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New York State Electric & Gas Corp. pulled no punches Wednesday in rejecting CalEnergy Co.'s $1.9 billion hostile bid, but analysts said the fight to control the utility may be far from over.

With harsh words, the utility's board said it was unanimous in its decision to reject both a partial tender offer and a full acquisition bid from CalEnergy.

The bid doesn't reflect the true value of NYSEG shares, which are "artificially depressed" because of uncertainty about how New York's move to open electricity sales to competition will affect the utility, NYSEG said.

NYSEG's directors had "troubling questions about CalEnergy's true motives and qualifications" and were concerned about the Omaha-based company's "misleading and disingenuous" tactics, said Wesley von Schack, NYSEG's chairman, president and chief executive officer.

"For all the smoke and mirrors CalEnergy has attempted to conjure, in reality it has not even begun to put a real offer on the table. They have no regulatory plan and they have no financing plan," von Schack said.

But analysts said they expect David Sokol, the CalEnergy chief executive who pushed aside political and company opposition in last year's takeover of Britain's Northern Electric Plc, will keep pursuing NYSEG.

"Mr. Sokol doesn't go into acquisition mode unless he has a good chance of succeeding," said David Schanzer, an analyst with Janney Montgomery Scott Inc.

NYSEG said both its financial advisers -- Morgan Stanley & Co. and Goldman, Sachs & Co. -- called CalEnergy's offer of $27.50 for a full-blown merger inadequate. Von Schack said CalEnergy was seeking to "get NYSEG on the cheap."

Based on NYSEG's book value, an offer of $30 a share or higher would be acceptable, said Bert Kramer, an analyst with PaineWebber Inc. "My guess is CalEnergy probably has another offer in the background."

CalEnergy stock fell 3/1 6 to 40 7/1 6. NYSEG shares rose 1/1 6 to 25 1/4 .

CalEnergy defended its bid, saying it's a 32 percent premium above NYSEG's closing price on June 30, the day before CalEnergy began its takeover effort.

Sokol said it "defies logic" that NYSEG would not accept the offer, especially considering its stock declined nearly 32 percent in value between 1992 and 1997 and the utility was forced to cut its dividend in 1994.

NYSEG's board and management "are attempting to preserve their own self interest given that they have not even taken the trouble to discuss the terms of our cash merger proposal with us," CalEnergy said.

Von Schack also said CalEnergy lacks experience as a manager of power lines and natural gas pipelines, and might not act in the best interest of NYSEG's shareholders, he said.

CalEnergy responded by noting that it operates Northern Electric, a utility with a larger customer base then NYSEG. "It is disingenuous to question CalEnergy's ability to run a regulated utility," Sokol said.

NYSEG also announced it has the backing of state Public Service Commission staff on a proposal that includes $600 million in rate cuts.

NYSEG said it agreed to forgo previously approved rate increases for residential and commercial customers totaling 6 percent that were scheduled to take effect in August of 1996 and 1997.

It also agreed to cut rates for major industrial and commercial customers by 5 percent each year for the next five years.

NYSEG "We can prepare for competition ourselves. We don't need CalEnergy to do it," said von Schack.

CalEnergy said the timing of the agreement was no coincidence. "Today's announcement is the perfect example of what a competitive company like CalEnergy can do to institute change" that benefits ratepayers, Sokol said. NYSEG didn't agree to rate cuts until after CalEnergy's bid, he said.

NYSEG also said it filed a lawsuit in U.S. District Court in New York seeking to block CalEnergy's attempts to gain control of the utility.

The suit charges CalEnergy with using confidential information to further its takeover efforts that it acquired from NYSEG last spring during talks about a possible joint venture.

It also faults CalEnergy for failing to disclose in its takeover offer that NYSEG is in the midst of an ongoing battle to modify a government-mandated contract that forces it to buy power from CalEnergy at above-market rates.

The contract covers NYSEG's purchase of electricity from CalEnergy's Saranac plant in Plattsburgh. CalEnergy controls the partnership that owns the plant.

The contract with the Saranac plant costs NYSEG customers well in excess of $100 million a year in above-market rates, the utility said.

"CalEnergy's position as the main beneficiary of the Saranac Agreement is in patent conflict with any position it might gain as a substantial NYSEG shareholder through the tender offer," it said.

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