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NERCO EXPECTS ASSET IMPAIRMENT IN FIRST QUARTER 1992

 NERCO EXPECTS ASSET IMPAIRMENT IN FIRST QUARTER 1992
 PORTLAND, Ore., March 18 /PRNewswire/ -- NERCO Inc. (NYSE: NER; Toronto) today disclosed that due to an approximate 45-percent decline in the company's natural gas prices since December 1991, the company expects to recognize a non-cash after-tax impairment expense ranging from approximately $150 million to $175 million on its oil and gas properties. The amount of the impairment, which will be recorded as of March 31, increases the company's previously reported estimate based upon a further evaluation of proved and unproved oil and gas properties and a change in price assumptions. The final amount will be based upon the company's evaluation of its oil and gas properties using current prices.
 NERCO Inc. President and Chief Executive Officer Lawrence E. Heiner said, "Before giving effect to the expected impairment expense, we expect to report a net loss for the first quarter and break-even to slightly negative results for the year, given the recent significant drop in natural gas prices."
 The company also confirmed that its debt ratings have been lowered principally as a result of low natural gas prices. Standard & Poor's recently downgraded the company's medium term notes ("MTN") to BBB- from BBB and commercial paper ("CP") to A-3 from A-2, and placed the ratings on "Creditwatch" with negative implications. In addition, Moody's Investors Service Inc., which had downgraded the company's ratings in April 1991 to comparable levels, recently placed the company's MTN and CP debt ratings under review for possible further downgrade. These actions have had no material effect on the company's liquidity or interest expense, although access to certain portions of the debt markets has been adversely affected.
 In a related matter, the company recently amended its principal debt agreement which contains covenants that limit borrowings, sale of assets, investments and the payment of dividends. The amendment liberalized restrictive covenants relating to cash flow coverages and dividend limitations. Under these covenants, as amended, the amount available for payment of future dividends was $100 million at Jan. 1. This amount will be increased by 75 percent of net income or decreased by 100 percent of net loss subsequent to Jan. 1, excluding up to $125 million of the expected first-quarter 1992 after- tax oil and gas asset impairment expense. Impairment expense for oil and gas properties in excess of $125 million or for other properties would reduce the amount available for future dividends.
 According to NERCO Inc. Senior Vice President, Treasurer and Chief Financial Officer Richard T. O'Brien, "Although we believe that the company will be able to meet the amended cash flow covenant, further price decreases for our commodities or reductions in volumes sold could result in a breach of the covenant unless debt levels are reduced through asset sales or otherwise. In addition, if the company's debt ratings are downgraded further, liquidity and interest expense could be negatively affected during 1992."
 Heiner added, "The company continues to review the carrying value of all its properties in light of the recent low price environment. In this low price cycle, the company is focused on reducing costs and increasing cash flow. We are pursuing steps to mitigate the immediate impact of this low price environment, including reassessing our planned capital expenditures and asset sales program with an objective of generating cash flow for debt reduction and exploration and development programs. In addition, our ongoing commitment to the oil and gas business is predicated upon the belief that current low prices are not representative of the long-term price environment."
 NERCO Inc. is a natural resource company with interests in low- sulfur coal, oil and natural gas, and precious metals.
 -0- 3/18/92
 /CONTACT: John C. Cummings, 503-731-6649, or Richard T. O'Brien, 503-731-6732, both of NERCO Inc./
 (NER) CO: NERCO Inc. ST: Oregon IN: OIL SU:


SC -- SE009 -- 9465 03/18/92 20:32 EST
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Date:Mar 18, 1992
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