EXHIBIT 99 (2)
NIAGARA MOHAWK REPORTS 1998 EARNINGS
DECLARES PREFERRED STOCK DIVIDENDS
SYRACUSE, January 28 - Niagara Mohawk Power Corp. (NYSE: NMK) today
announced financial results for 1998, concluding a year of notable achievements
that returned the company to financial stability, but required significant
non-cash charges to earnings. The company reported a 1998 loss of $157.4
million, or a loss of 95 cents per share, compared to 1997 earnings of $145.9
million, or $1.01 per share. The company also reported that, at a regularly
scheduled meeting today, its Board of Directors declared dividends at prescribed
rates for all series of preferred stock.
In a year of important achievements for the company, the most important was
the closing of the Master Restructuring Agreement (MRA) with independent power
producers (IPPs) in June. The MRA allowed the company to terminate, restate or
amend contracts which represented about 75 percent of the company's over-market
purchase power obligations. In return, the IPPs received approximately $3.9
billion in cash and 20.5 million shares of common stock. As part of its
POWERCHOICE agreement, Niagara Mohawk will recover the cost of the MRA over 10
years. The company established a regulatory asset to reflect the cost of the
MRA, and will amortize it as a non-cash charge to earnings over the 10-year
recovery period. Additionally, in approving POWERCHOICE, the New York Public
Service Commission limited the value of the MRA regulatory asset, which resulted
in a one-time non-cash charge to earnings of $263.2 million, or $1.03 per share,
in 1998. The amortization of the MRA regulatory asset in 1998 further reduced
earnings by $128.8 million, or 50 cents per share. Earnings in 1998 were also
lower because of the dilution caused by the issuance of 42.9 million shares of
common stock in connection with the MRA.
Although earnings were depressed as a result of the non-cash charges
related to the MRA, the company's cash flow improved in 1998. Payments to IPPs
were reduced by $225.9 million in 1998, compared to 1997, while fuel for
electric generation increased $60.5 million, and interest charges, primarily
related to the debt issued in connection with the MRA, increased $78.7 million.
Earnings in 1998 were also affected by the incremental costs of a January
ice storm and a Labor Day windstorm, reducing earnings by approximately 24 cents
per share and 6 cents per share, respectively.
The company reported a fourth-quarter 1998 loss of $26.5 million, or a loss
of 14 cents per share, compared to a fourth-quarter 1997 loss of $1.4 million,
or a loss of 1 cent per share. Earnings for the fourth quarter of 1998 were
lower than last year's fourth-quarter earnings primarily because of the impact
of the non-cash amortization of the MRA regulatory asset of $96.6 million, or 34
cents per share. Cash flow in the fourth quarter of 1998 improved as payments to
IPPs during the fourth quarter 1998 decreased $157.6 million compared to 1997.
For the same period, fuel for electric generation increased $9.4 million and
interest charges increased $63.4 million.
Electric revenues for 1998 were $3.3 billion, down 1.5 percent from 1997.
Electric revenues for the fourth quarter 1998 were down 5.6 percent compared to
the fourth quarter last year.
Primarily because of the warmer weather in 1998 as compared to 1997, retail
sales of electricity in 1998 decreased 1.6 percent and total electricity sales
were down 1.9 percent. Also, because of warmer weather in the fourth quarter of
1998, retail sales of electricity and total electricity sales in the fourth
quarter 1998 were down 2.7 percent and 4.6 percent, respectively, as compared to
the same period in 1997.
Natural gas revenues for 1998 were $565.2 million, down 14.0 percent from
1997. Fourth-quarter 1998 natural gas revenues were down 18.2 percent compared
to the fourth quarter 1997.
Retail sales of natural gas for the year and fourth quarter 1998 decreased
17.3 percent and 21.9 percent, respectively, compared to the same periods
in 1997, primarily due to warmer weather. Total gas
deliveries, which include the transportation of customer-owned gas, were
down 15.6 percent for the year 1998, and down 29.9 percent in the fourth
quarter 1998, also primarily due to the warmer weather and, in addition, due to
reduced consumption of natural gas by the IPPs.
Dividends were declared at the prescribed rates for all series of preferred
stock. The first quarter 1999 dividend rate per annum for the adjustable rate
preferred stock Series A is 6.50 percent; Series B is 7.50 percent; and Series C
is 7.00 percent. These rates equate to payments of $0.40625; $0.46875; and
$0.4375 per share, respectively. Preferred dividends are payable March 31 to
holders of record March 8, 1999.
Consolidated Statements of Income and Selected Operating Information will
be filed today with the Securities and Exchange Commission on Form 8-K.
SELECTED OPERATING INFORMATION
Niagara Mohawk Power Corporation
and Subsidiary Companies (Unaudited)
- ------------------------------------
ELECTRIC OPERATIONS
Three Months Ended Year Ended
December 31, December 31,
% %
SALES (MILLIONS OF KWH) 1998 1997 Change 1998 1997 Change
- ----------------------- ---- ---- ------ ---- ---- ------
Residential . . . . . . . . . . . . . 2,285 2,331 (2.0) 9,643 9,905 (2.6)
Commercial. . . . . . . . . . . . . . 2,736 2,815 (2.8) 11,560 11,552 0.1
Industrial. . . . . . . . . . . . . . 1,657 1,778 (6.8) 6,843 7,191 (4.8)
Industrial - Special. . . . . . . . . 1,190 1,166 2.1 4,568 4,507 1.4
Other . . . . . . . . . . . . . . . . 69 70 (1.4) 241 235 2.6
------ ----- ---- ----- ------ -----
TOTAL TO ULTIMATE CUSTOMERS . . . . . 7,937 8,160 (2.7) 32,855 33,390 (1.6)
Sales for resale. . . . . . . . . . . 495 680 (27.2) 3,577 3,746 (4.5)
------ ----- ------ ------ ------ -----
TOTAL SALES . . . . . . . . . . . . . 8,432 8,840 (4.6) 36,432 37,136 (1.9)
====== ===== ====== ====== ====== =====
Peak load - MW. . . . . . . . . . . . 5,724 5,682 0.7 5,928 6,348 (6.6)
Peak load - Date. . . . . . . . . . 12/22/1998 12/22/1997 7/16/1998 7/15/1997
GAS OPERATIONS
Three Months Ended Year Ended
December 31, December 31,
% %
SALES (THOUSANDS OF DEKATHERMS) . . 1998 1997 Change 1998 1997 Change
- ------------------------------- ---- ---- ------ ---- ---- ------
Residential . . . . . . . . . . . . 10,422 12,794 (18.5) 47,250 55,203 (14.4)
Commercial. . . . . . . . . . . . . 3,580 5,122 (30.1) 17,023 22,069 (22.9)
Industrial. . . . . . . . . . . . . 163 227 (28.2) 752 1,381 (45.5)
------ ------ -------- ------- ------- ------
TOTAL TO ULTIMATE CUSTOMERS . . . . . 14,165 18,143 (21.9) 65,025 78,653 (17.3)
Transportation of customer-owned gas. 25,868 39,508 (34.5) 127,867 152,841 (16.3)
Spot market sales . . . . . . . . . . 397 20 1,885.0 4,501 2,451 83.6
------- ------ -------- ------- ------- ------
TOTAL GAS DELIVERED . . . . . . . . . 40,430 57,671 (29.9) 197,393 233,945 (15.6)
======= ====== ======== ======= ======= ======
Degree days
Actual. . . . . . . . . . . . . . 2,130 2,430 (12.3) 5,806 6,842 (15.1)
Normal. . . . . . . . . . . . . . 2,326 2,326 6,803 6,803
CONSOLIDATED STATEMENTS OF INCOME
In thousands of dollars
Three Months Ended Year Ended
Niagara Mohawk Power Corporation December 31, December 31,
and Subsidiary Companies (Unaudited) 1998 1997 1998 1997
- ------------------------------------------------------- ------------- ------------- ----------- -----------
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . $ 755,096 $ 799,838 $3,261,144 $3,309,441
Gas . . . . . . . . . . . . . . . . . . . . . . . . . . 131,336 160,466 565,229 656,963
------------- ------------- ----------- -----------
886,432 960,304 3,826,373 3,966,404
------------- ------------- ----------- -----------
OPERATING EXPENSES:
Fuel for electric generation. . . . . . . . . . . . . . 61,549 52,124 239,982 179,455
Electricity purchased . . . . . . . . . . . . . . . . . 135,314 296,983 1,001,991 1,236,108
Gas purchased . . . . . . . . . . . . . . . . . . . . . 55,769 92,430 272,141 345,610
Other operation and maintenance expenses. . . . . . . . 240,011 230,020 937,798 835,282
POWERCHOICE charge. . . . . . . . . . . . . . . . . . . - - 263,227 -
Amortization of MRA regulatory asset. . . . . . . . . . 96,649 - 128,833 -
Depreciation and amortization . . . . . . . . . . . . . 90,877 85,472 355,417 339,641
Other taxes . . . . . . . . . . . . . . . . . . . . . . 103,000 117,251 459,961 471,469
------------- ------------- ----------- -----------
783,169 874,280 3,659,350 3,407,565
------------- ------------- ----------- -----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . 103,263 86,024 167,023 558,839
Other income (deductions) . . . . . . . . . . . . . . . (5,018) 4,144 42,602 24,997
------------- ------------- ----------- -----------
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . 98,245 90,168 209,625 583,836
Interest charges. . . . . . . . . . . . . . . . . . . . 132,069 68,646 397,178 273,906
------------- ------------- ----------- ----------
INCOME (LOSS) BEFORE FEDERAL & FOREIGN INCOME TAXES . . (33,824) 21,522 (187,553) 309,930
Federal and foreign income taxes. . . . . . . . . . . . (16,391) 13,641 (66,728) 126,595
------------- ------------- ----------- -----------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . (17,433) 7,881 (120,825) 183,335
Dividends on preferred stock. . . . . . . . . . . . . . 9,024 9,236 36,555 37,397
------------- ------------- ----------- -----------
BALANCE AVAILABLE FOR COMMON STOCK. . . . . . . . . . . ($26,457) ($1,355) ($157,380) $ 145,938
============= ============= =========== ===========
AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING (IN THOUSANDS). . . . . . . . . 187,365 144,419 166,186 144,404
BASIC AND DILUTED EARNINGS (LOSS) PER AVERAGE
SHARE OF COMMON STOCK . . . . . . . . . . . . . . ($0.14) ($0.01) ($0.95) $ 1.01
OTHER OPERATING DATA:
Earnings before interest charges, interest income,
income taxes, depreciation and amortization, and other
regulatory adjustments (EBITDA) . . . . . . . . . . . . $ 267,036 - $ 990,532 -
Net cash interest.. . . . . . . . . . . . . . . . . . . $ 114,707 - $ 345,523 -
Ratio of EBITDA to net cash interest. . . . . . . . . . 2.3 - 2.9 -
NOTES:
* The above information is not given in connection with any sale or offer to
sell or buy any stock or security.
* The Company files periodic reports pursuant to the Securities Exchange Act
of 1934. Accordingly, with respect to the financial information set forth
you are requested to refer to such filings for more detailed information.
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
---------------------------------------------------------
(Unaudited)
EARNINGS REPORT
---------------
(IN THOUSANDS OF DOLLARS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- ----------- ----------
Operating Revenues . . . . . . . . . . $ 886,432 $ 960,304 $3,826,373 $3,966,404
Operating Income . . . . . . . . . . . 103,263 86,024 167,023 558,839
Net Income (Loss). . . . . . . . . . . (17,433) 7,881 (120,825) 183,335
Balance Available for Common Stock . . $ ( 26,457) $ ( 1,355) $ (157,380) $ 145,938
Average number of shares of common
stock outstanding (in thousands) . . 187,365 144,419 166,186 144,404
Basic and diluted earnings (loss) per
average share of common stock
$ (0.14) $ (0.01) $ (0.95) $ 1.01
EBITDA . . . . . . . . . . . . . . . . $ 267,036 -- $ 990,532 --
Net Cash Interest. . . . . . . . . . . $ 114,707 -- $ 345,523 --
Ratio of EBITDA to Net Cash Interest . 2.3 -- 2.9 --
NOTE 1: The above information is not given in connection with any sale or
offer to sell or buy any stock or security.
NOTE 2: The company files periodic reports pursuant to the Securities
Exchange Act of 1934. Accordingly, with respect to the
financial information set forth above, you are requested to
refer to such filings for more detailed information.