-----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, MA0vWAFIvqgv6RrNjrt8pVhZGS0OYM0YjgpuPN5eXe8n7sZwVIzKwmu0ORKsXKZ6 sDAyvE2b0kFXOGmtILBKyQ== 0000071932-97-000014.txt : 19970502 0000071932-97-000014.hdr.sgml : 19970502 ACCESSION NUMBER: 0000071932-97-000014 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970501 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-02987 FILM NUMBER: 97592926 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-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A - ----------- (Amendment Number One) (Mark One) /X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1996 OR / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______ Commission file number 1-2987 - ------------------------------------------------------------------ NIAGARA MOHAWK POWER CORPORATION (Exact name of registrant as specified in its charter) State of New York 15-0265555 - ----------------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 300 Erie Boulevard West, Syracuse, New York 13202 (Address of principal executive offices) (zip code) (315) 474-1511 Registrant's telephone number, including area code - ----------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: (Each class is registered on the New York Stock Exchange) Title of each class Common Stock ($1 par value) Preferred Stock ($100 par Preferred Stock ($25 par value-cumulative): value-cumulative): 3.40% Series 4.10% Series 6.10% Series 9.50% Series 3.60% Series 4.85% Series 7.72% Series Adjustable Rate - 3.90% Series 5.25% Series Series A & Series C Securities registered pursuant to Section 12(g) of the Act: None - ----------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K / X / State the aggregate market value of the voting stock held by non- affiliates of the registrant. Approximately $1,227,000,000 at March 18, 1997. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common stock $1 par value, outstanding at March 18, 1997: 144,390,619. Documents incorporated by reference: Definitive Proxy Statement in connection with annual meeting of stockholders to be held May 6, 1997 incorporated in Part III to the extent described therein. ITEM 3. LEGAL PROCEEDINGS. For a detailed discussion of additional legal proceedings, see Part II, Item 8. Financial Statements and Supplementary Data - "Note 9. Commitments and Contingencies - Tax Assessments, - Litigation and - Environmental Contingencies." See also Item 1. Business - "Environmental Matters - Solid/Hazardous Waste," and Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Announced Agreement-in- Principle to Terminate or Restructure 44 IPP Contracts." The Company is unable to predict the ultimate disposition of the matters referred to below in (2), (3) and (4). For a discussion of the uncertainty regarding the Company's ability to recover these types of expenditures in rates, see Part II, Item 8. Financial Statements and Supplementary Data - "Note 2. Rate and Regulatory Issues and Contingencies." 1. On July 21, 1988, the Company became a defendant in an ongoing Superfund lawsuit in Federal District Court, Northern District of New York (Federal District Court) brought by the Federal Government. This suit involves PCB oil contamination at the York Oil Site in Moira, New York. Waste oil was transported to the site during the 1960's and 1970's by contractors of Peirce Oil Company (owners/operators of the site) who picked up waste oil at locations throughout Central New York, allegedly including one or more Company facilities. The government issued a final settlement demand upon the Company in February 1994, including a settlement figure which was rejected by the Company. The government subsequently filed a complaint against a group of PRPs, including the Company, who subsequently filed third and fourth-party actions against additional parties. Settlement of the litigation occurred in July 1996; the government lodged a Consent Decree with the Federal District Court in November 1996 embodying the settlement terms. The Company's allocated share of liability as a result of this settlement was immaterial to the results of operations and financial condition of the Company. 2. On June 22, 1993, the Company and twenty other industrial entities and the owner/operator of the Pfohl Brothers Landfill near Buffalo, New York, were sued in New York Supreme Court, Erie County, by a group of residents living in the vicinity of the landfill seeking compensation and damages for economic loss and property damage claimed to have resulted from contamination associated with the landfill. In addition, since January 18, 1995, the Company has been named as a defendant in a series of toxic tort actions filed in federal and state courts in the Buffalo area. The suits allege exposure on the part of the plaintiffs to toxic chemicals emanating from the Pfohl Brothers Landfill, resulting in the alleged causation of cancer in each of the plaintiffs. The plaintiffs seek compensatory and punitive damages in the amount of approximately $60 million. The Company has filed answers responding to the claims put forth in the existing suits, denying liability for any of the claimed damages. The Company is participating in joint defense efforts among the defendants during the initial stage of these suits, and intends to vigorously defend against these claims. The Company is unable to predict the ultimate outcome of these proceedings. Regarding the Company's alleged association with conditions at the landfill, notification was received from the DEC in 1986 of its status as a PRP. The Company at that time elected not to take an active role in the remediation process because only minimal evidence existed that hazardous substances generated by the Company were disposed at the Pfohl Brothers Landfill. It has since been alleged, however, that another defendant (Downing Container Division of Waste Mgt. of N.Y.) transported waste materials to the landfill from the Company's Dewey Avenue Service Center during the 1960's. Therefore, in July 1995, the Company elected to become a member of a Steering Committee made up of a group of identified PRPs, thereby participating in the development of an appropriate remedial action for the site while working to achieve an equitable allocation of liability among responsible parties. To date, no governmental action has been taken against the Company as a PRP. The Company continues to investigate the extent of its alleged connection to the landfill to allow for a reasonable allocation of cost liability. 3. On October 23, 1992, the Company petitioned the PSC to order IPPs to post letters of credit or other firm security to protect ratepayers' interests in advance payments made in prior years to these generators. The PSC dismissed the original petition without prejudice. In December 1995, the Company filed a petition with the PSC similar to the one that the Company filed in October 1992. The Company cannot predict the outcome of this action. However, in August 1996, the PSC proposed to examine the circumstances under which a utility, including the Company, should be allowed to demand security from IPPs to ensure the repayment of advance payments made under their purchased power contracts. See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Other Federal and State Regulatory Initiatives - PSC Proposal of New IPP Operating and PPA Management Procedures." On February 4, 1994, the Company notified the owners of nine projects with contracts that provide for front-end loaded payments of the Company's demand for adequate assurance that the owners will perform all of their future repayment obligations, including the obligation to deliver electricity in the future at prices below the Company's avoided cost as required by agreements and the repayment of any advance payment which remains outstanding at the end of the contract. The projects at issue total 426 MWs. The Company's demand is based on its assessment of the amount of advance payment to be accumulated under the terms of the contracts, future avoided costs and future operating costs for the projects. The Company has received the following responses to these notifications: On March 4, 1994, Encogen Four Partners, L.P. (Encogen) filed a complaint in the United States District Court for the Southern District of New York (U.S. District Court) alleging breach of contract and prima facie tort by the Company. Encogen seeks compensatory damages of approximately $1 million and unspecified punitive damages. In addition, Encogen seeks a declaratory judgment that the Company is not entitled to assurance of future performance from Encogen. On April 4, 1994, the Company filed its answer and counterclaim for declaratory judgment relating to the Company's exercise of its right to demand adequate assurance. Encogen has amended its complaint, rescinded its prima facie tort claim, and filed a motion of judgment on the pleadings. On February 6, 1996, the U.S. District Court granted Encogen's motion for judgment on the pleadings and ruled that under New York law, the Company did not have the right to demand adequate assurances of future performance. In addition, the U.S. District Court did not award any damages. The Company has appealed this decision. On March 4, 1994, Sterling Power Partners, L.P. (Sterling), Seneca Power Partners, L.P., Power City Partners, L.P. and AG-Energy, L.P. filed a complaint in the Supreme Court of the State of New York, County of New York seeking a declaratory judgment that: (a) the Company does not have any legal right to demand assurance of plaintiffs' future performance; (b) even if such a right existed, the Company lacks reasonable insecurity as to plaintiffs' future performance; (c) the specific forms of assurances sought by the Company are unreasonable and (d) if the Company is entitled to any form of assurances, plaintiffs have provided adequate assurances. On April 4, 1994, the Company filed its answer and counterclaim for declaratory judgment relating to the Company's exercise of its right to demand adequate assurance. On October 5, 1994, Sterling moved for summary judgment and the Company opposed and cross moved for summary judgment. On February 16, 1996, Sterling supplemented its motion, claiming that the February 6, 1996 ruling in the Encogen case is dispositive. On February 29, 1996, the New York State Supreme Court granted Sterling's motion for summary judgment and ruled that under New York law, the Company did not have the right to demand adequate assurances of future performance. The Company has appealed this decision. On March 7, 1994, NorCon Power Partners, L.P. (NorCon) filed a complaint in the U.S. District Court seeking to enjoin the Company from terminating a power purchase agreement between the parties and seeking a declaratory judgment that the Company has no right to demand additional security or other assurances of NorCon's future performance under the power purchase agreement. NorCon sought a temporary restraining order against the Company to prevent the Company from taking any action on its February 4 letter. On March 14, 1994, the Court entered the interim relief sought by NorCon. On April 4, 1994, the Company filed its answer and counterclaim for declaratory judgment relating to the Company's exercise of its right to demand adequate assurance. On November 2, 1994, NorCon filed for summary judgment. On February 6, 1996, the U.S. District Court granted NorCon's motion for summary judgment and ruled that under New York law, the Company did not have the right to demand adequate assurances of future performance. The Company has appealed this decision. While the Company will continue to press for adequate assurance that the owners of these projects will honor their repayment obligations, the Company can neither provide any judgement regarding the likely outcome nor any estimate or range of possible loss or reduction of exposure in these cases. Accordingly, no provision for liability, if any, that may result from any of these suits has been made in the Company's financial statements. It is possible that some of these litigations will be settled as a result of the agreement- in-principle that the Company recently entered into with the IPPs (see "Announced Agreement-In-Principle to Terminate or Restructure 44 IPP Contracts"). 4. In November 1993, Fourth Branch Associates Mechanicville (Fourth Branch) filed an action against the Company and several of its officers and employees in the NYS Supreme Court, seeking compensatory damages of $50 million, punitive damages of $100 million and injunctive and other related relief. The lawsuit grows out of the Company's termination of a contract for Fourth Branch to operate and maintain a hydroelectric plant the Company owns in the Town of Halfmoon, New York. Fourth Branch's complaint also alleges claims based on the inability of Fourth Branch and the Company to agree on terms for the purchase of power from a new facility that Fourth Branch hoped to construct at the Mechanicville site. In January 1994, the Company filed a motion to dismiss Fourth Branch's complaint. By order dated November 7, 1995, the Court granted the Company's motion to dismiss the complaint in its entirety. Fourth Branch filed an appeal from the Court's order. On January 30, 1997, the Appellate Division modified the November 7, 1995 court decision by reversing the dismissal of the fourth and fifth causes of action set forth in Fourth Branch's complaint. The Company and Fourth Branch had also entered into negotiations under a FERC mediation process. As a result of these negotiations, the Company had proposed to sell the hydroelectric plant to Fourth Branch for an amount which would not be material. In addition, the proposal included a provision that would require the discontinuance of all litigation between the parties. Attempts to implement this proposal have been unsuccessful and the Company has informed FERC that its participation in the mediation efforts has been concluded. On January 14, 1997, the FERC Administrative Law Judge issued a report to FERC recommending that the mediation proceeding be terminated, leaving outstanding a Fourth Branch complaint to FERC that alleges anti- competitive conduct by the Company. The Company has made a motion to dismiss Fourth Branch's antitrust complaint before the FERC, which motion was opposed by Fourth Branch. A decision from FERC on this matter is pending. The Company is unable to predict the ultimate disposition of the lawsuit referred to above. However, the Company believes it has meritorious defenses and intends to defend this lawsuit vigorously. No provision for liability, if any, that may result from this lawsuit has been made in the Company's financial statements. SIGNATURES - ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NIAGARA MOHAWK POWER CORPORATION (Registrant) Date: May 1, 1997 By /s/ Steven W. Tasker --------------------------- Steven W. Tasker Vice President-Controller and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. -----END PRIVACY-ENHANCED MESSAGE-----