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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______
Commission File Number 1-6788
THE UNITED ILLUMINATING COMPANY
(Exact name of registrant as specified in its charter)
Connecticut 06-0571640
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
157 Church Street, New Haven, Connecticut 06506
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-499-2000
________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, no par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
no par value
____________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's voting stock held by non-
affiliates on February 28, 1995 was $465,741,221, computed on the basis of
the average of the high and low sale prices of said stock reported in the
listing of composite transactions for New York Stock Exchange listed
securities, published in The Wall Street Journal on March 1, 1995.
The number of shares outstanding of the registrant's only class of common
stock, as of February 28, 1995, was 14,086,691.
DOCUMENTS INCORPORATED BY REFERENCE
Part of this Form 10-K into
Document which document is incorporated
-------- ------------------------------
Definitive Proxy Statement, dated
March 29, 1995, for Annual Meeting of the
Shareholders to be held on May 17, 1995. III
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THE UNITED ILLUMINATING COMPANY
FORM 10-K
December 31, 1994
TABLE OF CONTENTS
PAGE
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GLOSSARY 4
PART I
Item 1. Business. 6
- General 6
- Franchises, Regulation and Competition 6
- Franchises 6
- Regulation 7
- Competition 7
- Rates 8
- Financing 9
- Fuel Supply 11
- Fossil Fuel 11
- Nuclear Fuel 12
- Arrangements with Other Utilities 12
- Hydro-Quebec 13
- Environmental Regulation 13
- Employees 16
Item 2. Properties. 17
- Generating Facilities 17
- Tabulation of Peak Loads, Resources, and Margins 18
- Transmission and Distribution Plant 19
- Capital Expenditure Program 21
- Nuclear Generation 22
- General 22
- Insurance Requirements 22
- Waste Disposal and Decommissioning 23
Item 3. Legal Proceedings. 24
Item 4. Submission of Matters to a Vote of Security Holders. 25
Executive Officers of the Company 26
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TABLE OF CONTENTS (continued)
PAGE
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PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters. 29
Item 6. Selected Financial Data. 30
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 34
- Major Influences on Financial Condition 34
- Liquidity and Capital Resources 34
- Results of Operations 36
- Outlook 38
- Inflation 39
Item 8. Financial Statements and Supplementary Data. 40
- Consolidated Statements for the Years Ended December 31,
1994, 1993 and 1992 40
- Income Statement 40
- Cash Flows 41
- Balance Sheet 42
- Retained Earnings 44
- Notes to Consolidated Financial Statements 45
- Statement of Accounting Policies 45
- Capitalization 49
- Rate-Related Regulatory Proceedings 53
- Accounting for Phase-in Plan 54
- Income Taxes 55
- Short-Term Credit Arrangements 56
- Supplementary Information 58
- Pension and Other Benefits 59
- Jointly Owned Plant 62
- Unamortized Cancelled Nuclear Project 63
- Fuel Financing Obligations and Other Lease Obligations 63
- Commitments and Contingencies 64
- Capital Expenditure Program 64
- Seabrook 64
- Nuclear Insurance Contingencies 64
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TABLE OF CONTENTS (continued)
PAGE
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PART II (CONTINUED)
- Other Commitments and Contingencies 65
- Hydro-Quebec 65
- Reorganization Charge 65
- Site Remediation Costs 66
- Property Taxes 66
- Environmental Concerns 66
- Nuclear Fuel Disposal and Nuclear Plant Decommissioning 66
- Property Tax Settlement 68
- Fair Value of Financial Instruments 69
- Quarterly Financial Data (Unaudited) 70
Report of Independent Accountants 71
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures. 72
PART III
Item 10. Directors and Executive Officers of the Company 72
Item 11. Executive Compensation. 72
Item 12. Security Ownership of Certain Beneficial Owners
and Management. 72
Item 13. Certain Relationships and Related Transactions. 72
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 73
Consent of Independent Accountants 79
Signatures 80
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GLOSSARY
Certain capitalized terms used in this Annual Report have the following
meanings, and such meanings shall apply to terms both singular and plural
unless the context clearly requires otherwise:
"AFUDC" means allowance for funds used during construction.
"Company" or "UI" means The United Illuminating Company.
"CSC" means the Connecticut Siting Council.
"Connecticut Yankee" means the Connecticut Yankee Atomic Power Company.
"Connecticut Yankee Unit" means the nuclear electric generating unit owned
and operated by Connecticut Yankee.
"DEP" means the Connecticut Department of Environmental Protection.
"DOE" means the United States Department of Energy.
"DPUC" means the Connecticut Department of Public Utility Control.
"EPA" means the United States Environmental Protection Agency.
"FERC" means the United States Federal Energy Regulatory Commission.
"FCA" means fossil fuel adjustment clause.
"LLW" means low-level radioactive wastes.
"Millstone Unit 3" means the nuclear electric generating unit located in
Waterford, Connecticut, which is jointly owned by UI and thirteen other
New England electric utilities.
"NDFC" means the Nuclear Decommissioning Finance Committee.
"NEPOOL" means the New England Power Pool.
"NRC" means the United States Nuclear Regulatory Commission.
"PCBs" means polychlorinated biphenyls.
"Preferred Stock" means capital stock of the Company having preferential
dividend and liquidation rights over shares of the Company's other
classes of capital stock.
"RCI" means Research Center, Inc., a wholly-owned subsidiary of UI.
"RCRA" means the federal Resource Conservation and Recovery Act.
"Seabrook Unit 1" means nuclear generating unit No. 1 located in Seabrook,
New Hampshire, which is jointly owned by UI and eleven other New England
electric utilities.
"SEC" means Securities and Exchange Commission.
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GLOSSARY (CONTINUED)
"SO2" means sulfur dioxide.
"SPI" means Souwestcon Properties, Inc., a wholly-owned subsidiary of URI.
"TSCA" means the federal Toxic Substances Control Act.
"UEI" means United Energy International, Inc., a wholly-owned subsidiary of
UI.
"UI" or "Company" means The United Illuminating Company.
"URI" means United Resources, Inc., a wholly-owned subsidiary of UI.
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PART I
Item 1. Business.
GENERAL
The United Illuminating Company is an operating electric
public utility company, incorporated under the laws of the
State of Connecticut in 1899. It is engaged principally in
the production, purchase, transmission, distribution and
sale of electricity for residential, commercial and
industrial purposes in a service area of about 335 square
miles in the southwestern part of the State of Connecticut.
The population of this area is approximately 711,000 or 22%
of the population of the State. The service area, largely
urban and suburban in character, includes the principal
cities of Bridgeport (population 142,000) and New Haven
(population 130,000) and their surrounding areas. Situated
in the service area are retail trade and service centers, as
well as large and small industries producing a wide variety
of products, including helicopters and other transportation
equipment, electrical equipment, chemicals and
pharmaceuticals. Of the Company's 1994 retail electric
revenues, approximately 41% was derived from residential
sales, 40% from commercial sales, 17% from industrial sales
and 2% from other sales.
UI has three wholly-owned subsidiaries. Research Center,
Inc. (RCI) has been formed to participate in the development
of one or more regulated power production ventures,
including possible participation in arrangements for the
future development of independent power production and
cogeneration facilities. United Energy International, Inc.
(UEI) was formed to facilitate participation in a joint
venture relating to power production plants abroad. United
Resources, Inc. (URI) serves as the parent corporation for
several unregulated businesses, each of which is
incorporated separately to participate in business ventures
that will complement and enhance UI's electric utility
business and serve the interests of the Company and its
shareholders and customers.
Four wholly-owned subsidiaries of URI have been
incorporated. Souwestcon Properties, Inc. (SPI)
participated as a 25% partner in the ownership of a medical
hotel building in New Haven, which has recently been sold.
SPI no longer owns any property and is currently inactive.
A second wholly-owned subsidiary of URI is Thermal Energies,
Inc., which is participating in the development of district
heating and cooling facilities in the downtown New Haven
area, including the energy center for an office tower and
participation as a 37% partner in the energy center for a
city hall and office tower complex. A third URI subsidiary,
Precision Power, Inc., provides power-related equipment and
services to the owners of commercial buildings and
industrial facilities. A fourth URI subsidiary, American
Payment Systems, Inc., manages agents and equipment for
electronic data processing of bill payments made by
customers of utilities, including UI, at neighborhood
businesses. In addition to these subsidiaries, URI also has
a 90% ownership interest in Ventana Corporation, which
offers energy conservation engineering and project
management services to governmental and private
institutions.
The Board of Directors of the Company has authorized the
investment of a maximum of $18.0 million, in the aggregate,
of the Company's assets in all of URI's ventures, UEI and
RCI, and, at December 31, 1994, approximately $14.5 million
had been so invested.
FRANCHISES, REGULATION AND COMPETITION
FRANCHISES
Subject to the power of alteration, amendment or repeal by
the Connecticut legislature, and subject to certain
approvals, permits and consents of public authorities and
others prescribed by statute, the Company has valid
franchises to engage in the production, purchase,
transmission, distribution and sale of electricity in the
area served by it, the right to erect and maintain certain
facilities on public highways and grounds, and the power of
eminent domain.
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REGULATION
The Company is subject to regulation by the Connecticut
Department of Public Utility Control (DPUC), which has
jurisdiction with respect to, among other things, retail
electric service rates, accounting procedures, certain
dispositions of property and plant, mergers and
consolidations, the issuance of securities, certain
standards of service, management efficiency, operation and
construction, and the location and construction of certain
electric facilities. See "Rates". The DPUC consists of
five Commissioners, appointed by the Governor of Connecticut
with the advice and consent of both houses of the
Connecticut legislature.
The location and construction of certain electric
facilities is also subject to regulation by the Connecticut
Siting Council with respect to environmental compatibility
and public need. See "Environmental Regulation".
UI is a "public utility" within the meaning of Part II of
the Federal Power Act and is subject to regulation by the
Federal Energy Regulatory Commission (FERC), which has
jurisdiction with respect to interconnection and
coordination of facilities, wholesale electric service rates
and accounting procedures, among other things. See
"Arrangements with Other Utilities".
The Company is a holder of licenses under the Atomic
Energy Act of 1954, as amended, and, as such, is subject to
the jurisdiction of the United States Nuclear Regulatory
Commission (NRC), which has broad regulatory and supervisory
jurisdiction with respect to the construction and operation
of nuclear reactors, including matters of public health and
safety, financial qualifications, antitrust considerations
and environmental impact. Connecticut Yankee Atomic Power
Company (Connecticut Yankee) is also subject to this NRC
regulatory and supervisory jurisdiction. See Item 2.
Properties - "Nuclear Generation".
The Company is subject to the jurisdiction of the New
Hampshire Public Utilities Commission for limited purposes
in connection with its ownership interest in Seabrook
Unit 1.
COMPETITION
The electric utility industry has become, and can be
expected to be, increasingly competitive, due to a variety
of economic, regulatory and technological developments; and
UI is exposed to competitive forces in varying degrees.
Although UI has not historically been a major wholesale
supplier of bulk electric power (power sold to other
utilities), it has marketed generating capacity and energy
aggressively in recent years, seeking to sell outside its
service territory the power it produces in excess of the
present needs of its own customers that became available
when Seabrook Unit 1 commenced operating in 1990. Due to a
general oversupply of power in the New England region and
the region's slow economic growth, the Company's wholesale
sales efforts have faced increasing competition; and new
wholesale sales opportunities are expected to remain
relatively weak during the near term. Moreover, competition
in this market can be expected to increase by reason of the
federal Energy Policy Act of 1992, which was designed to
foster competition in the wholesale market by facilitating
the ownership and operation of independently-owned
generating facilities and authorizing the FERC to order
electric utilities to furnish transmission service to the
owners of these generating facilities. Competition may also
increase in the wholesale power market due to the entry of
brokers and marketers, who buy and sell generating capacity
and energy without owning or operating any generating or
transmission facilities.
In UI's principal market, retail sales of electricity in
the Company's franchised service territory, competitive
pressures are rising from several sources. Industrial and
large commercial customers may have the ability to own and
operate facilities that generate their own electric energy
requirements. If these facilities satisfy certain statutory
requirements, UI can be required to purchase their output at
UI's avoided cost. These customers may also substitute
natural gas or oil for electricity as fuel for heating and
cooling purposes, and industrial customers may have the
option of relocating their facilities to a lower-cost
environment. As a result of these pressures, and with the
approval of the DPUC, UI offers special rate and service
agreements to induce industrial and large commercial
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customers to remain on the Company's system. However, to
the extent that the Company loses revenues from customers
leaving the system or paying for service under special rate
or service agreements, the Company's only opportunity to
replace such revenues will be through increased wholesale
sales and retail sales growth. The Company is not
capitalizing these "lost" revenues for future rate recovery
and has stated publicly that it does not plan to seek retail
rate increases for the foreseeable future.
The legislatures and regulatory commissions in several
states have considered or are considering "retail wheeling."
This, in general terms, means the transmission by an
electric utility of energy produced by another entity over
the utility's transmission and distribution system to a
retail customer in the utility's own service territory. A
retail wheeling requirement would have the effect of
permitting retail customers to purchase electric capacity
and energy, at the election of such customers, from the
electric utility in whose service area they are located or
from any other electric utility or independent power
producer. The DPUC has completed a proceeding that
investigated whether retail wheeling should be permitted in
Connecticut. Among other things, the DPUC concluded that
the introduction of open competition for retail sales is not
in the best interests of the affected constituencies, State
energy policy, or the economy of the State of Connecticut.
Nevertheless, the DPUC recommended that Connecticut
utilities should prepare for the eventuality of either
retail wheeling or some other form of competition that is
more intense than the current franchise framework.
RATES
The Company's retail electric service rates are subject to
regulation by the DPUC.
UI's present general retail rate structure consists of
various rate and service classifications covering
residential, commercial, industrial and street lighting
services.
On December 16, 1992, the DPUC approved levelized rate
increases of 2.66% ($15.8 million) in 1993 and 2.66% (an
additional $17.3 million) in 1994, including allowed
conservation and load management program revenue increases.
However, the Company has realized increased revenues of
$12.1 million and $12.5 million in 1993 and 1994,
respectively, as a result of these rate increases.
Utilities are entitled by Connecticut law to revenues
sufficient to allow them to cover their operating and
capital costs, to attract needed capital and maintain their
financial integrity, while also protecting the public
interest. Accordingly, the DPUC's 1992 rate decision
authorized a return on equity of 12.4% for ratemaking
purposes. However, the Company may earn up to 1% above this
level before a mandatory review is required by the DPUC.
The Company is allowed revenue increases for conservation
and load management expenditures through a Conservation
Adjustment Mechanism (CAM) in its retail rates, and
accordingly expects a revenue increase in 1995 of $6
million, or 1%, through operation of the CAM. Except for
CAM revenue increases, the Company has stated publicly that
it does not plan to seek any retail rate increases for the
foreseeable future.
Since January 1971, UI has had a fossil fuel adjustment
clause (FCA) in virtually all of its retail rates. The DPUC
is required by law to convene an administrative proceeding
prior to approving FCA charges or credits for each month.
The law permits automatic implementation of the charges or
credits if the DPUC fails to act within five days of the
administrative proceeding, although all such charges and
credits are also subject to further review and appropriate
adjustment by the DPUC at public hearings required to be
held at least every three months. The DPUC has made no
material changes in UI's FCA charges and credits as the
result of any of these proceedings or hearings.
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FINANCING
The Company's capital requirements are presently projected
as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(000's)
<S> <C> <C> <C> <C> <C>
Capital Expenditure Program $ 75,840 $76,176 $ 51,816 $ 60,768 $ 92,880
Long-term Debt Maturities 97,000 - 50,000 100,000 100,000
Mandatory Redemptions
/Repayments 66,133 12,770 15,171 15,562 15,988
------- ------ ------- ------- -------
Total Capital Requirements $238,973 $88,946 $116,987 $176,330 $208,868
======== ======= ======== ======== ========
</TABLE>
The Company presently estimates that its cash on hand and
temporary cash investments at the beginning of 1995,
totaling $11.4 million, and its projected net cash provided
by operations, less dividends, of $105.3 million, will be
sufficient to fund the Company's entire capital expenditure
program of $75.8 million and $40.9 million of the $163.1
million necessary to satisfy the 1995 requirements for
long-term debt maturities and mandatory long-term debt
redemptions and repayments. The Company presently estimates
that its projected net cash provided by operations, less
dividends, of $97.7 million, will be sufficient to fund the
Company's entire capital expenditure program of $76.2
million and all of the Company's 1996 requirements for
mandatory redemptions and repayments of $12.8 million. The
Company presently estimates that its projected net cash
provided by operations, less dividends, of $282.0 million,
will be sufficient to fund the Company's entire capital
expenditure program of $205.5 million and $76.5 million of
the $296.7 million necessary to satisfy the 1997 through
1999 requirements for long-term debt maturities and
mandatory long-term debt redemptions and repayments.
All of the Company's capital requirements that exceed
available cash will have to be provided by external
financing. Although the Company has no commitment to
provide such financing from any source of funds, other than
a $225 million revolving credit agreement with a group of
banks, described below, the Company expects to be able to
satisfy its external financing needs by issuing common
stock, preferred stock and additional short-term and
long-term debt, although the continued availability of these
methods of financing will be dependent on many factors,
including conditions in the securities markets, economic
conditions, and the level of the Company's income and cash
flow.
In January 1994, the Company repaid $55.3 million
principal amount of maturing 10.32% First Mortgage Bonds of
Bridgeport Electric Company, a wholly-owned subsidiary of
the Company that was subsequently merged with and into the
Company, and a $5 million 13.1% term loan. These repayments
were made with a portion of the net proceeds from the
issuance and sale, in December 1993, of $100 million
five-year and one month Notes at a coupon rate of 6.20%.
On September 12, 1994, the Company repaid at maturity $30
million principal amount of 7.62% Notes. In addition, on
November 1, 1994, December 2, 1994 and January 17, 1995, the
Company repaid at maturity $13 million, $10 million and $50
million principal amounts of 7.20%, 6.82% and 6.0% Notes,
respectively.
On October 1, 1994 and December 1, 1994, the Company
redeemed the remaining $110,000 and $3,830,000 principal
amounts of 14 1/2% 1984 Series, and 14 1/2% 1984 Series B,
Pollution Control Revenue Bonds, respectively, at a 3%
premium.
On January 17, 1995 and February 15, 1995, the Company
repaid $55.3 million and $10.8 million principal amounts of
maturing 10.32% and 9.44% First Mortgage Bonds of Bridgeport
Electric Company, a wholly-owned subsidiary of the Company
that was merged with and into the Company in September of
1994.
On August 18, 1994, United Capital Funding Partnership
L.P. ("United Capital"), a special purpose limited
partnership in which the Company owns all of the general
partner interests, was formed for the sole purpose of
issuing its limited partner interests, represented by
Preferred Capital Securities ("Capital Securities"), and
lending
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the proceeds thereof to the Company in return for Junior
Subordinated Deferrable Interest Debentures ("Subordinated
Debentures"). United Capital and the Company have
registered $100 million of Capital Securities and/or
Subordinated Debentures for sale to the public from time to
time, in one or more series, under the Securities Act of
1933. The Company has also registered $200 million
principal amount of Notes for sale to the public from time
to time, in one or more series, under the Securities Act of
1933.
The Company has a revolving credit agreement with a group
of banks, which currently extends to December 14, 1995. The
borrowing limit of this facility is $225 million. The
facility permits the Company to borrow funds at a
fluctuating interest rate determined by the prime lending
market in New York, and also permits the Company to borrow
money for fixed periods of time specified by the Company at
fixed interest rates determined by the Eurodollar interbank
market in London, or by bidding, at the Company's option.
If a material adverse change in the business, operations,
affairs, assets or condition, financial or otherwise, or
prospects of the Company and its subsidiaries, on a
consolidated basis, should occur, the banks may decline to
lend additional money to the Company under this revolving
credit agreement, although borrowings outstanding at the
time of such an occurrence would not then become due and
payable. As of December 31, 1994, the Company had $67
million in short-term borrowings outstanding under this
facility.
In January 1995, the Company entered into interest rate
cap agreements, with several banks, to protect $100 million
of its short-term debt from increases in short-term interest
rates. The agreements provide that if the LIBOR (London
Interbank Offering Rate), for one-month borrowings, exceeds
8.50% on the 17th of any month during the period beginning
February 17, 1995 and ending January 17, 1997, the banks
will pay to the Company the difference between that LIBOR
and 8.50%, multiplied by $100 million, for the subsequent
one-month period.
The Company's long-term debt instruments do not limit the
amount of short-term debt that the Company may issue. The
Company's revolving credit agreement described above
requires it to maintain an available earnings/interest
charges ratio of not less than 1.5:1.0 for each 12-month
period ending on the last day of each calendar quarter. For
the 12-month period ended December 31, 1994, this coverage
ratio was 2.86.
The Company has a Fossil Fuel Supply Agreement with a
financial institution providing for financing up to $37.5
million in fossil fuel purchases. Under this agreement, the
financing entity acquires and stores natural gas, coal and
fuel oil for sale to the Company, and the Company purchases
these fossil fuels from the financing entity at a price for
each type of fuel that reimburses the financing entity for
the direct costs it has incurred in purchasing and storing
the fuel, plus a charge for maintaining an inventory of the
fuel determined by reference to the fluctuating interest
rate on thirty-day, dealer-placed commercial paper in New
York. The Company is obligated to insure the fuel
inventories and to indemnify the financing entity against
all liabilities, taxes and other expenses incurred as a
result of its ownership, storage and sale of fossil fuel to
the Company. This agreement currently extends to March
1996. At December 31, 1994, approximately $10.7 million of
fossil fuel purchases were being financed under this
agreement.
The Company's Preferred Stock provisions prohibit the
issuance of additional Preferred Stock unless the Company's
after-tax income for a period of twelve consecutive months
ending not more than 90 days prior to such issuance is at
least one and one-half times the aggregate of annual
interest charges on all indebtedness and annual dividends on
all Preferred Stock to be outstanding. The Preferred Stock
provisions also prohibit any increase in long-term
indebtedness unless the Company's after-tax income for a
period of twelve consecutive months ending not more than 90
days prior to such increase is at least twice the annualized
interest charges on all long-term indebtedness to be
outstanding.
The provisions of the financing documents under which the
Company leases a portion of its entitlement in Seabrook
Unit 1 from an owner trust established for the benefit of an
institutional investor presently require UI to maintain its
consolidated annual after-tax cash earnings available for
the payment of interest at a level that is at least one and
one-half times the aggregate interest charges paid on all
indebtedness outstanding during the year.
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<PAGE>
On the basis of the formulas contained in the Preferred
Stock provisions and the Seabrook Unit 1 lease financing
documents, the coverages for each of the five years ended
December 31, 1994 are set forth below.
<TABLE>
<CAPTION>
Preferred Stock Seabrook Lease
Provisions Provisions
------------------------- -----------------
Preferred Long-term Earnings/Interest
Year Stock Indebtedness Ratio
---- --------- ------------ -----------------
<S> <C> <C> <C>
1990 3.38 3.84 1.72
1991 3.38 3.77 2.20
1992 3.23 3.88 2.41
1993 3.33 3.67 2.59
1994 2.72 3.14 2.86
</TABLE>
The Company has a 5.45% participating share in Phase II of
the Hydro-Quebec transmission intertie facility linking New
England and Quebec, Canada. See "Arrangements with Other
Utilities - Hydro-Quebec". As a participant, the Company is
obligated to furnish a guarantee for its participating share
of the debt financing for Phase II of the facility.
Currently, the Company's guarantee liability for this debt
amounts to approximately $9.2 million.
The Company has a 9.5% common stock ownership share in
Connecticut Yankee Atomic Power Company, which owns and
operates a nuclear electric generating station in Haddam
Neck, Connecticut. Connecticut Yankee plans and implements
a construction program that is essential to maintain its
station as a dependable source of low-cost electric power in
New England. In this regard, the Company is obligated to
furnish 9.5% of Connecticut Yankee's capital requirements
within specified limits. As a condition of the debt
financing arrangements for Connecticut Yankee's construction
program, the lenders from time to time have required
guarantees from the shareowners of Connecticut Yankee,
although no such guaranteed debt is currently outstanding.
FUEL SUPPLY
FOSSIL FUEL
The Company burns coal, residual oil and natural gas at
its fossil fuel generating stations in Bridgeport and New
Haven. During 1994, approximately 821,000 tons of coal, 2.3
million barrels of fuel oil and 506 million cubic feet of
natural gas were consumed in the generation of electricity.
The Company owns and leases fuel oil storage tanks at its
major generating stations in Bridgeport and New Haven that
have maximum capacities of approximately 680,000 and 650,000
barrels of oil, respectively. In addition, the Company
maintains approximately a 45-day coal supply of 150,000 tons
at its Bridgeport Harbor Station.
The Company has a fuel oil supply contract with the Tosco
Corporation for the Company's New Haven and Bridgeport
generating stations. The contract expires on September 30,
1995.
The Company burns coal at the largest generating unit at
Bridgeport Harbor Station, which is also capable of burning
oil, and has a coal supply contract with Pittston Coal Sales
Company that extends until July 31, 2007, subject to earlier
termination provisions.
The Company's New Haven Harbor Station has a dual-fuel
capability of burning natural gas and oil. Under an
agreement with Tenngasco, a division of Tenneco, the Company
is obligated to burn approximately 6 billion cubic feet of
gas per year, when offered by Tenngasco at a price that is
competitive with oil. The natural gas burned by the Company
during 1994 was not purchased pursuant to this agreement.
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NUCLEAR FUEL
In addition to its common stock ownership in Connecticut
Yankee, the Company holds ownership and leasehold interests
in Seabrook Unit 1 and Millstone Unit 3, both of which are
nuclear-fueled generating units. Generally, the supply of
fuel for nuclear generating units involves the mining and
milling of uranium ore to uranium concentrates, the
conversion of uranium concentrates to uranium hexafluoride,
enrichment of that gas and fabrication of the enriched
hexafluoride into usable fuel assemblies.
After a region (approximately 1/5 to 1/3 of the nuclear
fuel assemblies in the reactor at any time) of spent fuel is
removed from a nuclear reactor, it is placed in temporary
storage in a spent fuel pool at the nuclear station for
cooling and ultimately is expected to be transported to
permanent storage sites.
Based on information furnished by the utilities
responsible for the operation of the units in which the
Company is participating, there are outstanding contracts
that cover uranium concentrate purchases for the Connecticut
Yankee Unit and Millstone Unit 3 through 1995 and for
Seabrook Unit 1 through 1999. In addition, there are
outstanding contracts, to the extent indicated below, for
conversion, enrichment and fabrication services for these
units extending through the following years:
<TABLE>
<CAPTION>
Conversion to
Hexafluoride Enrichment Fabrication
------------- ---------- -----------
<S> <C> <C> <C>
Connecticut Yankee Unit 1995 1999 <F1> 1999 <F2>
Millstone Unit 3 1995 1995 <F1> 1997 <F3>
Seabrook Unit 1 1999 2002 2007
<FN>
<F1> 70% of the enrichment requirements through 1998, and 50% through 1999,
are covered under the present contract. Negotiations are in progress
for the remaining uncontracted services through 2002.
<F2> Negotiations are in progress that would extend the contract through
2007.
<F3> The contract provides an option to extend fabrication services through
1999.
</FN>
</TABLE>
ARRANGEMENTS WITH OTHER UTILITIES
The Company, in cooperation with other privately and
publicly owned New England electric utilities, established
the New England Power Pool (NEPOOL) in 1971. The objectives
of NEPOOL are: (a) to assure that the bulk power supply of
New England and any adjoining areas served conforms to
proper standards of reliability, (b) to attain maximum
practicable economy, consistent with such proper standards
of reliability, in such bulk power supply, and (c) to
provide for equitable sharing of the resulting benefits and
costs. These objectives are achieved through joint
planning, central dispatching, cooperation in environmental
matters, coordinated construction, operation and maintenance
scheduling of electric generation and transmission
facilities and through the provision for more effective
coordination with other power pools and utilities situated
in the United States and Canada. The agreement establishing
NEPOOL is filed with the Federal Energy Regulatory
Commission (FERC) and its provisions are subject to
continuing FERC jurisdiction.
Operation, dispatching and coordination of planning of
electric generating capacity for New England is done on a
regular basis under NEPOOL. A central dispatching agency of
NEPOOL, designated NEPEX, directs the operation and
schedules the maintenance of the generating and transmission
facilities of participating utilities and provides for
coordination with other power pools and utilities.
The Company contributes to the financial support of
certain 345 kilovolt transmission facilities that are a part
of the New England transmission grid in connection with its
participation in the ownership of Seabrook Unit 1 and
Millstone Unit 3.
- 12 -<PAGE>
<PAGE>
HYDRO-QUEBEC
The Company is a participant in the Hydro-Quebec
transmission intertie facility linking New England and
Quebec, Canada. Phase II of this facility, in which UI has
a 5.45% participating share, has increased the capacity of
the intertie from 690 megawatts to a maximum of 2,000
megawatts. A ten-year Firm Energy Contract, which provides
for the sale of 7 million megawatt-hours per year by
Hydro-Quebec to the New England participants in the Phase II
facility, became effective on July 1, 1991. See
"Financing".
ENVIRONMENTAL REGULATION
The National Environmental Policy Act requires that
detailed statements of the environmental effect of the
Company's facilities be prepared in connection with the
issuance of various federal permits and licenses, some of
which are described below. Federal agencies are required by
that Act to make an independent environmental evaluation of
the facilities as part of their actions during proceedings
with respect to these permits and licenses.
The federal Clean Water Act requires permits for
discharges of effluents into navigable waters and requires
that all discharges of pollutants comply with federally
approved state water quality standards. The Connecticut
Department of Environmental Protection (DEP) has adopted,
and the federal government has approved, water quality
standards for receiving waters in Connecticut. A joint
federal and state permit system, administered by the DEP,
has been established to assure that applicable effluent
limitations and water quality standards are met in
connection with the construction and operation of facilities
that affect or discharge into these waters. The current
discharge permit for New Haven Harbor Station was issued by
the DEP on September 30, 1991. The discharge permits for
Bridgeport Harbor, English and Steel Point Stations expired
on February 25, 1992, May 15, 1992 and March 16, 1992,
respectively. Applications for renewal of these permits
were filed on August 23, 1991, November 14, 1991 and
September 13, 1991, respectively, and the applications for
English and Steel Point Stations have since been modified to
reflect changes in the operating status of these generating
facilities and changes in the permitting system. Some new
permits have been issued for specific discharges and,
although other new permits have not yet been issued, the
Company has not been advised by the DEP that any of these
facilities has a permitting problem. While renewal
applications are pending, the terms of the expired permits
continue in effect. The DEP has determined that the thermal
component of the discharges at each of the Company's
stations will not result in a violation of state water
quality standards and that the location, design,
construction and capacity of the cooling water intake
structures reflect the best technology available, as defined
by the federal Environmental Protection Agency (EPA). All
discharge permits may be reopened and amended to incorporate
more stringent standards and effluent limitations that may
be adopted by federal and state authorities. Compliance
with this permit system has necessitated substantial capital
and operational expenditures by UI, and it is expected that
such expenditures will continue to be required in the
future. Although the magnitude of future expenditures
cannot now be estimated accurately, the Company presently
anticipates spending several million dollars during the next
several years to consolidate and improve the wastewater
collection and treatment system at Bridgeport Harbor
Station.
Under the federal Clean Air Act, the EPA has promulgated
national primary and secondary air quality standards for
certain air pollutants, including sulfur oxides, particulate
matter and nitrogen oxides. The DEP has adopted regulations
for the attainment, maintenance and enforcement of these
standards. In order to comply with these regulations, the
Company is required to burn fuel oil with a sulfur content
not in excess of 1%, and Bridgeport Harbor Unit 3 is
required to burn a low-sulfur, low-ash content coal, the
sulfur dioxide (SO2) emissions from which are not to exceed
1.1 pounds of SO2 per million BTU of heat input. Current
air pollution regulations also include other air quality
standards, emission performance standards and monitoring,
testing and reporting requirements that are applicable to
the Company's generating stations and further restrict the
construction of new sources of air pollution or the
modification of existing sources by requiring that both
construction and operating permits be obtained and that a
new or modified source will not cause or contribute to any
violation of the EPA's national air quality standards or its
regulations for the prevention of significant deterioration
of air quality.
Amendments to the Clean Air Act in 1990 will require a
significant reduction in nationwide SO2 emissions by fossil
fuel-fired generating units to a permanent total emissions
cap in the year 2000. This reduction is to be
- 13 -<PAGE>
<PAGE>
achieved by the allotment of allowances to emit SO2,
measured in tons per year, to each owner of a unit, and
requiring the owner to hold sufficient allowances each year
to cover the emissions of SO2 from the unit during that
year. Allowances are transferable and able to be bought and
sold. The Company believes that, under the allowances
allocation formula, it will hold more than sufficient
allowances to permit continued operation of its existing
generating units without incurring substantial expenditures
for additional SO2 controls. The Company is marketing its
surplus allowances, and has sold to a midwestern utility
company an option to purchase a quantity of the Company's
surplus allowances commencing in the year 2000. This sale
has not had a significant impact on the Company's earnings.
The same 1990 Clean Air Act amendments also contain major
new requirements for the control of nitrogen oxides that are
applicable to generating units located in or near areas,
such as UI's service territory, where air quality standards
for nitrogen oxides and/or photochemical oxidants have not
been attained. These amendments also require the
installation and/or modification of continuous emission
monitoring systems, and require all existing generating
units to obtain operating permits. Through the end of 1994,
the Company has expended a total of approximately $14.7
million to comply with these nitrogen oxides controls and
emission monitoring systems requirements, and it expects to
spend approximately $2.0 million during 1995 for this
purpose. On September 27, 1994, the Ozone Transport
Commission (consisting of the twelve northeastern-most
states plus the District of Columbia) adopted a Memorandum
of Understanding (MOU) which obligates certain of those
states, including Connecticut, to adopt regulations which
will further limit emissions from large stationary sources
of nitrogen oxides, including utility boilers. The MOU
calls for such reductions to occur in two steps; the first
in 1999 and the second in 2003. It is expected that such
regulations, when promulgated, would become part of the
federally mandated revisions to Connecticut's plan for
achieving compliance with air quality standards for
photochemical oxidants. However, these revisions have not
yet been promulgated, and the Company is not yet able to
assess accurately the applicability and impact of
implementing regulations to and on its generating
facilities. Compliance may require substantial additional
capital and operational expenditures in the future. In
addition, due to the 1990 amendments and other provisions of
the Clean Air Act, future construction or modification of
fossil-fired generating units and all other sources of air
pollution in southwestern Connecticut will be conditioned on
installing state-of-the-art nitrogen oxides controls and
obtaining nitrogen oxide emission offsets -- in the form of
reductions in emissions from other sources -- which may
hinder or preclude such construction or modification
programs in UI's service area, depending on ambient
pollutant levels over which the Company has no control.
The Company's generating stations in Bridgeport and New
Haven comply with the air quality and emission performance
standards adopted by those cities.
Under the federal Toxic Substances Control Act (TSCA), the
EPA has issued regulations that control the use and disposal
of polychlorinated biphenyls (PCBs). PCBs had been widely
used as insulating fluids in many electric utility
transformers and capacitors manufactured before TSCA
prohibited any further manufacture of such PCB equipment.
Fluids with a concentration of PCBs higher than 500 parts
per million and materials (such as electrical capacitors)
that contain such fluids must be disposed of through burning
in high temperature incinerators approved by the EPA. Solid
wastes containing PCBs must be disposed of in either secure
chemical waste landfills or in high-efficiency incinerators.
In response to EPA regulations, UI has phased out the use of
certain PCB capacitors and has tested all Company-owned
transformers located inside customer-owned buildings and
replaced all transformers found to have fluids with
detectable levels of PCBs (higher than 1 part per million)
with transformers that have no detectable PCBs. Presently,
no transformers having fluids with levels of PCBs higher
than 500 parts per million are known by UI to remain in
service in its system, except at one of UI's generating
stations. Compliance with TSCA regulations has necessitated
substantial capital and operational expenditures by UI, and
such expenditures may continue to be required in the future,
although their magnitude cannot now be estimated. The
Company has agreed to participate financially in the
remediation of a source of PCB contamination attributed to
UI-owned electrical equipment on property in New Haven.
Although the scope of the remediation and the extent of UI's
participation have not yet been fully determined, the owner
of the property has estimated the total remediation cost to
be approximately $346,000.
- 14 -<PAGE>
<PAGE>
Under the federal Resource Conservation and Recovery Act
(RCRA), the generation, transportation, treatment, storage
and disposal of hazardous wastes are subject to regulations
adopted by the EPA. Connecticut has adopted state
regulations that parallel RCRA regulations but are more
stringent in some respects. The Company has complied with
the notification and application requirements of present
regulations, and the procedures by which UI handles, stores,
treats and disposes of hazardous waste products have been
revised, where necessary, to comply with these regulations.
The Company has estimated that the cost of environmental
remediation of its decommissioned Steel Point Station
property in Bridgeport will be approximately $11.3 million,
and that the value of the property following remediation
will not exceed $6 million. In its December 16, 1992
decision on UI's application for retail rate increases, the
DPUC provided for additional revenues to be recovered from
customers in the amount of $4.3 million of the difference
during the period 1993-1996, subject to true-up in the
Company's next retail rate proceeding based on actual
remediation costs and actual gain on the Company's
disposition of the property.
RCRA also regulates underground tanks storing petroleum
products or hazardous substances, and Connecticut has
adopted state regulations governing underground tanks
storing petroleum and petroleum products that, in some
respects, are more stringent than the federal requirements.
The Company has 18 underground storage tanks, which are used
primarily for gasoline and fuel oil, that are subject to
these regulations. The Company has a testing program to
detect leakage from any of its tanks, and it may incur
substantial costs for future actions taken to prevent tanks
from leaking, to remedy any contamination of groundwater,
and to remove and replace older tanks in compliance with
federal and state regulations.
In the past, the Company has disposed of residues from
operations at landfills, as most other industries have done.
In recent years it has been determined that such disposal
practices, under certain circumstances, can cause
groundwater contamination. Although the Company has no
knowledge of the existence of any such contamination, if the
Company or regulatory agencies determine that remedial
actions must be taken in relation to past disposal
practices, the Company may experience substantial costs.
A Connecticut statute authorizes the creation of a lien
against all real estate owned by a person causing a
discharge of hazardous waste, in favor of the DEP, for the
costs incurred by the DEP to contain and remove or mitigate
the effects of the discharge. Another Connecticut law
requires a person intending to transfer ownership of an
establishment that generates more than 100 kilograms per
month of hazardous waste to provide the purchaser and the
DEP with a declaration that no release of hazardous waste
has occurred on the site, or that any wastes on the site are
under control, or that the waste will be cleaned up in
accordance with a schedule approved by the DEP. Failure to
comply with this law entitles the transferee to recover
damages from the transferor and renders the transferor
strictly liable for the cleanup costs. In addition, the DEP
can levy a civil penalty of up to $100,000 for providing
false information. UI does not believe that any material
claims against the Company will arise under these
Connecticut laws.
A Connecticut statute prohibits the commencement of
construction or reconstruction of electric generation or
transmission facilities without a certificate of
environmental compatibility and public need from the
Connecticut Siting Council (CSC). In certification
proceedings, the CSC holds public hearings, evaluates the
basis of the public need for the facility, assesses its
probable environmental impact and may impose specific
conditions for protection of the environment in any
certificate issued. During 1993, a citizens' group appealed
to the Connecticut Superior Court from a decision of the CSC
declining to reopen the 1991 certification of a transmission
line that has since been completed by the Company and The
Connecticut Light and Power Company in Fairfield County.
The Superior Court dismissed this appeal; but the citizens'
group has taken an appeal from the Superior Court's
decision, and the Company is unable to predict what impact,
if any, the group's actions will have on the operation of
the transmission facility.
In complying with existing environmental statutes and
regulations and further developments in these and other
areas of environmental concern, including legislation and
studies in the fields of water and air quality (particularly
"air toxics" and "global warming"), hazardous waste handling
and disposal, toxic substances, and
- 15 -<PAGE>
<PAGE>
electric and magnetic fields, the Company may incur
substantial capital expenditures for equipment modifications
and additions, monitoring equipment and recording devices,
and it may incur additional operating expenses. Litigation
expenditures may also increase as a result of scientific
investigations, and speculation and debate, concerning the
possibility of harmful health effects of electric and
magnetic fields. The Company believes any additional costs
are recoverable through the ratemaking process. The total
amount of these expenditures is not now determinable. See
also Item 2. Properties - "Nuclear Generation".
EMPLOYEES
As of December 31, 1994, the Company had 1,377 employees,
including 25 in subsidiary operations. Of these,
approximately 63% had been with the Company for 10 or more
years.
Approximately 722 of the Company's operating, maintenance
and clerical employees are represented by Local 470-1,
Utility Workers Union of America, AFL-CIO, for collective
bargaining purposes. On May 21, 1992, the Company and the
union agreed on a three-year contract, effective May 16,
1992. There has been no work stoppage due to labor
disagreements since 1966, other than a strike of three days
duration in May 1985; and employee relations are considered
satisfactory by the Company.
- 16 -<PAGE>
<PAGE>
Item 2. Properties
GENERATING FACILITIES
The electric generating capability of the Company as of December 31, 1994,
based on summer ratings of the generating units, was as follows:
<TABLE>
<CAPTION>
YEAR OF MAX CLAIMED UI
UI OPERATED: FUEL INSTALLATION CAPABILITY, MW ENTITLEMENT
- --------------------------- ---- ------------ -------------- -----------
% Mw
<S> <C> <C> <C> <C> <C>
Bridgeport Harbor Station 1 #6 Oil 1957 82.00 100.00 82.00(1)
Bridgeport Harbor Station 2 #6 Oil 1961 170.00 100.00 170.00
Bridgeport Harbor Station 3 #6 Oil/
Coal 1968/1985 385.00 100.00 385.00(2)
Bridgeport Harbor Station 4 Jet Oil 1967 17.10 100.00 17.10
New Haven Harbor Station #6 Oil/
Gas 1975 447.00 93.71 418.86(3)
English Station 7 #6 Oil 1948 34.06 100.00 34.06(4)
English Station 8 #6 Oil 1953 38.49 100.00 38.49(4)
OPERATED BY OTHER UTILITIES:
- ---------------------------
Connecticut Yankee Unit, Nuclear 1968 560.10 9.50 53.21(5)
Haddam, Connecticut
Millstone Unit 3, Nuclear 1986 1136.73 3.69 41.89(6)
Waterford, Connecticut
Seabrook Unit 1, Nuclear 1990 1150.00 17.50 201.25(7)
Seabrook, New Hampshire
POWER PURCHASES FROM
COGENERATION FACILITIES:
- -----------------------
Bridgeport RESCO, Refuse 1988 59.45 100.00 59.45
-------
Bridgeport, Connecticut
Total 1501.31
=======
<FN>
(1) Effective January 1, 1994, Bridgeport Harbor Station 1 was removed from
operation and dispatching under NEPOOL and was placed in deactivated
reserve. See Item 1. Business - "Arrangements with Other Utilities."
(2) The unit has been burning coal since early January 1985.
(3) UI's 93.705% ownership share of total net capability, including 25 MW
sold to another utility for a 10-year period, commencing October 1,
1986 and 25 MW involved in a capacity exchange with another utility for
a 6.5 year period, commencing May 1, 1993. This unit is jointly owned
by UI (93.705%), Fitchburg Gas and Electric Light Company (4.5%) and
the electric departments of three Massachusetts municipalities (1.795%).
See Item 1. Business - "Fuel Supply".
(4) English Station Units 7 and 8 were placed in deactivated reserve,
effective January 1, 1992.
(5) Represents UI's 9.5% entitlement in the unit. See Item 1. Business -
"Financing".
(6) Represents UI's 3.685% ownership share of total net capability.
(7) Represents UI's 17.5% ownership share of total net capability. In
August 1990, UI sold to and leased back from an owner trust established
for the benefit of an institutional investor a portion of UI's 17.5%
ownership interest in this unit. This portion of the unit is subject to
the lien of a first mortgage granted by the owner trustee.
</FN>
</TABLE>
- 17 -<PAGE>
<PAGE>
<TABLE>
TABULATION OF PEAK LOADS, RESOURCES, AND MARGINS
1994 ACTUAL, 1995 - 1999 FORECAST
(MEGAWATTS)
<CAPTION>
Actual Forecast
------ -------------------------------------
1994 1995 1996 1997 1998 1999
<C> <C> <C> <C> <C> <C>
At Time of Peak Load
on UI's System:
- --------------------
Capacity of generating
units operated by UI (1) 990.96 990.96 990.96 990.96 990.96 990.96
- -------------------------
Entitlements in nuclear
units (1) (2)
- -----------------------
Connecticut Yankee Unit 53.21 53.21 53.21 53.21 53.21 53.21
Millstone Unit 3 41.89 41.89 41.89 41.89 41.89 41.89
Seabrook Unit 1 201.25 201.25 201.25 201.25 201.25 201.25
------ ------ ------ ------ ------ ------
296.35 296.35 296.35 296.35 296.35 296.35
------ ------ ------ ------ ------ ------
Equivalent capacity value
of entitlement in
Hydro-Quebec (1) (2) 98.10 98.10 98.10 98.10 98.10 98.10
- -------------------------
Purchases from cogeneration
facilities
- ---------------------------
Bridgeport RESCO 62.00 59.45 59.45 59.45 59.45 59.45
Shelton Landfill (3) 1.88 1.74 1.61 1.50
Purchase from New York
Power Authority 1.18 1.32 1.32 1.32 1.32 1.32
- ----------------------
Purchases from (sales to)
other utilities
- ------------------------
Net power contracts - fossil 15.00 (14.00) (1.80 8.20 38.20 38.20
------- ------- ------- ------- ------- -------
Total generating resources 1463.59 1432.18 1446.26 1456.12 1485.99 1485.88
======= ======= ======= ======= ======= =======
Calculation of NEPOOL
capability responsibility (4)
- ------------------------------
Peak load 1131.00 1126.00 1133.00 1135.00 1140.00 1146.00
Required reserve margin 172.50 197.46 225.39 234.92 232.64 237.43
------- ------- ------- ------- ------- -------
Total capability
responsibility 1303.50 1323.46 1358.39 1369.92 1372.64 1383.43
======= ======= ======= ======= ======= =======
Available Margin (5) 160.09 108.72 87.87 86.20 113.35 102.45
======= ======= ======= ======= ======= =======
<FN>
(1) Capacity shown reflects summer ratings of generating units.
(2) Winter ratings of UI nuclear and Hydro-Quebec interconnection's
equivalent capacity value entitlements (megawatts):
Connecticut Yankee Unit - 56.05
Millstone Unit 3 - 42.33
Seabrook Unit 1 - 201.25
Hydro-Quebec - 66.22
(3) Projected to begin commercial operation by September 1995.
(4) UI's required capacity as a NEPOOL participant.
(5) Total generating resources less capability responsibility. In addition,
UI maintains three units (Bridgeport Harbor Station 1 and English Station
7 and 8) in deactivated reserve, representing a total of 154 MW of
generating capacity.
</FN>
</TABLE>
- 18 -<PAGE>
<PAGE>
During 1994, the peak load on the Company's system was
approximately 1,131 megawatts, which occurred in July. UI's
total generating capability at the time was 1,462 megawatts,
including a 98 megawatt increase in capability provided by
the equivalent capacity value of UI's entitlements in the
Hydro-Quebec facility and reflecting the net effect of
temporary arrangements with other electric utilities and
cogenerators. The Company is currently forecasting a
compound growth in peak load of 0.5% during the period 1994
to 2004. Based on current forecasts of loads, UI's
generating capability will exceed its projected capability
responsibility to NEPOOL for generating capacity through at
least 2001, and English Station Units 7 and 8 and Bridgeport
Harbor Station Unit 1 can be reactivated if higher than
anticipated load growth occurs. If, due to the permanent
loss of a generating unit or higher than expected load
growth, UI's own generating capability becomes inadequate to
meet its capability responsibility to NEPOOL, UI expects to
be able to reduce the load on its system by the
implementation of additional demand-side management
programs, to acquire other demand-side and supply-side
resources, and/or to purchase capacity from other utilities
as necessary. However, because the generation and
transmission systems of the major New England utilities,
including UI, are operated as if they were a single system,
the ability of UI to meet its load is and will be dependent
on the ability of these New England utilities to meet the
region's load. At the time of the NEPOOL summer peak in
July 1994, these New England utilities had 26,555 megawatts
of generating capacity, including 1,500 megawatts of
interconnection credit of the Hydro-Quebec facility,
available to meet the New England peak load of 20,519
megawatts. See "Nuclear Generation" and Item 1. Business -
"Competition" and "Arrangements with Other Utilities".
Shown below is a summary of the Company's sources and uses
of electricity for 1994.
<TABLE>
MEGAWATTHOURS
-------------
(000's)
<CAPTION>
SOURCES USES
- ------- ----
<S> <C> <S> <C>
OWNED Retail Customers 5,363
Nuclear (Millstone Unit 3
and Seabrook Unit 1 1,433
Coal 2,156 Wholesale
Oil 1,310 Delivered to NEPOOL 907
Gas & Gas Turbines 48 Contracts 728
-----
Total Owned 4,947
Company Use & Losses 289
------
PURCHASED
Nuclear (Connecticut Yankee
Unit) 361 Total Uses 7,287
Contracts 922 =====
NEPOOL 706
Hydro-Quebec 351
-----
Total Sources 7,287
=====
</TABLE>
TRANSMISSION AND DISTRIBUTION PLANT
The transmission lines of the Company consist of
approximately 100 circuit miles of overhead lines and
approximately 19 circuit miles of underground lines, all
operated at 345 KV or 115 KV and located within or
immediately adjacent to the territory served by the Company.
These transmission lines interconnect the Company's English,
Bridgeport Harbor and New Haven Harbor generating stations
and are part of the New England transmission grid through
connections with the transmission lines of The Connecticut
Light and Power Company. A major portion of the Company's
transmission lines is constructed on a railroad right-of-way
pursuant to a Transmission Line Agreement that expires in
May 2000.
- 19 -<PAGE>
<PAGE>
The Company owns and operates 24 bulk electric supply
substations with a capacity of 2,637,000 KVA and 49
distribution substations with a capacity of 282,000 KVA.
The Company has 3,123 pole-line miles of overhead
distribution lines and 132 conduit-bank miles of underground
distribution lines.
See "Capital Expenditure Program" concerning the estimated
cost of additions to the Company's transmission and
distribution facilities.
- 20 -<PAGE>
<PAGE>
CAPITAL EXPENDITURE PROGRAM
The Company's 1995-1999 capital expenditure program, excluding
allowance for funds used during construction (AFUDC) and its
effect on certain capital related items, is presently budgeted as
follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Total
---- ---- ---- ---- ---- -----
(000's)
<S> <C> <C> <C> <C> <C> <C>
Production $16,848 $26,446 $10,912 $ 3,424 $34,906 $ 92,536
Distribution 18,864 16,728 16,884 16,080 16,560 85,116
Transmission 7,500 4,596 8,412 15,060 17,496 53,064
Conservation and
Load Management 11,580 9,756 9,468 9,048 9,012 48,864
Nuclear Fuel 8,052 11,280 1,248 11,820 10,128 42,528
Other 12,996 7,370 4,892 5,336 4,778 35,372
------- -------- ------- ------- ------- --------
Total Expenditures $75,840 $76,176 $51,816 $60,768 $92,880 $357,480
======= ======= ======= ======= ======= ========
AFUDC (Pre-tax) $3,174 $2,437 $2,031 $2,034 $ 938
Book Depreciation (1) 58,791 63,120 66,168 69,047 73,301
Decommissioning 2,898 2,985 2,001 2,097 2,198
Normalized Tax
Depreciation 34,767 36,898 38,382 39,732 42,877
Accelerated Tax
Depreciation 68,743 58,191 59,253 58,655 61,038
Amortization of Deferred
Return on Seabrook
Unit 1 Phase-In (2) 12,586 12,586 12,586 12,586 12,586
Estimated Rate Base
(end of period) $1,209,500 $1,238,035 $1,212,275 $1,184,307 $1,220,861
<FN>
(1) Steel Point Station environmental remediation costs of $1,075,000 per year
are included each year through 1996.
(2) Deferred return will be amortized over the period 1995-1999.
</TABLE>
- 21 -<PAGE>
<PAGE>
NUCLEAR GENERATION
GENERAL
UI holds ownership and leasehold interests in Seabrook
Unit 1 (17.5%) and Millstone Unit 3 (3.685%). UI also owns
9.5% of the common stock of Connecticut Yankee and is
entitled to 9.5% of the generating capability of its nuclear
generating unit. Each of these nuclear generating units is
subject to the licensing requirements and jurisdiction of
the NRC under the Atomic Energy Act of 1954, as amended, and
to a variety of other state and federal requirements.
The NRC regularly conducts generic reviews of numerous
technical issues, ranging from seismic design to education
and fitness for duty requirements for licensed plant
operators. The outcome of reviews that are currently
pending, and the ways in which the nuclear generating units
in which UI has interests may be affected by these reviews,
cannot be determined; and the cost of complying with any new
requirements that might result from the reviews cannot be
estimated. However, such costs could be substantial.
Additional capital expenditures and increased operating
costs for the nuclear generating units in which UI has
interests may result from modifications of these facilities
or their operating procedures required by the NRC, or from
actions taken by other joint owners or companies having
entitlements in the units. Some equipment modifications
have required and may in the future require shutdowns or
deratings of the generating units that would not otherwise
be necessary and that result in additional costs for
replacement power. The amounts of additional capital
expenditures, increased operating costs and replacement
power costs cannot now be predicted, but they have been and
may in the future be substantial.
Public controversy concerning nuclear power could also
adversely affect the nuclear generating units in which UI
has interests. Proposals to force the premature shutdown of
nuclear plants in other New England states have received
serious attention, and the licensing of Seabrook Unit 1 was
a regional issue. The continuing controversy can be
expected to increase the costs of operating the nuclear
generating units in which UI has interests; and it is
possible that one or more of the units could be shut down
prematurely.
INSURANCE REQUIREMENTS
The Price-Anderson Act, currently extended through August
1, 2002, limits public liability resulting from a single
incident at a nuclear power plant. The first $200 million
of liability coverage is provided by purchasing the maximum
amount of commercially available insurance. Additional
liability coverage will be provided by an assessment of up
to $75.5 million per incident, levied on each of the nuclear
units licensed to operate in the United States, subject to a
maximum assessment of $10 million per incident per nuclear
unit in any year. In addition, if the sum of all public
liability claims and legal costs resulting from any nuclear
incident exceeds the maximum amount of financial protection,
each reactor operator can be assessed an additional 5% of
$75.5 million, or $3.775 million. The maximum assessment is
adjusted at least every five years to reflect the impact of
inflation. Based on its interests in nuclear generating
units, the Company estimates its maximum liability would be
$23.2 million per incident. However, assessment would be
limited to $3.1 million per incident, per year. With
respect to each of the operating nuclear generating units in
which the Company has an interest, the Company will be
obligated to pay its ownership and/or leasehold share of any
statutory assessment resulting from a nuclear incident at
any nuclear generating unit.
The NRC requires nuclear generating units to obtain
property insurance coverage in a minimum amount of $1.06
billion and to establish a system of prioritized use of the
insurance proceeds in the event of a nuclear incident. The
system requires that the first $1.06 billion of insurance
proceeds be used to stabilize the nuclear reactor to prevent
any significant risk to public health and safety and then
for decontamination and cleanup operations. Only following
completion of these tasks would the balance, if any, of the
segregated insurance proceeds become available to the unit's
owners. For each of the nuclear generating units in which
the Company
- 22 -<PAGE>
<PAGE>
has an interest, the Company is required to pay its
ownership and/or leasehold share of the cost of purchasing
such insurance.
WASTE DISPOSAL AND DECOMMISSIONING
Costs associated with nuclear plant operations include
amounts for disposal of nuclear wastes, including spent
fuel, and for the ultimate decommissioning of the plants.
Under the Nuclear Waste Policy Act of 1982, the federal
Department of Energy (DOE) is required to design, license,
construct and operate a permanent repository for high level
radioactive wastes and spent nuclear fuel. The Act requires
the DOE to provide, beginning in 1998, for the disposal of
spent nuclear fuel and high level radioactive waste from
commercial nuclear plants through contracts with the owners
and generators of such waste; and the DOE has established
disposal fees that are being paid to the federal government
by electric utilities owning or operating nuclear generating
units. In return for payment of the prescribed fees, the
federal government is to take title to and dispose of the
utilities' high level wastes and spent nuclear fuel
beginning no later than 1998. However, the DOE has
announced that its first high level waste repository will
not be in operation earlier than 2010, notwithstanding the
DOE's statutory and contractual responsibility to begin
disposal of high-level radioactive waste and spent fuel
beginning not later than January 31, 1998.
Until the federal government begins receiving such
materials in accordance with the Nuclear Waste Policy Act,
operating nuclear generating units will need to retain high
level wastes and spent fuel on-site or make other provisions
for their storage. Storage facilities for Millstone Unit 3
are expected to be adequate for the projected life of the
unit. Storage facilities for the Connecticut Yankee unit
are expected to be adequate through the mid-1990s. Storage
facilities for Seabrook Unit 1 are expected to be adequate
until at least 2010. Fuel consolidation and compaction
technologies are being developed and are expected to provide
adequate storage capability for the projected lives of the
latter two units. In addition, other licensed technologies,
such as dry storage casks, can accommodate spent fuel
storage requirements.
Disposal costs for low-level radioactive wastes (LLW) that
result from normal operation of nuclear generating units
have increased significantly in recent years and are
expected to continue to rise. The cost increases are
functions of increased packaging and transportation costs
and higher fees and surcharges charged by the disposal
facilities. As of June 30, 1994, the disposal facility in
Barnwell, South Carolina was closed to all LLW disposal for
New England nuclear units, forcing all of these units into
on-site storage of LLW produced.
Pursuant to the Low-Level Radioactive Waste Policy Act of
1980, each state is responsible for providing disposal
facilities for LLW generated within the state and is
authorized to join with other states into regional compacts
to jointly fulfill their responsibilities. The Connecticut
Hazardous Waste Management Service (the Service), a state
quasi-public corporation, was charged with coordinating the
establishment of a facility for disposal of LLW originating
in Connecticut. In June 1991, the Service announced that it
had selected three potential sites in north-central
Connecticut for further study. The Service's announcement
provoked intense controversy in the affected municipalities
and resulted in legislative action to stop the selection
process. On February 1, 1993, the Service presented to the
legislature a new site selection plan under which
communities are urged to volunteer a site for a facility in
return for financial and other incentives. The volunteer
process is being continued through 1996. The Service's
activities in this regard are funded by assessments on
Connecticut's LLW generators. Due to a change in the
volunteer process, there was no assessment for the 1994-1995
fiscal year and the state projects no assessment for the
1995-1996 and 1996-1997 fiscal years. The service currently
projects that a disposal site will be designated by 2002,
although there are admitted inherent uncertainties in this
projection.
Additional LLW storage capacity has been or can be
constructed or acquired at the Millstone and Connecticut
Yankee sites to provide for temporary storage of LLW should
that become necessary. Connecticut LLW can be managed by
volume reduction, storage or shipment at least through 2000.
The Company cannot predict whether and when a disposal site
will be designated in Connecticut.
- 23 -<PAGE>
<PAGE>
The State of New Hampshire has not met deadlines for
compliance with the Low-Level Radioactive Waste Policy Act,
and Seabrook Unit 1 has been denied access to existing
disposal facilities. Therefore, LLW generated by Seabrook
Unit 1 is being stored on-site. The Seabrook storage
facility currently has capacity to store at least five
years' accumulation of waste generated by Seabrook, and the
plant operator plans to expand its storage capacity as
necessary.
NRC licensing requirements and restrictions are also
applicable to the decommissioning of nuclear generating
units at the end of their service lives, and the NRC has
adopted comprehensive regulations concerning decommissioning
planning, timing, funding and environmental reviews. UI and
the other owners of the nuclear generating units in which UI
has interests estimate decommissioning costs for the units
and attempt to recover sufficient amounts through their
allowed electric rates to cover expected decommissioning
costs. Changes in NRC requirements or technology can
increase estimated decommissioning costs, and UI's customers
in future years may experience higher electric rates to
offset the effects of any insufficient rate recovery in
prior years.
New Hampshire has enacted a law requiring the creation of
a government-managed fund to finance the decommissioning of
nuclear generating units in that state. The New Hampshire
Nuclear Decommissioning Financing Committee (NDFC) has
established $376 million (in 1995 dollars) as the
decommissioning cost estimate for Seabrook Unit 1. This
estimate premises the prompt removal and dismantling of the
Unit at the end of its estimated 40-year energy producing
life. Monthly decommissioning payments are being made to
the state-managed decommissioning trust fund. UI's share of
the decommissioning payments made during 1994 was $1.3
million. UI's share of the fund at December 31, 1994 was
approximately $5.2 million.
Connecticut has enacted a law requiring the operators of
nuclear generating units to file periodically with the DPUC
their plans for financing the decommissioning of the units
in that state. Current decommissioning cost estimates for
Millstone Unit 3 and the Connecticut Yankee Unit are $448
million (in 1995 dollars) and $357 million (in 1995
dollars), respectively. These estimates premise the prompt
removal and dismantling of each unit at the end of its
estimated 36-year energy producing life. Monthly
decommissioning payments, based on these cost estimates, are
being made to decommissioning trust funds managed by
Northeast Utilities. UI's share of the Millstone Unit 3
decommissioning payments made during 1994 was $388,000.
UI's share of the fund at December 31, 1994 was
approximately $2.4 million. For the Company's 9.5% equity
ownership in Connecticut Yankee, decommissioning costs of
$1.3 million were funded by UI during 1994, and UI's share
of the fund at December 31, 1994 was $14.1 million.
Item 3. Legal Proceedings.
On November 2, 1993, the Company received "updated"
personal property tax bills from the City of New Haven (the
City) for the tax year 1991-1992, aggregating $6.6 million,
based on an audit by the City's tax assessor. On May 7,
1994, the Company received a "Certificate of
Correction....to correct a clerical omission or mistake"
from the City's tax assessor relative to the assessed value
of the Company's personal property for the tax year
1994-1995, which certificate purports to increase said
assessed value by approximately 53% above the tax assessor's
valuation at February 28, 1994. The Company is contesting
each of these actions of the City's tax assessor vigorously,
and has commenced actions in the Superior Court to enjoin
the City from any effort to collect the "updated" personal
property tax bills for the tax year 1991-1992 and
challenging both the May 7, 1994 "Certificate of Correction"
and the tax assessor's valuation at February 28, 1994. In
December of 1994, the City's tax assessor conducted hearings
regarding the assessed value of the Company's personal
property for the tax years 1992-1993 and 1993-1994; and the
Company anticipates that the City will take some action to
revalue the Company's personal property for those tax years.
On March 1, 1995, the Company received from the City notices
of assessment changes, increasing the assessed valuation of
the Company's personal property for the tax year 1995-1996
by 48% over the valuation declared by the Company. The
Company expects to take the legal actions necessary to
challenge these increases. It is the present opinion of the
Company that the ultimate outcome of this dispute will not
have a significant impact on the financial position of the
Company.
- 24 -<PAGE>
<PAGE>
On December 30, 1994, the Company settled its property tax
dispute with the City of Bridgeport. See "Notes to
Consolidated Financial Statements - Note (N)".
Item 4. Submission of Matters to a Vote of Security
Holders.
There were no matters submitted to a vote of security
holders, through the solicitation of proxies or otherwise,
during the fourth quarter of the fiscal year ended December
31, 1994.
- 25 -<PAGE>
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the
Company and all such persons chosen to become executive
officers, all positions and offices with the Company held by
each such person, and the period during which he or she has
served as an officer in the office indicated, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION EFFECTIVE DATE
- ---- --- -------- --------------
<S> <C> <C> <C>
Richard J. Grossi 59 Chairman of the Board of May 1, 1991
Directors and Chief
Executive Officer
Robert L. Fiscus 57 President and Chief
Financial Officer May 1, 1991
James F. Crowe 52 Executive Vice President and
Chief Customer Officer January 1, 1994
Rita L. Bowlby 56 Vice President-Corporate February 1, 1993
Affairs
Raymond G. Dube 52 Vice President-Transmission October 1, 1994
and Distribution
Stephen F. Goldschmidt 49 Vice President-Information January 1, 1994
Resources
Albert N. Henricksen 53 Vice President-Administration January 1, 1994
David W. Hoskinson 59 Vice President-Generation January 1, 1994
Robert H. Hyde 54 Vice President-Customer January 1, 1986
Services
E. Jon Majkowski 52 Vice President May 1, 1992
Anthony J. Vallillo 46 Vice President-Marketing June 1, 1992
James L. Benjamin 53 Controller January 1, 1981
Kurt D. Mohlman 46 Treasurer and Secretary January 1, 1994
Charles J. Pepe 46 Assistant Treasurer and January 1, 1994
Assistant Secretary
</TABLE>
- 26 -<PAGE>
<PAGE>
There is no family relationship between any director,
executive officer, or person nominated or chosen to become a
director or executive officer of the Company. All executive
officers of the Company hold office during the pleasure of
the Company's Board of Directors and Messrs. Grossi, Fiscus
and Crowe have each entered into an employment agreement
with the Company. There is no arrangement or understanding
between any executive officer of the Company and any other
person pursuant to which such officer was selected as an
officer.
A brief account of the business experience during the past
five years of each executive officer of the Company is as
follows:
RICHARD J. GROSSI. Mr. Grossi served as President and
Chief Operating Officer during the period January 1, 1990 to
May 1, 1991. He has served as Chairman of the Board of
Directors and Chief Executive Officer since May 1, 1991.
ROBERT L. FISCUS. Mr. Fiscus served as Executive Vice
President and Chief Financial Officer of the Company during
the period January 1, 1990 to May 1, 1991. He has served as
President and Chief Financial Officer since May 1, 1991.
JAMES F. CROWE. Mr. Crowe served as Senior Vice
President-Marketing of the Company during the period January
1, 1990 to May 1, 1992, and as Executive Vice President from
May 1, 1992 to January 1, 1994. He has served as Executive
Vice President and Chief Customer Officer since January 1,
1994.
RITA L. BOWLBY. Ms. Bowlby has served as Vice President-
Corporate Affairs since February 1, 1993. Prior to joining
the Company, during the period from January 1, 1990 to
February 1, 1993, she served as President of Bowlby &
Associates, a business-to-business communications agency in
Farmington, Connecticut.
RAYMOND G. DUBE. Mr. Dube served as Transmission Manager
during the period January 1, 1990 to July 1, 1992, as
Director of Transmission & Distribution Operations from
July 1, 1992 to March 1, 1994 and Director of Electric
Systems from March 1, 1994 to October 1, 1994. He has
served as Vice President-Transmission and Distribution since
October 1, 1994.
STEPHEN F. GOLDSCHMIDT. Mr. Goldschmidt served as Vice
President-Planning from January 1, 1990 to January 1, 1994.
He has served as Vice President-Information Resources since
January 1, 1994.
ALBERT N. HENRICKSEN. Mr. Henricksen served as Vice
President-Engineering of the Company during the period
January 1, 1990 to July 23, 1990, and as Vice
President-Human and Environmental Resources from July 23,
1990 to January 1, 1994. He has served as Vice
President-Administration since January 1, 1994.
DAVID W. HOSKINSON. Mr. Hoskinson served as Senior Vice
President-Operations of the Company during the period
January 1, 1990 to July 23, 1990, and as Senior Vice
President-Generation Engineering and Operations from July
23, 1990 to January 1, 1994. He has served as Vice
President-Generation since January 1, 1994.
ROBERT H. HYDE. Mr. Hyde has served as Vice
President-Customer Services of the Company during the
five-year period.
E. JON MAJKOWSKI. Mr. Majkowski served as Vice
President-Public Affairs of the Company during the period
January 1, 1990 to May 1, 1992. He has served as Vice
President since May 1, 1992.
ANTHONY J. VALLILLO. Mr. Vallillo served as Director of
Sales and Market Development of the Company during the
period January 1, 1990 to December 1, 1990, and as Director
of Marketing from December 1, 1990 to June 1, 1992. He has
served as Vice President-Marketing since June 1, 1992.
JAMES L. BENJAMIN. Mr. Benjamin has served as Controller
of the Company during the five-year period.
- 27 -<PAGE>
<PAGE>
KURT D. MOHLMAN. Mr. Mohlman served as Director of
Financial Planning during the period January 1, 1990 to
September 1, 1990 and as Director of Financial Planning and
Investor Relations from September 1, 1990 to January 1,
1994. He has served as Treasurer and Secretary of the
Company since January 1, 1994.
CHARLES J. PEPE. Mr. Pepe served as Director of
Financing during the period January 1, 1990 to January 1,
1994. He has served as Assistant Treasurer and Assistant
Secretary of the Company since January 1, 1994.
- 28 -<PAGE>
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters.
UI's Common Stock is traded on the New York Stock
Exchange, where the high and low sale prices during 1994 and
1993 were as follows:
<TABLE>
<CAPTION>
1994 SALE PRICE 1993 SALE PRICE
--------------- ---------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 39 1/2 35 1/4 43 5/8 41
Second Quarter 37 1/8 32 1/2 44 41 3/4
Third Quarter 34 1/2 29 1/8 45 7/8 42 5/8
Fourth Quarter 30 1/2 29 45 1/4 38 1/2
</TABLE>
UI has paid quarterly dividends on its Common Stock since
1900. The quarterly dividends declared in 1993 and 1994
were at a rate of 66 1/2 cents per share and 69 cents per
share, respectively.
The indenture under which the Company's Notes are issued
places limitations on the payment of cash dividends on
common stock and on the purchase or redemption of common
stock. Retained earnings in the amount of $87.2 million
were free from such limitations at December 31, 1994.
As of February 28, 1995, there were 17,910 Common Stock
shareowners of record.
- 29 -<PAGE>
<PAGE>
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
FINANCIAL RESULTS OF OPERATION ($000'S)
Sales of electricity:
Retail
Residential $252,386 $238,185 $226,455
Commercial 250,771(2) 256,559 253,456(2)
Industrial 104,242(2) 97,466 97,010(2)
Other 11,469 11,349 11,065
---------- ---------- ----------
Total Retail 618,868 603,559 587,986
Wholesale (1) 34,927 45,931 75,484
Other operating revenues 2,953 3,533 3,855
---------- ---------- ----------
Total operating revenues 656,748 653,023 667,325
---------- ---------- ----------
Fuel and interchange energy -net:
Retail -own load 99,589 98,694 108,084
Wholesale 27,765 39,356 55,169
Capacity purchased-net 44,769 47,424 43,560
Depreciation 58,165 56,287 50,706
Other operating expenses,
excluding tax expense 194,270 205,207 193,841
Gross earnings tax 27,403 27,955 27,362
Other non-income taxes 32,458 29,977 31,869
---------- ---------- ----------
Total operating expenses, excluding
income taxes 484,419 504,900 510,591
---------- ---------- ----------
Deferred return Seabrook Unit 1 0 7,497 15,959
AFUDC 3,463 4,067 3,232
Other non-operating income(loss) (1,907) 71 18,545
Interest expense:
Long-term debt 73,772 80,030 88,666
Other 10,301 12,260 12,882
---------- ---------- ----------
Total 84,073 92,290 101,548
---------- ---------- ----------
Income tax expense:
Operating income tax 44,937 33,309 48,712
Non-operating income tax (3,214) (6,322) (12,558)
---------- ---------- ---------
Total 41,723 26,987 36,154
---------- ---------- ---------
Income(loss) before cumulative effect
of accounting change 48,089 40,481 56,768
Cumulative effect of change in
accounting - net of tax (1,294) 0 0
---------- ---------- ---------
Net income (loss) 46,795 40,481(3) 56,768
Preferred and preference stock
dividends 3,323 4,318 4,338
---------- ---------- ---------
Income (loss) applicable to common
stock $43,472 $36,163 $52,430
- -------------------------------------------------------------------------------
Operating income $127,392 $114,814 $108,022
===============================================================================
FINANCIAL CONDITION ($000'S)
Plant in service-net $1,268,145 $1,243,426 $1,224,058
Construction work in progress 57,669 77,395 59,809
Plant-related regulatory asset 0 0 0
Other property and investments 53,267 58,096 65,320
Current assets 157,309 187,981 247,954
Regulatory assets 538,601 567,394 556,493
---------- ---------- ----------
Total Assets $2,074,991 $2,134,292 $2,153,634
- -------------------------------------------------------------------------------
Common stock equity $428,028 $423,324 $422,746
Preferred and preference stock 44,700 60,945 60,945
Long-term debt excluding current
portion 708,340 875,268 893,457
Noncurrent liabilities 29,281 29,119 25,853
Current portion of long-term debt 193,133 143,333 92,833
Notes payable 67,000 0 84,099
Other current liabilites 152,261 150,890 133,471
Regulatory liabilities, principally
deferred tax liabilities 452,248 451,413 440,230
---------- ---------- ----------
Total Capitalization and
Liabilities $2,074,991 $2,134,292 $2,153,634
===============================================================================
<FN>
(1) Operating Revenues, for years prior to 1992, include wholesale power
exchange contract sales that were reclassified from Fuel and Capacity
expenses in accordance with Federal Energy Regulatory Commission
requirements.
</TABLE>
- 30 -<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
============================================================================
<C> <C> <C> <C> <C> <C> <C>
$226,751 $211,891 $205,183 $200,170 $188,740 $178,268 $190,880
255,782 234,704 219,852 208,801 195,972 180,888 192,658
91,895 94,526 92,855 96,665 100,354 99,939 118,637
10,886 10,536 9,943 9,732 9,480 9,516 10,367
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
585,314 551,657 527,833 515,368 494,546 468,611 512,542
84,236 85,657 77,925 63,263 54,708 48,010 49,164
3,821 3,332 3,348 3,570 3,077 2,508 2,394
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
673,371 640,646 609,106 582,201 552,331 519,129 564,100
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
123,010 119,285 128,739 121,425 131,471 126,778 175,764
61,858 69,117 62,681 53,837 51,411 46,466 49,066
44,668 42,827 50,234 35,465 17,746 15,028 10,112
48,181 36,526 35,618 24,069 37,160 22,112 18,128
189,327 180,592 155,282 143,822 138,315 131,448 122,567
27,223 25,595 24,506 23,948 22,997 21,838 25,221
28,673 24,648 20,294 21,695 17,194 17,991 16,566
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
522,940 498,590 477,354 424,261 416,294 381,661 417,424
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
17,970 21,503 0 0 0 0 0
5,190 3,443 65,443 75,656 81,419 78,044 62,623
2,697 22,654 (219,742) (23,369) (97,686) (75,380) 29,838
90,296 94,056 91,126 90,022 88,700 88,610 72,068
9,847 15,468 22,849 12,069 9,228 2,223 5,334
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
100,143 109,524 113,975 102,091 97,928 90,833 77,402
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
47,231 43,493 37,963 44,045 50,633 51,419 62,047
(19,299) (17,409) (101,135) (14,548) (37,440) (33,884) (3,317)
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
27,932 26,084 (63,172) 29,497 13,193 17,535 58,730
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
48,213 54,048 (73,350) 78,639 8,649 31,764 103,005
7,337 0 0 0 0 0 0
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
55,550 54,048 (73,350) 78,639 8,649 31,764 103,005
4,530 4,751 8,233 11,348 11,953 18,969 20,339
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$51,020 $49,297 ($81,583) $67,291 ($3,304) $12,795 $82,666
- ----------------------------------------------------------------------------
$103,200 $98,563 $93,789 $113,895 $85,404 $86,049 $84,629
=============================================================================
$1,219,871 $1,209,173 $562,473 $560,930 $563,210 $571,549 $425,873
54,771 50,257 675,831 812,246 737,169 742,585 845,112
0 0 81,768 88,339 68,603 55,497 0
79,009 90,006 91,648 83,860 76,032 70,927 60,127
164,839 161,066 170,823 166,270 122,075 107,399 214,057
554,365 553,986 605,696 653,418 610,913 607,294 93,350
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$2,072,855 $2,064,488 $2,188,239 $2,365,063 $2,178,002 $2,155,251 $1,638,519
- -----------------------------------------------------------------------------
$401,771 $379,812 $362,584 $473,674 $438,564 $476,108 $493,261
62,640 69,700 70,000 104,000 110,000 133,000 166,000
909,998 899,993 868,884 862,287 767,559 661,548 664,648
96,973 99,933 107,781 111,971 95,070 81,263 59,814
37,500 41,667 18,667 3,667 28,667 18,667 3,667
13,000 15,000 45,000 0 0 25,675 0
127,524 149,090 142,878 122,237 117,009 100,666 131,803
423,449 409,293 572,445 687,227 621,133 658,324 119,326
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$2,072,855 $2,064,488 $2,188,239 $2,365,063 $2,178,002 $2,155,251 $1,638,519
=============================================================================
<FN>
(2) Includes reclassification of certain Commercial and Industrial customers.
(3) Includes the effect of a reorganization charge of $7.8 million, after-tax.
</TABLE>
- 31 -<PAGE>
<PAGE>
<TABLE>
Item 6. Selected Financial Data (continued)
<CAPTION>
1994 1993 1992
===============================================================================
<S> <C> <C> <C>
COMMON STOCK DATA
Average number of shares outstanding 14,085,452 14,063,854 13,941,150
Number of shares outstanding at
year-end 14,086,691 14,083,291 14,033,148
Earnings (loss) per share (average) $3.09(1) $2.57(3) $3.76
Book value per share $30.39 $30.06 $30.12
Average return on equity
Total 10.19% 8.45% 12.67%
Utility 12.50% 10.97% 14.46%
Dividends declared per share $2.76 $2.66 $2.56
Market Price:
High $39.500 $45.875 $42.000
Low $29.000 $38.500 $34.125
Year-end $29.500 $40.250 $41.500
===============================================================================
Net cash provided by operating
activities, less dividends ($000's) $94,807 $104,547 $109,020
Capital expenditures, excluding AFUDC $63,044 $94,743 $66,390
===============================================================================
OTHER FINANCIAL AND STATISTICAL DATA
Sales by class (MWH's)
Residential 1,892,955 1,844,041 1,799,456
Commercial 2,285,942(2) 2,359,023 2,303,216(2)
Industrial 1,135,831(2) 1,036,547 997,168(2)
Other 48,718 50,715 52,984
--------- --------- ---------
Total 5,363,446 5,290,326 5,152,824
--------- --------- ---------
Number of retail customers by class
(average)
Residential 275,441 273,752 273,936
Commercial 28,394(2) 28,968 28,848(2)
Industrial 1,538(2) 959 1,017(2)
Other 1,127 1,175 1,358
--------- --------- ---------
Total 306,500 304,854 305,159
--------- --------- ---------
Revenue per kilowatt hour by class (cents)
Residential 13.33 12.92 12.58
Commercial 10.97 10.88 11.00
Industrial 9.18 9.40 9.73
Average large industrial customers time
of use rate (cents) 8.69 8.89 8.84
System requirements (MWH) 5,652,657 5,630,581 5,475,664
Peak load - kilowatts 1,130,780 1,114,900 1,034,440
Generating capability- peak(kilowatts) 1,462,290 1,515,420 1,402,800
Load factor 57.07% 57.65% 60.26%
Fuel generation mix percentages
Coal 35 31 34
Oil 14 16 17
Nuclear 32 38 35
Cogeneration 9 8 8
Gas 4 1 1
Hydro 6 6 5
- -------------------------------------------------------------------------------
Revenues - retail sales ($000's)
Base $619,097 $605,887 $608,176
Fuel Adjustment Clause (229) (2,328) (41,221)
Sales Provision Adjustment 0 0 21,031
--------- --------- ---------
Total $618,868 $603,559 $587,986
--------- --------- ---------
Revenue - retail sales per KWH (cents)
Base 11.54 11.45 11.80
Fuel Adjustment Clause 0.00 (0.04) (0.80)
Sales Provision Adjustment 0.00 0.00 0.41
--------- --------- ---------
Total 11.54 11.41 11.41
--------- --------- ---------
Fuel and energy cost per KWH (cents) 1.76 1.75 2.43
Fossil 2.14 2.08 2.98
Nuclear 0.94 1.23 1.42
- -------------------------------------------------------------------------------
Number of employees 1,377 1,490 1,554
Total payroll ($000's) $75,441 $75,305 $74,052
===============================================================================
<FN>
(1) Includes the cumulative effect of accounting change for postemployment
benefits, which decreased earnings by $0.09 per share.
(2) Includes reclassification of certain Commercial and Industrial customers.
</TABLE>
- 32 -<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
===============================================================================
<C> <C> <C> <C> <C> <C> <C>
13,899,906 13,887,748 13,887,748 13,887,748 13,887,654 13,827,431 13,623,093
13,932,348 13,887,748 13,887,748 13,887,748 13,887,748 13,886,566 13,720,050
$3.67(4) $3.55 ($5.87) $4.85 ($0.24) $0.93 $6.07
$28.84 $27.35 $26.11 $34.11 $31.58 $34.29 $35.95
13.01% 13.39% -18.88% 14.75% -0.72% 2.64% 17.83%
13.39% 13.97% 20.21% 32.91% 15.34% 16.81% 16.21%
$2.44 $2.32 $2.32 $2.32 $2.32 $2.32 $2.08
$39.125 $34.125 $34.250 $27.500 $34.000 $36.250 $27.125
$30.000 $26.875 $24.750 $19.125 $21.250 $26.625 $13.750
$39.000 $31.125 $34.250 $26.875 $26.875 $29.250 $27.000
===============================================================================
$73,865 $39,189 $31,437 $40,607 $37,986 $16,796 $47,239
$63,157 $64,018 $77,041 $83,735 $73,253 $116,124 $116,480
===============================================================================
1,851,447 1,826,700 1,883,363 1,870,318 1,780,333 1,700,302 1,654,591
2,347,757 2,259,340 2,254,099 2,174,200 2,046,289 1,914,889 1,810,192
980,071 1,060,751 1,109,119 1,186,336 1,236,151 1,232,209 1,286,402
55,118 58,013 60,427 61,303 62,246 65,533 68,064
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
5,234,393 5,204,804 5,307,008 5,292,157 5,125,019 4,912,933 4,819,249
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
274,064 275,637 276,385 274,884 271,302 267,509 264,112
29,768 29,808 29,526 28,826 28,103 27,215 26,679
268 319 347 367 369 372 386
1,361 1,352 1,316 1,267 1,191 1,179 1,145
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
305,461 307,116 307,574 305,344 300,965 296,275 292,322
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
12.25 11.60 10.89 10.70 10.60 10.48 11.54
10.89 10.39 9.75 9.60 9.58 9.45 10.64
9.38 8.91 8.37 8.15 8.12 8.11 9.22
8.64 8.06 7.58 7.14 7.04 6.79 n/a
5,541,477 5,501,495 5,603,502 5,581,897 5,403,519 5,182,516 5,058,084
1,145,820 1,054,600 1,094,400 1,132,100 1,039,600 985,710 1,019,980
1,474,190 1,449,600 1,289,800 1,271,500 1,236,000 1,309,700 1,169,700
55.21% 59.55% 58.45% 56.13% 59.33% 60.02% 56.61%
34 43 39 37 42 37 40
21 24 37 41 37 53 51
29 20 11 11 10 9 9
9 9 9 7 1 0 0
4 3 3 0 5 0 0
3 1 1 4 5 1 0
- -------------------------------------------------------------------------------
$607,997 $589,346 $577,611 $574,422 $558,060 $537,147 $532,264
(37,497) (45,900) (49,778) (59,054) (63,514) (68,536) (19,722)
14,814 8,211 0 0 0 0 0
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$585,314 $551,657 $527,833 $515,368 $494,546 $468,611 $512,542
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
11.62 11.32 10.88 10.85 10.89 10.93 11.04
(0.72) (0.88) (0.93) (1.11) (1.24) (1.39) (0.40)
0.28 0.16 0.00 0.00 0.00 0.00 0.00
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
11.18 10.60 9.95 9.74 9.65 9.54 10.64
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
2.67 2.63 2.78 2.53 2.54 2.45 3.48
3.11 2.89 2.98 2.74 2.58 2.58 3.71
1.62 1.55 0.89 0.87 0.94 1.02 1.01
- ------------------------------------------------------------------------------
1,571 1,587 1,627 1,620 1,604 1,576 1,501
$71,888 $69,237 $65,175 $62,387 $57,207 $52,782 $49,150
===============================================================================
<FN>
(3) Includes the effect of a reorganization charge which decreased earnings by
$.56 per share.
(4) Includes the cumulative effect of accounting change for municipal property
taxes, which increased earnings by $0.53 per share.
</TABLE>
- 33 -<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
MAJOR INFLUENCES ON FINANCIAL CONDITION
The Company's financial condition will continue to be
dependent on the level of retail and wholesale sales. The
two primary factors that affect sales volume are economic
conditions and weather. A 1% increase in retail sales would
increase revenues by $6.0 million (sales margin by about
$5.0 million). However, a return to normal weather could
decrease revenues by $4.5 million (sales margin by $3.4
million).
Another major factor affecting the Company's financial
condition will be the Company's ability to control expenses.
A significant reduction in interest expense has been
achieved since 1989, and additional savings of $4-$5 million
are expected in 1995 due to debt reduction and refinancing.
Since 1990, annual growth in total operation and maintenance
expense, excluding one-time items and cogeneration capacity
purchases, has averaged approximately 2.0%, and the Company
hopes to restrict future increases to less than the rate of
inflation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are presently projected
as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(000's)
<S> <C> <C> <C> <C> <C>
Capital Expenditure Program $ 75,840 $76,176 $ 51,816 $ 60,768 $ 92,880
Long-term Debt Maturities 97,000 - 50,000 100,000 100,000
Mandatory Redemptions
/Repayments 66,133 12,770 15,171 15,562 15,988
------- ------ ------- ------- -------
Total Capital Requirements $238,973 $88,946 $116,987 $176,330 $208,868
======== ====== ======= ======= =======
</TABLE>
The Company presently estimates that its cash on hand and
temporary cash investments at the beginning of 1995,
totaling $11.4 million, and its projected net cash provided
by operations, less dividends, of $105.3 million, will be
sufficient to fund the Company's entire capital expenditure
program of $75.8 million and $40.9 million of the $163.1
million necessary to satisfy the 1995 requirements for
long-term debt maturities and mandatory long-term debt
redemptions and repayments. The Company presently estimates
that its projected net cash provided by operations, less
dividends, of $97.7 million, will be sufficient to fund the
Company's entire capital expenditure program of $76.2
million and all of the Company's 1996 requirements for
mandatory redemptions and repayments of $12.8 million. The
Company presently estimates that its projected net cash
provided by operations, less dividends, of $282.0 million,
will be sufficient to fund the Company's entire capital
expenditure program of $205.5 million and $76.5 million of
the $296.7 million necessary to satisfy the 1997 through
1999 requirements for long-term debt maturities and
mandatory long-term debt redemptions and repayments.
All of the Company's capital requirements that exceed
available cash will have to be provided by external
financing. Although the Company has no commitment to
provide such financing from any source of funds, other than
a $225 million revolving credit agreement with a group of
banks, described below, the Company expects to be able to
satisfy its external financing needs by issuing common
stock, preferred stock and additional short-term and
long-term debt, although the continued availability of these
methods of financing will be dependent on many factors,
including conditions in the securities markets, economic
conditions, and the level of the Company's income and cash
flow.
On August 18, 1994, United Capital Funding Partnership
L.P. ("United Capital"), a special purpose limited
partnership in which the Company owns all of the general
partner interests, was formed for the sole purpose of
issuing its limited partner interests, represented by
Preferred Capital Securities ("Capital Securities"), and
lending the proceeds thereof to the Company in return for
Junior Subordinated Deferrable Interest Debentures
("Subordinated Debentures"). United Capital and the Company
have registered $100 million of Capital Securities
- 34 -<PAGE>
<PAGE>
and/or Subordinated Debentures for sale to the public from
time to time, in one or more series, under the Securities
Act of 1933. The Company has also registered $200 million
principal amount of Notes for sale to the public from time
to time, in one or more series, under the Securities Act of
1933.
At December 31, 1994, the Company had $11.4 million of
cash and temporary cash investments, a decrease of $36.8
million from the balance at December 31, 1993. The
components of this decrease, which are detailed in the
Consolidated Statement of Cash Flows, are summarized as
follows:
<TABLE>
<CAPTION>
(Millions)
----------
<S> <C>
Balance, December 31, 1993 $ 48.2
------
Net cash provided by operating activities 137.0
Net cash provided by (used in) financing activities:
- Financing activities, excluding dividend payments (68.5)
- Dividend payments (42.2)
Cash invested in plant, including nuclear fuel (63.1)
------
Net decrease (36.8)
------
Balance, December 31, 1994 $ 11.4
======
</TABLE>
The Company has a revolving credit agreement with a group
of banks, which currently extends to December 14, 1995. The
borrowing limit of this facility is $225 million. The
facility permits the Company to borrow funds at a
fluctuating interest rate determined by the prime lending
market in New York, and also permits the Company to borrow
money for fixed periods of time specified by the Company at
fixed interest rates determined by the Eurodollar interbank
market in London, or by bidding, at the Company's option.
If a material adverse change in the business, operations,
affairs, assets or condition, financial or otherwise, or
prospects of the Company and its subsidiaries, on a
consolidated basis, should occur, the banks may decline to
lend additional money to the Company under this revolving
credit agreement, although borrowings outstanding at the
time of such an occurrence would not then become due and
payable. As of December 31, 1994, the Company had $67
million in short-term borrowings outstanding under this
facility.
In January 1995, the Company entered into interest rate
cap agreements, with several banks, to protect $100 million
of its short-term debt from increases in short-term interest
rates. The agreements provide that if the LIBOR (London
Interbank Offering Rate), for one-month borrowings, exceeds
8.50% on the 17th of any month during the period beginning
February 17, 1995 and ending January 17, 1997, the banks
will pay to the Company the difference between that LIBOR
and 8.50%, multiplied by $100 million, for the subsequent
one-month period.
The Company's long-term debt instruments do not limit the
amount of short-term debt that the Company may issue. The
Company's revolving credit agreement described above
requires it to maintain an available earnings/interest
charges ratio of not less than 1.5:1.0 for each 12-month
period ending on the last day of each calendar quarter. For
the 12-month period ended December 31, 1994, this coverage
ratio was 2.86.
The Company has a Fossil Fuel Supply Agreement with a
financial institution providing for financing up to $37.5
million in fossil fuel purchases. Under this agreement, the
financing entity acquires and stores natural gas, coal and
fuel oil for sale to the Company, and the Company purchases
these fossil fuels from the financing entity at a price for
each type of fuel that reimburses the financing entity for
the direct costs it has incurred in purchasing and storing
the fuel, plus a charge for maintaining an inventory of the
fuel determined by reference to the fluctuating interest
rate on thirty-day, dealer-placed commercial paper in New
York. The Company is obligated to insure the fuel
inventories and to indemnify the financing entity against
all liabilities, taxes and other expenses
- 35 -<PAGE>
<PAGE>
incurred as a result of its ownership, storage and sale of
fossil fuel to the Company. This agreement currently
extends to March 1996. At December 31, 1994, approximately
$10.7 million of fossil fuel purchases were being financed
under this agreement.
UI has three wholly-owned subsidiaries. Research Center,
Inc. (RCI) has been formed to participate in the development
of one or more regulated power production ventures,
including possible participation in arrangements for the
future development of independent power production and
cogeneration facilities. United Energy International, Inc.
(UEI) was formed to facilitate participation in a joint
venture relating to power production plants abroad. United
Resources, Inc. (URI) serves as the parent corporation for
several unregulated businesses, each of which is
incorporated separately to participate in business ventures
that will complement and enhance UI's electric utility
business and serve the interests of the Company and its
shareholders and customers.
Four wholly-owned subsidiaries of URI have been
incorporated. Souwestcon Properties, Inc. (SPI)
participated as a 25% partner in the ownership of a medical
hotel building in New Haven, which has recently been sold.
SPI no longer owns any property and is currently inactive.
A second wholly-owned subsidiary of URI is Thermal Energies,
Inc., which is participating in the development of district
heating and cooling facilities in the downtown New Haven
area, including the energy center for an office tower and
participation as a 37% partner in the energy center for a
city hall and office tower complex. A third URI subsidiary,
Precision Power, Inc., provides power-related equipment and
services to the owners of commercial buildings and
industrial facilities. A fourth URI subsidiary, American
Payment Systems, Inc., manages agents and equipment for
electronic data processing of bill payments made by
customers of utilities, including UI, at neighborhood
businesses. In addition to these subsidiaries, URI also has
a 90% ownership interest in Ventana Corporation, which
offers energy conservation engineering and project
management services to governmental and private
institutions.
The Board of Directors of the Company has authorized the
investment of a maximum of $18.0 million, in the aggregate,
of the Company's assets in all of URI's ventures, UEI and
RCI, and, at December 31, 1994, approximately $14.5 million
had been so invested.
RESULTS OF OPERATIONS
1994 vs. 1993
- -------------
Earnings for the year 1994 were $43.5 million, or $3.09
per share, up $7.3 million, or $.52 per share, from 1993.
This increase reflects $7.8 million (after-tax), or $.56 per
share, from the absence of a one-time charge taken in the
fourth quarter of 1993 for the estimated costs of a
reorganization and early retirement program associated with
the Company's organization review and cost reduction
program. Earnings decreased $1.5 million (after-tax), or
$.10 per share, due to a one-time charge resulting from the
settlement of a dispute with the City of Bridgeport
regarding past taxes payable by the Company on its personal
property in that city. Earnings also decreased $1.3 million
(after-tax), or $.09 per share, from an accounting change
made in the first quarter of 1994 to implement Statement of
Financial Accounting Standards No. 112. Earnings per share
for 1994, excluding one-time items and accounting changes,
increased by $.15 per share, to $3.28 per share, from $3.13
per share for 1993.
Retail operating revenues increased about $15.3 million
for the year 1994 over the year 1993: $12.5 million from
retail rate changes, $7.1 million from higher retail
kilowatt-hour sales and $1.2 million to recover higher "pass-
through"expenses, partly offset by $5.4 million from an
increase in non-cash revenue amortization.
The $12.5 milion retail revenue increase due to rate
changes resulted from a rate increase granted by the DPUC in
1992 effective January 1, 1994. Included in this $12.5
million was $5.4 million to collect sales adjustment
revenues booked in prior periods. A separate non-cash
amortization charge to revenue was increased by $5.4 million
to eliminate any current period revenue effect of these
sales adjustment rate changes.
- 36 -<PAGE>
<PAGE>
Retail kilowatt-hour sales for the year increased 1.4%
over the prior year, producing additional retail revenues of
$7.1 million and additional sales margin (revenue less fuel
expense and revenue-based taxes) of about $6.0 million.
There was virtually no retail kilowatt-hour sales change
from weather factors between 1994 and 1993. Weather for the
year of 1994 was more severe than "normal", augmenting sales
by 0.9% and producing revenues of about $4.5 million and
sales margin of about $3.4 million. Retail revenues to
recover "pass-through" charges for certain expense changes,
including fossil fuel, increased by $1.2 million in 1994
over 1993.
Wholesale "capacity" revenues increased by $0.6 million in
1994 from their 1993 level. Wholesale "energy" revenues, as
well as the associated fuel expense, decreased by $11.6
million from 1993 to 1994.
Retail fuel and energy expenses increased $0.9 million for
the year of 1994 over 1993. A sales margin increase
(reduction of expense) of about $1.2 million resulted from
nuclear unit operations and nuclear fuel prices. There were
other offsetting fuel expense increases of $2.1 million.
Operating expenses for operations, maintenance and
purchased capacity charges in 1994 increased by $0.6 million
compared to 1993. Purchased capacity was $2.7 million lower
than 1993 due to the absence of a scheduled outage at the
Connecticut Yankee Unit, compared to ten weeks of scheduled
outage in 1993. Operation and maintenance increased $3.3
million. A $5.1 million increase resulted from higher
repair costs at Seabrook Unit 1, reflecting nine weeks of
scheduled outage and ten weeks of unscheduled outage in
1994. However, other operation and maintenance expenses
decreased by a net $1.8 million, reflecting reduced
maintenance costs at the Company's fossil fuel generating
plants, the impacts of the 1993 reorganization and early
retirement program, and re-engineering efforts.
Other operating expenses, excluding one-time items and
their tax effects, increased approximately $7.6 million in
1994 from 1993 due to higher depreciation and income taxes.
Other income and (deductions) decreased $13.2 million for
the year of 1994 from the prior year, due principally to
the elimination of the deferred returns (after-tax and not
representing current cash income) related to the portion of
the cost of Seabrook Unit 1 that had not been in the
Company's rate base in 1993 and the elimination of the
income tax benefits associated with the interest costs of
carrying that portion of the unit's cost, lower AFUDC from
lower construction costs and a lower AFUDC rate, the write-
off of certain terminated project costs previously
capitalized, and higher losses related to unregulated
subsidiaries. The revenue to support the increased rate
base in 1994, and the income tax benefits of the associated
cost of debt, are reflected in operating revenues and
expenses.
Interest costs and preferred stock dividends decreased by
$9.2 million in 1994 compared to 1993. Through its
refinancing program, the Company has taken advantage of
lower interest rates in both 1993 and 1994.
1993 vs. 1992
- -------------
Earnings for the year 1993 were $36.2 million, or $2.57
per share, down $16.3 million, or $1.19 per share, from
1992. This decrease reflects a one-time reorganization
charge of approximately $7.8 million after-tax, or $.56 per
share, and the non-recurrence of one-time gains of $.59 per
share in 1992. Earnings per share for 1993, excluding one-
time items and accounting changes, decreased by $.04 per
share, to $3.13 per share from $3.17 per share for 1992.
Sales margin increased by $10.3 million for the year.
Retail revenues increased $36.6 million; $20.7 million from
a recent rate decision ($12.1 million from rate changes,
$20.8 million for the fold-in to base rates of the 1992
sales adjustment revenues, a reduction of $7.7 million in
revenue from a separate amortization charge to eliminate the
current period revenue effect of rate changes intended to
collect sales adjustment revenues booked in prior periods,
and the pass through to customers of expense credits of $4.6
million), and $15.9 million from increased retail sales.
Retail sales increased by 2.7%, mostly due to a return to
more normal summer weather.
- 37 -<PAGE>
<PAGE>
The retail revenue increases were offset by anticipated
reductions of $20.8 million from the sales adjustment
provision and $13.7 million in wholesale capacity revenues.
Other operating revenues decreased by $0.3 million.
Reductions in wholesale energy revenues of $15.8 million
were directly offset by reductions in energy expense.
Other factors affecting sales margin were lower retail
fuel expense, increasing margin by $9.4 million, and higher
revenue related taxes, decreasing margin by $0.6 million.
Other operation and maintenance expenses, including
purchased capacity charges, increased by $10.2 million, or
4.5%, in 1993 relative to 1992. Major generating station
overhauls and unscheduled repairs accounted for $5.2 million
of this increase. Employment costs increased by $4.0
million, most of which resulted from the adoption of a
liability for postretirement benefits other than pensions
that the implementation of Statement of Financial Accounting
Standards No. 106 requires to be accrued over employees'
careers. Purchased capacity charges (cogeneration and
Connecticut Yankee power purchases) for 1993 increased by
$4.0 million, transmission costs increased by $2.4 million;
but other nuclear operation and maintenance expenses
decreased by $4.0 million.
Other operating expenses, including income taxes but
excluding a 1993 fourth quarter one-time reorganization
charge, decreased by $20.3 million in 1993 from 1992, as the
effect of accounting treatments ordered in recent rate
decisions for recovery of canceled plant, the flow-through
to income of certain income tax benefits and lower property
taxes more than offset increases in depreciation expense.
Other income declined by $23 million in 1993 from 1992,
$9.4 million of which was attributable to the absence of net
one-time gains realized in 1992. The remainder was due
primarily to an expected decline in deferred revenue and
income tax benefits associated with the DPUC's 1992 rate
decision, offset, in part, by lower interest charges of $9.3
million. "Net" interest margin (interest income less
interest expense) improved by $6.6 million in 1993 over
1992.
OUTLOOK
Revenues for 1995 will increase by $13.1 million compared
to 1994 due to the completion of the non-cash amortization
of deferred sales adjustment revenues ($7.7 million
amortized and collected in rates in 1993 and $13.1 million
amortized and collected in rates in 1994). Revenues for
1995 should also increase as a result of an approximate 1%
($6 million) rate increase for recovery, through the
Conservation Adjustment Mechanism, of previously recorded
and projected conservation costs.
The Company's financial condition will continue to be
dependent on the level of retail and wholesale sales. The
two primary factors that affect sales volume are economic
conditions and weather. A 1% increase in retail sales would
increase revenues by $6.0 million and sales margin (revenue
less fuel expense and revenue-based taxes) by about $5.0
million. The Company has experienced "real"
(nonweather-related) growth in kilowatt-hour sales of
approximately 0.7%, on average, per year since 1992.
However, a return to normal weather in 1995 could decrease
revenues by 0.7%, or $4.5 million (sales margin by $3.4
million). A continuation of the 1992-1994 "real" sales
growth trend would be offset by a return to normal weather.
Sales margin should improve further from lower fuel
expense in 1995. Higher generating output from the nuclear
units (there is currently no planned outage for Seabrook in
1995) and lower nuclear fuel prices could add $3-$4 million
to margin if normal operating assumptions are met. However,
if the generation level is higher than expected from the
Seabrook unit, a refueling outage, currently planned for
early in 1996, may move, partially or fully, into 1995.
Taking all of the above factors into account, overall
sales margin would be expected to increase in 1995, compared
to 1994, by $23-$25 million. These increases will be offset
by the commencement of the amortization of Seabrook phase-in
costs at $12.6 million after-tax (equivalent, approximately,
to a $23 million revenue requirement) per year for five
years beginning in 1995.
- 38-<PAGE>
<PAGE>
Another major factor affecting the Company's financial
condition will be the Company's ability to control expenses.
Operation and maintenance expense is expected to decline by
several million dollars in 1995 compared to 1994, due
primarily to lower maintenance costs at generating units,
the full impact of the Company's 1993 reorganization and
early retirement program, and other cost reduction efforts.
Anticipated depreciation and property taxes should increase
expenses by $4-$5 million in 1995 from 1994 levels.
The Company expects continued reductions in interest
expense from the 1994 level of $84 million, to about $79-$80
million at February 1995 interest rate levels. This 1995
interest expense level would be 30% below the 1989 level and
would mark the sixth consecutive year of interest expense
decline. Similar interest expense reductions are expected
for 1996, as well, assuming February 1995 interest rate
levels.
A major contingency in the Company's expected earnings for
1995 is the timing of the Seabrook refueling outage. If the
refueling outage moves fully into 1995, 1995 sales margin
would be reduced by about $2 million, and operations and
maintenance expense would be increased by $3-$4 million over
currently anticipated amounts. These negative effects on
1995 earnings would affect anticipated 1996 results
positively. The Company continues to expect to achieve
growth in earnings from operations of 4% annually, on
average, from its 1992 level of $3.17 per share.
The Company's financial status and financing capability
will continue to be sensitive to many other factors,
including conditions in the securities markets, economic
conditions, interest rates, the level of the Company's
income and cash flow, and legislative and regulatory
developments, including the cost of compliance with
increasingly stringent environmental legislation and
regulations and competition within the electric utility
industry.
The electric utility industry is being subjected to
increasing competition. Currently, the Company's retail
electric service rates are subject to regulation and are
based on the Company's costs. Therefore, the Company, and
all regulated utilities, are subject to certain accounting
standards (Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types
of Regulation") that are not applicable to other businesses
in general. These accounting rules allow all regulated
utilities, where appropriate, to defer the income statement
impact of certain costs that are expected to be recovered in
future regulated service rates and to establish regulatory
assets on balance sheets for such costs. The effects of
competition could cause the operations of the Company, or a
portion thereof, to fail to meet the criteria for
application of these accounting rules. While the Company
expects to continue to meet these criteria in the near
future, if the Company were to cease meeting these criteria,
accounting standards for business in general would become
applicable and immediate recognition of any previously
deferred costs would be required in the year in which the
criteria are no longer met. If this change in accounting
were to occur, it would have a material adverse effect on
the Company's earnings and retained earnings in that year
and may have a material adverse effect on the Company's
ongoing financial condition, as well.
INFLATION
Much of the Company's operating expense structure is based
on fixed charges for plant, purchased power, fuel expense
and taxes that have no direct relationship to "inflation" as
defined by the Producer Price Index (PPI). That portion of
fuel expense (fossil fuel expense) which is a factor in the
PPI, is subject to a "pass-through" revenue recovery from
customers. The operations expense component most sensitive
to inflation, wage and benefit costs, account for about 15%
of the Company's total operating expenses excluding income
taxes.
A significant portion of the "fixed charges for plant"
component of operating expenses is based on the historic
cost of the Company's generating units. Under current
conditions the cost of future additional or replacement
generating capacity, if needed, would probably be less than
the cost of existing generating capacity.
- 39 -<PAGE>
<PAGE>
<TABLE>
Item 8.Financial Statements and Supplementary Data
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1994, 1993 and 1992
(Thousands except per share amounts)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES (NOTE G) $656,748 $653,023 $667,325
--------- --------- ---------
OPERATING EXPENSES
Operation
Fuel and energy 127,354 138,050 163,253
Capacity purchased 44,769 47,424 43,560
Reorganization charge - 13,620 -
Other 151,330 148,332 145,032
Maintenance 41,768 41,475 38,394
Depreciation 58,165 56,287 50,706
Amortization of cancelled
nuclear project (Note J) 1,172 1,172 10,415
Amortization of deferred
fossil fuel costs - 608 -
Income taxes (Notes A and E) 44,937 33,309 48,712
Property tax settlement 2,536 - -
Other taxes (Note G) 57,325 57,932 59,231
--------- --------- ---------
Total 529,356 538,209 559,303
--------- --------- ---------
OPERATING INCOME 127,392 114,814 108,022
--------- --------- ---------
OTHER INCOME AND (DEDUCTIONS)
Allowance for equity funds
used during construction 753 999 1,003
Deferred return - Seabrook Unit 1 - 7,497 15,959
Other-net (Note G) (1,907) 71 18,545
Non-operating income taxes 3,214 6,322 12,558
--------- --------- ---------
Total 2,060 14,889 48,065
--------- --------- ---------
INCOME BEFORE INTEREST CHARGES 129,452 129,703 156,087
--------- --------- ---------
INTEREST CHARGES
Interest on long-term debt 73,772 80,030 88,666
Other interest (Note G) 10,301 12,260 12,882
Allowance for borrowed funds
used during construction (2,710) (3,068) (2,229)
--------- --------- ---------
Net Interest Charges 81,363 89,222 99,319
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 48,089 40,481 56,768
--------- --------- --------
Cumulative effect for years prior
to 1994 of accounting change for
postemployment benefits (net of income
taxes of $956) (Note H) (1,294) - -
--------- --------- ---------
NET INCOME 46,795 40,481 56,768
Dividends on Preferred Stock 3,323 4,318 4,338
--------- --------- ---------
INCOME APPLICABLE TO COMMON STOCK $43,472 $36,163 $52,430
========= ========= =========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 14,085 14,064 13,941
EARNINGS PER SHARE OF COMMON STOCK
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $3.18 $2.57 $3.76
Cumulative effect for years prior
to 1994 of accounting change
for postemployment benefits (0.09) - -
--------- --------- ---------
EARNINGS PER SHARE OF COMMON STOCK $3.09 $2.57 $3.76
========= ========= =========
CASH DIVIDENDS DECLARED PER SHARE
OF COMMON STOCK $2.76 $2.66 $2.56
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 40 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
(Thousands of Dollars)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $46,795 $40,481 $56,768
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 67,336 65,788 70,298
Deferred income taxes 9,541 9,422 31,093
Deferred investment tax credits - net (762) (762) (762)
Gain on sale of facility - - (5,915)
Amortization of nuclear fuel 11,632 21,922 23,440
Cumulative effect for years prior to 1994 of
accounting change for postemployment
benefits-net 1,294 - -
Allowance for funds used during construction (3,463) (4,067) (3,232)
Deferred return - Seabrook Unit 1 - (7,497) (15,959)
Sales adjustment revenue 13,113 7,668 (6,217)
Changes in:
Accounts receivable - net 2,840 3,344 (4,637)
Fuel, materials and supplies (1,140) (638) 1,481
Prepayments (7,344) (1,833) 1,503
Accounts payable (6,578) (10,098) 7,672
Interest accrued (1,046) (2,431) (6,918)
Taxes accrued 9,756 1,017 (1,829)
Reorganization charge accrued - 13,620 -
Other assets and liabilities (4,989) 9,920 1,851
--------- --------- ---------
Total Adjustments 90,190 105,375 91,869
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 136,985 145,856 148,637
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock 109 1,834 3,442
Long-term debt - 164,460 247,000
Notes payable 67,000 (84,099) 71,099
Securities redeemed and retired:
Preferred stock (15,858) - (1,695)
Long-term debt (117,391) (143,543) (214,811)
Expenses of issues - (1,742) (1,453)
Lease obligations (2,362) (4,174) (71,866)
Dividends
Preferred stock (3,658) (4,318) (4,365)
Common stock (38,520) (36,991) (35,252)
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES (110,680) (108,573) (7,901)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Plant expenditures, including nuclear fuel (63,044) (94,743) (66,390)
Proceeds from the sale of facility - - 6,012
Investment in debt securities - 94,529 (94,529)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (63,044) (214) (154,907)
--------- --------- ---------
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD (36,739) 37,069 (14,171)
BALANCE AT BEGINNING OF PERIOD 48,171 11,102 25,273
--------- --------- ---------
BALANCE AT END OF PERIOD $11,432 $48,171 $11,102
========= ========= =========
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $75,802 $78,021 $82,829
========= ========= =========
Income taxes $25,555 $17,435 $12,634
========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 41 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEET
December 31, 1994, 1993 and 1992
ASSETS
(Thousands of Dollars)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Utility Plant at Original Cost
In service $1,761,627 $1,690,142 $1,631,787
Less, accumulated provision
for depreciation 493,482 446,716 407,729
----------- ---------- -----------
1,268,145 1,243,426 1,224,058
Construction work in progress 57,669 77,395 59,809
Nuclear fuel 31,443 40,285 52,144
----------- ----------- -----------
Net Utility Plant 1,357,257 1,361,106 1,336,011
----------- ----------- -----------
Other Property and Investments 21,824 17,811 13,176
----------- ----------- -----------
Current Assets
Cash and temporary cash investments 11,432 48,171 11,102
Short-term investment - - 94,529
Accounts receivable
Customers, less allowance for doubtful
accounts of $4,900, $4,700 and $3,900 61,042 62,703 56,796
Other 26,981 28,160 37,411
Accrued utility revenues 23,139 22,765 24,389
Fuel, materials and supplies, at
average cost 22,318 21,178 20,540
Prepayments 12,307 4,963 3,130
Other 90 41 57
----------- ----------- -----------
Total 157,309 187,981 247,954
----------- ----------- -----------
Regulatory Assets (future amounts due
from customers through
the ratemaking process)
Income taxes due principally to book-tax
differences (Note A) 403,132 408,272 406,258
Deferred return - Seabrook Unit 1 62,929 62,929 55,432
Unamortized cancelled nuclear projects 25,792 26,964 28,136
Unamortized redemption costs 26,269 32,573 28,186
Sales adjustment revenues - 13,113 20,781
Uranium enrichment decommissioning costs 1,540 1,600 -
Deferred fossil fuel costs 112 198 1,109
Unamortized debt issuance expenses 5,527 6,631 6,474
Other 13,300 15,114 10,117
----------- ----------- -----------
Total 538,601 567,394 556,493
----------- ----------- -----------
$2,074,991 $2,134,292 $2,153,634
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 42 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEET
December 31, 1994, 1993 and 1992
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Capitalization (Note B)
Common stock equity
Common stock $284,133 $284,028 $282,433
Paid-in capital 738 734 495
Capital stock expense (2,402) (3,163) (3,163)
Retained earnings 145,559 141,725 142,981
----------- ----------- -----------
428,028 423,324 422,746
Preferred stock 44,700 60,945 60,945
Long-term debt 708,340 875,268 893,457
----------- ----------- -----------
Total 1,181,068 1,359,537 1,377,148
----------- ----------- -----------
Noncurrent Liabilities
Obligations under capital leases 17,799 19,871 23,855
Uranium enrichment decommissioning reserve 1,337 1,486 -
Nuclear decommissioning obligation 7,628 5,606 -
Other 2,517 2,156 1,998
----------- ----------- -----------
Total 29,281 29,119 25,853
----------- ----------- -----------
Current Liabilities
Current portion of long-term debt 193,133 143,333 92,833
Notes payable 67,000 - 84,099
Accounts payable 42,846 49,424 59,522
Dividends payable 10,467 10,445 10,017
Taxes accrued 16,607 6,851 5,834
Pensions accrued (Note H) 30,177 33,547 18,714
Interest accrued 20,926 21,972 24,403
Obligations under capital leases 1,169 1,838 2,028
Other accrued liabilities 30,069 26,813 12,953
----------- ----------- -----------
Total 412,394 294,223 310,403
----------- ----------- -----------
Customers' Advances for Construction 2,628 2,667 2,672
----------- ----------- -----------
Regulatory Liabilities (future amounts owed
to customers through
the ratemaking process)
Accumulated deferred investment tax credits 18,671 19,433 20,195
Deferred gain on sale of utility plant 276 2,070 3,391
Other 1,820 1,837 -
----------- ----------- -----------
Total 20,767 23,340 23,586
----------- ----------- -----------
Deferred Income Taxes (future tax liabilities
owed to taxing
authorities) 428,853 425,406 413,972
Commitments and Contingencies - - -
----------- ----------- -----------
$2,074,991 $2,134,292 $2,153,634
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 43 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
For the Years Ended December 31, 1994, 1993 and 1992
(Thousands of Dollars)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
BALANCE, JANUARY 1 $141,725 $142,981 $125,448
Net Income 46,795 40,481 56,768
Adjustments associated with repurchase
of preferred stock (761) - 796
--------- --------- ---------
Total 187,759 183,462 183,012
--------- --------- ---------
Deduct Cash Dividends Declared
Preferred stock 3,323 4,318 4,338
Common stock 38,877 37,419 35,693
--------- --------- ---------
Total 42,200 41,737 40,031
--------- --------- ---------
BALANCE, DECEMBER 31 $145,559 $141,725 $142,981
========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 44 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) STATEMENT OF ACCOUNTING POLICIES
ACCOUNTING RECORDS
The accounting records are maintained in accordance
with the uniform systems of accounts prescribed by the
Federal Energy Regulatory Commission (FERC) and the
Connecticut Department of Public Utility Control
(DPUC).
REGULATORY ACCOUNTING
The consolidated financial statements of the Company
are in conformity with generally accepted accounting
principles and with accounting for regulated electric
utilities prescribed by the Federal Energy Regulatory
Commission (FERC) and the Connecticut Department of
Public Utility Control (DPUC). Generally accepted
accounting principles for regulated entities allow the
Company to give accounting recognition to the actions
of regulatory authorities in accordance with the
provisions of Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation". In accordance with SFAS
No. 71, the Company has deferred recognition of costs
(a regulatory asset) or has recognized obligations (a
regulatory liability) if it is probable that such costs
will be recovered or obligation relieved in the future
through the ratemaking process.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the
accounts of the Company and its wholly-owned
subsidiaries, United Resources Inc., United Energy
International, Inc. and Research Center, Inc.
Intercompany accounts and transactions have been
eliminated in consolidation.
RECLASSIFICATION OF PREVIOUSLY REPORTED AMOUNTS
Certain amounts previously reported have been
reclassified to conform with current year
presentations.
UTILITY PLANT
The cost of additions to utility plant and the cost
of renewals and betterments are capitalized. Cost
consists of labor, materials, services and certain
indirect construction costs, including an allowance for
funds used during construction (AFUDC). The cost of
current repairs and minor replacements is charged to
appropriate operating expense accounts. The original
cost of utility plant retired or otherwise disposed of
and the cost of removal, less salvage, are charged to
the accumulated provision for depreciation.
The Company's utility plant in service as of
December 31, 1994, 1993 and 1992 is comprised as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Production $1,114,755 $1,104,156 $1,083,247
Transmission 143,984 129,186 126,211
Distribution 364,102 334,251 319,409
General 43,600 41,009 42,065
Future use plant 31,853 29,221 26,537
Other 63,333 52,319 34,318
---------- ---------- ----------
$1,761,627 $1,690,142 $1,631,787
========== ========== ==========
</TABLE>
- 45 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
In accordance with the applicable regulatory systems
of accounts, the Company capitalizes AFUDC, which
represents the approximate cost of debt and equity
capital devoted to plant under construction. In
accordance with FERC prescribed accounting, the portion
of the allowance applicable to borrowed funds is
presented in the Consolidated Statement of Income as a
reduction of interest charges, while the portion of the
allowance applicable to equity funds is presented as
other income. Although the allowance does not
represent current cash income, it has historically been
recoverable under the ratemaking process over the
service lives of the related properties. The
Company compounds semi-annually the allowance applicable to
major construction projects. Weighted average AFUDC rates
in effect for 1994, 1993 and 1992 were 8.19%, 8.75% and
10.25%, respectively.
DEPRECIATION
Provisions for depreciation on utility plant for book
purposes are computed on a straight-line basis, using
estimated service lives determined by independent engineers.
One-half year's depreciation is taken in the year of
addition and disposition of utility plant, except in the
case of major operating units on which depreciation
commences in the month they are placed in service and ceases
in the month they are removed from service. The aggregate
annual provisions for depreciation for the years 1994, 1993
and 1992 were equivalent to approximately 3.27%, 3.22% and
3.15%, respectively, of the original cost of depreciable
property.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109 "Accounting
for Income Taxes". In accordance with SFAS No. 109, the
Company has provided deferred taxes for all temporary
book-tax differences using the liability method. The
liability method requires that deferred tax balances be
adjusted to reflect enacted future tax rates that are
anticipated to be in effect when the temporary differences
reverse. In accordance with generally accepted accounting
principles for regulated industries, the Company has
established a net regulatory asset that reflects anticipated
future recovery in rates of these deferred tax provisions.
For ratemaking purposes, the Company practices full
normalization for all investment tax credits (ITC) related
to recoverable plant investments except for the ITC related
to Seabrook Unit 1, which was taken into income in
accordance with provisions of a 1990 DPUC retail rate
decision.
ACCRUED UTILITY REVENUES
The estimated amount of utility revenues (less related
expenses and applicable taxes) for service rendered but not
billed is accrued at the end of each accounting period.
CASH AND CASH EQUIVALENTS
For cash flow purposes, the Company considers all highly
liquid debt instruments with a maturity of three months or
less at the date of purchase to be cash equivalents. The
Company records outstanding checks as accounts payable until
the checks have been honored by the banks.
The Company is required to maintain an operating deposit
with the project disbursing agent related to its 17.5%
ownership interest in Seabrook Unit 1. This operating
deposit, which is the equivalent to one and one half
- 46 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
months of the funding requirement for operating expenses, is
restricted for use and amounted to $2.3 million, $3.4
million and $2.9 million, at December 31, 1994, 1993 and
1992, respectively.
INVESTMENTS
The Company's investment in the Connecticut Yankee Atomic
Power Company joint venture, a nuclear generating company in
which the Company has a 9 1/2% stock interest, is accounted
for on an equity basis. This investment amounted to $9.6
million, $9.5 million and $9.4 million at December 31, 1994,
1993 and 1992, respectively.
FOSSIL FUEL COSTS
The amount of fossil fuel costs that cannot be reflected
currently in customers' bills pursuant to the fossil fuel
adjustment clause in the Company's rates is deferred at the
end of each accounting period. Since adoption of the
deferred accounting procedure in 1974, rate decisions by the
DPUC and its predecessors have consistently made specific
provision for amortization and rate-making treatment of the
Company's existing deferred fossil fuel cost balances.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, including environmental
studies, are capitalized if related to specific construction
projects and depreciated over the lives of the related
assets. Other research and development costs are charged to
expense as incurred.
PENSION AND OTHER POSTEMPLOYMENT BENEFITS
The Company accounts for normal pension plan costs in
accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 87, "Employers' Accounting
for Pensions", and for supplemental retirement plan costs
and supplemental early retirement plan costs in accordance
with the provisions of SFAS No. 88, "Employers' Accounting
for Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination Benefits".
Prior to January 1, 1993, the Company accounted for other
postemployment benefits, consisting principally of health
and life insurance, on a pay-as-you-go basis. Effective
January 1, 1993, the Company commenced accounting for these
costs under the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions",
which requires, among other things, that the liability for
such benefits be accrued over the employment period that
encompasses eligibility to receive such benefits. The
annual incremental cost of this accounting change has been
allowed in retail rates in accordance with a 1992 rate
decision of the DPUC.
Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits." This
statement establishes accounting standards for employers who
provide benefits, such as unemployment compensation,
severance benefits and disability benefits to former or
inactive employees after employment but before retirement
and requires recognition of the obligation for these
benefits. The effect of adopting this statement is reported
as a change in accounting principle and decreased earnings
for common stock for 1994 by $1.3 million or $.09 per share.
- 47 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
URANIUM ENRICHMENT OBLIGATION
Under the Energy Policy Act of 1992 (Energy Act), the
Company will be assessed for its proportionate share of the
costs of the decontamination and decommissioning of uranium
enrichment facilities operated by the Department of Energy.
The Energy Act imposes an overall cap of $2.25 billion on
the obligation assessed to the nuclear utility industry and
limits the annual assessment to $150 million each year over
a 15-year period. At December 31, 1994, the Company's
unfunded share of the obligation, based on its ownership
interest in Seabrook Unit 1 and Millstone Unit 3, was
approximately $1.3 million. Effective January 1, 1993, the
Company was allowed to recover these assessments in rates as
a component of fuel expense. Accordingly, the Company has
recognized these costs as a regulatory asset on its
Consolidated Balance Sheet.
NUCLEAR DECOMMISSIONING TRUSTS
External trust funds are maintained to fund the estimated
future decommissioning costs of the nuclear generating units
in which the Company has an ownership interest. These costs
are accrued as a charge to depreciation expense over the
estimated service lives of the units and are recovered in
rates on a current basis. The Company paid $1,727,000,
$1,616,000 and $1,334,000 during 1994, 1993 and 1992 into
the decommissioning trust funds for Seabrook Unit 1 and
Millstone Unit 3. At December 31, 1994, the Company's share
of the trust fund balances, which include accumulated
earnings on the funds, were $5.2 million and $2.4 million
for Seabrook Unit 1 and Millstone Unit 3, respectively.
These fund balances are included in "Other Property and
Investments" and the accrued decommissioning obligation is
included in "Noncurrent Liabilities" on the Company's
Consolidated Balance Sheet.
- 48 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
(B) CAPITALIZATION December 31,
-----------------------------------------------------------------------------
1994 1993 1992
Shares Shares Shares
Outstanding $(000's) Outstanding $(000's) Outstanding $(000's)
------------- ----------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK EQUITY
Common stock, no par value,
at December 31(a) 14,086,691 $284,133 14,083,291 $284,028 14,033,148 $282,433
Shares authorized
1992 30,000,000
1993 30,000,000
1994 30,000,000
Paid-in capital 738 734 495
Capital stock expense (2,402) (3,163) (3,163)
Retained earnings (b) 145,559 141,725 142,981
----------- ----------- -----------
Total common stock equity 428,028 423,324 422,746
----------- ----------- -----------
PREFERRED AND PREFERENCE STOCK (C)
Cumulative preferred stock, $100 par value,
shares authorized at December 31,
1992 1,259,455
1993 1,259,455
1994 1,247,005
Preferred stock issues:
4.35% Series A 40,425 40,425 40,425
4.72% Series B 48,280 50,730 50,730
4.64% Series C 32,100 32,100 32,100
5 5/8% Series D 51,200 61,200 61,200
7.60% Series E 125,000 125,000 125,000
7.60% Series F 150,000 150,000 150,000
------------- ------------ ------------
447,005 44,700 459,455 45,945 459,455 45,945
------------- ----------- ------------ ----------- ------------ -----------
Cumulative preferred stock,
$25 par value, shares
authorized at December 31,
1992 2,400,000
1993 2,400,000
1994 2,400,000
Preferred stock issues:
8.80% 1976 Series - - 600,000 15,000 600,000 15,000
Cumulative preference stock,
$25 par value, shares
authorized at December 31,
1992 5,000,000
1993 5,000,000
1994 5,000,000
Preference stock issues - - - - - -
Total preferred stock not ----------- ----------- -----------
subject to mandatory redemption 44,700 60,945 60,945
----------- ----------- -----------
</TABLE>
- 49 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
December 31,
---------------------------------
1994 1993 1992
$(000's) $(000's) $(000's)
--------- -------- --------
<S> <C> <C> <C>
LONG-TERM DEBT (D)
First Mortgage Bonds:
9.44%, Series B, maturing serially as
to $10,800 principal amount on
February 15 in each of the years
1995 to 1999. $54,000 $54,000 $54,000
10.32%, Series C, maturing serially as
to $55,333 principal amount on
January 15, 1995 55,333 110,666 166,000
Other Long-term Debt
Pollution Control Revenue Bonds:
14 1/2%, 1984 Series, due October 1, 2009 - 110 40,000
14 1/2%, 1984 Series B, due December 1, 2009 - 3,830 28,400
9 1/2%, 1986 Series, due June 1, 2016 7,500 7,500 7,500
9 3/8%, 1987 Series, due July 1, 2012 25,000 25,000 25,000
10 3/4%, 1987 Series, due November 1, 2012 43,500 43,500 43,500
8%, 1989 Series A, due December 1, 2014 25,000 25,000 25,000
5 7/8%, 1993 Series, due October 1, 2033 64,460 64,460 -
Solid Waste Disposal Revenue Bonds:
Adjustable rate 1990 Series A due
September 1, 2015 30,000 30,000 30,000
Notes:
7.62%, 1991 Series A, due September 12, 1994 - 30,000 30,000
7.20%, 1991 Series B, due November 1, 1994 - 13,000 13,000
6.82%, 1991 Series C, due December 2, 1994 - 10,000 10,000
6.00%, 1992 Series D, due January 15, 1995 50,000 50,000 50,000
7.00%, 1992 Series E, due January 15, 1997 50,000 50,000 50,000
7.25%, 1992 Series F, due October 2, 1995 47,000 47,000 47,000
7 3/8%, 1992 Series G, due January 15, 1998 100,000 100,000 100,000
6.20%, 1993 Series H, due January 15, 1999 100,000 100,000 -
Long-term bank loans - 5,000 17,500
Obligation under the Seabrook Unit 1
sale/leaseback agreement 250,000 250,000 250,000
---------- ---------- ----------
901,793 1,019,066 986,900
Unamortized debt discount less premium
at December 31, 1994, 1993 & 1992 (320) (465) (610)
---------- ---------- ----------
Total long-term debt 901,473 1,018,601 986,290
---------- ---------- ----------
Less current portion included in Current
Liabilities (d) 193,133 143,333 92,833
---------- ---------- ----------
Total long-term debt included
in Capitalization 708,340 875,268 893,457
---------- ---------- ----------
TOTAL CAPITALIZATION $1,181,068 $1,359,537 $1,377,148
========== ========== ==========
</TABLE>
- 50 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(a) COMMON STOCK
The Company issued 3,400 shares of common stock in 1994,
46,000 shares of common stock in 1993 and 100,800 shares of
common stock in 1992 pursuant to a stock option plan.
During 1993, the Company also issued 4,143 shares of common
stock pursuant to a long-term incentive program.
In 1990, the Company's Board of Directors and the
shareowners approved a stock option plan for officers and
key employees of the Company. The plan provides for the
awarding of options to purchase up to 750,000 shares of the
Company's common stock over periods of from one to ten years
following the dates when the options are granted. On June
5, 1991, the DPUC approved the issuance of 500,000 shares of
stock pursuant to this plan. The exercise price of each
option cannot be less than the market value of the stock on
the date of the grant. Options to purchase 203,200 shares
of stock at an exercise price of $30.75 per share, 2,800
shares of stock at an exercise price of $28.3125 per share,
1,800 shares of stock at an exercise price of $31.1875 per
share, 4,000 shares of stock at an exercise price of $35.625
per share, 36,200 shares of stock at an exercise price of
$39.5625 per share, 5,000 shares of stock at an exercise
price of $42.375 per share and 18,600 shares of stock at an
exercise price of $30 per share have been granted by the
Board of Directors and remain outstanding at December 31,
1994. Options to purchase 98,000 shares of stock at an
exercise price of $30.75 and 2,800 shares of stock at an
exercise price of $28.3125 were exercised during 1992.
Options to purchase 42,000 shares of stock at an exercise
price of $30.75 per share, 1,400 shares of stock at an
exercise price of $28.3125 per share, 1,200 shares of stock
at an exercise price of $31.1875 per share and 1,000 shares
of stock at an exercise price of $35.625 per share were
exercised in 1993. Options to purchase 3,400 shares of
stock at an exercise price of $30.75 per share were
exercised during 1994.
(b) RETAINED EARNINGS RESTRICTION
The indenture under which the Company's Notes are issued
places limitations on the payment of cash dividends on
common stock and on the purchase or redemption of common
stock. Retained earnings in the amount of $87.2 million
were free from such limitations at December 31, 1994.
(c) PREFERRED AND PREFERENCE STOCK
The par value of each of these issues was credited to the
appropriate stock account and expenses related to these
issues were charged to capital stock expense.
In 1992, the Company purchased and cancelled 16,950 shares
of its $100 par value 4.72% Preferred Stock, Series B, at a
discount, resulting in a non-taxable addition to common
equity of approximately $797,000.
There was no redemption of preferred stock in 1993.
On April 15, 1994, the Company redeemed all of the 600,000
outstanding shares of its 8.80% Preferred Stock, 1976
Series, at $25.25 per share plus accrued dividends.
In July 1994, the Company purchased 2,450 shares of its
4.72% $100 par value Preferred Stock, Series B, at a
discount, resulting in a non-taxable gain of $116,000.
In December 1994, the Company purchased 10,000 shares of
its 5 5/8% $100 par value Preferred Stock, Series D, at a
discount, resulting in a non-taxable gain of $420,000.
Shares of preferred stock have preferential dividend and
liquidation rights over shares of common stock. Preferred
shareholders are not entitled to general voting rights.
However, if any preferred dividends are in arrears
- 51 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
for six or more quarters, or if some other event of default
occurs, preferred shareholders are entitled to elect a
majority of the Board of Directors until all preferred
dividend arrears are paid and any event of default is
terminated.
Preference stock is a form of stock that is junior to
preferred stock but senior to common stock. It is not
subject to the earnings coverage requirements or minimum
capital and surplus requirements governing the issuance of
preferred stock. There were no shares of preference stock
outstanding at December 31, 1994.
(d) LONG-TERM DEBT
In January 1994, the Company repaid $55.3 million
principal amount of maturing 10.32% First Mortgage Bonds of
Bridgeport Electric Company, a wholly-owned subsidiary of
the Company that was subsequently merged with and into the
Company, and a $5 million 13.1% term loan. These repayments
were made with a portion of the net proceeds from the
issuance and sale, in December 1993, of $100 million
five-year and one month Notes at a coupon rate of 6.20%.
On September 12, 1994, the Company repaid at maturity $30
million principal amount of 7.62% Notes. In addition, on
November 1, 1994, December 2, 1994 and January 17, 1995, the
Company repaid at maturity $13 million, $10 million and $50
million principal amounts of 7.20%, 6.82% and 6.0% Notes,
respectively.
On October 1, 1994 and December 1, 1994, the Company
redeemed the remaining $110,000 and $3,830,000 principal
amounts of 14 1/2% 1984 Series, and 14 1/2% 1984 Series B,
Pollution Control Revenue Bonds, respectively, at a 3%
premium.
On January 17, 1995 and February 15, 1995, the Company
repaid $55.3 million and $10.8 million principal amounts of
maturing 10.32% and 9.44% First Mortgage Bonds of Bridgeport
Electric Company, a wholly-owned subsidiary of the Company
that was merged with and into the Company in September of
1994.
On August 18, 1994, United Capital Funding Partnership
L.P. ("United Capital"), a special purpose limited
partnership in which the Company owns all of the general
partner interests, was formed for the sole purpose of
issuing its limited partner interests, represented by
Preferred Capital Securities ("Capital Securities"), and
lending the proceeds thereof to the Company in return for
Junior Subordinated Deferrable Interest Debentures
("Subordinated Debentures"). United Capital and the Company
have registered $100 million of Capital Securities and/or
Subordinated Debentures for sale to the public from time to
time, in one or more series, under the Securities Act of
1933. The Company has also registered $200 million
principal amount of Notes for sale to the public from time
to time, in one or more series, under the Securities Act of
1933.
- 52 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Maturities and mandatory redemptions/repayments and annual
interest expense on existing long-term debt are set forth
below:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(000's)
<S> <C> <C> <C> <C> <C>
Long-term debt (beginning of
period)(1) $871,793 $708,660 $695,890 $630,719 $515,157
Less:
Maturities 97,000 - 50,000 100,000 100,000
Mandatory redemptions/
repayments 66,133 12,770 15,171 15,562 15,988
-------- -------- -------- -------- --------
Long-term debt
(end of period)(1)(2) $708,660 $695,890 $630,719 $515,157 $399,169
======== ======== ======== ======== ========
Annual interest associated with
existing outstanding debt
(1)(2) $ 59,637 $ 55,221 $ 50,838 $ 42,930 $ 40,647
Annual amortization of issuance
expense and repurchase premiums
associated with existing debt $5,451 $3,167 $2,893 $2,543 $1,189
<FN>
(1) Does not include $30 million of tax-exempt adjustable rate Solid Waste
Disposal Revenue Bonds, 1990 Series A, due September 1, 2015, classified
on the Company's books as a current liability (interest rate for March
1995 to September 1995 is 4.50%).
(2) Does not include interest on any new financings that may be required to
fund maturities, redemptions or plant additions in any given year. The
Company expects some new financings to occur.
</FN>
</TABLE>
(C) RATE-RELATED REGULATORY PROCEEDINGS
On December 16, 1992, the DPUC approved levelized rate
increases of 2.66% ($15.8 million) in 1993 and 2.66% (an
additional $17.3 million) in 1994, including allowed
conservation and load management program revenue increases.
However, the Company has realized increased revenues of
$12.1 million and $12.5 million in 1993 and 1994,
respectively, as a result of these rate increases.
Utilities are entitled by Connecticut law to revenues
sufficient to allow them to cover their operating and
capital costs, to attract needed capital and maintain their
financial integrity, while also protecting the public
interest. Accordingly, the DPUC's 1992 rate decision
authorized a return on equity of 12.4% for ratemaking
purposes. However, the Company may earn up to 1% above this
level before a mandatory review is required by the DPUC.
The Company is allowed revenue increases for conservation
and load management expenditures through a Conservation
Adjustment Mechanism (CAM) in its retail rates, and
accordingly expects a revenue increase in 1995 of $6
million, or 1%, through operation of the CAM. Except for
CAM revenue increases, the Company has stated publicly that
it does not plan to seek any retail rate increases for the
foreseeable future.
Since January 1971, UI has had a fossil fuel adjustment
clause (FCA) in virtually all of its retail rates. The DPUC
is required by law to convene an administrative proceeding
prior to approving FCA charges or credits for each month.
The law permits automatic implementation of the charges or
credits if the DPUC fails to act within five days of the
administrative proceeding, although all such charges and
credits are also subject to further review and appropriate
adjustment by the DPUC at public hearings required to be
held at least every three months. The
- 53 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DPUC has made no material changes in UI's FCA charges and
credits as the result of any of these proceedings or
hearings.
(D) ACCOUNTING FOR PHASE-IN PLAN
The Company phased into rate base its allowable investment
in Seabrook Unit 1, amounting to $640 million, during the
period January 1, 1990 to January 1, 1994. In conjunction
with this phase-in plan, the Company has been allowed to
record a deferred return on the portion of allowable
investment excluded from rate base during the phase-in
period. The accumulated deferred return has been added to
rate base each year since January 1, 1991 in the same
proportion as the phase-in installment for that year has
borne to the portion of the $640 million remaining to be
phased-in. On January 1, 1994, the Company phased into rate
base the remaining $74.5 million of allowable investment,
plus the remaining $28.2 million of accumulated deferred
return. At December 31, 1993, the Company had recorded
$62.9 million of accumulated deferred return and no
additional deferred return on Seabrook Unit 1 was recognized
in income during 1994. The Company will amortize the
accumulated deferred return over a five-year period
commencing January 1, 1995.
- 54 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(E) INCOME TAXES
<CAPTION>
1994 1993 1992
---- ---- ----
(000's)
<S> <C> <C> <C>
Income tax expense consists of:
Income tax provisions:
Current
Federal $24,190 $13,484 $6,815
State 8,754 4,843 2,645
-------- -------- --------
Total current 32,944 18,327 9,460
-------- -------- --------
Deferred
Federal 11,123 9,620 16,860
State (2,538) (198) 14,233
-------- -------- --------
Total deferred 8,585 9,422 31,093
-------- -------- --------
Investment tax credits (762) (762) (4,399)
-------- -------- --------
Total income tax expense $40,767 $26,987 $36,154
======== ======== ========
Income tax components charged as follows:
Operating expenses $44,937 $33,309 $48,712
Other income and deductions - net (3,214) (6,322) (12,558)
Cumulative effect of change in accounting
for postemployment benefits (956) - -
-------- -------- --------
Total income tax expense $40,767 $26,987 $36,154
======== ======== ========
The following table details the components
of the deferred income taxes:
Accelerated depreciation $11,526 $11,318 $15,452
Tax depreciation on unrecoverable
plant investment 8,170 7,915 9,378
Conservation & load management 1,897 3,084 3,995
Property tax adjustment (1,991) (1,991) (1,991)
Deferred fossil fuel costs (37) (381) 490
Seabrook sale/leaseback transaction (2,039) (2,016) 1,629
Premiums on BEC bond redemption (1,619) (2,378) (3,209)
Cancelled nuclear projects (467) (467) (3,795)
Alternative minimum tax - (139) (1,344)
Sales adjustment revenues (5,553) (3,248) 2,415
Gains on sale of utility plant - - 1,237
Pension benefits 148 (6,641) (2,489)
Postretirement benefits 169 (538) -
Postemployment benefits (956) - -
Other - net (663) 4,904 9,325
-------- -------- --------
Deferred income taxes - net $8,585 $9,422 $31,093
======== ======== ========
</TABLE>
- 55 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Total income taxes differ from the amounts computed by
applying the federal statutory tax rate to income before
taxes. The reasons for the differences are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
PRE-TAX TAX PRE-TAX TAX PRE-TAX TAX
------- --- ------- --- ------- ---
(000's)
<S> <C> <C> <C> <C> <C> <C>
Computed tax at federal
statutory rate $30,646 $23,614 $31,593
Increases (reductions)
resulting from:
Deferred return-Seabrook
Unit 1 - - ($7,497) (2,624) ($15,959) (5,426)
ITC taken into income (762) (762) (762) (762) (4,399) (4,399)
Allowance for equity funds
used during construction (753) (263) (999) (349) (1,003) (341)
Tax exempt interest on
municipal bonds - - (283) (99) (3,664) (1,246)
Book depreciation in excess
of non-normalized tax
depreciation 20,625 7,218 21,711 7,599 20,182 6,862
State income taxes, net of
federal income tax
benefits 6,216 4,040 4,645 3,019 16,878 11,140
Other items - net (320) (112) (9,746) (3,411) (5,968) (2,029)
------- ------- ------
Total income tax expense $40,767 $26,987 $36,154
======= ======= =======
Book Income Before Federal
Income Taxes $87,561 $67,467 $92,921
======= ======= =======
Effective income tax rates 46.6% 40.0% 38.9%
===== ===== =====
</TABLE>
At December 31, 1994, the Company had deferred tax
liabilities for taxable temporary differences of $572
million and deferred tax assets for deductible temporary
differences of $143 million, resulting in a net deferred tax
liability of $429 million. Significant components of
deferred tax liabilities and assets were as follows: tax
liabilities on book/tax plant basis differences, $225
million; tax liabilities on the cumulative amount of income
taxes on temporary differences previously flowed through to
ratepayers, $162 million; tax liabilities on normalization
of book/tax depreciation timing differences, $101 million
and tax assets on the disallowance of plant costs, $69
million.
The Tax Reform Act of 1986 provides for a more
comprehensive corporate alternative minimum tax (AMT) for
years beginning after 1986. To the extent that the AMT
exceeds the federal income tax computed at statutory rates,
the excess must be paid in addition to the regular tax
liability. For tax purposes, the excess paid in any year
can be carried forward indefinitely and offset against any
future year's regular tax liability in excess of that year's
tentative AMT. The AMT carryforward at December 31, 1994,
1993 and 1992 was $11.4 million, $11.4 million and $11.3
million, respectively.
(F) SHORT-TERM CREDIT ARRANGEMENTS
The Company has a revolving credit agreement with a group
of banks, which currently extends to December 14, 1995. The
borrowing limit of this facility is $225 million. The
facility permits the Company to borrow funds at a
fluctuating interest rate determined by the prime lending
market in New York, and also permits the Company to borrow
money for fixed periods of time specified by the Company at
fixed interest rates determined by the Eurodollar interbank
market in London, or by bidding, at the Company's option.
If a material adverse change in the business, operations,
affairs, assets or condition, financial or otherwise, or
prospects of the Company and its subsidiaries, on a
consolidated basis, should occur, the banks may decline to
lend additional
- 56 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
money to the Company under this revolving credit agreement,
although borrowings outstanding at the time of such an
occurrence would not then become due and payable. As of
December 31, 1994, the Company had $67 million in short-term
borrowings outstanding under this facility.
The Company's long-term debt instruments do not limit the
amount of short-term debt that the Company may issue. The
Company's revolving credit agreement described above
requires it to maintain an available earnings/interest
charges ratio of not less than 1.5:1.0 for each 12-month
period ending on the last day of each calendar quarter. For
the 12-month period ended December 31, 1994, this coverage
ratio was 2.86.
Information with respect to short-term borrowings is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(000's)
<S> <C> <C> <C>
Maximum aggregate principal amount of
short-term borrowings outstanding at
any month-end $75,000 $94,635 $84,099
Average aggregate short-term borrowings
outstanding during the year* $57,000 $73,700 $43,055
Weighted average interest rate* 4.8% 4.1% 4.4%
Principal amounts outstanding at year-end $67,000 $0 $84,099
Annualized interest rate on principal
amounts outstanding at year-end 6.7% N/A 5.1%
<FN>
*Average short-term borrowings represent the sum of daily
borrowings outstanding, weighted for the number of days
outstanding and divided by the number of days in the period.
The weighted average interest rate is determined by dividing
interest expense by the amount of average borrowings.
Commitment fees of approximately $250,400, $259,600 and
$208,400 paid during 1994, 1993 and 1992, respectively, are
excluded from the calculation of the weighted average
interest rate.
</FN>
</TABLE>
- 57 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(G) SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(000's)
<S> <C> <C> <C>
OPERATING REVENUES
- ------------------
Retail - Base Rates $618,868 $603,559 $566,955
Sales provision adjustment - - 21,031
Wholesale - capacity 7,162 6,575 20,315
- energy 27,765 39,356 55,169
Other 2,953 3,533 3,855
--------- --------- ---------
Total Operating Revenues $656,748 $653,023 $667,325
========= ========= =========
OTHER INCOME AND (DEDUCTIONS) - NET
- -----------------------------------
Interest and dividend income $ 2,520 $ 3,568 $ 6,681
Seabrook funding adjustments - - 7,506
Earnings of subsidiaries and
Connecticut Yankee (2,843) (3,207) (381)
Amortization of loss on investment
in tax-exempt bonds - - (1,752)
Gain on sale of property 63 710 5,921
Engineering study costs (1,200) - -
Miscellaneous other income
and (deductions) - net (447) (1,000) 570
--------- --------- ---------
Total Other Income
and (Deductions) - net $ (1,907) $ 71 $ 18,545
========= ========= =========
OTHER TAXES
- -----------
Charged to:
Operating:
State gross earnings $ 27,403 $ 27,955 $ 27,362
Local real estate
and personal property 26,318 24,449 26,339
Payroll taxes 6,137 5,525 5,527
Other 3 3 3
--------- --------- ---------
59,861 57,932 59,231
Nonoperating and other accounts 41 335 837
--------- --------- ---------
Total Other Taxes $ 59,902 $ 58,267 $ 60,068
========= ========= =========
OTHER INTEREST CHARGES
- ----------------------
Notes payable $ 2,713 $ 3,049 $ 2,120
Amortization of debt expense
and repurchase premiums 6,570 7,818 8,898
Other 1,018 1,393 1,864
--------- --------- ---------
Total Other Interest Charges $ 10,301 $ 12,260 $ 12,882
========= ========= =========
</TABLE>
- 58 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(H) PENSION AND OTHER BENEFITS
The Company's qualified pension plan, which is based on
the highest three years of pay, covers substantially all of
its employees, and its entire cost is borne by the Company.
The Company also has a non-qualified supplemental plan for
certain executives and a non-qualified retiree only plan for
certain early retirement benefits. The net pension costs
for these plans for 1994, 1993 and 1992 were $4,028,000,
$14,966,000 and $5,749,000, respectively.
The Company's funding policy for the qualified plan is to
make annual contributions that satisfy the minimum funding
requirements of ERISA but which do not exceed the maximum
deductible limits of the Internal Revenue Code. These
amounts are determined each year as a result of an actuarial
valuation of the Plan. In accordance with this policy, the
Company contributed $3.3 million in 1994 for 1993 funding
requirements. In addition, the Company contributed $3.9
million in 1994 for 1994 funding requirements. Previously,
due to the application of the full funding limitation under
ERISA, the Company had not been required to make a
contribution since 1985. The supplemental plan is unfunded.
The qualified plan's irrevocable trust fund consists
principally of equity and fixed-income securities and real
estate investments in approximately the following
percentages:
<TABLE>
<CAPTION>
PERCENTAGE OF
ASSET CATEGORY TOTAL FUND
-------------- -------------
<S> <C>
Equity Securities 64.1
Fixed-income Securities 30.2
Real Estate 5.7
</TABLE>
<TABLE>
<CAPTION>
1994 1993
---- ----
(000's)
<S> <C> <C>
The components of net pension costs were as follows:
Service cost of benefits earned during the period $ 4,822 $ 3,977
Interest cost on projected benefit obligation 15,023 13,165
Actual return on plan assets (1,218) (23,344)
Net amortization and deferral (14,095) 10,130
------- -------
Net pension cost $ 4,532* $ 3,928**
======= =======
<FN>
*In addition, an adjustment of $504,000 was recorded due to
an overaccrual of the cost of special termation benefits
in 1993.
**In addition, a cost of $11,038,000 was recognized under
SFAS No. 88 as a result of special termination benefits
provided under the Pension Plan.
</FN>
</TABLE>
Assumptions used to determine pension costs were:
<TABLE>
<S> <C> <C>
Discount rate 7.50% 8.25%
Average wage increase 5.50% 5.50%
Return on plan assets 9.00% 8.50%
</TABLE>
- 59 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------- -----------------
Qualified Non-Qualified Qualified Non-Qualified
Plan Plans Plan Plans
---- ----- ---- -----
(000's)
<S> <C> <C> <C> <C>
The funded status and amounts
recognized in balance sheets
are as follows:
Actuarial present value of
benefit obligations:
Vested benefit obligation $125,289 $3,548 $130,582 $3,097
======== ====== ======== ======
Accumulated benefit
obligation $130,758 $3,548 $137,081 $3,097
======== ====== ======== ======
Reconciliation of accrued
pension liability:
Projected benefit
obligation $183,951 $4,510 $198,236 $4,262
Less fair value of plan
assets 165,788 - 167,732 -
-------- ------ -------- ------
Projected benefit
greater (less) than plan
assets 18,163 4,510 30,504 4,262
Unrecognized prior service
cost (5,619) (397) (6,516) (157)
Unrecognized net gain
(loss) from past
experience 1,849 - (6,966) (327)
Unrecognized net asset
(obligation) at date
of initial application 11,770 (99) 12,878 (131)
-------- ------ -------- ------
Accrued pension
liability $ 26,163 $4,014 $29,900 $3,647
======== ====== ======== ======
Assumptions used in estimating
benefit obligations:
Discount rate 8.50% 8.50% 7.50% 7.50%
Average wage increase 5.50% 5.50% 5.50% 5.50%
</TABLE>
In addition to providing pension benefits, the Company
also provides other postretirement benefits (OPEB),
consisting principally of health care and life insurance
benefits, for retired employees and their dependents.
Employees with 25 years of service are eligible for full
benefits, while employees with less than 25 years of service
but greater than 15 years of service are entitled to partial
benefits. Years of service prior to age 35 are not included
in determining the number of years of service.
Prior to January 1, 1993, the Company recognized the cost
of providing OPEB on a pay-as-you-go basis by expensing the
annual insurance premiums. Effective January 1, 1993, the
Company adopted Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", which requires, among other
things, that OPEB costs be recognized over the employment
period that encompasses eligibility to receive such
benefits. In its December 16, 1992 decision on the
Company's application for retail rate relief, the DPUC
recognized the Company's obligation to adopt SFAS No. 106,
effective January 1, 1993, and approved the Company's
request for revenues to recover OPEB expenses on a SFAS No.
106 basis. A portion of these expenses represents the
transition obligation, which will accrue over a 20-year
period, representing the future liability for medical and
life insurance benefits based on past service for retirees
and active employees.
For funding purposes, the Company established a Voluntary
Employees' Benefit Association Trust (VEBA) to fund OPEB for
union employees who retire on or after January 1, 1994.
Approximately 52% of the Company's employees are represented
by Local 470-1, Utility Workers Union of America, AFL-CIO,
for collective bargaining purposes. The Company established
a 401(h) account in connection with the qualified pension
plan to fund OPEB for non-union employees who retire on or
after January 1, 1994. The funding policy assumes
contributions to these trust funds to be the total OPEB
expense calculated under SFAS No. 106, excluding the amount
that resulted from the reorganization minus pay-as-you-go
benefit payments for pre-January 1, 1994 retirees, allocated
in a manner
- 60 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
that minimizes current income tax liability, without
exceeding maximum tax deductible limits. In accordance with
this policy, the Company contributed approximately $3
million and $1.8 million to the union VEBA on December 30,
1993 and December 29, 1994, respectively. During 1994, the
Company contributed approximately $2.2 million to the 401(h)
account. The Company currently plans to fund the portion of
the OPEB expense that is related to the reorganization
during the years 1994-1996.
The components of the net cost of OPEB were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
(000's)
<S> <C> <C>
Service cost $1,372 $1,182
Interest cost 2,534 1,959
Actual return on plan assets 72 -
Amortizations and deferrals - net 1,346 1,215
------ ------
Net Cost of Postretirement Benefit $5,324 $4,356
====== ======
</TABLE>
Assumptions used to determine OPEB costs were:
<TABLE>
<S> <C> <C>
Discount rate 7.5% 8.25%
Health Care Cost Trend Rate* 7.7% **
<FN>
*Assumed rates gradually decline to 6.2% by the year 2020
**Assumed rate for Pre-age 65 claims - 8.3% and for Post-age 65 claims - 9.0%
</FN>
</TABLE>
A one percentage point increase in the assumed health care
cost trend rate would have increased the service cost and
interest cost components of the 1994 net cost of periodic
postretirement benefit by approximately $599,000 and would
increase the accumulated postretirement benefit obligation
for health care benefits by approximately $3,525,000.
The following table reconciles the funded status of the
plan with the amount recognized in the Consolidated Balance
Sheet as of December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
(000's)
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees $13,028 $12,292
Fully eligible active plan participants 7,078 1,950
Other active plan participants 12,267 16,088
------ ------
Total Accumulated Postretirement Benefit Obligation 32,373 30,330
Plan assets at fair value 6,781 2,984
------ ------
Accumulated Postretirement Benefit Obligation in
Excess of Plan Assets 25,592 27,346
Unrecognized net loss (2,958) (2,990)
Unamortized transition obligation (21,874) (23,089)
------- -------
Accrued Postretirement Benefit Obligation $ 760 $ 1,267
======= =======
</TABLE>
- 61 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The weighted average discount rates used to measure the
accumulated postretirement benefit obligation at
December 31, 1994 and 1993 were 8.5% and 7.5%, respectively.
During 1993, in conjunction with an in-depth
organizational review, the Company offered a voluntary early
retirement program to non-union employees who were eligible
to receive pension benefits. This offer was accepted by 103
employees. The 1993 OPEB cost for this program was $1.3
million. These costs are recognized as a component of the
reorganization charge shown on the Company's Consolidated
Statement of Income.
Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits." This
statement establishes accounting standards for employers who
provide benefits, such as unemployment compensation,
severance benefits and disability benefits to former or
inactive employees after employment but before retirement
and requires recognition of the obligation for these
benefits. The effect of adopting this statement is reported
as a charge against income in the first quarter of 1994 due
to a change in accounting principle. The charge decreased
earnings for common stock for 1994 by $1.3 million, after
tax, or $.09 per share.
The Company has an Employee Stock Ownership Plan (ESOP)
for substantially all its employees. Under the plan,
eligible employees received Company common stock and the
plan provided certain tax benefits to the Company. Neither
the Company nor the employee-participants made any
contributions to the ESOP since 1987.
The Company has an Employee Savings Plan (401(k) Plan) in
which substantially all employees are eligible to
participate. The 401(k) Plan enables employees to defer
receipt of up to 15% of their compensation and to invest
such funds in a number of investment alternatives. The
Company makes matching contributions to the 401(k) Plan in
the form of Company common stock for each participant. The
matching contribution currently equals fifty cents for each
dollar of the participant's compensation deferred, but is
not more than three percent of the participant's annual
salary. The Company's matching contributions to the 401(k)
Plan during 1994, 1993 and 1992 were $1.6 million, $1.3
million and $.9 million, respectively.
(I) JOINTLY OWNED PLANT
At December 31, 1994, the Company had the following
interests in jointly owned plants:
<TABLE>
<CAPTION>
Ownership/
Leasehold Plant In Accumulated
Share Service Depreciation
--------- -------- ------------
(Millions)
<S> <C> <C> <C>
Seabrook Unit 1 17.5 % $654 $81
Millstone Unit 3 3.685 133 50
New Haven Harbor Station 93.7 132 63
</TABLE>
The Company's share of the operating costs of jointly
owned plants is included in the appropriate expense captions
in the Consolidated Statement of Income.
- 62 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(J) UNAMORTIZED CANCELLED NUCLEAR PROJECT
From December 1984 through December 1992, the Company had
been recovering its investment in Seabrook Unit 2, a nuclear
generating unit under construction that was cancelled in
1984, over a regulatory approved ten-year period without a
return on its unamortized investment. In the Company's 1992
rate decision, the DPUC adopted a proposal by the Company to
write off its remaining investment in Seabrook Unit 2,
beginning January 1, 1993, over a 24-year period,
corresponding with the flowback of certain Connecticut
Corporation Business Tax (CCBT) credits. Such decision will
allow the Company to retain the Seabrook Unit 2/CCBT amounts
for ratemaking purposes, with the accumulated CCBT credits
not deducted from rate base during the 24-year period of
amortization in recognition of a longer period of time for
amortization of the Seabrook Unit 2 balance.
(K) FUEL FINANCING OBLIGATIONS AND OTHER LEASE OBLIGATIONS
The Company has a Fossil Fuel Supply Agreement with a
financial institution providing for financing up to $37.5
million in fossil fuel purchases. Under this agreement, the
financing entity acquires and stores natural gas, coal and
fuel oil for sale to the Company, and the Company purchases
these fossil fuels from the financing entity at a price for
each type of fuel that reimburses the financing entity for
the direct costs it has incurred in purchasing and storing
the fuel, plus a charge for maintaining an inventory of the
fuel determined by reference to the fluctuating interest
rate on thirty-day, dealer-placed commercial paper in New
York. The Company is obligated to insure the fuel
inventories and to indemnify the financing entity against
all liabilities, taxes and other expenses incurred as a
result of its ownership, storage and sale of fossil fuel to
the Company. This agreement currently extends to March
1996. At December 31, 1994, approximately $10.7 million of
fossil fuel purchases were being financed under this
agreement.
The Company has leases (some of which are capital leases),
including arrangements for data processing and office
equipment, vehicles, office space and oil tanks. The gross
amount of assets recorded under capital leases and the
related obligations of those leases as of December 31, 1994
are recorded on the balance sheet.
Future minimum lease payments under capital leases,
excluding the Seabrook sale/leaseback transaction, which is
being treated as a long-term financing, are estimated to be
as follows:
<TABLE>
<CAPTION>
(000's)
<S> <C>
1995 $ 2,666
1996 1,715
1997 1,715
1998 1,715
1999 1,696
After 1999 22,783
------
Total minimum capital lease payments 32,290
Less: Amount representing interest 13,322
------
Present value of minimum capital lease payments $18,968
======
</TABLE>
In January 1994, the Company renegotiated a lease
agreement for a service facility. Since the effect of
renegotiating the lease, which continues to be treated as a
capital lease, was a noncash financing activity during 1994,
it is not reflected in the Consolidated Statement of Cash
Flows.
Capitalization of leases has no impact on income, since
the sum of the amortization of a leased asset and the
interest on the lease obligation equals the rental expense
allowed for ratemaking purposes.
- 63 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Rental payments charged to operating expenses in 1994,
1993 and 1992 amounted to $12.1 million, $14.1 million and
$14.8 million, respectively.
Operating leases, which are charged to operating expense,
consist principally of a large number of small, relatively
short-term, renewable agreements for a wide variety of
equipment. In addition, the Company has an operating lease
for its corporate headquarters. Future minimum lease
payments under this lease are estimated to be as follows:
<TABLE>
<CAPTION>
(000's)
<S> <C>
1995 $ 4,729
1996 5,317
1997 5,826
1998 6,125
1999 6,426
2000-2012 121,857
-------
Total $150,280
========
</TABLE>
(L) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURE PROGRAM
The Company has entered into certain commitments in
connection with its continuing capital expenditure program.
This program is presently estimated at approximately $357.5
million, excluding AFUDC, for 1995 through 1999.
SEABROOK
On February 28, 1991, EUA Power Corporation (EUA Power),
the holder of a 12.1% ownership share in Seabrook, commenced
a proceeding under Chapter 11 of the Bankruptcy Code. EUA
Power, a wholly-owned subsidiary of Eastern Utilities
Associates (EUA), was organized solely for the purpose of
acquiring an ownership share in Seabrook and selling in the
wholesale market its share of the electric power produced by
Seabrook. EUA Power commenced this bankruptcy proceeding
because the cash generated by its sales of power at current
market prices was insufficient to pay its obligations on its
outstanding debt. Subsequently, EUA Power's name was
changed to Great Bay Power Corporation (Great Bay). During
1994, the bankruptcy court confirmed a reorganization plan
for Great Bay, which was financed by the injection of $35
million of new ownership equity into this corporation. On
November 23, 1994, when this financing was completed, the
Company was repaid $5.7 million, representing all advance
Seabrook operating expense payments it had made, pending the
reorganization plan's becoming effective.
NUCLEAR INSURANCE CONTINGENCIES
The Price-Anderson Act, currently extended through August
1, 2002, limits public liability resulting from a single
incident at a nuclear power plant. The first $200 million
of liability coverage is provided by purchasing the maximum
amount of commercially available insurance. Additional
liability coverage will be provided by an assessment of up
to $75.5 million per incident, levied on each of the nuclear
units licensed to operate in the United States, subject to a
maximum assessment of $10 million per incident per nuclear
unit in any year. In addition, if the sum of all public
liability claims and legal costs resulting from any nuclear
incident exceeds the maximum
- 64 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
amount of financial protection, each reactor operator can be
assessed an additional 5% of $75.5 million, or $3.775
million. The maximum assessment is adjusted at least every
five years to reflect the impact of inflation. Based on its
interests in nuclear generating units, the Company estimates
its maximum liability would be $23.2 million per incident.
However, assessment would be limited to $3.1 million per
incident, per year. With respect to each of the operating
nuclear generating units in which the Company has an
interest, the Company will be obligated to pay its ownership
and/or leasehold share of any statutory assessment resulting
from a nuclear incident at any nuclear generating unit.
The NRC requires nuclear generating units to obtain
property insurance coverage in a minimum amount of $1.06
billion and to establish a system of prioritized use of the
insurance proceeds in the event of a nuclear incident. The
system requires that the first $1.06 billion of insurance
proceeds be used to stabilize the nuclear reactor to prevent
any significant risk to public health and safety and then
for decontamination and cleanup operations. Only following
completion of these tasks would the balance, if any, of the
segregated insurance proceeds become available to the unit's
owners. For each of the nuclear generating units in which
the Company has an interest, the Company is required to pay
its ownership and/or leasehold share of the cost of
purchasing such insurance.
OTHER COMMITMENTS AND CONTINGENCIES
HYDRO-QUEBEC
The Company is a participant in the Hydro-Quebec
transmission intertie facility linking New England and
Quebec, Canada. Phase II of this facility, in which UI has
a 5.45% participating share, has increased the capacity
value of the intertie from 690 megawatts to a maximum of
2000 megawatts. A ten-year Firm Energy Contract, which
provides for the sale of 7 million megawatt-hours per year
by Hydro-Quebec to the New England participants in the Phase
II facility, became effective on July 1, 1991. The Company
is obligated to furnish a guarantee for its participating
share of the debt financing for the Phase II facility.
Currently, the Company's guarantee liability for this debt
amounts to approximately $9.2 million.
REORGANIZATION CHARGE
During 1993, the Company undertook an in-depth
organizational review with the primary objective of
improving customer service. As a result of this review, the
Company eliminated approximately 75 positions in a corporate
reorganization.
In conjunction with this review and reorganization, the
Company offered a voluntary early retirement program to
non-union employees who were eligible to receive pension
benefits. The early retirement offer was accepted by 103
employees and the Company incurred a one-time charge to 1993
earnings of approximately $13.6 million ($7.8 million,
after-tax). The employees who accepted the offer retired
during 1994.
All non-retiring employees affected by the corporate
reorganization were placed in regular positions or assigned
to special projects.
During 1994, the Company realized savings of approximately
$2.8 million ($1.6 million, after-tax) as a result of the
corporate reorganization and expects annual savings,
beginning in 1995, to be approximately $7.9 million ($4.6
million, after-tax).
- 65 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
SITE REMEDIATION COSTS
The Company has estimated that the cost of environmental
remediation of its decommissioned Steel Point Station
property in Bridgeport will be approximately $11.3 million,
and that the value of the property following remediation
will not exceed $6 million. In its December 16, 1992
decision on UI's application for retail rate increases, the
DPUC provided for additional revenues to be recovered from
customers in the amount of $4.3 million of the difference
during the period 1993-1996, subject to true-up in the
Company's next retail rate proceeding based on actual
remediation costs and actual gain on the Company's
disposition of the property.
PROPERTY TAXES
On November 2, 1993, the Company received "updated"
personal property tax bills from the City of New Haven (the
City) for the tax year 1991-1992, aggregating $6.6 million,
based on an audit by the City's tax assessor. On May 7,
1994, the Company received a "Certificate of
Correction....to correct a clerical omission or mistake"
from the City's tax assessor relative to the assessed value
of the Company's personal property for the tax year
1994-1995, which certificate purports to increase said
assessed value by approximately 53% above the tax assessor's
valuation at February 28, 1994. The Company is contesting
each of these actions of the City's tax assessor vigorously,
and has commenced actions in the Superior Court to enjoin
the City from any effort to collect the "updated" personal
property tax bills for the tax year 1991-1992 and
challenging both the May 7, 1994 "Certificate of Correction"
and the tax assessor's valuation at February 28, 1994. In
December of 1994, the City's tax assessor conducted hearings
regarding the assessed value of the Company's personal
property for the tax years 1992-1993 and 1993-1994; and the
Company anticipates that the City will take some action to
revalue the Company's personal property for those tax years.
On March 1, 1995, the Company received from the City notices
of assessment changes, increasing the assessed valuation of
the Company's personal property for the tax year 1995-1996
by 48% over the valuation declared by the Company. The
Company expects to take the legal actions necessary to
challenge these increases. It is the present opinion of the
Company that the ultimate outcome of this dispute will not
have a significant impact on the financial position of the
Company.
ENVIRONMENTAL CONCERNS
In complying with existing environmental statutes and
regulations and further developments in these and other
areas of environmental concern, including legislation and
studies in the fields of water and air quality (particularly
"air toxics", "ozone non-attainment" and "global warming"),
hazardous waste handling and disposal, toxic substances, and
electric and magnetic fields, the Company may incur
substantial capital expenditures for equipment modifications
and additions, monitoring equipment and recording devices,
and it may incur additional operating expenses. Litigation
expenditures may also increase as a result of scientific
investigations, and speculation and debate, concerning the
possibility of harmful health effects of electric and
magnetic fields. The Company believes that any additional
costs incurred for these purposes will be recoverable
through the ratemaking process. The total amount of these
expenditures is not now determinable.
(M) NUCLEAR FUEL DISPOSAL AND NUCLEAR PLANT DECOMMISSIONING
Costs associated with nuclear plant operations include
amounts for disposal of nuclear wastes, including spent
fuel, and for the ultimate decommissioning of the plants.
Under the Nuclear Waste Policy Act of 1982, the federal
Department of Energy (DOE) is required to design, license,
construct and operate a permanent repository for high level
radioactive wastes and spent nuclear fuel. The Act requires
the DOE to provide, beginning in 1998, for the disposal of
spent nuclear fuel and high level radioactive waste from
commercial nuclear plants through contracts with the owners
and generators of such waste; and the DOE has established
disposal fees that are being paid to the federal government
by electric utilities owning or operating nuclear generating
units. In return for payment of the
- 66 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
prescribed fees, the federal government is to take title to
and dispose of the utilities' high level wastes and spent
nuclear fuel beginning no later than 1998. However, the DOE
has announced that its first high level waste repository
will not be in operation earlier than 2010, notwithstanding
the DOE's statutory and contractual responsibility to begin
disposal of high-level radioactive waste and spent fuel
beginning not later than January 31, 1998.
Until the federal government begins receiving such
materials in accordance with the Nuclear Waste Policy Act,
operating nuclear generating units will need to retain high
level wastes and spent fuel on-site or make other provisions
for their storage. Storage facilities for Millstone Unit 3
are expected to be adequate for the projected life of the
unit. Storage facilities for the Connecticut Yankee unit
are expected to be adequate through the mid-1990s. Storage
facilities for Seabrook Unit 1 are expected to be adequate
until at least 2010. Fuel consolidation and compaction
technologies are being developed and are expected to provide
adequate storage capability for the projected lives of the
latter two units. In addition, other licensed technologies,
such as dry storage casks, can accommodate spent fuel
storage requirements.
Disposal costs for low-level radioactive wastes (LLW) that
result from normal operation of nuclear generating units
have increased significantly in recent years and are
expected to continue to rise. The cost increases are
functions of increased packaging and transportation costs
and higher fees and surcharges charged by the disposal
facilities. As of June 30, 1994, the disposal facility in
Barnwell, South Carolina was closed to all LLW disposal for
New England nuclear units, forcing all of these units into
on-site storage of LLW produced.
Pursuant to the Low-Level Radioactive Waste Policy Act of
1980, each state is responsible for providing disposal
facilities for LLW generated within the state and is
authorized to join with other states into regional compacts
to jointly fulfill their responsibilities. The Connecticut
Hazardous Waste Management Service (the Service), a state
quasi-public corporation, was charged with coordinating the
establishment of a facility for disposal of LLW originating
in Connecticut. In June 1991, the Service announced that it
had selected three potential sites in north-central
Connecticut for further study. The Service's announcement
provoked intense controversy in the affected municipalities
and resulted in legislative action to stop the selection
process. On February 1, 1993, the Service presented to the
legislature a new site selection plan under which
communities are urged to volunteer a site for a facility in
return for financial and other incentives. The volunteer
process is being continued through 1996. The Service's
activities in this regard are funded by assessments on
Connecticut's LLW generators. Due to a change in the
volunteer process, there was no assessment for the 1994-1995
fiscal year and the state projects no assessment for the
1995-1996 and 1996-1997 fiscal years. The service currently
projects that a disposal site will be designated by 2002,
although there are admitted inherent uncertainties in this
projection.
Additional LLW storage capacity has been or can be
constructed or acquired at the Millstone and Connecticut
Yankee sites to provide for temporary storage of LLW should
that become necessary. Connecticut LLW can be managed by
volume reduction, storage or shipment at least through 2000.
The Company cannot predict whether and when a disposal site
will be designated in Connecticut.
The State of New Hampshire has not met deadlines for
compliance with the Low-Level Radioactive Waste Policy Act,
and Seabrook Unit 1 has been denied access to existing
disposal facilities. Therefore, LLW generated by Seabrook
Unit 1 is being stored on-site. The Seabrook storage
facility currently has capacity to store at least five
years' accumulation of waste generated by Seabrook, and the
plant operator plans to expand its storage capacity as
necessary.
NRC licensing requirements and restrictions are also
applicable to the decommissioning of nuclear generating
units at the end of their service lives, and the NRC has
adopted comprehensive regulations concerning decommissioning
planning, timing, funding and environmental reviews. UI and
the other owners of the nuclear
- 67 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
generating units in which UI has interests estimate
decommissioning costs for the units and attempt to recover
sufficient amounts through their allowed electric rates to
cover expected decommissioning costs. Changes in NRC
requirements or technology can increase estimated
decommissioning costs, and UI's customers in future years
may experience higher electric rates to offset the effects
of any insufficient rate recovery in prior years.
New Hampshire has enacted a law requiring the creation of
a government-managed fund to finance the decommissioning of
nuclear generating units in that state. The New Hampshire
Nuclear Decommissioning Financing Committee (NDFC) has
established $376 million (in 1995 dollars) as the
decommissioning cost estimate for Seabrook Unit 1, of which
the Company's share would be about $66 million. This
estimate premises the prompt removal and dismantling of the
Unit at the end of its estimated 40-year energy producing
life. Monthly decommissioning payments are being made to
the state-managed decommissioning trust fund. UI's share of
the decommissioning payments made during 1994 was $1.3
million. UI's share of the fund at December 31, 1994 was
approximately $5.2 million.
Connecticut has enacted a law requiring the operators of
nuclear generating units to file periodically with the DPUC
their plans for financing the decommissioning of the units
in that state. Current decommissioning cost estimates for
Millstone Unit 3 and the Connecticut Yankee Unit are $448
million (in 1995 dollars) and $357 million (in 1995
dollars), respectively, of which the Company's share would
be about $17 million and $34 million, respectively. These
estimates premise the prompt removal and dismantling of each
unit at the end of its estimated 36-year energy producing
life. Monthly decommissioning payments, based on these cost
estimates, are being made to decommissioning trust funds
managed by Northeast Utilities. UI's share of the Millstone
Unit 3 decommissioning payments made during 1994 was
$388,000. UI's share of the fund at December 31, 1994 was
approximately $2.4 million. For the Company's 9.5% equity
ownership in Connecticut Yankee, decommissioning costs of
$1.3 million were funded by UI during 1994, and UI's share
of the fund at December 31, 1994 was $14.1 million.
(N) PROPERTY TAX SETTLEMENT
In December 1994, the Company and the City of Bridgeport
settled a dispute regarding past taxes payable by the
Company on its personal property in that city and agreed
upon a method of valuation of personal property for tax
purposes for future periods.. As a result of the settlement
agreement, the Company recognized a non-recurring charge to
1994 earnings of approximately $2.5 million ($1.5 million,
after-tax).
- 68 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(O) FAIR VALUE OF FINANCIAL INSTRUMENTS (1)
The estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(000's) (000's)
<S> <C> <C> <C> <C>
Cash and temporary cash investments $ 11,432 $ 11,432 $ 48,171 $ 48,171
Long-term debt (2)(3) $651,473 $633,551 $768,601 $810,329
<FN>
(1) Equity investments were not valued because they were not considered to
be material.
(2) Excludes the $250,000,000 obligation under the Seabrook Unit 1
sale/leaseback agreement.
(3) The fair market value of the Company's long-term debt is estimated by
brokers based on market conditions at December 31, 1994 and 1993,
respectively.
</FN>
</TABLE>
- 69 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(P) QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for 1994 and 1993 are set
forth below:
<TABLE>
<CAPTION>
Earnings(Loss)
Operating Operating Net Income Per Share of
Quarter Revenues Income (4) (Loss)(2)(3)(4) Common Stock (1)(2)(3)(4)
- ------- --------- ---------- --------------- -------------------------
(000's) (000's) (000's)
<S> <C> <C> <C> <C>
1994
First $167,579 $32,626 $11,938 $ .77
Second 153,433 26,632 6,414 .40
Third 184,592 44,762 25,787 1.78
Fourth 151,144 23,372 2,656 .14
1993
First $161,936 $31,164 $12,586 $ .82
Second 151,012 29,335 10,374 .66
Third 189,432 41,358 22,756 1.54
Fourth 150,643 12,957 (5,235) (.45)
------------------
<FN>
(1) Based on weighted average number of shares outstanding each quarter.
(2) Earnings per share for the fourth quarter of 1993 include an after-tax
charge of $7.8 million or $.56 per share associated with the
reorganization of the Company.
(3) Net income and earnings per share for the first quarter of 1994 include
an after-tax charge of $1.3 million or $.09 per share associated with
the cumulative effect of the change in the method of accounting for
postemployment benefits. See Note (H), "Pension and Other Benefits".
(4) Operating income, net income and earnings per share for the fourth
quarter of 1994 include an after-tax charge of $1.5 million, or $.10 per
share, associated with a property tax settlement, and an after-tax
credit of $1.6 million, or $.11 per share, to reverse prior period
overestimates of distribution losses.
</FN>
</TABLE>
- 70 -<PAGE>
<PAGE>
[Letterhead of Coopers & Lybrand L.L.P.]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and Directors of
The United Illuminating Company:
We have audited the accompanying consolidated balance sheets
of The United Illuminating Company as of December 31, 1994,
1993 and 1992, and related consolidated statements of
income, retained earnings and cash flows for the years then
ended and the consolidated financial statement schedule
(page S-1). These financial statements and the financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The United Illuminating Company as of
December 31, 1994, 1993 and 1992, and the consolidated
results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in
relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects,
the information required to be included therein.
/s/ Coopers & Lybrand L.L. P.
Hartford, Connecticut
January 23, 1995
- 71 -<PAGE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures.
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Company.
The information appearing under the captions
"NOMINEES FOR ELECTION AS DIRECTORS" AND "COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934" in the Company's definitive Proxy Statement,
dated March 29, 1995, for the Annual Meeting of the
Shareholders to be held on May 17, 1995, which Proxy
Statement will be filed with the Securities and
Exchange Commission on or about March 29, 1995, is
incorporated by reference in partial answer to this
item. See also "EXECUTIVE OFFICERS OF THE COMPANY",
following Part I, Item 4 herein.
Item 11. Executive Compensation.
The information appearing under the captions
"EXECUTIVE COMPENSATION," "STOCK OPTION PLAN," "STOCK
OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES,"
"DIVIDEND EQUIVALENT PROGRAM," "RETIREMENT PLANS,"
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION" AND "DIRECTOR COMPENSATION" in the
Company's definitive Proxy Statement, dated March 29,
1995, for the Annual Meeting of the Shareholders to be
held on May 17, 1995, which Proxy Statement will be
filed with the Securities and Exchange Commission on or
about March 29, 1995, is incorporated by reference in
answer to this item.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information appearing under the captions
"PRINCIPAL SHAREHOLDERS" and "STOCK OWNERSHIP OF
DIRECTORS AND OFFICERS" in the Company's definitive
Proxy Statement, dated March 29, 1995 for the Annual
Meeting of the Shareholders to be held on May 17, 1995,
which Proxy Statement will be filed with the Securities
and Exchange Commission on or about March 29, 1995, is
incorporated by reference in answer to this item.
Item 13. Certain Relationships and Related Transactions.
The information appearing under the caption "NOMINEES
FOR ELECTION AS DIRECTORS" in the Company's definitive
Proxy Statement, dated March 29, 1995, for the Annual
Meeting of the Shareholders to be held on May 17, 1995,
which Proxy Statement will be filed with the Securities
and Exchange Commission on or about March 29, 1995, is
incorporated by reference in answer to this item.
- 72 -<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
Financial Statements (see Item 8):
Consolidated statement of income for the years ended December 31, 1994,
1993 and 1992
Consolidated statement of cash flows for the years ended December 31,
1994, 1993 and 1992
Consolidated balance sheet, December 31, 1994, 1993 and 1992
Consolidated statement of retained earnings for the years ended
December 31, 1994, 1993 and 1992
Statement of accounting policies
Notes to consolidated financial statements
Report of independent accountants
Financial Statement Schedule (see S-1)
Schedule II - Valuation and qualifying accounts for the years ended
December 31, 1994, 1993 and 1992.
- 73 -<PAGE>
<PAGE>
Exhibits:
Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934,
certain of the following listed exhibits, which are annexed as exhibits to
previous statements and reports filed by the Company, are hereby
incorporated by reference as exhibits to this report. Such statements and
reports are identified by reference numbers as follows:
(1) Filed with Registration Statement No. 2-60849, effective July 24, 1978.
(2) Filed with Quarterly Report (Form 10-Q) for fiscal quarter ended
September 30, 1991.
(3) Filed with Quarterly Report (Form 10-Q) for fiscal quarter ended
March 31, 1991.
(4) Filed with Registration Statement No. 33-40169, effective August 12,
1991.
(5) Filed with Registration Statement No. 33-35465, effective August 1,
1990.
(6) Filed with Registration Statement No. 2-57275, effective October 19,
1976.
(7) Filed with Annual Report (Form 10-K) for fiscal year ended December 31,
1991.
(8) Filed with Annual Report (Form 10-K) for fiscal year ended December 31,
1992.
(9) Filed with Annual Report (Form 10-K) for fiscal year ended December 31,
1990.
(10) Filed with Registration Statement No. 2-66518, effective February 25,
1980.
(11) Filed with Registration Statement No. 2-49669, effective December 11,
1973.
(12) Filed with Annual Report (Form 10-K) for fiscal year ended December 31,
1993.
(13) Filed with Registration Statement No. 2-54876, effective November 19,
1975.
(14) Filed with Registration Statement No. 2-52657, effective February 6,
1975.
(15) Filed with Quarterly Report (Form 10-Q) for fiscal quarter ended
September 30, 1990.
(16) Filed with Quarterly Report (Form 10-Q) for fiscal quarter ended
March 31, 1994.
- 74 -<PAGE>
<PAGE>
The exhibit number in the statement or report referenced is set forth in
the parenthesis following the description of the exhibit. Those of the
following exhibits not so identified are filed herewith.
Exhibit
Table Exhibit Reference
Item No. No. No. Description
- -------- ------- --------- -----------
(3) 3.1 Copy of Restated Certificate of Incorporation
of The United Illuminating Company, dated
January 23, 1995.
(3) 3.2a (1) Copy of Bylaws of The United Illuminating
Company. (Exhibit 2.3)
(3) 3.2b (2) Copy of Article II, Section 2, of Bylaws of The
United Illuminating Company, as amended
March 26, 1990, amending Exhibit 3.2a.
(Exhibit 3.23b)
(3) 3.2c (3) Copy of Article V, Section 1, of Bylaws of The
United Illuminating Company, as amended
April 22, 1991, amending Exhibit 3.2a.
(Exhibit 3.23c)
(4) 4.1 (4) Copy of Indenture, dated as of August 1, 1991,
from The United Illuminating Company to The
Bank of New York, Trustee. (Exhibit 4)
(4) 4.2 (5) Copy of Participation Agreement, dated as of
(10) August 1, 1990, among Financial Leasing
Corporation, Meridian Trust Company, The Bank
of New York and The United Illuminating
Company. (Exhibits 4(a) through 4(h),
inclusive, Amendment Nos. 1 and 2).
(10) 10.1 (6) Copy of Stockholder Agreement, dated as of
July 1, 1964, among the various stockholders
of Connecticut Yankee Atomic Power Company,
including The United Illuminating Company.
(Exhibit 5.1-1)
(10) 10.2a (6) Copy of Power Contract, dated as of July 1,
1964, between Connecticut Yankee Atomic Power
Company and The United Illuminating Company.
(Exhibit 5.1-2)
(10) 10.2b (1) Copy of Supplementary Power Contract, dated as
of March 1, 1978, between Connecticut Yankee
Atomic Power Company and The United
Illuminating Company, supplementing Exhibit
10.2a. (Exhibit 5.1-6)
(10) 10.2c (7) Copy of Agreement Amending Supplementary Power
Contract, dated August 22, 1980, between
Connecticut Yankee Atomic Power Company and
The United Illuminating Company, amending
Exhibit 10.2b. (Exhibit 10.2b)
(10) 10.2d (8) Copy of Second Amendment of the Supplementary
Power Contract, dated as of October 15, 1982,
between Connecticut Yankee Atomic Power
Company and The United Illuminating Company,
amending Exhibit 10.2b. (Exhibit 10.2d)
(10) 10.2e (9) Copy of Second Supplementary Power Contract,
dated as of April 30, 1984, between
Connecticut Yankee Atomic Power Company and
The United Illuminating Company,
supplementing Exhibit 10.2a. (Exhibit 10.2e)
(10) 10.2f (9) Copy of Additional Power Contract, dated as of
April 30, 1984, between Connecticut Yankee
Atomic Power Company and The United
Illuminating Company. (Exhibit 10.2f)
(10) 10.3 (6) Copy of Capital Funds Agreement, dated as of
September 1, 1964, between Connecticut
Yankee Atomic Power Company and The United
Illuminating Company. (Exhibit 5.1-3)
(10) 10.4a (6) Copy of Connecticut Yankee Transmission
Agreement, dated as of October 1,1964, among
the various stockholders of Connecticut
Yankee Atomic Power Company, including The
United Illuminating Company. (Exhibit 5.1-4)
- 75 -<PAGE>
<PAGE>
Exhibit
Table Exhibit Reference
Item No. No. No. Description
- -------- ------- --------- -----------
(10) 10.4b (10) Copy of Agreement Amending and Revising
Connecticut Yankee Transmission Agreement,
dated as of July 1, 1979, amending Exhibit
10.4a. (Exhibit 5.1-7)
(10) 10.5 (1) Copy of Capital Contributions Agreement, dated
October 16, 1967, between The United
Illuminating Company and Connecticut Yankee
Atomic Power Company. (Exhibit 5.1-5)
(10) 10.6a (7) Copy of NEPOOL Power Pool Agreement, dated as
of September 1, 1971, as amended to
November 1, 1988. (Exhibit 10.6a)
(10) 10.6b (11) Copy of Agreement Setting Out Supplemental
NEPOOL Understandings, dated as of April 2,
1973. (Exhibit 5.7-10)
(10) 10.6c (7) Copy of Amendment to NEPOOL Power Pool
Agreement, dated as of March 15, 1989,
amending Exhibit 10.6a. (Exhibit 10.6c)
(10) 10.6d (7) Copy of Agreement Amending NEPOOL Power Pool
Agreement, dated as of October 1, 1990,
amending Exhibit 10.6a. (Exhibit 10.6d)
(10) 10.6e (12) Copy of Agreement Amending NEPOOL Power Pool
Agreement, dated as of September 15, 1992,
amending Exhibit 10.6a. (Exhibit 10.6e)
(10) 10.6f (12) Copy of Agreement Amending NEPOOL Power Pool
Agreement, dated as of June 1, 1993,
amending Exhibit 10.6a. (Exhibit 10.6f)
(10) 10.7a (7) Copy of Agreement for Joint Ownership,
Construction and Operation of New Hampshire
Nuclear Units, dated May 1, 1973, as amended
to February 1, 1990. (Exhibit 10.7a)
(10) 10.7b (13) Copy of Transmission Support Agreement, dated
as of May 1, 1973, among the Seabrook
Companies. (Exhibit 5.9-2)
(10) 10.7c (2) Copy of Twenty-third Amendment to Agreement
for Joint Ownership, Construction and
Operation of New Hampshire Nuclear Units,
dated as of November 1, 1990, amending
Exhibit 10.7a. (Exhibit 10.8ab)
(10) 10.8a (10) Copy of Sharing Agreement - 1979 Connecticut
Nuclear Unit, dated as of September 1, 1973,
among The Connecticut Light and Power
Company, The Hartford Electric Light
Company, Western Massachusetts Electric
Company, New England Power Company, The
United Illuminating Company, Public Service
Company of New Hampshire, Central Vermont
Public Service Company, Montaup Electric
Company and Fitchburg Gas and Electric Light
Company, relating to a nuclear fueled
generating unit in Connecticut.
(Exhibit 5.8-1)
(10) 10.8b (14) Copy of Amendment to Sharing Agreement - 1979
Connecticut Nuclear Unit, dated as of
August 1, 1974, amending Exhibit 10.8a.
(Exhibit 5.9-2)
(10) 10.8c (6) Copy of Amendment to Sharing Agreement - 1979
Connecticut Nuclear Unit, dated as of
December 15, 1975, amending Exhibit 10.8a.
(Exhibit 5.8-4, Post-effective Amendment No.
2)
(10) 10.9a (1) Copy of Transmission Line Agreement, dated
January 13, 1966, between the Trustees of
the Property of The New York, New Haven and
Hartford Railroad Company and The United
Illuminating Company. (Exhibit 5.4)
(10) 10.9b (7) Notice, dated April 24, 1978, of The United
Illuminating Company's intention to extend
term of Transmission Line Agreement dated
January 13, 1966, Exhibit 10.9a.
(Exhibit 10.9b)
(10) 10.9c (7) Copy of Letter Agreement, dated March 28,
1985, between The United Illuminating
Company and National Railroad Passenger
Corporation, supplementing and modifying
Exhibit 10.9a. (Exhibit 10.9c)
- 76 -<PAGE>
<PAGE>
Exhibit
Table Exhibit Reference
Item No. No. No. Description
- -------- ------- --------- -----------
(10) 10.10 (8) Copy of Agreement, effective May 16, 1992,
between The United Illuminating Company
and Local 470-1, Utility Workers Union of
America, AFL-CIO. (Exhibit 10.10)
(10) 10.11 (12) Copy of Fuel Oil Purchase and Sale Agreement,
dated as of October 1, 1993, among Tosco
Corporation, The United Illuminating Company
and The Connecticut Light and Power Company.
(Confidential treatment requested)
(Exhibit 10.11)
(10) 10.12 (8) Copy of Coal Sales Agreement, dated as of
August 1, 1992, between Pittston Coal Sales
Corp. and The United Illuminating Company.
(Confidential treatment requested)
(Exhibit 10.13)
(10) 10.13 (2) Copy of Fossil Fuel Supply Agreement between
BLC Corporation and The United Illuminating
Company, dated as of July 1, 1991.
(Exhibit 10.31)
(10) 10.14 Copy of Revolving Credit Agreement, dated
as of December 15, 1994, among The United
Illuminating Company, the Banks named
therein, and Citibank, N.A., as Agent for
the Banks.
(10) 10.15a* (8) Copy of Employment Agreement, dated as of
January 1, 1988, between The United
Illuminating Company and Richard J. Grossi.
(Exhibit 10.22a)
(10) 10.15b* (15) Copy of Amendment to Employment Agreement,
dated as of July 23, 1990, between The
United Illuminating Company and Richard J.
Grossi, amending Exhibit 10.15a.
(Exhibit 10.26a)
(10) 10.16a* (8) Copy of Employment Agreement, dated as of
January 1, 1988, between The United
Illuminating Company and Robert L. Fiscus.
(Exhibit 10.23a)
(10) 10.16b* (15) Copy of Amendment to Employment Agreement,
dated as of July 23, 1990, between The
United Illuminating Company and Robert L.
Fiscus, amending Exhibit 10.16a.
(Exhibit 10.27a)
(10) 10.17a* (8) Copy of Employment Agreement, dated as of
January 1, 1988, between The United
Illuminating Company and James F. Crowe.
(Exhibit 10.24a)
(10) 10.17b* (15) Copy of Amendment to Employment Agreement,
dated as of July 23, 1990, between The
United Illuminating Company and James F.
Crowe, amending Exhibit 10.17a.
(Exhibit 10.28a)
(10) 10.18* (7) Copy of Executive Incentive Compensation
Program of The United Illuminating Company.
(Exhibit 10.24)
(10) 10.19a* (15) Copy of The United Illuminating Company 1990
Stock Option Plan. (Exhibit 10.33)
(10) 10.19b* (12) Amendments to The United Illuminating Company
1990 Stock Option Plan, adopted
November 22, 1993 and January 24, 1994.
(Exhibit 10.21b)
(10) 10.20* (16) Copy of The United Illuminating Company
Dividend Equivalent Program.
(Exhibit 10.20)
(21) 21 List of subsidiaries of The United
Illuminating Company.
(27) 27 Financial Data Schedule
(28) 28.1 (8) Copies of significant rate schedules of The
United Illuminating Company. (Exhibit 28.1)
- -------------------
*Management contract or compensatory plan or arrangement.
- 77 -<PAGE>
<PAGE>
The foregoing list of exhibits does not include instruments defining the
rights of the holders of certain long-term debt of the Company and its
subsidiaries where the total amount of securities authorized to be issued
under the instrument does not exceed ten (10%) of the total assets of
the Company and its subsidiaries on a consolidated basis; and the Company
hereby agrees to furnish a copy of each such instrument to the Securities
and Exchange Commission on request.
(b) Reports on Form 8-K.
Items Financial Statements Date of
Reported Filed Report
- -------- -------------------- -------
5, 7 None September 29, 1994
- 78 -<PAGE>
<PAGE>
[Letterhead of Coopers & Lybrand L.L.P.]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Post
Effective Amendment No. 1 to the Registration Statement of
The United Illuminating Company on Form S-3 (File No.
33-50221) and the Registration Statements on Form S-3 (File
No. 33-50445 and File No. 33-55461), of our report, dated
January 23, 1995, on our audits of the consolidated
financial statements and financial statement schedule of The
United Illuminating Company as of December 31, 1994, 1993
and 1992 and for the years then ended, which report is
included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L. L. P.
Hartford, Connecticut
March 7, 1995
- 79 -<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE UNITED ILLUMINATING COMPANY
By /s/ Richard J. Grossi
------------------------------
Richard J. Grossi
Chairman of the Board of Directors
and Chief Executive Officer
Date: March 8, 1995
-----------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
Director, Chairman of the
Board of Directors and
/s/ Richard J. Grossi Chief Executive Officer March 8, 1995
- ---------------------
(Richard J. Grossi)
(Principal Executive Officer)
Director, President and
/s/ Robert L. Fiscus Chief Financial Officer March 8, 1995
- ---------------------
(Robert L. Fiscus)
(Principal Financial and
Accounting Officer)
/s/ John D. Fassett Director March 8, 1995
- --------------------
(John D. Fassett)
Director March , 1995
- ----------------------
(William S. Warner)
/s/ John F. Croweak Director March 8, 1995
- --------------------
(John F. Croweak)
/s/ F. Patrick McFadden, Jr. Director March 8, 1995
- -----------------------------
(F. Patrick McFadden, Jr.)
/s/ J. Hugh Devlin Director March 8, 1995
- -------------------
(J. Hugh Devlin)
/s/ Betsy Henley-Cohn Director March 8, 1995
- ----------------------
(Betsy Henley-Cohn)
/s/ Frank R. O'Keefe, Jr. Director March 8, 1995
- --------------------------
(Frank R. O'Keefe, Jr.)
/s/ James A. Thomas Director March 8, 1995
- ----------------------
(James A. Thomas)
Director March , 1995
- ----------------------
(David E.A. Carson)
/s/ John L. Lahey Director March 8, 1995
- ----------------------
(John L. Lahey)
- 80 -<PAGE>
<PAGE>
<TABLE>
Schedule II
Valuation and
Qualifying Accounts
THE UNITED ILLUMINATING COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993 and 1992
(Thousands of Dollars)
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
---------- -------- -------- -------- --------
Additions
------------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Classification of Period Expenses Accounts Deductions Period
---------------- --------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
RESERVE DEDUCTION FROM
ASSET TO WHICH IT APPLIES:
Reserve for uncollectible
accounts:
1994 $4,700 $9,976 - $9,776 (A) $4,900
1993 3,900 8,971 - 8,171 (A) 4,700
1992 3,200 8,741 - 8,041 (A) 3,900
- --------------------
<FN>
NOTE:
(A) Accounts written off, less recoveries.
</TABLE>
S-1
<PAGE>
<PAGE>
EXHIBIT INDEX
(a) Exhibits
Exhibit
Table Item Exhibit
Number Number Description Page No.
---------- ------- ----------- --------
(3) 3.1 Copy of Restated Certificate of
Incorporation of The United
Illuminating Company, dated
January 23, 1995.
(10) 10.14 Copy of Revolving Credit Agreement,
dated as of December 15, 1994,
among The United Illuminating
Company, the Banks named therein,
and Citibank, N.A., as Agent for
the Banks.
(21) 21 List of subsidiaries of The United
Illuminating Company.
(27) 27 Financial Data Schedule.
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE UNITED ILLUMINATING COMPANY
(A Specially Chartered Stock Corporation)
(1) The name of the corporation is THE UNITED ILLUMINATING
COMPANY, a corporation specially chartered by the General
Assembly of the State of Connecticut on June 15, 1899 (Special
Acts, 1899, No. 452, Volume XIII, at Page 378).
(2) The Certificate of Incorporation of said corporation is
restated only, pursuant to Sections 33-362(a) and 33-392(c) of
the General Statutes of the State of Connecticut (Revision of
1958), as follows:
Section 1. The name of the corporation is THE
UNITED ILLUMINATING COMPANY (the "Company").
Section 2. The purpose of the Company is to engage
in the businesses and activities that the Company is authorized
to engage in by virtue of the Stock Corporation Act of the State
of Connecticut and the following Special Acts of the General
Assembly of the State of Connecticut, which Special Acts set
forth the Company's franchises, the nature of its specially
chartered businesses, and its special rights, privileges and
immunities, viz.:
Special
Act Name of
Year No. Volume Page Constituent Corporation
- ---- ------- ------ ---- -----------------------
1899 452 XIII 378 THE NEW HAVEN ILLUMINATING COMPANY
Name changed December 4, 1899 to The United
Illuminating Company.
1903 170 XIV 118 THE UNITED ILLUMINATING COMPANY
1911 29 XVI 23 THE UNITED ILLUMINATING COMPANY
1913 96 XVI 770 THE NEW HAVEN ILLUMINATING COMPANY
1917 124 XVII 811 THE UNITED ILLUMINATING COMPANY
1925 126 XIX 649 THE UNITED ILLUMINATING COMPANY
<PAGE>
<PAGE>
Special
Act Name of
Year No. Volume Page Constituent Corporation
- ---- ------- ------ ---- -----------------------
1931 406 XXI 365 THE UNITED ILLUMINATING COMPANY
1939 325 XXIII 224 THE UNITED ILLUMINATING COMPANY
1941 187 XXIII 818 THE UNITED ILLUMINATING COMPANY
1943 310 XXIV 218 THE UNITED ILLUMINATING COMPANY
1951 482 XXVI 348 THE UNITED ILLUMINATING COMPANY
1963 269 XXXI 267 THE UNITED ILLUMINATING COMPANY
_____________________________________
1893 147 XI 180 WEST HAVEN ELECTRIC POWER COMPANY
On November 10, 1899 sold all franchises and property
to The New Haven Illuminating Company
_____________________________________
1879 43 VIII 255 BRIDGEPORT STEAM HEATING COMPANY
1881 147 IX 203 BRIDGEPORT STEAM HEATING COMPANY
1884 139 IX 995 BRIDGEPORT STEAM HEATING COMPANY
Name changed March 26, 1884 to
The Bridgeport Illuminating Company
1889 345 X 1180 THE BRIDGEPORT ILLUMINATING COMPANY
1895 342 XII 485 THE BRIDGEPORT ILLUMINATING COMPANY
1899 488 XIII 482 THE BRIDGEPORT ILLUMINATING COMPANY
On November 10, 1899 sold all franchises to The New
Haven Illuminating Company.
_____________________________________
- 2 -<PAGE>
<PAGE>
Special
Act Name of
Year No. Volume Page Constituent Corporation
- ---- ------- ------ ---- -----------------------
1893 175 XI 236 THE STRATFORD ELECTRIC LIGHT AND GAS COMPANY
On November 10, 1899 sold all franchises and property
to The New Haven Illuminating Company
_____________________________________
1887 193 X 648 THE NEW HAVEN ELECTRIC COMPANY
1895 64 XII 96 THE NEW HAVEN ELECTRIC COMPANY
1899 523 XIII 528 THE NEW HAVEN ELECTRIC COMPANY
On January 25, 1900 sold all franchises and property to The
United Illuminating Company.
_____________________________________
1887 173 X 623 THE BRIDGEPORT ELECTRIC LIGHT COMPANY
1895 241 XII 316 THE BRIDGEPORT ELECTRIC LIGHT COMPANY
1895 279 XII 386 THE BRIDGEPORT ELECTRIC LIGHT COMPANY
On January 29, 1900 sold all franchises and property to
The United Illuminating Company.
_____________________________________
1893 300 XI 399 THE MILFORD ELECTRIC LIGHT AND GAS COMPANY
1895 165 XII 197 THE MILFORD ELECTRIC LIGHT AND GAS COMPANY
- 3 -<PAGE>
<PAGE>
Special
Act Name of
Year No. Volume Page Constituent Corporation
- ---- ------- ------ ---- -----------------------
1897 322 XII 985 THE MILFORD ELECTRIC LIGHT AND GAS COMPANY
1899 180 XIII 161 THE MILFORD ELECTRIC LIGHT AND GAS COMPANY
1901 453 XIII 1104 THE MILFORD ELECTRIC LIGHT AND GAS COMPANY
Between February 1, 1906 and April 1, 1906 sold all
franchises and property to The United Illuminating
Company.
_____________________________________
1905 343 XIV 830 THE NORTH HAVEN GAS AND POWER COMPANY
On March 19, 1906 sold all franchises and property to
The United Illuminating Company.
_____________________________________
1907 417 XV 399 THE FAIRFIELD LIGHT AND POWER COMPANY
On December 24, 1910 sold all franchises and property to The
United Illuminating Company.
_____________________________________
1915 196 XVII 210 THE TOTOKET ELECTRIC COMPANY
On March 25, 1930 merged with and into The United
Illuminating Company.
_____________________________________
1935 521 XXII 351 THE DERBY GAS AND ELECTRIC CORPORATION
OF CONNECTICUT
- 4 -<PAGE>
<PAGE>
Special
Act Name of
Year No. Volume Page Constituent Corporation
- ---- ------- ------ ---- -----------------------
1937 483 XXII 892 THE DERBY GAS AND ELECTRIC CORPORATION
OF CONNECTICUT
1939 515 XXIII 589 THE DERBY GAS AND ELECTRIC CORPORATION
OF CONNECTICUT
1953 225 XXVI 859 THE DERBY GAS AND ELECTRIC CORPORATION
OF CONNECTICUT
Name changed December 14, 1953 to
The Housatonic Public Service Company
1955 397 XXVII 327 THE HOUSATONIC PUBLIC SERVICE COMPANY
1957 100 XXVIII 125 THE HOUSATONIC PUBLIC SERVICE COMPANY
1958 36 XXIX 32 THE HOUSATONIC PUBLIC SERVICE COMPANY
On May 1, 1961 sold all electric franchises and
property in the towns of Ansonia, Derby and Shelton to
The United Illuminating Company.
_____________________________________
1859 - V 223 BIRMINGHAM GAS LIGHT COMPANY
1869 - VI 668 BIRMINGHAM GAS LIGHT COMPANY
1871 - VII 14 BIRMINGHAM GAS LIGHT COMPANY
Name changed June 14, 1871 to
Derby Gas Company
1881 58 IX 49 DERBY GAS COMPANY
1886 22 X 214 DERBY GAS COMPANY
1889 45 X 818 DERBY GAS COMPANY
1893 417 XI 533 DERBY GAS COMPANY
1897 140 XII 778 DERBY GAS COMPANY
- 5 -<PAGE>
<PAGE>
Special
Act Name of
Year No. Volume Page Constituent Corporation
- ---- ------- ------ ---- -----------------------
1901 83 XIII 652 DERBY GAS COMPANY
1905 39 XIV 545 DERBY GAS COMPANY
1913 317 XVI 988 DERBY GAS COMPANY
1915 185 XVII 181 DERBY GAS COMPANY
1921 9 XVIII 349 DERBY GAS COMPANY
Name changed March 9, 1921 to
The Derby Gas and Electric Company
1925 258 XIX 768 THE DERBY GAS AND ELECTRIC COMPANY
1945 220 XXIV 635 THE DERBY GAS AND ELECTRIC COMPANY
1949 83 XXV 876 THE DERBY GAS AND ELECTRIC COMPANY
On December 14, 1953 merged with and into The Derby Gas
and Electric Corporation of Connecticut.
Section 3. The designation of each class of shares
of capital stock of the Company, the authorized number of shares
of each such class with par value and the par value thereof per
share, and the authorized number of shares of each class without
par value, are as follows:
(a) COMMON STOCK:
The authorized number of shares of Common Stock of the
Company shall be 30,000,000, each without par value and without
any differences in terms, limitations and relative rights and
preferences. The holders of the Company's Common Stock shall
have no preemptive right to subscribe to, purchase or receive any
shares of the Company's Common Stock, or any other capital stock
of the Company of any class, or any bonds, debentures, notes or
other evidence of indebtedness, whether or not convertible into
shares of the capital stock of the Company of any class, now or
hereafter authorized.
- 6 -<PAGE>
<PAGE>
(b) PREFERRED STOCK:
ARTICLE I. AUTHORIZED AMOUNT OF PREFERRED STOCK.
The authorized amount of preferred stock subject to these
Articles (herein called the Preferred Stock), unless increased in
accordance with the provisions hereof, shall be $184,700,500,
consisting of a class of 1,247,005 shares of the par value of
$100 per share and a class of 2,400,000 shares of the par value
of $25 per share. Shares of either class may, subject to the
provisions of these Articles, be issued from time to time in one
or more series in such amounts, on such terms and for such
consideration as may be determined and authorized by the Board of
Directors. The series designation, dividend rate, redemption
prices, and other special rights, if any, of each series of the
Preferred Stock shall be determined and authorized by the Board
of Directors.
The authorized amount of Preferred Stock may be increased,
and stock ranking on a parity with or having a priority over the
Preferred Stock in respect of dividends or of payments in
liquidation, or of both, may be authorized by the affirmative
vote of two thirds of the issued and outstanding capital stock of
each class of the Company represented at a meeting of the
stockholders duly called and held upon at least 30 days' notice.
ARTICLE II. DIVIDENDS. The holders of any series of
the Preferred Stock shall receive, when declared by the Board of
Directors, preferential dividends at the rate provided for such
series and payable quarterly on such dividend payment dates in
each year as said Board may determine, such dividends to be
payable to Preferred stockholders of record on such dates, not
more than 45 days before the respective dividend payment dates,
as may be fixed by said Board.
Dividends on each share of the Preferred Stock shall be
cumulative from the date of issue thereof or from such date as
the Board of Directors may determine. Unless full cumulative
dividends to the last preceding dividend payment date shall have
been paid or set apart for payment on all outstanding shares of
Preferred Stock, no dividend (other than a dividend in shares of
common stock or other stock of the Company subordinate to the
Preferred Stock in respect of dividends and payments in
liquidation) shall be paid on any common stock or any other stock
of the Company subordinate to the Preferred Stock in respect of
dividends.
ARTICLE III. REDEMPTION OR PURCHASE OF PREFERRED
STOCK. All or any part of any series of the Preferred Stock at
any time outstanding may be called by vote of the Board of
Directors for redemption at any time at the then current
redemption price provided for such series and in the manner
hereinbelow provided and without calling any part or all of any
other series of the Preferred Stock. If less than all of any
series of the Preferred Stock is so called, the Transfer Agent
shall determine by lot or in some other proper manner approved by
the Board of Directors the shares of such series of Preferred
Stock to be called.
No call of less than all of the Preferred Stock outstanding
shall be made without setting aside an amount equal to the
dividends accumulated to the dividend payment date next following
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the redemption date fixed in such call on all of the Preferred
Stock then outstanding and not called, or to such redemption
date, if such date is a dividend payment date.
The sums payable in respect of any Preferred Stock so called
shall be payable at the office of an incorporated bank or trust
company in good standing. Notice of such call, stating the
redemption date and the place where the redemption price of the
stock so called is payable, shall be mailed not less than 30 days
before the redemption date to each holder of stock so called at
his address as it appears upon the books of the Company.
The Company shall, before the redemption date, deposit with
said bank or trust company all sums payable with respect to the
Preferred Stock so called. After such mailing and deposit, the
holders of the Preferred Stock so called for redemption shall
cease to have any right to future dividends or other rights or
privileges as stockholders in respect of such stock and shall be
entitled to look for payment on and after the redemption date
only to the sums so deposited with said bank or trust company for
their respective accounts. Stock so redeemed may be reissued but
only subject to the limitations imposed by these Articles upon
the issue of the Preferred Stock.
At any time when no dividend on any share of the Preferred
Stock is in arrears and there is no event of default within the
meaning of Article V hereof, the Company may purchase all or any
of the then outstanding shares of the Preferred Stock of any
series upon the best terms reasonably obtainable, but not
exceeding the then current redemption price of such shares.
ARTICLE IV. AMOUNTS PAYABLE ON LIQUIDATION. The
holders of any series of the Preferred Stock shall receive upon
any voluntary liquidation, dissolution or winding up of the
Company the then current redemption price of the series in
question and if such action is involuntary an amount equal to the
par value of the shares of such series, plus in each case all
dividends accrued and unpaid to the date of such payment, before
any payment in liquidation is made on any common stock or any
other stock of the Company subordinate to the Preferred Stock in
respect of payments in liquidation.
If the net assets of the Company available for distribution
on liquidation to the holders of the Preferred Stock shall be
insufficient to pay said amounts in full, then such net assets
shall be distributed among the holders of the Preferred Stock,
who shall receive a common percentage of the full respective
preferential amounts.
ARTICLE V. VOTING POWERS. Except as provided in these
Articles and as provided by law, the holders of the Preferred
Stock shall have no voting power or right to notice of any
meeting.
Whenever dividends on any share of the Preferred Stock shall
be in arrears in an amount equal to or exceeding six quarterly
dividend payments, or whenever there shall have occurred some
default in the observance of any of the provisions of these
Articles, or some default on which action has been taken by
debenture holders, bondholders or the trustee of any deed of
trust or indenture of mortgage of the Company, or whenever the
Company shall have been declared
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bankrupt or a receiver of its property shall have been appointed
(any of said conditions being herein called an "event of
default"), then the holders of the Preferred Stock shall be given
notice of all stockholders' meetings and shall have the right to
elect the smallest number of directors necessary to constitute a
majority of the Board of Directors of the Company. When all
arrears of dividends on the Preferred Stock shall have been paid
and such event of default shall have terminated, all the rights
and powers of the holders of the Preferred Stock to receive
notice and to vote shall cease, subject to being again revived on
any subsequent event of default.
When the holders of the Preferred Stock shall have acquired
the right to elect a majority of the Board of Directors, or such
right shall cease, the Company shall, promptly after the first
delivery to the Company of a written request therefor by any
stockholder, cause a meeting of the stockholders to be held not
less than 45 days nor more than 90 days after the delivery of
such request for the purpose of electing a new Board of
Directors. Forthwith, upon the election and qualification of the
new Board of Directors, the terms of office of the existing
directors shall terminate.
For voting purposes under this Article V, each share of the
Preferred Stock of the par value of $100 per share shall have
four votes, and each share of the Preferred Stock of the par
value of $25 per share shall have one vote.
ARTICLE VI. ACTION REQUIRING CONSENT OF PREFERRED
STOCKHOLDERS. The dividend rate or the amounts payable upon
redemption or liquidation with respect to any share of the
Preferred Stock outstanding shall not be reduced without the
consent of the holder of such share.
Without the consent of the holders of two thirds of the
outstanding capital stock of each class of the Preferred Stock,
the Company shall not change the general preferences, voting
powers, restrictions and qualifications of the Preferred Stock,
but no other consent shall be required for such a change.
Without the consent of the holders of a majority in amount
of the total par value of shares of the Preferred Stock
outstanding, the Company shall not:
A. Create or assume any indebtedness maturing more
than one year from the date thereof (other than indebtedness
created to refund, in any manner, not exceeding a like
principal amount of any other such indebtedness of the
Company) unless the gross income of the Company (computed in
accordance with the Uniform System of Accounts prescribed
for Electric Utilities by the Public Utilities Control
Authority of the State of Connecticut) for twelve
consecutive calendar months ending not more than ninety days
before the date of such creation or assumption is equal to
at least two times the annual interest charges on all
indebtedness of the Company maturing more than one year from
the date thereof which will be outstanding immediately after
such creation or assumption.
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B. Issue any additional shares, or reissue any
reacquired shares, of Preferred Stock or of any other stock
ranking prior to or on a parity with the Preferred Stock as
to dividends, or payments in liquidation, for any purpose
other than to refinance Preferred Stock or stock ranking
prior to or on a parity with the Preferred Stock as to
dividends or payments in liquidation at the time outstanding
to an amount not exceeding the aggregate amount payable
thereon upon involuntary liquidation, unless:
1. the gross income of the Company (computed in
accordance with the Uniform System of Accounts prescribed
for Electric Utilities by the Public Utilities Control
Authority of the State of Connecticut) for twelve
consecutive calendar months ending not more than ninety days
before the date of such issuance is equal to at least one
and one-half times the aggregate of the annual interest
charges on all outstanding indebtedness of the Company
(excluding interest charges on indebtedness to be retired by
the application of the proceeds from the issuance of such
shares) and the annual dividend requirements on all
Preferred Stock (including dividend requirements on any
class of stock ranking prior to or on a parity with the
outstanding Preferred Stock, as to dividends or payments in
liquidation), which will be outstanding immediately after
the issuance of such shares; and
2. the aggregate of (i) the par value of, or stated
capital represented by, the Company's outstanding common
stock and other stock subordinate to the Preferred Stock in
respect of dividends and payments in liquidation, and (ii)
the amount of the Company's surplus (both capital and
earned) as then stated on the Company's books is at least
equal to the aggregate amount payable upon involuntary
liquidation on all shares of the Preferred Stock and all
shares of stock, if any, ranking prior thereto or on a
parity therewith as to dividends or payments in liquidation,
which will be outstanding immediately after the issuance of
such shares of Preferred Stock or stock ranking prior
thereto or on a parity therewith.
C. Purchase, redeem or otherwise acquire for value
any common stock of the Company or other stock of the
Company subordinate to the Preferred Stock in respect of
dividends or payments in liquidation, other than for resale
to employees; provided that the Company may purchase or
redeem any preferred stock for not more than the current
redemption price thereof so long as it is not in arrears in
the payment of dividends on the Preferred Stock and no event
of default exists within the meaning of Article V hereof.
ARTICLE VII. MERGER, CONSOLIDATION OR SALE OF ALL ASSETS.
With the consent of the holders of a majority in amount
of the total par value of shares of the Preferred Stock
outstanding, the Company may merge or consolidate with or be
merged into any other corporation, or sell substantially all of
its assets subject to the provisions, if any, of any indenture of
mortgage or deed of trust or charter of the Company, or of any
applicable law.
ARTICLE VIII. NO PRE-EMPTIVE RIGHT. The holders of
the Preferred Stock shall have no pre-emptive right to subscribe
to any future issue of additional shares of the
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Preferred Stock or of any other preferred stock or of common
stock or of any other class of stock now or hereafter authorized,
or to any future issue of bonds, debentures, notes or other
evidence of indebtedness, whether or not convertible into stock.
ARTICLE IX. IMMUNITY OF DIRECTORS, OFFICERS AND AGENTS.
No director, officer or agent of the Company shall be
held personally responsible for any action taken in good faith
though subsequently adjudged to be in violation of these Articles.
ARTICLE X. TRANSFER AGENT. The Company shall always
have at least one Transfer Agent for the Preferred Stock, which
shall be an incorporated bank or trust company of good standing.
(b)(1) 4.35% PREFERRED STOCK - SERIES A
RESOLVED, That the issuance of 50,000 shares of the
Company's Preferred Stock as authorized by the resolution adopted
by the stockholders of the Company at their Special Meeting on
June 28, 1956, is deemed advisable for the purposes of the
Company's business and that, pursuant to said resolution, the
Company issue 50,000 shares of such Preferred Stock, in an
initial series hereby designated and hereinafter in these
resolutions called the "4.35% Preferred Stock - Series A", in
accordance with and subject to the following resolutions:
RESOLVED, That dividends on the 4.35% Preferred Stock -Series A
shall be at the rate of 4.35% per annum, and no more, shall be
cumulative from July 15, 1956, and, when declared, shall be payable
quarterly on January 15, April 15, July 15 and October 15 of each year.
RESOLVED, That the redemption prices of the 4.35% Preferred
Stock - Series A shall be as follows: $104.50 per share if
redeemed on or before July 31, 1959, $103.50 per share if
redeemed thereafter and on or before July 31, 1962, $102.50 per
share if redeemed thereafter and on or before July 31, 1966, and
$102.00 per share if redeemed thereafter, plus, in each case,
that portion of the current quarterly dividend accrued thereon to
the redemption date and all unpaid dividends thereon, if any.
(b)(2) 4.72% PREFERRED STOCK - SERIES B
RESOLVED, That the issuance of 75,000 shares of the
Company's Preferred Stock as authorized by the resolution adopted
by the stockholders of the Company at their Special Meeting on
June 28, 1956, is deemed advisable for the purposes of the
Company's business and that, pursuant to said resolution, the
Company issue 75,000 shares of such Preferred Stock, in a second
series hereby designated and hereinafter in these resolutions
called the "4.72% Preferred Stock - Series B", in accordance with
and subject to the following resolutions:
RESOLVED, That dividends on the 4.72% Preferred Stock -
Series B shall be at the rate of 4.72% per annum, and no more,
shall be cumulative from December 10, 1962, and, when
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declared, shall be payable quarterly on January 15, April 15,
July 15 and October 15 of each year.
RESOLVED, That the redemption prices of the 4.72% Preferred
Stock - Series B shall be as follows: $105 per share if redeemed
on or before January 15, 1968, $104 per share if redeemed
thereafter and on or before January 15, 1971, $103 per share if
redeemed thereafter and on or before January 15, 1974, $102 per
share if redeemed thereafter and on or before January 15, 1977,
and $101 per share if redeemed thereafter, plus, in each case,
that portion of the current quarterly dividend accrued thereon to
the redemption date and all unpaid dividends thereon, if any;
provided, however, that the Company will not prior to January 15,
1968 redeemed any shares of the 4.72% Preferred Stock - Series B
if such redemption is part of any refunding operation involving
the application of borrowed funds or the proceeds of issue of any
shares of stock ranking prior to or on a parity with the 4.72%
Preferred Stock - Series B and if (a) such borrowed funds have an
interest rate or cost to the Company (calculated in accordance
with accepted financial practice) or (b) such shares have a
dividend rate or cost to the Company (similarly calculated) less
than the dividend rate per annum of the 4.72% Preferred Stock -
Series B.
(b)(3) 4.64% PREFERRED STOCK - SERIES C
RESOLVED, That the issuance of 75,000 shares of the
Company's Preferred Stock as authorized by the resolution adopted
by the stockholders of the Company at their Special Meeting on
June 28, 1956, is deemed advisable for the purposes of the
Company's business and that, pursuant to said resolution, the
Company issue 75,000 shares of such Preferred Stock, in a third
series hereby designated and hereinafter in these resolutions
called the "4.64% Preferred Stock - Series C", in accordance with
and subject to the following resolutions:
RESOLVED, That the dividends on the 4.64% Preferred Stock -
Series C shall be at the rate of 4.64% per annum, and no more,
shall be cumulative from December 15, 1965, and, when declared,
shall be payable quarterly on January 15, April 15, July 15 and
October 15 of each year.
RESOLVED, That the redemption prices of the 4.64% Preferred
Stock - Series C shall be as follows: at $105 per share if
redeemed on or before January 15, 1971, at $104 per share if
redeemed thereafter and on or before January 15, 1974, at $103
per share if redeemed thereafter and on or before January 15,
1977, at $102 per share if redeemed thereafter and on or before
January 15, 1980, and at $101 per share if redeemed thereafter
plus, in each case, that portion of the current quarterly
dividend accrued thereon to the redemption date and all unpaid
dividends thereon, if any; provided, however, that the Company
will not prior to January 15, 1971 redeem any shares of the 4.64%
Preferred Stock - Series C if such redemption is part of any
refunding operation involving the application of borrowed funds
or the proceeds of issue of any shares of stock ranking prior to
or on a parity with the 4.64% Preferred Stock - Series C and if
(a) such borrowed funds have an interest rate or cost to the
Company (calculated in accordance with
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accepted financial practice) or (b) such shares have a dividend
rate or cost to the Company (similarly calculated) less than the
dividend rate per annum of the 4.64% Preferred Stock - Series C.
(b)(4) 5 5/8% PREFERRED STOCK - SERIES D
RESOLVED, That the issuance of 75,000 shares of the
Company's Preferred Stock as authorized by the resolutions
adopted by the stockholders of the Company at their Special
Meeting on June 28, 1956, and their Annual Meeting on April 20,
1966, is deemed advisable for the purposes of the Company's
business and that, pursuant to said resolutions, the Company
issue 75,000 shares of such Preferred Stock, in a fourth series
hereby designated and hereinafter in these resolutions called the
"5 5/8% Preferred Stock - Series D", in accordance with and the
subject to the following resolutions:
RESOLVED, That dividends on the 5 5/8% Preferred Stock - Series D
shall be at the rate of 5 5/8% per annum, and no more, shall be
cumulative from December 12, 1967, and, when declared, shall be
payable quarterly on January 15, April 15, July 15 and October 15
of each year.
RESOLVED, That the redemption prices of the 5 5/8% Preferred
Stock - Series D shall be as follows: at $106.00 per share if
redeemed on or before January 15, 1973, at $104.50 per share if
redeemed thereafter and on or before January 15, 1976, at $103.00
per share if redeemed thereafter and on or before January 15,
1979, at $102.00 per share if redeemed thereafter and on or
before January 15, 1982, and at $101.00 per share if redeemed
thereafter plus, in each case, that portion of the current
quarterly dividend accrued thereon to the redemption date and all
unpaid dividends thereon, if any; provided, however, that the
Company will not prior to January 15, 1973 redeem any shares of
the 5 5/8% Preferred Stock - Series D if such redemption is part
of any refunding operation involving the application of borrowed
funds or the proceeds of issue of any shares of stock ranking
prior to or on a parity with the 5 5/8% Preferred Stock - Series
D and if (a) such borrowed funds have an interest rate or cost to
the Company (calculated in accordance with accepted financial
practice) or (b) such shares have a dividend rate or cost to the
Company (similarly calculated) less than the dividend rate per
annum of the 5 5/8% Preferred Stock - Series D.
(b)(5) 7.60% PREFERRED STOCK - SERIES E
RESOLVED, That the issuance of 125,000 shares of the Company's
Preferred Stock as authorized by the resolutions adopted by the
stockholders of the Company at their Special Meeting on June 28, 1956,
and their Annual Meeting on April 20, 1966, is deemed advisable for
the purposes of the Company's business and that, pursuant to said
resolutions, the Company issue 125,000 shares of such Preferred Stock,
in a fifth series hereby designated and hereinafter in these resolutions
called the "7.60% Preferred Stock - Series E", in accordance with and
subject to the following resolutions:
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RESOLVED, That dividends on the 7.60% Preferred Stock -
Series E shall be at the rate of 7.60% per annum, and no more,
shall be cumulative from and including April 6, 1972, and, when
declared, shall be payable quarterly on January 15, April 15,
July 15 and October 15 of each year.
RESOLVED, That the redemption prices of the 7.60% Preferred
Stock - Series E shall be as follows: at $108.00 per share if
redeemed on or before April 15, 1982, at $104.50 per share if
redeemed thereafter and on or before April 15, 1985, and at
$101.00 per share if redeemed thereafter, plus, in each case,
that portion of the current quarterly dividend accrued thereon to
the redemption date and all unpaid dividends thereon, if any;
provided, however, that the Company will not prior to April 15,
1977 redeem any shares of the 7.60% Preferred Stock - Series E if
such redemption is part of, or in anticipation of, any refunding
operation involving, directly or indirectly, the application of
borrowed funds or the proceeds of issue of any shares of stock
ranking prior to or on a parity with the 7.60% Preferred Stock -
Series E and if (a) such borrowed funds have an interest rate or
cost to the Company (calculated in accordance with accepted
financial practice) or (b) such shares have a dividend rate or
cost to the Company (similarly calculated) less than the dividend
rate per annum of the 7.60% Preferred Stock - Series E.
(b)(6) 7.60% PREFERRED STOCK - SERIES F
RESOLVED: That the issuance of 150,000 shares of the
Company's Preferred Stock as authorized by the resolutions
adopted by the stockholders of the Company at their Special
Meeting on June 28, 1956, their Annual Meeting on April 20, 1966,
and their Annual Meeting on April 18, 1973, is deemed advisable
for the purposes of the Company's business and that, pursuant to
said resolutions, the Company issue 150,000 shares of such
Preferred Stock, in a sixth series hereby designated and
hereinafter in these resolutions called the "7.60% Preferred
Stock - Series F", in accordance with and subject to the
following resolutions:
RESOLVED: That dividends on the 7.60% Preferred Stock -
Series F shall be at the rate of 7.60% per annum, and no more,
shall be cumulative from and including July 10, 1973, and, when
declared, shall be payable quarterly on January 15, April 15,
July 15 and October 15 of each year.
RESOLVED: That the redemption prices of the 7.60% Preferred
Stock - Series F shall be as follows: at $108.00 per share if
redeemed on or before July 15, 1983, at $104.50 per share if
redeemed thereafter and on or before July 15, 1986, and at
$101.00 per share if redeemed thereafter, plus, in each case,
that portion of the current quarterly dividend accrued thereon to
the redemption date and all unpaid dividends thereon, if any;
provided, however, that the Company will not prior to July 15,
1978 redeem any shares of the 7.60% Preferred Stock - Series F if
such redemption is part of, or in anticipation of, any refunding
operation involving the application, directly or indirectly, of
borrowed funds or the proceeds of issue of any shares of stock
ranking prior to or on a parity with the 7.60% Preferred Stock -
Series F and if (a) such borrowed funds have an interest rate or
cost to the Company (calculated in accordance with accepted
financial
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practice) or (b) such shares have a dividend rate or cost to the
Company (similarly calculated) less than the dividend rate per
annum of the 7.60% Preferred Stock - Series F.
(c) PREFERENCE STOCK
ARTICLE I. AUTHORIZED AMOUNT OF PREFERENCE STOCK. The
authorized amount of preferred stock subject to these Articles
(herein called the Preference Stock), unless increased in
accordance with the provisions hereof, shall be $125,000,000,
consisting of 5,000,000 shares of the par value of $25 per share.
Said shares may, subject to the provisions of these Articles, be
issued from time to time in one or more series in such amounts,
on such terms and for such consideration as may be determined and
authorized by the Board of Directors. The series designation,
dividend rate, redemption prices, and other special rights, if
any, of each series of the Preference Stock shall be determined
and authorized by the Board of Directors.
The authorized amount of Preference Stock may be increased,
and stock ranking on a parity with or having a priority over the
Preference Stock in respect of dividends or of payments in
liquidation, or of both, may be authorized by the affirmative
vote of two thirds of the issued and outstanding capital stock of
each class of the Company represented at a meeting of the
stockholders duly called and held upon at least 30 days' notice.
ARTICLE II. DIVIDENDS. The Preference Stock shall be
subordinate to the Preferred Stock of the Company, and to any
other stock of the Company which, by its terms, has a priority
over the Preference Stock, in respect of dividends. Subject to
the foregoing, the holders of any series of the Preference Stock
shall receive, when declared by the Board of Directors,
preferential dividends at the rate provided for such series and
payable quarterly on such dividend payment dates in each year as
said Board may determine, such dividends to be payable to the
holders of such Preference Stock of record on such dates, not
more than 60 days before the respective dividend payment dates,
as may be fixed by said Board.
Dividends on each share of Preference Stock shall be
cumulative from the date of issue thereof or from such date as
the Board of Directors may determine. Unless full cumulative
dividends to the last preceding dividend payment date shall have
been paid or set apart for payment on all outstanding shares of
Preference Stock, no dividend (other than a dividend in shares of
common stock or other stock of the Company subordinate to the
Preference Stock in respect of dividends and payments in
liquidation) shall be paid on any common stock or any other stock
of the Company subordinate to the Preference Stock in respect of
dividends. No dividends shall be declared or paid or set apart
for payment on any series of the Preference Stock for any
quarterly dividend period unless proportionate dividends, ratably
in proportion to the annual dividend rate fixed therefor, shall
be declared or paid or set apart for payment on each other series
of the Preference Stock then issued and outstanding and having a
quarterly dividend period conterminous with the quarterly
dividend period of the series of the Preference Stock for which
dividends are being declared or paid or set apart for payment.
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ARTICLE III. REDEMPTION OR PURCHASE OF PREFERENCE STOCK.
All or any part of any series of the Preference Stock at any time
outstanding may be called by vote of the Board of Directors for
redemption at any time at the then current redemption price
provided for such series and in the manner hereinbelow provided
and without calling any part or all of any other series of the
Preference Stock; provided, however, that no share of the
Preference Stock shall be called for redemption or redeemed (for
the purpose of any sinking fund or otherwise) at any time when
any dividend on any share of the Preferred Stock of the Company
is in arrears or there is an event of default within the meaning
of Article V of the General Preferences, Voting Powers,
Restrictions and Qualifications of the Preferred Stock of the
Company; and provided, further, that no share of the Preference
Stock shall be called for redemption or redeemed (for the purpose
of any sinking fund or otherwise) at any time when any dividend
on any share of the Preference Stock is in arrears or there is an
event of default within the meaning of Article V hereof unless
all of the Preference Stock then issued and outstanding is
simultaneously called for redemption or redeemed. If less than
all of any series of the Preference Stock is called for
redemption, the Transfer Agent shall determine by lot the shares
of such series of the Preference Stock to be called.
The sums payable in respect of any Preference Stock so
called shall be payable at the office of an incorporated bank or
trust company in good standing. Notice of such call, stating the
redemption date and the place where the redemption price of the
stock so called is payable, shall be mailed not less than 15 days
before the redemption date to each holder of stock so called at
his address as it appears upon the books of the Company.
The Company shall, on or before the redemption date, deposit
with said bank or trust company all sums payable with respect to
the Preference Stock so called. When such notice shall have been
mailed or when the Company shall have given the Transfer Agent
irrevocable written authorization to prepare and mail such
notice, and when such deposit shall have been made, the holders
of the Preference Stock so called for redemption shall cease to
be stockholders of the Company in respect of such stock and shall
have no rights or privileges as stockholders in respect of such
stock and shall be entitled to look for payment on and after the
redemption date only to the sums so deposited with said bank or
trust company for their respective accounts. Stock so redeemed
shall resume the status of authorized but unissued shares of
Preference Stock without serial designation, dividend rate,
redemption prices or other special rights.
If the holder of any share of the Preference Stock so called
shall not, within six years after the redemption date, claim the
sums so deposited with said bank or trust company for his
account, said bank or trust company shall, upon demand, pay over
to the Company said unclaimed funds and said bank or trust
company and the Company shall thereupon be relieved of all
responsibility in respect thereof and to such stockholder.
At any time when no dividend on any share of the Preference
Stock or the Preferred Stock of the Company is in arrears and
there is no event of default within the meaning of Article V
hereof or Article V of the General Preferences, Voting Powers,
Restrictions and Qualifications of the Preferred Stock of the
Company, the Company may purchase all or any of the then
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outstanding shares of the Preference Stock of any series upon the
best terms reasonably obtainable, but not exceeding the then
current redemption price of such shares. Stock so purchased
shall resume the status of authorized but unissued shares of
Preference Stock without serial designation, dividend rate,
redemption prices or other special rights.
ARTICLE IV. AMOUNTS PAYABLE ON LIQUIDATION. The Preference
Stock shall be subordinate to the Preferred Stock of the Company,
and to any other stock of the Company which, by its terms, has a
priority over the Preference Stock, in respect of payments in
liquidation. Subject to the foregoing, the holders of any series
of the Preference Stock shall receive upon any voluntary
liquidation, dissolution or winding up of the Company the then
current redemption price of the series in question and if such
action is involuntary $25 per share, plus in each case all
dividends accrued and unpaid to the date of such payment, before
any payment in liquidation is made on any common stock or any
other stock of the Company subordinate to the Preference Stock in
respect of payments in liquidation.
If the net assets of the Company available for distribution
on liquidation to the holders of the Preference Stock shall be
insufficient to pay said amounts in full, then such net assets
shall be distributed among the holders of the Preference Stock,
who shall receive a common percentage of the full respective
preferential amounts.
ARTICLE V. VOTING POWERS. Except as provided in these
Articles and as provided by law, the holders of the Preference
Stock shall have no voting power or right to notice of any
meeting.
Whenever dividends on any share of the Preference Stock
shall be in arrears in an amount equal to or exceeding six
quarterly dividend payments, or whenever there shall have
occurred some default in the observance of any of the provisions
of these Articles, or some default on which action has been taken
by debenture holders, bondholders or the trustee of any deed of
trust or indenture of mortgage of the Company, or whenever the
Company shall have been declared bankrupt or a receiver of its
property shall have been appointed (any of said conditions being
herein called an "event of default"), then the holders of the
Preference Stock shall be given notice of all stockholders'
meetings and shall have the right to elect two members of the
Board of Directors of the Company. When all arrears of dividends
on the Preference Stock shall have been paid and such event of
default shall have terminated, all the rights and powers of the
holders of the Preference Stock to receive notice and to vote
shall cease, subject to being again revived on any subsequent
event of default.
When the holders of the Preference Stock shall have acquired
the right to elect two members of the Board of Directors, or such
right shall cease, the Company shall, promptly after the first
delivery to the Company of a written request therefor by any
stockholder, cause a meeting of the stockholders to be held not
less than 45 days nor more than 90 days after the delivery of
such request for the purpose of electing a new Board of
Directors. Forthwith, upon the election and qualification of the
new Board of Directors, the terms of office of the existing
directors shall terminate.
- 17 -<PAGE>
<PAGE>
ARTICLE VI. ACTION REQUIRING CONSENT OF PREFERENCE STOCKHOLDERS.
The dividend rate or the amounts payable upon redemption or liquidation
with respect to any share of the Preference Stock outstanding shall not
be reduced without the consent of the holder of such share.
Without the consent of the holders of two thirds of the total number
of shares of the Preference Stock outstanding, the Company shall not change
the general preferences, voting powers, restrictions and qualifications
of the Preference Stock, but no other consent shall be required for such
a change.
Without the consent of the holders of a majority of the total
number of shares of the Preference Stock outstanding, the Company
shall not purchase, redeem or otherwise acquire for value any common
stock of the Company or other stock of the Company subordinate to the
Preference Stock in respect of dividends or payments in liquidation,
other than for resale to employees; provided that the Company may
purchase or redeem any preferred stock for not more than the current
redemption price thereof so long as it is not in arrears in the payment
of dividends on the Preference Stock and no event of default exists
within the meaning of Article V hereof.
ARTICLE VII. MERGER, CONSOLIDATION OR SALE OF ALL ASSETS.
With the consent of the holders of a majority of the total number
of shares of the Preference Stock outstanding, the Company may
merge or consolidate with or be merged into any other corporation,
or sell substantially all of its assets subject to the provisions,
if any, of any indenture of mortgage or deed of trust or charter
of the Company, or of any applicable law.
ARTICLE VIII. NO PRE-EMPTIVE RIGHT. The holders of the
Preference Stock shall have no pre-emptive right to subscribe to
any future issue of additional shares of the Preference Stock or
of any other preferred stock or of common stock or of any other
class of stock now or hereafter authorized, or to any future
issue of bonds, debentures, notes or other evidence of
indebtedness, whether or not convertible into stock.
ARTICLE IX. IMMUNITY OF DIRECTORS, OFFICERS AND AGENTS. No
director, officer or agent of the Company shall be held
personally responsible for any action taken in good faith though
subsequently adjudged to be violation of these Articles.
ARTICLE X. TRANSFER AGENT. The Company shall always have
at least one Transfer Agent for the Preference Stock, which shall
be an incorporated bank or trust company of good standing.
Section 4. No person who is or was a director of the
Company shall be personally liable to the Company or its
shareholders for monetary damages for breach of duty as a
director in an amount that exceeds the compensation received by
the director for serving the Company during the year of the
violation if such breach did not (A) involve a knowing and
culpable violation of law by the director, (B) enable the
director or an associate, as defined in subdivision (3) of
- 18 -<PAGE>
<PAGE>
Section 33-374d of the Connecticut General Statutes, on the
effective date hereof and as it may be amended from time to time,
to receive an improper personal economic gain, (C) show a lack of
good faith and a conscious disregard for the duty of the director
to the Company under circumstances in which the director was
aware that his or her conduct or omission created an
unjustifiable risk of series injury to the Company, (D)
constitute a sustained and unexcused pattern of inattention that
amounted to an abdication of the director's duty to the Company,
or (E) create liability under Section 33-321 of the Connecticut
General Statutes, on the effective date hereof and as it may be
amended from time to time. This provision shall not limit or
preclude the liability of a person who is or was a director for
any act or omission occurring prior to the effective date of this
provision. Any lawful repeal or modification of this provision
shall not adversely affect any limitation of liability, right or
protection of a director of the Company existing hereunder with
respect to any breach of duty occurring prior to the effective
date of such repeal or modification.
(3) This Restated Certificate of Incorporation merely
restates, and it does not change, the provisions of the
Corporation's original certificate of incorporation, as
supplemented and amended to the date hereof, and there is no
discrepancy between such provisions and the provisions of this
Restated Certificate of Incorporation.
(4) The manner of adopting this Restated Certificate of
Incorporation was by the Board of Directors, acting alone, pursuant
to Section 33-362(a) of the General Statutes of Connecticut (Revision 1958).
The number of affirmative Directors' votes required to adopt
this Restated Certificate of Incorporation was seven (7).
The number of Directors' votes in favor of adoption of this
Restated Certificate of Incorporation was twelve (12).
WE, THE UNDERSIGNED, being the President and Chief Financial
Officer and the Treasurer and Secretary of The United Illuminating
Company, hereby declare, under penalties of false statement, that
the statements made in the foregoing certificate are true.
- 19 -<PAGE>
<PAGE>
Dated at New Haven, Connecticut, this 23rd day of January,
1995.
THE UNITED ILLUMINATING COMPANY
/s/ Robert L. Fiscus
-------------------------------------
Robert L. Fiscus
President and Chief Financial
Officer
/s/ Kurt Mohlman
-------------------------------------
Kurt Mohlman
Secretary and Treasurer
- 20 -
<PAGE>
_______________________________________________________
$225,000,000
REVOLVING CREDIT AGREEMENT
Dated as of December 15, 1994
Among
THE UNITED ILLUMINATING COMPANY
as Borrower
and
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Agent
_______________________________________________________
<PAGE>
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Computation of Time Periods. . . . . . . . . . . . . . . . . . . . 10
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.02. Making the A Advances. . . . . . . . . . . . . . . . . . . . . . . 11
2.03. The B Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.04. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.05. Reduction of the Commitments . . . . . . . . . . . . . . . . . . . 16
2.06. Repayment of A Advances. . . . . . . . . . . . . . . . . . . . . . 16
2.07. Interest on A Advances. . . . . . . . . . . . . . . . . . . . . . 16
2.08. Additional Interest on Eurodollar Rate Advances. . . . . . . . . . 17
2.09. Interest Rate Determination. . . . . . . . . . . . . . . . . . . . 17
2.10. Voluntary Conversion of A Advances . . . . . . . . . . . . . . . . 19
2.11. Optional Prepayments of A Advances . . . . . . . . . . . . . . . . 19
2.12. Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.13. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.14. Payments and Computations. . . . . . . . . . . . . . . . . . . . . 21
2.15. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . 23
2.16. Extension of Commitments and Maturity Date . . . . . . . . . . . . 23
2.17. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III
CONDITIONS OF LENDING
3.01. Condition Precedent to Initial Advances. . . . . . . . . . . . . . 27
3.02. Conditions Precedent to Each A Borrowing . . . . . . . . . . . . . 28
3.03. Conditions Precedent to Each B Borrowing . . . . . . . . . . . . . 28
- i -<PAGE>
<PAGE>
Section Page
- ------- ----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower. . . . . . . . . . 29
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . 33
5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
THE AGENT
7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . 40
7.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . 41
7.03. Citibank and Affiliates. . . . . . . . . . . . . . . . . . . . . . 41
7.04. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . 42
7.05. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.06. Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.02. Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.03. No Waiver; Remedies. . . . . . . . . . . . . . . . . . . . . . . . 44
8.04. Costs, Expenses, Taxes and Indemnification. . . . . . . . . . . .. 44
8.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.06. Binding Effect; Participations and Assignments. . . . . . . . . .. 46
8.07. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.08. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . 50
- ii -<PAGE>
<PAGE>
Schedule I - List of Applicable Lending Offices
Exhibit A-1 - Form of A Note
Exhibit A-2 - Form of B Note
Exhibit B-1 - Notice of A Borrowing
Exhibit B-2 - Notice of B Borrowing
Exhibit C - Form of Opinion of Counsel to the Borrower
Exhibit D - Form of Opinion of Special New York Counsel to the Agent
REVOLVING CREDIT AGREEMENT
Dated as of December 15, 1994
THE UNITED ILLUMINATING COMPANY, a Connecticut
corporation (the "BORROWER"), the banks parties hereto (the
"BANKS"), and CITIBANK, N.A. ("CITIBANK"), as agent (the
"AGENT") for the Banks hereunder, agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in
this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"A ADVANCE" means an advance by a Bank to the
Borrower as part of an A Borrowing and refers to an
Adjusted Base Rate Advance or a Eurodollar Rate
Advance, each of which shall be a "Type" of A
Advance.
"A BORROWING" means a borrowing consisting of
simultaneous A Advances of the same Type and, in the
case of Eurodollar Rate Advances, having Interest
Periods of the same duration, made by each of the
Banks pursuant to Section 2.01 or Converted pursuant
to Section 2.09 or 2.10.
"A NOTE" means a promissory note of the Borrower
payable to the order of any Bank, in substantially
the form of Exhibit A-1 hereto, evidencing the
aggregate indebtedness of the Borrower to such Bank
resulting from the A Advances made by such Bank.
<PAGE>
<PAGE>
2
"ADJUSTED RATE BASE" means, for any period, a
fluctuating interest rate per annum as shall be in
effect from time to time which rate per annum shall
at all times be equal to the higher of:
(a) the rate of interest announced
publicly by Citibank in New York, New York, from
time to time as Citibank's base rate; and
(b) the sum of (i) 1/2 of 1% per
annum plus (ii) the Federal Funds Rate.
The Adjusted Base Rate shall change concurrently with
each change in such base rate or the Federal Funds
Rate, as the case may be.
"ADJUSTED BASE RATE ADVANCE" means an A Advance
which bears interest as provided in Section 2.07(a)
hereof.
"ADVANCE" means an A Advance or a B Advance.
"AFFILIATE" means, as to any Person, any other
Person that, directly or indirectly, controls, is
controlled by or is under common control with such
Person or is a director or officer of such Person.
"APPLICABLE LENDING OFFICE" means, with respect
to each Bank, such Bank's Domestic Lending Office in
the case of an Adjusted Base Rate Advance and such
Bank's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance and, in the case of a B
Advance, the office of such Bank notified by such
Bank to the Agent as its Applicable Lending Office
with respect to such B Advance.
"APPLICABLE MARGIN" means 2/5 of 1% per annum
for Eurodollar Rate Advances and 0% per annum for
Adjusted Base Rate Advances.
"AVAILABLE EARNINGS" means, for any period, net
income of the Borrower, plus any amount which, in the
determination of net income for such period, has been
deducted for (i) interest payable on all Debt of the
Borrower, and (ii) non-cash charges of the Borrower
(including, without limitation, amortization and
depreciation), minus any amount which, in the
determination of net income for such period, has been
added for non-cash credits to income (including,
<PAGE>
<PAGE>
3
without limitation, allowance for funds used during
construction and accrued revenues on account of a sales
adjustment clause).
"B ADVANCE" means an advance by a Bank to the
Borrower as part of a B Borrowing resulting from the
bidding procedure described in Section 2.03.
"B BORROWING" means a borrowing consisting of
simultaneous B Advances from each of the Banks whose
offer to make one or more B Advances as part of such
borrowing has been accepted by the Borrower under the
bidding procedure described in Section 2.03.
"B NOTE" means a promissory note of the Borrower
payable to the order of any Bank, in substantially
the form of Exhibit A-2 hereto, evidencing the
indebtedness of the Borrower to such Bank resulting
from the B Advances made by such Bank.
"B REDUCTION" has the meaning specified in
Section 2.01.
"BANKS" means the Banks listed on the signature
pages hereof and their successors and permitted
assigns pursuant to Sections 2.16 and 8.06.
"BEC MORTGAGE" means the First Mortgage and Deed
of Trust, dated as of December 1, 1984, between
Bridgeport Electric Company and The First National
Bank of Boston, Trustee.
"BORROWING" means an A Borrowing or a B
Borrowing.
"BRIDGEPORT ELECTRIC COMPANY" means Bridgeport
Electric Company which was a wholly-owned subsidiary
of the Borrower and has been merged with and into the
Borrower.
"BRIDGEPORT ELECTRIC COMPANY BONDS" means,
collectively, the 9.44% First Mortgage Bonds (Series
B) having a final maturity of February 15, 1999, in
the aggregate principal amount of $54,000,000, issued
by Bridgeport Electric Company and secured by the BEC
Mortgage, and any refinancing thereof, and the 10.32%
First Mortgage Bonds (Series C) having a final
maturity of January 15, 1995, in the outstanding
aggregate principal amount of $60,000,000,
<PAGE>
<PAGE>
4
issued by Bridgeport Electric Company and secured by
the BEC Mortgage, and any refinancing thereof.
"BRIDGEPORT HARBOR UNIT NO. 3" means the 385
megawatt fossil fuel fired electric generating unit
at Bridgeport Harbor Station, Bridgeport,
Connecticut.
"BUSINESS DAY" means a day of the year other
than a Saturday, Sunday or a public or bank holiday
in New York City or in Connecticut and, if the
applicable Business Day relates to any Eurodollar
Rate Advances, on which dealings are carried on in
the London interbank market.
"COMMITMENT" has the meaning specified in
Section 2.01 hereof.
"CONVERT", "CONVERSION" and "CONVERTED" each
refers to a conversion of A Advances of one Type into
A Advances of another Type pursuant to Section 2.09
or 2.10 or the selection of a new, or the renewal of
the same, Interest Period for Eurodollar Rate
Advances pursuant to Section 2.09 or 2.10.
"DEBT" means (i) indebtedness for borrowed money
or for the deferred purchase price of property or
services; (ii) obligations as lessee under leases
which shall have been or should be, in accordance
with generally accepted accounting principles,
recorded as capital leases; (iii) Guaranteed Debt;
and (iv) liabilities in respect of unfunded vested
benefits under plans covered by Title IV of ERISA.
"DOMESTICE LENDING OFFICE" means, with respect to
any Bank, the office of such Bank specified as its
"Domestic Lending Office" opposite its name on
Schedule I hereto or such other office of such Bank
as such Bank may from time to time specify to the
Borrower and the Agent.
"DPUC" means the Department of Public Utility
Control of the State of Connecticut, or any successor
or other agency or authority of the State of
Connecticut from time to time having a similar
jurisdiction.
<PAGE>
<PAGE>
5
"ENVIRONMENTAL EVENT" means (i) the generation,
storage, disposal, removal, transportation or
treatment of Hazardous Materials in violation of
applicable law (A) on any real property owned,
occupied or operated by the Borrower or any Person
for whose conduct the Borrower is responsible ("Real
Property"), or (B) in the vicinity of any Real
Property, which through soil or ground water
migration could have come to be located at or on such
Real Property; (ii) the receipt by the Borrower of
any notice or claim of any violation of any
Environmental Law or of any action based upon
nuisance, negligence or other tort theory alleging
liability on the basis of improper generation,
storage, disposal, removal, transportation or
treatment of Hazardous Materials on any Real
Property; or (iii) the presence or release of
Hazardous Materials at or from any Real Property,
that has resulted in contamination or deterioration
of any portion of such property in a level of
contamination greater than the levels permitted or
established by any governmental authority having
jurisdiction over the Borrower or any Real Property.
"ENVIRONMENTAL LAWS" means any and all federal,
state and local statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions
relating to the environment or the release of any
materials into the environment, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended,
the Clean Water Act (33 U.S.C. Sections 1251 et
seq.), the Clean Air Act (42 U.S.C. Sections 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seq.),
and the Resource Conservation and Recovery Act (42
U.S.C. Sections 6901 et seq.).
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time,
and the regulations promulgated and rulings issued
thereunder.
"ERISA EVENT" means (i) the occurrence of a
reportable event, within the meaning of Section 4043
of ERISA, unless the 30-day notice requirement with
respect thereto has been waived by the PBGC; (ii) the
provision by the administrator of any Plan of notice
of intent to terminate such Plan, pursuant to Section
4041(a)(2) of
<PAGE>
<PAGE>
6
ERISA (including any such notice with
respect to a plan amendment referred to in Section
4041(e) of ERISA); (iii) the cessation of operations
at a facility in the circumstances described in
Section 4062(e) of ERISA; (iv) the withdrawal by the
Borrower or an Affiliate of the Borrower from a
Multiple-Employer Plan during a plan year for which
it was a "substantial employer", as defined in
Section 4001(a)(2) of ERISA; (v) the failure by the
Borrower or an Affiliate of the Borrower to make a
payment to a Plan required under Section 302(f)(1) of
ERISA, which Section imposes a lien for failure to
make required payments; (vi) the adoption of an
amendment to a Plan requiring the provision of
security to such Plan, pursuant to Section 307 of
ERISA; or (vii) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section
4042 of ERISA, or the occurrence of any event or
condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, a Plan.
"EUROCURRENCY LIABILITIES" has the meaning
assigned to that term in Regulation D of the Board of
Governors of the Federal Reserve System, as in effect
from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect
to any Bank, the office of such Bank specified as its
"Eurodollar Lending Office" opposite its name on
Schedule I hereto, or such other office of such Bank
as such Bank may from time to time specify to the
Borrower and the Agent.
"EURODOLLAR RATE" means, for the Interest Period
for each Eurodollar Rate Advance comprising part of
the same A Borrowing, a fixed interest rate per annum
equal to the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the rate per annum
at which deposits in U.S. dollars are offered by the
principal office of each of the Reference Banks in
London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two
Business Days before the first day of such Interest
Period in an amount substantially equal to such
Reference Bank's Eurodollar Rate Advance comprising
part of such A Borrowing and for a period equal to
such Interest Period. The Eurodollar Rate for the
Interest Period for each Eurodollar Rate Advance
comprising part of the same A Borrowing shall be
determined by the Agent on the basis of
<PAGE>
<PAGE>
7
applicable rates furnished to and received by the Agent
from the Reference Banks two Business Days before the first
day of such Interest Period, subject, however, to the
provisions of Section 2.09 hereof.
"EURODOLLAR RATE ADVANCE" means an A Advance
which bears interest as provided in Section 2.07(b)
hereof.
"EURODOLLAR RATE RESERVE PERCENTAGE" of any Bank
for the Interest Period for any Eurodollar Rate
Advance means the reserve percentage applicable
during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average
of such percentages for those days in such Interest
Period during which any such percentage shall be so
applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum
reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to
liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such
Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in
Section 6.01 hereof.
"FEDERAL FUNDS RATE" means, for any period, a
fluctuating interest rate per annum equal for each
day during such period to the weighted average of the
rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the
quotations for such day on such transactions received
by the Agent from three Federal funds brokers of
recognized standing selected by it.
"GUARANTEED DEBT" of any Person means all Debt
guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to
pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt; (ii)
to purchase or
<PAGE>
<PAGE>
8
sell property or services, primarily for the purpose
of enabling the debtor to make payment of such Debt
or to assure the holder of such Debt against loss;
(iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to
pay for property or services irrespective of whether
or not such property is received or such services
are rendered); or (iv) otherwise to assure a creditor
against loss.
"HAZARDOUS MATERIALS" means any solid wastes,
toxic or hazardous substances, wastes or
contaminants, polychlorinated biphenyls, paint
containing lead, urea, formaldehyde foam insulation
and discharges of sewage or effluent, as any of such
terms is defined from time to time in or for the
purposes of any Environmental Laws, friable asbestos,
pesticides, petroleum or petroleum products.
"INTEREST CHARGES" means, for any period, the
interest due and payable by the Borrower on all Debt
of the Borrower during such period.
"INTEREST PERIOD" means, for each Eurodollar
Rate Advance comprising part of the same A Borrowing,
the period commencing on the date of such Eurodollar
Rate Advance or the date of the Conversion of any
A Advance into such a Eurodollar Rate Advance and
ending on the last day of the period selected by the
Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the
last day of the immediately preceding Interest Period
and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one,
two, three or six months, as the Borrower may select,
upon notice received by the Agent in accordance with
Section 2.02(a) or Section 2.10; provided, however,
that:
(i) the duration of any Interest
Period which commences before the Maturity Date
and otherwise ends after the Maturity Date shall
end on the Maturity Date;
(ii) if any Interest Period begins on
a day for which there is no corresponding day in
the calendar month during which such Interest
Period is to end, such Interest Period shall end
on the last Business Day of such month; and
<PAGE>
<PAGE>
9
(iii) whenever the last day of any
Interest Period would otherwise occur on a day
other than a Business Day, the last day of such
Interest Period shall be extended to occur on
the next succeeding Business Day, provided, that
if such extension would cause the last day of
such Interest Period to occur in the next
following calendar month, the last day of such
Interest Period shall occur on the next
preceding Business Day.
"MAJORITY BANKS" means at any time, if there are
A Advances outstanding, Banks holding at least
66 2/3% of the then aggregate unpaid principal amount
of the A Notes held by the Banks, or, if there are no
A Advances outstanding, Banks holding at least 66
2/3% of, collectively, the Commitments (without
giving effect to any B Reduction) and the then
aggregate unpaid principal amount of the B Notes held
by the Banks.
"MATURITY DATE" means the 364th day following
the date of this Agreement or as to any Bank that has
extended its Commitment and any Notes held by such
Bank pursuant to Section 2.16, such later date that
may be established pursuant to Section 2.16 hereof,
or, in either case, the earlier date of termination
in whole of the Commitments pursuant to Section 2.05
or Section 6.01 hereof.
"MULTIPLE-EMPLOYER PLAN" means a single employer
plan, as defined in Section 4001(a)(15) of ERISA,
which (i) is maintained for employees of the Borrower
or an Affiliate of the Borrower and at least one
Person other than the Borrower and its Affiliates or
(ii) was so maintained and in respect of which the
Borrower or an Affiliate of the Borrower could have
liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"NOTE" means an A Note or a B Note.
"NOTICE OF A BORROWING" has the meaning
specified in Section 2.02(a) hereof.
"NOTICE OF B BORROWING" has the meaning
specified in Section 2.03(a) hereof.
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10
"PBGC" means the Pension Benefit Guaranty
Corporation or any successor thereto.
"PERSON" means an individual, partnership,
corporation (including a business trust), joint stock
company, trust, unincorporated association, joint
venture or other entity, or a government or any
political subdivision or agency thereof.
"PLAN" means a Single-Employer Plan or a
Multiple-Employer Plan.
"REFERENCE BANKS" means Citibank, The Bank of
New York and Barclays Bank PLC.
"SINGLE-EMPLOYER PLAN" means a single employer
plan, as defined in Section 4001(a)(15) of ERISA,
which (i) is maintained for employees of the Borrower
or an Affiliate of the Borrower and no Person other
than the Borrower and its Affiliates, or (ii) was so
maintained and in respect of which the Borrower or an
Affiliate of the Borrower could have liability under
Section 4069 of ERISA in the event such plan has been
or were to be terminated.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In
this Agreement in the computation of periods of time
from a specified date to a later specified date, the
word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting
terms not specifically defined herein shall be
construed in accordance with generally accepted
accounting principles consistent with those applied
in the preparation of the financial statements
referred to in Section 4.01(e) hereof.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE A ADVANCES. Each Bank
severally agrees, on the terms and conditions
hereinafter set forth, to make A Advances to the
Borrower from time to time on any Business Day during
the period from the date hereof until the day
immediately preceding the Maturity Date in an
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11
aggregate amount not to exceed at any time outstanding
the amount set opposite such Bank's name on the signature
pages hereof as such amount may be reduced pursuant to
Section 2.05 hereof (such Bank's "COMMITMENT"), provided
that the aggregate amount of the Commitments of the Banks
shall be deemed used from time to time to the extent of
the aggregate amount of the B ADVANCES then outstanding
and such deemed use of the aggregate amount of the
Commitments shall be applied to the Banks ratably according
to their respective Commitments (such deemed use of the
aggregate amount of the Commitments being a "B
REDUCTION"). Each A Borrowing comprised of Adjusted
Base Rate Advances shall be in an aggregate amount
not less than $1,000,000 or an integral multiple of
$1,000,000 in excess thereof and each A Borrowing
comprised of Eurodollar Rate Advances shall be in an
aggregate amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof.
Each A Borrowing shall consist of A Advances of the
same Type and, in the case of Eurodollar Rate Advances,
having Interest Periods of the same duration, made on
the same day by the Banks ratably according to their
respective Commitments. Within the limits of each Bank's
Commitment, the Borrower may from time to time borrow,
prepay pursuant to Section 2.11 hereof and reborrow under
this Section 2.01.
SECTION 2.02. MAKING THE A ADVANCES. (a) Each
A Borrowing shall be made on notice, given not later
than 11:00 A.M. (New York City time) on the date of a
proposed Adjusted Base Rate Borrowing or on the third
Business Day prior to the date of a proposed
Eurodollar Rate Borrowing, by the Borrower to the
Agent, which shall give to each Bank prompt notice
thereof by telecopier, telex or cable. Each such
notice of an A Borrowing (a "Notice of A Borrowing")
shall be by telecopier, telex or cable, confirmed
immediately in writing, in substantially the form of
Exhibit B-1 hereto, specifying therein the requested
(i) date of such A Borrowing, (ii) Type of A
Advances comprising such A Borrowing, (iii)
aggregate amount of such A Borrowing, and (iv) in the
case of an A Borrowing comprised of Eurodollar Rate
Advances, the initial Interest Period for each such A
Advance. Each Bank shall, before 12:00 noon (New
York City time) on the date of such A Borrowing, make
available for the account of its Applicable Lending
Office to the Agent at its address referred to in
Section 8.02 such Bank's ratable portion of such A
Borrowing, in same day funds. After the Agent's
receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower
at the Agent's aforesaid address.
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12
(b) Each Notice of A Borrowing shall be
irrevocable and binding on the Borrower. In the case
of any A Borrowing which the related Notice of A
Borrowing specifies is to be comprised of Eurodollar
Rate Advances, the Borrower shall indemnify each Bank
against any loss, cost or expense incurred by such
Bank as a result of any failure to fulfill on or
before the date specified in such Notice of A
Borrowing for such A Borrowing the applicable
conditions set forth in Article III, including,
without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits
or other funds acquired by such Bank to fund the A
Advance to be made by such Bank as part of such A
Borrowing when such A Advance, as a result of such
failure, is not made on such date.
(c) Unless the Agent shall have received notice
from a Bank prior to the date of any A Borrowing that
such Bank will not make available to the Agent such
Bank's ratable portion of such A Borrowing, the Agent
may assume that such Bank has made such portion
available to the Agent on the date of such A
Borrowing in accordance with subsection (a) of this
Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent
that such Bank shall not have so made such ratable
portion available to the Agent, such Bank and the
Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount
together with interest thereon, for each day from the
date such amount is made available to the Borrower
until the date such amount is repaid to the Agent, at
(i) in the case of the Borrower, the interest rate
applicable at the time to A Advances comprising such
A Borrowing and (ii) in the case of such Bank, the
Federal Funds Rate. If such Bank shall repay to the
Agent such corresponding amount, such amount so
repaid shall constitute such Bank's A Advance as part
of such A Borrowing for purposes of this Agreement.
(d) The failure of any Bank to make the A Advance
to be made by it as part of any A Borrowing shall not
relieve any other Bank of its obligation, if any, hereunder
to make its A Advance on the date of such A Borrowing, but
no Bank shall be responsible for the failure of any other
Bank to make the A Advance to be made by such other Bank
on the date of any A Borrowing.
SECTION 2.03. The B ADVANCES. (a) Each Bank
severally agrees that the Borrower may make B
Borrowings under this Section 2.03 from time to time
on any Business Day during the period from the date
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13
hereof until the day prior to the Maturity Date in
the manner set forth below; provided that, following
the making of each B Borrowing, the aggregate amount
of the Advances then outstanding shall not exceed the
aggregate amount of the Commitments of the Banks
(computed without regard to any B Reduction).
(i) The Borrower may request a B Borrowing
under this Section 2.03 by delivering to each Bank by
telecopier a notice of a B Borrowing (a "NOTICE OF B
BORROWING"), in substantially the form of Exhibit B-2
hereto, not later than 10:00 A.M. (New York City
time) at least one Business Day prior to the date of
the proposed B Borrowing. The Borrower shall specify
in the Notice of B Borrowing the date of such
proposed B Borrowing, the aggregate amount of the
proposed B Borrowing, the maturity date for repayment
of each B Advance to be made as part of such proposed
B Borrowing (which maturity date may not be later
than the Maturity Date), and the interest payment
date or dates for such proposed B Borrowing. Such
Notice of B Borrowing shall also specify the basis to
be used by the Banks in determining the rates of
interest to be offered by them or that such rates of
interest are to be fixed rates per annum, and any
other terms to be applicable to such B Borrowing.
(ii) Each Bank may, if, in its sole discretion,
it elects to do so, irrevocably offer to make one or
more B Advances to the Borrower as part of such
proposed B Borrowing at a rate or rates of interest
specified by such Bank in its sole discretion, by
notifying the Borrower by telecopier, before 10:00
A.M. (New York City time) on or before the date of
such proposed B Borrowing of the minimum amount and
maximum amount of each B Advance which such Bank
would be willing to make as part of such proposed B
Borrowing (which amounts may, subject to the proviso
to the first sentence of this Section 2.03(a), exceed
such Bank's Commitment), the rate or rates of
interest therefor and such Bank's Applicable Lending
Office with respect to such B Advance. If any Bank
shall elect not to make such an offer, such Bank
shall so notify the Borrower, before 10:00 A.M. (New
York City time) on the date on which notice of such
election is to be given to the Borrower by the other
Banks, and such Bank shall not be obligated to, and
shall not, make any B Advance as part of such B
Borrowing; provided that the failure by any Bank to
give such notice shall not cause such Bank to be
obligated to make any B Advance as part of such
proposed B Borrowing.
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14
(iii) The Borrower shall, in turn, before
11:00 A.M. (New York City time) on the date of such
proposed B Borrowing, either
(x) cancel such B Borrowing by giving
each Bank that has made an offer as described in
paragraph (ii) above written notice by
telecopier to that effect, or
(y) accept one or more of the offers
made by any Bank or Banks pursuant to paragraph
(ii) above, in its sole discretion, by giving
notice to each Bank that has made an offer as
described in paragraph (ii) above of the amount
of each B Advance (which amount shall be equal
to or greater than the minimum amount and equal
to or less than the maximum amount notified to
the Borrower by such Bank for such B Advance
pursuant to paragraph (ii) above) to be made by
any Bank as part of such B Borrowing and the
date of such B Borrowing, and reject any
remaining offers made by Banks pursuant to
paragraph (ii) above by giving each Bank that
has made an offer as described in paragraph (ii)
above written notice by telecopier to that
effect.
(iv) If the Borrower accepts one or more of the
offers made by any Bank or Banks pursuant to
paragraph (iii)(y) above, the Borrower shall promptly
deliver to each Bank that is to make a B Advance as
part of such B Borrowing, the documents necessary to
fulfill the applicable conditions set forth in
Article III. Each Bank that is to make a B Advance
as part of such B Borrowing shall, before 12:00 noon
(New York City time) on the date of such B Borrowing
specified in the notice received from the Borrower
pursuant to paragraph (iii)(y) or any later time when
such Bank shall have received and be satisfied that
the documents delivered pursuant to the preceding
sentence fulfill such conditions set forth in Article
III, make available such Bank's portion of such B
Borrowing to the Borrower, in same day funds. Upon
fulfillment of the applicable conditions set forth in
Article III and after receipt by the Borrower of such
funds, the Borrower will promptly notify each Bank in
writing by telecopier of the amount of the B
Borrowing, the consequent B Reduction and the dates
upon which such B Reduction commenced and will
terminate.
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15
(b) Each B Borrowing shall be in an aggregate
amount not less than $5,000,000 or an integral
multiple of $1,000,000 in excess thereof and,
following the making of each B Borrowing, the
Borrower and each Bank shall be in compliance with
the limitations set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set
forth in this Section 2.03, the Borrower may from
time to time borrow under this Section 2.03, repay or
prepay pursuant to subsection (d) below and reborrow
under this Section 2.03.
(d) The Borrower shall repay each Bank which
has made a B Advance, or each other holder of a B
Note, on the maturity date of each B Advance (such
maturity date being that specified by the Borrower
for repayment of such B Advance in the related Notice
of B Borrowing delivered pursuant to subsection
(a)(i) above and recorded on the grid attached to the
related B Note), the then unpaid principal amount of
such B Advance. The Borrower shall have no right to
prepay any principal amount of any B Advance unless,
and then only on the terms, specified by the Borrower
for such B Advance in the related Notice of B
Borrowing delivered pursuant to subsection (a)(i)
above and set forth in the related B Note.
(e) The Borrower shall pay interest on the
unpaid principal amount of each B Advance from the
date of such B Advance to the date such principal
amount of such B Advance is repaid in full, at the
rate of interest for such B Advance specified by the
Bank making such B Advance in its notice with respect
thereto delivered pursuant to subsection (a)(ii)
above, payable on the interest payment date or dates
specified by the Borrower for such B Advance in the
related Notice of B Borrowing delivered pursuant to
subsection (a)(i) above, as provided in the related B
Note.
(f) The Borrower shall make each payment under
any B Note not later than 11:00 A.M. (New York City
time) on the date when due in U.S. Dollars to any
Bank due such payment at its Applicable Lending
Office.
(g) The Borrower shall provide the Agent prompt
notice of all B Advances made pursuant to this
Section 2.03 or all payments made in respect of such
B Advances so that the Agent may maintain accurate
records of all B Advances outstanding hereunder.
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16
SECTION 2.04. FEES. (a) The Borrower agrees
to pay to the Agent for the account of each Bank a
facility fee on the total amount of such Bank's
Commitment (without giving effect to any B Reduction)
from the date hereof until the Maturity Date at the
rate of .2% per annum regardless of usage. Such fee
shall be calculated on the basis of actual number of
days elapsed in a year of 360 days. Such fee shall
be payable quarterly in arrears on the last day of
each March, June, September and December during the
term of such Bank's Commitment, commencing March 31,
1995, and on the Maturity Date.
(b) The Borrower agrees to pay to the Agent an
agency fee in such amounts and payable at such times,
as shall be agreed to between them in writing.
SECTION 2.05. REDUCTION OF THE COMMITMENTS.
The Borrower shall have the right, upon at least
three Business Days' notice to the Agent, to
terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the
Banks (without giving effect to any B Reduction),
provided that the aggregate amount of the Commitments
of the Banks shall not be reduced to an amount which
is less than the aggregate principal amount of the B
Advances then outstanding and provided, further, that
each partial reduction shall be in the aggregate
amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof. The Agent shall
promptly notify each Bank of any reduction in the
Commitments pursuant to this Section 2.05.
SECTION 2.06. REPAYMENT OF A ADVANCES. The
Borrower shall repay the principal amount of each A
Advance made by each Bank in accordance with the A
Note to the order of such Bank.
SECTION 2.07. INTEREST ON A ADVANCES. The
Borrower shall pay interest on the unpaid principal
amount of each A Advance made by each Bank from the
date of such A Advance until such principal amount
shall be paid in full, at the following rates per
annum:
(a) ADJUSTED BASE RATE ADVANCES. If such A
Advance is an Adjusted Base Rate Advance, a rate per
annum equal at all times to the Adjusted Base Rate
plus the Applicable Margin, payable quarterly on the
last day of each March, June, September and December
during the term hereof, on the Maturity Date and on
the
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17
date such Adjusted Base Rate Advance shall be
Converted or paid in full.
(b) EURODOLLAR RATE ADVANCES. If such A
Advance is a Eurodollar Rate Advance, a rate per
annum equal at all times during the Interest Period
for such A Advance to the Eurodollar Rate for such
Interest Period plus the Applicable Margin, payable
on the last day of such Interest Period and, if the
Interest Period for such A Advance has a duration of
six months, on the numerically corresponding day that
occurs during such Interest Period three months from
the first day of such Interest Period (or, if any
such month does not have a numerically corresponding
day, then on the last day of such month).
SECTION 2.08. ADDITIONAL INTEREST ON EURODOLLAR
RATE ADVANCES. The Borrower shall pay to each Bank,
so long as such Bank shall be required under
regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate
Advance of such Bank, from the date of such A Advance
until such principal amount is paid in full, at an
interest rate per annum equal at all times to the
remainder obtained by subtracting (i) the Eurodollar
Rate for the Interest Period for such A Advance from
(ii) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of such Bank for
such Interest Period, payable on each date on which
interest is payable on such A Advance. Such
additional interest shall be determined by such Bank
and notified to the Borrower through the Agent.
SECTION 2.09. INTEREST RATE DETERMINATION. (a)
Each Reference Bank agrees to furnish to the Agent
timely information for the purpose of determining
each Eurodollar Rate. If any one or more of the
Reference Banks shall not furnish such timely
information to the Agent for the purpose of
determining any such interest rate, the Agent shall
determine such interest rate on the basis of timely
information furnished by the remaining Reference
Banks.
(b) The Agent shall give prompt notice to the
Borrower and the Banks of the applicable interest
rate determined by the Agent for purposes of Section
2.07(a) or (b) hereof, and the applicable rate, if
any, furnished by
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18
each Reference Bank for the purpose of determining
the applicable interest rate under Section 2.07(b) hereof.
(c) If fewer than two Reference Banks furnish timely
information to the Agent for determining the
Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Agent shall forthwith notify the
Borrower and the Banks that the interest rate cannot
be determined for such Eurodollar Rate Advances,
(ii) each such Advance will automatically, on
the last day of the then existing Interest Period
therefor, Convert into an Adjusted Base Rate Advance
(or if such Advance is then an Adjusted Base Rate
Advance, will continue as an Adjusted Base Rate
Advance), and
(iii) the obligation of the Banks to make,
or to Convert A Advances into Eurodollar Rate
Advances shall be suspended until the Agent shall
notify the Borrower and the Banks that the
circumstances causing such suspension no longer
exist.
(d) If, with respect to any Eurodollar Rate
Advances, the Majority Banks notify the Agent that
the Eurodollar Rate for any Interest Period for such
Advances will not adequately reflect the cost to such
Majority Banks of making, funding or maintaining
their respective Eurodollar Rate Advances for such
Interest Period, the Agent shall forthwith so notify
the Borrower and the Banks, whereupon
(i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing
Interest Period therefor, Convert into an Adjusted
Base Rate Advance, and
(ii) the obligation of the Banks to make, or to
Convert A Advances into, Eurodollar Rate Advances
shall be suspended until the Agent shall notify the
Borrower and the Banks that the circumstances causing
such suspension no longer exist.
(e) If the Borrower shall fail to select the
duration of any Interest Period for any Eurodollar
Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in
Section 1.01, the Agent will
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19
forthwith so notify the Borrower and the Banks and
such Advances will automatically, on the last day of
the then existing Interest Period therefor, Convert
into Adjusted Base Rate Advances.
(f) On the date on which the aggregate unpaid
principal amount of A Advances comprising any A
Borrowing shall be reduced, by payment or prepayment
or otherwise, to less than $5,000,000, such A
Advances shall, if they are Eurodollar Rate Advances,
automatically Convert into Adjusted Base Rate
Advances, and on and after such date the right of the
Borrower to Convert such A Advances into Eurodollar
Rate Advances shall terminate; provided, however,
that if and so long as each such A Advance shall be
of the same Type and have the same Interest Period as
A Advances comprising another A Borrowing or other A
Borrowings, and the aggregate unpaid principal amount
of all such A Advances shall equal or exceed $5,000,000,
the Borrower shall have the right to continue all such A
Advances as, or to Convert all such A Advances into,
Advances of such Type having such Interest Period.
SECTION 2.10. VOLUNTARY CONVERSION OF A ADVANCES.
So long as no Event of Default or event which would
constitute an Event of Default but for the requirement
that notice be given or time elapse or both, the Borrower
may on any Business Day, upon notice given to the Agent
not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.09
and 2.13 hereof, Convert all A Advances of one Type
comprising the same A Borrowing into A Advances of another
Type or A Advances of the same Type to a new Interest Period;
provided, however, that any Conversion of any Eurodollar
Rate Advances into Adjusted Base Rate Advances or Eurodollar
Rate Advances into Eurodollar Rate Advances having new
Interest Periods shall be made on, and only on, the last
day of an Interest Period for such Eurodollar Rate Advances,
unless the Borrower shall also reimburse the Banks in respect
thereof pursuant to Section 8.04(b) hereof on the date of
such Conversion. Each such notice of a Conversion shall,
within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the A Advances to be Converted,
and (iii) if such Conversion is into or relating to Eurodollar
Rate Advances, the duration of the Interest Period for each
such A Advance. The Agent shall promptly notify each Bank of
any notice received from the Borrower pursuant to this Section.
SECTION 2.11. OPTIONAL PREPAYMENTS OF A
ADVANCES. The Borrower may, upon at least one
Business Day's notice to the Agent stating
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20
the proposed date and aggregate principal amount of the
prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amounts of
the Advances comprising part of the same A Borrowing
in whole or ratably in part, together with accrued
interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (i)
each partial prepayment shall be in an aggregate
principal amount not less than $1,000,000 or an
integral multiple of $1,000,000 thereof, and (ii) in
the case of any such prepayment of a Eurodollar Rate
Advance, the Borrower shall be obligated to reimburse
the Banks in respect thereof pursuant to Section
8.04(b). Except as provided in this Section 2.11,
the Borrower shall have no right to prepay any
principal amount of any A Advances.
SECTION 2.12. INCREASED COSTS. (a) If, due to
either (i) the introduction of or any change (other
than any change by way of imposition or increase of
reserve requirements in the case of Eurodollar Rate
Advances included in any Bank's Eurodollar Rate
Reserve Percentage) in or in the interpretation of
any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other
governmental authority (whether or not having the
force of law), there shall be any increase in the
cost to any Bank of agreeing to make or making,
funding or maintaining Eurodollar Rate Advances, then
the Borrower shall from time to time, upon demand by
such Bank (with a copy of such demand to the Agent),
pay to the Agent for the account of such Bank
additional amounts sufficient to compensate such Bank
for such increased cost. A certificate as to the
amount of such increased cost, submitted to the
Borrower and the Agent by such Bank, shall be
conclusive and binding for all purposes, absent
manifest error.
(b) If any Bank determines that compliance with
any law or regulation or any guideline or request
from any central bank or other governmental authority
(whether or not having the force of law) affects or
would affect the amount of capital required or
expected to be maintained by such Bank or any
corporation controlling such Bank and that the amount
of such capital is increased by or based upon the
existence of such Bank's commitment to lend hereunder
and other commitments of this type, then, upon demand
by such Bank (with a copy of such demand to the
Agent), the Borrower shall immediately pay to the
Agent for the account of such Bank, from time to time
as specified by such Bank, additional amounts
sufficient to compensate such Bank or such
corporation in the light of such circumstances, to
the extent that such Bank reasonably determines such
increase in capital to be allocable to the existence
of such Bank's commitment to lend hereunder. A
certificate as to such amounts submitted to the
Borrower and
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21
the Agent by such Bank shall be conclusive and binding
for all purposes, absent manifest error.
(c) Each Bank will notify the Borrower and the
Agent of any increase in cost incurred by such Bank
pursuant to subsection (a) or of any determination
made by such Bank pursuant to subsection (b) as
promptly as practicable. Each Bank will designate a
different Lending Office if such designation will
avoid the need for, or reduce the amount of, such
compensation and will not, in the reasonable judgment
of such Bank, be otherwise disadvantageous to such Bank.
SECTION 2.13. ILLEGALITY. Notwithstanding any
other provision of this Agreement, if any Bank shall
notify the Agent that the introduction of or any
change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or
other governmental authority asserts that it is
unlawful, for such Bank or its Eurodollar Lending
Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (i) the
obligation of the Banks to make, or to Convert A
Advances into, Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower
and the Banks that the circumstances causing such
suspension no longer exist and (ii) the Borrower
shall forthwith prepay in full all Eurodollar Rate
Advances of all Banks then outstanding, together with
interest accrued thereon, unless the Borrower, within
five Business Days of notice from the Agent, Converts
all Eurodollar Rate Advances of all Banks then
outstanding into Adjusted Base Rate Advances in
accordance with Section 2.10; provided, however, that
the Borrower will not be permitted to Convert such
Eurodollar Rate Advances to Adjusted Base Rate
Advances if the applicable law or regulation requires
immediate compliance on the part of such affected Bank.
SECTION 2.14. PAYMENTS AND COMPUTATIONS. (a)
Subject to Section 2.03 hereof, the Borrower shall
make each payment hereunder and under the A Notes not
later than 11:00 A.M. (New York City time) on the day
when due in U.S. dollars to the Agent at its address
at One Court Square, 7th Floor, Zone 1, Long Island
City, New York 11120, in same day funds. The Agent
will promptly thereafter cause to be distributed like
funds relating to the payment of principal, interest
or facility fees ratably (other than amounts payable
pursuant to Section 2.03, 2.08, 2.12 or 2.15 hereof)
to the Banks for the account of their respective
Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any
Bank to
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22
such Bank for the account of its Applicable
Lending Office, in each case to be applied in
accordance with the terms of this Agreement.
(b) The Borrower hereby authorizes each Bank,
if and to the extent payment owed to such Bank is not
made (to such Bank or to the Agent for such Bank)
when due hereunder or under any Note held by such
Bank, to charge from time to time against any or all
of the Borrower's accounts with such Bank any amount so due.
(c) All computations of interest based on the
Adjusted Base Rate (to the extent the Adjusted Base
Rate is based on the Citibank's base rate) shall be
made by the Agent on the basis of a year of 365 or
366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate or the Adjusted
Base Rate (to the extent the Adjusted Base Rate is
based on the Federal Funds Rate) and of all fees
shall be made by the Agent, and all computations of
interest pursuant to Section 2.08 shall be made by a
Bank, on the basis of a year of 360 days, in each
case for the actual number of days (including the
first day but excluding the last day) occurring in
the period for which such interest or fees are
payable. Each determination by the Agent (or, in the
case of Section 2.08 hereof, by a Bank) of an
interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the
Notes shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time
shall in such case be included in the computation of
payment of interest or fees, as the case may be;
provided, however, if such extension would cause
payment of interest on or principal of Eurodollar
Rate Advances to be made in the next following
calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Agent shall have received notice
from the Borrower prior to the date on which any
payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the
Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to
be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If
and to the extent that the Borrower shall not have so
made such payment in full to the Agent, each Bank
shall repay to the Agent forthwith on demand such
amount distributed to such Bank together with
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23
interest thereon for each day from the date such amount
is distributed to such Bank until the date such Bank
repays such amount to the Agent, at the Federal Funds Rate.
(f) Notwithstanding anything to the contrary
contained herein, any amount payable by the Borrower
hereunder or under any Note (i) that is not paid when
due (whether at stated maturity, by acceleration or
otherwise) or (ii) at any time and for so long as an
Event of Default has occurred and is continuing shall
bear interest from the date when due until paid in
full or for so long as such Event of Default is
continuing (as the case may be) at a rate equal at
all times to the sum of the Adjusted Base Rate, plus
2% per annum, payable upon demand.
SECTION 2.15. SHARING OF PAYMENTS, ETC. If any
Bank shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-
off, or otherwise) on account of the A Advances made
by it (other than pursuant to Section 2.08 or 2.12
hereof) in excess of its ratable share of payments on
account of the A Advances obtained by all the Banks,
such Bank shall forthwith purchase from the other
Banks such participations in the A Advances made by
them as shall be necessary to cause such purchasing
Bank to share the excess payment ratably with each of
them, provided, however, that if all or any portion
of such excess payment is thereafter recovered from
such purchasing Bank, such purchase from each Bank
shall be rescinded and such Bank shall repay to the
purchasing Bank the purchase price to the extent of
such recovery together with an amount equal to such
Bank's ratable share (according to the proportion of
(i) the amount of such Bank's required repayment to
(ii) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable
by the purchasing Bank in respect of the total amount
so recovered. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant
to this Section 2.15 may, to the fullest extent permitted
by law, exercise all its rights of payment (including the
right of set-off) with respect to such participation as
fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.16. EXTENSION OF COMMITMENTS AND MATURITY
DATE. (a) So long as no Event of Default has occurred and
is continuing, at least 60 but not more than 90 days before
the Maturity Date then in effect, the Borrower may, by
delivering a written request to the Agent (each such request
being irrevocable), request that each Bank extend for 364
days the Maturity Date with respect to such Bank's Commitment.
The Agent shall,
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24
upon its receipt of such a request, promptly notify
each Bank thereof, and request that each Bank promptly
advise the Agent of its approval or rejection of such request.
(b) Upon receipt of such notification from the
Agent, each Bank may (but shall not be required to),
in its sole and absolute discretion, agree to extend
the Maturity Date with respect to its Commitment and
any of its outstanding Advances for a period of 364
days, and shall (should it determine to do so), no
earlier than 30 days (but in any event no later than
20 days prior to the then-scheduled Maturity Date)
following its receipt of such notification, notify
the Agent in writing of its approval concerning such
request. If any Bank shall not so notify the Agent,
such Bank shall be deemed not to have consented to
such request. The Agent shall thereupon notify the
Borrower no later than 15 days prior to the then-
scheduled Maturity Date as to the Banks, if any, that
have consented to such request.
(c) If the Majority Banks agree to such request, the
Commitment of each Bank that consents to such request
shall be extended for a period of 364 days, commencing
on the then-scheduled Maturity Date. Subject to subsection
(d), below, the Commitment of any Bank electing not to
extend (or failing to notify the Agent in writing of its
consent to extend) the Maturity Date shall automatically
terminate on the then-scheduled Maturity Date.
(d) In the event that any Bank (a "NONCONSENTING
BANK") shall not consent (or shall be deemed not to
have consented) to the Borrower's extension request
made prior to the Maturity Date pursuant to
subsection (a), above, the Borrower will have the
right to substitute other financial institutions
acceptable to the Agent for any Nonconsenting Bank
(provided that the other Banks shall have the right
to increase their commitments up to the amount of
such Nonconsenting Bank's commitment before the
Borrower shall be permitted to substitute any other
financial institution for such Nonconsenting Bank) by
causing any Nonconsenting Bank to assign its
Commitment hereunder pursuant to Section 8.06 hereof.
(e) On each then-scheduled Maturity Date, the
aggregate Commitments shall be automatically reduced
by an amount equal to the product of (i) the sum of
the percentages of those Nonconsenting Banks (other
than those Nonconsenting Banks for which the Borrower
has substituted another financial institution
pursuant to subsection (d) above) that have elected
not to extend (or failed to notify the Agent of their
consent to extend) their Commitments pursuant to
subsection (b) or (d), above, as
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25
applicable, and (ii) the Commitments on such Maturity
Date immediately prior to such calculation.
(f) In the event that any Bank shall not have
consented to a request made by the Borrower under
this Section 2.16 to extend the Maturity Date, then,
on the date of any termination or reduction of the
respective Commitment for such Bank pursuant to this
Section 2.16, the Borrower shall pay or prepay to
such Bank the aggregate outstanding principal amount
of all Advances of such Bank, together with accrued
interest to the date of such prepayment on the
principal amount prepaid and all other fees and other
amounts due hereunder. In the case of any such
prepayment of a Eurodollar Rate Advance, the Borrower
shall be obligated to reimburse each such Bank in
respect thereof pursuant to Section 8.04.
SECTION 2.17. TAXES. (a) Any and all payments by
the Borrower hereunder and under the Notes shall be
made, in accordance with Section 2.14, free and clear
of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges,
or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the
Agent, taxes imposed on its overall net income and
franchise taxes imposed on it by the jurisdiction
under the laws of which such Bank or the Agent (as
the case may be) is organized or any political
subdivision thereof and, in the case of each Bank,
taxes imposed on its overall net income and franchise
taxes imposed on it by the jurisdiction of such
Bank's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as
"TAXES"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum
payable hereunder or under the Notes to any Bank or
the Agent, (i) the sum payable shall be increased as
may be necessary so that after making all required
deductions (including deductions applicable to additional
sums payable under this Section 2.17) such Bank or the
Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with
applicable law.
(b) The Borrower will indemnify each Bank and the Agent
for the full amount of Taxes (including, without limitation,
any Taxes imposed by any jurisdiction on amounts payable under
this Section 2.17) paid by such Bank or the Agent (as the case
may be) and any liability (including penalties,
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26
interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or
legally asserted. This indemnification shall be made
within 30 days from the date such Bank or the Agent
(as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its
address referred to in Section 8.02, the original or
a certified copy of a receipt evidencing payment thereof.
(d) Each Bank which is organized under the laws of a
jurisdiction outside of the United States agrees
that, on or prior to the date upon which it shall
become a party hereto, and upon the reasonable
request from time to time of the Borrower or the
Agent, such Bank will deliver to the Borrower and the
Agent duly completed copies of such form or forms as
may from time to time be prescribed by the United
States Internal Revenue Service indicating that such
Bank is entitled to receive payments without
deduction or withholding of any United States Federal
income taxes, as permitted by the Code. Each Bank
that delivers to the Borrower and the Agent the form
or forms referred to in the preceding sentence
further undertakes to deliver to the Borrower and the
Agent further copies of such form or forms, or
successor applicable form or forms, as the case may
be, as and when any previous form filed by it
hereunder shall expire or shall become incomplete or
inaccurate in any respect, unless such Bank is no
longer permitted under United States law to deliver
such form or forms. Each such Bank represents and
warrants that each such form supplied by it to the
Agent and the Borrower pursuant to this subsection
(e), and not superseded by another form supplied by
it, is or will be, as the case may be, complete and accurate.
(e) Any Bank claiming any additional amounts payable
pursuant to this Section 2.17 shall use its best
efforts (consistent with its internal policy and
legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the
making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts
which may thereafter accrue and would not, in the
reasonable judgment of such Bank, be otherwise
disadvantageous to such Bank.
(f) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements
and obligations of the Borrower contained in this
Section 2.17 shall survive the payment in full of
principal and interest hereunder and under the Notes.
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27
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITION PRECEDENT TO INITIAL
ADVANCES. The obligation of each Bank to make its
initial Advance is subject to the condition precedent
that the Agent shall have received on or before the
day of the initial Borrowing the following, each
dated such day, in form and substance satisfactory to
the Agent and (except for the Notes) in sufficient
copies for each Bank:
(a) The Notes payable to the order of the
Banks, respectively.
(b) Certified copies of the resolutions of the
Board of Directors of the Borrower approving this
Agreement and the Notes, and of all documents
evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
Agreement and the Notes, together with certified
copies of the charter and bylaws (or equivalent
documents) of the Borrower, and a certificate from
the Secretary of State of the State of Connecticut
(or other appropriate authority of such jurisdiction)
evidencing the good standing of the Borrower.
(c) A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the
names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the
Notes and the other documents to be delivered
hereunder.
(d) A favorable opinion of Wiggin & Dana,
counsel for the Borrower, substantially in the form
of Exhibit C hereto and as to such other matters as
any Bank through the Agent may reasonably request.
(e) A favorable opinion of King & Spalding,
counsel for the Agent, substantially in the form of
Exhibit D hereto, to the effect that, while they have
not independently considered the matters covered by
the opinion furnished pursuant to Section 3.01(d)
hereof to the extent necessary to enable them to
express the conclusions stated therein, (i) this
Agreement and the Notes appear to be in substantially
acceptable legal form and (ii) such opinion and the
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28
other documents furnished pursuant to the preceding
provisions of this Section 3.01 are substantially
responsive to the requirements of this Agreement.
(f) Evidence that all obligations of the
Borrower under the Revolving Credit Agreement, dated
as of January 25, 1993, as amended (as amended, the
"OLD CREDIT AGREEMENT"), among the Borrower, certain
banks and Citibank, as administrative agent, will be
paid in full with the proceeds of the initial
Advance, and that the commitments of such banks under
the Old Credit Agreement have been terminated as of
the date this Agreement became effective pursuant to
Section 8.06(a) hereof or otherwise.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH A
BORROWING. The obligation of each Bank to make an A
Advance on the occasion of each A Borrowing
(including the initial A Borrowing) shall be subject
to the further conditions precedent that on the date
of such A Borrowing, the Borrower shall certify that:
(a) the following statements shall be true (and each
of the giving of the applicable Notice of A Borrowing
and the acceptance by the Borrower of the proceeds of
such A Borrowing shall constitute a representation
and warranty by the Borrower that on the date of such
A Borrowing such statements are true):
(i) The representations and
warranties contained in Section 4.01 are correct
on and as of the date of such A Borrowing,
before and after giving effect to such A
Borrowing and to the application of the proceeds
therefrom, as though made on and as of such
date, and
(ii) No event has occurred and is
continuing, or would result from such A
Borrowing or from the application of the
proceeds therefrom, which constitutes an Event
of Default or would constitute an Event of
Default but for the requirement that notice be
given or time elapse or both;
and (b) the Agent shall have received such other
approvals, opinions or documents as any Bank through the
Agent may reasonably request.
SECTION 3.03. CONDITIONS PRECEDENT TO EACH
B BORROWING. The obligation of each Bank which
is to make a B Advance on the occasion of a B
Borrowing (including the initial B Borrowing) to
make such B Advance
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29
as part of such B Borrowing is subject to the
conditions precedent that (i) such Bank shall
have received the written confirmatory Notice
of B Borrowing with respect thereto, and (ii)
on the date of such B Borrowing, the Borrower
shall certify that the following statements
shall be true (and each of the giving of the
applicable Notice of B Borrowing and the
acceptance by the Borrower of the proceeds of
such B Borrowing shall constitute a representation
and warranty by the Borrower that on the date of
such B Borrowing such statements are true):
(a) The representations and warranties
contained in Section 4.01 are correct on and as of
the date of such B Borrowing, before and after giving
effect to such B Borrowing and to the application of
the proceeds therefrom, as though made on and as of
such date,
(b) No event has occurred and is continuing, or
would result from such B Borrowing or from the
application of the proceeds therefrom, which
constitutes an Event of Default or which would
constitute an Event of Default but for the
requirement that notice be given or time elapse or
both, and
(c) No event has occurred and no circumstance
exists as a result of which the information
concerning the Borrower that has been provided to the
Agent and each Bank by the Borrower in connection
herewith would include an untrue statement of a
material fact or omit to state any material fact or
any fact necessary to make the statements contained
therein, in the light of the circumstances under
which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF
THE BORROWER. The Borrower represents and warrants
as follows:
(a) The Borrower is a corporation duly
incorporated, validly existing and in good standing
under the laws of the State of Connecticut and is
duly qualified to do business, and is in good
standing, in every jurisdiction where the nature of
its business
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30
requires it to be so qualified. Except
where failure to procure the same will not materially
affect the conduct of its business, the Borrower has
validly procured and now possesses all franchises,
rights, licenses and permits and other similar
authorizations which are required for its present
operations by each jurisdiction in which it is
carrying on any material portion of its business.
The Borrower is in compliance in all material
respects with all applicable laws, rules, regulations
and orders (such compliance to include, without
limitation, compliance with all Environmental Laws
and payment of all taxes, assessments and
governmental charges imposed upon it or upon its
property, except to the extent contested in good
faith), non-compliance with which would materially
adversely affect the business, operations, affairs,
assets, condition, financial or otherwise, or
prospects of the Borrower or in any way affect the
ability of the Borrower to perform its obligations
under this Agreement or under the Notes.
(b) The execution, delivery and performance by
the Borrower of this Agreement, the Notes and all
other instruments and documents to be delivered
hereunder, and the transactions contemplated hereby
and thereby, are within the Borrower's corporate
powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the
Borrower's charter or bylaws or (ii) any law, rule,
regulation, order or judgment applicable to, or any
contractual restriction binding on or affecting, the
Borrower, and do not result in or require the
creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of
its properties.
(c) No authorization or approval or other
action by, and no notice to or filing with, any
governmental authority or regulatory body is required
for the due execution, delivery and performance by
the Borrower of this Agreement, the Notes or any
other document or instrument to be delivered
hereunder.
(d) This Agreement is, and each Note when
delivered hereunder will be, the legal, valid and
binding obligation of the Borrower enforceable
against the Borrower in accordance with their
respective terms.
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31
(e) The consolidated balance sheet (including
the notes thereto) of the Borrower and its
subsidiaries as at December 31, 1993 and the related
consolidated statements of income and retained
earnings of the Borrower and its subsidiaries for the
fiscal year then ended, certified by Coopers &
Lybrand, independent public accountants, and the
unaudited consolidated balance sheet of the Borrower
and its subsidiaries as at September 30, 1994, and
the related consolidated statements of income and
retained earnings of the Borrower and its
subsidiaries for the fiscal quarter and nine months
then ended, certified by the chief financial officer
of the Borrower, copies of which have been furnished
to each Bank, fairly present (subject, in the case of
such balance sheet and statements of income for the
fiscal quarter and nine months ended September 30,
1994, to normal year-end adjustments) the
consolidated financial condition of the Borrower and
its subsidiaries as at such dates and the
consolidated results of the operations of the
Borrower and its subsidiaries for the periods ended
on such dates, all in accordance with generally
accepted accounting principles consistently applied
and, except as described in said September 30, 1994
financial statements, since December 31, 1993 there
has been no material adverse change in the business,
operations, affairs, assets, condition, financial or
otherwise, or prospects of the Borrower and its
subsidiaries on a consolidated basis. Neither the
Borrower nor any of its subsidiaries has any material
contingent liability not provided for or disclosed in
the financial statements referred to in this
subsection (e) or contained in the Borrower's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1993.
(f) There has not been any failure by the
Borrower to file at or prior to the time required any
report or other filing with any regulatory or other
governmental authority having jurisdiction over it,
which failure would materially adversely affect the
business, operations, affairs, assets, condition,
financial or otherwise, or prospects of the Borrower.
(g) Except as described in the financial
statements furnished pursuant to subsection (e) above
or in the Borrower's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, there are
neither (i) any actions, suits or proceedings pending
or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or the property of
the Borrower in any court
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32
or before any arbitrator of any kind or before or by
any governmental body, nor (ii) any developments or
determinations in any such suits or proceedings, which
actions, suits, proceedings, developments or determinations
may materially adversely affect the business, operations,
affairs, assets, condition, financial or otherwise,
or prospects of the Borrower or which may materially
adversely affect the ability of the Borrower to
perform its obligations under this Agreement or the
Notes. The Borrower is not in default with respect
to any order of any court, arbitrator or governmental
body, except for defaults with respect to orders of
governmental agencies which defaults are not material
to the business or operations of the Borrower.
(h) No proceeds of any Advance will be used by
the Borrower to acquire any security in any
transaction which is subject to Sections 13 and 14 of
the Securities Exchange Act of 1934.
(i) The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any
Advance will be used to purchase or carry any margin
stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
(j) The Borrower is not an "investment company"
as defined in, or is otherwise subject to regulation
under, the Investment Company Act of 1940. The
Borrower is not a "holding company" as that term is
defined in the Public Utility Holding Company Act of
1935.
(k) No ERISA Event has occurred or is
reasonably expected to occur with respect to any Plan
which reasonably could be expected to materially
adversely affect the business, operations, affairs,
assets or condition, financial or otherwise, or
prospects of the Borrower and its subsidiaries on a
consolidated basis, or the ability of the Borrower to
perform its obligations hereunder. The Borrower is
not an employer under any Multiple-Employer Plan.
(l) The Borrower carries insurance with
responsible and reputable insurance companies or
associations in such amounts and
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33
covering such risks as is usually carried by companies
engaged in similar businesses and owning similar properties
(including, without limitation, the operation and ownership of
nuclear generating facilities) in the same general
areas in which the Borrower operates.
(m) No Environmental Event has occurred and is
continuing except for such Environmental Events as
have been disclosed to the Banks in writing and as do
not, in the reasonable opinion of the Borrower,
materially adversely affect the assets, liabilities,
financial condition, business, operations or
prospects of the Borrower.
(n) The Borrower has filed all tax returns
(Federal, state and local) required to be filed and
paid taxes shown thereon to be due, including
interest and penalties, or, to the extent the
Borrower is contesting in good faith an assertion of
liability based on such returns, has provided
adequate reserves in accordance with generally
accepted accounting principles for payment thereof.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. AFFIRMATIVE COVENANTS. So long
as any Note shall remain unpaid or any Bank shall
have any Commitment hereunder, the Borrower will,
unless the Majority Banks shall otherwise consent in
writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all
material respects with all applicable laws, rules,
regulations and orders (such compliance to include,
without limitation, compliance with ERISA, all
Environmental Laws and the payment before the same
become delinquent of all taxes, assessments and
governmental charges imposed upon it or upon its
property, except to the extent contested in good
faith), non-compliance with which would materially
adversely affect the business, operations, affairs,
assets or condition, financial or otherwise, or
prospects of the Borrower or in any way affect the
ability of the Borrower to perform its obligations
under this Agreement or under the Notes.
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34
(b) PRESERVATION OF CORPORATE EXISTENCE.
Preserve and maintain its corporate existence,
rights, licenses, permits, franchises and privileges
in the jurisdiction of its incorporation, and qualify
and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure of
the Borrower to preserve and maintain such existence,
rights, franchises, privileges and qualification
would materially adversely affect the interests of
the Banks under this Agreement or under the Notes, or
the ability of the Borrower to perform its
obligations under this Agreement or under the Notes.
(c) PERFORMANCE AND COMPLIANCE WITH OTHER
AGREEMENTS. Perform and comply with each of the
material provisions of each indenture, credit
agreement, contract or other agreement by which the
Borrower or its properties are bound, non-performance
or non-compliance with which would have a material
adverse effect upon the business or credit of the
Borrower or in any way affect the ability of the
Borrower to perform its obligations under this
Agreement or under the Notes.
(d) MAINTENANCE OF INSURANCE. Maintain
insurance with responsible and reputable insurance
companies or associations in such amounts and
covering such risks as is usually carried by
companies engaged in similar businesses and owning
similar properties (including, without limitation,
the operation and ownership of nuclear generating
facilities) in the same general areas in which the
Borrower operates.
(e) VISITATION RIGHTS. At any reasonable time
and from time to time, permit the Agent or any of the
Banks or any agents or representatives thereof, to
examine and make copies of and abstracts from the
records and books of account of, and visit the
properties of, the Borrower and to discuss the
affairs, finances and accounts of the Borrower with
any of its officers or directors.
(f) KEEPING OF BOOKS. Keep proper books of
record and account, in which full and correct entries
shall be made of all financial transactions and the
assets and business of the Borrower in accordance
with generally accepted accounting principles
consistent with those applied in the preparation of
the financial statements referred to in Section
4.01(e) hereof.
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35
(g) MAINTENANCE OF PROPERTIES, ETC. Maintain
and preserve all of its properties which are used or
useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(h) PAYMENT OF TAXES, ETC. Pay and discharge
before the same shall become delinquent all taxes,
assessments and governmental charges, royalties or
levies imposed upon it or upon its property, except
to the extent the Borrower is contesting the same in
good faith by appropriate proceedings and has set
aside adequate reserves in accordance with generally
accepted accounting principles for the payment
thereof.
(i) REPORTING REQUIREMENTS. Furnish to each of
the Banks:
(i) as soon as available and in any
event within 60 days after the end of each of
the first three quarters of each fiscal year of
the Borrower, the Borrower's Quarterly Report on
Form 10-Q together with a certificate of the
chief financial officer of the Borrower
(x) stating that no event has occurred and is
continuing which constitutes an Event of Default
or would constitute an Event of Default but for
the requirement that notice be given or time
elapse or both, or, if an Event of Default or
such event has occurred and is continuing, a
statement as to the nature thereof and the
action which the Borrower proposes to take with
respect thereto and (y) demonstrating compliance
with Section 5.02(d) hereof for and as of the
end of such quarter, such demonstration to be in
a schedule which sets forth the computations
used in demonstrating such compliance;
(ii) as soon as available and in any
event within 120 days after the end of each
fiscal year of the Borrower, the Borrower's
Annual Report on Form 10-K, together with a
certificate of the chief financial officer of
the Borrower stating that no event has occurred
and is continuing which constitutes an Event of
Default or would constitute an Event of Default
but for the requirement that notice be given or
time elapse or both, or, if an Event of Default
or such event has occurred and is continuing, a
statement as to the nature thereof and
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36
the action which the Borrower proposes to take with
respect thereto;
(iii) promptly after the sending
or filing thereof, copies of all reports which
the Borrower sends to any of its shareholders
and copies of all other reports and registration
statements which the Borrower files with the
Securities and Exchange Commission or any
national securities exchange, other than
registration statements relating to employee
benefit plans, to the Borrower's Dividend
Reinvestment and Common Stock Purchase Plan, and
to registrations of securities for any selling
security holder;
(iv) promptly after the filing or
receiving thereof, copies of all reports and
notices with respect to any Reportable Event
defined in Article IV of ERISA which the
Borrower files under ERISA with the Internal
Revenue Service or the PBGC or the U.S.
Department of Labor or which the Borrower
receives from the PBGC;
(v) as soon as possible and in any
event within five days after the occurrence of
each Event of Default or each event which, with
the giving of notice or lapse of time or both,
would constitute an Event of Default, the
statement of the chief financial officer or
chief accounting officer of the Borrower setting
forth details of such Event of Default or event
and the action which the Borrower proposes to
take with respect thereto;
(vi) as soon as possible and in any
event within five days after the commencement
thereof or any adverse determination or
development therein, notice of all actions,
suits and proceedings which may adversely affect
the Borrower's ability to perform its
obligations under the Agreement or under the
Notes; and
(vii) promptly, from time to time,
such other information, documents, records or
reports respecting the business, operations,
affairs, assets or condition, financial or
otherwise, or prospects of the Borrower as any
Bank through the Agent may from time to time
reasonably request.
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37
SECTION 5.02. NEGATIVE COVENANTS. So long
as any Note shall remain unpaid or any Bank
shall have any Commitment hereunder, the
Borrower will not, without the written consent
of the Majority Banks:
(a) LIENS, ETC. Create, assume or suffer to
exist any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance, or
any other type of preferential arrangement, upon or
with respect to any of its properties or rights,
whether now owned or hereafter acquired, or assign
any right to receive income, services or property;
provided, however, that the lien on Bridgeport Harbor
Unit No. 3 in favor of the holders of the Bridgeport
Electric Company Bonds that were assumed by the
Borrower as part of the merger of Bridgeport Electric
Company with and into the Borrower shall be permitted
to exist.
(b) MERGERS, SALE OF ASSETS, ETC. Merge or
consolidate with any Person or sell, assign, lease,
transfer or otherwise dispose of, (whether in one
transaction or a series of transactions) all or
substantially all of its assets or properties
(whether now owned or hereafter acquired) or any
material asset or property to any Person, except for
(i) dispositions of receivables and (ii) dispositions
arising in the ordinary course of its business as
conducted on the date hereof.
(c) INVESTMENTS IN OTHER PERSONS. Make any
loan or advance to any Person or purchase or
otherwise acquire the capital stock, assets or
obligations of, or any interest in, any Person
(except in the ordinary course of business),
provided, (i) that the Borrower may purchase original
issue capital stock or treasury stock from any wholly-
owned direct subsidiary of the Borrower for cash,
and/or contribute capital to any wholly-owned direct
subsidiary of the Borrower, in the form of cash or
real property of the Borrower, (ii) that the Borrower
may loan or advance funds to any wholly-owned direct
or indirect subsidiary of the Borrower hereof at any
time outstanding in an aggregate amount not to exceed
$50,000,000, and (iii) that the Borrower may loan or
advance funds to the trustee of any employee stock
ownership plan of the Borrower or any of its
subsidiaries in an aggregate amount not to exceed
$50,000,000; provided that the aggregate amount of
all such purchases, contributions, loans and advances
referred to in clauses (i), (ii) and (iii) above,
plus the aggregate amount of the Borrower's Guaranteed
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38
Debt in respect of all employee stock ownership plans
of the Borrower and all of its subsidiaries at any time
outstanding, shall not exceed in the aggregate $60,000,000.
(d) INTEREST COVERAGE RATIO. Allow the ratio
of Available Earnings to Interest Charges for each
period of twelve consecutive calendar months ending
on the last day of each of March, June, September and
December to be less than 1.5 to 1.0.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the
following events ("Events of Default") shall occur
and be continuing:
(a) The Borrower shall fail to pay any
principal of, or interest on, any Note or any
facility fees or other amounts payable hereunder when
due; or
(b) Any representation or warranty made, or
deemed made, by the Borrower herein or by the
Borrower (or any of its officers) in connection with
this Agreement shall prove to have been incorrect in
any material respect when made or deemed made; or
(c) The Borrower shall fail to perform or
observe any of the covenants and agreements contained
in Section 5.01(i)(v) or Section 5.02; or
(d) The Borrower shall fail to perform or
observe any other term, covenant or agreement
contained in this Agreement on its part to be
performed or observed and any such failure shall
remain unremedied for 10 days after written notice
thereof shall have been given to the Borrower by the
Agent or any Bank; or
(e) The Borrower shall fail to pay any Debt or
Guaranteed Debt, or any interest or premium thereon,
when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable
grace period, if any, specified in the agreement or
instrument relating to
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39
such Debt or Guaranteed Debt; or any other default
under any agreement or instrument relating to any
such Debt or Guaranteed Debt, or any other event,
shall occur and shall continue after the applicable
Grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is
to accelerate, or to permit the acceleration of, the
maturity of such Debt or Guaranteed Debt; or any such
Debt or Guaranteed Debt shall be declared to be due and
payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to
the stated maturity thereof; or
(f) The Borrower shall generally not pay its
debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by
or against the Borrower seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debts, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or
for any substantial part of its property and, in the
case of any such proceeding instituted against the
Borrower (but not instituted by the Borrower) such
proceeding shall continue undismissed or unstayed for
a period of 30 days, or any of the actions sought in
such proceeding (including, without limitation, the
entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or
other similar official for, the Borrower or any
substantial part of the property of the Borrower)
shall occur or the Borrower shall consent to or
acquiesce in any such proceeding; or the Borrower
shall take any corporate action to authorize any of
the actions set forth above in this subsection; or
(g) Any judgment or order for the payment of
money in excess of $10,000,000 shall be rendered
against the Borrower and enforcement proceedings
shall have been commenced by any creditor upon such
judgment or order or there shall be any period of 30
consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
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40
(h) Any ERISA Event shall have occurred with
respect to a Plan and, 30 days after notice thereof
shall have been given to the Borrower by the Agent or
any Bank, such ERISA Event shall still exist; or
(i) An Environmental Event or any other event
shall have occurred that in the reasonable opinion of
the Borrower materially adversely affects the assets,
liabilities, financial condition, business,
operations or prospects of the Borrower;
then, and in any such event, the Agent (i) shall at the
request, or may with the consent, of the holders of
at least 66 2/3% in principal amount of the A Notes
then outstanding or, if no A Notes are then
outstanding, Banks having at least 66 2/3% of the
Commitments (without giving effect to any B
Reduction), by notice to the Borrower, declare the
obligation of each Bank to make Advances to be
terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with
the consent, of the holders of at least 66 2/3% in
principal amount of the Notes then outstanding or, if
no Notes are then outstanding, Banks having at least
66 2/3% of the Commitments, by notice to the
Borrower, declare the Notes (if any), all interest
thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon
the Notes, all such interest and all such amounts
shall become and be forthwith due and payable,
without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in
the event of an actual or deemed entry of an order
for relief with respect to the Borrower under the
Federal Bankruptcy Code, (A) the obligation of each
Bank to make Advances shall automatically be
terminated and (B) the Notes, all such interest and
all such amounts shall automatically become and be
due and payable, without presentment, demand, protest
or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. AUTHORIZATION AND ACTION. Each
Bank hereby appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such
powers as are reasonably
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41
incidental thereto. As to any matters not expressly
provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes),
the Agent shall not be required to exercise any
discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such
instructions shall be binding upon all Banks and all
holders of Notes; provided, however, that the Agent
shall not be required to take any action which
exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law.
SECTION 7.02. AGENT'S RELIANCE, ETC. Neither
the Agent nor any of its directors, officers, agents
or employees shall be liable for any action taken or
omitted to be taken by it or them under or in
connection with this Agreement, except for its or
their own gross negligence or willful misconduct.
Without limitation of the generality of the
foregoing, the Agent: (i) may treat the payee of any
Note as the holder thereof until the Agent receives
written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the
Agent; (ii) may consult with legal counsel (including
counsel for the Borrower), independent public
accountants and other experts selected by it and
shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts;
(iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any
statements, warranties or representations made in or
in connection with this Agreement; (iv) shall not
have any duty to ascertain or to inquire as to the
performance or observance of any of the terms,
covenants or conditions of this Agreement on the part
of the Borrower or to inspect the property (including
the books and records) of the Borrower or any of its
subsidiaries; (v) shall not be responsible to any
Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of
this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by
acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier,
telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or
parties.
SECTION 7.03. CITIBANK AND AFFILIATES. With
respect to its Commitment, the Advances made by it
and the Notes issued to it, Citibank shall have the
same rights and powers under this Agreement as any
other Bank and may exercise the same as though it
were not the Agent; and the term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include
Citibank in its individual capacity. Citibank and
its Affiliates may accept
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42
deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of
business with, the Borrower, any of its subsidiaries
and any Person who may do business with or own
securities of the Borrower or any such subsidiary,
all as if Citibank were not the Agent and without any
duty to account therefor to the Banks.
SECTION 7.04. BANK CREDIT DECISION. Each Bank
acknowledges that it has, independently and without
reliance upon the Agent or any other Bank and based
on the financial statements referred to in Section
4.01 hereof and such other documents and information
as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or
any other Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking
or not taking action under this Agreement.
SECTION 7.05. INDEMNIFICATION. The Banks agree
to indemnify the Agent (to the extent not reimbursed
by the Borrower), ratably according to the respective
principal amounts of the A Notes then held by each of
them (or if no A Notes are at the time outstanding or
if any A Notes are held by Persons which are not
Banks, ratably according to the respective amounts of
their Commitments (without regard to any
B Reduction)), from and against any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against
the Agent in any way relating to or arising out of
this Agreement or any action taken or omitted by the
Agent under this Agreement, provided that no Bank
shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent
promptly upon demand for its ratable share of any out-
of-pocket expenses (including counsel fees) incurred
by the Agent in connection with the preparation,
execution, delivery, administration, modification,
amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities
under, this Agreement, to the extent that the Agent
is not reimbursed for such expenses by the Borrower.
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43
SECTION 7.06. SUCCESSOR AGENT. The Agent may resign
at any time by giving written notice thereof to the Banks
and the Borrower and may be removed at any time with or
without cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the
right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Majority Banks, and shall
have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the
Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of
at least $150,000,000. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this Article
VII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment or
waiver of any provision of this Agreement or the A
Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority
Banks, and then such waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which given; provided, however,
that no amendment, waiver or consent shall, unless in
writing and signed by all the Banks, do any of the
following: (a) waive any of the conditions specified
in Section 3.01, 3.02 or 3.03 hereof, (b) increase
the Commitment of any Bank or subject any Bank to any
additional obligations, (c) reduce the principal of,
or interest on, the A Notes or any fees or other
amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest
on, the A Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the A
Notes, or the number of Banks, which shall be required
for the Banks or any of them to take any action hereunder
or (f) amend the definition of Majority
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44
Banks or this Section 8.01; and provided, further, that
no amendment, waiver or consent shall, unless in writing
and signed by the Agent in addition to the Banks required
above to take such action, affect the rights or duties of
the Agent under this Agreement or any Note; and provided,
further, however, that no amendment, waiver or consent shall
reduce the principal of or interest on any B Note or postpone
any date fixed for any payment of principal of, or interest
on, any B Note unless in writing and signed by the Bank holding
such B Note.
SECTION 8.02. NOTICES, ETC. All notices and
other communications provided for hereunder shall be
in writing (including telegraphic communication) and
mailed, telecopied, telexed, telegraphed or delivered,
if to the Borrower, at its address at 157 Church Street,
P.O. Box 1564, New Haven, Connecticut 06506-0901,
Attention: Charles J. Pepe, Assistant Treasurer;
telecopy no. 203-499-2414; if to any Bank, at its
Domestic Lending Office specified opposite its name
on Schedule I hereto; and if to the Agent, at its
address at 399 Park Avenue, New York, New York 10043,
Attention: Department Head, Utilities Department, North
American Finance Group, telecopy no. 212-793-6130; or,
as to each party, at such other address as shall be
designated by such party in a written notice to the
other parties. All such notices and communications shall,
when mailed, telecopied, telexed or telegraphed, be effective
when deposited in the mails or sent by telecopy or telex
or delivered to the telegraph company, respectively,
addressed as aforesaid, except that notices and communications
delivered pursuant to Article II or VII shall not be effective
until received.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the
part of any Bank or the Agent to exercise, and no delay in
exercising, any right hereunder or under any Note shall
operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 8.04. COSTS, EXPENSES, TAXES AND INDEMNIFICATION.
(a) The Borrower agrees to pay on demand all costs and expenses
in connection with the preparation, execution, delivery,
modification and amendment of this Agreement, the Notes and
the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect thereto and
with respect to advising the Agent as to its rights and
responsibilities under this Agreement.
The Borrower further agrees to pay on demand all
costs and
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45
expenses of the Agent and Banks, if any (including,
without limitation, reasonable fees and expenses of
counsel for the Agent and counsel for each Bank), in
connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this
Agreement, the Notes and the other documents to be
delivered hereunder, including, without limitation,
reasonable counsel fees and expenses of the Agent and
the Banks in connection with the enforcement of rights
under this Section 8.04(a). In addition, the Borrower
shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution
and delivery of this Agreement, the Notes and the other
documents to be delivered hereunder, and agrees to save the
Agent and each Bank and their Affiliates harmless from and
against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes.
(b) If any payment of principal of, or
Conversion of, any Eurodollar Rate Advance is made
other than on the last day of the Interest Period for
such Eurodollar Rate Advance, as a result of a
payment or Conversion pursuant to Section 2.09(f),
2.12 or 2.13 hereof, or acceleration of the maturity
of the Notes pursuant to Section 6.01 hereof or if
the Borrower fails to borrow or Convert (including,
without limitation, failure to borrow or Convert
resulting from any failure to fulfill on the date
specified for such Borrowing or Conversion the
applicable conditions set forth in Article III
hereof) in accordance with notices delivered pursuant
to Section 2.02 or 2.10 hereof or for any other
reason, the Borrower shall, upon demand by any Bank
(with a copy of such demand to the Agent), pay to the
Agent for the account of such Bank any amounts
required to compensate such Bank for any additional
losses, costs or expenses which it may reasonably
incur as a result of such payment or Conversion,
including, without limitation, any loss (including
loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Bank to
fund or maintain such Eurodollar Rate Advance.
(c) The Borrower hereby agrees to indemnify and hold
harmless each Bank, the Agent, counsel to the Agent
and their respective officers, directors, partners,
employees and Affiliates (each, an "INDEMNIFIED
PERSON") from and against any and all claims,
damages, losses, liabilities, costs, or expenses
(including reasonable attorney's fees and expenses,
whether or not such Indemnified Person is named as a
party to any proceeding or is otherwise subjected to
judicial or legal process arising from any such
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46
proceeding) which any of them may incur or which may
be claimed against any of them by any Person:
(i) by reason of or in connection with the
execution, delivery, or performance of this Agreement
or the Notes, or the use by the Borrower of the
proceeds of any Advance; and
(ii) in connection with or resulting from
the utilization, storage, disposal, treatment,
generation, transportation, release, or ownership of
any Hazardous Material (i) at, upon, or under any
property of the Borrower or any of its Affiliates or
(ii) by or on behalf of the Borrower or any of its
Affiliates at any time and in any place.
(d) The Borrower's obligations under this
Section 8.04 shall survive the repayment of all
amounts owing to the Banks and the Agent hereunder
and under the Notes and the termination of the
Commitments. If and to the extent that the
obligations of the Borrower under this Section 8.04
are unenforceable for any reason, the Borrower agrees
to make the maximum contribution to the payment and
satisfaction thereof which is permissible under
applicable law.
SECTION 8.05. RIGHT OF SET-OFF. Upon the
occurrence and during the continuance of any Event of
Default each Bank is hereby authorized at any time
and from time to time, to the fullest extent
permitted by law, to set off and apply any and all
deposits (general or special, time or demand,
provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for
the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or
hereafter existing under this Agreement and any Note
held by such Bank, whether or not such Bank shall
have made any demand under this Agreement or such
Note and although such obligations may be unmatured.
Each Bank agrees promptly to notify the Borrower
after any such set-off and application made by such
Bank, provided that the failure to give such notice
shall not affect the validity of such set-off and
application. The rights of each Bank under this
Section are in addition to other rights and remedies
(including, without limitation, other rights of set-
off) which such Bank may have.
SECTION 8.06. BINDING EFFECT; PARTICIPATIONS
AND ASSIGNMENTS. (a) This Agreement shall become
effective when it shall have been executed by the
Borrower and the Agent and when the Agent shall have
been notified
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47
by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the
benefit of the Borrower, the Agent and each Bank and
their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written
consent of the Banks. The Agent shall notify the Borrower
and the Banks of the effectiveness of this Agreement. The
parties hereto who are also parties to the Old Credit
Agreement agree that the commitments of the Banks thereunder
shall automatically terminate upon the effectiveness of
this Agreement.
(b) Each Bank may sell participations to one or
more banks or other entities in or to all or a
portion of its rights and obligations under this
Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it
and the Note or Notes held by it); provided, however,
that (i) such Bank's obligations under this Agreement
(including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such
Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such
Bank shall remain the holder of any such Note for all
purposes of this Agreement, and (iv) the Borrower, the
Agent and the other Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement.
(c) Any Bank shall have the right to assign its
Commitment, Advances and other rights and obligations
hereunder, with the prior consent of the Borrower
(which shall not be unreasonably withheld) and the
Agent (which shall not be unreasonably withheld), in
accordance with subsection (e) below; provided that
any such assignment by any Bank during the continuance
of an Event of Default or an event which with the giving
of notice or passage of time, or both, would constitute
an Event of Default, shall be ineffective without the
consent of the Majority Banks.
(d) If any Bank shall have made a demand for
compensation under Section 2.12 hereof, then within
15 days of such demand for compensation (and without
relieving the Borrower of its obligation to pay such
compensation) the Borrower may demand that such Bank
assign in accordance with this Section, to an
assignee designated by the Borrower and reasonably
acceptable to the Agent, all (but not less than all)
of such Bank's Commitment, Advances and other rights
and obligations hereunder; provided, that any such
demand by the Borrower during the continuance of an
Event of Default or an event which with the giving of
notice or the passage of time,
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48
or both, would constitute an Event of Default,
shall be ineffective without the consent of such Bank
and the Majority Banks. If within the period ending
on the later to occur of the date 30 days from the date
of the Borrower's demand and the last day of the longest of
the then current Interest Periods for such Advances,
any such assignee so designated shall fail to
consummate such assignment for any reason, or if the
Borrower shall fail to designate an assignee
reasonably acceptable to the Agent, then such demand
by the Borrower shall become ineffective.
Notwithstanding anything set forth above in this
subsection (d) to the contrary, the Borrower shall
not be entitled to compel such an assignment by any
Bank making a demand for compensation under Section
2.12(a) hereof if, prior to or promptly following any
such demand by the Borrower, such Bank shall have
changed or shall change its Applicable Lending Office
for its Eurodollar Rate Advances so as to eliminate
the further incurrence of such increased cost.
(e) Upon its receipt of an assignment agreement
executed by an assigning Bank and an assignee
pursuant to subsection (c) or (d) above, together
with any Note or Notes subject to such assignment,
the Agent shall (i) accept such assignment agreement,
(ii) record the information contained therein in its
records and (iii) give prompt notice thereof to the
Borrower. Within five Business Days after its
receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in
exchange for the surrendered Note or Notes a new Note
or Notes to the order of such assignee and, if
necessary, such assignor in an amount equal to the
Commitment assumed by it pursuant to such assignment
agreement. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes
and shall be dated the effective date of such
assignment agreement.
(f) By executing and delivering an assignment
agreement, the Bank assignor thereunder and the
assignee thereunder confirm to and agree with each
other and the other parties hereto as follows:
(i) other than as provided in such assignment
agreement, such assigning Bank makes no
representation or warranty and assumes no
responsibility with respect to any statements,
warranties or representations made in or in
connection with this Agreement or any Note or any
other instrument or document furnished pursuant
hereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of
this Agreement, any Note or any other instrument or
document furnished pursuant hereto; (ii) such
assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the
financial condition of the Borrower or the
performance or observance by the
<PAGE>
<PAGE>
49
Borrower of any of its obligations under this
Agreement, any Note or any other instrument or
document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of
this Agreement and the Note or Notes to be assigned
to it, together with copies of the financial
statements referred to in Section 4.01(e) hereof and
such other documents and information as it has deemed
appropriate to make its own credit analysis and decision
to enter into such assignment agreement; (iv) such
assignee will, independently and without reliance upon
the Agent, such assigning Bank or any other Bank and
based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this
Agreement and its Notes; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of
this Agreement are required to be performed by it as a Bank.
(g) Any Bank may, in connection with any completed or
proposed participation or assignment pursuant to this Section
8.06, disclose to the participant or assignee or proposed
participant or assignee, any information relating to the
Borrower furnished to such Bank by or on behalf of the
Borrower; provided that, prior to any such disclosure, the
participant or assignee or proposed participant or assignee
shall agree to preserve the confidentiality of any confidential
information relating to the Borrower received by it from such
Bank.
(h) Anything in this Section 8.06 to the
contrary notwithstanding, any Bank may assign and
pledge all or any portion of its Commitment and the
Advances owing to it to any Federal Reserve Bank (and
its transferees) as collateral security pursuant to
Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by
such Federal Reserve Bank. No such assignment shall
release the assigning Bank from its obligations
hereunder.
SECTION 8.07. GOVERNING LAW. (a) This Agreement
and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) The Borrower hereby irrevocably (i) submits
to the jurisdiction of any New York State or Federal
court sitting in New York City
<PAGE>
<PAGE>
50
in any action or proceeding arising out of or relating
to this Agreement or the Notes, (ii) agrees that all
claims in respect of such action or proceeding may be
heard and determined in such New York State or Federal
court, (iii) waives, to the fullest extent it may
effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding
and (iv) waives all right to trial by jury in any
action, proceeding or counterclaim arising out of or
relating to this Agreement or any other instrument or
document delivered hereunder or thereunder. The
Borrower irrevocably consents to the service of any
and all process in any such action or proceeding by
the mailing of copies of such process to the Borrower
at its address specified in Section 8.02 hereof. The
Borrower agrees that a final judgment in any such
action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(c) Nothing in this Section shall affect the
right of the Agent or the Banks to serve legal
process in any other manner permitted by law or
affect the right of the Agent or the Banks to bring
any action or proceeding against the Borrower or its
property in the courts of any other jurisdictions.
SECTION 8.08. EXECUTION IN COUNTERPARTS. This
Agreement may be executed in any number of
counterparts and by different parties hereto in
separate counterparts, each of which when so executed
shall be deemed to be an original and all of which
taken together shall constitute one and the same
agreement.
<PAGE>
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of
the date first above written.
THE UNITED ILLUMINATING
COMPANY
By /s/ Kurt Mohlman
----------------------------------
Title: Treasurer and Secretary
CITIBANK, N.A., as Agent
By /s/ Anita J. Brickell
----------------------------------
Vice President
<PAGE>
<PAGE>
S-2
Commitment
- ----------
$30,000,000 CITIBANK, N.A.
By /s/ Anita J. Brickell
-------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-3
Commitment
- ----------
$25,000,000 THE BANK OF NEW YORK
By /s/ Michael F. Donohue, Jr.
-------------------------------
Title: Senior Vice President
<PAGE>
<PAGE>
S-4
Commitment
- ----------
$25,000,000 FLEET BANK, N.A.
By /s/ Suresh V. Chivukula
--------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-5
Commitment
- ----------
$25,000,000 SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Thomas Rose
--------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-6
Commitment
- ----------
$20,000,000 THE FIRST NATIONAL BANK OF BOSTON
By /s/ Frank T. Smith, Jr.
--------------------------------
Title: Director
<PAGE>
<PAGE>
S-7
Commitment
- ----------
$20,000,000 UNION TRUST COMPANY
By /s/ John H. Frost
--------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-8
Commitment
- ----------
$15,000,000 BARCLAYS BANK, PLC
By /s/ Vijay Rajguru
--------------------------------
Title: Associate Director
<PAGE>
<PAGE>
S-9
Commitment
- ----------
$11,250,000 THE BANK OF NOVA SCOTIA
By /s/ Steven Lockhart
--------------------------------
Title: Senior Manager
<PAGE>
<PAGE>
S-10
Commitment
- ----------
$11,250,000 THE CHASE MANHATTAN BANK, N.A.
By /s/ A. Neil Sweeny
--------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-11
Commitment
- ----------
$11,250,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Richard Waldman
--------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-12
Commitment
- ----------
$11,250,000 NATIONAL WESTMINSTER BANK USA
By /s/ Michael M. Dwyer
--------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-13
Commitment
- ----------
$10,000,000 STATE STREET BANK AND TRUST COMPANY
By /s/ Lise Ann Boutiette
---------------------------------
Title: Vice President
<PAGE>
<PAGE>
S-14
Commitment
- ----------
$10,000,000 THE TOKAI BANK, LIMITED
By /s/ Masaharu Muto
--------------------------------
Title: Deputy General Manager
$225,000,000 Total of the Commitments
<PAGE>
<PAGE>
SCHEDULE I
THE UNITED ILLUMINATING COMPANY
REVOLVING CREDIT AGREEMENT
NAME OF BANK DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ------------ ----------------------- -------------------------
The Bank of New York One Wall Street, 19th Floor One Wall St., 19th Floor
New York, NY 10286 New York, NY 10286
Attn: Jo-Ann Evans Attn: Jo-Ann Evans
Energy Industries Division Energy Industries Div.
Telephone: 212.635.7535 Telephone: 212.635.7535
Telecopy: 212.635.7923 Telecopy: 212.635.7923
The Bank of Nova Scotia One Liberty Plaza One Liberty Plaza
New York, New York 10006 New York, New York 10006
Attn: Kevin C. Clark Attn: Kevin C. Clark
Telephone: 212.225.5009 Telephone: 212.225.5009
Telecopy: 212.225.5090 Telecopy: 212.225.5090
Barclays Bank PLC 75 Wall Street Nassau Branch
New York, New York 10265 c/o Barclays Bank
Attn: Customer Service 75 Wall Street
Team 1 New York, NY 10265
Attn: Customer Service
Team 1
With a copy to: Telephone: 212.412.5028
Telecopy: 212.412.5002
222 Broadway, 12th Floor
New York, NY 10038
Attn: Customer Serv. Team 1
Telephone: 212.412.5028
Telecopy: 212.412.5002
Citibank, N.A. 399 Park Avenue 399 Park Avenue
4th Floor 4th Floor
New York, NY 10043 New York, NY 10043
Attn: Scott DeGhetto Attn: Scott DeGhetto
Utilities Department Utilities Department
Telephone: 212.559.1670 Telephone: 212.559.1670
Telecopy: 212.793.6130 Telecopy: 212.793.6130
<PAGE>
<PAGE>
2
NAME OF BANK DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ------------ ----------------------- -------------------------
The Chase Manhattan 999 Broad Street 999 Broad Street
Bank, N.A. Bridgeport, CT 06604 Bridgeport, CT 06604
Attn: Mardi Keeler Attn: Mardi Keeler
2nd Floor 2nd Floor
Telephone: 203.382.5326 Telephone: 203.382.5326
Telecopy: 203.382.6575 Telecopy: 203.382.6575
The First National Bank 100 Federal Street 100 Federal Street
of Boston Boston, MA 02106 Boston, MA 02106
Attn: Carol Holley Attn: Carol Holley
Telephone: 617.434.1921 Telephone: 617.434.1921
Telecopy: 617.434.3652 Telecopy: 617.434.3652
The First National Bank One First National Plaza One First National Plaza
of Chicago Suite 0363/1-10 Suite 0363/1-10
Chicago, IL 60670 Chicago, IL 60670
Attn: Lynn Pozsgay Attn: Lynn Pozsgay
Administrative Coordinator Administrative Coordinator
Telephone: 312.732.8705 Telephone: 312.732.8705
Telecopy: 312.732.4840 Telecopy: 312.732.4840
Fleet Bank, N.A. One Constitution Plaza One Constitution Plaza
Hartford, CT 06115 Hartford, CT 065115
Attn: Suresh Chivukula Attn: Suresh Chivukula
Vice President Vice President
Telephone: 203.244.6038 Telephone: 203.244.6038
Jacqueline Steffans Jacqueline Steffans
Telephone: 203.244.5208 Telephone: 203.244.5208
Telecopy: 203.244.5391 Telecopy: 203.244.5391
National Westminster 244 Westchester Avenue 244 Westchester Avenue
Bank USA White Plains, N.Y. 10604 White Plains, N.Y. 10604
Attn: Amelia Coletta Attn: Amelia Coletta
Telephone: 914.681.5021 Telephone: 914.681.5021
Telecopier: 914.681.5027 Telecopier: 914.681.5027
<PAGE>
<PAGE>
3
NAME OF BANK DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ------------ ----------------------- -------------------------
Shawmut Bank 777 Main Street 777 Main Street
Connecticut, N.A. MSN 397 MSN 397
Hartford, CT 06115 Hartford, CT 06115
Telephone: 203.728.4531 Telephone: 203.728.4531
Telecopy: 203.728.4621 Telecopy: 203.728.4621
State Street Bank and 225 Franklin Street/M2 225 Franklin Street/M2
Trust Company Boston, MA 02110 Boston, MA 02110
Attn: Lise Anne Boutiette Attn: Lise Anne Boutiette
Telephone: 617.654.3262 Telephone: 617.654.3262
Telecopy: 617.654.4176 Telecopy: 617.654.4176
The Tokai Bank, Limited 55 East 52nd Street 55 East 52nd Street
Park Avenue Plaza Park Avenue Plaza
New York, NY 10055 New York, NY 10055
Attn: Mona Karout Attn: Mona Karout
Telephone: 212.339.1146 Telephone: 212.339.1146
Telecopy: 212.754.2171 Telecopy: 212.754.2171
Union Trust Company Post Office Box 404 Post Office Box 404
New Haven, CT 06502-0907 New Haven, CT 06502-0907
Attn: Geoffrey G. Gregory Attn: Geoffrey G. Gregory
Senior Vice President Senior Vice President
Telephone: 203.787.0080 Telephone: 203.787.0080
(extension 5894) (extension 5894)
Jack Frost Jack Frost
Vice President Vice President
Telephone: 203.787.0080 Telephone: 203.787.0080
(extension 5885) (extension 5885)
Telecopy: 203.782.9673 Telecopy: 203.782.9673
<PAGE>
<PAGE>
EXHIBIT A-1
FORM OF A NOTE
$ Dated: December 15, 1994
-----------------
FOR VALUE RECEIVED, the undersigned, THE UNITED
ILLUMINATING COMPANY, a Connecticut corporation (the
"Borrower"), HEREBY PROMISES TO PAY to the order of
_____________________ (the "Bank") for the account of
its Applicable Lending Office (as defined in the Credit
Agreement referred to below) the principal sum of [amount
of the Bank's Commitment in figures] or, if less, the
aggregate principal amount of the A Advances (as defined
below) made by the Bank to the Borrower pursuant to the
Credit Agreement outstanding on the Maturity Date.
The Borrower promises to pay interest on the
unpaid principal amount of each A Advance from the date
of such A Advance until such principal amount is paid in
full, at such interest rates, and payable at such times,
as are specified in the Credit Agreement.
Both principal and interest are payable in lawful
money of the United States of America to Citibank, as
Agent, at One Court Square, Seventh Floor, Zone 1, Long
Island City, New York 11120, in same day funds. Each A
Advance made by the Bank to the Borrower pursuant to the
Credit Agreement, and all payments made on account of
principal thereof, shall be recorded by the Bank and,
prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Promissory Note,
provided that the failure to record any A Advance or any
payment thereof shall not affect the payment obligations
of the Borrower hereunder or under the Credit Agreement.
This Promissory Note is one of the A Notes
referred to in, and is entitled to the benefits of, the
Credit Agreement, dated as of December 15, 1994 (as may
hereinafter be amended or supplemented, the "CREDIT
AGREEMENT"), among the Borrower, the Bank and certain
other banks parties thereto, and Citibank, as Agent for
the Bank and such other banks. The Credit Agreement,
among other things, (i) provides for the making of
advances (the "A ADVANCES") by the Bank to the Borrower
from time to time in an aggregate amount not to exceed at
any time outstanding the U.S. dollar
<PAGE>
<PAGE>
2
amount first above mentioned, the indebtedness of the
Borrower resulting from each such A Advance being
evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for
prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein
specified.
The Borrower hereby waives presentment, demand,
protest and notice of any kind. No failure to exercise,
and no delay in exercising, any rights hereunder on the
part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and
construed in accordance with, the laws of the State of
New York.
THE UNITED ILLUMINATING COMPANY
By
-----------------------------
Title:
<PAGE>
<PAGE>
ADVANCES, MATURITIES, INTEREST RATE AND PAYMENTS OF PRINCIPAL
Date of Maturity Amount of Interest Interest Number of Interest Date Amt. Noted
Advance Date Principal Rate Period Days Due Paid Paid By
- ------- ------- --------- -------- -------- --------- -------- ---- ---- -----
<PAGE>
<PAGE>
EXHIBIT A-2
FORM OF B NOTE
$225,000,000 Dated: December 15, 1994
FOR VALUE RECEIVED, the undersigned, THE UNITED
ILLUMINATING COMPANY, a Connecticut corporation (the
"BORROWER"), hereby promises to pay to the order of
__________ (the "BANK"), at its Applicable Lending Office
(as defined in the Credit Agreement referred to below)
the lesser of the principal sum of TWO HUNDRED TWENTY
FIVE MILLION DOLLARS ($225,000,000) and the aggregate
unpaid principal amount of all B Advances (as defined in
the Credit Agreement) made by the Bank to the Borrower
pursuant to Section 2.03 of the Credit Agreement, dated
as of December 15, 1994, among the Borrower, certain
Banks parties thereto and Citibank, N.A., as Agent (as
may hereinafter be amended or supplemented, the "CREDIT
AGREEMENT"), such payment of each B Advance to be made on
the earlier of the Maturity Date or the date listed on
the schedule attached hereto as the maturity date for
such B Advance, in lawful money of the United States of
America in immediately available funds, and to pay
interest on such principal amount from time to time
outstanding, in like funds, at said office, at a rate or
rates per annum and payable with respect to such periods
and on such dates as determined pursuant to the Credit
Agreement.
The Borrower promises to pay interest, on demand,
on any overdue principal and, to the extent permitted by
law, overdue interest from its due date at a rate or
rates determined as set forth in the Credit Agreement.
The Borrower hereby waives diligence, presentment,
demand, protest and notice of any kind whatsoever. The
nonexercise by the holder of any of its rights hereunder
in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
Each B Advance made by the Bank to the Borrower
pursuant to the Credit Agreement, the maturity date
thereof, the interest rate applicable thereto and all
payments on account of the principal thereof, shall be
recorded by the Bank and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of
this Promissory Note, provided that the failure to record
any B Advance or any payment thereof shall not affect the
payment obligation of the Borrower hereunder or under the
Credit Agreement.
<PAGE>
<PAGE>
2
This B Note is one of the B Notes referred to in
the Credit Agreement, and is entitled to the benefits
thereof and subject to the provisions thereof. The
Credit Agreement, among other things, contains provisions
for the acceleration of the maturity hereof upon the
happening of certain events, for prepayment of the
principal hereof prior to the maturity thereof and for
the amendment or waiver of certain provisions of the
Credit Agreement, all upon the terms and conditions
therein specified. This B Note shall be construed in
accordance with a governed by the laws of the State of
New York and any applicable laws of the Untied States of
America.
THE UNITED ILLUMINATING
COMPANY
By
------------------------
Title:
<PAGE>
<PAGE>
ADVANCES, MATURITIES, INTEREST RATE AND PAYMENTS OF PRINCIPAL
Date of Maturity Amount of Interest Interest Number of Interest Date Amt. Noted
Advance Date Principal Rate Period Days Due Paid Paid By
- ------- -------- --------- -------- -------- --------- -------- ---- ---- -----
<PAGE>
<PAGE>
EXHIBIT B-1
NOTICE OF A BORROWING
[Date]
Citibank, N.A., as Agent
for the Banks parties
to the Credit Agreement
referred to below
One Court Square
7th Floor, Zone 1
Long Island City, New York 11120
Attention: Capital Markets/Bank Loan Syndications
Department
Ladies and Gentlemen:
The undersigned, THE UNITED ILLUMINATING
COMPANY, refers to the Credit Agreement, dated as of
December 15, 1994 (as may hereinafter be amended or
supplemented, the "CREDIT AGREEMENT", the terms defined
therein being used herein as therein defined), among the
undersigned, certain Banks parties thereto and Citibank,
N.A., as Agent for said Banks, and hereby gives you
notice, irrevocably, pursuant to Section 2.02 of the
Credit Agreement that the undersigned hereby requests an
A Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to
such A Borrowing (the "PROPOSED A BORROWING") as required
by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed A
Borrowing is_____________ _____, 19 .
(ii) The Type of A Advances comprising the
Proposed A Borrowing is [Adjusted Base Rate
Advances] [Eurodollar Rate Advances].
<PAGE>
<PAGE>
2
(iii) The aggregate amount of the
Proposed A Borrowing is $_____________.
(iv) The Interest Period for each Eurodollar
Rate Advance made as part of the Proposed A
Borrowing is [____ month[s]].
The undersigned hereby certifies that the
following statements are true on the date hereof, and
will be true on the date of the Proposed A Borrowing:
(A) the representations and warranties
contained in Section 4.01 of the Credit Agreement
are correct, before and after giving effect to the
Proposed A Borrowing and to the application of the
proceeds therefrom, as though made on and as of
such date; and
(B) no event has occurred and is continuing,
or would result from such Proposed A Borrowing or
from the application of the proceeds therefrom,
which constitutes an Event of Default or would
constitute an Event of Default but for the
requirement that notice be given or time elapse or
both.
Very truly yours,
THE UNITED ILLUMINATING
COMPANY
By
----------------------------
Title:
cc: Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attention: Utilities Department
<PAGE>
<PAGE>
EXHIBIT B-2
NOTICE OF B BORROWING
[Date]
[Address of the Banks]
Attention:
--------------------------
Ladies and Gentlemen:
The undersigned, THE UNITED ILLUMINATING
COMPANY, refers to the Credit Agreement, dated as of
December 15, 1994 (as may hereinafter be amended or
supplemented, the "CREDIT AGREEMENT", the terms defined
therein being used herein as therein defined), among the
undersigned, certain Banks parties thereto and Citibank,
N.A., as Agent for said Banks, and hereby gives you
notice pursuant to Section 2.03(a)(i) of the Credit
Agreement that the undersigned hereby requests a B
Borrowing under the Credit Agreement, and in that
connection sets forth the terms on which such B Borrowing
(the "PROPOSED B BORROWING") is requested to be made:
(A) Date of B Borrowing
--------------------
(B) Amount of B Borrowing
--------------------
(C) Maturity Date
--------------------
(D) Interest Rate Basis
--------------------
(E) Interest Payment Date(s)
--------------------
(F)
----------------------- --------------------
(G)
----------------------- --------------------
(H)
----------------------- --------------------
The undersigned hereby certifies that the
following statements are true on the date hereof, and
will be true on the date of the Proposed B Borrowing:
(a) the representations and warranties
contained in Section 4.01 of the Credit Agreement
are correct, before and after giving effect to the
Proposed B Borrowing and to the application of the
proceeds therefrom, as though made on and as of
such date;
<PAGE>
<PAGE>
2
(b) no event has occurred and is continuing,
or would result from the Proposed B Borrowing or
from the application of the proceeds therefrom,
which constitutes an Event of Default or would
constitute an Event of Default but for the
requirement that notice be given or time elapse or
both;
(c) no event has occurred and no
circumstance exists as a result of which the
information concerning the undersigned that has
been provided to the Agent and each Bank by the
undersigned in connection with the Credit
Agreement would include an untrue statement of a
material fact or omit to state any material fact
or any fact necessary to make the statements
contained therein, in the light of the
circumstances under which they were made, not
misleading; and
(d) the aggregate amount of the Proposed B
Borrowing and all other Borrowings to be made on
the same day under the Credit Agreement is within
the aggregate amount of the unused Commitments of
the Banks.
The undersigned hereby confirms that the
Proposed B Borrowing is to be made available to it in
accordance with Section 2.03 of the Credit Agreement.
Very truly yours,
THE UNITED ILLUMINATING
COMPANY
By
---------------------------
Title:
cc: Citibank, N.A., as Agent
399 Park Avenue
New York, New York 10043
Attention: Utilities Department
<PAGE>
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL TO THE BORROWER
December 15, 1994
To each of the Banks party to
the Revolving Credit Agreement,
dated as of December 15, 1994,
among The United Illuminating Company,
said Banks and Citibank, N.A., as Agent
for said Banks
THE UNITED ILLUMINATING COMPANY
Ladies and Gentlemen:
This opinion is furnished to you pursuant to
Section 3.01(d) of the Revolving Credit Agreement, dated
as of December 15, 1994 (the "CREDIT AGREEMENT"), among
The United Illuminating Company (the "BORROWER"), the
banks parties thereto (the "BANKS") and Citibank, N.A.,
as Agent for the Banks (the "AGENT"). Terms defined in
the Credit Agreement are used herein as therein defined.
We have acted as counsel for the Borrower in
connection with the preparation, execution and delivery
of the Credit Agreement and the Notes executed and
delivered by the Borrower to the Banks on the date hereof
(the "NOTES").
In that connection we have examined:
(1) The Credit Agreement and the Notes.
(2) The other documents furnished by the Borrower
pursuant to Article III of the Credit
Agreement.
(3) The Certificate of Incorporation of the
Borrower and all amendments thereto (the
"CHARTER").
(4) The bylaws of the Borrower and all amendments
thereto (the "BYLAWS").
<PAGE>
<PAGE>
2
(5) (i) A certificate of the Secretary of State
of the State of Connecticut, dated
December 13, 1994, attesting to the continued
legal existence of the Borrower in such
State; and (ii) a telegram from said
Secretary of State, dated December 15, 1994,
confirming the continued legal existence of
the Borrower in such state.
We have also examined the originals, or copies
certified to our satisfaction, of such other corporate
records of the Borrower, certificates of public officials
and of officers of the Borrower, and agreements,
instruments and documents, as we have deemed necessary as
a basis for the opinions hereinafter expressed. As to
questions of fact material to such opinions, we have,
when relevant facts were not independently established by
us, relied upon certificates of the Borrower or its
officers or of public officials. We have assumed the due
execution and delivery, pursuant to due authorization, of
the Credit Agreement by the Agent and the Banks.
Based upon the foregoing and upon such
investigation as we have deemed necessary, we are of the
opinion that:
1. The Borrower is a corporation duly
incorporated, validly existing and in good
standing under the laws of the State of
Connecticut and is duly qualified to do business,
and is in good standing, in every jurisdiction
where the nature of its business requires it to be
so qualified. Except where failure to procure the
same will not materially affect the conduct of its
business, the Borrower has validly procured and
now possesses all franchises, rights, licenses and
permits and other similar authorizations which are
required for the Borrower's present operations by
each jurisdiction in which the Borrower is
carrying on any material portion of its
businesses.
2. The execution, delivery and performance
by the Borrower of the Credit Agreement, the Notes
and all other instruments and documents to be
delivered by the Borrower under the Credit
Agreement, and the transactions contemplated under
the Credit Agreement and such other instruments
and documents, are within the Borrower's corporate
powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the
Charter or the Bylaws or (ii) any law, rule,
regulation, order or judgment applicable to, or
any contractual restriction binding on or
affecting, the Borrower, and do not result in or
require the creation of any lien, security
interest or other charge or encumbrance upon or
with respect to any of its properties.
<PAGE>
<PAGE>
3
3. No authorization, approval or other
action by, and no notice to or filing with, any
governmental authority or regulatory body is
required for the due execution, delivery and
performance by the Borrower of the Credit Agreement,
the Notes or any other document or instrument to be
delivered under the Credit Agreement.
4. The Credit Agreement is, and each of the
Notes when delivered hereunder will be, a legal,
valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance
with their respective terms.
5. To the best of our knowledge there has
not been any failure by the Borrower to file at or
prior to the time required any report or other filing
with any regulatory authority having jurisdiction over
it, which failure would materially adversely affect
the business, operations, affairs, assets or condition,
financial or otherwise, or prospects of the Borrower.
6. Except as described in the financial
statements furnished pursuant to Section 4.01(e)
of the Credit Agreement and in the Borrower's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, there are neither (i) any
actions, suits or proceedings pending or, to the
best of our knowledge, threatened against or
affecting the Borrower or the property of the
Borrower in any court or before any arbitrator of
any kind or before or by any governmental body,
nor (ii) to the best of our knowledge, any
developments or determinations in any such
actions, suits or proceedings, which actions,
suits, proceedings, developments or determinations
may materially adversely affect the business,
operations, affairs, assets or condition,
financial or otherwise, or prospects of the
Borrower or which may materially adversely affect
the ability of the Borrower to perform its
obligations under the Credit Agreement and the
Notes. The Borrower is not in default with
respect to any order of any court, arbitrator or
governmental body, except for defaults with
respect to orders of governmental agencies which
defaults are not material to the business or
operations of the Borrower.
7. The Borrower is not an "investment
company" as defined in, or otherwise subject to
regulation under, the Investment Company Act of
1940. The Borrower is not a "holding company" as
that term is defined in the Public Utility Holding
Company Act of 1935.
<PAGE>
<PAGE>
4
8. No Bank nor the Agent will violate
Section 36-5a of the Connecticut General Statutes
solely by reason of the execution and delivery of
the Agreement by such Bank or the Agent, the
performance by such Bank or Agent of any of its
obligations under the Credit Agreement, the making
of advances under the Credit Agreement by such
Bank, or the enforcement, or the seeking of
enforcement, by such Bank or the Agent of any of
its rights under the Credit Agreement.
The opinion in paragraph 4 above is subject to the
following qualifications:
(a) The enforceability of the Borrower's
obligations under the Credit Agreement is subject
to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar
law affecting creditors' rights generally.
(b) The enforceability of the Borrower's
obligations under the Credit Agreement is subject
to general principles of equity (regardless of
whether such enforceability is considered in a
proceeding in equity or at law).
All of the opinions set forth above are limited to
the laws of the State of Connecticut, the State of New
York and the United States of America, and we do not
express any opinion concerning any other law.
Very truly yours,
WIGGIN & DANA
By
-----------------------------
William C. Baskin, Jr.
<PAGE>
<PAGE>
EXHIBIT D
FORM OF OPINION OF SPECIAL NEW YORK
COUNSEL TO THE AGENT
December 15, 1994
To each of the Banks party to
the Revolving Credit Agreement
referred to below, and to
Citibank, N.A., as Agent for
such Banks
THE UNITED ILLUMINATING COMPANY
Ladies and Gentlemen:
We have acted as counsel to Citibank, N.A.,
individually and as Agent, in connection with the
preparation, execution and delivery of, and the closing
on December 15, 1994 under, the Revolving Credit
Agreement, dated as of December 15, 1994 (the "CREDIT
AGREEMENT"), among The United Illuminating Company (the
"BORROWER"), the Banks parties thereto and Citibank,
N.A., as Agent for said Banks.
In this connection, we have examined the following
documents:
1. a counterpart of the Credit Agreement,
executed by the parties thereto; and
2. the Notes (as defined in the Credit
Agreement) and the other documents furnished
pursuant to Section 3.01 of the Credit Agreement.
In our examination of the documents referred to
above, we have assumed the authenticity of all such
documents submitted to us as originals, the genuineness
of all signatures, the due authority of the parties
executing such documents and the conformity to the
originals of all such documents
<PAGE>
<PAGE>
2
submitted to us as copies. We have relied, as to factual
matters, on the documents we have examined and, as to
matters addressed by the opinion of counsel to the
Borrower, on such opinion. We have also assumed that you
have evaluated, and are satisfied with, the
creditworthiness of the Borrower and the business and
financial terms evidenced by the Credit Agreement and the
Notes.
Our opinions expressed below are limited to the
law of the State of New York and the Federal law of the
United States, and we do not express any opinions herein
concerning any other law.
Based upon and subject to the foregoing, we are of
the opinion that (i) the Credit Agreement and the Notes
we have examined are in substantially acceptable legal
form, and (ii) the opinion of counsel to the Borrower and
the other documents referred to in paragraph 2 above are
substantially responsive to the provisions of the Credit
Agreement pursuant to which the same have been delivered.
Very truly yours,
KING & SPALDING
MEO:GDP:tah
<PAGE>
<TABLE>
List of Subsidiaries of
The United Illuminating Company
-------------------------------
<CAPTION>
State or Jurisdiction
Name of of incorporation Name under which
Subsidiary or organization Subsidiary does business
- ---------- --------------------- ------------------------
<C> <C> <C>
Research Center, Inc. Connecticut Research Center, Inc.
United Energy United Energy
International, Inc. Connecticut International, Inc.
United Resources, Inc. Connecticut United Resources, Inc.
Souwestcon Properties, Inc.* Connecticut Souwestcon Properties, Inc.
Thermal Energies, Inc.* Connecticut Thermal Energies, Inc.
Precision Power, Inc.* Connecticut Precision Power, Inc.
American Payment
Systems, Inc.* Connecticut American Payment Systems, Inc.
Ventana Corporation* Connecticut Ventana Corporation
- ----------------------------
*Subsidiary of United Resources, Inc.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,357,257
<OTHER-PROPERTY-AND-INVEST> 21,824
<TOTAL-CURRENT-ASSETS> 157,309
<TOTAL-DEFERRED-CHARGES> 538,601
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,074,991
<COMMON> 284,133
<CAPITAL-SURPLUS-PAID-IN> (1,664)
<RETAINED-EARNINGS> 145,559
<TOTAL-COMMON-STOCKHOLDERS-EQ> 428,028
0
44,700
<LONG-TERM-DEBT-NET> 708,340
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 67,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 193,133
0
<CAPITAL-LEASE-OBLIGATIONS> 17,799
<LEASES-CURRENT> 1,169
<OTHER-ITEMS-CAPITAL-AND-LIAB> 614,822
<TOT-CAPITALIZATION-AND-LIAB> 2,074,991
<GROSS-OPERATING-REVENUE> 656,748
<INCOME-TAX-EXPENSE> 44,937
<OTHER-OPERATING-EXPENSES> 484,419
<TOTAL-OPERATING-EXPENSES> 529,356
<OPERATING-INCOME-LOSS> 127,392
<OTHER-INCOME-NET> 2,060
<INCOME-BEFORE-INTEREST-EXPEN> 129,452
<TOTAL-INTEREST-EXPENSE> 81,363
<NET-INCOME> 46,795
3,323
<EARNINGS-AVAILABLE-FOR-COMM> 43,472
<COMMON-STOCK-DIVIDENDS> 38,877
<TOTAL-INTEREST-ON-BONDS> 70,005
<CASH-FLOW-OPERATIONS> 136,985
<EPS-PRIMARY> 3.09
<EPS-DILUTED> 3.09
</TABLE>
