Niagara Mohawk reports improved third quarter profits

SYRACUSE, N.Y., Nov. 13, 2001 – Niagara Mohawk Holdings Inc., parent company of Niagara Mohawk Power Corp., a regulated energy delivery company, today reported earnings for the third quarter of 2001.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the 12 months ended Sept. 30, 2001, were $1.10 billion, compared to a level of $1.09 billion for the 12 months ended June 30, 2001.

The company reported earnings of $4.2 million, or 3 cents per share. This compares to earnings of $2.7 million or 2 cents per share in the third quarter of 2000. Reported earnings have been and will continue to be substantially depressed due to the non-cash charges related to the 1998 Master Restructuring Agreement with a group of independent power producers.

Results for the third quarter of 2001 include an $80.0 million charge ($123.0 million pre-tax), or 50 cents per share, for the reduction in unrecovered nuclear investment as part of a regulatory settlement agreement on the sale of Niagara Mohawk’s interest in the Nine Mile Point Nuclear Station. On Nov. 7, 2001, Niagara Mohawk announced that it had completed the sale of its nuclear assets to Constellation Nuclear.

Earnings for the third quarter of 2001 were positively impacted by $79.7 million, or 50 cents per share as a result of the recognition of unamortized investment tax credits upon the sale of the nuclear plants; by $8.6 million, or 5 cents per share due to lower interest costs; by $7.0 million, or 4 cents per share as a result of lower natural gas prices in the company’s purchased power portfolio; and by $3.2 million, or 2 cents per share due to higher deliveries of electricity to residential customers.

Earnings for the third quarter of 2000 included $19.4 million, or 12 cents per share, of insurance proceeds and disaster relief associated with the 1998 ice storm restoration effort.

The company reported a loss of $79.0 million, or a loss of 49 cents per share for the 12 months ended Sept. 30, 2001, compared to a loss of $20.7 million, or a loss of 12 cents per share for the 12 months ended Sept. 30, 2000. The loss for the 12 months ended Sept. 30, 2001 reflects an $80.0 million after-tax charge, or 50 cents per share, for the reduction in unrecovered nuclear investment connected with the sale of the Nine Mile Point Nuclear Station, and a charge of $44.0 million or 27 cents per share due to the recognition of an impairment charge in connection with the company’s investment in a development stage telecommunications company. Results for the 12 months ended Sept. 30, 2001 were also negatively impacted by $44.9 million, or 28 cents per share as a result of the company’s exposure to higher natural gas prices in its purchased power portfolio through Aug. 31, 2001. Effective Sept. 1, 2001, in accordance with the company’s current regulatory agreement, the commodity cost of electricity is passed directly on to customers.

Results for the 12-month period ended Sept. 30, 2001 were favorably impacted by $79.7 million, or 50 cents per share to reflect the recognition of unamortized investment tax credits upon the sale of the nuclear plants; $20.0 million, or 12 cents per share due to lower interest expense; by $17.7 million, or 11 cents per share due to a credit related to New York State’s “Power For Jobs” economic development program; and by a gain of $12.8 million, or 8 cents per share for the cumulative effect of adopting Statement of Financial Accounting Standards (SFAS) No. 133 – “Accounting for Derivative Instruments and Hedging Activities.”

The 12-month period ended Sept. 30, 2000 included an extraordinary item related to the cost of the early retirement of debt of $0.9 million, or 1 cent per share, and also included $19.4 million, or 12 cents per share, for insurance proceeds and disaster relief associated with the 1998 ice storm restoration effort.

Niagara Mohawk’s electric revenues for the third quarter of 2001 were $940.9 million, up 13.4 percent from the same period in 2000. Electric revenues for the 12 months ended Sept. 30, 2001 were $3.4 billion, up 4.1 percent from same period a year ago.

Retail sales of electricity for the three months and 12 months ended Sept. 30, 2001 increased 1.6 percent and decreased 2.3 percent, respectively, compared to the same periods in 2000. Total deliveries of electricity, which include deliveries to customers who chose to buy electricity from other energy service providers, were up 26.1 percent for the third quarter of 2001, and up 8.8 percent for the 12 months ended Sept. 30, 2001, compared to the same periods in 2000. Total deliveries of electricity and total electric revenues both increased for the three-month and 12-month periods ended Sept. 30, 2001, primarily as a result of higher sales to the New York Independent System Operator (NYISO). The increased revenues from sales to the NYISO were offset by higher electricity purchased costs.

Niagara Mohawk’s natural gas revenues for the third quarter of 2001 were $69.1 million, down 13.4 percent from the same period in 2000. For the 12 months ended Sept. 30, 2001, natural gas revenues were $786.1 million, up 31.1 percent, compared to same period in 2000. Revenues in both periods were primarily influenced by the market price of natural gas. The company passes the commodity cost of natural gas directly on to customers without markup.

Retail sales of natural gas for the three months and 12 months ended Sept. 30, 2001, decreased 7.9 percent and increased 2.6 percent, respectively, compared to the same periods in 2000. Total gas deliveries, which includes the transportation of customer-owned gas, were up 1.0 percent and down 4.8 percent, respectively, for the three months and 12 months ended Sept. 30, 2001.

Consolidated Statements of Income will be filed with the Securities and Exchange Commission on Form 10-Q.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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