As filed with the Securities and Exchange Commission on November 9, 2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report - November 7, 2001
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
0-25595 Niagara Mohawk Holdings, Inc. 16-1549726
(a New York corporation)
300 Erie Boulevard West
Syracuse, New York 13202
315.474.1511
1-2987 Niagara Mohawk Power Corporation 15-0265555
(a New York corporation)
300 Erie Boulevard West
Syracuse, New York 13202
315.474.1511
On November 7, 2001, Niagara Mohawk Power Corporation (“Niagara Mohawk”) sold its Nine Mile Point Unit 1 (“Unit 1”) and 41 percent share of its Nine Mile Point Unit 2 (“Unit 2”) nuclear plants pursuant to an agreement dated December 2000 to Constellation Energy Group, Inc. (“Constellation Energy”). See Niagara Mohawk Holdings, Inc. (“Holdings”) and Niagara Mohawk’s combined Form 10-K for fiscal year ended December 31, 2000, Part II, Item 8. Financial Statements and Supplementary Data - Note 3 and Holdings and Niagara Mohawk’s combined Form 10-Q for the quarter ended June 30, 2001, Part I, Item 1. Financial Statements Note 3 for a complete discussion regarding this announced sale of Niagara Mohawk’s nuclear generation assets and its regulatory treatment. The agreement with Constellation Energy was filed as exhibits 10-42a and 10-42b in Holdings and Niagara Mohawk’s combined Form 10-K for fiscal year ended December 31, 2000.
Niagara Mohawk received cash proceeds of approximately $271 million and note receivable of $249.8 million on November 7, 2001.Niagara Mohawk is obligated to use 85 percent of the net proceeds of the sales of the generation assets to reduce its senior debt outstanding within 180 days after the receipt of such proceeds pursuant to the covenants of the Senior Notes issued in 1998. Such Senior Notes were issued to fund the Master Restructuring Agreement. Along with the asset purchase agreements, Niagara Mohawk also signed power purchase agreements (“PPAs”) with Constellation to purchase energy at negotiated competitive prices for approximately ten years.
(a) On November 7, 2001, Niagara Mohawk issued a press release relating to the sale of its nuclear generation assets. See Attached Exhibit No. 99.
(b) Unaudited Pro Forma Financial Information
The following unaudited Pro Forma Consolidated Financial Information illustrates the effects of the sale of the nuclear assets discussed in Item 2 on Holdings and Niagara Mohawk’s results of operations and financial position. The Pro Forma Consolidated Statements of Income for the Year Ended December 31, 2000, and for the Six Months Ended June 30, 2001, were prepared as if the sale occurred on January 1, 2000, but exclude nonrecurring items relating to the sale. Such nonrecurring items include the non-cash write-off of $123 million of stranded costs in accordance with the October 26, 2001 New York State Public Service Commission (“PSC”) Order approving such sale and the income that would be recognized from the unamortized investment tax credits (“ITCs”) of $79.7 million associated with the nuclear assets. The Pro Forma Consolidated Balance Sheet at June 30, 2001, was prepared as if the sale occurred on June 30, 2001. None of the Unaudited Pro Forma Consolidated Financial Information includes any returns that Niagara Mohawk might have earned on the cash sales proceeds. |
The unaudited Pro Forma Consolidated Financial Information is presented for illustrative purposes only and does not purport to represent what Holdings and Niagara Mohawk’s results of operations or financial position would have been if the nuclear asset sale had occurred at the beginning of the periods or on the date indicated, or project Holdings and Niagara Mohawk’s results of operations or financial position for any future period or date. The pro forma disposition adjustments are based upon available information that Niagara Mohawk believes is reasonable under the circumstances. |
The following unaudited Pro Forma Consolidated Financial Information, therefore, is dependent on the assumptions described in the footnotes and should be read in conjunction with Holdings and Niagara Mohawk’s audited consolidated financial statements for the year ended December 31, 2000, including footnotes, as contained in Holdings and Niagara Mohawk’s 2000 Annual Report on Form 10-K, and (b) Holdings and Niagara Mohawk’s unaudited consolidated financial statements for the six months ended June 30, 2001, including footnotes, as contained in Holdings and Niagara Mohawk’s 2001 second quarter report on Form 10-Q. |
(c) Exhibits - Following is the list of Exhibits furnished in accordance with the provisions of Item 601 of Regulation S-K, filed as part of this current report on Form 8-K.
Exhibit No. 99 - Press release of Niagara Mohawk issued on November 7, 2001 relating to the sale of its nuclear generation assets. |
For the year ended December 31, 2000
Pro Forma
As Reported Adjustments Pro Forma
------------ ----------- -----------
(in thousands of dollars)
Operating revenues:
Electric (Note 1) $3,799,926 $ (5,371) $3,794,555
Gas 733,197 733,197
Other 6,149 6,149
------------ ----------- -----------
4,539,272 (5,371) 4,533,901
------------ ----------- -----------
Operating expenses:
Electricity purchased (Note 1) 1,714,946 306,519 2,021,465
Fuel for electric generation (Note 1) 74,340 (38,986) 35,354
Gas purchased 434,044 434,044
Other operation and maintenance (Note 2) 913,710 (142,455) 771,255
Amortization/accretion of MRA/IPP buyout costs 375,487 375,487
Amortization of loss on sale of assets (Note 3) - 100,000 100,000
Depreciation and amortization (Note 4) 312,337 (114,617) 197,720
Other taxes (Note 5) 284,558 (27,446) 257,112
------------ ----------- -----------
4,109,422 83,015 4,192,437
------------ ----------- -----------
Operating income 429,850 (88,386) 341,464
Other income (deductions) (Note 6) (13,542) 21,058 7,516
------------ ----------- -----------
Income before interest charges 416,308 (67,328) 348,980
Interest charges (Note 7) 437,274 (7,769) 429,505
Preferred dividend requirement of subsidiary 31,437 31,437
------------ ----------- -----------
Loss before income taxes (52,403) (59,559) (111,962)
Income taxes (Note 8) (6,769) (17,370) (24,139)
------------ ----------- -----------
Loss before extraordinary item (45,634) (42,189) (87,823)
Extraordinary item - loss from the extinguishment
of debt, net of income taxes of $489 (909) (909)
------------ ----------- -----------
Net loss (46,543) (42,189) (88,732)
===========
Retained earnings at beginnning of year 610,952 610,952
------------ -----------
Retained earnings at end of year $ 564,409 $ 522,220
============ ===========
Average number of shares of common stock
outstanding (in thousands) 167,383 167,383 167,383
Basic and diluted loss per average share of
common stock before extraordinary item $ (0.27) $ (0.25) $ (0.52)
Extraordinary item per average share of common
stock (0.01) (0.01)
------------ ----------- -----------
Basic and diluted loss per average share of
common stock $ (0.28) $ (0.25) $ (0.53)
============ =========== ===========
For the six months ended June 30, 2001
Pro Forma
As Reported Adjustments Pro Forma
----------- ----------- -----------
(in thousands of dollars)
Operating revenues:
Electric (Note 1) $1,881,471 $ (1,975) $1,879,496
Gas 575,231 575,231
Other 312 312
----------- ---------- -----------
2,457,014 (1,975) 2,455,039
----------- ---------- -----------
Operating expenses:
Electricity purchased (Note 1) 851,915 128,668 980,583
Fuel for electric generation (Note 1) 21,699 (16,523) 5,176
Gas purchased 391,627 391,627
Other operation and maintenance (Note 2) 516,538 (72,170) 444,368
Amortization/accretion of MRA/IPP buyout costs 182,145 182,145
Amortization of loss on sale of assets (Note 3) - 50,000 50,000
Depreciation and amortization (Note 4) 157,104 (58,584) 98,520
Other taxes (Note 5) 115,808 (13,451) 102,357
----------- ---------- -----------
2,236,836 17,940 2,254,776
----------- ---------- -----------
Operating income 220,178 (19,915) 200,263
Other income (deductions) (Note 6) (44,468) 7,584 (36,884)
----------- ---------- -----------
Income before interest charges 175,710 (12,331) 163,379
Interest charges (Note 7) 202,487 (8,132) 194,355
Preferred dividend requirement of subsidiary 15,515 15,515
----------- ---------- -----------
Income before income taxes (42,292) (4,199) (46,491)
Income taxes (Note 8) 9,619 (388) 9,231
----------- ---------- -----------
Loss before cumulative effect of (51,911) (3,811) (55,722)
a change in accounting principle
Cumulative effect of a change in accounting
principle, net of income tax 12,790 12,790
----------- ---------- -----------
Net loss $ (39,121) $ (3,811) $ (42,932)
==========
Retained earnings at beginning of year 564,409 564,409
----------- -----------
Retained earnings at end of year $ 525,288 $ 521,477
=========== ===========
Average number of shares of common stock
outstanding (in thousands) 160,240 160,240 160,240
Basic and diluted loss per average share of
common stock before cumulative effect of
change in accounting principle $ (0.32) $ (0.03) $ (0.35)
Cumulative effect of a change in accounting
principle, net of tax 0.08 0.08
----------- ---------- ------------
Basic and diluted loss per average share of
common stock $ (0.24) $ (0.03) $ (0.27)
=========== ========== ===========
June 30, 2001
Pro Forma
As Reported Adjustments Pro Forma
------------ ------------- ------------
(in thousands of dollars)
ASSETS
Utility plant:
Electric plant (Note 9) $ 7,201,994 $(2,400,976) $ 4,801,018
Nuclear fuel (Note 9) 674,721 (674,721) -
Gas plant 1,326,578 1,326,578
Common plant (Note 9) 359,604 359,604
Construction work in progress (Note 9) 245,093 (25,860) 219,233
------------ ------------ ------------
Total utility plant 9,807,990 (3,101,557) 6,706,433
Less-Accumulated depreciation and amortization (Note 9) 4,111,520 (1,966,331) 2,145,189
------------ ------------ ------------
Net utility plant 5,696,470 (1,135,226) 4,561,244
------------ ------------ ------------
Other property and investments (Note 10) 533,300 (349,530) 183,770
------------ ------------ ------------
Current assets:
Cash, including temporary cash investments (Note 11) 169,171 38,397 207,568
Funds restricted for the repayment of debt (Note 11) 217,582 217,582
Accounts receivable (less allowance for doubtful
accounts) 307,285 307,285
Notes receivable - Constellation Energy (Note 12) - 49,956 49,956
Materials and supplies, at average cost:
Gas storage 44,240 44,240
Other (Note 13) 90,162 (71,535) 18,627
Assets from price risk management activities 21,330 21,330
Prepaid taxes 43,811 43,811
Other 20,836 20,836
------------ ------------ ------------
696,835 234,400 931,235
------------ ------------ ------------
Regulatory assets:
MRA regulatory asset 3,151,007 3,151,007
Swap contracts regulatory asset 611,646 611,646
Regulatory tax asset (Note 14) 409,636 (269,511) 140,125
IPP restructuring costs 215,669 215,669
Deferred environmental restoration costs 285,000 285,000
Deferred loss on sale of assets (Note 15) 122,804 1,171,356 1,294,160
Postretirement benefits other than pensions 43,164 43,164
Unamortized debt expense 37,787 37,787
Other (Note 16) 168,921 (45,249) 123,672
------------ ------------ ------------
5,045,634 856,596 5,902,230
------------ ------------ ------------
Other assets (Note 12) 91,622 199,822 291,444
------------ ------------ ------------
$12,063,861 $ (193,938) $11,869,923
============ ============ ============
June 30, 2001
Pro Forma
As Reported Adjustments Pro Forma
------------ ----------- ------------
(in thousands of dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders' equity
Common stock, issued 187,364,863 shares; outstanding $ 1,874 $ $ 1,874
160,239,818 shares
Treasury stock, at cost - 27,125,045 shares (407,193) (407,193)
Capital stock premium and expense 2,548,576 2,548,576
Accumulated other comprehensive income (45,734) (45,734)
Retained earnings (Note 17) 525,288 (239) 525,049
------------ ----------- -----------
2,622,811 (239) 2,622,572
Non-redeemable preferred stock 440,000 440,000
Mandatorily redeemable preferred stock 51,950 51,950
Long-term debt 4,735,477 4,735,477
------------ ----------- ------------
Total capitalization 7,850,238 (239) 7,849,999
------------ ----------- ------------
Current liabilities:
Short-term debt 5,000 5,000
Long-term debt due within one year 418,121 418,121
Sinking fund requirements on redeemable preferred stock 7,620 7,620
Accounts payable 278,678 278,678
Payable on outstanding bank checks 18,624 18,624
Customers' deposits 20,393 20,393
Accrued taxes (Note 14) 56,455 6,833 63,288
Accrued interest 92,256 92,256
Accrued vacation pay (Note 18) 35,206 (6,150) 29,056
Liabilities from price risk management activities 33,296 33,296
Other 157,643 157,643
------------ ----------- ------------
1,123,292 683 1,123,975
------------ ----------- ------------
Regulatory and other liabilities:
Accumulated deferred income taxes (Notes 14 and 17) 1,483,732 (204,727) 1,279,005
Liability for swap contracts 757,059 757,059
Employee pension and other benefits (Note 19) 214,895 26,900 241,795
Other (Note 16) 349,645 (16,555) 333,090
------------ ----------- ------------
2,805,331 (194,382) 2,610,949
------------ ----------- ------------
Commitments and contingencies:
Liability for environmental restoration 285,000 285,000
------------ ----------- ------------
$12,063,861 $ (193,938) $11,869,923
============ =========== ============
For the year ended December 31, 2000
Pro Forma
As Reported Adjustments Pro Forma
----------- ----------- -----------
(in thousands of dollars)
Operating revenues:
Electric (Note 1) $3,239,253 $ (5,371) $3,233,882
Gas 658,502 658,502
----------- ---------- -----------
3,897,755 (5,371) 3,892,384
----------- ---------- -----------
Operating expenses:
Electricity purchased (Note 1) 1,175,923 306,519 1,482,442
Fuel for electric generation (Note 1) 74,340 (38,986) 35,354
Gas purchased 357,524 357,524
Other operation and maintenance (Note 2) 888,067 (142,455) 745,612
Amortization/accretion of MRA/IPP buyout costs 375,487 375,487
Amortization of loss on sale of assets (Note 3) - 100,000 100,000
Depreciation and amortization (Note 4) 311,803 (114,617) 197,186
Other taxes (Note 5) 283,511 (27,446) 256,065
----------- ---------- -----------
3,466,655 83,015 3,549,670
----------- ---------- -----------
Operating income 431,100 (88,386) 342,714
Other income (deductions) (Note 6) (24,755) 21,058 (3,697)
----------- ---------- -----------
Income before interest charges 406,345 (67,328) 339,017
Interest charges (Note 7) 437,274 (7,769) 429,505
----------- ---------- -----------
Loss before income taxes (30,929) (59,559) (90,488)
Income taxes (Note 8) (9,526) (17,370) (26,896)
----------- ---------- -----------
Loss before extraordinary item (21,403) (42,189) (63,592)
Extraordinary item - loss from the extinguishment
of debt, net of income taxes of $489 (909) (909)
---------- ---------- -----------
Net loss (22,312) (42,189) (64,501)
Dividends on preferred stock 31,437 31,437
----------- ---------- -----------
Balance available for common stock $ (53,749) $ (42,189) $ (95,938)
=========== ========== ===========
For the six months ended June 30, 2001
Pro Forma
As Reported Adjustments Pro Forma
----------- ----------- -----------
(in thousands of dollars)
Operating revenues:
Electric (Note 1) $1,604,741 $ (1,975) $1,602,766
Gas 521,116 521,116
----------- ---------- -----------
2,125,857 (1,975) 2,123,882
----------- ---------- -----------
Electricity purchased (Note 1) 574,548 128,668 703,216
Fuel for electric generation (Note 1) 21,699 (16,523) 5,176
Gas purchased 341,486 341,486
Other operation and maintenance (Note 2) 502,171 (72,170) 430,001
Amortization/accretion of MRA/IPP buyout costs 182,145 182,145
Amortization of loss on sale of assets (Note 3) - 50,000 50,000
Depreciation and amortization (Note 4) 156,861 (58,584) 98,277
Other taxes (Note 5) 115,444 (13,451) 101,993
----------- ---------- -----------
1,894,354 17,940 1,912,294
----------- ---------- -----------
Operating income 231,503 (19,915) 211,588
Other income (deductions) (Note 6) (2,697) 7,584 4,887
----------- ---------- -----------
Income before interest charges 228,806 (12,331) 216,475
Interest charges (Note 7) 202,487 (8,132) 194,355
----------- ---------- -----------
Income before income taxes 26,319 (4,199) 22,120
Income taxes (Note 8) 13,312 (388) 12,924
----------- ---------- -----------
Net income 13,007 (3,811) 9,196
Dividends on preferred stock 15,515 15,515
----------- ---------- -----------
Balance available for common stock $ (2,508) $ (3,811) $ (6,319)
=========== ========== ===========
June 30, 2001
Pro Forma
As Reported Adjustments Pro Forma
------------ ----------- ------------
(in thousands of dollars)
ASSETS
Utility plant:
Electric plant (Note 9) $ 7,201,994 $(2,400,976) $ 4,801,018
Nuclear fuel (Note 9) 674,721 (674,721) -
Gas plant 1,326,578 1,326,578
Common plant (Note 9) 359,604 359,604
Construction work in progress (Note 9) 245,093 (25,860) 219,233
------------ ------------ ------------
Total utility plant 9,807,990 (3,101,557) 6,706,433
Less-Accumulated depreciation and amortization (Note 9) 4,111,520 (1,966,331) 2,145,189
------------ ------------ ------------
Net utility plant 5,696,470 (1,135,226) 4,561,244
------------ ------------ ------------
Other property and investments (Note 10) 441,542 (349,530) 92,012
------------ ------------ ------------
Current assets:
Cash, including temporary cash investments (Note 11) 82,698 38,397 121,095
Funds restricted for repayment of debt (Note 11) 217,582 217,582
Accounts receivable (less allowance for doubtful
accounts) 264,358 264,358
Notes receivable - Constellation Energy (Note 12) - 49,956 49,956
Materials and supplies, at average cost:
Gas storage 41,124 41,124
Other (Note 13)
90,162 (71,535) 18,627
Assets from price risk management activities 112 112
Prepaid taxes 33,639 33,639
Other 16,410 16,410
------------ ------------ ------------
528,503 234,400 762,903
------------ ------------ ------------
Regulatory assets:
MRA regulatory asset 3,151,007 3,151,007
Swap contracts regulatory asset 611,646 611,646
Regulatory tax asset (Note 14) 409,636 (269,511) 140,125
IPP restructuring costs 215,669 215,669
Deferred environmental restoration costs 285,000 285,000
Deferred loss on sale of assets (Note 15) 122,804 1,171,356 1,294,160
Postretirement benefits other than pensions 43,164 43,164
Unamortized debt expense 37,787 37,787
Other (Note 16) 168,921 (45,249) 123,672
------------ ------------ ------------
5,045,634 856,596 5,902,230
------------ ------------ ------------
Other assets (Note 12) 90,843 199,822 290,665
------------ ------------ ------------
$11,802,992 $ (193,938) $11,609,054
============ ============ ============
June 30, 2001
Pro Forma
As Reported Adjustments Pro Forma
------------ ----------- ------------
(in thousands of dollars)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders' equity
Common stock, issued and outstanding 187,364,863 shares $ 187,365 $ $ 187,365
Repurchase of Holdings' common stock, at cost (407,193) (407,193)
Capital stock premium and expense 2,363,095 2,363,095
Accumulated other comprehensive income (20,384) (20,384)
Retained earnings (Note 17) 259,438 (239) 259,199
------------ ----------- -------------
2,382,321 (239) 2,382,082
Non-redeemable preferred stock 440,000 440,000
Mandatorily redeemable preferred stock 51,950 51,950
Long-term debt 4,735,477 4,735,477
------------ ----------- -------------
Total capitalization 7,609,748 (239) 7,609,509
------------ ----------- -------------
Current liabilities:
Short-term debt 5,000 5,000
Long-term debt due within one year 418,121 418,121
Sinking fund requirements on redeemable preferred stock 7,620 7,620
Accounts payable 223,899 223,899
Payable on outstanding bank checks 18,625 18,625
Customers' deposits 20,393 20,393
Accrued taxes (Note 14) 58,532 6,833 65,365
Accrued interest 92,256 92,256
Accrued vacation pay (Note 18) 35,206 (6,150) 29,056
Liabilities from price risk management activities 33,296 33,296
Other 184,070 184,070
------------ ----------- ------------
1,097,018 683 1,097,701
------------ ----------- ------------
Regulatory and other liabilities:
Accumulated deferred income taxes (Notes 14 and 17) 1,489,627 (204,727) 1,284,900
Liability for swap contracts 757,059 757,059
Employee pension and other benefits (Note 19) 214,895 26,900 241,795
Other (Note 16) 349,645 (16,555) 333,090
------------ ----------- ------------
2,811,226 (194,382) 2,616,844
------------ ----------- ------------
Commitments and contingencies:
Liability for environmental restoration 285,000 285,000
------------ ----------- ------------
$11,802,992 $ (193,938) $11,609,054
============ =========== ============
The accompanying Pro Forma Consolidated Financial Information for Holdings and Niagara Mohawk for year ended December 31, 2000, the six months ended June 30, 2001, and at June 30, 2001, is unaudited. This financial information does not contain the detail or footnote disclosure concerning accounting policies and other matters that would be included in full fiscal year financial statements.
The $39.0 million and $16.5 million decrease infuel for electric generation for 2000 and the six months ended June 30, 2001, respectively, reflect the discontinuance of expenses related to the sale of the nuclear assets. The $306.5 million and $128.7 million increase inelectricity purchased for 2000 and the six months ended June 30, 2001, respectively, reflect the costs to replace the power which would have been otherwise available from owning these nuclear assets. Niagara Mohawk entered into PPAs with Constellation, the new owners of the nuclear assets, to purchase energy at negotiated competitive prices for approximately ten years. In addition,electric revenueswere reduced by $5.4 million for 2000 and $2.0 million for the six months ended June 30, 2001 to reflect the loss of voltage support income due to the sale of the nuclear assets.
The adjustments assume that under the PPAs with Constellation, Niagara Mohawk will purchase 90 percent of the output for Unit 1 and 37 percent of the output for Unit 2 (90 percent of Niagara Mohawk’s 41 percentage ownership of Unit 2) or 7,166,149 Megawatt-hours (“MWhs”) in 2000 for a price of $36.57/MWh and 3,277,517 MWhs for the 6 months ended June 30, 2001 for a price of $33.53/MWh. The adjustments also assume that Niagara Mohawk will purchase 796,239 MWhs in 2000 from the New York Independent System Operator (“NYISO”) for a price of $55.88/MWh and 364,100 MWhs for the 6 months ended June 30, 2001 for a price of $51.58/MWh. The NYISO prices reflect the actual historical variable market prices in effect at the time. Although the prices Niagara Mohawk must pay for electricity are higher than the fuel costs incurred when the assets were owned, Niagara Mohawk avoids operating costs from running these plants, including labor, fuel, real estate taxes and depreciation.
The $142.5 million and $72.2 million decreases inother operation and maintenanceexpenses for 2000 and the 6 months ended June 30, 2001, respectively, represent a reduction of operation and maintenance expenses associated with the sale of the nuclear assets. These expenses include items such as the operating and maintenance costs to run the plants, labor and related employee-benefit costs, property insurance and materials and supplies. Direct costs consist of approximately 90 percent of the other operation and maintenance expenses for 2000 and the 6 months ended June 30, 2001.
Theamortization of the loss on the sale of assets for 2000 and the 6 months ended June 30, 2001 was $100.0 million and $50.0 million, respectively. The deferred loss on the sale of assets was established as a result of the sales of Niagara Mohawk’s generating assets in accordance with PSC Orders approving the sales. See note 15 for a further discussion of the deferred loss on the sale of assets.
The $114.6 million and $58.6 million decreases indepreciation and amortization for 2000 and the 6 months ended June 30, 2001, respectively, reflect decreased depreciation expense and nuclear decommissioning costs related to the sale of the nuclear assets.
The $27.4 million and $13.5 million decreases inother taxes for 2000 and the 6 months ended June 30, 2001, respectively, principally reflect decreased property taxes due to the sale of the nuclear assets.
The $21.1 million and $7.6 million increases inother income (deductions) for 2000 and the 6 months ended June 30, 2001, respectively, principally reflect interest income earned on the notes receivable resulting from the nuclear sale (using 11.0 percent interest rate), the elimination of the income received from the co-tenants related to the carrying costs on the inventory for Unit 2 and the elimination of the equity portion of the allowance for funds used during construction relating to nuclear generation construction projects.
The $7.8 million and $7.6 million decreases ininterest charges for 2000 and the 6 months ended June 30, 2001, respectively, primarily reflect decreased interest expense as a result of the required use of the sale proceeds to fund $217.6 million in debt reductions and the elimination of the interest portion of the allowance for funds used during construction relating to nuclear generation construction projects. The redemptions are assumed to occur 180 days subsequent to the receipt of the net proceeds from the sale of the nuclear assets.
The $17.4 million and $0.4 million decrease inincome taxes for 2000 and the 6 months ended June 30, 2001, respectively, primarily reflect lower overall net taxable income because of the items described above, calculated at the federal statutory federal income tax rate of 35.0 percent. This was partially offset by the elimination of the amortization of investment tax credits associated with the nuclear assets of $3.5 million and $1.1 million for 2000 and the 6 months ended June 30, 2001.
The decrease of $2,401.0 million inelectric plant and $25.9 million inconstruction work in progressrepresents the original cost of utility property, plant, and equipment sold to Constellation. In addition, the entire balance of nuclear fuelwas sold to Constellation in the amount of $674.7 million.Accumulated depreciation, which includes accumulated amortization of nuclear fuel, was reduced by $1,966.3 million as a result of the sale of the nuclear assets.
The decrease of $349.5 million inother property and investments represents the transfer of the decommissioning trust fund to Constellation.
Cashandfunds restricted for repayment of debt increased by $271.0 million, which represents the cash proceeds that was received for the nuclear assets, partially offset by the estimated expenses associated with the nuclear sale of $15.0 million.Funds restricted for repayment of debt represents the 85 percent of cash proceeds that are required to be used for debt reductions within 180 days of receipt.
The increase of $249.8 million innotes receivableandother assets represents the note receivable that Niagara Mohawk received from Constellation upon the closing of the sale of the nuclear assets. The principle balance note receivable is scheduled to be received in five equal annual installments. The current portion ($50.0 million) is shown innotes receivableand the noncurrent portion is recorded inother assets.
Materials and supplieswere reduced by $71.5 million as a result of the sale of the nuclear materials and supplies.
Accrued taxeswere increasedby $6.8 million to reflect the provision for deferred taxes on the tax gain on the sale of the nuclear assets of $16.6 million with a corresponding decrease inaccumulated deferred income taxes, partially offset by a decrease of $9.8 million to reflect the real estate tax adjustments associated with the sale. The decrease of $269.5 million in theregulatory tax asset was primarily due to the reclassification of Statement of Financial Accounting Standards No. 109 (“SFAS No. 109”) nuclear regulatory asset to the deferred loss on the sale of the assets. The $204.7 million decrease inaccumulated deferred income taxes liability primarily represents the elimination of the SFAS No. 109 net regulatory asset associated with nuclear assets of $197.0 million.
The increase of $1,171.4 million in thedeferred loss on the sale of the assetsrepresents the deferral for future recovery of the net losses resulting from the sale of the nuclear assets. The deferred loss on the sale of the assets was reduced by the stranded costs that Niagara Mohawk was required to write-off of $123 million in accordance with the October 26, 2001 PSC Order approving such sale. This asset is expected to be recovered and amortized over approximately 12 years.
The decrease inother regulatory assets of $45.2 million and the decrease inother regulatory liabilities of $16.6 million reflect the reclassification of nuclear regulatory assets and liabilities to the deferred loss on the sale of assets.
The decrease of $0.2 million in Retained Earnings reflects the non-cash after tax write-off of $79.9 million in accordance with the October 26, 2001 PSC Order approving such sale, partially offset by the recognition of ITCs with the corresponding decrease inaccumulated deferred income taxes. Unamortized ITCs associated with the nuclear assets are not transferable to the new owners, but flow through to income as a result of the sale. Because these items constitute a one-time event resulting from the sale, we have credited retained earnings on the pro forma balance sheet for $79.7 million in ITCs but have not reflected this amount on the pro forma income statement.
The decrease inaccrued vacation pay of $4.2 million reflects the cash paid to nuclear employees for their accrued vacation pay.
The increase of $26.9 million inemployee pension and other benefits liability represents recognition of the estimated pension curtailment loss as a result of employees transferring to the buyers. This loss is also included in the deferred loss on the sale of assets account.
This Form 8-K may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements should be read with the cautionary statements and important factors included in the Holdings and Niagara Mohawk’s Annual Report on Form 10-K for the year ended December 31, 2000, before Item 1, “Business.” Forward-looking statements are all statements other than statements of historical fact, including, without limitation, those that are identified by the use of the words “expects,” “believes,” “anticipates,” and similar expressions.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
NIAGARA MOHAWK HOLDINGS, INC.
(Registrant)
Date: November 9, 2001 By: /s/ Steven W. Tasker
Steven W. Tasker
Vice President–Controller and
Principal Accounting Officer,
in his respective capacities as such
NIAGARA MOHAWK POWER CORPORATION
(Registrant)
Date: November 9, 2001 By: /s/ Steven W. Tasker
Steven W. Tasker
Vice President–Controller and
Principal Accounting Officer,
in his respective capacities as such
EXHIBIT INDEX
Following is the index of Exhibits furnished in accordance with the provisions of Item 601 of Regulation S-K, filed as part of this current report on Form 8-K.
Exhibit No. 99 - Press release of Niagara Mohawk issued on November 7, 2001 relating to its sale of the nuclear generation assets.