change in 1998 and beyond, resulting in material adverse effects on the Company's financial condition and results of operations. /s/ Price Waterhouse LLP ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, including the improvement in the Company's financial condition expected as a result of the MRA and the implementation of POWERCHOICE. The Company's actual results and developments may differ materially from the results discussed in or implied by such forward-looking statements, due to risks and uncertainties that exist in the Company's operations and business environment, including, but not limited to, matters described in the context of such forward-looking statements, as well as such other factors as set forth in the Notes to Consolidated Financial Statements contained herein. MASTER RESTRUCTURING AGREEMENT AND POWERCHOICE AGREEMENT (See Form 10-K for fiscal year ended December 31, 1997, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Master Restructuring Agreement and the POWERCHOICE Agreement.") MASTER RESTRUCTURING AGREEMENT. The MRA was amended to decrease the cash payable to the IPP Parties by approximately $157 million in exchange for agreed-upon price increases in certain restated IPP contracts. Only one IPP, NorCon Power Partners, L.P. ("NorCon"), has withdrawn from the MRA. The withdrawal of NorCon will reduce the cash payable by the Company at closing by approximately $158 million. The Company is currently assessing its possible actions with respect to Norcon's contract. The Company has also determined to replace the fixed price swap contracts originally contemplated by the MRA with an additional $297 million of cash compensation to the IPP Parties. The MRA currently provides for the termination, restatement or amendment of 27 PPAs with 14 IPPs, which represent approximately three quarters of the Company's over-market purchased power obligations, in exchange for an aggregate of approximately $3.631 billion in cash and 42.9 million shares of the Company's common stock. The closing of the MRA is subject to certain conditions, including the successful financing of the MRA and Company shareholder approval of the issuance of common stock to the IPP Parties. Norcen Energy Resources, Ltd. ("Norcen"), a gas supplier, sued three IPPs that are party to the MRA and the Company, as to which litigation a settlement agreement has been reached. (see Part II, Item 1. Legal Proceedings - "Norcen Litigation"). POWERCHOICE AGREEMENT. In April 1998, the cities of Oswego, Fulton, Cohoes and the New York Conference of Mayors and Municipal Officials sought a temporary restraining order and preliminary injunction in New York State Supreme Court against the PSC to enjoin the implementation of the POWERCHOICE settlement, the MRA and the Company's contemplated auction of its fossil and hydro generation assets on the grounds that the PSC failed to comply with the provisions of the State Environmental Quality Review Act. They were joined in their petition by the chairman of the Buffalo City Council Energy Committee (see Part II, Item 1. Legal Proceedings - "City of Oswego Litigation"). In addition, the City of Oswego and others petitioned the PSC for rehearing of the March 20, 1998 Order approving POWERCHOICE. The Company is unable to predict the outcome or timing of this matter. In its written order dated May 6, 1998, the PSC approved the Company's plan to divest its fossil and hydroelectric generating plants, which is a key component in the Company's POWERCHOICE plan to lower average electricity prices and provide customer choice. The Company has begun distributing information about the plants to interested bidders and is reviewing potential buyers for appropriate financial qualifications. The Company expects to begin receiving non-binding bids in June 1998. Final bids are expected in September 1998 and definitive agreements will be completed shortly thereafter. Transaction closings are anticipated to occur in mid-1999. JANUARY 1998 ICE STORM In early January 1998, a major ice storm and flooding caused extensive damage in a large area of northern New York. The Company's electric transmission and distribution facilities in an area of approximately 7,000 square miles were damaged, interrupting service to approximately 120,000 of the Company's customers, or approximately 300,000 people. The Company had to rebuild much of its transmission and distribution system to restore power in this area. By the end of January 1998, service to all customers was restored. The total estimated cost of the restoration and rebuild efforts is approximately $131 million. As of March 1998, the Company recorded $70.2 million in expense associated with the January 1998 ice storm (of which $62.9 million was considered incremental) and $61.2 million was capitalized. The Company is continuing to inspect and survey the work completed and these efforts may impact the allocation of costs between capital and expense. The Company continues to pursue federal disaster relief assistance and is working with its insurance carriers to assess what portion of the rebuild costs are covered by insurance policies. The Company is also analyzing potential available options for state financial aid. The Company is unable to determine what recoveries, if any, it may receive from these sources. While these efforts are continuing, the fact that the Company has not recovered any amounts to date required a charge to first-quarter earnings. NUCLEAR MATTERS UNIT 1 OUTAGE. On April 28, 1998, Unit 1 was taken out of service to fix design deficiencies related to the control room emergency ventilation system. Unit 1 is expected to return to service by early June 1998. UNIT 2 OUTAGE. On May 2, 1998, Unit 2 was taken out of service for a planned refueling and maintenance outage. Based on progress to date, Unit 2 is scheduled to return to service, mid-June 1998. DISPOSAL OF NUCLEAR FUEL. (See Form 10-K for fiscal year ended December 31, 1997, Part II, Item 8. Financial Statements and Supplementary Data - "Note 3. Nuclear Operations - Nuclear Fuel Disposal Cost.") In April 1998, the U.S. Senate passed legislation to reform the federal government's spent nuclear fuel disposal policy. Such legislation requires the Department of Energy to accept spent nuclear fuel from nuclear power plants beginning no later than June 30, 2003, if all necessary approvals are obtained. In addition, it requires the payment of one-time fees by electric utilities for the disposal of nuclear fuel irradiated prior to 1983 to be paid to the Nuclear Waste Fund no later than September 30, 2001. As of March 31, 1998, the Company has recorded a liability of $115.9 million for the disposal of nuclear fuel irradiated prior to 1983. The Company is unable to predict whether this bill will be enacted into law. PSC STAFF'S TENTATIVE CONCLUSIONS ON THE FUTURE OF NUCLEAR GENERATION. (See Form 10-K for fiscal year ended December 31, 1997, Part II, Item 8. Financial Statements and Supplementary Data - "Note 3. Nuclear Operations - PSC Staff's Tentative Conclusions on the Future of Nuclear Generation.") In late March 1998, the PSC issued an Opinion and Order Instituting Further Inquiry. The order concluded that a more extensive examination is required to address all issues regarding the future treatment of nuclear generation brought forth by the PSC staff and other parties. GENERIC GAS RESTRUCTURING PROCEEDING As a result of the generic restructuring proceeding, in which the PSC ordered all New York utilities to implement a service unbundling beginning in May 1996, nearly 3,200 customers have chosen to buy natural gas from other sources, with the Company continuing to provide transportation service for a separate fee. These changes have not had a material impact on the Company's margins since the margin is traditionally derived from the delivery service and not from the commodity sale. The margin for delivery for residential and commercial aggregation services approximately equals the margin on the traditional sales service classes. To date the PSC has allowed the utilities to assign the pipeline capacity to the customers converting from sales to transportation. This assignment is allowed during a three-year period ending March 1999, by which time the PSC will decide on methods for dealing with the remaining unassigned or excess capacity. In a clarifying order in the generic restructuring proceeding, issued September 4, 1997, the PSC indicated that it is unlikely that utilities will be allowed to continue to assign pipeline capacity to departing customers after March, 1999. As a part of the generic restructuring proceeding, all utilities were required to file a report with the PSC in April 1998, describing actions that have been taken to mitigate potential stranded costs as customers migrate to transportation service. The Company filed a report on March 31, 1998 that noted that it has taken numerous actions to reduce its capacity obligations and its potential stranded costs to the maximum extent possible. The Company's actions include the following: 1) The Company has not entered into any new upstream capacity contracts; 2) The Company has provided notice of termination with respect to firm upstream capacity contracts that have reached their notification date (the total capacity under such contracts is 96,101 Dth per day); 3) All opportunities to reduce capacity contracts continue to be exercised by the Company; 4) Active participation in programs to remarket or release its existing capacity, where those programs do not provide full reimbursement of the Company's costs; 5) Active participation in open seasons offered by the interstate pipelines to return capacity prior to the termination date of the contract; and 6) Expansion of the Company's service territory by obtaining new franchises to serve areas not previously served. The Company is unable to determine the timing or outcome of this proceeding. FINANCING PLANS AND FINANCIAL POSITION The Company's EBITDA for the twelve months ended March 31, 1998, was approximately $859.7 million, and upon implementation of the MRA and POWERCHOICE is expected to increase to approximately $1.2 billion to $1.3 billion per year. EBITDA represents earnings before interest charges, interest income, income taxes, depreciation and amortization, amortization of nuclear fuel, allowance for funds used during construction, the POWERCHOICE charge, non-cash regulatory deferrals and other amortizations, and extraordinary items. EBITDA is a non-GAAP measure of cash flows and is presented to provide additional information about the Company's ability to meet its future requirements for debt service which would increase significantly upon consummation of the MRA. EBITDA should not be considered an alternative to net income as an indicator of operating performance or as an alternative to cash flows, as presented on the Consolidated Statement of Cash Flows, as a measure of liquidity. LIQUIDITY AND CAPITAL RESOURCES Under the MRA, the Company will pay an aggregate of $3.631 billion in cash. The Company now expects to obtain $3.272 billion of this amount through a public market offering of senior unsecured debt and the remainder from cash on hand. The Company will not be able to issue incremental first mortgage bonds under the terms of the public debt offering. The Company plans to amend its existing $804 million bank facility to, among other things, extend the term from June 30, 1999 to June 1, 2000 and accommodate the holding company restructuring and permit the auction of fossil/hydro generating assets. NET CASH PROVIDED BY OPERATING ACTIVITIES decreased $103.9 million in the first quarter of 1998 primarily due to a decrease of $98.7 million in the amount of accounts receivable sold under the accounts receivable sales program (which the Company has budgeted to restore in 1998). NET CASH USED IN INVESTING ACTIVITIES decreased $16.5 million in the first quarter of 1998 primarily as a result of a decrease in other investments of $81.4 million offset by an increase in the acquisition of utility plant of $77.6 million, primarily due to the January 1998 ice storm. RESULTS OF OPERATIONS Three Months Ended March 31, 1998 versus Three Months Ended March 31, 1997 - --------------------------------------------------------------------- The following discussion presents the material changes in results of operations for the first quarter of 1998 in comparison to the same period in 1997. The Company's quarterly results of operations reflect the seasonal nature of its business, with peak electric loads in summer and winter periods. Gas sales peak principally in the winter. The earnings for the three month period should not be taken as an indication of earnings for all or any part of the balance of the year. In addition, this discussion and analysis is not likely to be indicative of future operations or earnings, particularly in view of the probable termination, restatement or amendment of IPP contracts and implementation of POWERCHOICE. It should also be read in conjunction with other financial and statistical information appearing elsewhere in this report. Earnings for the first quarter were $11.1 million or 8 cents per share, as compared with $93.6 million or 65 cents per share for the first quarter of 1997. Earnings for the first quarter 1998 reflect the write-off of $62.9 million, or 28 cents per share, to reflect the Company's estimate of incremental, non-capitalized costs to restore power and rebuild its electric system in northern New York as a result of the January 1998 ice storm (see "January 1998 Ice Storm"). First quarter 1998 earnings were also lower by approximately 14 cents per share due to a higher allocation of federal income taxes in this period reflecting the expected lower level of earnings over the remainder of the year. In addition, first quarter 1998 earnings were also lower due to warmer weather, higher capacity payments to IPPs and higher industrial customer discounts. ELECTRIC REVENUES Electric revenues decreased $14.2 million or 1.6% from 1997 primarily as a result of a decrease in volume and mix of sales to ultimate customers of $25.5 million, offset by an increase in sales to other electric systems and miscellaneous electric revenues of $11.3 million. ELECTRIC SALES Electric sales to ultimate consumers were approximately 8.7 billion KWh in the first quarter of 1998, a 1.1% decrease from 1997 primarily as a result of warmer weather and the power outages during the January 1998 ice storm (see "January 1998 Ice Storm"). Residential and commercial sales declined 4.9% and 1.1%, respectively. After adjusting for the effects of weather and the farm and food processor retail access pilot program, sales to ultimate consumers would have been expected to increase 0.9%. Sales for resale increased 204 million Kwh (17.2%), reflecting sales to energy service companies participating in the Company's farm and food processor retail access pilot program. This resulted in a net increase in total electric sales of 106 million KWh (1.1%).
THREE MONTHS ENDED MARCH 31, Electric Revenue (Thousands) Sales (GWh) ----------------------------- ---------------------- % % 1998 1997 Change 1998 1997 Change --------- --------- ------- ------ ----- ------- Residential $ 336,434 $ 352,919 (4.7) 2,737 2,877 (4.9) Commercial 310,038 314,291 (1.4) 2,956 2,988 (1.1) Industrial 123,470 129,943 (5.0) 1,743 1,738 0.3 Industrial - Special 15,977 14,922 7.1 1,162 1,099 5.7 Other 14,576 13,888 5.0 70 64 9.4 --------- --------- ------- ------ ----- ------- Total to Ultimate Consumers 800,495 825,963 (3.1) 8,668 8,766 (1.1) Other Electric Systems 32,923 23,949 37.5 1,387 1,183 17.2 Miscellaneous 29,751 27,457 8.4 - - - --------- --------- ------- ------ ----- ------- Total $ 863,169 $ 877,369 (1.6) 10,055 9,949 1.1 ========= ========= ======= ====== ===== =======
Electric fuel and purchased power costs increased $5.3 million or 1.4%. This increase is the result of an $8.7 million increase in actual fuel costs, a $0.1 million increase in payments to IPPs and a $2.7 million increase in costs deferred and recovered through the operation of the FAC, partially offset by a decrease in other purchased power costs of $6.2 million. Internal generation increased in 1998, reflecting the full operation of the Company's nuclear power plants in the first quarter of 1998 as compared to 1997. On March 3, 1997, Unit 1 was taken out of service for a planned refueling and maintenance outage and was returned to service on May 8, 1997. GAS REVENUES Gas revenues decreased $51.2 million or 17.9% in 1998 from the comparable period in 1997, primarily as a result of lower purchased gas adjustment clause revenues of $26.9 million and a decrease in sales to ultimate consumers of $24.3 million. GAS SALES Due primarily to warmer weather during the first quarter of 1998, gas sales to ultimate consumers decreased 4.0 million Dth or 10.8% from the first quarter of 1997. After adjusting for the effects of weather, sales to ultimate consumers decreased 6.5% primarily due to the migration of certain large commercial sales customers to the transportation class and lower customer usage. Spot market sales (sales for resale), which are generally from the higher priced gas available to the Company and therefore yield margins that are substantially lower than traditional sales to ultimate consumers, also decreased as the warm weather depressed spot sales opportunities. In addition, changes in purchased gas adjustment clause revenues are generally margin-neutral.
THREE MONTHS ENDED MARCH 31, Gas Revenue (Thousands) Sales (Thousands of Dth) ----------------------------- ----------------------- % % 1998 1997 Change 1998 1997 Change --------- --------- ------- ------ ------ ------- Residential $ 160,664 $ 188,687 (14.9) 23,820 25,764 (7.5) Commercial 55,053 72,500 (24.1) 8,862 10,540 (15.9) Industrial 1,546 3,412 (54.7) 306 678 (54.9) --------- --------- ------- ------ ------ ------- Total to Ultimate Consumers 217,263 264,599 (17.9) 32,988 36,982 (10.8) Transportation of Customer-Owned Gas 16,685 15,313 9.0 42,297 41,702 1.4 Spot Market Sales 38 3,082 (98.8) 15 1,088 (98.6) Miscellaneous 1,249 3,469 (64.0) - - --------- --------- ------- ------ ------ ------ Total to System Core Customers $ 235,235 $ 286,463 (17.9) 75,300 79,772 (5.6) ========= ========= ======= ====== ====== =======
The total cost of gas included in expense decreased 22.3% in 1998. This was the result of a 5.8 million decrease in Dth purchased and withdrawn from storage for ultimate consumer sales ($20.1 million), a $3.0 million decrease in Dth purchased for spot market sales, a $0.7 million decrease in purchased gas costs and certain other items recognized and recovered through the purchased gas adjustment clause and an 8.3% decrease in the average cost per Dth purchased ($9.4 million). The Company's net cost per Dth sold, as charged to expense and excluding spot market purchases, decreased to $3.56 in 1998 from $3.82 in 1997. OTHER OPERATION AND MAINTENANCE EXPENSES increased by $55.7 million primarily as a result of the write-off of the costs associated with the January 1998 ice storm (see "January 1998 Ice Storm"). BAD DEBT EXPENSE for the first quarter of 1998 was $16.0 million as compared with $21.3 million in 1997. The decrease in FEDERAL AND FOREIGN INCOME TAXES of approximately $15.9 million was primarily due to a decrease in pre-tax income, partially offset by a higher percentage allocation of federal income taxes to the first quarter of 1998, reflecting the expected lower level of earnings over the remainder of the year. The effective tax rate for the first quarter of 1998 was 72% as compared to 40% for the first quarter of 1997. This increase is caused by the allocation of certain flow through tax adjustments. NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES PART II - OTHER INFORMATION - --------------------------- ITEM 1. LEGAL PROCEEDINGS. Norcen Litigation - ----------------- In April 1998, Norcen sued three IPPs that are parties to the MRA and the Company. The claim against the Company relates to certain rights of Norcen to sue if the Company breached its PPAs with the three projects and alleges tortious interference by the Company with Norcen's gas purchase agreements. In May 1998, such projects announced that they had entered into a settlement agreement with Norcen in which Norcen agreed to release the Company from litigation upon the closing of the MRA. City of Oswego Litigation - ------------------------- In April 1998, the cities of Oswego, Fulton,Cohoes and the New York Conference of Mayors and Municipal Officials sought a temporary restraining order and preliminary injunction in New York State Supreme Court against the PSC to enjoin the implementation of the POWERCHOICE settlement, the MRA and the Company's contemplated auction of its fossil and hydro generation assets on the grounds that the PSC failed to comply with the provisions of the State Environmental Quality Review Act. The application of the City of Oswego and the other petitioners for the temporary restraining order was denied at a Supreme Court hearing held in Albany on April 21, 1998. On May 8, 1998, there were oral arguments heard in the Supreme Court in Albany and the court did not grant the cities' request for preliminary injunction but rather reserved ruling on all of the cities' requests. The Company is unable to predict the outcome of this matter. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibit 3(i) - By-laws of the Company, as amended April 23, 1998. Exhibit 10 - Employment Agreement between the Company and John H. Mueller, dated January 19, 1998, incorporated herein by reference to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1997. Exhibit 10(b) - PSC Opinion and Order regarding approval of the POWERCHOICE settlement agreement with the PSC, issued and effective March 20, 1998, incorporated herein by reference to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1997. Exhibit 10(c) - Amendments to the Master Restructuring Agreement. Exhibit 11 - Computation of the Average Number of Shares of Common Stock Outstanding for the Three Months Ended March 31, 1998 and 1997. Exhibit 12 - Statement Showing Computations of Ratio of Earnings to Fixed Charges, Ratio of Earnings to Fixed Charges without Allowance for Funds Used During Construction ("AFC") and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends for the Twelve Months Ended March 31, 1998. Exhibit 15 - Accountants' Acknowledgement Letter. Exhibit 27 - Financial Data Schedule. In accordance with Paragraph 4(iii) of Item 601(b) of Regulation S-K, the Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of the agreements comprising the $804 million senior debt facility that the Company completed with a bank group during March 1996. The total amount of long-term debt authorized under such agreement does not exceed 10 percent of the total consolidated assets of the Company and its subsidiaries. (b) Report on Form 8-K: Form 8-K Reporting Date - February 11, 1998 Item reported - Item 5. Other Events. Registrant filed information concerning the January 1998 ice storm. NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NIAGARA MOHAWK POWER CORPORATION (Registrant) Date: May 14, 1998 By /s/ Steven W. Tasker -------------------- Steven W. Tasker Vice President-Controller and Principal Accounting Officer NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES EXHIBIT INDEX Exhibit Number Description - ------ ----------- 3(i) By-laws of NMPC, as amended April 23, 1998. 10 Employment Agreement between the Company and John H. Mueller, dated January 19, 1998, incorporated herein by reference to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1997. 10(b) PSC Opinion and Order regarding approval of the POWERCHOICE settlement agreement with the PSC, issued and effective March 20, 1998, incorporated herein by reference to the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1997. 10(c) Amendments to the Master Restructuring Agreement. 11 Computation of the Average Number of Shares of Common Stock Outstanding for the Three Months Ended March 31, 1998 and 1997. 12 Statement Showing Computations of Ratio of Earnings to Fixed Charges, Ratio of Earnings to Fixed Charges without AFC and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends for the Twelve Months Ended March 31, 1998. 15 Accountants' Acknowledgement Letter. 27 Financial Data Schedule. 1 Exhibit 3(i) BY-LAWS NIAGARA MOHAWK POWER CORPORATION ADOPTED JANUARY 5, 1950 (As Amended April 23, 1998) 2 BY-LAWS NIAGARA MOHAWK POWER CORPORATION ADOPTED JANUARY 5, 1950 (As Amended April 23, 1998)
Index* Page Page Additional Officers 14 Officers 11 Adjournments 4 Place of Meeting 3 Amendments 20 President 12 Annual Meeting 2 Procedure 4,9,11,20 Assistant Officers 13,14 Proxies 6 Audit Committee 10 Quorum 4,9 Bonds 15 Record Date 18 Certificate of Stock 17 Registrar 17 Chairman of the Board 12 Resignation 7 Committees 9 Scrip 19 Compensation 8,15 Secretary 13 Controller 13 Special Meetings 3 Corporate Charter 1 Stock 17 Corporate Seal 20 Stockholders' Meetings 2 Directors 6 Term of Office 6,12 Directors' Meetings 8 Transfer Agent 17 Election 2,6,12,20 Transfers of Shares 18 Executive Committee 10 Treasurer 14 Finance Committee 10 Unanimous Written Consent 11 Finances 19 Vacancies 7 Fiscal Year 20 Vice Presidents 13 General Provisions 19 Voting 5 Indemnification; Insurance 15,17 Inspectors of Election 5 Lost Stock Certificates 19 Notices of Meetings 3,8,11 /TABLE *This Index does not constitute part of the By-Laws or have any bearing upon the interpretation of their terms and provisions. 3 BY-LAWS OF NIAGARA MOHAWK POWER CORPORATION ARTICLE I BY-LAWS SUPPLEMENT CORPORATE CHARTER Section 1. Corporate Charter: The provisions of these by-laws supplement the corporate charter. The provisions of the latter shall govern over the provisions of these by-laws in the event of any conflict. Elections of directors and meetings of stockholders in addition to those provided by these by-laws may be held in accordance with the provisions of the corporate charter. The term "corporate charter" as used in these by-laws includes the Certificate of Consolidation of Antwerp Light and Power Company, Baldwinsville Light and Heat Company of Baldwinsville, N.Y., Fulton Fuel and Light Company, Fulton Light, Heat and Power Company, Malone Light and Power Company, Northern New York Utilities, Inc., The Norwood Electric Light and Power Company, Peoples Gas and Electric Company of Oswego, St. Lawrence County Utilities, Inc., St. Lawrence Valley Power Corporation, The Syracuse Lighting Company, Inc., and Utica Gas and Electric Company forming Niagara Hudson Public Service Corporation, filed in the Department of State of the State of New York on July 31, 1937, all certificates supplemental thereto or amendatory thereof or in restatement thereof filed in the Department of State of the State of New York (including specifically but without limitation among all such supplemental or amendatory certificates heretofore filed or hereafter to be filed, the Certificate of Change of Name of Niagara Hudson Public Service Corporation to Central New York Power Corporation, filed in the Department of State of the State of New York on September 15, 1937, the Certificate of Consolidation of New York Power and Light Corporation and Buffalo Niagara Electric Corporation and Central New York Power Corporation which is to survive the consolidation and be named Niagara Mohawk Power Corporation Pursuant to Sections 26-a and 86 of the Stock Corporation Law and to Subdivision 4 of Section 11 of the Transportation Corporations Law, filed in the Department of State of the State of New York on January 5, 1950, and the Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk Power Corporation Pursuant to Sections 26-a and 36 of the Stock 4 Corporation Law, filed in the Department of State of the State of New York on January 5, 1950), and includes also all resolutions of the board of directors fixing the designations, preferences, privileges and voting powers of any series of stock of the corporation, and all other instruments which are binding upon, and define or set forth the rights of, the stockholders of the corporation. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Annual Meeting: The annual meeting of the stockholders of the corporation for the election of directors and the transaction of such other business as may properly come before it shall be held at such date and time as may be designated by the Board of Directors. Business properly brought before any such annual meeting shall include matters specifically set forth in the corporation's proxy statement with respect to such meeting, matters which the Chairman of the Board of Directors in his sole discretion causes to be placed on the agenda of any such annual meeting and (i) any proposal of a stockholder of this corporation and (ii) any nomination by a stockholder of a person or persons for election as director or directors, if such stockholder has made a written request to this corporation to have such proposal or nomination considered at such annual meeting, as provided herein, and further provided that such proposal or nomination is otherwise proper for consideration under applicable law and the certificate of incorporation and by-laws of the corporation. Notice of any proposal to be presented by any stockholder or of the name of any person to be nominated by any stockholder for election as a director of the corporation must be received by the secretary of the corporation at its principal executive office not less than 60 nor more than 90 days prior to the date of the annual meeting; provided, however, that if the date of the annual meeting is first publicly announced or disclosed (in a public filing or otherwise) less than 70 days prior to the date of the meeting, such notice shall be given not more than ten days after such date is first so announced or disclosed. Public notice shall be deemed to have been 5 given more than 70 days in advance of the annual meeting if the corporation shall have previously disclosed, in these by-laws or otherwise, that the annual meeting in each year is to be held on a determinable date, unless and until the Board of Directors determines to hold the meeting on a different date. Any stockholder who gives notice of any such proposal shall deliver therewith the text of the proposal to be presented and a brief written statement of the reasons why such stockholder favors the proposal and setting forth such stockholder's name and address, the number and class of all shares of each class of stock of the corporation beneficially owned by such stockholder and any material interest of such stockholder in the proposal (other than as a stockholder). Any stockholder desiring to nominate any person for election as a director of the corporation shall deliver with such notice a statement in writing setting forth the name of the person to be nominated, the number and class of all shares of each class of stock of the corporation beneficially owned by such person, the information regarding such person required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and Exchange Commission (or the corresponding provisions of any regulation subsequently adopted by the Securities and Exchange Commission applicable to the corporation), such person's signed consent to serve as a director of the corporation if elected, such stockholder's name and address and the number and class of all shares of each class of stock of the corporation beneficially owned by such stockholder. As used herein, shares "beneficially owned" shall mean all shares as to which such person, together with such person's affiliates and associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934), may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as well as all shares as to which such person, together with such person's affiliates and associates, has the right to become the beneficial owner pursuant to any agreement or understanding, or upon the exercise of warrants, option or rights to convert or exchange (whether such rights are exercisable immediately or only after the passage of time or the occurrence of conditions). The person presiding at the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall determine whether such notice has been duly given 6 and shall direct that proposals and nominees not be considered if such notice has not been so given. Section 2. Special Meetings: Special meetings of the stockholders of the corporation may be called at any time by a majority of the entire board of directors or by the Chairman of the Board or the President. Such request shall state the purpose or purposes of the proposed meeting. Special meetings of stockholders for the election of directors in accordance with the provisions of the corporate charter providing for a special election of directors in the event of default in the payment of dividends on the preferred stock or preference stock for a specified period and on the termination of such default may be called as provided in the corporate charter. Section 3. Place and Notice of Stockholders' Meetings: Meetings of Stockholders shall be held at the principal office of the corporation in the City of Syracuse, New York, or at such other place or places in the State of New York as may be determined from time to time by the board of directors. For meetings other than annual meetings, the notice shall also state by and at whose direction and for what purpose or purposes the meeting is called. If the manner of giving notice of the meeting is not specified by law or the corporate charter, notice shall be given by mailing, postage prepaid, not less than ten (10) nor more than sixty (60) days before such meeting, a copy of the notice of such meeting, stating the purpose or purposes for which the meeting is called and the time when and the place where it is to be held, to each stockholder of record on the record date established pursuant to Article VII, Section 4 entitled to vote at the meeting at his address as it appears on the stock book of the corporation, unless he shall have filed with the Secretary of the corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. If, at any meeting, action is proposed to be taken which would, if taken, entitle shareholders fulfilling the requirements of Section 623 of the New York Business Corporation Law to receive payment for their shares, the notice of such meeting shall also include a statement to that effect. 7 Section 4. Business at Stockholders' Meetings: Business transacted at all meetings of stockholders shall be confined to the objects stated in the notice of the meeting and matters germane thereto. In the absence of fraud, the determination of the holders of a majority of the stock present in person or by proxy and entitled to vote at the meeting shall be conclusive as to whether any proposed action or proceeding at such meeting is within the scope of the notice of such meeting. Section 5. Procedure: The order of business and all other matters of procedure at every meeting of stockholders may be determined by the presiding officer. Section 6. Quorum: Except as otherwise provided by law or in the corporate charter, the presence of a majority of the holders of shares, in person or by proxy, entitled to vote thereat shall constitute a quorum at any shareholders' meeting. Section 7. Adjournments: Except as otherwise provided by the corporate charter, the stockholders entitled to vote who are present in person or by proxy at any meeting of stockholders, whether or not a quorum shall be present or represented at the meeting, shall have power by a majority vote to adjourn the meeting from time to time without further notice other than announcement at the meeting, unless the board of directors shall fix a new record date in respect of such adjourned meeting, in which case the provisions of Section 3 of this Article shall apply. At any adjourned meeting at which the requisite amount of voting stock shall be present in person or by proxy any business may be transacted which might have been transacted at the meeting as originally called, and the stockholders entitled to vote at the meeting as originally called, and no others, unless the board of directors shall have fixed a new record date in respect thereof, shall be entitled to vote at such adjourned meeting. Section 8. Voting: Whenever an action shall require the vote of stockholders, the tabulations that identify the particular vote of a stockholder on all proxies, consents, authorizations and ballots shall be kept confidential, except as disclosure may be required 8 (i) by applicable law, (ii) in pursuit or defense of legal proceedings, (iii) to resolve a bona fide dispute as to the authenticity of one or more proxies, consents, authorizations or ballots or as to the accuracy of any tabulation of such proxies, consents, authorizations or ballots, (iv) if an individual stockholder requests that his or her vote and identity be forwarded to the corporation, or (v) in the event of a proxy or consent solicitation in opposition to the solicitation of the Board of Directors of the corporation; and the receipt and tabulation of such votes will be by an independent third party not affiliated with the corporation. Comments written on proxies, consents, authorizations and ballots, will be transcribed and provided to the secretary of the corporation without reference to the vote of the stockholder, except where such stockholder has requested that the nature of their vote be forwarded to the corporation. Stockholders shall have such voting rights as may be granted by law and the provisions of the corporate charter. All questions presented to stockholders for decision shall be decided by a vote of shares. Voting may be viva voce unless a stockholder present in person or by proxy and entitled to vote at the meeting shall demand a vote by ballot in which event a vote by ballot shall be taken. Except where otherwise provided by law, the corporate charter or these by-laws, elections shall be determined by a plurality vote and all other questions that shall be submitted to stockholders for decision shall be decided by a majority of the votes cast. Section 9. Inspectors of Election: Two inspectors of election who are not employees or directors of the corporation, shall be appointed by the directors to serve at each meeting of stockholders, or of a class of stockholders, such inspectors to serve at such meeting and any adjournments thereof; and such inspectors shall have authority to count and report upon the votes cast at such meeting upon the election of directors and such other questions as may be voted upon by ballot. In the event that any such inspector of election shall not have been appointed by the directors to serve at such meeting, or, having been appointed, shall be absent from such meeting or adjournment or unable to serve thereat, such inspector shall be appointed by the presiding officer at such meeting or adjournment. The inspectors appointed to act at any meeting of stockholders, before entering upon the discharge of their duties, shall be sworn 9 faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of their ability, and the oath so taken shall be subscribed by them and shall be filed in the records of such meeting. The inspectors shall be responsible for determining the number of shares outstanding, the voting power of each, the shares represented at the meeting, the existence of a quorum, and the validity and effect of any proxies. They shall also receive and tabulate all votes, ballots or consents and determine the result of any election, hear and determine all challenges and questions arising in connection with any election and do such acts to conduct the election according to the applicable provisions of law of the State of New York. Section 10. Proxies: Each stockholder entitled to vote at any meeting of stockholders may be represented and vote at such meeting by his proxy, authorized and acting in manner as provided by the applicable laws of the State of New York. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless otherwise provided in the proxy in accordance with law. ARTICLE III DIRECTORS Section 1. Number and Qualifications: Except as otherwise required by the provisions of the corporate charter relating to the rights of the holders of any class or series of preferred or preference stock having a preference over the common stock as to dividends or to elect directors under specified circumstances, the board of directors shall consist of not less than nine (9) nor more than twenty-one (21) persons, the exact number initially to be fifteen (15) persons, subject to change from time to time to any number not less than nine (9) nor more than twenty-one (21) persons by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist 10 any vacancies in previously authorized directorships at the time any such resolution is presented to the board for adoption). Directors need not be stockholders. No person, other than those serving on November 11, 1976, who has reached age 70 prior to May 1 in the year such director would otherwise stand for election, shall stand for election as a director. Section 2. Election and Tenure of Office: Except as otherwise provided by law, the corporate charter or these by-laws, the directors of the corporation shall be elected at the annual meeting of the stockholders or at any meeting of the stockholders held in lieu of such annual meeting, which meeting, for the purposes of these by-laws, shall be deemed the annual meeting. The directors shall be classified, with respect to the time for which they severally hold office into three classes, as nearly equal in number as possible, one class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1989, another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1990, and another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1991, with the members of each class to hold office until their successors are elected and qualified. At each annual meeting of the stockholders of the corporation, the successors to the class of directors whose terms expire at that meeting shall be elected, to hold office until the annual meeting of stockholders held in the third year following the year of their election. Except as otherwise provided in the corporate charter, the directors shall hold office until the annual meeting at which their respective terms expire and until their successors are elected and have qualified. The election of directors shall be conducted by two inspectors of election appointed as hereinbefore provided. The election need not be by ballot and shall be decided by a plurality vote. Section 3. Resignation; Removal: Any director of the corporation may resign at any time by giving his resignation to the chief executive officer of the corporation, or to the Secretary. Such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation 11 shall not be necessary to make it effective. Subject to the rights of the holders of any class or series of preferred or preference stock having preference over the holders of common stock as to dividends or to elect directors under specified circumstances, any director, or the entire board of directors, may be removed from office at any time, but only for cause. Section 4. Vacancies: Except as otherwise provided by the corporate charter, if the office of any director becomes vacant for any reason, a majority of the directors then in office, whether or not such majority shall constitute a quorum, may choose a successor who, to the extent required by New York law, shall hold office until the next annual meeting of stockholders at which the election of directors is in the regular order of business and until his successor has been elected and qualified; provided that if New York law does not so require, such director shall hold office for the full unexpired term of the director whose seat he is filling, or any such vacancy in the board of directors may be filled by the stockholders entitled to vote at any meeting of stockholders, notice of which shall have referred to the proposed election. Except as otherwise provided by the corporate charter, in the event of an increase in the number of directors pursuant to Section 1 of this Article III, a majority of the directors then in office, whether or not such majority shall constitute a quorum, may elect the additional director or directors who to the extent required by New York law, shall hold office until the next annual meeting of stockholders at which the election of directors is in the regular order of business and until his successor has been elected and qualified; provided that if New York law does not so require, such director or directors shall hold office for the full unexpired term of the class of directors to which such director or directors is elected, or any such director or directors may be elected by the 12 stockholders entitled to vote at any meeting of stockholders, notice of which shall have referred to the proposed election. No decrease in the number of authorized directors constituting the entire board of directors shall shorten the term of any incumbent director. Section 5. Compensation: Members of the board of directors shall be entitled to compensation for service and the board of directors may assign duties to any member or members of the board and may fix the amount of compensation therefor, which shall be a charge to be paid by the corporation. The board of directors may elect or appoint members of the board as officers, members of committees, or agents of the corporation, may assign duties to be performed and may fix the amount of the respective salaries, fees or other compensation therefor, and the amount so fixed shall be a charge to be paid by the corporation. In addition to any other compensation provided pursuant to these by-laws, each director shall be entitled to receive a fee, in amount as fixed from time to time by resolution of the board of directors, for attendance at any meeting of the board, or of any committee of the board, together with his expenses of attendance, if any. Section 6. Meetings of Directors: Regular meetings of the board of directors shall be held at such times and at such places as may be determined by the board of directors, or by the Chairman of the Board or by the President. Special meetings of the board may be called from time to time by any three directors, or by the Chairman of the Board or by the President. Any action required or permitted to be taken by the board or any committee thereof may be taken without a meeting if all board or committee members file one or more written consents to a resolution authorizing the action with the respective minutes of the board or committee as the case may be. Any one or more members of the board or of any of its committees may participate in a meeting of the board or committee by conference telephone or similar communications equipment allowing 13 all participants in the meeting to hear each other at the same time. Participation by such means shall constitute presence at a meeting. Section 7. Notice of Meetings of Board of Directors: Notice of each meeting of the board of directors, stating the time and place thereof, shall be given to each member of the board by the Secretary, or an Assistant Secretary, by mailing the same, postage prepaid, addressed to each member of the board at his residence to usual place of business not less than three (3) days before the meeting, or by delivering the same to each member of the board personally or to his residence or usual place of business, or by sending the same by telegraph or facsimile transmission to his residence or usual place of business, not less than one (1) day before the meeting. Meetings of the board of directors may also be held at any time and place without notice provided all the members are present at such meeting without protest or, at any time before or after the meeting, shall sign a written waiver of notice. The notice of any meeting of the board of directors need not specify the purpose or purposes for which the meeting is called, except as otherwise expressly provided in these by-laws. Section 8. Quorum: At all meetings of the board of directors, except where otherwise provided by law, the corporate charter, or these by-laws, a quorum shall be required for the transaction of business and shall consist of not less than one-third of the entire board, if the number of members be more than nine (9), but not less than a majority, if the number of directors be less than nine (9); and the vote of a majority of the directors present shall decide any questions that may come before the meeting. A majority of the directors present at any meeting, although less than a quorum, may adjourn the same from time to time, without notice other than announcement at the meeting, until a quorum is present. Section 9. Procedure: The order of business and all other matters of procedure at every meeting of directors may be determined by the presiding member. 14 ARTICLE IV COMMITTEES OF DIRECTORS Section 1. Designation: The board of directors, by resolution or resolutions adopted by a majority of the entire board, shall designate an Executive Committee, an Audit Committee and a Finance Committee, and may designate one or more other committees, each committee to consist of three (3) or more directors of the corporation. In the interim between meetings of the board, the Executive Committee shall have and may exercise the powers of the board of directors granted by the corporate charter and these by-laws and by resolution of the board, and such other committees shall have only such powers as shall be granted by these by-laws and by resolution of the board; provided, however, that no committee shall have authority as to the following matters: (a) The submission to shareholders of any action that needs shareholders' approval by law; (b) The filling of vacancies in the board of directors or in any committee; (c) The fixing of compensation of the directors for serving on the board or on any committee; (d) The amendment or repeal of the by-laws, or the adoption of new by-laws; or (e) The amendment or repeal of any resolution of the board which, by its terms, shall not be so amendable or repealable. Each committee shall serve at the pleasure of the board of directors and shall have such name or names as may be determined from time to time by the by-laws or by resolution or resolutions adopted by the board of directors. Except as otherwise required by law, the existence of any such committee may be terminated, or its powers and authority modified, at any time by resolution of the board of directors. 15 Section 2. Executive Committee: When the board of directors is not in session, the Executive Committee shall have all of the authority of the board of directors, except it shall have no authority as to the matters specified in Section 1 of this Article IV. The Chairman of the Board shall be Chairman of the Executive Committee. The members of the Executive Committee shall serve at the pleasure of the board of directors. Section 3. Audit Committee: The Audit Committee shall recommend to the board of directors the accounting firm to be selected by the board or to be recommended by it for shareholder approval, as independent auditor of the corporation and its subsidiaries; act on behalf of the board in meeting and reviewing with the independent auditors, the chief internal auditor and the appropriate corporate officers matters relating to corporate financial reporting and accounting procedures and policies, adequacy of internal controls and the scope of the respective audits of the independent auditors and the internal auditor; review the results of such audits with the respective auditing agency and reporting thereon to the board; review and make recommendations to the board concerning the independent auditor's fees and services; review interim and annual financial reports and disclosures and submit to the board any recommendations it may have from time to time with respect to financial reporting and accounting practices and policies; be consulted, and its consent obtained, prior to the selection or termination of the chief internal auditor; oversee matters involving compliance with Corporate business ethics policies including the work of the Business Ethics Council; review management's assessment of financial risks; authorize special investigations and studies, as appropriate, in fulfillment of its function as specified herein or by resolution of the board of directors; and perform any other duties or functions deemed appropriate by the board of directors. The Committee will conduct a self-assessment at least every three years of its performance in relation to its powers and responsibilities. The membership of such committee shall consist only of directors of the corporation who are not, and have not been, officers of the company. Section 4. Finance Committee: The Finance Committee shall exercise such powers of the board of directors as shall be provided in one 16 or more resolutions of the board of directors with respect to the issuance by the corporation of securities and evidences of indebtedness and the participation by the corporation in other financing transactions and with respect to the authorization of the making, modification, alteration, termination or abrogation of notes, bills, mortgages, sales, deeds, financing leases, liens and contracts of the corporation and shall further be empowered to take any action in connection with the determination of the terms of any securities, evidences of indebtedness or other financing transactions of the corporation the issuance of which by the corporation or the participation in which by the corporation shall have theretofore been approved by the board of directors, and shall further perform any other duties or functions deemed appropriate by the board of directors. Section 5. Records and Procedure: Said committees shall keep regular minutes of their proceedings and report the same to the board when required. Unless otherwise determined by the board of directors each committee may appoint a chairman and a secretary and such other officers of the committee as it may deem advisable, may determine the time and place of holding each meeting of the committee, the notice of meetings to be given to members, and all other procedural questions which may arise in connection with the work of the committee. Section 6. Unanimous Written Consent: Any action authorized in writing, by all of the members of a committee, and filed with the minutes of the corporation shall be the act of that committee with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of such committee. Section 7. Notice: Unless otherwise provided by resolution of the board of directors or by a vote of a majority of the members of the relevant committee, notice of committee meetings shall be given in the same manner as notice of special meetings of the board of directors is to be given under Article III, Section 7 of the By-Laws. ARTICLE V OFFICERS Section 1. Officers: The officers of the corporation shall consist of a Chairman of the Board, a President, one or more Vice-Presidents, a Secretary, a Controller, a Treasurer, and such Assistant Secretaries, Assistant Controllers and Assistant Treasurers and other officers as shall be elected or appointed by the board of directors. The board of directors may elect or appoint a General Counsel upon such terms and with such powers and duties as it may prescribe and may also designate the General Counsel an officer of the corporation. Section 2. Election: The officers of the corporation shall be 17 elected or appointed by the board of directors at the meeting of the board held after each annual meeting of the stockholders. The Chairman of the Board and the President shall be elected or appointed by the board of directors from among their number. Any number of Vice-Presidents, the Secretary, the Controller, the Treasurer and other officers established pursuant to resolution of the board of directors shall also be elected or appointed by the board of directors. Section 3. Term of Office: The officers of the corporation shall hold office until the meeting of the board of directors held after the next annual meeting of the stockholders and until their successors are elected and have qualified, unless a shorter term is fixed or unless removed, subject to the provisions of law, by the board of directors. The Chairman of the Board, the President, any Vice President, the Secretary, the Controller or the Treasurer may be removed at any time, with or without cause, by the board of directors provided that notice of the meeting at which such action shall have been taken shall set forth such action as one of the purposes of such meeting. Any other officer of the corporation may be removed at any time, with or without cause, by the board of directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the board of directors at any time to serve the remaining current term of that office. Section 4. Chairman of the Board: There shall be a chairman of the Board of Directors, with the official title "Chairman of the Board", who shall be the chief executive officer of the corporation. The Chairman of the Board shall preside at meetings of the stockholders, the board of directors and the Executive Committee. He shall recommend to the board policies to be followed by the corporation, and, subject to the board, shall have general charge of the policies and business of the corporation and general supervision of the details thereof, and shall supervise the operation, maintenance and preservation of the properties of the corporation. He shall keep the board of directors informed respecting thebusiness of the corporation. He shall have authority to sign on behalf of the corporation all contracts and other documents or instruments to be signed or executed by the corporation, and, in all cases where the 18 duties and powers of subordinate officers and agents of the corporation are not specifically prescribed by the by-laws or by resolutions of the board of directors, the Chairman of the Board may prescribe such duties and powers. He shall perform such other duties as may from time to time be assigned to him by the board of directors. Section 5. The President: The President shall have the direction of and responsibility for the operations of the corporation and such other powers and duties as the board of directors or the Chairman of the Board shall designate from time to time and, in the absence or inability to act of the Chairman of the Board, shall have the powers and duties of the Chairman of the Board. The President, unless some other person is thereunto specifically authorized by vote of the board of directors, shall have authority to sign all contracts and other documents and instruments of the corporation. Section 6. The Vice-Presidents: The Vice-Presidents may be designated by such title or titles and in such order of seniority as the board of directors may determine. The Vice-Presidents shall perform such of the duties and exercise such of the powers of the President on behalf of the corporation as may be assigned to them respectively from time to time by the board of directors or by the Chairman of the Board or the President, and, subject to the control of the board, shall have authority to sign on behalf of the corporation all contracts and other documents or instruments necessary for the conduct of the business of the corporation. The Vice-Presidents shall perform such other duties as may from time to time be assigned to them respectively by the board of directors or the Chairman of the Board or the President. Section 7. The Secretary and Assistant Secretaries: The Secretary shall cause notices of all meetings of stockholders and directors to be given as required by law, the corporate charter, and these by-laws. He shall attend all meetings of stockholders and of the board of directors and keep the minutes thereof. He shall affix the corporate seal to and sign such instruments as require the seal and his signature and shall perform such other duties as usually pertain to his office or as are required of him by the board of directors or the Chairman of the Board or the President. 19 Any Assistant Secretary may, in the absence or disability of the Secretary, or at his request, perform the duties and exercise the powers of the Secretary, and shall perform such other duties as the board of directors, the Chairman of the Board, the President or the Secretary shall prescribe. The Secretary or any Assistant Secretary may certify under the corporate seal as to the corporate charter or these by-laws or any provision thereof, the acts of the board of directors or any committee thereof, the tenure, signatures, identity and acts of officers of the corporation or other corporate facts, and any such certificate may be relied upon by any person or corporation to whom the same shall be given until receipt of written notice to the contrary. In the absence of the Secretary and of an Assistant Secretary, the stockholders or the board of directors may appoint a secretary pro tem to record the proceedings of their respective meetings and to perform such other acts pertaining to said office as they may direct. Section 8. The Controller and Assistant Controllers: The Controller shall be the chief accounting officer of the corporation. He shall have general supervision of the accounting and financial reporting policies of the corporation, and shall recommend policies and procedures and shall render current and periodic reports of financial status to the Chairman of the Board, the President and the board of directors. He shall perform such other duties as usually pertain to his office or as are required of him by the board of directors or the Chairman of the Board or the President. Any Assistant Controller may, in the absence or disability of the Controller, or at his request, perform the duties and exercise the powers of the Controller and shall perform such other duties as the board of directors, the Chairman of the Board, the President or the Controller shall prescribe. Section 9. The Treasurer and Assistant Treasurers: The Treasurer is authorized and empowered to receive and collect all moneys due the corporation and to receipt for the same. He shall be empowered to execute on behalf of the corporation all instruments, agreements 20 and certificates necessary or appropriate to effect the issuance by the corporation of securities or evidences of indebtedness or to permit the corporation to enter into and perform any other financing transactions to the extent the foregoing are within the ordinary course of business of the corporation or have been authorized by the board of directors or a committee thereof. He shall cause to be entered in books of the corporation to be kept for that purpose full and accurate accounts of all moneys received by and paid on account of the corporation. He shall make and sign such reports, statements, and instruments as may be required of him by the board of directors or by laws of the United States or the State of New York, or by commission, bureau, department or agency created under any such laws, and shall perform such other duties as usually pertain to his office or as are required of him by the board of directors or the Chairman of the Board or the President. Any Assistant Treasurer may, in the absence or disability of the Treasurer, or at his request, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the board of directors, the Chairman of the Board, or the President, or the Treasurer shall prescribe. Section 10. Additional Officers: In addition to the officers provided for by these by-laws, the board of directors may, from time to time, designate and appoint such other officers as may be necessary or convenient for the transaction of the business and affairs of the corporation. Such other officers shall have such powers and duties as may be assigned to them by resolution of the board of directors. Section 11. Officers Holding Two or More Offices: Any two or more of the above-mentioned offices may be held by the same person, except that the President shall not also be the Secretary, but no officer shall execute or verify any instrument in more than one capacity if such instrument be required by law or otherwise to be executed or verified by any two or more officers. Section 12. Duties of Officers May be Delegated: In case of the absence of any officer of the corporation, or for any other reason 21 that the board of directors may deem sufficient, the board of directors may delegate, for the time and to the extent specified, the powers or duties of any officer to any other officer, or to any director. Section 13. Compensation: The compensation of all officers with an assigned salary level above the scale of Salary Level 20 as prescribed in the Salary Administration Program, as adopted by the board of directors, shall be fixed by the board of directors. The compensation of all other officers and employees shall be fixed by the Chairman of the Board or by the President in accordance with the Salary Administration Program. Section 14. Bonds: The board of directors may require any officer, agent or employee of the corporation to give a bond to the corporation, conditional upon the faithful performance of his duties, with one or more sureties and in such amount as may be satisfactory to the board of directors. The premium payable to any surety company for such bond shall be paid by the corporation. ARTICLE VI INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE Section 1. Indemnification: The corporation shall fully indemnify, to the extent not expressly prohibited by law, each person involved in, or made or threatened to be made a party to, any action, claim or proceeding, whether civil or criminal, including any investigative, administrative, legislative, or other proceeding, and including an action by or in the right of the corporation or any other corporation, or any partnership, joint venture, trust, employee benefit plan, or other enterprise, and including appeals therein (any such action or proceeding being hereinafter referred to as a "Matter"), by reason of the fact that such person, such person's testator or intestate (i) is or was a director or officer of the corporation, or (ii) is or was serving, at the request of the corporation, as a director, officer, or in any other capacity, any other corporation, or any partnership, joint venture, trust, employee benefit plan, or other enterprise, against any and all 22 judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and reasonably incurred as a result of or in connection with any Matter, except as provided in the next paragraph. No indemnification shall be made to or on behalf of any such person if a judgment or other final adjudication adverse to such person establishes that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled. In addition, no indemnification shall be made with respect to any Matter initiated by any such person against the corporation, or a director or officer of the corporation, other than to enforce the terms of this article, unless such Matter was authorized by the board of directors. Further, no indemnification shall be made with respect to any settlement or compromise of any Matter unless and until the corporation has consented to such settlement or compromise. In making any determination regarding any person's entitlement to indemnification hereunder, it shall be presumed that such person is entitled to indemnification, and the corporation shall have the burden of proving the contrary. Written notice of any Matter for which indemnity may be sought by any person shall be given to the corporation as soon as practicable and the corporation shall be permitted to participate therein. Such person shall cooperate in good faith with any request that common counsel be utilized by the parties to any Matter who are similarly situated, unless to do so would be inappropriate due to actual or potential differing interests between or among such parties. Section 2. Advancement of Expenses: Except in the case of a Matter against a director, officer, or other person specifically approved by the board of directors, the corporation shall, subject to Section 1 above, pay expenses actually and reasonably incurred by 23 or on behalf of such a person in connection with any Matter in advance of the final disposition of such Matter. Such payments shall be made promptly upon receipt by the corporation, from time to time, of a written demand of such person for such advancement, together with an undertaking by or on behalf of such person to repay any expenses so advanced to the extent that the person receiving the advancement is ultimately found not to be entitled to indemnification for part or all of such expenses. Section 3. Rights Not Exclusive: The rights to indemnification and advancement of expenses granted by or pursuant to this article (i) shall not limit or exclude, but shall be in addition to, any other rights which may be granted by or pursuant to any statute, corporate charter, by-law, resolution, or agreement, (ii) shall be deemed to constitute contractual obligations of the corporation to any director, officer, or other person who serves in a capacity referred to herein at any time while this article is in effect, (iii) are intended to be retroactive and shall be available with respect to events occurring prior to the adoption of this article, and (iv) shall continue to exist after the repeal or modification hereof with respect to events occurring prior thereto. It is the intent of this article to require the corporation to indemnify the persons referred to herein for the aforementioned judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, in each and every circumstance in which such indemnification could lawfully be permitted by express provisions of by-laws, and the indemnification required by this article shall not be limited by the absence of an express recital of such circumstances. Section 4. Authorization of Contracts: The corporation may, with the approval of the board of directors, enter into an agreement with any person who is, or is about to become, a director or officer of the corporation, or who is serving, or is about to serve, at the request of the corporation, as a director, officer, or in any other capacity, any other corporation, or any partnership, joint venture, trust, employee benefit plan, or other enterprise, which agreement may provide for indemnification of such person and advancement of 24 expenses to such person upon terms, and to the extent, not prohibited by law. The failure to enter into any such agreement shall not affect or limit the rights of any such person under this article. Section 5. Insurance: The corporation may purchase and maintain insurance to indemnify the corporation and the directors and officers within the limits permitted by law. Section 6. Severability: If any provision of this article is determined at any time to be unenforceable in any respect, the other provisions shall not in any way be affected or impaired thereby. ARTICLE VII STOCK Section 1. Transfer Agent and Registrar: The board of directors may appoint one or more individuals, banks, firms of bankers, or trust companies the agent or agents of the corporation for the transfer of shares of its stock, and may also appoint one or more individuals, bank, firms of bankers, or trust companies registrar or registrars for the registering of shares of its stock. Section 2. Certificate of Stock: The certificates of stock of the corporation shall be numbered and shall be recorded in the books of the corporation as they are issued. They shall contain the holder's name and number of shares and shall be signed by the Chairman of the Board, the President or a Vice-President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall be sealed with the corporate seal, 25 which may be a facsimile. Where any such certificate is signed by a registrar, the signatures of any such Chairman of the Board, President, Vice-President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer upon such certificate may be facsimiles. In case any such officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by the corporation with the same effect as if such officer had not ceased to be such at the date of its issue. No certificate of stock shall be valid until countersigned by a transfer agent if the corporation have a transfer agent for the class or series of stock represented by such certificate whose signature may be a facsimile and until registered by a registrar if the corporation have a registrar for such class or series. Section 3. Transfers of Shares: Subject to applicable law, shares of stock shall be transferable on the books of the corporation by the holder thereof, in person or by duly authorized attorney, upon the surrender to the corporation or any transfer agent of the corporation of the certificate representing the shares to be transferred, duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of New York. The board of directors, to the extent permitted by law, shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer, and registration of certificates of stock. Section 4. Fixing of Record Date or Closing Transfer Books: The board of directors may fix a day and hour, not more than sixty (60) days prior to the day on which any meeting of stockholders is to be held, as the time as of which stockholders entitled to notice of or to vote at such meeting and at all adjournments thereof shall be determined; and in the event such record date is fixed by the board of directors no one other than the holders of record on such date of stock entitled to notice of or to vote at such meeting shall be entitled to notice of or to vote at such meeting, or unless a new 26 record date be fixed as provided in Article II, Section 7 of these by-laws, any adjournment thereof. The board of directors may at its option, in lieu of fixing a record date as aforesaid, prescribe a period, not exceeding sixty (60) days prior to any meeting of stockholders, during which no transfer of shares on the books of the corporation may be made. The board of directors may fix a day and hour, not exceeding sixty (60) days preceding the date fixed for the payment of a dividend or the making of any distribution, or for the delivery of evidences or rights or evidences of interests arising out of any change, conversion or exchange of stock, as a record time for the determination of the stockholders, or stockholders of any class or series, entitled to receive any such dividend, distribution, rights, or interests, and in such case only stockholders of record at the time so fixed shall be entitled to receive such dividend, distribution, rights, or interests, or the board of directors may at its option prescribe a period, not exceeding sixty (60) days prior to the date for such payment, distribution or delivery, during which no transfer of stock on the books of the corporation may be made. Section 5. Lost Stock Certificates: The holder of any certificate representing shares of stock of the corporation shall immediately notify the corporation of any mutilation, loss, or destruction thereof, and the board of directors or an officer or officers duly authorized thereunto by the board of directors may in its or his discretion authorize one or more new certificates for the same number of shares in the aggregate to be issued to such holder upon the surrender of the mutilated certificate, or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and the deposit of indemnity by way of bond or otherwise in such form and amount and with such surety or sureties or security as the board of directors or such officer or officers may require to protect the corporation against loss or liability by reason of the issuance of such new certificates; but the board of directors may in its discretion refuse to issue new certificates save upon the order of the court having jurisdiction in such matters. 27 Section 6. Scrip: The board of directors may from time to time authorize the issuance by the corporation of scrip certificates representing interests in fractions of a full share of any class or series of stock of the corporation, and, subject to the provisions of the corporate charter and applicable provisions of law, shall have power to prescribe the rights, and the conditions and limitations thereof, to which the holders of such scrip certificates shall be entitled in respect of such scrip certificates and of the interests in shares of stock of the corporation represented thereby, which rights and the conditions and limitations thereon shall be set forth therein to the extent required by law. Such scrip certificates may be issued in registered or bearer form, as the board of directors may determine. ARTICLE VIII GENERAL PROVISIONS Section 1. Finances: The funds of the corporation shall be deposited in its name with such bank or banks, firm or firms of bankers, trust company or trust companies as the board of directors may from time to time designate. All checks, notes, drafts and other negotiable instruments of the corporation shall be signed by such officer or officers, agent or agents, employee or employees or such other person or persons as may be designated by the board of directors from time to time by resolution, or by the Chairman of the Board or the President or the Treasurer in the exercise of authority conferred by resolution of the board of directors. No officers, agents, employees of the corporation, or other person, alone or with others, shall have power to make any checks, notes, drafts or other negotiable instruments in the name of the corporation or to bind the corporation thereby, except as in this article provided. Section 2. Fiscal Year: The fiscal year of the corporation shall be the calendar year unless otherwise provided by the board of directors. 28 ARTICLE IX CORPORATE SEAL Section 1. Form of Seal: The seal of the corporation shall bear the name of the corporation, the year of its incorporation, and such appropriate design as the board of directors may approve. The seal on stock certificates or on any corporate obligation for the payment of money may be facsimile. ARTICLE X AMENDMENTS Section 1. Procedure: These by-laws may be added to, amended, altered, or repealed at any meeting of stockholders, notice of which shall have referred to the proposed action, by the vote of the holders of record of a majority of the outstanding shares of the corporation entitled to vote, or, to the extent permitted by law, at any meeting of the board of directors, notice of which shall have referred to the proposed action, by the affirmative vote of a majority of the board of directors. Section 2. Amendment of By-Law Regulating Election of Directors: If any by-law regulating an impending election of directors is adopted or amended or repealed by the board of directors, there shall be set forth in the notice of the next meeting of stockholders for the election of directors the by-law so adopted or amended or repealed, together with a concise statement of the changes made. EXHIBIT 10(c) FIRST AMENDMENT OF MASTER RESTRUCTURING AGREEMENT AMENDMENT, entered into on March 31, 1998 (the "Amendment") by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company") and the several independent power producers identified as such on the signature pages hereto (each, an "IPP" and collectively, the "IPPs"). RECITALS The Company and the IPPs are parties to that certain Master Restructuring Agreement entered into on July 9, 1997 (the "MRA"), and such parties desire to amend the MRA as set forth herein. NOW, THEREFORE, the parties hereby agree as follows: 1. DEFINED TERMS. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the MRA. 2. AMENDMENT. The definition of the term "Expiration Date" in Section 1 of the MRA is hereby amended by deleting said definition and substituting the following therefor: "Expiration Date" shall mean July 15, 1998, except as otherwise provided in Sections 2.7(b) and 12.3(b). 3. NO OTHER AMENDMENT. Except as expressly set forth in this Amendment, none of the rights, obligations, terms, covenants or conditions of the Parties pursuant to the MRA shall be amended, modified, waived, terminated or otherwise affected in any manner whatsoever. 4. COUNTERPARTS; FACSIMILE. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment may be delivered with only a facsimile signature, with the same force and effect as if an original signature had been delivered. 5. ENTIRE AGREEMENT. This Amendment constitutes the entire agreement among the Parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, among the Parties hereto with respect thereto. IN WITNESS WHEREOF, the parties have duly executed this Agreement, effective as of the day and year first above written. Niagara Mohawk Power Corporation By: /s/ William F. Edwards ---------------------- Name: William F. Edwards Title: Senior Vice President American Ref-Fuel Company of Niagara, L.P. By: /s/ Richard Oliver ------------------ Name: Richard Oliver Title: Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By: /s/ Luis Tellez ---------------- Name: Luis Tellez Title: Vice President Project Orange Associates, L.P. By: NCP Syracuse, Inc., Its General Partner By: NCP Energy, Inc., Its Attorney-in-Fact By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner By: /s/ Mark P. Barry ----------------- Name: Mark P. Barry Title: Vice President Cogen Energy Technology L.P. By: Cogen Energy Technology, Inc., Its General Partner By: /s/ John E. Guinness -------------------- Name: John E. Guinness Title: President Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Harbinger Lyonsdale L.L.C. Its Managing General Partner By: /s/ Patrick E. Molony --------------------- Name: Patrick E. Molony Title: Vice President Encogen Four Partners, L.P. By: EDC Four Inc., Its General Partner By: /s/ Melvin E. Wentz ------------------- Name: Melvin E. Wentz Title: President NorCon Power Partners, L.P. By: Northern Consolidated Power, Inc., Its General Partner By: /s/ J. Douglas Divine --------------------- Name: J. Douglas Divine Title: Vice President - Strategic Planning Indeck-Ilion Limited Partnership By: Indeck Energy Services of Ilion, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Yerkes Limited Partnership By: Indeck-Yerkes Energy Services, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Olean Limited Partnership By: Indeck Energy Services of Olean, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Oswego Limited Partnership By: Indeck Energy Services of Oswego, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Black River Limited Partnership By: Jones Black River Services, Inc., Its Managing General Partner By: /s/ William A. Garnett ---------------------- Name: William A. Garnett Title: President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power 15 Incorporated, A General Partner By: Name: Title: By: Westmoreland-Rensselaer, L.P., A General Partner By: WEI-Rensselaer, Inc. A General Partner By: Name: Title: Salt City Energy Venture, L.P. By: Salt City Energy, LLC, Its General Partner By: /s/ Edward Barno ---------------- Name: Edward Barno Title: Member AG-Energy, L.P. By: AG-Energy, Inc., Its General Partner By: Name: Title: Seneca Power Partners, L.P. By: Seneca Power Corporation, Its General Partner By: Name: Title: Sterling Power Partners, L.P. By: Sterling Power, Ltd., Its General Partner By: Name: Title: Power City Partners, L.P. By: Power City Generating, Inc., Its General Partner By: Name: Title: P&N Partners, L.P. By: P&N Energy Systems, Inc., Its General Partner By: Name: Title: Selkirk Cogen Partners, L.P. By: JMC Selkirk, Inc., Managing General Partner By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President East Syracuse Generating Company, L.P. By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President Kamine/Besicorp Carthage L.P. By: Kamine Carthage Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Carthage, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp South Glens Falls L.P. By: Kamine South Glens Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta South Glens Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Natural Dam L.P. By: Kamine Natural Dam Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Natural Dam, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Syracuse, L.P. By: Kamine Syracuse Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Syracuse, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Beaver Falls, L.P. By: Kamine Beaver Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Beaver Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President United Development Group - Niagara, L.P. By: United Development Group - Niagara, Inc., Its General Partner By: /s/ W. John Fair ---------------- Name: W. John Fair Title: President SECOND AMENDMENT OF MASTER RESTRUCTURING AGREEMENT AMENDMENT entered into on April 21, 1998 (the "Amendment") by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company") and the several independent power producers identified as such on the signature pages hereto (each, an "IPP" and collectively, the "IPPs"). RECITALS (A) The Company and the IPPs are parties to that certain Master Restructuring Agreement entered into on July 9, 1997, as amended by the First Amendment of Master Restructuring Agreement entered into on March 31, 1998 (as so amended, the "MRA"). (B) The MRA has been terminated with respect to Oxbow Power Corporation of North Tonawanda, New York, Inc. ("Oxbow") pursuant to Section 2.6 of the MRA. (C) Pursuant to an agreement dated September 26, 1997 (the "NorCon Agreement"), the Company and NorCon have agreed that NorCon's Existing PPA shall be a Terminating PPA and to amend NorCon's share of the Allocation. (D) Pursuant to an agreement dated February 25, 1998 (the "Encogen Amendment"), the Company and Encogen Four Partners, L.P. ("Encogen") have agreed to amend Encogen's share of the Allocation. (E) The Parties desire to amend the MRA to reflect certain modifications to the terms and conditions of the MRA as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 6. DEFINED TERMS. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the MRA. 7. AMENDMENTS. (A) DEFINITIONS. Sections 1 and 2.9 of the MRA are hereby amended by deleting the definitions of the following terms set forth therein, and substituting and/or adding the following definitions: "Conditions Determination Date" shall mean May 7, 1998, except as otherwise provided in Section 2.7(b). "Scheduled Date" shall mean June 30, 1998. "Contract Adjustment" shall mean the annual aggregate Contract Adjustment set forth on Attachment A-3 to Exhibit A to the MRA, as adjusted by Sections 2.5 and 2.6 and as the same may be further adjusted pursuant to Sections 2.7 or 12.4(b) of the MRA. For purposes hereof, the Contract Adjustment shall be determined after giving effect to all adjustments required to be made hereunder through the Consummation Date. "Contract Price Discounts" shall mean the annual aggregate Contract Price Discounts set forth on Exhibit B annexed to this Amendment, which includes adjustments to reflect the termination of the MRA with respect to Oxbow and the NorCon Agreement, which amount shall be further adjusted in the event the MRA is terminated with respect to any IPP whose Existing PPA is set forth on Schedule 2.3, by reducing the annual aggregate Contract Price Discounts set forth on Exhibit B annexed to this Amendment by the product of (x) the number of megawatt hours in the respective Contract Year set forth in the Restated Contract allocated to any such IPP with respect to which the MRA is terminated and (y) $5.00/MWh in the third through ninth Contract Years and $2.50/MWh in the tenth Contract Year. For purposes hereof, the Contract Price Discounts shall be determined after giving effect to all adjustments required to be made hereunder through the Consummation Date. (B) CONTRACT ADJUSTMENT; CONTRACT PRICE DISCOUNTS. A new Section 2.10 is hereby added to the MRA, which reads in its entirety as follows: 2.10 CONTRACT ADJUSTMENT; CONTRACT PRICE DISCOUNTS. (a) On the Consummation Date, the Cash Payment to be paid by the Company shall be reduced by an amount equal to the sum of (i) the present value of the Contract Adjustment for the first through tenth Contract Years under the Restated Contracts, which present value shall be determined as of the Consummation Date using a discount rate of ten percent (10%) per annum, mid-year convention, plus (ii) the present value of the Contract Price Discounts for the third through tenth Contract Years under the Restated Contracts, which present value shall be determined as of the Consummation Date using a discount rate of seven and one- half percent (7.5%) per annum, mid-year convention. (b) The Company and the IPPs shall, not later than five (5) Business Days after the Conditions Determination Date, calculate and agree on the amount of the reduction of the Cash Payment pursuant to subsection (a) above. For purposes of illustration only, if no IPP is hereafter terminated from the MRA, then the reduction of the Cash Payment pursuant to subsection (a)(i) will be $54,659,857 and pursuant to subsection (a)(ii) will be $102,420,244. The calculated and agreed to amounts shall be further adjusted in the event that following such calculation any IPP is terminated from the MRA. As soon as practicable following such calculation (or further adjustment thereto), the Company and the IPPs shall give an appropriate notice or notices to the Depositary to effect the reduction of the Cash Payment pursuant to the provisions of this Section 2.10. The IPPs shall cause WP&Co. to give an appropriate notice to the Depositary to effect such reduction among the individual IPPs. (c) The Parties acknowledge and agree that the Contract Adjustment required to be realized by the Company pursuant to Section 2.9 of the MRA will be realized by the Company upon reduction of the Cash Payment pursuant to subsection (a) above. (d) The Parties acknowledge and agree that the contract prices under each of the Restated Contracts will be increased by $5.00/MWh in the third through ninth Contract Years and by $2.50/MWh in the tenth Contract Year under the Restated Contracts and that the Restated Contracts to be entered into pursuant to Section 2.3 of the MRA shall be adjusted accordingly. (C) NEGOTIATIONS. (1) Section 2.7 is hereby modified as follows: (i) The words "not later than the date which is ten (10) Business Days prior to the Conditions Determination Date" in the first sentence of Section 2.7(b) of the MRA are changed to "not later than April 30, 1998". (ii) For purposes of Section 2.7(b), the term "Contract(s)" also shall include the Fixed Price Swap Contracts. (2) The following new sub-sections (c) and (d) are hereby added to Section 2.7 of the MRA, which read in their entirety as follows: (c) The Company agrees to use its Reasonable Best Efforts (i) to negotiate with the IPPs and Constellation Power Source, Inc. ("CPS") to agree, not later than April 30, 1998, on a final form of the Fixed Price Swap Contracts. The IPPs agree to use their Reasonable Best Efforts to negotiate with CPS and enter into, not later than April 30, 1998, a definitive agreement with respect to the purchase by CPS or its designee of the Fixed Price Swap Contracts on the Consummation Date (the "CPS Purchase Agreement"). The CPS Purchase Agreement (other than the consideration to be paid by CPS, which shall be redacted) shall be made available to the Company as soon as practicable, in order to provide the Company a reasonable opportunity to review same in connection with the approvals and determinations to be made by the Company pursuant to this Section 2.7(c). If the CPS Purchase Agreement shall contain any conditions to the obligations of CPS and/or the IPPs to consummate the purchase of the Fixed Price Swap Contracts that differ materially from the conditions to the obligations of each IPP to consummate the Restructuring under the MRA on the Consummation Date, then such conditions shall be subject to the Company's approval, which approval shall be given (or not given) by the Company not later than April 30, 1998. The Company also shall notify the IPPs, not later than April 30, 1998, if the Company determines that the purchaser of the Fixed Price Swap Contracts under the CPS Purchase Agreement is not a permitted counterparty in accordance with Section 2.4 of the MRA, failing which such counterparty shall be deemed an "Approved Assignee" in accordance with Section 2.4(iii). (d) If requested by such IPP, the Company and each IPP with a Terminating PPA shall use their Reasonable Best Efforts (i) to negotiate and agree on new or amended gas transportation agreements between the Company and each IPP with a Terminating PPA that has an existing gas transportation agreement with the Company and (ii) to negotiate and agree on amended interconnection agreements or interconnection arrangements between the Company and each IPP with a Terminating PPA, in each case in order to complete same not later than April 30, 1998. (D) ALLOCABLE CONSIDERATION. In order to reflect the adjustments to the amount of the Cash Payment and the number of Company Shares resulting from the termination of the MRA with respect to Oxbow, the NorCon Agreement and the Encogen Amendment (but not to reflect any reduction of the Cash Payment pursuant to Section 2.10), Section 3.1 of the MRA is hereby amended by deleting same in its entirety and substituting the following therefor: 3.1 ALLOCABLE CONSIDERATION. The Company shall, not later than 10:00 a.m. on the Consummation Date, pay and/or deliver to the Depositary on behalf of the IPPs or their respective designees, the following (referred to herein as the "Allocable Consideration"): (a) Three billion five hundred fifty-two million eight hundred four thousand dollars ($3,552,804,000) (the "Cash Payment"); (b) Forty-two million nine hundred forty-five thousand five hundred twelve (42,945,512) newly-issued, fully-paid and nonassessable shares ("Company Shares") of Common Stock of the Company, which number of Company Shares shall be subject to adjustment in accordance with Section 3.5 hereof; and (c) The cash amount to be paid by the Company to Encogen pursuant to the Encogen Amendment in lieu of Company Shares allocated to Encogen in the original Allocation. (E) SHORT-TERM NOTES; ADDITIONAL CASH PAYMENT. Pursuant to Section 3.2 of the MRA, the Company hereby gives notice of its election to deliver the Additional Cash Payment in lieu of the Short-Term Notes. The Company shall, not later than 10:00 a.m. on the Consummation Date, pay the Depositary the Additional Cash Payment in accordance with Section 3.2 of the MRA. (F) ACQUISITION OF COMPANY SHARES. The existing Section 3.3 of the MRA is hereby re-designated as "sub-section (a)" of Section 3.3, and the following new sub-section (b) is hereby added to Section 3.3 of the MRA: (b) Any IPP that pursuant to the Allocation will acquire Company Shares shall have the right to name as the designee of such Company Shares (in accordance with Section 3.3(a) above) WP&Co. (or its broker-dealer affiliate) or another person acting as a broker-dealer for distribution, and not for investment purposes, with respect to the Company Shares, for purposes of effecting one or more block trades of such Company Shares or an underwritten offering of such Company Shares (in each case pursuant to the Shelf Registration Statement) at or immediately following the Consummation Date to a person or persons that, to the Knowledge (as said term is defined in the Shareholder's Agreement annexed as Exhibit 3.7 hereto) of the selling IPP, is an Eligible Purchaser (referred to herein as the "Initial Resale"). For purposes of this Section 3.3, an "Eligible Purchaser" shall be any person who (regardless of the number of Company Shares acquired by such person), were it to acquire direct or indirect beneficial ownership of more than five percent of the total outstanding shares of Common Stock of the Company, would be eligible by virtue of the provisions of Rule 13d-1(b) or (c) under the Exchange Act to file a Statement on Schedule 13G in respect of such beneficial ownership in lieu of a Statement on Schedule 13D. In connection with any such issuance or sale of Company Shares, (i) if the Company Shares are issued to a broker- dealer, the Company Shares so issued shall not bear the legend required by Section 3.6, (ii) neither the broker- dealer nor any purchaser of the Company Shares shall be required to execute a Shareholders' Agreement in accordance with Section 3.7 (unless such purchaser is a permitted designee pursuant to Section 3.3(a) who, had it acquired Company Shares pursuant to Section 3.3(a), would have been required to execute a Shareholder's Agreement) and (iii) the broker-dealer shall not be required to provide to the Company the representation letters required by Sections 3.7 and 5.6, but any purchaser of the Company Shares shall provide to the Company the representation letter required by Section 3.7. Nothing contained in this Section 3.3(b) shall prohibit any sale of Company Shares by an IPP that is otherwise not prohibited by this Agreement or, if applicable, the Shareholder's Agreement. (G) INITIAL RESALE. The following new sub-section (c) is hereby added to Section 3.6 of the MRA: (c) In order to facilitate the disposition of the Company Shares, the Company agrees to reasonably cooperate with WP&Co. (or its broker-dealer affiliate) or other broker-dealer in connection with the Initial Resale as described in Section 3.3(b) and, without limiting the generality of the foregoing, to permit WP&Co. (or its broker-dealer affiliate) or such other broker-dealer to participate with the Company in all material presentations to rating agencies and investors in connection with the Public Offering and to invite potential investors to such presentations. The Parties agree that DLJ shall participate in any Initial Resale that is organized by WP&Co. (or its broker-dealer affiliate). The Company also agrees, at the request of the IPPs, to cooperate with CPS in connection with CPS's proposed sale of bonds in connection with the purchase of the Fixed Price Swap Contracts. (H) CONDITIONS TO EACH IPP'S OBLIGATIONS ON THE CONSUMMATION DATE. New Sections 8.14 and 8.15 are hereby added to the MRA, which read in their entirety as follows: 8.14 SALE OF FIXED PRICE SWAP CONTRACTS. If the CPS Purchase Agreement has been entered into as contemplated by Section 2.7(c) and the IPPs shall give a notice designating CPS or its designee as the counterparty pursuant to Section 2.4, the Fixed Price Swap Contracts shall have been issued by the Company to CPS or its designee in accordance with the terms of the CPS Purchase Agreement. 8.15 SELKIRK INDENTURE APPROVAL. The obligations of Selkirk Cogen Partners, L.P. ("Selkirk") (and only of Selkirk) to consummate the Restructuring are subject to, at Selkirk's option, either (a) receipt of the approval of its bondholders to the Restructuring as its affects Selkirk or (b) a conclusive determination by Selkirk made in a written notice to the Company that Selkirk will undertake the Restructuring as it affects Selkirk without a vote of its bondholders (the applicable event in the preceding clauses (a) and (b) being referred to herein as the "Indenture Approval"). If, on or before the Consummation Date, the Indenture Approval has not been obtained and Selkirk nevertheless elects to proceed with the Restructuring, the transactions contemplated by this Agreement with respect to Selkirk shall be consummated on the Consummation Date in escrow by delivering Selkirk's share of the Allocation, including any related documentation, to the Escrow Agent pending receipt of the Indenture Approval. In such event, the Company and Selkirk shall enter into an escrow agreement with the Escrow Agent (in substantially the same form, with such changes as may be appropriate, as the Escrow Agreement) setting forth the rights and obligations of the Company and Selkirk prior to receipt of the Indenture Approval and in the event that the Indenture Approval is not obtained. Upon the later to occur of the Consummation Date or receipt of the Indenture Approval (and provided that this Agreement shall not otherwise have been terminated with respect to Selkirk as provided herein), the Company and Selkirk shall promptly enter into the Restated Contract, and the Company and Selkirk shall simultaneously reconcile between them in cash any payments made pursuant to Selkirk's Existing PPA which are in excess of or less than payments that would have been made pursuant to Selkirk's Restated Contract had such Restated Contract been in effect from the Consummation Date based on a methodology to be mutually agreed to by the Company and Selkirk, and the term of the Restated Contract between the Company and Selkirk shall be determined as if such Restated Contract had commenced as of the Consummation Date. If (i) the Indenture Approval has not been received on or before August 31, 1998 in form and substance reasonably acceptable to Selkirk or (ii) prior to August 31, 1998, Selkirk has concluded in a written notice to the Company that the Indenture Approval cannot be expected to be received on or before August 31, 1998 in form and substance acceptable to Selkirk, then the Agreement shall be deemed for all purposes under this Agreement (except as otherwise provided in Section 12.4(d)) to have terminated with respect to Selkirk prior to the Consummation Date in accordance with Section 12.2(c). In the event of such termination with respect to Selkirk, the Contract Price Discounts and the reduction of the Cash Payment pursuant to Section 2.10(a)(ii) each shall be re-calculated as if this Agreement was terminated with respect to Selkirk prior to the Consummation Date and the amount by which such reduction is decreased as a result of such re-calculation shall promptly be paid by the Company to the Depositary on behalf of the IPPs or as the IPPs may otherwise direct. Failure of Selkirk to obtain the Indenture Approval prior to the Conditions Determination Date shall not be deemed a waiver of any condition in accordance with Section 10.1(c). The provisions of this Section 8.15 shall survive the Consummation Date until fully performed. (I) SCHEDULES. In order to reflect that NorCon's Existing PPA shall be a Terminating PPA, NorCon's Existing PPA shall be deleted from Schedule 2.3 annexed to the MRA and shall be added to Schedule 2.1 annexed to the MRA. (J) SELKIRK TERMINATION. The following new sub- section (d) is hereby added to Section 12.4 of the MRA: (d) Notwithstanding anything to the contrary contained in Section 12.4(b), in the event this Agreement shall terminate with respect to Selkirk for any reason, including but not limited to pursuant to Section 8.15, then (x) the aggregate contract quantity of energy and aggregate contract quantity of installed capacity under the Restated Contracts shall be reduced by the contract quantity of energy and contract quantity of installed capacity allocated to Selkirk in the Contracts Allocation and Selkirk shall not enter into a Restated Contract and (y) with respect to the negative Cash Payment of $2,211,000 allocated to Selkirk in the initial Allocation, the Company shall pay such sum as follows: (A) if this Agreement shall terminate with respect to Selkirk on or before the Consummation Date, the Company shall add the sum of $2,211,000 to the Cash Payment and pay such additional sum to the Depositary on the Consummation Date in the same manner as provided in Section 3.3 or (B) if this Agreement shall terminate with respect to Selkirk after the Consummation Date in accordance with Section 8.15 hereof, the Company shall pay the sum of $2,211,000 to Selkirk within two Business Days of such termination (by wire transfer of federal funds to the account designated by Selkirk). The provisions of this Section 12.4(d) shall survive the Consummation Date until fully performed. 8.16 NO OTHER AMENDMENT. Except as expressly set forth in this Amendment, the NorCon Agreement (with respect to the Company and NorCon only) and the Encogen Amendment (with respect to the Company and Encogen only), none of the rights or obligations of the parties hereto pursuant to the MRA shall be amended, modified, waived, terminated or otherwise affected in any manner whatsoever. Without limiting the generality of the foregoing, the parties hereto agree that except as expressly set forth in the NorCon Agreement (with respect to NorCon only), the Encogen Amendment (with respect to Encogen only) and herein, the Allocation with respect to each IPP shall remain unchanged, and nothing contained herein shall increase or reduce the Allocable Consideration payable to any IPP, nor in any way affect the Additional Cash Payment, or the terms of any Termination Agreements, Amended PPAs, Restated Contracts or Fixed Price Swap Contracts. The Company, on the one hand, and NorCon and Encogen, respectively, on the other, represent that they have given (or covenant that promptly after the execution hereof they will give) an appropriate notice to WP&Co. and the Depositary pursuant to Section 3.4(a) of the MRA to reflect the changes in NorCon's and Encogen's shares of the Allocation resulting from the NorCon Agreement and Encogen Amendment, respectively. 9. RATIFICATION. Each party hereto agrees that (i) the MRA is in full force and effect and (ii) to the best knowledge of such party, there is no current breach or default on the part of any other party or any other event or condition which, upon notice, the passage of time, or both, would constitute such a breach or default. 10. COUNTERPARTS; FACSIMILE. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment may be delivered with only a facsimile signature, with the same force and effect as if an original signature had been delivered. 11. ENTIRE AGREEMENT. This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, between the parties hereto with respect thereto. IN WITNESS WHEREOF, the parties have duly executed this Second Amendment of Master Restructuring Agreement, effective as of the day and year first above written. Niagara Mohawk Power Corporation By: /s/ William F. Edwards -------------------------- Name: William F. Edwards Title: Senior Vice President American Ref-Fuel Company of Niagara, L.P. By /s/ Richard Oliver ------------------ Name: Richard Oliver Title: Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Project Orange Associates, L.P. By: NCP Syracuse, Inc., Its General Partner By: NCP Energy, Inc., Its Attorney-in-Fact By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner By: Name: Title: Cogen Energy Technology L.P. By: Cogen Energy Technology, Inc., Its General Partner By: /s/ John E. Guinness -------------------- Name: John E. Guinness Title: President Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Harbinger Lyonsdale L.L.C. Its Managing General Partner By: /s/ Patrick E. Molony --------------------- Name: Patrick E. Molony Title: Vice President Encogen Four Partners, L.P. By: EDC Four Inc., Its General Partner By: /s/ Melvin E. Wentz ------------------- Name: Melvin E. Wentz Title: President NorCon Power Partners, L.P. By: Northern Consolidated Power, Inc., Its General Partner By: /s/ J. Douglas Divine --------------------- Name: J. Douglas Divine Title: Vice President - Strategic Planning Indeck-Ilion Limited Partnership By: Indeck Energy Services of Ilion, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Yerkes Limited Partnership By: Indeck-Yerkes Energy Services, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Olean Limited Partnership By: Indeck Energy Services of Olean, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Oswego Limited Partnership By: Indeck Energy Services of Oswego, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Black River Limited Partnership By: Jones Black River Services, Inc., Its Managing General Partner By: /s/ William a. Garnett ---------------------- Name: William A. Garnett Title: President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power 15 Incorporated, A General Partner By: Name: Title: By: Westmoreland-Rensselaer, L.P., A General Partner By: WEI-Rensselaer, Inc. A General Partner By: Name: Title: Salt City Energy Venture, L.P. By: Salt City Energy, LLC, Its General Partner By: /s/ Edward Barno ---------------- Name: Edward Barno Title: Member AG-Energy, L.P. By: AG-Energy, Inc., Its General Partner By: Name: Title: Seneca Power Partners, L.P. By: Seneca Power Corporation, Its General Partner By: Name: Title: Sterling Power Partners, L.P. By: Sterling Power, Ltd., Its General Partner By: Name: Title: Power City Partners, L.P. By: Power City Generating, Inc., Its General Partner By: Name: Title: P&N Partners, L.P. By: P&N Energy Systems, Inc., Its General Partner By: Name: Title: Selkirk Cogen Partners, L.P. By: JMC Selkirk, Inc., Managing General Partner By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President East Syracuse Generating Company, L.P. By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President Kamine/Besicorp Carthage L.P. By: Kamine Carthage Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Carthage, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp South Glens Falls L.P. By: Kamine South Glens Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta South Glens Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Natural Dam L.P. By: Kamine Natural Dam Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Natural Dam, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Syracuse, L.P. By: Kamine Syracuse Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Syracuse, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Beaver Falls, L.P. By: Kamine Beaver Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Beaver Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President United Development Group - Niagara, L.P. By: United Development Group - Niagara, Inc., Its General Partner By: /s/ W. John Fair ---------------- Name: W. John Fair Title: President EXHIBIT B TO SECOND AMENDMENT OF MASTER RESTRUCTURING AGREEMENT CONTRACT PRICE DISCOUNTS AGGREGATE ANNUAL AGGREGATE CONTRACT MEGAWATT CONTRACT PRICE CONTRACT PRICE YEAR HOURS* DISCOUNT/MWh DISCOUNTS 3 4,036,541 $5.00 $20,182,705 4 4,077,076 $5.00 $20,385,380 5 4,082,893 $5.00 $20,414,465 6 4,101,576 $5.00 $20,507,880 7 4,112,341 $5.00 $20,561,705 8 4,124,871 $5.00 $20,624,355 9 4,132,976 $5.00 $20,664,880 10 4,144,776 $2.50 $10,361,940 * Includes megawatt hours under Restated Contracts to be entered into by all IPPs that are parties to Existing PPAs listed on Schedule 2.3 of the MRA, other than Oxbow and NorCon. THIRD AMENDMENT OF MASTER RESTRUCTURING AGREEMENT AMENDMENT entered into on April 30, 1998 (the "Amendment") by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company") and the several independent power producers identified as such on the signature pages hereto (each, an "IPP" and collectively, the "IPPs"). RECITALS (A) The Company and the IPPs are parties to that certain Master Restructuring Agreement entered into on July 9, 1997, as amended by the First Amendment of Master Restructuring Agreement entered into on March 31, 1998 and the Second Amendment of Master Restructuring Agreement entered into on April 21, 1998 (as so amended, the "MRA"). (B) Pursuant to Section 2.7(b) of the MRA, not later than April 30, 1998, the Company shall deliver a notice of any Contracts which have not been agreed upon in their final form. (C) The parties believe that all Contracts, as well as the gas transportation agreements and interconnection agreements or arrangements referred to in Section 2.7(d) of the MRA, will be agreed upon by May 5, 1998, but desire extra time to finalize such agreements without commencing the steps required by Section 2.7(b). (D) Section 10.1(b)(ii) of the MRA requires the Company's condition as to Third Party Releases to be satisfied or waived as of the Conditions Determination Date, yet many of such releases cannot be obtained until the Consummation. (E) The Parties desire to amend the MRA to reflect certain modifications to the terms and conditions of the MRA as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 12. DEFINED TERMS. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the MRA. 13. AMENDMENTS. (A) NEGOTIATIONS. (1) Sections 2.7(b), (c) and (d) are hereby modified to replace "April 30, 1998" in all places with "noon on May 5, 1998". (2) Section 2.7(b)(ii) is hereby amended to replace the words "within five (5) Business Days following the receipt of such notice" and the words "on or before ten (10) Business Days after receipt of the Company's subclause (y) notice" with, in each case, "no later than 6:00 p.m. (New York time) on May 6, 1998". (3) The following new sub-section (e) is hereby added to Section 2.7 of the MRA, which reads in its entirety as follows: (e) The Company agrees that neither an IPP's delivery of a Termination Agreement initialed by such IPP (having a Terminating PPA pursuant to Schedule 2.1), regardless of the terms thereof with respect to gas transportation agreements and interconnection agreements and interconnection arrangements ("ancillary agreements"), nor the Company's failure to issue a Company Notice pursuant to Section 2.7(b) with respect to such IPP, shall be construed to preclude such IPP from terminating the MRA with respect to itself pursuant to Section 12.2(c) on or before the Conditions Determination Date in the event such IPP has not concluded negotiations of the ancillary agreements with the Company in a manner satisfactory to such IPP. In the event such IPP has not concluded negotiations of the ancillary agreements with the Company in a manner satisfactory to such IPP (whether before or after the Conditions Determination Date), then such IPP, at its option, may add to the list of agreements to be terminated pursuant to the Termination Agreement any or all of such IPP's existing ancillary agreements and may elect to retain its existing interconnection agreement or existing interconnection arrangements. The Company agrees to continue the negotiations referenced in Section 2.7(d) with respect to such ancillary agreements through the Conditions Determination Date and thereafter. (B) REPRESENTATION LETTERS. A new Section 10.6 is hereby added to read as follows: 10.6. REPRESENTATION LETTERS. Notwithstanding Sections 8.3(a) and 9.3(a), or Exhibits 8.3A and 9.3A, respectively, in the event that an IPP shall elect (a) pursuant to Section 10.1(c)(ii)(x) to waive any of the conditions set forth in Section 8.10 or 8.11 with respect to a third party or (b) pursuant to Section 9.7 to provide the Company with an indemnity in lieu of a NMPC/Third Party Release with respect to a third party or in the event the Company shall elect pursuant to Section 10.1(b)(ii)(x) (as modified by this Amendment with respect to Third Party Releases) to waive any of the conditions set forth in Section 9.7, then in any such case such party shall not be required to provide the representation and warranty set forth in paragraph 4(b)(i) of its respective representation letter annexed as Exhibit 8.3A or 9.3A with respect to the applicable mortgage, indenture, agreement, instrument or contract with such third party. (C) SATISFACTION OF CONDITIONS; CONSUMMATION. (1) Subsections 10.1(b) and (c) are hereby amended to delete the words "or within three (3) Business Days before". (2) In the event the MRA is terminated with respect to any IPP(s) on or before the Conditions Determination Date and the Company desires to terminate the MRA pursuant to Section 12.1(d) as a result of such termination with respect to any IPP(s), the Company shall give notice thereof to all IPPs not later than ten (10) days after the Conditions Determination Date. (D) NMPC/THIRD PARTY RELEASES. Notwithstanding any provision of the MRA to the contrary, the Company's condition set forth in Section 9.7(b) shall remain in effect until the Consummation Date. The only NMPC/Third Party Releases that will be required to be furnished to the Company pursuant to Section 9.7(b) are those set forth on the schedule provided to the IPPs' Special Counsel on or before April 30, 1998. 14. NO OTHER AMENDMENT. Except as expressly set forth in this Amendment, none of the rights or obligations of the parties hereto pursuant to the MRA shall be amended, modified, waived, terminated or otherwise affected in any manner whatsoever. Without limiting the generality of the foregoing, the parties hereto agree that except as expressly set forth in the NorCon Agreement (with respect to NorCon only), the Encogen Amendment (with respect to Encogen only) or any prior amendment of the MRA, the Allocation with respect to each IPP shall remain unchanged, and nothing contained herein shall increase or reduce the Allocable Consideration payable to any IPP, nor in any way affect the Additional Cash Payment, or, except as expressly set forth herein, the terms of any Termination Agreements, Amended PPAs, Restated Contracts or Fixed Price Swap Contracts. 15. RATIFICATION. Each party hereto agrees that (i) the MRA is in full force and effect and (ii) to the best knowledge of such party, there is no current breach or default on the part of any other party or any other event or condition which, upon notice, the passage of time, or both, would constitute such a breach or default. 16. COUNTERPARTS; FACSIMILE. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment may be delivered with only a facsimile signature, with the same force and effect as if an original signature had been delivered. 17. ENTIRE AGREEMENT. This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, between the parties hereto with respect thereto. IN WITNESS WHEREOF, the parties have duly executed this Third Amendment of Master Restructuring Agreement, effective as of the day and year first above written. Niagara Mohawk Power Corporation By: /s/ William F. Edwards ------------------------- Name: William F. Edwards Title: Senior Vice President American Ref-Fuel Company of Niagara, L.P. By: /s/ Richard Oliver ------------------ Name: Richard Oliver Title: Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Project Orange Associates, L.P. By: NCP Syracuse, Inc., Its General Partner By: NCP Energy, Inc., Its Attorney-in-Fact By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner By: Name: Title: Cogen Energy Technology L.P. By: Cogen Energy Technology, Inc., Its General Partner By: /s/ John E. Guinness -------------------- Name: John E. Guinness Title: President Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Harbinger Lyonsdale L.L.C. Its Managing General Partner By: /s/ Patrick E. Molony --------------------- Name: Patrick E. Molony Title: Vice President Encogen Four Partners, L.P. By: EDC Four Inc., Its General Partner By: /s/ Melvin E. Wentz ------------------- Name: Melvin E. Wentz Title: President NorCon Power Partners, L.P. By: Northern Consolidated Power, Inc., Its General Partner By: /s/ J. Douglas Divine --------------------- Name: J. Douglas Divine Title: Vice President - Strategic Planning Indeck-Ilion Limited Partnership By: Indeck Energy Services of Ilion, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Yerkes Limited Partnership By: Indeck-Yerkes Energy Services, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Olean Limited Partnership By: Indeck Energy Services of Olean, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Oswego Limited Partnership By: Indeck Energy Services of Oswego, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Black River Limited Partnership By: Jones Black River Services, Inc., Its Managing General Partner By: /s/ William a. Garnett ---------------------- Name: William A. Garnett Title: President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power 15 Incorporated, A General Partner By: Name: Title: By: Westmoreland-Rensselaer, L.P., A General Partner By: WEI-Rensselaer, Inc. A General Partner By: Name: Title: Salt City Energy Venture, L.P. By: Salt City Energy, LLC, Its General Partner By: /s/ Edward Barno ---------------- Name: Edward Barno Title: Member AG-Energy, L.P. By: AG-Energy, Inc., Its General Partner By: Name: Title: Seneca Power Partners, L.P. By: Seneca Power Corporation, Its General Partner By: Name: Title: Sterling Power Partners, L.P. By: Sterling Power, Ltd., Its General Partner By: Name: Title: Power City Partners, L.P. By: Power City Generating, Inc., Its General Partner By: Name: Title: P&N Partners, L.P. By: P&N Energy Systems, Inc., Its General Partner By: Name: Title: Selkirk Cogen Partners, L.P. By: JMC Selkirk, Inc., Managing General Partner By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President East Syracuse Generating Company, L.P. By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President Kamine/Besicorp Carthage L.P. By: Kamine Carthage Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Carthage, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp South Glens Falls L.P. By: Kamine South Glens Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta South Glens Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Natural Dam L.P. By: Kamine Natural Dam Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Natural Dam, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Syracuse, L.P. By: Kamine Syracuse Cogen Co., Inc., Its General Partner By: /s/ Haraold N. Kamine --------------------- Name: Harold N. Kamine Title: President By: Beta Syracuse, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Beaver Falls, L.P. By: Kamine Beaver Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Beaver Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President United Development Group - Niagara, L.P. By: United Development Group - Niagara, Inc., Its General Partner By: /s/ W. John Fair ---------------- Name: W. John Fair Title: President FOURTH AMENDMENT OF MASTER RESTRUCTURING AGREEMENT AMENDMENT entered into on May 7, 1998 (the "Amendment") by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company") and the several independent power producers identified as such on the signature pages hereto (each, an "IPP" and collectively, the "IPPs"). RECITALS (A) The Company and the IPPs are parties to that certain Master Restructuring Agreement entered into on July 9, 1997, as amended by the First Amendment of Master Restructuring Agreement entered into on March 31, 1998, and the Second Amendment of Master Restructuring Agreement entered into on April 21, 1998, and the Third Amendment of Master Restructuring Agreement entered into on April 30, 1998 (as so amended, the "MRA"). (B) The Parties desire to amend the MRA to reflect certain modifications to the terms and conditions of the MRA as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 18. DEFINED TERMS. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the MRA. 19. AMENDMENT. Section 8.14 of the MRA is hereby deleted in its entirety, and the following new Section 8.14 is hereby substituted therefor, which reads in its entirety as follows: 8.14 SALE OF FIXED PRICE SWAP CONTRACTS. (a) Either (i) NMPC and the IPPs shall have entered into definitive agreements with respect to the purchase by Constellation Power Source, Inc. ("CPS") or its designee of the Fixed Price Swap Contracts on the Consummation Date, including the form of the Fixed Price Swap Contracts (such agreements, collectively, the "CPS Purchase Agreement"), on terms reasonably satisfactory to NMPC and the IPPs, with a purchase price of $330,000,000 and the Fixed Price Swap Contracts shall have been issued by the Company to CPS or its designee in accordance with the terms of the CPS Purchase Agreement and the purchase price therefor shall have been paid to the IPPs on the Consummation Date or (ii) the Company shall have increased the Cash Payment by $330,000,000 (subject to clause (b) below), in which case no Fixed Price Swap Contracts shall be delivered by the Company to the Escrow Agent and all references to the Fixed Price Swap Contracts in this Agreement and in Exhibit A hereto shall be deleted and the section entitled "Fixed Price Swap Contracts" on page 6 of Exhibit A and Attachments A-10 and A-11 to Exhibit A shall be deleted in their entirety. (b) Notwithstanding clause (a)(ii) above, the amount by which the Cash Payment shall be increased pursuant to clause (ii) above shall be reduced by the amount certified by WP&Co. to the Company as being the net amount of the value of the Fixed Price Swap Contracts deemed allocated to any IPP with respect to which the MRA is terminated in accordance with Section 12.2 hereof on or after the Conditions Determination Date. (c) If, at any time on or before the second anniversary of the Consummation Date, NMPC shall consummate any agreement to terminate, materially amend, restate or otherwise restructure (other than as a result of a final judgment in litigation) the Existing PPA of any IPP with respect to which the MRA is terminated pursuant to Section 12.2 and the aggregate fair market value to the terminated IPP at such time of the amended, restated or restructured contract (if any) plus all other consideration paid to such terminated IPP plus the out of pocket expenses incurred by NMPC in connection therewith (as determined in a good faith reasonable manner by NMPC) (the "Aggregate New Value" for such terminated IPP) is less than the Aggregate Allocation Amount (as defined below) for such terminated IPP, NMPC shall thereupon pay WP&Co. on behalf of the remaining IPPs, an amount equal to (a) the reduction in the Cash Payment made pursuant to Section 8.14(b) (the "Section 8.14(b) Reduction") with respect to such terminated IPP times (b) the greater of (i) zero and (ii) one minus (x) the Aggregate New Value for such terminated IPP divided by the Aggregate Allocation Amount for such terminated IPP. As used herein, "Aggregate Allocation Amount" for any terminated IPP means (i) the Section 8.14(b) Reduction for such terminated IPP plus (ii) the fair market value of such terminated IPP's share of the original Allocation (which value shall be determined, in the case of the Company Shares, based on the average closing price of the Company's Common Stock on the New York Stock Exchange on the 20 consecutive trading days ending on (and including) the trading day immediately preceding the Consummation Date). 20. CONTRACTS. (A) In the event that all references to the Fixed Price Swap Contracts are deleted in accordance with clause (ii) of Section 8.14(a) of the MRA, then prior to the Consummation Date and the effectiveness of the Contracts between the Company and any IPP, the Company and each such IPP shall (i) modify the terms of each Contract to delete all references to the Fixed Price Swap Contracts, (ii) jointly deliver executed counterparts of such modified Contracts to the Escrow Agent, and (iii) execute and deliver instructions to the Escrow Agent directing the Escrow Agent to replace the relevant Contracts then held by the Escrow Agent with such modified Contracts. (B) Notwithstanding anything to the contrary contained in Section 2.8 of the MRA, prior the Consummation Date and the effectiveness of the Restated Contracts, NMPC shall, upon the request of any of Cogen Energy Technology L.P., Fulton Cogeneration Associates, Indeck-Oswego Limited Partnership, Indeck-Yerkes Limited Partnership, LG&E Westmoreland Rensselaer, Onondaga Cogeneration Limited Partnership, Project Orange Associates, L.P. or Selkirk Cogen Partners, L.P. (each, a "Continuing IPP"), (i) modify the terms of any of such Continuing IPP's Restated Contracts for the mutual benefit of NMPC and such Continuing IPP to include therein or modify a demonstrated maximum net capacity provision as detailed in Attachment A hereto or such other demonstrated maximum net capacity provision as shall be mutually agreed upon by NMPC and such Continuing IPP, (ii) modify the terms of any of such Continuing IPP's Restated Contracts to include or exclude any other provisions mutually agreed between NMPC and such Continuing IPP, (iii) jointly with such Continuing IPP, deliver executed counterparts of such modified Restated Contracts to the Escrow Agent, and (iv) execute and deliver instructions to the Escrow Agent, jointly with such Continuing IPP, directing the Escrow Agent to replace the relevant Restated Contracts then held by the Escrow Agent with such modified Restated Contracts. 21. NO OTHER AMENDMENT. Except as expressly set forth in this Amendment, none of the rights or obligations of the parties hereto pursuant to the MRA shall be amended, modified, waived, terminated or otherwise affected by this Amendment in any manner whatsoever. Without limiting the generality of the foregoing, the parties hereto agree that except as expressly set forth in the NorCon Agreement (with respect to NorCon only), the Encogen Amendment (with respect to Encogen only), any prior amendment of the MRA, or herein, the Allocation with respect to each IPP shall remain unchanged, and nothing contained herein shall increase or reduce the Allocable Consideration payable to any IPP, nor in any way affect the Additional Cash Payment or, except as expressly set forth herein, the terms of any Termination Agreements, Amended PPAs, Restated Contracts (including any amendments thereto or agreements to amend such Restated Contracts executed prior to the date hereof) or Fixed Price Swap Contracts. 22. RATIFICATION. Each party hereto agrees that (i) the MRA is in full force and effect and (ii) to the best knowledge of such party, there is no current breach or default on the part of any other party or any other event or condition which, upon notice, the passage of time, or both, would constitute such a breach or default. 23. COUNTERPARTS; FACSIMILE. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment may be delivered with only a facsimile signature, with the same force and effect as if an original signature had been delivered. 24. ENTIRE AGREEMENT. This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, between the parties hereto with respect thereto. IN WITNESS WHEREOF, the parties have duly executed this Fourth Amendment of Master Restructuring Agreement, effective as of the day and year first above written. Niagara Mohawk Power Corporation By: /s/ William F. Edwards ------------------------- Name: William F. Edwards Title: Senior Vice President American Ref-Fuel Company of Niagara, L.P. By: /s/ Richard Oliver ------------------ Name: Richard Oliver Title: Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Project Orange Associates, L.P. By: NCP Syracuse, Inc., Its General Partner By: NCP Energy, Inc., Its Attorney-in-Fact By: /s/ Luis Tellez --------------- Name: Luis Tellez Title: Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner By: Name: Title: Cogen Energy Technology L.P. By: Cogen Energy Technology, Inc., Its General Partner By: /s/ John E. Guinness -------------------- Name: John E. Guinness Title: President Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Harbinger Lyonsdale L.L.C. Its Managing General Partner By: /s/ Patrick E. Molony --------------------- Name: Patrick E. Molony Title: Vice President Encogen Four Partners, L.P. By: EDC Four Inc., Its General Partner By: /s/ Melvin E. Wentz ------------------- Name: Melvin E. Wentz Title: President NorCon Power Partners, L.P. By: Northern Consolidated Power, Inc., Its General Partner By: Name: J. Douglas Divine Title: Vice President - Strategic Planning Indeck-Ilion Limited Partnership By: Indeck Energy Services of Ilion, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Yerkes Limited Partnership By: Indeck-Yerkes Energy Services, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Olean Limited Partnership By: Indeck Energy Services of Olean, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Indeck-Oswego Limited Partnership By: Indeck Energy Services of Oswego, Inc., Its General Partner By: /s/ Thomas M. Campone --------------------- Name: Thomas M. Campone Title: President Black River Limited Partnership By: Jones Black River Services, Inc., Its Managing General Partner By: /s/ William A. Garnett ---------------------- Name: William A. Garnett Title: President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power 15 Incorporated, A General Partner By: Name: Title: By: Westmoreland-Rensselaer, L.P., A General Partner By: WEI-Rensselaer, Inc. A General Partner By: Name: Title: Salt City Energy Venture, L.P. By: Salt City Energy, LLC, Its General Partner By: /s/ Edward Barno ---------------- Name: Edward Barno Title: Member AG-Energy, L.P. By: AG-Energy, Inc., Its General Partner By: Name: Title: Seneca Power Partners, L.P. By: Seneca Power Corporation, Its General Partner By: Name: Title: Sterling Power Partners, L.P. By: Sterling Power, Ltd., Its General Partner By: Name: Title: Power City Partners, L.P. By: Power City Generating, Inc., Its General Partner By: Name: Title: P&N Partners, L.P. By: P&N Energy Systems, Inc., Its General Partner By: Name: Title: Selkirk Cogen Partners, L.P. By: JMC Selkirk, Inc., Managing General Partner By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President East Syracuse Generating Company, L.P. By: /s/ George J. Grunbeck ---------------------- Name: George J. Grunbeck Title: Vice President Kamine/Besicorp Carthage L.P. By: Kamine Carthage Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Carthage, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp South Glens Falls L.P. By: Kamine South Glens Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine --------------------- Name: Harold N. Kamine Title: President By: Beta South Glens Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Natural Dam L.P. By: Kamine Natural Dam Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine --------------------- Name: Harold N. Kamine Title: President By: Beta Natural Dam, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Syracuse, L.P. By: Kamine Syracuse Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Syracuse, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President Kamine/Besicorp Beaver Falls, L.P. By: Kamine Beaver Falls Cogen Co., Inc., Its General Partner By: /s/ Harold N. Kamine -------------------- Name: Harold N. Kamine Title: President By: Beta Beaver Falls, Inc., Its General Partner By: /s/ Michael J. Daley -------------------- Name: Michael J. Daley Title: President United Development Group - Niagara, L.P. By: United Development Group - Niagara, Inc., Its General Partner By: /s/ W. John Fair ---------------- Name: W. John Fair Title: President
EXHIBIT 11 NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES Computation of the Average Number of Shares of Common Stock Outstanding For the Three Months Ended March 31, 1998 and 1997 (4) Average Number of Shares Outstanding As Shown on the (1) (2) (3) Consolidated Shares of Number of Share Statement of Income Common Days Days (3 divided by number Stock Outstanding (2 x 1) of Days in Period) ----------- -------------- -------------- ------------------ Three Month's Ended March 31: January 1 - March 31, 1998 144,419,351 90 12,997,741,590 144,419,351 =========== ============== =========== January 1 - March 31, 1997 144,365,214 90 12,992,869,260 Shares issued - Acqusition - Syracuse Suburban Gas Company, Inc - January 6 25,405 85 2,159,425 ----------- -------------- 144,390,619 12,995,028,685 144,389,208 =========== ============== ============ Note: Earnings per share calculated on both a primary and fully diluted basis are the same due to the effects of rounding.
EXHIBIT 12 NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES Statement Showing Computation of Ratio of Earnings to Fixed Charges, Ratio of Earnings to Fixed Charges without AFC and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends for the Twelve Months Ended March 31, 1998 (in thousands of dollars) A. Net Income $ (22,824) B. Taxes Based on Income or Profits 44,187 ----------- C. Earnings, Before Income Taxes 21,363 D. Fixed Charges (a) 304,670 ----------- E. Earnings Before Income Taxes and Fixed Charges 326,033 F. Allowance for Funds Used During Construction (AFC) 12,844 ----------- G. Earnings Before Income Taxes and Fixed Charges without AFC $ 313,189 =========== Preferred Dividend Factor: H. Preferred Dividend Requirements $ 37,221 I. Ratio of Pre-tax Income to Net Income (C / A) (NEGATIVE) ----------- J. Preferred Dividend Factor (H x I) $ 37,221 K. Fixed Charges as Above (D) 304,670 ----------- L. Fixed Charges and Preferred Dividends Combined $ 341,891 =========== M. Ratio of Earnings to Fixed Charges (E / D) 1.07 =========== N. Ratio of Earnings to Fixed Charges without AFC (G / D) 1.03 =========== O. Ratio of Earnings to Fixed Charges and Preferred Dividends Combined (E / L) 0.95 =========== (a) Includes a portion of rentals deemed representative of the interest factor ($26,345).
EXHIBIT 15 May 14, 1998 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that Niagara Mohawk Power Corporation has included our report dated May 14, 1998 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the Registration Statements on Form S-8 (Nos. 33-36189, 33-42771 and 333-13781) in the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 33-50703, 33-51073, 33-54827, 33-55546 and 333-49541) and in the Prospectus/Proxy Statement constituting part of the Registration Statement on Form S-4 (No. 333-49769). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, /s/ Price Waterhouse LLP EX-27 2
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS DEC-31-1998 MAR-31-1998 PER-BOOK 6897664 296976 1266128 1174570 72245 9707583 144419 1780978 691060 2616457 76610 440000 3418299 0 0 0 67065 10120 0 0 3079032 9707583 1098404 52569 964107 964107 134297 4225 138522 65590 20363 9223 11140 0 0 127223 0.08 0
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