[NATIONAL GRID LOGO] [NIAGARA MOHAWK LOGO]
NATIONAL GRID TO ACQUIRE NIAGARA MOHAWK
IN $3.0 BILLION TRANSACTION;
CREATES NINTH LARGEST ELECTRIC UTILITY IN U.S.
TRANSACTION DOUBLES SIZE OF NATIONAL GRID USA; CREATES MOST EXTENSIVE
TRANSMISSION NETWORK AND 2ND LARGEST DISTRIBUTION BUSINESS
IN NEW ENGLAND/NEW YORK REGION
NIAGARA MOHAWK TO RETAIN NAME AND SYRACUSE-BASED OPERATING HEADQUARTERS;
NATIONAL GRID CASTS VOTE OF CONFIDENCE FOR UPSTATE NEW YORK ECONOMY
WESTBOROUGH, MA AND SYRACUSE, NY, SEPTEMBER 5, 2000 - National Grid
Group plc (LSE, NYSE: NGG) and Niagara Mohawk Holdings, Inc. (NYSE: NMK)
announced today that they have signed a merger agreement under which National
Grid will acquire Niagara Mohawk through the formation of a new National Grid
holding company, New National Grid, and the exchange of Niagara Mohawk shares
for a combination of American Depositary Shares (ADSs) and cash. National Grid,
one of the U.K.'s 50 largest companies and the world's largest independent
electric transmission company, builds, owns and operates electric and
telecommunications networks around the world. Niagara Mohawk is the second
largest combined electric and gas utility in New York State.
Niagara Mohawk is National Grid's third U.S. acquisition, after New
England Electric System (NEES) and Eastern Utilities Associates (EUA), which
were both acquired earlier this year.
The combination will create the ninth largest electric utility in the
U.S. with an electric customer base of approximately 3.3 million. With Niagara
Mohawk, National Grid will own and operate the most extensive transmission
network (by miles) and be the second largest distribution business (by power
delivered) in the New England/New York market.
Niagara Mohawk will continue to operate under its current name and will
keep its operating headquarters in Syracuse. Upon completion of the transaction,
Niagara
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Mohawk will become a wholly-owned subsidiary of National Grid and be re-branded
"Niagara Mohawk, a National Grid Company."
Under the terms of the transaction, Niagara Mohawk shareholders will
receive consideration of $19.00 per Niagara Mohawk share, subject to the dollar
value of five National Grid ordinary shares being between $32.50 and $51.00. In
the event that the dollar value of five National Grid ordinary shares is greater
than $51.00, the per share consideration received by Niagara Mohawk shareholders
will increase by two-thirds of the percentage of the increase in value over
$51.00. In the event that the dollar value of five National Grid ordinary shares
is less than $32.50, the per share consideration received by Niagara Mohawk
shareholders will decrease by two-thirds of the percentage of the decrease in
value below $32.50. Shareholders can elect to receive their consideration either
in cash or ADSs, or a combination of both, subject to the aggregate cash
consideration offered being at least $1.0 billion. If cash elections received
from Niagara Mohawk shareholders exceed $1.0 billion, National Grid has the
option to increase the cash element of the consideration. The terms of the
merger agreement value the equity of Niagara Mohawk at approximately $3.0
billion ((pound)2.1 billion) and the enterprise value of Niagara Mohawk at
approximately $8.9 billion ((pound)6.1 billion), including net debt of $5.9
billion ((pound) 4.0 billion) as of June 30, 2000.
The transaction is expected to be accretive to National Grid's earnings
per share after the amortization of goodwill in the first full financial year
after completion of the acquisition, and should substantially enhance National
Grid's cash flow per share immediately following the completion. Through
merger-related cost synergies and sharing of best practices, National Grid
expects to achieve annual cost savings of approximately $90 million across New
England and New York operations, representing some 10 percent of the enlarged
group's electric controllable cost base. These savings are expected to be
achieved within four years of the merger's completion, with approximately 50% of
these savings achieved in the combined company's first full financial year.
The transaction is expected to be completed by late 2001, subject to a
number of conditions, including regulatory and other governmental consents and
approvals, the sale of Niagara Mohawk's nuclear facilities or other satisfactory
arrangements being reached, and the approval of Niagara Mohawk and National Grid
shareholders.
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David Jones, chief executive of National Grid, said, "This acquisition
builds perfectly on our successful North American strategy. It builds on both
the platform we have created in New England and our top quality U.S. management
team. With Niagara Mohawk, we double the size of our U.S. business and reinforce
our position as a leading player in the Northeast - a region that is clearly at
the forefront of the industry's restructuring in the U.S.
"Niagara Mohawk's management team has managed the critical issues
related to purchase power contracts and industry restructuring over the last
several years, which resulted in lower delivery costs for customers," Jones
continued. "This work, along with its focused transmission and distribution
business and depth of regional knowledge and experience, makes Niagara Mohawk an
attractive partner to National Grid as we expand our U.S. business."
Jones concluded: "Our ten years of experience operating a transmission
system in a competitive environment strengthens our ability to provide services
that will benefit customers in today's rapidly changing U.S. energy markets. We
look forward to bringing our experience to New York, and to continuing to
contribute to the current debate on the restructuring of the U.S. transmission
sector."
William E. Davis, chairman and chief executive of Niagara Mohawk, who
will become chairman of National Grid USA and will join the National Grid board
of directors as an executive director for two years after the completion of the
acquisition, said, "We are delighted to be joining forces with National Grid to
become an important part of one of the largest and most efficient energy
delivery companies in the world. This transaction is in the best interests of
our shareholders, and will yield significant benefits for our customers,
employees and the communities we serve. Direct savings and sharing of best
practices will create an even more efficient company, leading to lower delivery
costs and enhanced customer service, making upstate New York a more attractive
region for economic growth."
National Grid will have - following the acquisition of Niagara Mohawk -
approximately 10,000 employees in its regulated electric and gas businesses in
New York and New England. National Grid's goal is to achieve workforce
reductions across the entire National Grid USA organization by 500 to 750
positions - over a period of four years - through natural attrition and
voluntary programs. National Grid has achieved
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targeted merger savings and efficiencies in its previous U.S. mergers on a
similar basis. A joint National Grid - Niagara Mohawk integration team will
manage the cost reduction program and facilitate sharing of best practices.
Said National Grid USA President and CEO Rick Sergel, who will continue
in his role after the merger, "Based on our successful integration of NEES and
EUA earlier this year, we are confident that we will be able to reduce energy
delivery costs, improve service for consumers in Niagara Mohawk's territories
and contribute to economic development in upstate New York. We are fortunate to
be working with Niagara Mohawk's dedicated employees, who have decades of
experience in serving customers in upstate New York."
Noting that the Pataki administration, New York State regulators, and
Niagara Mohawk have made tremendous progress in restructuring New York State's
energy markets and achieving settlements on above-market power purchase
contracts, Sergel added, "We aim to work with New York regulators to structure
long-term rate plans that benefit customers and shareholders and include
incentives for cost control and superior customer service. We intend to provide
long-term rate stability that will support regional economic development in
upstate New York."
"This transaction is a vote of our confidence for the long-term health
of the upstate New York economy," concluded Sergel, noting that Niagara Mohawk
will continue to be a major taxpayer in New York State. "We will continue
Niagara Mohawk's excellent record of corporate citizenship in upstate New York.
The same people who serve Niagara Mohawk customers and live in their
neighborhoods will continue to do so after the merger. We will honor all union
agreements, be responsive to the needs of local communities and support
charitable organizations as Niagara Mohawk has done in the past. We will
establish a New York Advisory Board made up of Niagara Mohawk's current outside
directors to help advise on customer and community relations."
N M Rothschild & Sons Limited and Rothschild Inc. are advising National
Grid, and Niagara Mohawk is being advised by Donaldson, Lufkin & Jenrette
Securities Corporation. Merrill Lynch International and Credit Suisse First
Boston are brokers to National Grid.
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Niagara Mohawk Holdings, Inc. (NYSE: NMK) is an investor-owned energy
services company that provides electricity to more than 1.5 million customers
across 24,000 square miles of upstate New York. The company also delivers
natural gas to more than 540,000 customers over 4,500 square miles of eastern,
central and northern New York. The company has approximately 7,600 employees.
The National Grid Group plc builds, owns and operates electric and
telecommunications networks around the world, focusing on liberalizing markets.
National Grid operates electric networks in the U.K., the U.S., Argentina and
Zambia. The company's growing portfolio of telecommunications businesses
includes ventures in the U.K., the U.S., Brazil, Argentina, Chile and Poland.
National Grid Group's headquarters are in London, England.
National Grid USA includes local electric companies Massachusetts
Electric, Narragansett Electric, Granite State Electric, and Nantucket Electric,
and a substantial transmission business. The company has approximately 3,800
employees.
CONTACTS:
Citigate Sard Verbinnen
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Media:
Judy Brennan/Susan Burns/Jonathan Gasthalter
212-687-8080
National Grid
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Media:
Fred Mason, Vice President and Director, Corporate Communications
508-389-3568
Niagara Mohawk:
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Media:
Joseph M. Russo, Vice President,
Public Affairs and Corporate Communications
315-428-6922
Financial:
Leon T. Mazur, Director, Investor Relations
315-428-5876
This press release includes forward looking statements within the meaning of
Section 27A of the United States Security Act of 1933 and Section 21E of the
United States Securities Exchange Act of 1934. Although National Grid believes
that its expectations are based on reasonable
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assumptions, it can give no assurance that its goals will be achieved. Important
factors that could cause actual results to differ materially from those in the
forward looking statements herein include risks and uncertainties relating to
the ability to obtain expected synergies from the merger, delays in obtaining or
adverse conditions contained in related regulatory approvals, competition and
industry restructuring, changes in economic conditions, changes in energy market
prices, changes in historical weather patterns, changes in laws, regulations or
regulatory policies, developments in legal or public policy doctrines,
technological developments, the availability of new acquisition opportunities,
the timing and success of future acquisition opportunities and other presently
unknown or unforeseen factors.
In connection with the proposed merger, National Grid and Niagara Mohawk will
file a proxy statement/prospectus with the Securities and Exchange Commission
(the "SEC"). Investors are urged to read the proxy statement/prospectus and
other documents filed with the SEC when they become available because they
contain important information concerning the transaction. Investors will be able
to obtain a free copy of the proxy statement/prospectus (when available) and
other documents filed by National Grid and Niagara Mohawk at the SEC's web site,
http://www.sec.gov or at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, documents filed by Niagara Mohawk
with the SEC can be obtained by contacting Niagara Mohawk at the following
address and telephone number: Investor Relations, Niagara Mohawk Holdings, Inc.,
300 Erie Boulevard West, Syracuse, NY 13202, telephone: 315-4283134. Documents
filed with the SEC by National Grid can be obtained by contacting National Grid
at the following address and telephone number: David Forward, National Grid
Group plc, 15 Marylebone Road, London, NW1 5JD, telephone: 020-7312-5600.
Niagara Mohawk, its officers, directors, employees and certain other members of
Niagara Mohawk management and employees may be soliciting proxies from Niagara
Mohawk shareholders in favor of the merger and may be deemed to be "participants
in the solicitation" under the rules of the SEC. Information concerning the
participants will be set forth in the proxy statement/prospectus when it is
filed with the SEC.
N M Rothschild & Sons Limited, which is regulated in the U.K. by The Securities
and Futures Authority Limited, is acting exclusively for National Grid and no
one else in connection with the Acquisition and will not be responsible to
anyone other than National Grid for providing the protections afforded to their
customers or for giving advice in relation to the Acquisition.
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