ALBANY, N.Y.--Oct. 6, 1995--href="chap11.niagara.html">Niagara Mohawk
Power Corp. (NYSE:NMK) Friday proposed a sweeping corporate
restructuring designed to create an open, competitive electricity
market, deregulate electricity generation in the company's service
area and freeze or reduce electricity prices over the next five
The proposal, called PowerChoice, was filed today with the New
York State Public Service Commission. PowerChoice would allow all
customers to choose their electricity supplier within three years
after the plan is implemented.
PowerChoice also calls for Niagara Mohawk to restructure itself
by putting its power plants into a separate company. The rest of
the business would be reconfigured, under separate ownership, into a
holding company with regulated subsidiaries that would transmit and
distribute electricity and natural gas and supply energy services.
It would also have subsidiaries that will engage in marketing,
brokering and service activities.
"An outdated regulatory system and failed energy policies have
destroyed the link between electricity supply, demand and price in
New York," Niagara Mohawk Chairman William E. Davis said. "The
present system doesn't work. We have an oversupply of power but
prices are rising. Niagara Mohawk, our customers and shareholders
have been pushed to a crisis point. There must be a fundamental
restructuring of the electricity market in Niagara Mohawk's service
area or the upstate economy will continue to bear the burdens of
growing electricity prices."
Mr. Davis cautioned that this vision for a competitive
electricity market and customer choice cannot be achieved unless
high-cost contracts that the company was required to sign with
unregulated generators are restructured and onerous state tax and
energy policies are addressed.
"Our customers are already suffering from past policies that
require them to pay more than $400 million a year extra for power
produced by unregulated generators," Mr. Davis said. "In addition,
New York utility taxes are more than double the national average.
We stand ready to endure our fair share of the hardship that will
result from this transition process for the long-term good of our
customers and shareholders, but unregulated generators and the state
absolutely must do their part as well."
Key provisions of the PowerChoice proposal include:
As an interim step, Niagara Mohawk announced that it is
reorganizing its business units to create a Generation Group, which
will include all of its power plants as well as unregulated
generator contracts; an Energy Distribution Group, which will
include both electricity and natural gas customer service functions;
and a separate group for existing and new business ventures. This
interim reorganization will not result in substantial job
If negotiations fail, Niagara Mohawk proposes to take possession
of these projects through the company's power of eminent domain.
Niagara Mohawk would then resell the projects and compensate their
owners, allowing the projects to sell electricity into the
competitive pool at market prices. Some of the costs related to
Niagara Mohawk and unregulated generators that would be "stranded"
or unrecoverable in a competitive market would be written off.
Remaining costs would be recovered through a fee tied to
"Niagara Mohawk shareholders have already endured years of
depressed returns on their investments. Our customers have seen
their bills rise and should not have to endure more increases due to
escalating payments to unregulated generators and unfair taxes. And
our employees have experienced large staff reductions, restricted
resources, and continuing uncertainty. We are not willing to accept
further deterioration of this situation. If PowerChoice appears
unachievable, the company cannot rule out the possibility of
restructuring under Chapter 11 of the U.S. bankruptcy code. That
certainly wouldn't be in the best interest of the state or
unregulated generators. We look forward to discussing PowerChoice
constructively with other parties, and we hope they will do the same
for the sake of the New York economy."
Under procedures established by the Public Service Commission,
Niagara Mohawk and the parties to its rate case will negotiate the
company proposal with the goal of achieving a PSC-approved
settlement by year-end. "We recognize that this is an arduous
undertaking; but we remain committed to pushing our plan forward,"
Mr. Davis said.
Niagara Mohawk is an electric and gas utility with the largest
service area in New York State. The company serves 1.5 million
electricity and 500,000 natural gas customers across a 24,000-square-
mile service area in upstate New York.
CONTACT: Niagara Mohawk Power Corporation,
Kerry P. Burns, 315/428-5266;
Stephen F. Brady, 315/428-6961
NEW YORK, New York--Oct. 6, 1995--href="chap11.niagara.html">Niagara Mohawk Power's
outstanding $2.6 billion first mortgage bonds and secured pollution
control bonds are downgraded to "BB" from "BBB" by Fitch. The
company's $541 million preferred stock is also downgraded to "B+"
from "BBB-." The credit trend is declining.
Niagara Mohawk's projected bondholder protection measures are
weak, and investors are likely to face prolonged uncertainty
following the company's announcement today of a proposal to split
into a distribution/transmission company and a separate generating
company as part of a broad restructuring.
As proposed, the restructuring would include staged initiation
of retail open access over a period from 1997 to 2000, inauguration
of a competitive wholesale generation market, rate freezes, and
reformation of purchase power contracts. According to management,
the legal separation of the generating company would be accomplished
via a tax- free split-up, in which common and preferred stock would
be divided pro rata between the two corporations. Existing
bondholders would continue to hold bonds in the generating company,
which would carry on as Niagara Mohawk, unless the holders exchanged
the bonds in a voluntary exchange offer for bonds of the new holding
company, which would acquire the electric transmission and gas and
electric distribution businesses.
A major risk is that the company's plan depends on many
variables, a number of which are not in the company's control,
including the reduction or elimination of the New York gross receipt
tax, potential purchase of nuclear power facilities by the New York
Power Authority, and voluntary renegotiation of uneconomic power
purchase contracts. Power contract negotiations would be spurred by
the twin threats that the utility will condemn unregulated generator
properties by exercise of eminent domain or may ultimately file a
petition in bankruptcy. To make the generating company a
competitive power producer, NMK proposes to write down the carrying
value of its owned generating assets by a significant amount, which
has been estimated at roughly $400 million, providing that non-
utility generators reduce contractual prices to effect a reduction
in the present value of contract obligations four times as great as
NMK's write-down. It is highly uncertain whether the outcome will
ultimately match this aggressive proposal.
While pressing forward with the proposed restructuring, NMK
plans to hedge its bets by filing a traditional rate increase
application for a large rate increase to become effective in 1997,
and may consider an application for an emergency rate increase to
become effective in 1996. Despite the company's forecasts that a
voluntary bankruptcy is an option in the event that the proposed
restructuring is not implemented as proposed, Niagara Mohawk
continues to pay common stock dividends of approximately $40 million
/CONTACT: Ellen Lapson, 212-908-0504, or John Watt, 212-908-0523/
SECAUCUS, N.J., Oct. 6, 1995 -- href="chap11.jamesway.html">Jamesway Corporation
(NYSE: JMY) today announced that same store sales for the five-week
period ended September 30, 1995, decreased 9% compared with the
corresponding period a year ago.
Sales for the five-week period ended September 30, 1995,
excluding leased departments, were $57.5 million compared to $64.2
million for the same period a year ago. The Company had 90 stores
in operation at the end of the period this year compared with 92
stores a year ago.
Sales for the thirty-five weeks ended September 30, 1995,
excluding leased departments were $374.0 million compared with
$418.5 million for the thirty-five week period a year ago. Same
store sales for the thirty-five week period were 8% below the same
period last year.
Jamesway also announced that, as a result of the continued weak
sales results, operating losses and increasingly constricted trade
credit, it is considering the filing of a petition under Chapter 11
of the United States Bankruptcy Code.
Jamesway Corporation operates a chain of 90 regional discount
department stores in seven Northeastern and mid-Atlantic States.
/CONTACT: Michael Palmer, Executive VP, Finance, Administration of
Jamesway Corporation, 201-330-6000/
RICHMOND, Va., Oct. 6, 1995 -- href="chap11.consumat.html">Consumat Systems, Inc. (OTC-
Bulletin Board: CSMT), the Richmond, Virginia based incineration and
pollution control equipment manufacturer, announced today that it
has filed for protection under Chapter 11 of the United States
Bankruptcy Code, in the United States Bankruptcy Court for the
Eastern District of Virginia in Richmond.
While the Company has operated profitably for the last five
quarters, the bankruptcy filing was precipitated by a continued
working capital deficiency and litigation involving New England
Waste Services, Inc. (NEWS). The NEWS litigation relates to the
1994 sale of the stock in the Company's landfill subsidiary in New
Hampshire. Subject to Bankruptcy Court approval, Sirrom Capital
Corporation, a Small Business Investment Company based in Nashville,
Tennessee, will provide up to $500,000 of Debtor in Possession
financing during the bankruptcy. This financing will alleviate the
working capital deficiency and allow the Company to complete all
contracts in a timely manner. Subject to successful negotiation of
creditor claims, Sirrom will also provide post- bankruptcy financing
to the Company.
The Company intends to file a plan of reorganization later this
month and will seek confirmation of the plan as soon as is possible
thereafter. Pending confirmation, the Company will conduct business
/CONTACT: Robert L. Massey or Mark E. Hills, Consumat Systems Inc.,