<PAGE>
<PAGE>
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, 1995
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
Registrant Title of each class which registered
---------- ------------------- ------------------------
The United Illuminating
Company Common Stock, no par value New York Stock Exchange
United Capital Funding
Partnership L.P. (1) 9 5/8% Preferred Capital New York Stock Exchange
Securities, Series A
(Liquidation Preference
$25 per Security)
(1) The 9 5/8% Preferred Capital Securities, Series A, were issued on
April 3, 1995 by United Capital Funding Partnership L.P., a wholly-owned
subsidiary of The United Illuminating Company, and are guaranteed by The
United Illuminating Company.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
no par value, of
The United
Illuminating
Company
____________________________________________________
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 January 31, 1996 was $543,734,759, 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 February 1, 1996.
The number of shares outstanding of the registrant's only class of common
stock, as of January 31, 1996, was 14,100,091.
DOCUMENTS INCORPORATED BY REFERENCE
Part of this Form 10-K into
Document which document is incorporated
-------- ------------------------------
Definitive Proxy Statement, dated
March 28, 1996, for Annual Meeting of the
Shareholders to be held on May 15, 1996. III
<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
FORM 10-K
December 31, 1995
TABLE OF CONTENTS
PAGE
----
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 12
- Fossil Fuel 12
- Nuclear Fuel 12
- Arrangements with Other Utilities 13
- 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
- 1 -<PAGE>
<PAGE>
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 35
- Results of Operations 37
- Outlook 40
Item 8. Financial Statements and Supplementary Data. 42
- Consolidated Statements for the Years Ended December 31,
1995, 1994 and 1993 42
- Statement of Income 42
- Cash Flows 43
- Balance Sheet 44
- Retained Earnings 46
- Notes to Consolidated Financial Statements 47
- Statement of Accounting Policies 47
- Capitalization 52
- Rate-Related Regulatory Proceedings 56
- Accounting for Phase-in Plan 57
- Income Taxes 58
- Short-Term Credit Arrangements 59
- Supplementary Information 61
- Pension and Other Benefits 62
- Jointly Owned Plant 65
- Unamortized Cancelled Nuclear Project 65
- Fuel Financing Obligations and Other Lease Obligations 66
- Commitments and Contingencies 67
- Capital Expenditure Program 67
- Nuclear Insurance Contingencies 67
- 2 -<PAGE>
<PAGE>
TABLE OF CONTENTS (continued)
PAGE
----
PART II (CONTINUED)
- Other Commitments and Contingencies 68
- Hydro-Quebec 68
- Reorganization Charge 68
- Site Remediation Costs 68
- Property Taxes 68
- Environmental Concerns 69
- Nuclear Fuel Disposal and Nuclear Plant Decommissioning 69
- Property Tax Settlement 71
- Fair Value of Financial Instruments 71
- Quarterly Financial Data (Unaudited) 72
Report of Independent Accountants 73
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures. 74
PART III
Item 10. Directors and Executive Officers of the Company 74
Item 11. Executive Compensation. 74
Item 12. Security Ownership of Certain Beneficial Owners
and Management. 74
Item 13. Certain Relationships and Related Transactions. 74
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 75
Consent of Independent Accountants 82
Signatures 83
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<PAGE>
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.
"CAM" means conservation adjustment mechanism.
"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.
"EAC" means energy adjustment clause.
"EPA" means the United States Environmental Protection Agency.
"FERC" means the United States Federal Energy Regulatory Commission.
"FCA" means fossil fuel adjustment clause.
"LIBOR" means London Interbank Borrowing Rate.
"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.
"NOx" means nitrogen oxides.
"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.
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<PAGE>
GLOSSARY (CONTINUED)
"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 ten other New England
electric utilities.
"SEC" means Securities and Exchange Commission.
"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.
- 5 -<PAGE>
<PAGE>
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 704,000 or 21%
of the population of the State. The service area, largely
urban and suburban in character, includes the principal
cities of Bridgeport (population 137,000) and New Haven
(population 124,000) 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 1995 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) was 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, that has 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 had
a majority ownership interest in Ventana Corporation, a
subsidiary that was dissolved in December 1995 and formerly
offered 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 $22.0 million, in the aggregate,
of the Company's assets in all of URI's ventures, UEI and
RCI, and, at December 31, 1995, approximately $19.8 million
had been 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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<PAGE>
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. 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, as a result of a pending FERC rulemaking that
seeks to promote competition in that market by requiring
electric utilities to furnish non-discriminatory
transmission service to all buyers and sellers in the
marketplace, and 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 its pending rulemaking, the FERC has
stressed the importance of allowing electric utilities to
recover the costs of existing facilities (primarily
generation) that would be rendered uneconomic ("stranded")
by a competitive bulk power market.
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
- 7 -<PAGE>
<PAGE>
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
customers to remain on the Company's system. The Company
now has more than a dozen multi-year contracts with major
customers, including its largest customer. This customer is
constructing a cogeneration unit that is expected to produce
enough electricity to supply approximately one-half of the
customer's requirements. The customer's remaining
requirements will continue to be supplied by UI under a
special rate and service agreement. 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 access".
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 access 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 access 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 access or some other form of competition that is more
intense than the current franchise framework. Among many
other factors, decisions and actions concerning retail
access in other states could impact the timing and form of
this transition. The FERC has stated that state regulatory
commissions should address the issue of recovery by electric
utilities of the costs of existing facilities that would be
stranded by retail access.
Although the Company is unable to predict the future
effects of competitive forces in the electric utility
industry, competition could result in a change in the
regulatory structure of the industry, and costs that have
traditionally been recoverable through the ratemaking
process may not be recoverable in the future. This effect
could have a material impact on the financial condition
and/or results of operations of the Company.
In anticipation of increased competition, the Company has
initiated a continuing and focused effort to reduce and
control costs, to reinforce customer loyalty and to develop
additional sources of revenue. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results
of Operations - "Major Influences on Financial Condition"
and "Outlook".
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.
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. In the Company's most recent retail rate
proceeding, the DPUC authorized a return on equity of 12.4%
for ratemaking purposes. However, the Company may earn up
to 1% above this level for six consecutive months before a
mandatory review is required by the DPUC. A Connecticut
statute requires the DPUC to review and investigate the
financial and operating records of each electric utility
company, at intervals of not more than four years, to
determine whether the company's rates comply with statutory
standards. The Company expects that a proceeding under this
statute will commence during 1996.
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<PAGE>
The Company is allowed revenue increases for conservation
and load management expenditures through a Conservation
Adjustment Mechanism (CAM) in its retail rates, and
accordingly received a revenue increase in 1995 of $6.1
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. The
Connecticut legislature has authorized the DPUC to adopt an
energy adjustment clause (EAC), a fully-tracking fuel
clause, to replace the FCA, if the EAC will achieve
specified objectives; and the DPUC has conducted hearings on
this issue. While the FCA applies only to fossil fuel price
changes, an EAC could permit recovery of replacement fuel
cost differentials incurred during extended nuclear
generating unit outages. However, an EAC could also pass
through to customers the benefits of the lower fuel costs
associated with increased nuclear generation.
FINANCING
The Company's capital requirements are presently projected
as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C> <C>
Cash on Hand - Beginning of Year $ 5.1 $ 23.8 $ - $ - $ -
Internally Generated Funds (less Dividends) 99.4 95.2 101.0 99.1 83.7
----- ----- ----- ---- ----
Subtotal 104.5 119.0 101.0 99.1 83.7
Less:
Capital Expenditures 69.9 60.0 52.2 77.5 51.1
----- ----- ----- ---- ----
Cash Available to pay Debt Maturities
and Redemptions 34.6 59.0 48.8 21.6 32.6
Less:
Maturities and Mandatory Redemptions 10.8 65.2 115.6 116.0 155.7
----- ----- ----- ----- -----
External Financing Requirements $(23.8) $ 6.2 $ 66.8 $ 94.4 $123.1
======= ===== ====== ====== ======
</TABLE>
Note: Internally Generated Funds (less Dividends), Capital Expenditures and
External Financing Requirements are estimates based on current earnings
and cash flow projections and are subject to change due to future
events and conditions that may be substantially different than those
used in developing the projections.
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 $75 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. 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 January 17, 1995 and October 2, 1995, the Company
repaid, at maturity, $50 million principal amount of 6.00%
Notes and $47 million principal amount of 7.25% Notes,
respectively, of the Company.
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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 issued by
Bridgeport Electric Company, a wholly-owned subsidiary of
the Company that was merged with and into the Company in
September of 1994. On February 15, 1996, the Company repaid
an additional $10.8 million of the 9.44% First Mortgage
Bonds issued by Bridgeport Electric Company.
On April 3, 1995, United Capital Funding Partnership L.P.
("United Capital"), a special purpose limited partnership in
which the Company owns all of the general partner interests,
issued $50 million of its monthly income 9 5/8% Preferred
Capital Securities, Series A, ("Preferred Capital
Securities") representing limited partnership interests in
United Capital. United Capital loaned the proceeds of the
issuance and sale of the Preferred Capital Securities to the
Company in return for the Company's 9 5/8% Junior
Subordinated Deferrable Interest Debentures, Series A, Due
2025. The net proceeds to the Company, approximately $48.4
million, were used to redeem, on May 10, 1995, $12.5 million
of outstanding $100 par value 7.60% Preferred Stock,
Series E (including a redemption premium of $125,000) and
$15.0 million of outstanding $100 par value 7.60% Preferred
Stock, Series F (including a redemption premium of $150,000)
and to reduce short-term borrowings.
On May 10, 1995, the Company made a tender offer for all
of the shares of its outstanding $100 par value 4.35%
Preferred Stock, Series A, 4.72% Preferred Stock, Series B,
4.64% Preferred Stock, Series C, and 5.625% Preferred Stock,
Series D. On June 12 and July 17, 1995, the Company
purchased and retired, at a discount of $2,457,531, 19,178
shares of the Series A, 17,790 shares of the Series B,
19,155 shares of the Series C and 10,488 shares of the
Series D preferred stock issues.
In May 1995 and June 1995, the Company entered into two
separate, five-year, $50 million interest rate swap
agreements with a major money center bank. Under the terms
of the agreements, the Company will pay interest to the bank
at fixed annual rates of 6.40% and 5.92%, respectively, and
the bank will pay the Company interest at floating rates
equal to the three-month London Interbank Borrowing Rate
(LIBOR), which floating rates correspond to the floating
rates on the Term Loan borrowings described below. The fair
value of interest rate swaps is the estimated amount that
the Company would receive or pay to terminate the swap
agreements at the reporting date, taking into account
current interest rates. At December 31, 1995, the Company
would have been required to pay approximately $2.3 million
to terminate the agreements.
On August 29 and September 6, 1995, the Company borrowed
$50 million and $100 million, respectively, under a Term
Loan Agreement with a group of banks for a five-year period.
The Company pays interest on the borrowings at a floating
rate equal to the three-month LIBOR plus 0.55%. The
interest rate swap agreements described in the preceding
paragraph have effectively converted the interest rate on
$100 million of the Company's floating rate Term Loan
borrowings to fixed rates. As a result, the interest rates
on two $50 million borrowings under the Term Loan Agreement
are fixed at 6.95% and 6.47%.
The Company has a revolving credit agreement with a group
of banks, which currently extends to December 11, 1996. The
borrowing limit of this facility is $75 million, reduced
from the borrowing limit of $225 million under the previous
revolving credit agreement. 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, 1995, the Company had no 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
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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, 1995,
this coverage ratio was 3.31.
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.
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, 1995 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>
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
1995 2.68 2.71 3.31
</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. As of
December 31, 1995, the Company's guarantee liability for
this debt amounted to approximately $8.7 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.
- 11 -<PAGE>
<PAGE>
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 1995, approximately 881,000 tons of coal, 2.2
million barrels of fuel oil and 4.1 billion cubic feet of
natural gas were consumed in the generation of electricity.
The Company owns 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 170,000 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,
1996.
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, that
expires on December 31, 2000, 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 1995
was not purchased pursuant to this agreement.
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 1/3 to 1/2 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 1997 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 1997 2002 2007
Millstone Unit 3 1999 2002 1997 (1)
Seabrook Unit 1 1999 2002 2007
<FN>
(1) The contract provides an option to extend fabrication services
through 2003.
</TABLE>
- 12 -<PAGE>
<PAGE>
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.
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
in February, May and March of 1992, respectively.
Applications for renewal of these permits had been filed in
August, November and September of 1991, respectively, and
while these renewal applications are pending, the terms of
the expired permits continue in effect. The applications
for English and Steel Point Stations have been modified to
reflect changes in the operating status of these generating
facilities and changes in the permitting system, and in
November 1995 UI filed a request with the DEP to withdraw
the application for Steel Point Station, as a result of the
ongoing demolition of the decommissioned generating units at
that location. Several new permits have been issued for
specific discharges at New Haven Harbor, Bridgeport Harbor
and/or English Stations; 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. The
- 13 -<PAGE>
<PAGE>
DEP has determined that the thermal component of the
discharges at each of the 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.
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 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 (NOx)
that are applicable to generating units located in or near
areas, such as UI's service territory, where ambient air
quality standards for 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 1995, the Company has
expended a total of approximately $15.6 million to comply
with these NOx controls and emission monitoring systems
requirements. Controls installed with a portion of these
expenditures have resulted in achievement of NOx emissions
from the largest generating unit at Bridgeport Harbor
Station substantially below, and at a date significantly in
advance of, that required under the statute. As a result,
the DEP has approved UI's creation of transferable and
marketable NOx emission reduction credits, and supplemental
approvals are anticipated for the creation of additional
credits at this generating unit through April 1999. During
1995, UI consummated four sales of NOx emission reduction
credits, and it continues to market these credits. These
sales have not had a significant impact on the Company's
earnings. In September 1994, the Ozone Transport Commission
(consisting of the twelve northeastern-most states plus the
District of Columbia) adopted a Memorandum of Understanding
(MOU) that obligates certain of those states, including
Connecticut, to adopt regulations that will further limit
emissions of NOx from large stationary sources, including
utility boilers. The MOU calls for the reductions to occur
in two steps; the first in 1999 and the second in 2003. It
is expected that the regulations, when promulgated, will
become part of the federally mandated revisions to
Connecticut's plan for achieving compliance with air quality
standards for photochemical oxidants. However, these
regulations 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
- 14 -<PAGE>
<PAGE>
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, owners of
the property have estimated the total remediation cost to be
approximately $346,000.
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.
UI's Bridgeport Harbor and New Haven Harbor Stations have
been registered as treatment, storage and disposal
facilities, because of historic solid waste management
activities at these sites. The Company has ceased using
these sites for any of these purposes and has filed facility
closure plans with the DEP; but further corrective actions
may be required at one or more of them for documented or
potential releases of hazardous wastes. Because regulations
for such corrective actions have not yet been promulgated,
the Company is unable to predict what impact, if any, such
regulations may have on these facilities.
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 $6.0 million. In its December 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 17 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.
- 15 -<PAGE>
<PAGE>
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 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
total amount of these expenditures is not now determinable.
See also "Franchises, Regulation and Competition" and Item
2. Properties - "Nuclear Generation".
EMPLOYEES
As of December 31, 1995, the Company had 1,358 employees,
including 38 in subsidiary operations. Of these,
approximately 67% had been with the Company for 10 or more
years.
Approximately 695 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 22, 1995, the Company and the
union agreed on a three-year contract, effective May 16,
1995. 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, 1995,
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 1119.60 3.685 41.26(6)
Waterford, Connecticut
Seabrook Unit 1, Nuclear 1990 1155.00 17.50 202.13(7)
Seabrook, New Hampshire
POWER PURCHASES FROM
COGENERATION FACILITIES:
- -----------------------
Bridgeport RESCO, Refuse 1988 59.45 100.00 59.45
Bridgeport, Connecticut
Shelton Landfill Gas 1995 1.88 100.00 1.88
Shelton, Connecticut
-------
Total 1503.44
=======
<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 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
1995 ACTUAL, 1996 - 2000 FORECAST
(MEGAWATTS)
<CAPTION>
Actual Forecast
------ -------------------------------------
1995 1996 1997 1998 1999 2000
<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 41.26 41.26 41.26 41.26 41.26 41.26
Seabrook Unit 1 202.13 202.13 202.13 202.13 202.13 202.13
------ ------ ------ ------ ------ ------
296.60 296.60 296.60 296.60 296.60 296.60
------ ------ ------ ------ ------ ------
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 59.45 59.45 59.45 59.45 59.45 59.45
Shelton Landfill 1.88 1.74 1.61 1.50 1.57 1.54
Purchase from New York
Power Authority 1.14 1.14 1.14 1.14 1.14 1.14
- ----------------------
Purchases from (sales to)
other utilities
- ------------------------
Net power contracts - fossil (14.00) (1.80) 8.20 38.20 38.20 (30.00)
------- ------- ------- ------- ------- -------
Total generating resources 1434.13 1446.19 1456.06 1485.95 1486.02 1417.79
======= ======= ======= ======= ======= =======
Calculation of NEPOOL
capability responsibility (3)
- ------------------------------
Peak load 1157.00 1167.00 1164.00 1167.00 1175.00 1183.00
Required reserve margin 194.51 237.07 231.57 218.74 212.93 220.26
------- ------- ------- ------- ------- -------
Total capability
responsibility 1351.51 1404.07 1395.57 1385.74 1387.93 1403.26
======= ======= ======= ======= ======= =======
Available Margin (4) 79.60 39.24 57.74 97.57 95.38 11.85
======= ======= ======= ======= ======= =======
<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 - 55.40
Millstone Unit 3 - 42.22
Seabrook Unit 1 - 202.65
Hydro-Quebec - 66.22
(3) UI's required capacity as a NEPOOL participant.
(4) Total generating resources, excluding purchases from New York Power
Authority and Shelton Landfill, 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
155 MW of generating capacity.
</FN>
</TABLE>
- 18 -<PAGE>
<PAGE>
During 1995, the peak load on the Company's system was
approximately 1,157 megawatts, which occurred in August.
UI's total generating capability at the time was 1,434
megawatts, including a 98.7 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 an annual average compound growth in peak load
of .6% during the period 1995 to 2005. 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, these New England utilities had
26,531 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
20,499 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 1995.
<TABLE>
MEGAWATTHOURS
-------------
(000'S)
<CAPTION>
SOURCES USES
- ------- ----
<S> <C> <S> <C>
OWNED Retail Customers 5,339
Nuclear (Millstone Unit 3
and Seabrook Unit 1) 1,762
Coal 2,295 Wholesale
Oil 1,285 Delivered to NEPOOL 1,105
Gas & Gas Turbines 390 Contracts 889
-----
Total Owned 5,732
Company Use & Losses 308
-----
PURCHASED
Nuclear (Connecticut Yankee Unit) 348 Total Uses 7,641
Contracts 926 =====
NEPOOL 350
Hydro-Quebec 285
-----
Total Sources 7,641
=====
</TABLE>
TRANSMISSION AND DISTRIBUTION PLANT
The transmission lines of the Company consist of
approximately 100 circuit miles of overhead lines and
approximately 20 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 2,656,000 KVA and 46
distribution substations with a capacity of 263,750 KVA.
The Company has 3,123 pole-line miles of overhead
distribution lines and 130 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 1996-2000 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>
1996 1997 1998 1999 2000 Total
---- ---- ---- ---- ---- -----
(000's)
<S> <C> <C> <C> <C> <C> <C>
Production $19,464 $15,240 $14,304 $32,700 $12,972 $ 94,680
Distribution 22,272 19,956 19,236 18,996 20,112 100,572
Transmission 2,436 3,360 5,436 5,304 5,256 21,792
Conservation and
Load Management 7,848 6,492 6,000 6,000 6,000 32,340
Nuclear Fuel 2,988 8,292 2,952 10,488 3,204 27,924
Other 14,880 6,612 4,260 3,996 3,588 33,336
------- -------- ------- ------- ------- --------
Total Expenditures $69,888 $59,952 $52,188 $77,484 $51,132 $310,644
------- ------- ------- ------- ------- --------
AFUDC (Pre-tax) $2,626 $2,815 $2,606 $2,502 $3,305
Book Depreciation (1) 63,177 65,419 68,830 72,296 71,369
Decommissioning 2,083 2,238 2,330 2,436 2,547
Amortization of Deferred
Return on Seabrook
Unit 1 Phase-In 12,586 12,586 12,586 12,586 0
Estimated Rate Base
(end of period) $1,209,001 $1,183,537 $1,153,302 $1,142,580 $1,111,187
<FN>
(1) Steel Point Station environmental remediation costs of $1,075,000 are
included in 1996.
</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 in the past
received serious attention, and the licensing of Seabrook
Unit 1 was a regional issue. A renewal of the controversy
could 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, resulting in increased fuel and/or replacement
power costs, earlier funding of costs associated with
decommissioning the unit and acceleration of depreciation
expense, which could have an adverse impact on the Company's
financial condition and/or results of operations.
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
- 22 -<PAGE>
<PAGE>
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.
Although each of these units has purchased $2.75 billion
of property insurance coverage, representing the limits of
coverage currently available from conventional nuclear
insurance pools, the cost of a nuclear incident could exceed
available insurance proceeds. In addition, two of the
nuclear insurance pools that provide portions of this
coverage may levy assessments against the insured owner
companies if pool losses exceed the accumulated funds
available to the pool. The maximum potential assessments
against the Company with respect to losses occurring during
current policy years are approximately $7.5 million.
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 January 1998. However, the DOE has
announced that its first high level waste repository will
not be in operation earlier than 2010 and possibly not
earlier than 2013, 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.
The DOE has also announced that, absent a repository, DOE
has no statutory obligation to begin taking high level
wastes and spent nuclear fuel for disposal by January 1998.
Numerous utilities and states have filed suit seeking a
judicial declaration that DOE has a statutory responsibility
to take title to and dispose of high level wastes and spent
nuclear fuel beginning in January 1998, and seeking remedies
should this not occur. The court is expected to issue
findings by mid-1996.
Legislation is pending in the United States Congress to
address Spent Fuel/High Level Waste Disposal issues; but it
is unclear at this time whether legislation will be
forthcoming.
Until the federal government begins receiving such
materials, operating nuclear generating units will need to
retain high level wastes and spent nuclear fuel on-site or
make other provisions for their storage. Storage facilities
for Millstone Unit 3 and the Connecticut Yankee Unit are
expected to be adequate for the projected life of the units.
Storage facilities for Seabrook Unit 1 are expected to be
adequate until at least 2010. Fuel consolidation and
compaction technologies are being considered for Seabrook
Unit 1 and may provide adequate storage capability for the
projected life of the unit. In addition, other licensed
technologies, such as dry storage casks, may satisfy spent
nuclear 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. Currently, the Chem Nuclear LLW facility at
Barnwell, South Carolina, is open to the Connecticut Yankee
Unit, Millstone Unit 3, and Seabrook Unit 1 for disposal of
LLW. The Envirocare LLW facility at Clive, Utah, is also
open to these generating units for portions of their LLW.
All three units have contracts in place for LLW disposal at
these disposal facilities.
- 23 -<PAGE>
<PAGE>
Because access to LLW disposal may be lost at any time,
the Connecticut Yankee Unit, Millstone Unit 3 and Seabrook
Unit 1 have storage plans that will allow on-site retention
of LLW for at least five years in the event that disposal is
interrupted.
The Company cannot predict whether or when a LLW 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 has stated that the
state is unsuitable for a LLW disposal facility. Both
Connecticut and New Hampshire are also pursuing other
options for out-of-state disposal of LLW.
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.
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 $432 million (in 1996 dollars) as the
decommissioning cost estimate for Seabrook Unit 1, of which
the Company's share would be approximately $76 million.
This estimate premises the prompt removal and dismantling of
the Unit at the end of its estimated 36-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 1995 was
$1.4 million. UI's share of the fund at December 31, 1995
was approximately $7.2 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 $478
million (in 1996 dollars) and $375 million (in 1996
dollars), respectively, of which the Company's share would
be approximately $18 million and $36 million, respectively.
These estimates premise the prompt removal and dismantling
of each unit at the end of its estimated 40-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
1995 was $459,000. UI's share of the fund at December 31,
1995 was approximately $3.1 million. For the Company's 9.5%
equity ownership in Connecticut Yankee, decommissioning
costs of $1.3 million were funded by UI during 1995, and
UI's share of the fund at December 31, 1995 was $17.1
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, generating tax claims of
approximately $3.5 million. On March 1, 1995, the Company
received notices of assessment changes relative to the
assessed value of the Company's personal property for the
tax year 1995-1996, which notices purport to increase said
assessed value by approximately 48% over the valuation
declared by the Company, generating tax claims of
approximately $3.5 million. On May 11, 1995, the Company
received notices of assessment changes relative to the
assessed values of the Company's personal property for the
tax years 1992-1993 and 1993-1994, which notices purport to
increase said assessed values by approximately 45% and 49%,
respectively, over the valuations declared by the Company,
generating tax claims of approximately $4.1 million and $3.5
million, respectively. The City's tax assessor is
conducting hearings regarding the assessed value of the
Company's personal property for the tax year 1996-1997; and
the Company
- 24 -<PAGE>
<PAGE>
anticipates that the tax assessor will take some action to
increase said assessed value for that tax year. The Company
is contesting each of these actions by the City's tax
assessor vigorously. On January 9, 1996, the Connecticut
Superior Court granted the Company's motion for summary
judgment against the City relative to the "updated" personal
property tax bills for the tax year 1991-1992. The City has
appealed to the Appellate Court from the Superior Court
decision, which decision would also be applicable to and
defeat the valuation increases for the tax years 1992-1993
and 1993-1994 if it is sustained on appeal. 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.
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, 1995.
- 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 60 Chairman of the Board of May 1, 1991
Directors and Chief
Executive Officer
Robert L. Fiscus 58 President and Chief
Financial Officer May 1, 1991
James F. Crowe 53 Executive Vice President and
Chief Customer Officer January 1, 1994
Rita L. Bowlby 57 Vice President-Corporate Affairs February 1, 1993
Raymond G. Dube 53 Vice President-Transmission and
Distribution October 1, 1994
Stephen F. Goldschmidt 50 Vice President-Information
Resources January 1, 1994
Albert N. Henricksen 54 Vice President-Administration January 1, 1994
David W. Hoskinson 60 Vice President-Generation January 1, 1994
Robert H. Hyde 55 Vice President-Customer Services January 1, 1986
E. Jon Majkowski 53 Vice President May 1, 1992
Anthony J. Vallillo 47 Vice President-Marketing June 1, 1992
James L. Benjamin 54 Controller January 1, 1981
Kurt D. Mohlman 47 Treasurer and Secretary January 1, 1994
Charles J. Pepe 47 Assistant Treasurer and
Assistant Secretary January 1, 1994
</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, 1991 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, 1991 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, 1991 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, 1991 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, 1991 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, 1991 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-Human and Environmental Resources during the
period January 1, 1991 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-Generation Engineering and Operations during the
period January 1, 1991 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, 1991 to May 1, 1992. He has served as Vice
President since May 1, 1992.
ANTHONY J. VALLILLO. Mr. Vallillo served as Director of
Marketing during the period January 1, 1991 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 and Investor Relations during the period
January 1, 1991 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, 1991 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 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 SALE PRICE 1994 SALE PRICE
--------------- ---------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 33 1/4 29 1/2 39 1/2 35 1/4
Second Quarter 33 5/8 31 1/4 37 1/8 32 1/2
Third Quarter 35 1/4 31 1/2 34 1/2 29 1/8
Fourth Quarter 38 1/2 35 3/4 30 1/2 29
</TABLE>
UI has paid quarterly dividends on its Common Stock since
1900. The quarterly dividends declared in 1994 and 1995
were at a rate of 69 cents per share and 70 1/2 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 $98.7 million
were free from such limitations at December 31, 1995.
As of January 31, 1996, there were 16,976 Common Stock
shareowners of record.
- 29 -<PAGE>
<PAGE>
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
1995 1994 1993
===============================================================================
<S> <C> <C> <C>
FINANCIAL RESULTS OF OPERATION ($000'S)
Sales of electricity:
Retail
Residential $260,694 $252,386 $238,185
Commercial 259,715 250,771(2) 256,559
Industrial 106,963 104,242(2) 97,466
Other 11,736 11,469 11,349
---------- ---------- ----------
Total Retail 639,108 618,868 603,559
Wholesale (1) 48,232 34,927 45,931
Other operating revenues 3,109 2,953 3,533
---------- ---------- ----------
Total operating revenues 690,449 656,748 653,023
---------- ---------- ----------
Fuel and interchange energy -net
Retail -own load 96,538 99,589 98,694
Wholesale 41,631 27,765 39,356
Capacity purchased-net 47,420 44,769 47,424
Depreciation 61,426 58,165 56,287
Other amortization, principally deferred
return and cancelled plant 13,758 1,172 1,780
Other operating expenses,
excluding tax expense 183,749 193,098 203,427(3)
Gross earnings tax 27,379 27,403 27,955
Other non-income taxes 31,564 32,458 29,977
---------- ---------- ----------
Total operating expenses, excluding
income taxes 503,465 484,419 504,900
---------- ---------- ----------
Deferred return Seabrook Unit 1 0 0 7,497
AFUDC 2,762 3,463 4,067
Other non-operating income(loss) (4,272) (1,907) 71
Interest expense
Long-term debt 63,431 73,772 80,030
Other 13,140 10,301 12,260
---------- ---------- ----------
Total 76,571 84,073 92,290
---------- ---------- ----------
Minority interest in preferred
securities 3,583 0 0
Income tax expense
Operating income tax 59,828 44,937 33,309
Non-operating income tax (4,901) (3,214) (6,322)
---------- ---------- ---------
Total 54,927 41,723 26,987
---------- ---------- ---------
Income(loss) before cumulative effect
of accounting change 50,393 48,089 40,481
Cumulative effect of change in
accounting - net of tax 0 (1,294) 0
---------- ---------- ---------
Net income (loss) 50,393 46,795 40,481(4)
Discount on preferred stock redemption (2,183) 0 0
Preferred and preference stock
dividends 1,329 3,323 4,318
---------- ---------- ---------
Income (loss) applicable to common
stock $51,247 $43,472 $36,163
- -------------------------------------------------------------------------------
Operating income $127,156 $127,392 $114,814
===============================================================================
FINANCIAL CONDITION ($000'S)
Plant in service-net $1,277,910 $1,268,145 $1,243,426
Construction work in progress 41,817 57,669 77,395
Plant-related regulatory asset 0 0 0
Other property and investments 53,355 53,267 58,096
Current assets 137,277 157,309 187,981
Deferred charges and regulatory assets 475,258 538,601 567,394
---------- ---------- ----------
Total Assets $1,985,617 $2,074,991 $2,134,292
- -------------------------------------------------------------------------------
Common stock equity $439,981 $428,028 $423,324
Preferred, preference stock and
preferred securities 60,539 44,700 60,945
Long-term debt excluding current portion 845,684 708,340 875,268
Noncurrent liabilities 31,915 29,281 29,119
Current portion of long-term debt 40,800 193,133 143,333
Notes payable 0 67,000 0
Other current liabilites 136,168 152,261 150,890
Deferred income tax liabilities
and other 430,530 452,248 451,413
---------- ---------- ----------
Total Capitalization and
Liabilities $1,985,617 $2,074,991 $2,134,292
===============================================================================
<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.
(2) Includes reclassification of certain Commercial and Industrial customers.
</TABLE>
- 30 -<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
============================================================================
<C> <C> <C> <C> <C> <C> <C>
$226,455 $226,751 $211,891 $205,183 $200,170 $188,740 $178,268
253,456(2) 255,782 234,704 219,852 208,801 195,972 180,888
97,010(2) 91,895 94,526 92,855 96,665 100,354 99,939
11,065 10,886 10,536 9,943 9,732 9,480 9,516
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
587,986 585,314 551,657 527,833 515,368 494,546 468,611
75,484 84,236 85,657 77,925 63,263 54,708 48,010
3,855 3,821 3,332 3,348 3,570 3,077 2,508
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
667,325 673,371 640,646 609,106 582,201 552,331 519,129
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
108,084 123,010 119,285 128,739 121,425 131,471 126,778
55,169 61,858 69,117 62,681 53,837 51,411 46,466
43,560 44,668 42,827 50,234 35,465 17,746 15,028
50,706 48,181 36,526 35,618 24,069 37,160 22,112
10,415 10,415 4,173 10,415 10,415 10,415 11,354
183,426 178,912 176,419 144,867 133,407 127,900 120,094
27,362 27,223 25,595 24,506 23,948 22,997 21,838
31,869 28,673 24,648 20,294 21,695 17,194 17,991
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
510,591 522,940 498,590 477,354 424,261 416,294 381,661
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
15,959 17,970 21,503 0 0 0 0
3,232 5,190 3,443 65,443 75,656 81,419 78,044
18,545 2,697 22,654 (219,742) (23,369) (97,686) (75,380)
88,666 90,296 94,056 91,126 90,022 88,700 88,610
12,882 9,847 15,468 22,849 12,069 9,228 2,223
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
101,548 100,143 109,524 113,975 102,091 97,928 90,833
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
0 0 0 0 0 0 0
48,712 47,231 43,493 37,963 44,045 50,633 51,419
(12,558) (19,299) (17,409) (101,135) (14,548) (37,440) (33,884)
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
36,154 27,932 26,084 (63,172) 29,497 13,193 17,535
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
56,768 48,213 54,048 (73,350) 78,639 8,649 31,764
0 7,337 0 0 0 0 0
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
56,768 55,550 54,048 (73,350) 78,639 8,649 31,764
0 0 0 0 0 0 0
4,338 4,530 4,751 8,233 11,348 11,953 18,969
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$52,430 $51,020 $49,297 ($81,583) $67,291 ($3,304) $12,795
- ----------------------------------------------------------------------------
$108,022 $103,200 $98,563 $93,789 $113,895 $85,404 $86,049
=============================================================================
$1,224,058 $1,219,871 $1,209,173 $562,473 $560,930 $563,210 $571,549
59,809 54,771 50,257 675,831 812,246 737,169 742,585
0 0 0 81,768 88,339 68,603 55,497
65,320 79,009 90,006 91,648 83,860 76,032 70,927
247,954 164,839 161,066 170,823 166,270 122,075 107,399
556,493 554,365 553,986 605,696 653,418 610,913 607,294
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$2,153,634 $2,072,855 $2,064,488 $2,188,239 $2,365,063 $2,178,002 $2,155,251
- -----------------------------------------------------------------------------
$422,746 $401,771 $379,812 $362,584 $473,674 $438,564 $476,108
60,945 62,640 69,700 70,000 104,000 110,000 133,000
893,457 909,998 899,993 868,884 862,287 767,559 661,548
25,853 96,973 99,933 107,781 111,971 95,070 81,263
92,833 37,500 41,667 18,667 3,667 28,667 18,667
84,099 13,000 15,000 45,000 0 0 25,675
133,471 127,524 149,090 142,878 122,237 117,009 100,666
440,230 423,449 409,293 572,445 687,227 621,133 658,324
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$2,153,634 $2,072,855 $2,064,488 $2,188,239 $2,365,063 $2,178,002 $2,155,251
=============================================================================
<FN>
(3) Includes the effect of a reorganization charge of $13.6 million,
before-tax, associated with a voluntary early retirement program.
(4) 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>
1995 1994 1993
===============================================================================
<S> <C> <C> <C>
COMMON STOCK DATA
Average number of shares outstanding 14,089,835 14,085,452 14,063,854
Number of shares outstanding at
year-end 14,100,091 14,086,691 14,083,291
Earnings (loss) per share (average) $3.64 $3.09 $2.57
Recurring earnings (loss) per share
(average)(1) $3.61 $3.28 $3.13
Book value per share $31.20 $30.39 $30.06
Average return on equity
Total 11.84% 10.19% 8.45%
Utility 13.04% 12.50% 10.97%
Dividends declared per share $2.82 $2.76 $2.66
Market Price:
High $38.500 $39.500 $45.875
Low $29.500 $29.000 $38.500
Year-end $37.375 $29.500 $40.250
===============================================================================
Net cash provided by operating
activities, less dividends ($000's) $120,033 $94,807 $104,547
Capital expenditures, excluding AFUDC $59,363 $63,044 $94,743
===============================================================================
OTHER FINANCIAL AND STATISTICAL DATA
Sales by class (MWh's)
Residential 1,890,575 1,892,955 1,844,041
Commercial 2,273,965 2,285,942(2) 2,359,023
Industrial 1,126,458 1,135,831(2) 1,036,547
Other 48,435 48,718 50,715
--------- --------- ---------
Total 5,339,433 5,363,446 5,290,326
--------- --------- ---------
Number of retail customers by class
(average)
Residential 278,326 275,441 273,752
Commercial 28,550 28,394(2) 28,968
Industrial 1,599 1,538(2) 959
Other 1,122 1,127 1,175
--------- --------- ---------
Total 309,597 306,500 304,854
--------- --------- ---------
Revenue per kilowatt hour by class (cents)
Residential 13.79 13.33 12.92
Commercial 11.42 10.97 10.88
Industrial 9.50 9.18 9.40
Average large industrial customers time
of use rate (cents) 8.53 8.69 8.89
System requirements (MWh) 5,647,690 5,652,657 5,630,581
Peak load - kilowatts 1,156,740 1,130,780 1,114,900
Generating capability- peak(kilowatts) 1,434,102 1,462,290 1,515,420
Load factor 55.74% 57.07% 57.65%
Fuel generation mix percentages
Coal 37 35 31
Oil 7 14 16
Nuclear 37 32 38
Cogeneration 9 9 8
Gas 5 4 1
Hydro 5 6 6
- -------------------------------------------------------------------------------
Revenues - retail sales ($000's)
Base $637,219 $619,097 $605,887
Fuel adjustment clause 1,889 (229) (2,328)
Sales provision adjustment 0 0 0
--------- --------- ---------
Total $639,108 $618,868 $603,559
--------- --------- ---------
Revenue - retail sales per kWh (cents)
Base 11.93 11.54 11.45
Fuel adjustment clause 0.04 0.00 (0.04)
Sales provision adjustment 0.00 0.00 0.00
--------- --------- ---------
Total 11.97 11.54 11.41
--------- --------- ---------
Fuel and energy cost per kWh (cents) 1.71 1.76 1.75
Fossil 2.22 2.14 2.08
Nuclear 0.85 0.94 1.23
- -------------------------------------------------------------------------------
Number of employees at year-end 1,358 1,377 1,490
Total payroll ($000's) $72,984 $75,441 $75,305
===============================================================================
<FN>
(1) Recurring earnings (loss) per share (average) is not a generally accepted
accounting principle measurement.
(2) Includes reclassification of certain Commercial and Industrial customers.
</TABLE>
- 32 -<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
===============================================================================
<C> <C> <C> <C> <C> <C> <C>
13,941,150 13,899,906 13,887,748 13,887,748 13,887,748 13,887,654 13,827,431
14,033,148 13,932,348 13,887,748 13,887,748 13,887,748 13,887,748 13,886,566
$3.76 $3.67 $3.55 ($5.87) $4.85 ($0.24) $0.93
$3.17 $2.90 $3.55 ($5.87) $4.85 ($0.24) $0.93
$30.12 $28.84 $27.35 $26.11 $34.11 $31.58 $34.29
12.67% 13.01% 13.39% -18.88% 14.75% -0.72% 2.64%
14.46% 13.39% 13.97% 20.21% 32.91% 15.34% 16.81%
$2.56 $2.44 $2.32 $2.32 $2.32 $2.32 $2.32
$42.000 $39.125 $34.125 $34.250 $27.500 $34.000 $36.250
$34.125 $30.000 $26.875 $24.750 $19.125 $21.250 $26.625
$41.500 $39.000 $31.125 $34.250 $26.875 $26.875 $29.250
===============================================================================
$109,020 $73,865 $39,189 $31,437 $40,607 $37,986 $16,796
$66,390 $63,157 $64,018 $77,041 $83,735 $73,253 $116,124
===============================================================================
1,799,456 1,851,447 1,826,700 1,883,363 1,870,318 1,780,333 1,700,302
2,303,216(2) 2,347,757 2,259,340 2,254,099 2,174,200 2,046,289 1,914,889
997,168(2) 980,071 1,060,751 1,109,119 1,186,336 1,236,151 1,232,209
52,984 55,118 58,013 60,427 61,303 62,246 65,533
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
5,152,824 5,234,393 5,204,804 5,307,008 5,292,157 5,125,019 4,912,933
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
273,936 274,064 275,637 276,385 274,884 271,302 267,509
28,848(2) 29,768 29,808 29,526 28,826 28,103 27,215
1,017(2) 268 319 347 367 369 372
1,358 1,361 1,352 1,316 1,267 1,191 1,179
- ---------- ---------- ---------- ---------- ---------- ---------- ---------
305,159 305,461 307,116 307,574 305,344 300,965 296,275
- ---------- ---------- ---------- ---------- ---------- ---------- ---------
12.58 12.25 11.60 10.89 10.70 10.60 10.48
11.00 10.89 10.39 9.75 9.60 9.58 9.45
9.73 9.38 8.91 8.37 8.15 8.12 8.11
8.84 8.64 8.06 7.58 7.14 7.04 6.79
5,475,664 5,541,477 5,501,495 5,603,502 5,581,897 5,403,519 5,182,516
1,034,440 1,145,820 1,054,600 1,094,400 1,132,100 1,039,600 985,710
1,402,800 1,474,190 1,449,600 1,289,800 1,271,500 1,236,000 1,309,700
60.26% 55.21% 59.55% 58.45% 56.13% 59.33% 60.02%
34 34 43 39 37 42 37
17 21 24 37 41 37 53
35 29 20 11 11 10 9
8 9 9 9 7 1 0
1 4 3 3 0 5 0
5 3 1 1 4 5 1
- -------------------------------------------------------------------------------
$608,176 $607,997 $589,346 $577,611 $574,422 $558,060 $537,147
(41,221) (37,497) (45,900) (49,778) (59,054) (63,514) (68,536)
21,031 14,814 8,211 0 0 0 0
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$587,986 $585,314 $551,657 $527,833 $515,368 $494,546 $468,611
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
11.80 11.62 11.32 10.88 10.85 10.89 10.93
(0.80) (0.72) (0.88) (0.93) (1.11) (1.24) (1.39)
0.41 0.28 0.16 0.00 0.00 0.00 0.00
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
11.41 11.18 10.60 9.95 9.74 9.65 9.54
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
2.43 2.67 2.63 2.78 2.53 2.54 2.45
2.98 3.11 2.89 2.98 2.74 2.58 2.58
1.42 1.62 1.55 0.89 0.87 0.94 1.02
- ------------------------------------------------------------------------------
1,554 1,571 1,587 1,627 1,620 1,604 1,576
$74,052 $71,888 $69,237 $65,175 $62,387 $57,207 $52,782
===============================================================================
</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 and the
Company's ability to control expenses. The two primary
factors that affect sales volume are economic conditions and
weather. Since 1990, annual growth in total operation and
maintenance expense, excluding one-time items and
cogeneration capacity purchases, has averaged less than
1.0%. The Company hopes to restrict this average to less
than the rate of inflation in future years (see "Outlook").
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 electric
service rates are subject to regulation and are based on the
Company's costs. Therefore, the Company, and most regulated
utilities, are subject to certain accounting standards
(Statement of Financial Accounting Standards No. 71 (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 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 no longer meet the criteria for
application of these accounting rules. While the Company
expects to continue to meet these criteria in the
foreseeable 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.
The Financial Accounting Standards Board recently issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets to Be Disposed Of". This standard, which is
effective for the 1996 calendar year, requires the
recognition of impairment losses on long-lived assets when
the book value of an asset exceeds the sum of the expected
future undiscounted cash flows that result from the use of
the asset and its eventual disposition. This standard also
requires that rate-regulated companies recognize an
impairment loss when a regulator excludes all or part of a
cost from rates, even if the regulator allows the company to
earn a return on the remaining allowable costs. Under this
standard, the probability of recovery and the recognition of
regulatory assets under the criteria of SFAS No. 71 must be
assessed on an ongoing basis. Since the Company continues
to follow SFAS No. 71, it does not have any assets that are
impaired under this new standard. However, the Company
cannot predict what effect, if any, a competitive
marketplace or future regulatory action will have on the
future impact of SFAS No. 121.
- 34 -<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are presently projected
as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C> <C>
Cash on Hand - Beginning of Year $ 5.1 $ 23.8 $ - $ - $ -
Internally Generated Funds (less Dividends) 99.4 95.2 101.0 99.1 83.7
----- ----- ----- ---- ----
Subtotal 104.5 119.0 101.0 99.1 83.7
Less:
Capital Expenditures 69.9 60.0 52.2 77.5 51.1
----- ----- ----- ---- ----
Cash Available to pay Debt Maturities
and Redemptions 34.6 59.0 48.8 21.6 32.6
Less:
Maturities and Mandatory Redemptions 10.8 65.2 115.6 116.0 155.7
----- ----- ----- ----- -----
External Financing Requirements $(23.8) $ 6.2 $ 66.8 $ 94.4 $123.1
======= ===== ====== ====== ======
</TABLE>
Note: Internally Generated Funds (less Dividends), Capital Expenditures and
External Financing Requirements are estimates based on current
earnings and cash flow projections and are subject to change due to
future events and conditions that may be substantially different than
those used in developing the projections.
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 $75 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. 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 January 17, 1995 and October 2, 1995, the Company
repaid, at maturity, $50 million principal amount of 6.00%
Notes and $47 million principal amount of 7.25% Notes,
respectively, of the Company.
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 issued by
Bridgeport Electric Company, a wholly-owned subsidiary of
the Company that was merged with and into the Company in
September of 1994. On February 15, 1996, the Company repaid
an additional $10.8 million of the 9.44% First Mortgage
Bonds issued by Bridgeport Electric Company.
On April 3, 1995, United Capital Funding Partnership L.P.
("United Capital"), a special purpose limited partnership in
which the Company owns all of the general partner interests,
issued $50 million of its monthly income 9 5/8% Preferred
Capital Securities, Series A, ("Preferred Capital
Securities") representing limited partnership interests in
United Capital. United Capital loaned the proceeds of the
issuance and sale of the Preferred Capital Securities to the
Company in return for the Company's 9 5/8% Junior
Subordinated Deferrable Interest Debentures, Series A, Due
2025. The net proceeds to the Company, approximately $48.4
million, were used to redeem, on May 10, 1995, $12.5 million
of outstanding $100 par value 7.60% Preferred Stock,
Series E (including a redemption premium of $125,000) and
$15.0 million of outstanding $100 par value 7.60% Preferred
Stock, Series F (including a redemption premium of $150,000)
and to reduce short-term borrowings.
On May 10, 1995, the Company made a tender offer for all
of the shares of its outstanding $100 par value 4.35%
Preferred Stock, Series A, 4.72% Preferred Stock, Series B,
4.64% Preferred Stock, Series C, and 5.625%
- 35 -<PAGE>
<PAGE>
Preferred Stock, Series D. On June 12 and July 17, 1995,
the Company purchased and retired, at a discount of
$2,457,531, 19,178 shares of the Series A, 17,790 shares of
the Series B, 19,155 shares of the Series C and 10,488
shares of the Series D preferred stock issues.
In May 1995 and June 1995, the Company entered into two
separate, five-year, $50 million interest rate swap
agreements with a major money center bank. Under the terms
of the agreements, the Company will pay interest to the bank
at fixed annual rates of 6.40% and 5.92%, respectively, and
the bank will pay the Company interest at floating rates
equal to the three-month London Interbank Borrowing Rate
(LIBOR), which floating rates correspond to the floating
rates on the Term Loan borrowings described below. The fair
value of interest rate swaps is the estimated amount that
the Company would receive or pay to terminate the swap
agreements at the reporting date, taking into account
current interest rates. At December 31, 1995, the Company
would have been required to pay approximately $2.3 million
to terminate the agreements.
On August 29 and September 6, 1995, the Company borrowed
$50 million and $100 million, respectively, under a Term
Loan Agreement with a group of banks for a five-year period.
The Company pays interest on the borrowings at a floating
rate equal to the three-month LIBOR plus 0.55%. The
interest rate swap agreements described in the preceding
paragraph have effectively converted the interest rate on
$100 million of the Company's floating rate Term Loan
borrowings to fixed rates. As a result, the interest rates
on two $50 million borrowings under the Term Loan Agreement
are fixed at 6.95% and 6.47%.
The Company has a revolving credit agreement with a group
of banks, which currently extends to December 11, 1996. The
borrowing limit of this facility is $75 million, reduced
from the borrowing limit of $225 million under the previous
revolving credit agreement. 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, 1995, the Company had no short-term borrowings
outstanding under this facility.
At December 31, 1995, the Company had $5.1 million of cash
and temporary cash investments, a decrease of $6.3 million
from the balance at December 31, 1994. 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, 1994 $ 11.4
-----
Net cash provided by operating activities 161.5
Net cash provided by (used in) financing activities:
- Financing activities, excluding dividend payments (67.0)
- Dividend payments (41.5)
Cash invested in plant, including nuclear fuel (59.3)
-----
Net Change in Cash (6.3)
-----
Balance, December 31, 1995 $ 5.1
=====
</TABLE>
- 36 -<PAGE>
<PAGE>
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, 1995 this coverage
ratio was 3.31.
UI has three wholly-owned subsidiaries. Research Center,
Inc. (RCI) was 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, that has 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 had
a majority ownership interest in Ventana Corporation, a
subsidiary that was dissolved in December 1995 and formerly
offered energy conservation engineering and project
management services to governmental and private
institutions.
The after-tax impact of the subsidiaries on the
consolidated financial statements of the Company is as
follows:
<TABLE>
<CAPTION>
ASSETS
NET INCOME (LOSS) EARNINGS AT DEC. 31
(000'S) PER SHARE (000'S)
----------------- --------- ----------
<S> <C> <C> <C>
1995 $(2,640) $(0.19) $16,323
1994 (3,245) (0.23) 15,334
1993 (2,458) (0.17) 8,355
</TABLE>
RESULTS OF OPERATIONS
1995 vs. 1994
- -------------
Earnings for the year 1995 were $51.2 million, or $3.64
per share, up $7.8 million, or $.55 per share, from 1994.
Earnings from operations, which exclude one-time items, were
$50.7 million, or $3.61 per share, for 1995. Earnings from
operations for 1994 were $46.2 million, or $3.28 per share.
The one-time items were: a one-time charge of $.12 per
share, taken in the third quarter of 1995 and reflecting the
effects of legislated future state income tax rate
reductions that reduced future tax benefits on plant
previously written off, a one-time gain of $.15 per share,
recorded in the second and third quarters of 1995, from the
repurchase of preferred stock at a discount to par value, a
one-time accounting change, a charge of $.09 per share,
recorded in the first quarter of 1994 to reflect the accrual
of postemployment benefits under Statement of Financial
Accounting Standards (SFAS) No. 112, and a one-time charge
of $.10 per share, recorded in the fourth quarter of 1994,
from the settlement of a property tax dispute with the City
of Bridgeport.
Retail operating revenues increased by $20.2 million in
1995 compared to 1994:
- 37 -<PAGE>
<PAGE>
. Retail revenues increased by $13.1 million due to the
completion of the 1994 non-cash amortization of deferred
sales adjustment revenues, by $6.1 million from the
recovery, through the Conservation Adjustment Mechanism, of
previously recorded and projected conservation program
costs, and by a net $3.2 million from pass-through charges
for certain expense changes. The expense changes included
the absence of a property tax credit that occurred and was
refunded to customers in the third quarter of 1994 and
increases in fuel costs in 1995 compared to 1994.
. A retail kilowatt-hour sales decrease of 0.4% from the
prior year reduced retail revenues by $2.1 million. The
Company believes that the sales decrease due to weather
factors was greater than 0.4% and that there was a small but
"real" (i.e. not attributable to abnormal weather) retail
kilowatt-hour sales increase of about 0.5% in 1995 compared
to 1994.
Wholesale "capacity" revenues decreased by $0.6 million in
1995 compared to 1994. Wholesale "energy" revenues are a
direct offset to wholesale energy expense and do not
contribute to sales margin.
Retail fuel and energy expenses decreased by $3.1 million
in 1995 compared to 1994. A decrease of $5.7 million was
due to improved nuclear power plant output: the 1995
Seabrook Unit 1 refueling outage was much shorter than the
1994 outage, and the Seabrook Unit 1 and Connecticut Yankee
Unit had unscheduled outages in 1994, while Millstone Unit 3
and the Connecticut Yankee Unit (much smaller sources of
generation for the Company compared to Seabrook Unit 1) had
refueling outages in the first six months of 1995 but none
in 1994.
Operating expenses for operations, maintenance and
purchased capacity charges decreased by $6.7 million in 1995
compared to 1994:
. Purchased capacity was $2.7 million higher due to costs
associated with eleven weeks of scheduled refueling outage
at the Connecticut Yankee Unit in the first half of 1995 and
somewhat higher cogeneration output.
. Operation and maintenance expense decreased by $9.4
million. There was a $7.2 million reduction in fossil power
plant costs reflecting reduced scheduled maintenance
activity. Employment costs decreased by $3.1 million due
primarily to the Company's 1993 reorganization and early
retirement program, which was phased-in over 1994. Other
costs increased by $0.9 million.
Other amortization increased by $12.6 million (after-tax
and equivalent, approximately, to a $23 million revenue
requirement) in 1995 compared to 1994, due to commencement
of the amortization of Seabrook Unit 1 phase-in costs
(deferred return that was recorded and accumulated during
the period January 1, 1990 to December 31, 1993). The
annual amortization amount is $12.6 million after-tax per
year for five years beginning in 1995.
Other operating expenses increased in 1995 compared to
1994 from higher depreciation expense and income taxes as
well as from the absence of a pass-through property tax
credit that occurred in the third quarter of 1994.
Interest charges decreased by $7.5 million in 1995
compared to 1994 as a result of the Company's refinancing
program and strong cash flows. Total Preferred Stock
dividends (net-of-tax) were virtually unchanged in 1995
compared to 1994.
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
- 38 -<PAGE>
<PAGE>
(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 million 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.
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.
- 39 -<PAGE>
<PAGE>
OUTLOOK
The Company's long term earnings goal is to achieve growth
in earnings per share from operations of 4% annually from
the 1992 level of $3.17 per share. The Company exceeded the
goal in 1995 and anticipates achieving the goal in 1996.
The 1996 quarterly earnings from operations are expected
to follow a pattern similar to that of 1995, with
significantly higher earnings in the third quarter when
compared to other quarters. Summer seasonal retail sales
and summer pricing are the predominant factors contributing
to this pattern.
It is anticipated that retail revenues for all of 1996
will increase by about $5 million as a result of recovery,
through the Conservation Adjustment Mechanism, of previously
recorded and projected conservation costs mandated by the
Department of Public Utility Control (DPUC), partially
offset by competitive pricing and other price reduction
mechanisms. The Company has dealt with the possible loss of
customers as a result of cogeneration, relocation or shut
down of operations by successfully negotiating more than a
dozen multi-year contracts with major customers, including
its largest customer, which is constructing a cogeneration
unit that will produce approximately one-half of the
customer's electricity requirements. These contracts
provide cost reduction and price stability for the customers
while helping the Company maintain its customer base.
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. Overall, 1995 weather was more
severe than "normal", producing additional revenues of about
$6 million in 1995. A return to "normal" weather in 1996
would result in a revenue reduction of about $6 million
compared to 1995, while a "real" retail kilowatt-hour sales
growth of 0.5% would increase revenues by about $3 million.
The Company expects that higher generating output from
nuclear generating units (no refueling outages planned for
the Seabrook Unit 1 or Millstone Unit 3 in 1996) and lower
nuclear fuel prices could add $4-$5 million to sales margin
(through lower retail fuel and energy expense) in 1996
compared to 1995, if normal operating assumptions are met.
The Connecticut state legislature has authorized the DPUC to
adopt an Energy Adjustment Clause (EAC - a fully tracking
fuel clause) to replace the existing Fuel Adjustment Clause,
if the EAC achieves certain objectives. The DPUC has
conducted hearings on this issue. Currently, the Company
is only protected for fossil price changes in its fuel
expense. While the Company could benefit, under an EAC,
from expense pass through for replacement fuel from extended
nuclear outages, it could relinquish benefits from higher
nuclear generation and lower fuel prices.
Another major factor affecting the Company's financial
condition will be the Company's ability to control expenses.
As part of a new three-year agreement between the Company
and its union employees (the Bargaining Unit), and in
conjunction with the Company's cost savings programs, a
Bargaining Unit Voluntary Early Retirement Program has been
initiated and will result in a one-time charge against
income of approximately $7.2 million ($4.2 million
after-tax) in the first quarter of 1996. Savings from the
program should begin accruing in the second quarter of 1996.
The overall agreement also resulted in the commitment, by
the Company and the Bargaining Unit, to a partnership to
improve efficiency, cost-effectiveness and the quality of
customer service through the development of a flexible,
multi-skilled and highly trained workforce, and to support
the involvement of Bargaining Unit employees in helping to
streamline work processes to yield maximum results at
minimum costs while sustaining quality customer service.
Anticipated depreciation expense should increase expenses
by $4-$5 million in 1996 from 1995 levels.
The Company expects continued reductions in interest
expense of about $5 million from the 1995 level of $77
million to about $72 million. This 1996 interest expense
level would be 37% below the 1989 level and would mark the
seventh consecutive year of net interest expense decline.
- 40 -<PAGE>
<PAGE>
The Company expects an improvement in unregulated
subsidiary earnings compared to the results of 1995. In the
near term, the Company's investments in these subsidiaries
are unlikely to have a positive effect on earnings, but the
Company believes that these investments will contribute to
future earnings growth.
- 41 -<PAGE>
<PAGE>
<TABLE>
Item 8.Financial Statements and Supplementary Data
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
(Thousands except per share amounts)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES (NOTE G) $690,449 $656,748 $653,023
--------- --------- ---------
OPERATING EXPENSES
Operation
Fuel and energy 138,169 127,354 138,050
Capacity purchased 47,420 44,769 47,424
Reorganization charge - - 13,620
Other 147,660 151,330 148,332
Maintenance 36,089 41,768 41,475
Depreciation 61,426 58,165 56,287
Amortization of cancelled nuclear project
and deferred return (Note J and D) 13,758 1,172 1,172
Amortization of deferred fossil fuel costs - - 608
Income taxes (Notes A and E) 59,828 44,937 33,309
Property tax settlement - 2,536 -
Other taxes (Note G) 58,943 57,325 57,932
--------- --------- ---------
Total 563,293 529,356 538,209
--------- --------- ---------
OPERATING INCOME 127,156 127,392 114,814
--------- --------- ---------
OTHER INCOME AND (DEDUCTIONS)
Allowance for equity funds
used during construction 390 753 999
Deferred return - Seabrook Unit 1 - - 7,497
Other-net (Note G) (4,272) (1,907) 71
Non-operating income taxes 4,901 3,214 6,322
--------- --------- ---------
Total 1,019 2,060 14,889
--------- --------- ---------
INCOME BEFORE INTEREST CHARGES 128,175 129,452 129,703
--------- --------- ---------
INTEREST CHARGES
Interest on long-term debt 63,431 73,772 80,030
Other interest (Note G) 9,002 3,731 4,442
Allowance for borrowed funds
used during construction (2,372) (2,710) (3,068)
--------- --------- ---------
70,061 74,793 81,404
Amortization of debt discount and
redemption premiums 4,138 6,570 7,818
--------- --------- ---------
Net Interest Charges 74,199 81,363 89,222
--------- --------- ---------
MINORITY INTEREST IN PREFERRED SECURITIES 3,583 - -
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 50,393 48,089 40,481
--------- --------- --------
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 50,393 46,795 40,481
Discount on preferred stock redemptions (2,183) - -
Dividends on Preferred Stock 1,329 3,323 4,318
--------- --------- ---------
INCOME APPLICABLE TO COMMON STOCK $51,247 $43,472 $36,163
========= ========= =========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,090 14,085 14,064
EARNINGS PER SHARE OF COMMON STOCK
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $3.64 $3.18 $2.57
Cumulative effect for years prior
to 1994 of accounting change
for postemployment benefits - (0.09) -
--------- --------- ---------
EARNINGS PER SHARE OF COMMON STOCK $3.64 $3.09 $2.57
========= ========= =========
CASH DIVIDENDS DECLARED PER SHARE
OF COMMON STOCK $2.82 $2.76 $2.66
</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 STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
(Thousands of Dollars)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $50,393 $46,795 $40,481
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 66,958 67,336 65,788
Deferred income taxes 27,495 9,541 9,422
Deferred investment tax credits - net (762) (762) (762)
Amortization of nuclear fuel 13,571 11,632 21,922
Cumulative effect for years prior to 1994 of
accounting change for postemployment
benefits-net - 1,294 -
Allowance for funds used during construction (2,762) (3,463) (4,067)
Deferred return - Seabrook Unit 1 - - (7,497)
Amortization of deferred return 12,586 - -
Sales adjustment revenue - 13,113 7,668
Changes in:
Accounts receivable - net 9,489 2,840 3,344
Fuel, materials and supplies 69 (1,140) (638)
Prepayments 9,256 (7,344) (1,833)
Accounts payable 2,555 (6,578) (10,098)
Interest accrued (6,420) (1,046) (2,431)
Taxes accrued (11,310) 9,756 1,017
Reorganization charge accrued - - 13,620
Other assets and liabilities (9,627) (4,989) 9,920
--------- --------- ---------
Total Adjustments 111,098 90,190 105,375
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 161,491 136,985 145,856
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock 440 109 1,834
Long-term debt 150,000 - 164,460
Preferred securities of subsidiary 50,000 - -
Notes payable (67,000) 67,000 (84,099)
Securities redeemed and retired:
Preferred stock (34,161) (16,245) -
Long-term debt (165,103) (117,391) (143,543)
(Premium)Discount on preferred stock redemption 2,183 387 -
Expenses of issues (2,222) - (1,742)
Lease obligations (1,169) (2,362) (4,174)
Dividends
Preferred stock (1,944) (3,658) (4,318)
Common stock (39,514) (38,520) (36,991)
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES (108,490) (110,680) (108,573)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Plant expenditures, including nuclear fuel (59,363) (63,044) (94,743)
Investment in debt securities - - 94,529
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (59,363) (63,044) (214)
--------- --------- ---------
CASH AND TEMPORARY CASH INVESTMENTS:
NET CHANGE FOR THE PERIOD (6,362) (36,739) 37,069
BALANCE AT BEGINNING OF PERIOD 11,432 48,171 11,102
--------- --------- ---------
BALANCE AT END OF PERIOD $5,070 $11,432 $48,171
========= ========= =========
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $76,271 $75,802 $78,021
========= ========= =========
Income taxes $32,100 $25,555 $17,435
========= ========= =========
</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 BALANCE SHEET
December 31, 1995, 1994 and 1993
ASSETS
(Thousands of Dollars)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Utility Plant at Original Cost
In service $1,809,925 $1,761,627 $1,690,142
Less, accumulated provision
for depreciation 532,015 493,482 446,716
----------- ---------- -----------
1,277,910 1,268,145 1,243,426
Construction work in progress 41,817 57,669 77,395
Nuclear fuel 25,967 31,443 40,285
----------- ----------- -----------
Net Utility Plant 1,345,694 1,357,257 1,361,106
----------- ----------- -----------
Other Property and Investments 27,388 21,824 17,811
----------- ----------- -----------
Current Assets
Cash and temporary cash investments 5,070 11,432 48,171
Accounts receivable
Customers, less allowance for doubtful
accounts of $6,300, $4,900 and $4,700 63,987 61,042 62,703
Other 14,547 26,981 28,160
Accrued utility revenues 28,318 23,139 22,765
Fuel, materials and supplies, at
average cost 22,249 22,318 21,178
Prepayments 3,051 12,307 4,963
Other 55 90 41
----------- ----------- -----------
Total 137,277 157,309 187,981
----------- ----------- -----------
Deferred Charges
Unamortized debt issuance expenses 7,577 5,527 6,631
Other 2,377 2,119 2,163
----------- ----------- -----------
Total 9,954 7,646 8,794
----------- ----------- -----------
Regulatory Assets (future amounts due
from customers through
the ratemaking process)
Income taxes due principally to book-tax
differences (Note A) 358,168 403,132 408,272
Deferred return - Seabrook Unit 1 50,343 62,929 62,929
Unamortized cancelled nuclear projects 24,620 25,792 26,964
Unamortized redemption costs 22,244 26,269 32,573
Sales adjustment revenues - - 13,113
Uranium enrichment decommissioning costs 1,505 1,540 1,600
Other 8,424 11,293 13,149
----------- ----------- -----------
Total 465,304 530,955 558,600
----------- ----------- -----------
$1,985,617 $2,074,991 $2,134,292
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 44 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED BALANCE SHEET
December 31, 1995, 1994 and 1993
CAPITALIZATION AND LIABILITIES
(Thousands of Dollars)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Capitalization (Note B)
Common stock equity
Common stock $284,542 $284,133 $284,028
Paid-in capital 769 738 734
Capital stock expense (2,207) (2,402) (3,163)
Retained earnings 156,877 145,559 141,725
----------- ----------- -----------
439,981 428,028 423,324
Preferred stock 10,539 44,700 60,945
Minority interest in preferred securities 50,000 - -
Long-term debt 845,684 708,340 875,268
----------- ----------- -----------
Total 1,346,204 1,181,068 1,359,537
----------- ----------- -----------
Noncurrent Liabilities
Obligations under capital leases 17,508 17,799 19,871
Uranium enrichment decommissioning reserve 1,301 1,337 1,486
Nuclear decommissioning obligation 10,317 7,628 5,606
Other 2,789 2,517 2,156
----------- ----------- -----------
Total 31,915 29,281 29,119
----------- ----------- -----------
Current Liabilities
Current portion of long-term debt 40,800 193,133 143,333
Notes payable - 67,000 -
Accounts payable 45,401 42,846 49,424
Dividends payable 10,072 10,467 10,445
Taxes accrued 5,297 16,607 6,851
Pensions accrued (Note H) 33,832 30,177 33,547
Interest accrued 14,506 20,926 21,972
Obligations under capital leases 291 1,169 1,838
Other accrued liabilities 26,769 30,069 26,813
----------- ----------- -----------
Total 176,968 412,394 294,223
----------- ----------- -----------
Customers' Advances for Construction 2,655 2,628 2,667
----------- ----------- -----------
Regulatory Liabilities (future amounts owed
to customers through
the ratemaking process)
Accumulated deferred investment tax credits 17,909 18,671 19,433
Deferred gain on sale of utility plant - 276 2,070
Other 1,990 1,820 1,837
----------- ----------- -----------
Total 19,899 20,767 23,340
----------- ----------- -----------
Deferred Income Taxes (future tax liabilities
owed to taxing
authorities) 407,976 428,853 425,406
Commitments and Contingencies - - -
----------- ----------- -----------
$1,985,617 $2,074,991 $2,134,292
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 45 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
For the Years Ended December 31, 1995, 1994 and 1993
(Thousands of Dollars)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
BALANCE, JANUARY 1 $145,559 $141,725 $142,981
Net Income 50,393 46,795 40,481
Adjustments associated with repurchase
of preferred stock 1,988 (761) -
--------- --------- ---------
Total 197,940 187,759 183,462
--------- --------- ---------
Deduct Cash Dividends Declared
Preferred stock 1,329 3,323 4,318
Common stock 39,734 38,877 37,419
--------- --------- ---------
Total 41,063 42,200 41,737
--------- --------- ---------
BALANCE, DECEMBER 31 $156,877 $145,559 $141,725
========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of the financial statements.
- 46 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The United Illuminating Company is an operating electric public
utility company 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 service area, largely urban and suburban in
character, includes the principal cities of Bridgeport
(population 137,000) and New Haven (population 124,000) 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.
In addition, the Company has created, and owns, unregulated
subsidiaries. The Board of Directors of the Company has
authorized the investment of a maximum of $22.0 million in the
unregulated subsidiaries and at December 31, 1995, approximately
$19.8 million had been invested. The principal subsidiary,
United Resources, Inc., serves as the parent corporation to
American Payment Systems, Inc., which manages agents and
equipment for electronic data processing of bill payments made by
customers of utilities at neighborhood businesses.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
use estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(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).
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.
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.
In addition to the regulatory assets and liabilities shown on the
Consolidated Balance Sheet, there are other regulatory assets and
liabilities such as conservation and load management costs and
certain deferred tax liabilities. The Company also has
obligations under long-term power contracts, the recovery of
which is subject to regulation.
- 47 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The effects of competition could cause the operations of
the Company, or a portion thereof, to cease meeting the
criteria for application of these accounting rules. While
the Company expects to continue to meet these criteria in
the foreseeable future, if the Company were to cease meeting
these criteria, accounting standards for businesses in
general would become applicable and immediate recognition of
any previously regulatory-related deferred costs would be
required in the year in which the criteria are no longer
met.
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,
1995, 1994 and 1993 was comprised as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(000's)
<S> <C> <C> <C>
Production $1,122,001 $1,114,755 $1,104,156
Transmission 158,373 143,984 129,186
Distribution 375,962 364,102 334,251
General 45,924 43,600 41,009
Future use plant 32,762 31,853 29,221
Other 74,903 63,333 52,319
--------- --------- ---------
$1,809,925 $1,761,627 $1,690,142
========= ========= =========
</TABLE>
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 1995, 1994 and 1993 were 8.0%, 8.19% and
8.75%, 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 1995, 1994
and 1993 were equivalent to approximately 3.34%, 3.27% and
3.22%, respectively, of the original cost of depreciable
property.
- 48 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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 months
of the funding requirement for operating expenses, is
restricted for use and amounted to $3.9 million, $2.3
million and $3.4 million, at December 31, 1995, 1994 and
1993, 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, $9.6 million and $9.5 million at December 31, 1995,
1994 and 1993, 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 ratemaking treatment of the
Company's existing deferred fossil fuel cost balances.
- 49 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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".
The Company accounts for other postemployment benefits,
consisting principally of health and life insurance, 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 accrual 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 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.
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, 1995, 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 $1,882,000,
$1,727,000 and $1,616,000 during 1995, 1994 and 1993 into
the decommissioning trust funds for Seabrook Unit 1 and
Millstone Unit 3. At December 31, 1995, the Company's share
of the trust fund balances, which include accumulated
earnings on the funds, were $7.2 million and $3.1 million
for Seabrook Unit 1 and Millstone Unit 3, respectively.
These fund balances are included in "Other Property and
Investments"
- 50 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
and the accrued decommissioning obligation is included in
"Noncurrent Liabilities" on the Company's Consolidated
Balance Sheet.
IMPAIRMENT OF LONG-LIVED ASSETS
The Financial Accounting Standards Board recently issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets to Be Disposed Of". This standard, which is
effective for the 1996 calendar year, requires the
recognition of impairment losses on long-lived assets when
the book value of an asset exceeds the sum of the expected
future undiscounted cash flows that result from the use of
the asset and its eventual disposition. This standard also
requires that rate-regulated companies recognize an
impairment loss when a regulator excludes all or part of a
cost from rates, even if the regulator allows the company to
earn a return on the remaining allowable costs. Under this
standard, the probability of recovery and the recognition of
regulatory assets under the criteria of SFAS No. 71 must be
assessed on an ongoing basis. Since the Company continues
to follow SFAS No. 71, it does not have any assets that are
impaired under this new standard.
- 51 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
(B) CAPITALIZATION December 31,
-----------------------------------------------------------------------------
1995 1994 1993
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) 14,100,091 $284,542 14,086,691 $284,133 14,083,291 $284,028
Shares authorized
1993 30,000,000
1994 30,000,000
1995 30,000,000
Paid-in capital 769 738 734
Capital stock expense (2,207) (2,402) (3,163)
Retained earnings (b) 156,877 145,559 141,725
----------- ----------- ----------
Total common stock equity 439,981 428,028 423,324
----------- ----------- ----------
PREFERRED AND PREFERENCE STOCK (C)
Cumulative preferred stock, $100 par value,
shares authorized at December 31,
1993 1,259,455
1994 1,247,005
1995 1,180,394
Preferred stock issues:
4.35% Series A 21,247 40,425 40,425
4.72% Series B 30,490 48,280 50,730
4.64% Series C 12,945 32,100 32,100
5 5/8% Series D 40,712 51,200 61,200
7.60% Series E - 125,000 125,000
7.60% Series F - 150,000 150,000
------------- ------------ ------------
105,394 10,539 447,005 44,700 459,455 45,945
------------- ----------- ------------ ----------- ------------ -----------
Cumulative preferred stock,
$25 par value, shares
authorized at December 31,
1993 2,400,000
1994 2,400,000
1995 2,400,000
Preferred stock issues:
8.80% 1976 Series - - - - 600,000 15,000
Cumulative preference stock,
$25 par value, shares
authorized at December 31,
1993 5,000,000
1994 5,000,000
1995 5,000,000
Preference stock issues - - - - - -
Total preferred stock not ----------- ----------- -----------
subject to mandatory redemption 10,539 44,700 60,945
----------- ----------- -----------
MINORITY INTEREST IN PREFERRED SECURITIES (D) 50,000 - -
----------- ----------- -----------
</TABLE>
- 52 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
December 31,
---------------------------------
1995 1994 1993
$(000's) $(000's) $(000's)
--------- -------- --------
<S> <C> <C> <C>
LONG-TERM DEBT (E)
First Mortgage Bonds:
9.44%, Series B, maturing serially as
to $10,800 principal amount on
February 15 in each of the years
1996 to 1999. $43,200 $54,000 $54,000
10.32%, Series C - 55,333 110,666
Other Long-term Debt
Pollution Control Revenue Bonds:
14 1/2%, 1984 Series, due October 1, 2009 - - 110
14 1/2%, 1984 Series B, due December 1, 2009 - - 3,830
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 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
7.20%, 1991 Series B, due November 1, 1994 - - 13,000
6.82%, 1991 Series C, due December 2, 1994 - - 10,000
6.00%, 1992 Series D, due January 15, 1995 - 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
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 100,000 100,000 100,000
Long-term bank loans - - 5,000
Term Loans:
6.95%, due August 29, 2000 50,000 - -
6.47%, due September 6, 2000 50,000 - -
Variable rate, due September 6, 2000 50,000 - -
Obligation under the Seabrook Unit 1
sale/leaseback agreement 248,030 250,000 250,000
---------- ---------- ----------
886,690 901,793 1,019,066
Unamortized debt discount less premium (206) (320) (465)
---------- ---------- ----------
Total long-term debt 886,484 901,473 1,018,601
---------- ---------- ----------
Less current portion included in Current
Liabilities (e) 40,800 193,133 143,333
---------- ---------- ----------
Total long-term debt included
in Capitalization 845,684 708,340 875,268
---------- ---------- ----------
TOTAL CAPITALIZATION $1,346,204 $1,181,068 $1,359,537
========== ========== ==========
</TABLE>
- 53 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(A) COMMON STOCK
The Company issued 13,400 shares of common stock in 1995,
3,400 shares of common stock in 1994 and 46,000 shares of
common stock in 1993 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 191,800 shares
of stock at an exercise price of $30.75 per share, 600
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, 35,133 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 remained outstanding at December 31,
1995. 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. Options to purchase 10,800 shares of
stock at an exercise price of $30.75, 1,400 shares of stock
at an exercise price of $28.3125 and 1,200 shares of stock
at an exercise price of $31.1875 were exercised during 1995.
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based
Compensation". This statement establishes financial
accounting and reporting standards for stock-based employee
compensation plans, such as stock purchase plans, stock
options, restricted stock, and stock appreciation rights.
The statement defines the methods of determining the fair
value of stock-based compensation and requires the
recognition of compensation expense for book purposes.
However, the statement allows entities to continue to
measure compensation expense in accordance with prior
accounting principle APB No. 25, "Accounting for Stock
Issued to Employees", but requires pro forma net income and
earnings per share be disclosed as if SFAS No. 123 were
applied. The accounting provisions of SFAS No. 123 apply to
the Company's stock option plan and affect options granted
in the year of adoption. As of December 31, 1995, there
were no options granted to which this statement would apply.
The Company has not elected to adopt the expense recognition
provisions of SFAS No. 123.
(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 $98.7 million
were free from such limitations at December 31, 1995.
(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.
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.
-54 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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.
On April 10, 1995, the Company called for redemption all
125,000 shares of its outstanding $100 par value 7.60%
Preferred Stock, Series E and all 150,000 shares of its
outstanding $100 par value 7.60% Preferred Stock, Series F.
The Company paid a redemption premium of $275,000 in
effecting these redemptions, which were completed on May 10,
1995.
On May 10, 1995, the Company made a tender offer for all
of the shares of its outstanding $100 par value 4.35%
Preferred Stock, Series A, 4.72% Preferred Stock, Series B,
4.64% Preferred Stock, Series C, and 5.625% Preferred Stock,
Series D. On June 12 and July 17, 1995, the Company
purchased and retired, at a discount of $2,457,531, 19,178
shares of the Series A, 17,790 shares of the Series B,
19,155 shares of the Series C and 10,488 shares of the
Series D preferred stock issues.
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 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, 1995.
(D) PREFERRED CAPITAL SECURITIES
On April 3, 1995, United Capital Funding Partnership L.P.
("United Capital"), a special purpose limited partnership in
which the Company owns all of the general partner interests,
issued $50 million of its monthly income 9 5/8% Preferred
Capital Securities, Series A, ("Preferred Capital
Securities") representing limited partnership interests in
United Capital. United Capital loaned the proceeds of the
issuance and sale of the Preferred Capital Securities to the
Company in return for the Company's 9 5/8% Junior
Subordinated Deferrable Interest Debentures, Series A, Due
2025. The net proceeds to the Company, approximately $48.4
million, were used to redeem, on May 10, 1995, $12.5 million
of outstanding $100 par value 7.60% Preferred Stock,
Series E (including a redemption premium of $125,000) and
$15.0 million of outstanding $100 par value 7.60% Preferred
Stock, Series F (including a redemption premium of $150,000)
and to reduce short-term borrowings.
United Capital and the Company have registered an
additional $50 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.
(E) LONG-TERM DEBT
On January 17, 1995 and October 2, 1995, the Company
repaid, at maturity, $50 million principal amount of 6.00%
Notes and $47 million principal amount of 7.25% Notes,
respectively, of the Company.
- 55 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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 issued by
Bridgeport Electric Company, a wholly-owned subsidiary of
the Company that was merged with and into the Company in
September of 1994. On February 15, 1996, the Company repaid
an additional $10.8 million of the 9.44% First Mortgage
Bonds issued by Bridgeport Electric Company.
In May 1995 and June 1995, the Company entered into two
separate, five-year, $50 million interest rate swap
agreements with a major money center bank. Under the terms
of the agreements, the Company will pay interest to the bank
at fixed annual rates of 6.40% and 5.92%, respectively, and
the bank will pay the Company interest at floating rates
equal to the three-month London Interbank Borrowing Rate
(LIBOR), which floating rates correspond to the floating
rates on the Term Loan borrowings described below. The fair
value of interest rate swaps is the estimated amount that
the Company would receive or pay to terminate the swap
agreements at the reporting date, taking into account
current interest rates. At December 31, 1995, the Company
would have been required to pay approximately $2.3 million
to terminate the agreements.
On August 29 and September 6, 1995, the Company borrowed
$50 million and $100 million, respectively, under a Term
Loan Agreement with a group of banks for a five-year period.
The Company pays interest on the borrowings at a floating
rate equal to the three-month LIBOR plus 0.55%. The
interest rate swap agreements described in the preceding
paragraph have effectively converted the interest rate on
$100 million of the Company's floating rate Term Loan
borrowings to fixed rates. As a result, the interest rates
on two $50 million borrowings under the Term Loan Agreement
are fixed at 6.95% and 6.47%.
Maturities and mandatory redemptions/repayments are set
forth below:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(000's)
<S> <C> <C> <C> <C> <C>
Matuities $ - $50,000 $100,000 $100,000 $150,000
Mandatory redemptions/repayment 10,800 15,171 15,562 15,988 5,652
------- ------- -------- -------- --------
Maturities and Mandatory
redemptions/repayments (1) $10,800 $65,171 $115,562 $115,988 $155,652
======= ======= ======== ======== ========
<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 1996 to
September 1996 is 3.30%).
</FN>
</TABLE>
The Company has 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. In addition,
the Company has registered $213.6 million of Seabrook Unit 1
Secured Lease Obligation Bonds for sale to the public under
the Securities Act of 1933. These Lease Obligation Bonds
may only be used to refinance the outstanding Seabrook
Unit 1 Lease Obligation Bonds.
(C) RATE-RELATED REGULATORY PROCEEDINGS
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. In the Company's most recent retail rate
proceeding, the DPUC authorized a return on equity of 12.4%
for ratemaking purposes. However, the Company may earn up
to 1% above this level for six consecutive months before a
mandatory review is required by the DPUC. A Connecticut
statute requires the DPUC to review and investigate the
financial and operating records of each electric utility
company, at intervals of not more than four
- 56 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
years, to determine whether the company's rates comply with
statutory standards. The Company expects that a proceeding
under this statute will commence during 1996.
The Company is allowed revenue increases for conservation
and load management expenditures through a Conservation
Adjustment Mechanism (CAM) in its retail rates, and
accordingly received a revenue increase in 1995 of $6.1
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. The
Connecticut legislature has authorized the DPUC to adopt an
energy adjustment clause (EAC), a fully-tracking fuel
clause, to replace the FCA, if the EAC will achieve
specified objectives; and the DPUC has conducted hearings on
this issue. While the FCA applies only to fossil fuel price
changes, an EAC could permit recovery of replacement fuel
cost differentials incurred during extended nuclear
generating unit outages. However, an EAC could also pass
through to customers the benefits of the lower fuel costs
associated with increased nuclear generation.
(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 was allowed to record a
deferred return on the portion of allowable investment
excluded from rate base during the phase-in period.
Accordingly, the Company is amortizing the accumulated
deferred return of $62.9 million over a five-year period
that commenced January 1, 1995.
- 57 -<PAGE>
<PAGE>
<TABLE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(E) INCOME TAXES
<CAPTION>
1995 1994 1993
---- ---- ----
(000's)
<S> <C> <C> <C>
Income tax expense consists of:
Income tax provisions:
Current
Federal $18,031 $24,190 $13,484
State 10,163 8,754 4,843
-------- -------- --------
Total current 28,194 32,944 18,327
-------- -------- --------
Deferred
Federal 24,682 11,123 9,620
State 2,813 (2,538) (198)
-------- -------- --------
Total deferred 27,495 8,585 9,422
-------- -------- --------
Investment tax credits (762) (762) (762)
-------- -------- --------
Total income tax expense $54,927 $40,767 $26,987
======== ======== ========
Income tax components charged as follows:
Operating expenses $59,828 $44,937 $33,309
Other income and deductions - net (4,901) (3,214) (6,322)
Cumulative effect of change in accounting
for postemployment benefits - (956) -
-------- -------- --------
Total income tax expense $54,927 $40,767 $26,987
======== ======== ========
The following table details the components
of the deferred income taxes:
Alternative minimum tax $11,404 - ($139)
Accelerated depreciation 9,410 $11,526 11,318
Tax depreciation on unrecoverable
plant investment 8,889 8,170 7,915
Pension benefits (1,460) 148 (6,641)
Conservation & load management 804 1,897 3,084
Premiums on BEC bond redemption (753) (1,619) (2,378)
Cancelled nuclear projects (467) (467) (467)
Seabrook sale/leaseback transaction (397) (2,039) (2,016)
Postretirement benefits 163 169 (538)
Deferred fossil fuel costs (122) (37) (381)
Postemployment benefits - (956) -
Sales adjustment revenues - (5,553) (3,248)
Property tax adjustment - (1,991) (1,991)
Other - net 24 (663) 4,904
-------- -------- --------
Deferred income taxes - net $27,495 $8,585 $9,422
======== ======== ========
</TABLE>
- 58 -<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>
1995 1994 1993
---- ---- ----
PRE-TAX TAX PRE-TAX TAX PRE-TAX TAX
------- --- ------- --- ------- ---
(000's)
<S> <C> <C> <C> <C> <C> <C>
Computed tax at federal
statutory rate $36,862 $30,646 $23,614
Increases (reductions)
resulting from:
Deferred return-Seabrook
Unit 1 12,586 4,405 - - ($7,497) (2,624)
ITC taken into income (762) (762) (762) (762) (762) (762)
Allowance for equity funds
used during construction (390) (136) (753) (263) (999) (349)
Tax exempt interest on
municipal bonds - - - - (283) (99)
Book depreciation in excess
of non-normalized tax
depreciation 21,586 7,555 20,625 7,218 21,711 7,599
State income taxes, net of
federal income tax
benefits 12,976 8,434 6,216 4,040 4,645 3,019
Other items - net (4,090) (1,431) (320) (112) (9,746) (3,411)
------ ----- -----
Total income tax expense $54,927 $40,767 $26,987
====== ====== ======
Book Income Before Federal
Income Taxes $105,320 $87,561 $67,467
======= ====== ======
Effective income tax rates 52.1% 46.6% 40.0%
===== ===== =====
</TABLE>
At December 31, 1995 the Company had deferred tax
liabilities for taxable temporary differences of $535
million and deferred tax assets for deductible temporary
differences of $127 million, resulting in a net deferred tax
liability of $408 million. Significant components of
deferred tax liabilities and assets were as follows: tax
liabilities on book/tax plant basis differences, $206
million; tax liabilities on the cumulative amount of income
taxes on temporary differences previously flowed through to
ratepayers, $148 million; tax liabilities on normalization
of book/tax depreciation timing differences, $110 million
and tax assets on the disallowance of plant costs, $61
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 Company had no AMT carryforward at
December 31, 1995. The AMT carryforward at December 31,
1994 and 1993 was $11.4 million.
(F) SHORT-TERM CREDIT ARRANGEMENTS
The Company has a revolving credit agreement with a group
of banks, which currently extends to December 11, 1996. The
borrowing limit of this facility is $75 million, reduced
from the borrowing limit of $225 million under the previous
revolving credit agreement. 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
- 59 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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, 1995, the
Company had no 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, 1995, this coverage
ratio was 3.31.
Information with respect to short-term borrowings is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(000's)
<S> <C> <C> <C>
Maximum aggregate principal amount of
short-term borrowings outstanding at
any month-end $195,000 $75,000 $94,635
Average aggregate short-term borrowings
outstanding during the year* $117,980 $57,000 $73,700
Weighted average interest rate* 6.5% 4.8% 4.1%
Principal amounts outstanding at year-end $0 $67,000 $0
Annualized interest rate on principal
amounts outstanding at year-end N/A 6.7% N/A
<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 $426,500, $250,400 and
$259,600 paid during 1995, 1994 and 1993, respectively, are
excluded from the calculation of the weighted average
interest rate.
</FN>
</TABLE>
- 60 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(G) SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(000's)
<S> <C> <C> <C>
OPERATING REVENUES
- ------------------
Retail $639,108 $618,868 $603,559
Wholesale - capacity 6,601 7,162 6,575
- energy 41,631 27,765 39,356
Other 3,109 2,953 3,533
--------- --------- ---------
Total Operating Revenues $690,449 $656,748 $653,023
========= ========= =========
OTHER INCOME AND (DEDUCTIONS) - NET
- -----------------------------------
Interest and dividend income $ 2,624 $ 2,520 $ 3,568
Equity earnings from Connecticut Yankee 1,440 1,539 1,350
Loss from subsidiary companies (4,898) (4,382) (4,557)
Engineering study costs (849) (1,200) -
Miscellaneous other income
and (deductions) - net (2,589) (384) (290)
--------- --------- ---------
Total Other Income
and (Deductions) - net $ (4,272) $ (1,907) $ 71
========= ========= =========
OTHER TAXES
- -----------
Charged to:
Operating:
State gross earnings $ 27,379 $ 27,403 $ 27,955
Local real estate
and personal property 25,761 26,318 24,449
Payroll taxes 5,800 6,137 5,525
Other 3 3 3
--------- --------- ---------
58,943 59,861 57,932
Nonoperating and other accounts 527 41 335
--------- --------- ---------
Total Other Taxes $ 59,470 $ 59,902 $ 58,267
========= ========= =========
OTHER INTEREST CHARGES
- ----------------------
Notes payable $ 7,660 $ 2,713 $ 3,049
Other 1,342 1,018 1,393
--------- --------- ---------
Total Other Interest Charges $ 9,002 $ 3,731 $ 4,442
========= ========= =========
</TABLE>
- 61 -<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 1995, 1994 and 1993 were $3,842,000,
$4,028,000 and $14,966,000, respectively.
The Company's funding policy for the qualified plan is to
make annual contributions that satisfy the minimum funding
requirements of ERISA but that 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. No pension
fund contributions were made in 1995. Previously, due to
the application of the full funding limitation under ERISA,
the Company had not been required to make a contribution
since 1985. As of December 31, 1995, 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 67.4%
Fixed-income Securities 27.7%
Real Estate 4.9%
</TABLE>
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's)
<S> <C> <C>
The components of net pension costs were as follows:
Service cost of benefits earned during the period $ 3,680 $ 4,822
Interest cost on projected benefit obligation 15,217 15,023
Actual return on plan assets (41,166) (1,218)
Net amortization and deferral 26,111 (14,095)
------ ------
Net pension cost $ 3,842 $ 4,532*
====== ======
<FN>
*In addition, an adjustment of $504,000 was recorded due to
an overaccrual of the cost of special termination benefits
in 1993.
</FN>
</TABLE>
Assumptions used to determine pension costs were:
<TABLE>
<S> <S> <S>
Discount rate 8.50% 7.50%
Average wage increase 5.50% 5.50%
Return on plan assets 9.00% 9.00%
</TABLE>
- 62 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
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 $153,473 $3,877 $125,289 $3,548
======== ====== ======== ======
Accumulated benefit
obligation $160,266 $3,877 $130,758 $3,548
======== ====== ======== ======
Reconciliation of accrued
pension liability:
Projected benefit
obligation $217,698 $4,746 $183,951 $4,510
Less fair value of plan
assets 195,104 - 165,788 -
-------- ------ -------- ------
Projected benefit greater
(less) than plan assets 22,594 4,746 18,163 4,510
Unrecognized prior service
cost (5,510) (96) (5,619) (397)
Unrecognized net gain
(loss) from past experience 1,832 (233) 1,849 -
Unrecognized net asset
(obligation) at date of
initial application 10,662 (163) 11,770 (99)
-------- ------ ------- ------
Accrued pension liability $ 29,578 $4,254 $26,163 $4,014
======== ====== ======= ======
Assumptions used in estimating
benefit obligations:
Discount rate 7.25% 7.25% 8.50% 8.50%
Average wage increase 4.50% 4.50% 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 Company's 1993 reorganization and
1996 early retirement program minus pay-as-you-go benefit
payments for
- 63 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
pre-January 1, 1994 retirees, allocated in a manner that
minimizes current income tax liability, without exceeding
maximum tax deductible limits. In accordance with this
policy, the Company contributed approximately $1.8 million
and $3.1 million to the union VEBA on December 29, 1994 and
December 28, 1995, respectively. During 1994, the Company
contributed approximately $2.2 million to the 401(h)
account. During 1995, no contributions were made to the
401(h) account. Plan assets for both the union VEBA and
401(h) account consist primarily of equity and fixed-income
securities.
The components of the net cost of OPEB were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's)
<S> <C> <C>
Service cost $1,106 $1,372
Interest cost 2,584 2,534
Actual return on plan assets (2,081) 72
Amortizations and deferrals - net 2,882 1,346
------ ------
Net Cost of Postretirement Benefit $4,491 $5,324
====== ======
</TABLE>
Assumptions used to determine OPEB costs were:
<TABLE>
<S> <C> <C>
Discount rate 8.5% 7.5%
Health Care Cost Trend Rate 6.5% 7.7%*
Return on plan assets 8.5% 8.5%
<FN>
*Assumed rates gradually decline to 6.2% by the year 2020
</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 1995 net cost of periodic
postretirement benefit by approximately $600,000 and would
increase the accumulated postretirement benefit obligation
for health care benefits by approximately $4,100,000.
The following table reconciles the funded status of the
plan with the amount recognized in the Consolidated Balance
Sheet as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(000's)
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees and dependents $ 22,720 $13,028
Fully eligible active plan participants 764 7,078
Other active plan participants 16,955 12,267
------ ------
Total Accumulated Postretirement Benefit Obligation 40,439 32,373
Plan assets at fair value 11,148 6,781
------ ------
Accumulated Postretirement Benefit Obligation in
Excess of Plan Assets 29,291 25,592
Unrecognized net loss (8,395) (2,958)
Unamortized transition obligation (20,659) (21,874)
------ ------
Accrued Postretirement Benefit Obligation $ 237 $ 760
====== ======
</TABLE>
- 64 -<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, 1995 and 1994 were 7.25% and 8.5%,
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 receive Company common stock and the plan
provides certain tax benefits to the Company. In 1995, the
Company made a contribution to the ESOP in the amount of
$192,000. Prior to 1995, no contributions to the ESOP had
been made 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 1995, 1994 and 1993 were $1.6 million, $1.6
million and $1.3 million, respectively.
(I) JOINTLY OWNED PLANT
At December 31, 1995, 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 % $647 $93
Millstone Unit 3 3.685 132 53
New Haven Harbor Station 93.7 137 68
</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.
(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
- 65 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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 may acquire and/or store natural gas, coal
and fuel oil for sale to the Company, and the Company may
purchase 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 1997. At December 31, 1995, approximately
$16.2 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 and office space. The gross amount of
assets recorded under capital leases and the related
obligations of those leases as of December 31, 1995 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>
1996 $ 1,715
1997 1,715
1998 1,715
1999 1,696
2000 1,696
After 2000 21,088
------
Total minimum capital lease payments 29,625
Less: Amount representing interest 11,826
------
Present value of minimum capital lease payments $17,799
======
</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.
Rental payments charged to operating expenses in 1995,
1994 and 1993 amounted to $11.5 million, $12.1 million and
$14.1 million, respectively.
- 66 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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>
1996 $ 5,317
1997 5,826
1998 6,125
1999 6,426
2000 6,524
2001-2012 115,339
-------
Total $145,557
=======
</TABLE>
(L) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURE PROGRAM
The Company's continuing capital expenditure program is
presently estimated at approximately $310.6 million,
excluding AFUDC, for 1996 through 2000.
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 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.
Although each of these units has purchased $2.75 billion
of property insurance coverage, representing the limits of
coverage currently available from conventional nuclear
insurance pools, the cost of a nuclear incident
- 67 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
could exceed available insurance proceeds. In addition, two
of the nuclear insurance pools that provide portions of this
coverage may levy assessments against the insured owner
companies if pool losses exceed the accumulated funds
available to the pool. The maximum potential assessments
against the Company with respect to losses occurring during
current policy years are approximately $7.5 million.
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. As
of December 31, 1995, the Company's guarantee liability for
this debt amounted to approximately $8.7 million.
EARLY RETIREMENT PROGRAM
As part of a new three-year agreement between the Company
and its union employees, the Company offered a voluntary
early retirement program to union employees who had until
January 31, 1996 to accept. The early retirement offer was
accepted by 64 employees and the Company will recognize a
charge to earnings in January 1996 of $7.2 million ($4.2
million, after-tax). The employees accepting the offer will
retire during the first six months of 1996.
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 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, generating tax claims of
approximately $3.5 million. On March 1, 1995, the Company
received notices of assessment changes relative to the
assessed value of the Company's personal property for the
tax year 1995-1996, which notices purport to increase said
assessed value by approximately 48% over the valuation
declared by the Company, generating tax claims of
approximately $3.5 million. On May 11, 1995, the Company
received notices of assessment changes relative to the
assessed values of the Company's personal property for the
tax years 1992-1993 and 1993-1994, which notices purport to
increase said assessed values by approximately 45% and 49%,
respectively, over the valuations declared by the Company,
generating tax claims of approximately $4.1 million and $3.5
million, respectively. The City's tax assessor is
conducting hearings
- 68 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
regarding the assessed value of the Company's personal
property for the tax year 1996-1997; and the Company
anticipates that the tax assessor will take some action to
increase said assessed value for that tax year. The Company
is contesting each of these actions by the City's tax
assessor vigorously. On January 9, 1996, the Connecticut
Superior Court granted the Company's motion for summary
judgment against the City relative to the "updated" personal
property tax bills for the tax year 1991-1992. The City has
appealed to the Appellate Court from the Superior Court
decision, which decision would also be applicable to and
defeat the valuation increases for the tax years 1992-1993
and 1993-1994 if it is sustained on appeal. 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" 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
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 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 January 1998. However, the DOE has
announced that its first high level waste repository will
not be in operation earlier than 2010 and possibly not
earlier than 2013, 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.
The DOE has also announced that, absent a repository, DOE
has no statutory obligation to begin taking high level
wastes and spent nuclear fuel for disposal by January 1998.
Numerous utilities and states have filed suit seeking a
judicial declaration that DOE has a statutory responsibility
to take title to and dispose of high level wastes and spent
nuclear fuel beginning in January 1998, and seeking remedies
should this not occur. The court is expected to issue
findings by mid-1996.
Legislation is pending in the United States Congress to
address Spent Fuel/High Level Waste Disposal issues; but it
is unclear at this time whether legislation will be
forthcoming.
Until the federal government begins receiving such
materials, operating nuclear generating units will need to
retain high level wastes and spent nuclear fuel on-site or
make other provisions for their storage. Storage facilities
for Millstone Unit 3 and the Connecticut Yankee Unit are
expected to be adequate for the projected life of the units.
Storage facilities for Seabrook Unit 1 are expected to be
adequate until at least 2010. Fuel consolidation and
compaction technologies are being considered for Seabrook
Unit 1 and may provide adequate storage capability for
- 69 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
the projected life of the unit. In addition, other licensed
technologies, such as dry storage casks, may satisfy spent
nuclear 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. Currently, the Chem Nuclear LLW facility at
Barnwell, South Carolina, is open to the Connecticut Yankee
Unit, Millstone Unit 3, and Seabrook Unit 1 for disposal of
LLW. The Envirocare LLW facility at Clive, Utah, is also
open to these generating units for portions of their LLW.
All three units have contracts in place for LLW disposal at
these disposal facilities.
Because access to LLW disposal may be lost at any time,
the Connecticut Yankee Unit, Millstone Unit 3 and Seabrook
Unit 1 have storage plans that will allow on-site retention
of LLW for at least five years in the event that disposal is
interrupted.
The Company cannot predict whether or when a LLW 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 has stated that the
state is unsuitable for a LLW disposal facility. Both
Connecticut and New Hampshire are also pursuing other
options for out-of-state disposal of LLW.
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.
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 $432 million (in 1996 dollars) as the
decommissioning cost estimate for Seabrook Unit 1, of which
the Company's share would be approximately $76 million.
This estimate premises the prompt removal and dismantling of
the Unit at the end of its estimated 36-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 1995 was
$1.4 million. UI's share of the fund at December 31, 1995
was approximately $7.2 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 $478
million (in 1996 dollars) and $375 million (in 1996
dollars), respectively, of which the Company's share would
be approximately $18 million and $36 million, respectively.
These estimates premise the prompt removal and dismantling
of each unit at the end of its estimated 40-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
1995 was $459,000. UI's share of the fund at December 31,
1995 was approximately $3.1 million. For the Company's 9.5%
equity ownership in Connecticut Yankee, decommissioning
costs of $1.3 million were funded by UI during 1995, and
UI's share of the fund at December 31, 1995 was $17.1
million.
- 70 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(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).
(O) FAIR VALUE OF FINANCIAL INSTRUMENTS (1)
The estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(000's) (000's)
<S> <C> <C> <C> <C>
Cash and temporary cash investments $ 5,070 $ 5,070 $ 11,432 $ 11,432
Long-term debt (2)(3)(4) $638,454 $648,142 $651,473 $633,551
<FN>
(1) Equity investments were not valued because they were
not considered to be material.
(2) Excludes the 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, 1995 and 1994, respectively.
(4) See Note (B), Capitalization - Long-Term Debt.
</FN>
</TABLE>
- 71 -<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(P) QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for 1995 and 1994 are set
forth below:
<TABLE>
<CAPTION>
OPERATING OPERATING NET EARNINGS PER SHARE OF
QUARTER REVENUES INCOME (5) INCOME(3)(4)(5) COMMON STOCK (1)(2)(3)(4)(5)
- ------- --------- ---------- --------------- ----------------------------
(000's) (000's) (000's)
1995
<S> <C> <C> <C> <C>
First $165,398 $28,135 $ 9,470 $ .62
Second 163,429 26,535 7,774 .67
Third 200,308 47,431 26,535 1.89
Fourth 161,314 25,055 6,614 .46
1994
<S> <C> <C> <C> <C>
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
------------------
<FN>
(1) Based on weighted average number of shares
outstanding each quarter.
(2) Earnings per share for the second and third quarter
of 1995 included a total gain of $.15 per share from the
repurchase of preferred stock at a discount to par value.
(3) Net income and earnings per share for the third
quarter of 1995 included an after-tax charge of $1.6
million, or $.12 per share, reflecting the effects of
legislated future state income tax rate reductions which
will reduce future tax benefits on plant previously
written off.
(4) 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".
(5) 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>
- 72 -<PAGE>
<PAGE>
[Letterhead of Coopers & Lybrand]
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, 1995,
1994 and 1993, 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, 1995, 1994 and 1993, 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 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 29, 1996
- 73 -<PAGE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.
Previously reported. See Part IV, Item 14(b).
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 28, 1996 for the Annual Meeting of
the Shareholders to be held on May 15, 1996, which Proxy
Statement will be filed with the Securities and Exchange
Commission on or about March 28, 1996, 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
1995 AND YEAR-END OPTION VALUES," "DIVIDEND EQUIVALENT PROGRAM,"
"RETIREMENT PLANS," "BOARD OF DIRECTORS COMPENSATION AND
EXECUTIVE DEVELOPMENT COMMITTEE REPORT ON EXECUTIVE
COMPENSATION," "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION," "DIRECTOR COMPENSATION" and "SHAREOWNER RETURN
PRESENTATION" in the Company's definitive Proxy Statement, dated
March 28, 1996, for the Annual Meeting of the Shareholders to be
held on May 15, 1996, which Proxy Statement will be filed with
the Securities and Exchange Commission on or about March 28,
1996, 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
SHAREOWNERS" and "STOCK OWNERSHIP OF DIRECTORS AND OFFICERS" in
the Company's definitive Proxy Statement, dated March 28, 1996
for the Annual Meeting of the Shareholders to be held on May 15,
1996, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about March 28, 1996, is incorporated
by reference in answer to this item.
Item 13. Certain Relationships and Related Transactions.
Since January 1, 1995, there has been no transaction,
relationship or indebtedness of the kinds described in Item 404
of Regulation S-K.
- 74 -<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, 1995, 1994 and 1993
Consolidated statement of cash flows for the years ended
December 31, 1995, 1994 and 1993
Consolidated balance sheet, December 31, 1995, 1994 and 1993
Consolidated statement of retained earnings for the years
ended December 31, 1995, 1994 and 1993
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, 1995, 1994 and 1993.
- 75 -<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 Annual Report (Form 10-K) for fiscal year
ended December 31, 1995.
(2) Filed with Quarterly Report (Form 10-Q) for fiscal
quarter ended September 30, 1995.
(3) Filed with Registration Statement No. 2-60849, effective
July 24, 1978.
(4) Filed with Quarterly Report (Form 10-Q) for fiscal
quarter ended September 30, 1991.
(5) Filed with Quarterly Report (Form 10-Q) for fiscal
quarter ended March 31, 1991.
(6) Filed with Registration Statement No. 33-40169,
effective August 12, 1991.
(7) Filed with Registration Statement No. 33-35465,
effective August 1, 1990.
(8) Filed with Amendment No. 1 to Registration Statement
No. 33-55461, effective October 31, 1994.
(9) Filed with Quarterly Report (Form 10-Q) for fiscal
quarter ended March 31, 1995.
(10) Filed with Registration Statement No. 2-57275, effective
October 19, 1976.
(11) Filed with Annual Report (Form 10-K) for fiscal year
ended December 31, 1991.
(12) Filed with Annual Report (Form 10-K) for fiscal year
ended December 31, 1992.
(13) Filed with Registration Statement No. 2-66518, effective
February 25, 1980.
(14) Filed with Registration Statement No. 2-49669, effective
December 11, 1973.
(15) Filed with Annual Report (Form 10-K) for fiscal year
ended December 31, 1993.
(16) Filed with Registration Statement No. 2-54876, effective
November 19, 1975.
(17) Filed with Registration Statement No. 2-52657, effective
February 6, 1975.
(18) Filed with Quarterly Report (Form 10-Q) for fiscal
quarter ended June 30, 1995.
(19) Filed with Amendment No. 2 to Current Report (Form
8-K/A), dated January 18, 1996.
(20) Filed with Quarterly Report (Form 10-Q) for fiscal
quarter ended March 31, 1994.
- 76 -<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) 3.1a (1) Copy of Restated Certificate of Incorporation of
The United Illuminating Company, dated
January 23, 1995. (Exhibit 3.1)
(3) 3.1b (2) Copy of Certificate Amending Certificate of
Incorporation By Action of Board of Directors,
dated August 4, 1995. (Exhibit 3.1b)
(3) 3.2a (3) Copy of Bylaws of The United Illuminating
Company. (Exhibit 2.3)
(3) 3.2b (4) 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 (5) 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 (6) 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 (7) 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).
(4) 4.3a (8) Copy of form of Amended and Restated Agreement of
Limited Partnership of United Capital Funding
Partnership L.P. (Exhibit 4(c))
(4) 4.3b (9) Copy of Action of The United Illuminating
Company, as General Partner of United Capital
Funding Partnership L.P., relating to the 9 5/8%
Preferred Capital Securities, Series A, of
United Capital Funding Partnership L.P.
(Exhibit 4(b))
(4) 4.3c (8) Copy of form of Indenture, dated as of April 1,
1995, from The United Illuminating Company to
The Bank of New York, as Trustee. (Exhibit 4(e))
(4) 4.3d (9) Copy of First Supplemental Indenture, dated as of
April 1, 1995, between The United Illuminating
Company and The Bank of New York, Trustee,
supplementing Exhibit 4.3c. (Exhibit 4(d))
(4) 4.3e (8) Copy of form of Payment and Guarantee Agreement
of The UnitedIlluminating Company, dated as of
April 1, 1995. (Exhibit 4(j))
(10) 10.1 (10) 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 (10) 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 (3) 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 (11) 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)
- 77 -<PAGE>
<PAGE>
Exhibit
Table Exhibit Reference
Item No. No. No. Description
- -------- ------- --------- -----------
(10) 10.2d (12) 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 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.
(10) 10.2f Copy of Additional Power Contract, dated as of
April 30, 1984, between Connecticut Yankee
Atomic Power Company and The United Illuminating
Company.
(10) 10.3 (10) 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 (10) 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)
(10) 10.4b (13) 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 (3) 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 (11) Copy of NEPOOL Power Pool Agreement, dated as of
September 1, 1971, as amended to November 1,
1988. (Exhibit 10.6a)
(10) 10.6b (14) Copy of Agreement Setting Out Supplemental NEPOOL
Understandings, dated as of April 2, 1973.
(Exhibit 5.7-10)
(10) 10.6c (11) Copy of Amendment to NEPOOL Power Pool Agreement,
dated as of March 15, 1989, amending Exhibit
10.6a. (Exhibit 10.6c)
(10) 10.6d (11) Copy of Agreement Amending NEPOOL Power Pool
Agreement, dated as of October 1, 1990, amending
Exhibit 10.6a. (Exhibit 10.6d)
(10) 10.6e (15) Copy of Agreement Amending NEPOOL Power Pool
Agreement, dated as of September 15, 1992,
amending Exhibit 10.6a. (Exhibit 10.6e)
(10) 10.6f (15) Copy of Agreement Amending NEPOOL Power Pool
Agreement, dated as of June 1, 1993, amending
Exhibit 10.6a. (Exhibit 10.6f)
(10) 10.7a (11) 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 (16) Copy of Transmission Support Agreement, dated as of
May 1, 1973, among the Seabrook Companies.
(Exhibit 5.9-2)
(10) 10.7c (4) 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)
- 78 -<PAGE>
<PAGE>
Exhibit
Table Exhibit Reference
Item No. No. No. Description
- ------- ------- --------- -----------
(10) 10.8a (13) 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 (17) 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 (10) 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 (3) 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 (11) 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 (11) 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)
(10) 10.10a (18) Copy of Agreement, effective May 16, 1995,
between The United Illuminating Company and
Local 470-1, Utility Workers Union of America,
AFL-CIO. (Exhibit 10.10a)
(10) 10.10b (18) Copy of Supplemental Agreement - Part-Time
Employees, effective May 16, 1995, between The
United Illuminating Company and Local 470-1,
Utility Workers Union of America, AFL-CIO.
(Exhibit 10.10b)
(10) 10.11 Copy of Fuel Oil Supply and Management Agreement,
dated as of October 1, 1995, between The United
Illuminating Company and Bayway Refining
Company. (Confidential treatment requested)
(10) 10.12 (12) 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 (4) Copy of Fossil Fuel Supply Agreement between BLC
Corporation and The United Illuminating Company,
dated as of July 1, 1991. (Exhibit 10.31)
(10) 10.14a* (12) Copy of Employment Agreement, dated as of January 1,
1988, between The United Illuminating Company and
Richard J. Grossi. (Exhibit 10.22a)
(10) 10.14b* Copy of Amendment to Employment Agreement, dated
as of July 23, 1990, between The United
Illuminating Company and Richard J. Grossi,
amending Exhibit 10.14a.
(10) 10.14c* (18) Copy of Second Amendment to Employment Agreement,
dated as of June 1, 1995, between The United
Illuminating Company and Richard J. Grossi,
amending Exhibit 10.14a. (Exhibit 10.15c)
(10) 10.15a* (12) Copy of Employment Agreement, dated as of January
1, 1988, between The United Illuminating Company
and Robert L. Fiscus. (Exhibit 10.23a)
(10) 10.15b* Copy of Amendment to Employment Agreement, dated as
of July 23, 1990, between The United Illuminating
Company and Robert L. Fiscus, amending
Exhibit 10.15a.
- 79 -<PAGE>
<PAGE>
Exhibit
Table Exhibit Reference
Item No. No. No. Description
- ------- ------- --------- -----------
(10) 10.15c* (18) Copy of Second Amendment to Employment Agreement,
dated as of June 1, 1995, between The United
Illuminating Company and Robert L. Fiscus,
amending Exhibit 10.15a. (Exhibit 10.16c)
(10) 10.16a* (12) Copy of Employment Agreement, dated as of
January 1, 1988, between The United Illuminating
Company and James F. Crowe. (Exhibit 10.24a)
(10) 10.16b* Copy of Amendment to Employment Agreement, dated
as of July 23, 1990, between The United
Illuminating Company and James F. Crowe, amending
Exhibit 10.16a.
(10) 10.16c* (18) Copy of Second Amendment to Employment Agreement,
dated as of June 1, 1995, between The United
Illuminating Company and James F. Crowe,
amending Exhibit 10.16a. (Exhibit 10.17c)
(10) 10.17* (11) Copy of Executive Incentive Compensation Program
of The United Illuminating Company. (Exhibit
10.24)
(10) 10.18* Copy of The United Illuminating Company 1990 Stock
Option Plan, as amended on December 20, 1993,
January 24, 1994 and August 22, 1994.
(10) 10.19* (20) Copy of The United Illuminating Company Dividend
Equivalent Program. (Exhibit 10.20)
(12),(99) 12 Statement Showing Computation of Ratios of Earnings
to Fixed Charges and Ratios of Earnings to
Combined Fixed Charges and Preferred Stock
Dividend Requirements (Twelve Months Ended
December 31, 1995, 1994, 1993, 1992 and
1991).
(16) 16 (19) Letter re Change in certifying accountant.
(Exhibit (1))
(21) 21 List of subsidiaries of The United Illuminating
Company.
(27) 27 Financial Data Schedule
(28) 28.1 (12) Copies of significant rate schedules of The United
Illuminating Company. (Exhibit 28.1)
- -----------------------
*Management contract or compensatory plan or arrangement.
- 80 -<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
- -------- -------------------- -------
4 None December 15, 1995
(amended January 2, 1996
and January 18, 1996)
- 81 -<PAGE>
<PAGE>
[Letterhead of Coopers & Lybrand]
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, File No. 33-55461 and File No. 33-64003), of
our report, dated January 29, 1996, on our audits of the
consolidated financial statements and financial statement
schedule of The United Illuminating Company as of
December 31, 1995, 1994 and 1993 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
January 29, 1996
- 82 -<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 1, 1996
-----------------
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 1, 1996
- ---------------------
(Richard J. Grossi)
(Principal Executive Officer)
Director, President and
/s/ Robert L. Fiscus Chief Financial Officer March 1, 1996
- ---------------------
(Robert L. Fiscus)
(Principal Financial and
Accounting Officer)
/s/ John F. Croweak Director March 1, 1996
- --------------------
(John F. Croweak)
/s/ F. Patrick McFadden, Jr. Director March 1, 1996
- -----------------------------
(F. Patrick McFadden, Jr.)
/s/ J. Hugh Devlin Director March 1, 1996
- -------------------
(J. Hugh Devlin)
/s/ Betsy Henley-Cohn Director March 1, 1996
- ----------------------
(Betsy Henley-Cohn)
/s/ Frank R. O'Keefe, Jr. Director March 1, 1996
- --------------------------
(Frank R. O'Keefe, Jr.)
/s/ James A. Thomas Director March 1, 1996
- ----------------------
(James A. Thomas)
/s/ David E.A. Carson Director March 1, 1996
- -----------------------
(David E.A. Carson)
/s/ John L. Lahey Director March 1, 1996
- ----------------------
(John L. Lahey)
/s/ Marc C. Breslawsky Director March 1, 1996
- -----------------------
(Marc C. Breslawsky)
/s/ Thelma R. Albright Director March 1, 1996
- ------------------------
(Thelma R. Albright)
- 83 -<PAGE>
EXHIBIT INDEX
(a) Exhibits
Exhibit
Table Item Exhibit
Number Number Description Page No.
- ---------- ------- ----------- -------
(10) 10.2e 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.
(10) 10.2f Copy of Additional Power Contract, dated
as of April 30, 1984, between Connecticut
Yankee Atomic Power Company and The
United Illuminating Company.
(10) 10.11 Copy of Fuel Oil Supply and Management Agreement,
dated as of October 1, 1995, between The United
Illuminating Company and Bayway Refining
Company. (Confidential treatment requested)
(10) 10.14b Copy of Amendment to Employment Agreement, dated
as of July 23, 1990, between The United
Illuminating Company and Richard J. Grossi,
amending Exhibit 10.14a.
(10) 10.15b Copy of Amendment to Employment Agreement, dated
as of July 23, 1990, between The United
Illuminating Company and Robert L. Fiscus,
amending Exhibit 10.15a.
(10) 10.16b Copy of Amendment to Employment Agreement, dated
as of July 23, 1990, between The United
Illuminating Company and James F. Crowe,
amending Exhibit 10.16a.
(10) 10.18 Copy of The United Illuminating Company 1990
Stock Option Plan, as amended on
December 20, 1993, January 24, 1994
and August 22, 1994.
(12),(99) 12 Statement Showing Computation of Ratios of
Earnings to Fixed Charges and Ratios of Earnings
to Combined Fixed Charges and Preferred
Stock Dividend Requirements (Twelve Months
Ended December 31, 1995, 1994, 1993, 1992 and
1991).
(21) 21 List of subsidiaries of The United Illuminating
Company.
(27) 27 Financial Data Schedule.<PAGE>
<PAGE>
<PAGE>
EXHIBIT 10.2e
SECOND SUPPLEMENTARY POWER CONTRACT
SECOND SUPPLEMENTARY POWER CONTRACT, dated as of April 30,
1984, between CONNECTICUT YANKEE ATOMIC POWER COMPANY
("Connecticut Yankee"), a Connecticut corporation, and The United
Illuminating Company (the "Purchaser") to the Power Contract,
dated as of July 1, 1964, between Connecticut Yankee and the
Purchaser (the "Power Contract").
W I T N E S S E T H :
WHEREAS, Connecticut Yankee is establishing a trust pursuant
to an Indenture of Trust dated as of April 30, 1984 (the
"Connecticut Yankee Trust") to make provision for financing the
decommissioning of the nuclear electric generating unit of the
pressurized water type, having a maximum net capability of
approximately 582 megawatts electric, at a site adjacent to the
Connecticut River at Haddam, Connecticut (said unit, together
with the site and all related facilities owned or to be owned by
Connecticut Yankee, being referred to herein as the "Unit") in
accordance with the rules and regulations of the Nuclear
Regulatory Commission (the "NRC") and to assure Connecticut
Yankee's financial ability to meet the obligations to the NRC,
other applicable regulatory bodies, the general public and its
customers in connection with said decommissioning. The
Connecticut Yankee Trust is to hold all payments made to it and
any earnings thereon solely for the purpose of meeting such
decommissioning expenses and thereafter for the benefit of the
wholesale purchasers of power from Connecticut Yankee in
<PAGE>
<PAGE>
accordance with the terms and conditions ordered by any
governmental regulatory body having jurisdiction; and
WHEREAS, pursuant to an Order (the "Order") issued by the
Federal Energy Regulatory Commission (the "FERC") on June 12,
1980 (Docket No. ER80-717), Connecticut Yankee has been
collecting estimated costs of decommissioning the Unit pursuant
to the Power Contract; and
WHEREAS, in order to provide for the continued accrual of
funds for decommissioning the Unit at the end of its useful life
Connecticut Yankee and each of its other purchasers are
contemporaneously entering into Second Supplementary Power
Contracts which are identical to this Second Supplementary Power
Contract, except for the necessary changes in the names of the
parties.
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree that the Power Contract is
hereby supplemented as follows:
1. Decommissioning Payment
-----------------------
For each month after which this Second Supplementary Power
Contract shall have become effective pursuant to Section 15
herein, the Purchaser will pay Connecticut Yankee an amount equal
to the Purchaser's entitlement percentage of the Total
Decommissioning Costs for the month with respect to the Unit.
(a) "Total Decommissioning Costs" for any month shall
mean the sum of (x) an amount equal to all accruals in
such month to any reserve, as from time to time
- 2 -<PAGE>
<PAGE>
established by Connecticut Yankee and approved by its
board of directors, to provide for the ultimate payment
of the Decommissioning Expenses of the Unit plus (y)
Decommissioning Tax Liability for such month. It is
understood (i) that such funds may be held by
Connecticut Yankee or by an independent trust or other
separate fund, as determined by said board of
directors, (ii) that, upon compliance with Section 5
hereof, the amount, custody and/or timing of such
accruals may from time to time during the term hereof
be modified by said board of directors in its
discretion or to comply with applicable statutory or
regulatory requirements or to reflect changes in the
amount, custody or timing of anticipated
Decommissioning Expenses, and (iii) that the use of the
term "to decommission" herein encompasses compliance
with all requirements (other than those relating to
spent nuclear fuel) of the Nuclear Regulatory
Commission or its successors (the "NRC") for permanent
cessation of operation of a nuclear facility and any
other activities reasonably related thereto.
(b) "Decommissioning Expenses" shall include:
(1) All costs and expenses of any NRC - approved
method of removing the Unit from service,
including without limitation, dismantling,
mothballing, entombment, removing radioactive
material (excluding spent nuclear fuel) to
- 3 -<PAGE>
<PAGE>
temporary and/or permanent storage sites,
decontaminating, restoring and supervising the
site, and any costs and expenses incurred in
connection with proceedings before governmental
authorities relating to any authorization to
decommission the Unit or remove the Unit from
service;
(2) All costs of labor and services, whether
directly or indirectly incurred, including without
limitation, services of foremen, inspectors,
supervisors, surveyors, engineers, security
personnel, counsel and accountants, performed or
rendered in connection with the decommissioning of
the Unit and the removal of the Unit from service,
and all costs of materials, supplies, machinery,
construction equipment and apparatus acquired or
used (including rental charges for machinery,
equipment or apparatus hired) for or in connection
with the decommissioning of the Unit and the
removal of the Unit from service, and all
administrative costs, including services of
counsel and financial advisers, of any applicable
independent trust or other separate fund; it being
understood that any amount, exclusive of proceeds
of insurance, realized by Connecticut Yankee as
salvage on any machinery, construction equipment
and apparatus, the cost of which was charged to
- 4 -<PAGE>
<PAGE>
Decommissioning Expense, shall be treated as a
reduction of the amounts otherwise chargeable on
account of the costs of decommissioning of the
Unit; and
(3) All overhead costs applicable to the Unit
during its decommissioning period, including,
without limiting the generality of the foregoing,
taxes (other than taxes on or in respect of
income), charges, licenses, excises and
assessments, casualties, surety bond premiums and
insurance premiums.
(c) "Decommissioning Tax Liability" for any month shall be
an amount established by Connecticut Yankee and approved by its
board of directors to meet possible income tax obligations, which
amount shall not exceed: the amount to be included in the clause
(x) portion of Total Decommissioning Costs for such month
multiplied by a fraction whose numerator is equal to the combined
highest applicable statutory Federal and state marginal income
tax rate and whose denominator is equal to one minus the combined
highest statutory Federal and state marginal income tax rate.
Without limiting the generality of the foregoing, any other
amounts expended or to be paid with respect to decommissioning of
the Unit or removal of the Unit from service shall constitute
part of the Decommissioning Expenses if they are, or when paid
will be, either (i) properly chargeable to any account related to
decommissioning of a nuclear generating unit in accordance with
the Uniform System of Accounts applicable to Connecticut Yankee
- 5 -<PAGE>
<PAGE>
or generally accepted accounting principles as then in effect, or
(ii) properly chargeable to decommissioning of a nuclear
generating unit in accordance with then applicable regulations of
the NRC or the FERC or any other regulatory agency having
jurisdiction.
2. Billing
-------
Connecticut Yankee will bill the Purchaser, as soon as
practicable after the end of each month, for all amounts payable
by the Purchaser with respect to the particular month pursuant to
Section 1 hereof. Such bills will be rendered in such detail as
the Purchaser may reasonably request and may be rendered on an
estimated basis subject to corrective adjustments in subsequent
billing periods. All bills shall be due and payable when
rendered and any amount remaining unpaid 15 days following the
date of receipt of bills shall bear interest at an annual rate
equal to 2% in excess of the current prime rate then in effect at
The Connecticut Bank and Trust Company, National Association,
from the due date to the date payment is received by Connecticut
Yankee.
3. Decommissioning Fund
--------------------
Connecticut Yankee agrees to pay to, or cause to be paid to,
the Connecticut Yankee Trust or any successor trust approved by
the board of directors of Connecticut Yankee all funds collected
hereunder for the express purpose of decommissioning the Unit or
removing the Unit from service and further agrees that, after the
- 6 -<PAGE>
<PAGE>
tax consequences of decommissioning collections have been
resolved, any funds collected hereunder to meet Decommissioning
Tax Liability which are not used for that purpose will be
refunded to the Purchaser.
4. Duration of Payments
--------------------
The Purchaser's obligation to make payment of its
entitlement percentage of Total Decommissioning Costs shall,
whether or not the Unit is operated or operable and
notwithstanding any earlier termination of the service life of
the Unit and cancellation of the Power Contract, remain in full
force and effect until January 1, 1998 or the completion of
decommissioning of the Unit, whichever is earlier, it being
recognized that such costs represent deferred payments in
connection with power theretofore delivered by Connecticut
Yankee; provided, however, that the payment of Total
Decommissioning Costs shall cease upon the taking of the Unit by
exercise of the right of eminent domain or similar right or
power.
5. Amendments
----------
Upon authorization by Connecticut Yankee's board of
directors of uniform amendments to all the Second Supplementary
Power Contracts identical to this Second Supplementary Power
Contract, Connecticut Yankee shall have the right to amend the
provisions of Section 1 hereof by serving an appropriate
statement of such amendment upon the Purchaser and filing the
- 7 -<PAGE>
<PAGE>
same with the FERC (or such other regulatory agency as may have
jurisdiction in the premises) in accordance with the provisions
of applicable laws and any rules and regulations thereunder, and
the amendment shall thereupon become effective on the date
specified therein, subject to any suspension order duly issued by
such agency. All other amendments to this Second Supplementary
Power Contract shall be by mutual agreement, evidenced by a
written amendment signed by the parties hereto.
6. Arbitration
-----------
In case any dispute shall arise as to the interpretation or
performance of this Second Supplementary Power Contract which
cannot be settled by mutual agreement, such dispute shall be
submitted to arbitration. The parties shall if possible agree
upon a single arbitrator. In case of failure to agree upon an
arbitrator within 15 days after the delivery by either party to
the other of a written notice requesting arbitration, either
party may request the American Arbitration Association to appoint
the arbitrator. The arbitrator, after opportunity for each of
the parties to be heard, shall consider and decide the dispute
and notify the parties in writing of his decision. Such decision
shall be binding upon the parties, and the expenses of the
arbitration shall be borne equally by them.
7. Regulation
----------
This Second Supplementary Power Contract, and all rights,
obligations and performance of the parties hereunder, are subject
- 8 -<PAGE>
<PAGE>
to all applicable state and Federal law and to all duly
promulgated orders and other duly authorized action of any
governmental authority having jurisdiction.
8. Assignment
----------
This Second Supplementary Power Contract shall be binding
upon and shall inure to the benefit of, and may be performed by,
the successors and assigns of the parties, except that no
assignment, pledge or other transfer of this Second Supplementary
Power Contract by either party shall operate to release the
assignor, pledgor or transferor of any of its obligations under
this Second Supplementary Power Contract unless consent to the
release is given in writing by the other party, or, if the other
party has theretofore assigned, pledged or otherwise transferred
its interest in this Second Supplementary Power Contract, by the
other party's assignee, pledgee or transferee, or unless such
transfer is incident to a merger or consolidation with, or
transfer of all or substantially all of the assets of the
transferor to, another Purchaser which shall, as part of such
succession, assume all the obligations of the transferor under
this contract.
9. Right of Setoff
---------------
The Purchaser shall not be entitled to set off against the
payments required to be made by it under this Second
Supplementary Power Contract (i) any amounts owed to it by
Connecticut Yankee or (ii) the amount of any claim by it against
- 9 -<PAGE>
<PAGE>
Connecticut Yankee. However, the foregoing shall not affect in
any other way the Purchaser's rights and remedies with respect to
any such amounts owed to it by Connecticut Yankee or any claim by
it against Connecticut Yankee.
10. Interpretation
--------------
The interpretation and performance of this Second
Supplementary Power Contract shall be in accordance with and
controlled by the law of the State of Connecticut.
11. Addresses
---------
Except as the parties may otherwise agree, any notice,
request, bill or other communication from one party to the other,
relating to this Second Supplementary Power Contract, or the
rights, obligations or performance of the parties hereunder,
shall be in writing and shall be effective upon delivery to the
other party. Any such communication shall be considered as duly
delivered when mailed to the respective post office address of
the other party shown following the signatures of such other
party hereto, or such other post office address as may be
designated by written notice given as provided in this Section.
12. Corporate Obligations
---------------------
This Second Supplementary Power Contract is the corporate
act and obligation of the parties hereto, and any claim hereunder
against any stockholder, director or officer of any party, as
such, is expressly waived.
- 10 -<PAGE>
<PAGE>
13. Usage of Defined Terms
----------------------
Except where otherwise specifically provided herein, the
usage in this contract of terms which are defined in the Power
Contract shall be deemed to be in accordance with the definitions
thereof in the Power Contract.
14. Counterparts
------------
This Second Supplementary Power Contract may be executed in
any number of counterparts and each executed counterpart shall
have the same force and effect as an original instrument and as
if all the parties to all of the counterparts had signed the same
instrument. Any signature page of this Second Supplementary Power
Contract may be detached from any counterpart without impairing
the legal effect of any signatures thereon, and may be attached
to another counterpart of this Second Supplementary Power
Contract identical in form hereto but having attached to it one
or more signature pages.
15. Effectiveness
-------------
This Second Supplementary Power Contract shall become
effective sixty days after the date upon which this Second
Supplementary Power Contract shall have been filed with the FERC,
subject to any suspension order duly issued by the FERC.
- 11 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second
Supplementary Power Contract by their respective officers duly
authorized as of the 30th day of April, 1984.
CONNECTICUT YANKEE ATOMIC POWER COMPANY
By /s/ Bernard M. Fox
--------------------------
(Officer)
Its /s/ Senior Vice President
--------------------------
(Title)
P.O. Box 270
Hartford, CT 06141
--------------------------
(Address)
THE UNITED ILLUMINATING COMPANY
By /s/ James F. Cobey, Jr.
---------------------------
James F. Cobey, Jr.
Its President
---------------------------
80 Temple Street
New Haven, CT 06506
- 12 -
<PAGE>
<PAGE>
EXHIBIT 10.2f
ADDITIONAL POWER CONTRACT
ADDITIONAL POWER CONTRACT, dated as of April 30, 1984,
between CONNECTICUT YANKEE ATOMIC POWER COMPANY ("Connecticut
Yankee"), a Connecticut corporation, and The United Illuminating
Company (the "Purchaser").
In consideration of the following understandings and the
respective undertakings of the parties, it is agreed as follows:
1. Basic Understandings.
--------------------
Connecticut Yankee was organized in 1962 to provide for the
supply of power to its sponsoring utility companies (including
the Purchaser). Connecticut Yankee constructed a nuclear electric
generating unit of the pressurized water type, having a maximum
net capability of approximately 582 megawatts electric, at a site
adjacent to the Connecticut River at Haddam, Connecticut (said
unit, together with the site and all related facilities owned or
to be owned by Connecticut Yankee, being referred to herein as
the "Unit"). On June 30, 1967, Connecticut Yankee was issued a
full-term, operating license for the Unit from the Atomic Energy
Commission (now the Nuclear Regulatory Commission which, together
with any successor agency or agencies, is hereafter called the
"NRC"), which license expires on May 26, 2004, and the Unit
commenced commercial operation on January 1, 1968.
The Unit is operated to supply power to the purchasers from
Connecticut Yankee (collectively the "Purchasers"), each of which
by a Power Contract dated as of July 1, 1964, as supplemented by
Supplementary Power Contracts dated as of March 1, 1978, such
Supplementary Power Contracts amended on August 22, 1980 and<PAGE>
<PAGE>
October 15, 1982 (collectively the "Power Contracts"), has
undertaken to purchase a fixed percentage of the capacity and
output of the Unit for a term extending through December 31,
1997. The names of the Purchasers and their respective
percentages ("entitlement percentages") of the capacity and
output of the Unit are as follows:
Entitlement
Percentage
-----------
The Connecticut Light and Power Company. . . . . . . . . . .34.5%
New England Power Company. . . . . . . . . . . . . . . . . .15.0
Western Massachusetts Electric Company . . . . . . . . . . . 9.5
The United Illuminating Company. . . . . . . . . . . . . . . 9.5
Boston Edison Company. . . . . . . . . . . . . . . . . . . . 9.5
Central Maine Power Company. . . . . . . . . . . . . . . . . 6.0
Public Service Company of New Hampshire. . . . . . . . . . . 5.0
Montaup Electric Company . . . . . . . . . . . . . . . . . . 4.5
Cambridge Electric Light Company . . . . . . . . . . . . . . 4.5
Central Vermont Public Service Corporation . . . . . . . . . 2.0
The Power Contracts have been supplemented most recently by
Second Supplementary Power Contracts, dated as of April 30, 1984,
between Connecticut Yankee and each of the Purchasers (the
"Second Supplementary Power Contracts"). The Second Supplementary
Power Contracts provide for the collection of funds to defray the
ultimate cost of decommissioning the Unit and to provide an
allowance for potential taxes payable by Connecticut Yankee with
respect to the decommissioning fund.
- 2 -<PAGE>
<PAGE>
Connecticut Yankee and the Purchasers desire to provide for
the orderly continuation of the sale and purchase of the capacity
and output of the Unit during the useful life of the Unit to the
extent that such useful life continues beyond the termination
date of the Power Contracts and the Second Supplementary Power
Contracts and to provide appropriate provisions for the
collection of funds for, and the payment of, decommissioning
costs and any other costs, including potential taxes, with
respect to the Unit during and after the useful life of the Unit.
Connecticut Yankee and the other Purchasers are entering into
Additional Power Contracts which are identical to this contract
except for necessary changes in the names of the
parties.
2. Effective Date, Term and Waiver.
-------------------------------
This contract shall become effective upon receipt by the
Purchaser of notice that Connecticut Yankee has entered into
Additional Power Contracts, as contemplated by Section 1 above,
with each of the other Purchasers. The operative term of this
contract shall commence on January 1, 1998 notwithstanding the
fact that the useful service life of the Unit may have been
terminated prior to that date, and shall terminate upon the later
to occur of (i) 30 days after the date on which the last of the
financial obligations of Connecticut Yankee which constitute
elements of the payment calculated pursuant to Section 7 of this
contract has been extinguished by Connecticut Yankee, or (ii) 30
days after the date on which Connecticut Yankee is finally
relieved of any obligations under the last of any licenses
- 3 -<PAGE>
<PAGE>
(operating and/or possessory) which it now holds from, or which
may hereafter be issued to it by, the NRC with respect to the
Unit under applicable provisions of the Atomic Energy Act of
1954, as amended from time to time (the "Act").
Connecticut Yankee and the Purchaser acknowledge that, if
the useful service life of the Unit is terminated prior to
January 1, 1998, then only the provisions of this contract
applicable to decommissioning of the Unit will apply during the
operative term of this contract.
The Purchaser hereby irrevocably waives its right to extend
the contract term of its Power Contract pursuant to subsections
(a) or (b) of Section 8 thereof.
3. Operation and Maintenance of the Unit.
-------------------------------------
Connecticut Yankee will operate and maintain the Unit in
accordance with good utility practice under the circumstances and
all applicable law, including the applicable provisions of the
Act and of any licenses issued thereunder to Connecticut Yankee.
Within the limits imposed by good utility practice under the
circumstances and applicable law, the Unit will be operated at
its maximum capability and on a long hour use basis.
Outages for inspection, maintenance, refueling and repairs
and replacements will be scheduled in accordance with good
utility practice and insofar as practicable shall be mutually
agreed upon by Connecticut Yankee and the Purchaser. In the event
of an outage, Connecticut Yankee will use its best efforts to
restore the Unit to service as promptly as practicable.
- 4 -<PAGE>
<PAGE>
4. Decommissioning.
---------------
After commercial operation of the Unit permanently ceases,
Connecticut Yankee will decommission the Unit in a manner
authorized by Connecticut Yankee's board of directors and
approved by the NRC in accordance with the Act and the rules and
regulations thereunder then in effect and by any agency having
jurisdiction over decommissioning of the Unit.
It is understood that, pursuant to the Second Supplementary
Power Contracts, the Purchasers are currently being billed for
Total Decommissioning Costs which, as of the date of this
contract, are being accumulated in a separate fund which was
established for the purpose of reimbursing Connecticut Yankee for
Decommissioning Expenses incurred in the process of
decommissioning the Unit and that such billings are subject to
change in accordance with the provisions of the Second
Supplementary Power Contracts, subject to the jurisdiction of the
Federal Energy Regulatory Commission or any successor agency
thereto (the "FERC"). It is contemplated that sufficient funds
will be accumulated pursuant to those contracts and paragraph 7
hereof to make payment to reimburse Connecticut Yankee for the
full cost of decommissioning the Unit.
5. Purchaser's Entitlement.
-----------------------
The Purchaser will, throughout the term of this contract, be
entitled and obligated to take its entitlement percentage of the
capacity and net electrical output of the Unit, at whatever level
the Unit is operated or operable, whether more or less than 582
megawatts electric.
- 5 -<PAGE>
<PAGE>
6. Deliveries and Metering.
-----------------------
The Purchaser's entitlement percentage of the output of the
Unit will be delivered to and accepted by the Purchaser at the
step-up substation at the site. All deliveries will be made in
the form of 3-phase, 60 cycle, alternating current at a nominal
voltage of 345,000 volts. The Purchaser will make its own
arrangements for the transmission of its entitlement percentage
of the output of the Unit.
Connecticut Yankee will supply and maintain all necessary
metering equipment for determining the quantity and conditions of
supply of deliveries under this contract, will make appropriate
tests of such equipment in accordance with good utility practice
and as reasonably requested by the Purchaser, and will maintain
the accuracy of such equipment within reasonable limits.
Connecticut Yankee will furnish the Purchaser with such summaries
of meter readings as the Purchaser may reasonably request.
7. Payment.
-------
With respect to each month commencing on or after January 1,
1998, the Purchaser will pay Connecticut Yankee an amount equal
to the Purchaser's entitlement percentage of the sum of (a) the
Total Decommissioning Costs for the month with respect to the
Unit, plus (b) Connecticut Yankee's total operating expenses for
the month with respect to the Unit, plus (c) an amount equal to
one-twelfth of the composite percentage for such month of the net
Unit investment as most recently determined in accordance with
this Section 7.
- 6 -<PAGE>
<PAGE>
"Composite percentage" shall be computed as of the last day
of each month during the term hereof (the "computation date") and
for any month the composite percentage shall be that computed as
of the last day of the previous month. "Composite percentage" as
of a computation date shall be the sum of (i) the equity
percentage as of such date multiplied by the ratio which the
equity investment with respect to the Unit, as of such date, is
to the total capital as of such date; plus (ii) the "effective
interest rate" per annum of each principal amount of long-term
debt outstanding on such date for money borrowed with respect to
the Unit, multiplied by the ratio which such principal amount is
to total capital as of such date; plus (iii) the "effective
dividend rate" per annum of each series of preferred stock
outstanding as of such date with respect to the Unit multiplied
by the ratio which the amount at which such preferred stock would
be reflected on a balance sheet of Connecticut Yankee is to total
capital as of such date. The "effective interest rate" of each
principal amount of long-term debt referred to in clause (ii)
will reflect the annual interest requirements and to the extent
applicable, amortization of issue expenses, discounts and
premiums, sinking fund call premiums, expenses and discounts,
refunding and retirement expenses, discounts and premiums, and
all other expenses applicable to the issue of such indebtedness.
The "effective dividend rate" of each series of preferred
stock referred to in clause (iii) will reflect the annual
dividend requirements applicable to each such series of preferred
stock.
- 7 -<PAGE>
<PAGE>
"Equity percentage" as of any date after commencement of the
operative term hereof shall be that percentage which was the
"equity percentage" applicable under the Power Contracts on the
last day of the term of the Power Contracts or such other
percentage as may from time to time thereafter be approved by the
FERC or any successor regulatory authority.
"Equity investment" as of any date shall consist of the sum
of (i) all amounts theretofore paid to Connecticut Yankee for all
common capital stock theretofore issued, plus all amounts paid to
Connecticut Yankee by any of its common stockholders as capital
contributions or advances, less the sum of any amounts paid by
Connecticut Yankee to its common stockholders in the form of
stock retirements, repurchases or redemptions, return of capital
or repayments of such contributions or advances; plus (ii) any
credit balance in the capital surplus account not included under
(i) and in the retained earnings account on the books of
Connecticut Yankee as of such date.
"Total capital" as of any date shall be the equity
investment with respect to the Unit, plus the total of the amount
which would be reflected on a balance sheet of Connecticut Yankee
for all other securities (excluding short term debt), including
long-term debt and preferred stock then outstanding with respect
to the Unit.
"Uniform System" shall mean the Uniform System of Accounts
prescribed by the FERC for Class A and Class B Public Utilities
and Licensees, as from time to time in effect.
- 8 -<PAGE>
<PAGE>
Connecticut Yankee's "operating expenses" shall include all
amounts properly chargeable to operating expense accounts, less
any applicable credits thereto, in accordance with the Uniform
System; however, excluding for purposes of this contract Total
Decommissioning Costs.
"Net Unit Investment" shall consist, in each case with
respect to the Unit, of (i) the aggregate amount properly
chargeable at the time in accordance with the Uniform System to
Connecticut Yankee's electric plant accounts (including
construction work in progress to the extent allowed by the FERC)
less the balance, if any, at the time of the accumulated
provision for depreciation, as determined in accordance with the
Uniform System (excluding any amounts specifically allowed by the
FERC to be so excluded); plus (ii) the aggregate amount properly
chargeable at the time in accordance with the Uniform System to
accounts representing materials and supplies; plus (iii) such
reasonable allowances for prepaid items and cash working capital
as may from time to time be determined by Connecticut Yankee and,
for purposes hereof, net Unit investment shall include, in
addition to all other amounts which may be includable therein
under this section, but without duplication, the aggregate amount
properly chargeable at the time in accordance with the Uniform
System to Connecticut Yankee's nuclear fuel accounts (other than
nuclear fuel in process of fabrication), less the balance at the
time of the accumulated provision for amortization of the cost of
nuclear fuel (excluding any amounts specifically permitted by the
FERC), all as determined in accordance with the Uniform System.
- 9 -<PAGE>
<PAGE>
The net Unit investment shall be determined as of the
commencement of each calendar year, or, if Connecticut Yankee
elects, at more frequent intervals.
"Total Decommissioning Costs" for any month shall mean the
sum of (x) an amount equal to all accruals in such month to any
reserve, as from time to time established by Connecticut Yankee
and approved by its board of directors, to provide for the
ultimate payment of the Decommissioning Expenses of the Unit plus
(y) Decommissioning Tax Liability for such month. It is
understood (i) that such funds may be held by Connecticut Yankee
or by an independent trust or other separate fund, as determined
by said board of directors, (ii) that, upon compliance with
Section 17 hereof, the amount, custody and/or timing of such
accruals may from time to time during the term hereof be modified
by said board of directors in its discretion or to comply with
applicable statutory or regulatory requirements or to reflect
changes in the amount, custody or timing of anticipated
Decommissioning Expenses, and (iii) that the use of the term "to
decommission" herein encompasses compliance with all requirements
(other than those relating to spent nuclear fuel) of the NRC for
permanent cessation of operation of a nuclear facility and any
other activities reasonably related thereto.
"Decommissioning Expenses" shall include:
(1) All costs and expenses of removing the Unit from
service, including without limitation, dismantling,
mothballing, removing radioactive material (excluding
spent nuclear fuel) to temporary and/or permanent
- 10 -<PAGE>
<PAGE>
storage sites, decontaminating, restoring and
supervising the site, and any costs and expenses
incurred in connection with proceedings before
governmental authorities relating to any authorization
to decommission the Unit or remove the Unit from
service:
(2) All costs of labor and services, whether directly or
indirectly incurred, including without limitation,
services of foremen, inspectors, supervisors,
surveyors, engineers, security personnel, counsel and
accountants, performed or rendered in connection with
the decommissioning of the Unit and the removal of the
Unit from service, and all costs of materials,
supplies, machinery, construction equipment and
apparatus acquired or used (including rental charges
for machinery, equipment or apparatus hired) for or in
connection with the decommissioning of the Unit and the
removal of the Unit from service, and all
administrative costs, including services of counsel and
financial advisers, of any applicable independent trust
or other separate fund; it being understood that any
amount, exclusive of proceeds of insurance, realized by
Connecticut Yankee as salvage on any machinery,
construction equipment and apparatus, the cost of which
was charged to Decommissioning Expense, shall be
treated as a reduction of the amounts otherwise
- 11 -<PAGE>
<PAGE>
chargeable on account of the costs of decommissioning
of the Unit; and
(3) All overhead costs applicable to the Unit during its
decommissioning period, including, without limiting the
generality of the foregoing, taxes (other than taxes on
or in respect of income), charges, licenses, excises
and assessments, casualties, surety bond premiums and
insurance premiums.
"Decommissioning Tax Liability" for any month shall be an
amount established by Connecticut Yankee and approved by its
board of directors to meet possible income tax obligations, which
amount shall not exceed: the amount to be included in the clause
(x) portion of Total Decommissioning Costs for such month
multiplied by a fraction whose numerator is equal to the combined
highest applicable statutory Federal and state marginal income
tax rate and whose denominator is equal to one minus the combined
highest statutory Federal and state marginal income tax rate.
Without limiting the generality of the foregoing, any other
amounts expended or to be paid with respect to decommissioning of
the Unit or removal of the Unit from service shall constitute
part of the Decommissioning Expenses if they are, or when paid
will be, either (i) properly chargeable to any account related to
decommissioning of a nuclear generating unit in accordance with
the Uniform System or generally accepted accounting principles as
then in effect, or (ii) properly chargeable to decommissioning of
a nuclear generating unit in accordance with then applicable
- 12 -<PAGE>
<PAGE>
regulations of the NRC or the FERC or any other regulatory agency
having jurisdiction.
8. Billing.
-------
Connecticut Yankee will bill the Purchaser, as soon as
practicable after the end of each month, for all amounts payable
by the Purchaser with respect to the particular month pursuant to
Section 7 hereof. Such bills will be rendered in such detail as
the Purchaser may reasonably request and may be rendered on an
estimated basis subject to corrective adjustments in subsequent
billing periods. All bills shall be due and payable when
rendered and any amount remaining unpaid 15 days following the
date of receipt of bills shall bear interest at an annual rate
equal to 2% in excess of the current prime rate then in effect at
The Connecticut Bank and Trust Company, National Association,
from the due date to the date payment is received by Connecticut
Yankee.
9. Decommissioning Fund.
--------------------
Connecticut Yankee agrees to cause an appropriate
decommissioning reserve to be maintained in accordance with
applicable regulatory requirements. Connecticut Yankee has
established an independent trust or other separate fund (the
"Connecticut Yankee Trust") which has the necessary powers to
hold and invest all funds collected for the decommissioning of
the Unit and to disburse the same to reimburse Connecticut Yankee
for such costs when actually incurred for decommissioning of the
Unit or removal of the Unit from service. If during the term of
the Connecticut Yankee Trust applicable legislation or
- 13 -<PAGE>
<PAGE>
regulations are promulgated which so permit or require, or an
alternative entity is created for funding decommissioning of the
Unit, the Connecticut Yankee Trust has the authority, with the
concurrence of Connecticut Yankee, to transfer its trust estate
to such newly authorized entity for the purpose of providing for
the decommissioning of the Unit or removal of the Unit from
service. Connecticut Yankee agrees to pay to, or cause to be
paid to, the Connecticut Yankee Trust or any successor trust
approved by the board of directors of Connecticut Yankee all
funds collected hereunder for the express purpose of
decommissioning the Unit or removing the Unit from service and
further agrees that, after the tax consequences of
decommissioning collections have been resolved, any funds
collected hereunder to meet Decommissioning Tax Liability which
are not used for that purpose will be refunded to the Purchaser.
10. Cancellation of Contract.
------------------------
If deliveries cannot be made to the Purchaser because either
(i) the Unit is damaged to the extent of being
completely or substantially completely destroyed, or
(ii) the Unit is taken by exercise of the right of
eminent domain or a similar right or power, or
(iii) (a) the Unit cannot be used because of
contamination, or because a necessary license or other
necessary public authorization cannot be obtained or is
revoked, or because the utilization of such a license
or authorization is made subject to specified
conditions which are not met, and (b) the situation
- 14 -<PAGE>
<PAGE>
cannot be rectified to an extent which will permit
Connecticut Yankee to make deliveries to the Purchaser
from the Unit;
then and in any such case, the Purchaser may cancel the
provisions of this contract, except that in all cases other than
those described in clause (ii) above, the provisions relating to
the payment of Total Decommissioning costs shall, whether or not
the Unit is operated or operable and notwithstanding any earlier
termination of the service life of the Unit, remain in full force
and effect until the expiration of the term hereof, it being
recognized that such costs represent deferred payments in
connection with power theretofore delivered by Connecticut Yankee
hereunder. Such cancellation shall be effected by written notice
given by the Purchaser to Connecticut Yankee. In the event of
such cancellation, all continuing obligations of the parties
hereunder as to subsequently incurred costs of Connecticut Yankee
other than the obligations relating to the payment and
application of Total Decommissioning Costs excluded from such
cancellation by the second preceding sentence, but including the
Purchaser's obligations to continue payments pursuant to clauses
(b) and (c) of the first paragraph of Section 7 hereof, shall
cease forthwith. Notwithstanding the foregoing, the applicable
provisions of this contract shall continue in effect after the
cancellation hereof to the extent necessary to permit final
billings and adjustments hereunder with respect to obligations
incurred through the date of cancellation and the collection
thereof. Any dispute as to the Purchaser's right to cancel this
- 15 -<PAGE>
<PAGE>
contract pursuant to the foregoing provisions shall be referred
to arbitration in accordance with the provisions of Section 13.
Notwithstanding anything in this contract elsewhere
contained, the Purchaser may cancel this contract or be relieved
of its obligations to make payments hereunder only as provided in
the next preceding paragraph of this Section 10. Further, if for
reasons beyond Connecticut Yankee's reasonable control,
deliveries are not made as contemplated by this contract,
Connecticut Yankee shall have no liability to the Purchaser on
account of such non-delivery.
11. Insurance.
---------
Connecticut Yankee presently has in effect, and hereafter
will at all times maintain until the expiration of the term
hereof, insurance to cover its "public liability" for personal
injury and property damage resulting from a "nuclear incident"
(as those terms are defined in the Act), with limits not less
than Connecticut Yankee may be required to maintain to qualify
for governmental indemnity under the Act and shall maintain an
indemnification agreement with the NRC as provided by the Act.
Connecticut Yankee will also at all time maintain such other
types of liability insurance, including workmen's compensation
insurance, in such amounts, as is customary in the case of other
similar electric utility companies, or as may be required by law.
Connecticut Yankee will at all times keep insured such
portions of the Unit as are of a character usually insured by
electric utility companies similarly situated and operating like
properties, against the risk of a "nuclear incident" and such
- 16 -<PAGE>
<PAGE>
other risks as electric utility companies, similarly situated and
operating like properties, usually insure against; and such
insurance shall to the extent available be carried in amounts
sufficient to prevent Connecticut Yankee from becoming a
coinsurer. Such insurance shall to the extent available be
carried in an amount at least equal to the original cost of the
insured facilities, less accrued depreciation thereon.
12. Audit.
-----
Connecticut Yankee's books and records (including metering
records) shall be open to reasonable inspection and audit by the
Purchaser.
13. Arbitration.
-----------
In case any dispute shall arise as to the interpretation or
performance of this contract which cannot be settled by mutual
agreement, such dispute shall be submitted to arbitration. The
parties shall if possible agree upon a single arbitrator. In case
of failure to agree upon an arbitrator within 15 days after the
delivery by either party to the other of a written notice
requesting arbitration, either party may request the American
Arbitration Association to appoint the arbitrator. The
arbitrator, after opportunity for each of the parties to be
heard, shall consider and decide the dispute and notify the
parties in writing of his decision. Such decision shall be
binding upon the parties, and the expenses of the arbitration
shall be borne equally by them.
- 17 -<PAGE>
<PAGE>
14. Regulation.
----------
This contract, and all rights, obligations and performance
of the parties hereunder, are subject to all applicable state and
Federal law and to all duly promulgated orders and other duly
authorized action of governmental authorities having jurisdiction.
15. Assignment.
----------
This contract shall be binding upon and shall inure to the
benefit of, and may be performed by, the successors and assigns
of the parties, except that no assignment, pledge or other
transfer of this contract by either party shall operate to
release the assignor, pledgor or transferor from any of its
obligations under this contract unless consent to the release is
given in writing by the other party, or, if the other party has
theretofore assigned, pledged or otherwise transferred its
interest in this contract, by the other party's assignee, pledgee
or transferee, or unless such transfer is incident to a merger or
consolidation with, or transfer of all or substantially all of
the assets of the transferor to, another Purchaser which shall,
as a part of such succession, assume all the obligations of the
transferor under this contract.
16. Right of Setoff.
---------------
The Purchaser shall not be entitled to set off against the
payments required to be made by it under this contract (i) any
amounts owed to it by Connecticut Yankee or (ii) the amount of
any claim by it against Connecticut Yankee. However, the
foregoing shall not affect in any other way the Purchaser's right
and remedies with respect to any such amounts owed to it by
- 18 -<PAGE>
<PAGE>
Connecticut Yankee or any such claim by it against Connecticut Yankee.
17. Amendments.
----------
Upon authorization by Connecticut Yankee's board of
directors of uniform amendments to all the Additional Power
Contracts, Connecticut Yankee shall have the right to amend the
provisions of Section 7 hereof by serving an appropriate
statement of such amendment upon the Purchaser and filing the
same with the FERC (or such other regulatory agency as may have
jurisdiction in the premises) in accordance with the provisions
of applicable laws and any rules and regulations thereunder, and
the amendment shall thereupon become effective on the date
specified therein, subject to any suspension order issued by such
agency. All other amendments to this contract shall be by mutual
agreement, evidenced by a written amendment signed by the parties hereto.
18. Interpretation.
--------------
The interpretation and performance of this contract shall be
in accordance with and controlled by the law of the State of
Connecticut.
19. Addresses.
---------
Except as the parties may otherwise agree, any notice,
request, bill or other communication from one party to the other,
relating to this contract, or the rights, obligations or
performance of the parties hereunder, shall be in writing and
shall be effective upon delivery to the other party. Any such
communication shall be considered as duly delivered when
- 19 -<PAGE>
<PAGE>
delivered in person or mailed by registered or certified mail,
postage prepaid, to the respective post office address of the
other party shown following the signatures of such other party
hereto, or such other address as may be designated by written
notice given as provided in this Section 19.
20. Corporate Obligations.
---------------------
This contract is the corporate act and obligation of the
parties hereto, and any claim hereunder against any stockholder,
director or officer of either party, as such, is expressly
waived.
21. All Prior Agreements Superseded.
-------------------------------
This contract represents the entire agreement between the
parties relating to the subject matter hereof during the
operative term hereof ( i.e., post-December 31, 1997), and all
previous agreements, discussions, communications and
correspondence with respect to the subject matter are hereby
superseded and are of no further force and effect.
22. Counterparts.
------------
This contract may be executed in any number of counterparts
and each executed counterpart shall have the same force and
effect as an original instrument and as if all the parties to all
of the counterparts had signed the same instrument. Any signature
page of this contract may be detached from any counterpart
without impairing the legal effect of any signatures thereon, and
may be attached to another counterpart of this contract identical
in form hereto but having attached to it one or more signature
pages.
- 20 -<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this contract
by their respective officers thereunto duly authorized as of the
date first above written.
CONNECTICUT YANKEE ATOMIC POWER COMPANY
By /s/ Bernard M. Fox
-------------------------------
Its Senior Vice President
P.O. Box 270
Hartford, Connecticut 06141
THE UNITED ILLUMINATING COMPANY
By /s/ James F. Cobey, Jr.
-------------------------------
James F. Cobey, Jr.
Its President
80 Temple Street
New Haven, Connecticut 06506
- 21 -
<PAGE>
<PAGE>
EXHIBIT 10.11
THE UNITED ILLUMINATING COMPANY
AND
BAYWAY REFINING COMPANY
FUEL OIL SUPPLY
AND MANAGEMENT AGREEMENT
AS OF OCTOBER 1, 1995
<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY AND BAYWAY REFINING COMPANY
FUEL OIL SUPPLY AND MANAGEMENT AGREEMENT
CONTENTS PAGE
-------- ----
I. TERM 1
II. DEFINITIONS 1
III. COMMODITY CONTRACT
A. CONTRACT VOLUME 2
B. QUALITY SPECIFICATIONS 2
C. SALE PRICE 3
D. BTU GUARANTEE & CREDIT ADJUSTMENT 4
E. NOMINATION PROCEDURE & DELIVERY 4
F. TANK TRANSFERS & VESSEL DELIVERIES:
QUANTITY & QUALITY DETERMINATION 4
G. BARRELS CONSUMED 5
H. TITLE AND RISK OF LOSS 5
I. EMERGENCY SUPPLY 5
IV. INVENTORY MANAGEMENT
A. DESCRIPTION OF INVENTORY MANAGEMENT
SERVICE 6
B. NOTIFICATION REQUIREMENTS 7
C. SERVICE FEE 7
D. OPENING INVENTORY & TRANSITION
SERVICE FEE 7
V. INVENTORY FINANCING
A. SERVICE CHARGE 7
VI. RECORDKEEPING, INVOICING & PAYMENT TERMS
A. RECORDKEEPING 8
B. INVOICING & PAYMENT TERMS 9
C. FINANCIAL RESPONSIBILITY 9
VII. FIXED PRICE, FUEL PROCESSING & THIRD PARTY
TRANSACTIONS 9
VIII. OTHER PROVISIONS
A. INSURANCE 9
B. CONTACTS 9
C. UCC FILING 10
D. TAXES & FEES ON SELLER'S PRODUCT 10
E. TERMINATION OF AGREEMENT 10
F. GOVERNING LAW 11
G. CONFIDENTIALITY 11
H. ASSIGNMENT 11
I. FORCE MAJEURE 11
2<PAGE>
<PAGE>
THE UNITED ILLUMINATING COMPANY AND BAYWAY REFINING COMPANY
FUEL OIL SUPPLY AND MANAGEMENT AGREEMENT
CONTENTS
IX. ATTACHMENTS
A. DISCOUNT FORMULAS FOR ASH & WATER BY DISTILLATION
B. NO. 6 FUEL OIL INVENTORY & CONSUMPTION REPORT
SAMPLE
C. INVOICE & STATEMENT FORMAT SAMPLES
3<PAGE>
<PAGE>
FUEL OIL SUPPLY AND MANAGEMENT AGREEMENT
THIS AGREEMENT IS MADE AS OF OCTOBER 1, 1995 BETWEEN THE
UNITED ILLUMINATING COMPANY (THE "BUYER"), A CONNECTICUT
CORPORATION, WITH ITS PRINCIPAL PLACE OF BUSINESS AT 157 CHURCH
STREET, NEW HAVEN, CONNECTICUT, AND BAYWAY REFINING COMPANY (THE
"SELLER"), A DELAWARE CORPORATION, HAVING ITS PRINCIPAL PLACE OF
BUSINESS AT 1400 PARK AVENUE, LINDEN, NEW JERSEY.
WHEREAS, BUYER AND SELLER WISH TO ENTER INTO AN AGREEMENT
FOR THE PURCHASE/SALE OF NO. 6 FUEL OIL (THE "PRODUCT"), AND THE
MANAGEMENT AND FINANCING OF BUYER'S NO. 6 FUEL OIL INVENTORY;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, MUTUAL
COVENANTS, PROMISES AND REPRESENTATIONS CONTAINED HEREIN, AND
OTHER VALUABLE CONSIDERATIONS, THE RECEIPT OF WHICH IS HEREBY
ACKNOWLEDGED BY THE RESPECTIVE PARTIES HERETO, BUYER AND SELLER
AGREE AS FOLLOWS:
I. TERM
THE TERM OF THIS AGREEMENT SHALL BE FOR ONE YEAR COMMENCING ON
OCTOBER 1, 1995 AND EXPIRING ON SEPTEMBER 30, 1996. THIS
AGREEMENT MAY BE EXTENDED FOR ADDITIONAL ONE-YEAR PERIODS
PROVIDED BOTH BUYER AND SELLER AGREE TO SUCH AN EXTENSION NOT
LATER THAN SIXTY CALENDAR DAYS PRIOR TO THE EXPIRATION DATE. IF
BUYER AND SELLER DO NOT AGREE TO EXTEND THIS AGREEMENT, THE
PROVISIONS OF SECTION VIII.E. (TERMINATION OF AGREEMENT) SHALL
APPLY.
II. DEFINITIONS
A. PRODUCT: NO. 6 FUEL OIL CONFORMING TO THE
SPECIFICATIONS CONTAINED IN SECTION III.B.
B. OPERATING TANK: DESIGNATED TANK AT RELEVANT
LOCATION (AS DEFINED IN SECTION III.A.) INTO WHICH
SELLER PUMPS PRODUCT FROM WHICH BUYER SHALL DRAW FOR
CONSUMPTION.
C. SELLER'S LEASED TANKAGE: DESIGNATED TANKS AT
RELEVANT LOCATION INTO WHICH SELLER SHALL STORE PRODUCT
PURSUANT TO SELLER'S STORAGE TANK LEASE & TERMINAL
SERVICES AGREEMENT DATED AS OF OCTOBER 1, 1995.
D. DELIVERY MONTH: CALENDAR MONTH DURING WHICH
SELLER SHALL DELIVER AND BUYER SHALL CONSUME PRODUCT.
E. TANK TRANSFER: MOVING PRODUCT FROM ONE TANK TO
ANOTHER TANK VIA PUMPOVER.
4<PAGE>
<PAGE>
F. VESSEL DELIVERY: PRODUCT DELIVERED TO BUYER'S
OPERATING TANK DIRECTLY FROM A BARGE OR TANKER.
G. BARRELS: ALL BARRELS REFERRED TO HEREIN ARE
CORRECTED TO 60 DEGREES F.
H. BARRELS CONSUMED: QUANTITY OF PRODUCT USED BY
BUYER IN A DELIVERY MONTH WILL BE DETERMINED BY OPENING
OPERATING TANK(S) INVENTORY FIGURES PLUS PRODUCT
TRANSFERRED OR DELIVERED INTO OPERATING TANK(S) MINUS
CLOSING INVENTORY FIGURES. DAILY AND WEEKLY REPORTS OF
BARRELS CONSUMED WILL BE BASED ON BRIDGEPORT AND NEW
HAVEN HARBOR STATION READINGS.
I. CONTRACT QUARTER: THE THREE MONTH PERIODS ENDING
DECEMBER 31, MARCH 31, JUNE 30, AND SEPTEMBER 30.
J. DELIVERY LOCATIONS: THE LOCATIONS TO WHICH SELLER
SHALL DELIVER PRODUCT SHALL BE BUYER'S BRIDGEPORT
HARBOR STATION AND BUYER'S NEW HAVEN HARBOR STATION.
III. COMMODITY CONTRACT
A. CONTRACT VOLUME:
SELLER AGREES TO SELL AND DELIVER TO BUYER, AND
BUYER AGREES TO PURCHASE FROM SELLER, __% OF BUYER'S
NO. 6 FUEL OIL REQUIREMENTS DURING THE TERM OF THIS
AGREEMENT. BUYER'S ESTIMATED ANNUAL REQUIREMENTS FOR
BRIDGEPORT HARBOR STATION AND NEW HAVEN HARBOR STATION
("THE LOCATIONS") ARE ___ MILLION BARRELS.
B. QUALITY SPECIFICATIONS:
PRODUCT DELIVERED BY SELLER TO BUYER HEREUNDER
SHALL BE COMMERCIALLY ACCEPTABLE AND NOT CONTAIN ANY
HAZARDOUS MATERIALS. PRODUCT MUST NOT CONTAIN
PETROCHEMICAL WASTES, PETROCHEMICAL RESIDUES OR SPENT
CHEMICALS, INCLUDING, BUT NOT LIMITED TO CAUSTICS AND
ACIDS, PRODUCT MUST HAVE A MARKETABLE ODOR
CHARACTERISTIC OF RESIDUAL FUEL OIL AND COMPLY WITH THE
FOLLOWING QUALITY SPECIFICATIONS:
SPECIFICATION TABLE:
SPECIFICATION ASTM/IP MIN. MAX.
------------- ------- ---- ----
(1) API GRAVITY ("API") D-287 8.0 --
FLASH POINT, DEG. F D-93 150 --
POUR POINT, DEG. F D-97 -- 115
(2) VIS. SFS @ 122 DEG.F D-445/D-2161 15 300
SULFUR, WT. % D-4294 -- 1.0
SEDIMENT BY EXTRAC. WT.% D-473 -- 0.25
WATER BY DISTILL. VOL.% D-95 -- 0.5
ASH, WT. % D-482 -- 0.15
5<PAGE>
<PAGE>
VANADIUM, PPM D-1548 -- 200
ALUMINUM, PPM PER SHIPMENT IP-377 -- 175
PER MONTH -- 125
SILICON, PPM PER SHIPMENT IP-377 -- 175
PER MONTH -- 125
ASPHALTENES % PER SHIPMENT IP-143 -- 15.0
6-MONTH WEIGHTED AVG -- 8.0
BTU PER GALLON @ 60 DEG. F D-240 145,000 --
(BTU CONTENT BELOW THIS LEVEL WILL CREATE OPERATIONAL
PROBLEMS. NOT TO BE CONFUSED WITH BTU GUARANTEE IN SECTION
III.D.)
NOTE 1: API GRAVITY BELOW THE 8.0 MINIMUM MAY BE ACCEPTED
IF COMPATIBILITY TEST RESULTS (ASTM D-4740) ARE LESS THAN
3.0.
NOTE 2: ASTM D-2161 SHALL BE USED TO CONVERT KINEMATIC
VISCOSITY TEST RESULTS (ASTM D-445) TO SAYBOLT FUROL
VISCOSITY.
OIL LOADING OR DISCHARGE TEMPERATURE SHALL BE THE GREATER OF
110 DEGREES FAHRENHEIT OR 30 DEGREES FAHRENHEIT ABOVE POUR
POINT.
AN INDEPENDENT PETROLEUM INSPECTOR'S REPORT AS TO QUALITY
MUST BE PROVIDED TO BUYER PRIOR TO ANY TANK TRANSFER OR
VESSEL DISCHARGE INTO BUYER'S OPERATING TANK(S). IF THE
INSPECTOR CERTIFIES THAT THE RESULTS FAIL TO MEET ANY OF THE
PRECEDING QUALITY CHARACTERISTICS, BUYER MAY REFUSE TO
ACCEPT DELIVERY. IF BUYER ELECTS TO ACCEPT THE NON-
CONFORMING FUEL OIL, SELLER WILL PROVIDE A SALE PRICE
DISCOUNT TO BUYER. THE FORMULAS FOR DETERMINING DISCOUNTS
FOR FAILURE TO MEET ASH OR WATER BY DISTILLATION
SPECIFICATIONS ARE PROVIDED IN ATTACHMENT A. THE DISCOUNT
FOR FAILURE TO MEET ANY OTHER SPECIFICATIONS WILL BE
NEGOTIATED BETWEEN BUYER AND SELLER.
C. SALE PRICE:
THE SALE PRICE PER BARREL SHALL BE THE ARITHMETIC
AVERAGE OF_____________________________________________
EFFECTIVE POSTING FOR 1.0% SULFUR NO. 6 FUEL OIL
PUBLISHED DURING ______________________ ROUNDED TO
THREE DECIMAL PLACES AND ANY CORRECTIONS TO SUCH
PUBLISHED PRICES _________ PER BARREL, DELIVERED TO
BUYER'S BURNER TIP AT THE LOCATIONS.
THE SALE PRICE INCLUDES TRANSPORTATION AND ALL
APPLICABLE TAXES CURRENTLY IN EFFECT INCLUDING IMPORT
DUTY, SUPERFUND, CUSTOMS FEES, HARBOR MAINTENANCE FEE,
FEDERAL OIL SPILL TAX, NEW YORK AND NEW JERSEY SPILL
TAX, AND OPA 90 SPILL COVERAGE. THE CONNECTICUT GROSS
RECEIPTS TAX ON PETROLEUM PRODUCTS IS NOT INCLUDED IN
THE SALE PRICE AND BUYER SHALL BE CHARGED THEREFOR,
MONTHLY.
6<PAGE>
<PAGE>
D. BTU GUARANTEE & CREDIT ADJUSTMENT:
THE GUARANTEED WEIGHTED AVERAGE OF THE BTU CONTENT
OF FUEL CONSUMED HEREUNDER DURING EACH CONTRACT QUARTER
SHALL BE _______ BTU PER GALLON. IN THE EVENT THAT THE
WEIGHTED AVERAGE BTU CONTENT IS NOT MET DURING A
CONTRACT QUARTER, THE BUYER WILL BE ENTITLED TO A
CREDIT DETERMINED AS FOLLOWS:
IF THE ACTUAL WEIGHTED AVERAGE BTU/GALLON FOR THE
CONTRACT QUARTER WHEN DIVIDED BY THE GUARANTEE IS LESS
THAN 1.0, THE DIFFERENCE FROM 1.0 WILL BE MULTIPLIED
TIMES THE WEIGHTED AVERAGE SALE PRICE (PER SECTION
III.C.) OF THE FUEL OIL FOR THE SAME CONTRACT QUARTER.
THIS RESULT WILL THEN BE MULTIPLIED BY THE VOLUME OF
FUEL OIL CONSUMED DURING THAT CONTRACT QUARTER TO
DETERMINE THE TOTAL CREDIT DUE THE BUYER. ANY AND ALL
CREDITS DUE BUYER WILL BE REFLECTED ON THE NEXT MONTHLY
INVOICE TO BUYER AFTER THE END OF THE CONTRACT QUARTER.
E. NOMINATION PROCEDURE AND DELIVERY:
ON THE LAST BUSINESS DAY OF EACH WEEK, BUYER WILL
PROVIDE SELLER WITH WRITTEN NOTIFICATION OF ACTUAL
BARRELS CONSUMED FOR THE PREVIOUS TEN DAYS AND A SIXTY-
DAY PROJECTION OF ITS ANTICIPATED CONSUMPTION FOR EACH
OF THE LOCATIONS. SEE ATTACHMENT B FOR SAMPLE FORMAT.
WITHIN TWO BUSINESS DAYS OF RECEIVING BUYER'S
PROJECTIONS, SELLER SHALL PROVIDE WRITTEN NOTIFICATION
TO BUYER OF ITS PLANS TO SUPPLY PRODUCT TO MEET BUYER'S
PROJECTIONS IN ACCORDANCE WITH THE MINIMUM INVENTORY
REQUIREMENTS DESCRIBED IN SECTION IV. BUYER SHALL MAKE
BEST EFFORTS TO PROMPTLY ADVISE SELLER OF ANY CHANGES
TO ITS IMMEDIATE FUEL OIL REQUIREMENTS AND ANY
SCHEDULED OR UNSCHEDULED MAINTENANCE OF THE LOCATIONS.
SELLER SHALL DELIVER PRODUCT TO THE BUYER'S BURNER
TIP VIA THE BUYER'S OPERATING TANK AT THE LOCATIONS.
F. TANK TRANSFERS & VESSEL DELIVERIES: QUANTITY AND
QUALITY DETERMINATION:
1. TANK TRANSFERS: THE QUANTITY FOR TANK
TRANSFERS INTO BUYER'S OPERATING TANK WILL BE
BASED ON SHORE TANK MEASUREMENTS OF SELLER'S
LEASED TANKAGE PRIOR TO AND AFTER PUMPOVER TO
BUYER'S OPERATING TANK. QUALITY WILL BE BASED ON
COMPOSITE SAMPLES OF THE SHORE TANK(S) DESIGNATED
BY SELLER TAKEN PRIOR TO PUMPOVER TO BUYER'S
OPERATING TANK.
2. VESSEL DELIVERIES: THE QUANTITY FOR
VESSEL DELIVERIES INTO BUYER'S ACTIVE OPERATING
TANK WILL BE DETERMINED BY VESSEL TANK
MEASUREMENTS TAKEN PRIOR TO AND AFTER DISCHARGE OF
THE VESSEL. THIS
7<PAGE>
<PAGE>
VOLUME WILL BE CORRECTED BY THE VESSEL
EXPERIENCE FACTOR (VEF). THE QUANTITY FOR VESSEL
DELIVERIES INTO BUYER'S INACTIVE OPERATING TANK
WILL BE BASED ON SHORE TANK MEASUREMENTS OF
OPERATING TANK TAKEN PRIOR TO AND AFTER VESSEL
DISCHARGE. QUALITY WILL BE BASED ON A COMPOSITE
OF SAMPLES TAKEN FROM EACH OF THE VESSEL'S HOLDS
DISCHARGED INTO THE OPERATING TANK.
ALL QUANTITY AND QUALITY MEASUREMENTS
SHALL BE CARRIED OUT BY A MUTUALLY ACCEPTABLE
INDEPENDENT LICENSED AND CERTIFIED PETROLEUM
INSPECTION COMPANY WHOSE FINDINGS SHALL BE FINAL
AND BINDING ON THE PARTIES. THE COST OF THESE
INSPECTIONS WILL BE SHARED EQUALLY BETWEEN BUYER
AND SELLER.
THE INSPECTOR'S REPORT AS TO QUALITY
MUST BE PROVIDED TO BUYER PRIOR TO TANK TRANSFER
OR VESSEL DISCHARGE. IF THE INSPECTOR CERTIFIES
THAT THE RESULTS FAIL TO MEET ANY OF THE QUALITY
CHARACTERISTICS SPECIFIED IN SECTION III.B., BUYER
MAY REFUSE TO ACCEPT DELIVERY. IF BUYER ELECTS TO
ACCEPT THE NON-CONFORMING FUEL OIL, THE DISCOUNT
PROVISIONS CONTAINED IN SECTION III.B. WILL APPLY.
G. BARRELS CONSUMED:
BARRELS CONSUMED BY BUYER WILL BE DETERMINED BY
OPENING OPERATING TANK(S) INVENTORY FIGURES PLUS
PRODUCT TRANSFERRED OR DELIVERED INTO OPERATING TANK(S)
MINUS CLOSING INVENTORY FIGURES. ALL INVENTORY, TANK
TRANSFER AND DELIVERY VOLUMES WILL BE CERTIFIED BY A
MUTUALLY ACCEPTABLE INDEPENDENT LICENSED AND CERTIFIED
PETROLEUM INSPECTION COMPANY. CLOSING INVENTORIES WILL
BE MEASURED AT MIDNIGHT ON THE LAST CALENDAR DAY OF THE
MONTH AND SERVE AS THE BASIS FOR THE FOLLOWING MONTH'S
OPENING INVENTORY. THE COST OF THESE INSPECTIONS WILL
BE SHARED EQUALLY BETWEEN BUYER AND SELLER.
H. TITLE AND RISK OF LOSS:
TITLE AND RISK OF LOSS WILL PASS FROM SELLER TO
BUYER AT THE BUYER'S BURNER TIP AT THE LOCATIONS. FOR
DETERMINING THE BARRELS PURCHASED BY BUYER AT THE
BURNER TIP, THE PARTIES SHALL USE THE FORMULA DEFINING
BARRELS CONSUMED IN SECTION II.H.
I. EMERGENCY SUPPLY:
IN THE EVENT THAT BUYER REQUIRES AN EMERGENCY
SUPPLY OF PRODUCT TO MEET UNANTICIPATED FUEL NEEDS AT
ITS ELECTRIC GENERATING STATIONS, SELLER AGREES THAT IT
WILL SUPPLY SUCH PRODUCT WITHIN FOUR DAYS OF NOTICE.
EMERGENCY SUPPLY REQUIREMENTS UNDER THIS PROVISION MAY
NOT EXCEED _______BARRELS DURING EACH CONTRACT QUARTER.
THE PRICE OF SUCH ADDITIONAL SUPPLY SHALL BE DETERMINED
IN
8<PAGE>
<PAGE>
ACCORDANCE WITH SECTION III.C. OF THIS AGREEMENT,
PLUS OTHER SUCH DOCUMENTED COSTS INCURRED BY SELLER TO
RESPOND TO BUYER'S EMERGENCY DEMAND.
IV. INVENTORY MANAGEMENT:
A. DESCRIPTION OF INVENTORY MANAGEMENT SERVICE:
SELLER WILL MANAGE BUYER'S REQUIREMENTS FOR NO. 6
FUEL OIL AT THE LOCATIONS FOR THE SERVICE FEE DESCRIBED
IN SECTION IV.C., HEREAFTER. SELLER GUARANTEES TO
MAINTAIN MINIMUM INVENTORIES OF PRODUCT IN BUYER'S
STORAGE FACILITIES AT THE LOCATIONS AT ALL TIMES DURING
THE TERM OF THIS AGREEMENT. THE MINIMUM AGGREGATE
AMOUNT OF NO. 6 FUEL OIL WHICH THE SELLER SHALL
MAINTAIN IN THE OPERATING TANKS AND SELLER'S LEASED
TANKAGE AT BRIDGEPORT HARBOR AND NEW HAVEN HARBOR
STATIONS IS _______BARRELS. SELLER FURTHER AGREES TO
MAINTAIN NO LESS THAN A ________SUPPLY IN THE
DESIGNATED OPERATING TANK AT EACH LOCATION IN
ACCORDANCE WITH THE FOLLOWING:
BRIDGEPORT NEW HAVEN
---------- ---------
MINIMUM __-DAY INVENTORY _______BBLS ______BBLS
IN THE EVENT THAT BRIDGEPORT HARBOR STATION UNIT
#3 SWITCHES FROM COAL TO OIL DURING THE TERM OF THIS
AGREEMENT, BUYER WILL HAVE THE OPTION OF INCREASING THE
MINIMUM INVENTORY LEVELS TO ACCOMMODATE ITS ADDITIONAL
SUPPLY REQUIREMENTS.
BUYER WILL MONITOR SELLER'S INVENTORY LEVELS AND
PROVIDE WRITTEN NOTIFICATION OF ACTUAL INVENTORY
LEVELS, ACTUAL BARRELS CONSUMED AND A SIXTY-DAY
PROJECTION OF ANTICIPATED CONSUMPTION FOR EACH LOCATION
ON THE LAST BUSINESS DAY OF EACH WEEK. SEE ATTACHMENT
B FOR SAMPLE FORMAT.
IF INVENTORY LEVELS FALL BELOW ANY OF THE MINIMUM
LEVELS DESIGNATED ABOVE DURING ANY MONTH, SELLER WILL
FORFEIT THE SERVICE FEE DESCRIBED IN SECTION IV.C. FOR
THAT MONTH AND THE SERVICE CHARGE UNDER SECTION V.A.
WILL BE ADJUSTED ACCORDINGLY. IF INVENTORY LEVELS FALL
BELOW THE DESIGNATED MINIMUMS ON MORE THAN TWO
OCCASIONS, BUYER WILL HAVE THE OPTION OF TERMINATING
THIS AGREEMENT WITHOUT PRIOR NOTICE.
IN THE EVENT THAT SELLER ALLOWS INVENTORIES AT
EITHER OF BUYER'S FACILITIES TO BE DEPLETED TO THE
EXTENT THAT THE BUYER'S GENERATING PLANT MUST REDUCE
LOAD OR IS FORCED OFF-LINE, SELLER WILL REIMBURSE BUYER
FOR ________________________________. BUYER WILL ALSO
HAVE THE RIGHT TO TERMINATE THIS AGREEMENT WITHOUT
PRIOR NOTICE.
9<PAGE>
<PAGE>
B. NOTIFICATION REQUIREMENTS:
SELLER WILL PROVIDE BUYER'S OPERATIONS CONTACT
WITH AT LEAST 72 HOURS NOTICE FOR ANY PLANNED TANK
TRANSFER OR VESSEL DELIVERY TO BUYER'S OPERATING
TANK(S). THE ESTIMATED DAY OF TRANSFER OR DELIVERY
WILL BE PROVIDED 36 HOURS IN ADVANCE. WRITTEN
NOTIFICATION OF THE HOUR OF VESSEL ARRIVAL WILL BE
PROVIDED 12 HOURS IN ADVANCE.
C. SERVICE FEE:
THE SERVICE FEE SHALL BE A FLAT FEE OF $____ PER
BARREL ON ALL BARRELS CONSUMED DURING THE DELIVERY
MONTH. THIS FEE WILL BE INVOICED ON A MONTHLY BASIS IN
ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION VI.
D. OPENING INVENTORY & TRANSITION SERVICE FEE:
BUYER WILL PROVIDE SELLER WITH A DETAILED
ACCOUNTING OF NO. 6 FUEL OIL INVENTORY IN ITS STORAGE
FACILITIES AT BRIDGEPORT HARBOR AND NEW HAVEN HARBOR
STATIONS AS OF OCTOBER 1, 1995. ALL FUEL OIL INVENTORY
OWNED BY BUYER WILL BE CONSUMED FIRST. SELLER'S
BEGINNING INVENTORY FOR BUYER WILL BE ZERO. DURING THE
TRANSITION PERIOD, BUYER WILL MAINTAIN RECORDS FOR TWO
SEPARATE INVENTORIES: 1) BUYER-OWNED BARRELS AND 2)
SELLER-OWNED BARRELS.
DURING THE TRANSITION PERIOD, THE SERVICE FEE
CHARGED BY SELLER IN SECTION IV.C. WILL BE PRORATED
UNTIL THE MINIMUM INVENTORY LEVELS HAVE BEEN ATTAINED
BY SELLER. SELLER'S CONTRIBUTION TOWARD THE MINIMUM
INVENTORY LEVELS WILL BE LIMITED BY BUYER-OWNED BARRELS
IN INVENTORY DURING THE TRANSITION PERIOD. FOR
EXAMPLE, IF AT THE END OF OCTOBER 1995 SELLER'S AVERAGE
CONTRIBUTION TO THE MINIMUM AGGREGATE INVENTORY LEVEL
IS 100,000 OF THE _______ BARRELS OF MINIMUM AGGREGATE
INVENTORY, SELLER WILL ONLY BE ENTITLED TO INVOICE FOR
100,000/_______ OR ____% OF THE $____ PER BARREL
SERVICE FEE, OR $_____ PER BARREL. NO SERVICE FEE WILL
BE APPLIED TO BUYER-OWNED BARRELS CONSUMED DURING THE
TRANSITION.
V. INVENTORY FINANCING:
A. SERVICE CHARGE:
SELLER SHALL CHARGE BUYER A SERVICE CHARGE FOR
MAINTAINING MINIMUM OPERATING INVENTORIES OF NO. 6 FUEL
OIL AT BUYER'S BRIDGEPORT HARBOR AND NEW HAVEN HARBOR
GENERATING STATIONS. THE MONTHLY SERVICE CHARGE HAS TWO
COMPONENTS: 1) SERVICE CHARGE ON BARRELS CONSUMED IN A
DELIVERY MONTH, AND 2) SERVICE CHARGE ON MINIMUM AGGREGATE
INVENTORY. THE RATE USED TO CALCULATE THE SERVICE CHARGE
WILL BE THE _____________________________________________
_______________________________________ AS QUOTED IN THE
WALL STREET JOURNAL ON THE FIRST BUSINESS DAY OF EACH
DELIVERY MONTH _________. THE
10<PAGE>
<PAGE>
SALE PRICE USED TO VALUE BARRELS CONSUMED AND MINIMUM
AGGREGATE INVENTORY WILL BE DETERMINED IN ACCORDANCE WITH
SECTION III.C.
1) THE SERVICE CHARGE ON BARRELS CONSUMED IN A
DELIVERY MONTH WILL BE CALCULATED AS FOLLOWS:
((BARRELS CONSUMED*SALE PRICE*RATE)/360 DAYS) *___DAYS)
2) THE SERVICE CHARGE ON MINIMUM AGGREGATE
INVENTORY WILL BE:
((MIN.INVEN.BARRELS*SALE PRICE*RATE)/360 DAYS)*___DAYS)
DURING THE TRANSITION PERIOD, THE SERVICE CHARGE
ON MINIMUM AGGREGATE INVENTORY WILL BE PRORATED UNTIL
THE MINIMUM INVENTORY LEVELS HAVE BEEN ATTAINED BY
SELLER. SELLER'S CONTRIBUTION TOWARD THE MINIMUM
INVENTORY LEVELS WILL BE LIMITED BY BUYER-OWNED BARRELS
IN INVENTORY DURING THE TRANSITION PERIOD. FOR
EXAMPLE, IF AT THE END OF OCTOBER 1995 SELLER'S AVERAGE
CONTRIBUTION TO THE MINIMUM AGGREGATE INVENTORY LEVEL
IS 100,000 OF THE _______ BARRELS OF MINIMUM AGGREGATE
INVENTORY, THE SERVICE CHARGE COMPUTATION WILL BE BASED
ON THE SELLER'S AVERAGE CONTRIBUTION TOWARD THE MINIMUM
INVENTORY LEVELS FOR THE MONTH. NO SERVICE CHARGE WILL
BE APPLIED TO BUYER-OWNED BARRELS CONSUMED DURING THE
TRANSITION PERIOD.
VI. RECORDKEEPING, INVOICING & PAYMENT TERMS:
A. RECORDKEEPING:
BUYER WILL MAINTAIN DETAILED RECORDS OF DAILY
INVENTORY LEVELS, TANK TRANSFERS, VESSEL DELIVERIES AND
BARRELS CONSUMED FOR EACH LOCATION. SEE ATTACHMENT B
FOR SAMPLE FORMAT. BOTH BUYER AND SELLER WILL RECEIVE
COPIES OF ALL INDEPENDENT PETROLEUM INSPECTOR'S REPORTS
WITH RESPECT TO QUALITY AND QUANTITY OF TANK TRANSFERS
AND VESSEL DELIVERIES.
SELLER SHALL HAVE THE RIGHT TO AUDIT ALL BUYER'S
RECORDS RELATED TO THIS AGREEMENT AT ANY TIME, UPON
REASONABLE NOTICE TO BUYER.
SELLER WILL MAINTAIN DETAILED RECORDS OF THE DAILY
PLATT'S POSTINGS USED TO DETERMINE THE SALE PRICE IN
ACCORDANCE WITH SECTION III.C. A DETAILED RECORD WILL
BE PROVIDED WITH EACH MONTHLY STATEMENT. SELLER WILL
ALSO MAINTAIN A RECORD OF THE ________________
________________ RATE USED IN THE COMPUTATION OF THE
SERVICE CHARGE UNDER SECTION V.A. SEE ATTACHMENT C FOR
SAMPLE INVOICE AND STATEMENT FORMATS.
11<PAGE>
<PAGE>
B. INVOICING & PAYMENT TERMS:
ON THE FIRST BUSINESS DAY FOLLOWING THE END OF A
DELIVERY MONTH, BUYER WILL PROVIDE SELLER WITH WRITTEN
DOCUMENTATION OF BARRELS CONSUMED AT EACH LOCATION. BY
THE SECOND BUSINESS DAY FOLLOWING THE END OF A DELIVERY
MONTH, SELLER SHALL INVOICE BUYER FOR THE FULL VOLUME OF
FUEL OIL CONSUMED DURING THE DELIVERY MONTH PLUS SERVICE
FEE AND SERVICE CHARGE DESCRIBED IN SECTIONS IV.C. AND
V.A. SEE ATTACHMENT C FOR SAMPLE INVOICE AND STATEMENT
FORMATS. PAYMENT SHALL BE MADE VIA AUTOMATIC CLEARING
HOUSE FUNDS (ACH) FOR AVAILABILITY ON ________________
___________________________ FOLLOWING PRESENTATION OF
THE INVOICE AND INSPECTOR'S REPORTS OF QUANTITY AND QUALITY.
IN THE EVENT THAT THE BUYER FAILS TO MAKE FUNDS
AVAILABLE ON OR BEFORE THE DUE DATE, BUYER SHALL BE
OBLIGATED TO PAY INTEREST AT THE RATE OF CHASE MANHATTAN
BANK PRIME RATE PERCENT AS QUOTED ON THE DAY(S) PAYMENT IS
LATE, BUT NOT TO EXCEED THE MAXIMUM RATE PERMITTED BY LAW.
C. FINANCIAL RESPONSIBILITY:
IN THE EVENT SELLER OR BUYER REASONABLY DOCUMENTS
THAT THE OTHER PARTY'S CREDITWORTHINESS HAS DETERIORATED,
BOTH SELLER AND BUYER WILL AGREE IN A COMMERCIALLY
REASONABLE MANNER TO SATISFY SELLER'S OR BUYER'S CONCERNS.
VII. FIXED PRICE, FUEL PROCESSING & THIRD PARTY TRANSACTIONS:
FROM TIME TO TIME, BUYER AND SELLER MAY MUTUALLY AGREE TO ENTER
INTO A FIXED PRICE, FUEL OIL PROCESSING OR THIRD PARTY
TRANSACTION IN WHICH PRODUCT PRICING AND TERMS OF PURCHASE/SALE
MAY DEVIATE FROM THE TERMS CONTAINED IN THIS AGREEMENT. THE
TERMS, PRICING AND FEES APPLICABLE TO SUCH TRANSACTION WILL BE
NEGOTIATED BETWEEN THE BUYER AND THE SELLER AND MAY, IF BOTH
PARTIES AGREE, BE INCLUDED UNDER THE INVENTORY MANAGEMENT AND
FINANCING PROVISIONS OF THIS AGREEMENT.
VIII. OTHER PROVISIONS:
A. INSURANCE:
SELLER SHALL BE RESPONSIBLE FOR INSURING PRODUCT UP
TO THE BUYER'S BURNER TIP IN ACCORDANCE WITH INDUSTRY
PRACTICE. THE COST OF THIS INSURANCE WILL BE BORNE BY THE
SELLER.
B. CONTACTS:
SELLER'S ADDRESS: BAYWAY REFINING COMPANY
1400 PARK AVENUE
LINDEN, NEW JERSEY 07036
TELEPHONE: TELEFAX:
---------- --------
OPERATIONS: JIM SPATARO 203-326-7554 203-326-7565
12<PAGE>
<PAGE>
(PAGER:1-800-592-0751)
INVOICING: RICK GORDIMER 908-523-5591 908-523-5365
FINANCIAL: SCOTT NELSON 908-523-5305 908-523-5256
CONTRACTS: MIKE HALL 908-523-5180 908-523-5045
ALL OTHER: DON LUCEY 203-326-7544 203-326-7505
BUYER'S ADDRESS: THE UNITED ILLUMINATING COMPANY
157 CHURCH STREET
P. O. BOX 1564
NEW HAVEN, CT 06506-0901
TELEPHONE: TELEFAX:
--------- -------
OPERATIONS:
BRIDGEPORT: DAVID J. DOMOGALA 203-330-4036 203-330-4014
NEW HAVEN: DONNA R. MELONEY 203-499-3007 203-499-3004
INVENTORY RECORDS, INVOICING
& CONTRACTS: ROBERT M. GILMORE 203-499-2723 203-499-3617
ALL OTHER: KATHRYN A. CRAIG 203-499-2719 203-499-3617
C. UCC FILING:
BUYER AGREES TO ASSIST SELLER IN CAUSING A UCC
FILING TO BE EFFECTED TO EVIDENCE SELLER'S OWNERSHIP OF
PRODUCT IN BUYER'S TANKS. SUCH FILING SHALL REMAIN IN
EFFECT FOR THE ENTIRE TERM OF THIS AGREEMENT.
D. TAXES AND FEES ON SELLER'S PRODUCT:
SELLER WILL PAY ANY INSPECTION FEES, SALES TAXES,
AND/OR PERSONAL PROPERTY TAXES LEVIED ON ITS PRODUCT
STORED IN BUYER'S OPERATING TANK(S) OR SELLER'S LEASED
TANKAGE.
E. TERMINATION OF AGREEMENT:
IF BUYER AND SELLER HAVE NOT AGREED TO EXTEND THIS
AGREEMENT IN ACCORDANCE WITH THE PROVISIONS CONTAINED
IN SECTION I(TERM), BUYER HAS THE OPTION OF LOWERING
THE MINIMUM INVENTORY LEVELS DESCRIBED IN SECTION IV TO
ACCOMMODATE THE TRANSITION TO A NEW FUEL OIL SUPPLY AND
MANAGEMENT ARRANGEMENT. ON THE LAST DAY OF THIS
AGREEMENT, THE OPERATING TANK AT EACH LOCATION WILL BE
GAUGED AND SAMPLED AT MIDNIGHT BY AN INDEPENDENT
INSPECTOR TO DETERMINE THE CLOSING INVENTORIES AND
COMPOSITE QUALITY. BUYER WILL PURCHASE THE OPERATING
TANK INVENTORIES (INCLUDING TANK BOTTOMS) AT EACH
LOCATION AT THE TERMINATION PRICE DESCRIBED BELOW.
TERMINATION PRICE = THE AVERAGE OF ______________
_________________________ FOR 1% SULFUR NO. 6 FUEL OIL
IN EFFECT ON THE THREE BUSINESS DAYS PRECEDING THE
CONTRACT TERMINATION DATE, ROUNDED TO THREE DECIMAL
PLACES, _____________ PER BARREL, ADJUSTED FOR ACTUAL
VERSUS GUARANTEED BTU CONTENT.
13<PAGE>
<PAGE>
F. GOVERNING LAW:
THIS AGREEMENT, THE TRANSACTIONS EVIDENCED HEREBY
AND THE OBLIGATIONS OF THE PARTIES HEREUNDER WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF CONNECTICUT WITHOUT
REGARD TO ANY CONFLICT OF LAWS RULES. EACH PARTY
EXPRESSLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND THE FEDERAL COURT OF THE
UNITED STATES OF AMERICA LOCATED IN NEW HAVEN,
CONNECTICUT WITH RESPECT TO ANY LEGAL ACTION OR
PROCEEDING PERTAINING TO THIS AGREEMENT, THE
TRANSACTIONS EVIDENCED HEREBY OR THE OBLIGATIONS OF THE
PARTIES HEREUNDER. IN ANY SUCH ACTION OR
PROCEEDING,SERVICE OF PROCESS MAY BE MAILING BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, A COPY
OF THE SUMMONS AND COMPLAINT, OR OTHER LEGAL PROCESS IN
ANY SUCH ACTION OR PROCEEDING TO THE ADDRESS OF THE
PARTY SET FORTH IN SECTION VIII.B. OF THIS AGREEMENT.
G. CONFIDENTIALITY:
BUYER AND SELLER AGREE TO CAUSE THEIR RESPECTIVE
OFFICERS, AGENTS AND EMPLOYEES TO MAINTAIN THE
CONFIDENTIALITY OF THE TERMS AND CONDITIONS OF THIS
AGREEMENT UNLESS DISCLOSURE IS REQUIRED BY LAW. IN THE
EVENT THAT BUYER OR SELLER BECOMES LEGALLY COMPELLED TO
DISCLOSE ANY OF THE TERMS AND CONDITIONS OF THIS
AGREEMENT, THE LEGALLY COMPELLED PARTY SHALL GIVE THE
OTHER PARTY PROMPT WRITTEN NOTICE OF SUCH REQUIREMENT.
EITHER PARTY MAY SEEK A PROTECTIVE ORDER OR TAKE OTHER
APPROPRIATE ACTION.
H. ASSIGNMENT:
THIS AGREEMENT SHALL NOT BE ASSIGNED OR
TRANSFERRED BY EITHER PARTY HERETO WITHOUT THE WRITTEN
CONSENT OF BOTH PARTIES, WHICH SHALL NOT BE
UNREASONABLY WITHHELD.
I. FORCE MAJEURE:
SELLER WILL NOT BE LIABLE FOR DAMAGES OR FAILURE OR
DELAY IN PERFORMANCE OF ANY OBLIGATION UNDER THIS
AGREEMENT WHERE SUCH FAILURE OR DELAY IS CAUSED BY FORCE
MAJEURE. FORCE MAJEURE EVENTS ARE LIMITED TO WARS OR
RESTRICTIONS IMPOSED BY ANY GOVERNMENTAL AUTHORITY.
STRIKES, SEVERE SHORTAGE OR UNAVAILABILITY OF CRUDE OIL OR
PRODUCT, REFINERY ACCIDENTS OR EXPLOSIONS, ACTS OF GOD, OR
NAVIGATIONAL ACCIDENTS ARE NOT VALID FORCE MAJEURE CLAIMS
FOR SELLER. IF FORCE MAJEURE CONTINUES FOR MORE THAN
THIRTY DAYS, EITHER PARTY MAY TERMINATE THIS AGREEMENT
UPON NOTICE TO THE OTHER.
IF BUYER IS UNABLE TO ACCEPT PRODUCT DELIVERY DUE
TO STRIKES, EQUIPMENT BREAKDOWN, ACCIDENTS, EXPLOSIONS
OR ACTS OF GOD, THEN SELLER WILL NOT BE LIABLE FOR
DAMAGES OR FAILURE OR DELAY IN PERFORMANCE OF ANY
OBLIGATION UNDER THIS AGREEMENT.
14<PAGE>
<PAGE>
IN WITNESS WHEREOF, BUYER AND SELLER HAVE CAUSED THIS AGREEMENT
TO BE EXECUTED BY THEIR DULY AUTHORIZED REPRESENTATIVES AS OF THE
DATE FIRST ABOVE WRITTEN.
THE UNITED ILLUMINATING COMPANY (BUYER):
BY __________________________________
TITLE __________________________________
WITNESS:_____________________________________
BAYWAY REFINING COMPANY (SELLER):
BY __________________________________
TITLE __________________________________
WITNESS:_____________________________________
15<PAGE>
<PAGE>
ATTACHMENT A
------------
DISCOUNT FORMULAS
DEFINITIONS:
- -----------
SG = SPECIFIC GRAVITY = 141.5 (API OF DELIVERY + 131.5)
BD = BARRELS DELIVERED
8.34 = POUNDS PER GALLON OF WATER
PD = POUNDS DELIVERED = BD * 42 * SG * 8.34
ASH SPECIFICATION MAX. = 0.15%
- ---
THE DISCOUNT FOR NONCOMPLIANCE WITH THE ASH SPECIFICATION IS
INTENDED TO COMPENSATE THE BUYER FOR ADDITIONAL ASH DISPOSAL
COSTS OF $____ PER POUND.
ASH DISCOUNT $
= PD * (ASH CONTENT OF DELIVERY - 0.15%) * $
--------------------------------- -----
100
WATER BY DISTILLATION SPECIFICATION MAX. = 0.5%
- ---------------------
THE DISCOUNT FOR NONCOMPLIANCE WITH THE WATER BY DISTILLATION
SPECIFICATION IS INTENDED TO COMPENSATE THE BUYER FOR THE SALE
PRICE CHARGED ON VOLUMES OF WATER PURCHASED (AS OPPOSED TO NO. 6
OIL) IN EXCESS OF THE SPECIFICATION.
WATER DISCOUNT $
=(ACTUAL WATER CONTENT % - 0.5%) * BD * SALE PRICE PER BARREL
-------------------------------
100
16<PAGE>
<PAGE>
ATTACHMENT C
------------
PAGE 1 OF 2
SAMPLE INVOICE FORMAT:
- ---------------------
INVOICE DATE: 2/1/96 PAYMENT DUE: 3/1/96
PERIOD COVERED: 1/1/96 - 1/31/96
BARRELS CONSUMED: _______
PRICE PER BARREL (1): $____________
SUBTOTAL: $____________
CT PETROLEUM PRODUCTS TAX AT 5.26% $____________
TOTAL INVOICE AMOUNT $____________
(1) CONTRACT PRICE TO BURNER TIP.
17<PAGE>
<PAGE>
ATTACHMENT C
------------
PAGE 2 0F 2
SAMPLE STATEMENT FORMAT:
- -----------------------
PERIOD COVERED: 1/1/96-1/31/96
SALE PRICE: $ _____ (SEE CALCULATION BELOW)
BARRELS CONSUMED: 200,000
PRICE OF BARRELS CONSUMED: $____________
MINIMUM INVENTORY BARRELS: _______
INVENTORY VALUE $____________
SERVICE CHARGES & FEES:
- ----------------------
ANNUAL RATE ____%
BARRELS CONSUMED AT ___DAYS $ ________
MINIMUM INVENTORY LEVEL AT ___ DAYS $ _________
SERVICE FEE ON BARRELS CONSUMED $ _________
TOTAL SERVICE CHARGES & FEES $ _________ ($____ PER BARREL
CONSUMED)
SUBTOTAL INVOICE AMOUNT $___________ ($_____ PER BARREL
CONSUMED)
CT PETROLEUM PRODUCTS TAX AT 5.26% $____________
TOTAL INVOICE AMOUNT $____________ ($______ PER BARREL
CONSUMED)
CALCULATION OF SALE PRICE:
- -------------------------
_________________________
DATE DAY POSTING FOR 1% SULFUR NO. 6 FUEL OIL COMMENTS
- ---- --- ------------------------------------ --------
1/1/96 SUN. $ NA NO POSTING
1/2/96 MON. $15.150
1/3/96 TUE. $15.100
ETC...
SHOW CALCULATION OF AVERAGE ______________ PRICE AND ADDITION OF
$_____ FOR DETERMINATION OF SALE PRICE PER SECTION III.C.
18
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<PAGE>
EXHIBIT 10.14b
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT, made as of the 23rd day of July, 1990, to
the Employment Agreement, made of the 1st day of January,1988,
(the Agreement) between THE UNITED ILLUMINATING COMPANY, a
Connecticut corporation (the Company) and RICHARD J. GROSSI, an
individual, (the Executive),
WITNESSETH THAT:
(1) The Company and the Executive hereby agree to amend the
Agreement as set forth in Sections (2) through (8) inclusive,
below:
(2) By deleting Section (1)(b) of the Agreement in its
entirety and by substituting the following therefor:
"(b) Unless and until terminated pursuant to Section
(5)(a), Section 5(b)(i) or section 5(c)(i) hereof, the
employment of the Executive by the Company shall be for
a term expiring on the date specified in a Notice of
Termination pursuant to Section (5)(d) hereof."
(3) By deleting Section (5)(b)(ii) of the Agreement in its
entirety and by substituting the following therefor:
"(ii) Without Cause. The Company may terminate the
Executive's employment without Cause, effective upon at
least three (3) years' prior Notice of Termination
delivered to the Executive pursuant to Section 5(d)
hereof."
(4) By deleting Section (5)(c)(ii) of the Agreement in its
entirety and by substituting the following therefor:
"(ii) Absent Breach by the Company. The Executive may
terminate his employment hereunder in the absence of a
Breach by the Company, effective upon at least six (6)
months' prior Notice of Termination delivered to the
Company pursuant to Section (5)(d) hereof."
(5) By deleting from the fourth line of Section (5)(e) of
the Agreement the words "the Expiration Date" and by substituting
therefor the words "the date specified in the Notice of
Termination."
(6) By deleting from the third and fourth lines of Section
(6)(d)(iv) of the Agreement the words "Expiration Date in effect
on the date the Notice of Termination is delivered" and by
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<PAGE>
substituting therefor the words "third anniversary of the Date of
Termination."
(7) By deleting from the fourth and fifth lines of Section
(6)(d)(v) of the Agreement the words "Expiration Date in effect
on the Date of Termination" and by substituting therefor the
words "third anniversary of the Date of termination".
(8) By deleting from the ninth and tenth lines of Section
(6)(d)(vi) of the Agreement the words "Expiration Date in effect
on the date the Notice of Termination is delivered", by deleting
from the seventeenth and eighteenth lines of said Section
(6)(d)(vi) the words "Expiration Date in effect on said Date of
Termination", and by substituting therefor in each instance the
words "third anniversary of the Date of Termination"; by deleting
from the fourteenth line of said Section (6)(d)(vi) the words
"Expiration Date" and by substituting therefor the words
"anniversary date"; and by deleting from the twenty and twenty-
first lines of said Section (6)(d)(vi) the words "Expiration Date
in effect on his Date of Termination" and by substituting
therefor the words "third anniversary of his Date of
Termination".
(9) All the terms and conditions of the Agreement, as
hereby amended, are and shall remain in full force and effect.
(10) This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
ATTEST: THE UNITED ILLUMINATING COMPANY
/s/ Mary Ellen Manthey By /s/ George W. Edwards, Jr.
- ------------------------- -----------------------------
Secretary Chairman of the Board
Directors and Chief Executive
Officer
/s/ Richard J. Grossi
------------------------------
Richard J. Grossi
- 2 -
<PAGE>
<PAGE>
EXHIBIT 10.15b
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT, made as of the 23rd day of July, 1990, to
the Employment Agreement, made of the 1st day of January,1988,
(the Agreement) between THE UNITED ILLUMINATING COMPANY, a
Connecticut corporation (the Company) and ROBERT L. FISCUS, an
individual, (the Executive),
WITNESSETH THAT:
(1) The Company and the Executive hereby agree to amend the
Agreement as set forth in Sections (2) through (8) inclusive,
below:
(2) By deleting Section (1)(b) of the Agreement in its
entirety and by substituting the following therefor:
"(b) Unless and until terminated pursuant to Section
(5)(a), Section 5(b)(i) or section 5(c)(i) hereof, the
employment of the Executive by the Company shall be for
a term expiring on the date specified in a Notice of
Termination pursuant to Section (5)(d) hereof."
(3) By deleting Section (5)(b)(ii) of the Agreement in its
entirety and by substituting the following therefor:
"(ii) Without Cause. The Company may terminate the
Executive's employment without Cause, effective upon at
least three (3) years' prior Notice of Termination
delivered to the Executive pursuant to Section 5(d)
hereof."
(4) By deleting Section (5)(c)(ii) of the Agreement in its
entirety and by substituting the following therefor:
"(ii) Absent Breach by the Company. The Executive may
terminate his employment hereunder in the absence of a
Breach by the Company, effective upon at least six (6)
months' prior Notice of Termination delivered to the
Company pursuant to Section (5)(d) hereof."
(5) By deleting from the fourth line of Section (5)(e) of
the Agreement the words "the Expiration Date" and by substituting
therefor the words "the date specified in the Notice of
Termination."
(6) By deleting from the third and fourth lines of Section
(6)(d)(iv) of the Agreement the words "Expiration Date in effect
on the date the Notice of Termination is delivered" and by
<PAGE>
<PAGE>
substituting therefor the words "third anniversary of the Date of
Termination."
(7) By deleting from the fourth and fifth lines of Section
(6)(d)(v) of the Agreement the words "Expiration Date in effect
on the Date of Termination" and by substituting therefor the
words "third anniversary of the Date of termination".
(8) By deleting from the ninth and tenth lines of Section
(6)(d)(vi) of the Agreement the words "Expiration Date in effect
on the date the Notice of Termination is delivered", by deleting
from the seventeenth and eighteenth lines of said Section
(6)(d)(vi) the words "Expiration Date in effect on said Date of
Termination", and by substituting therefor in each instance the
words "third anniversary of the Date of Termination"; by deleting
from the fourteenth line of said Section (6)(d)(vi) the words
"Expiration Date" and by substituting therefor the words
"anniversary date"; and by deleting from the twenty and twenty-
first lines of said Section (6)(d)(vi) the words "Expiration Date
in effect on his Date of Termination" and by substituting
therefor the words "third anniversary of his Date of
Termination".
(9) All the terms and conditions of the Agreement, as
hereby amended, are and shall remain in full force and effect.
(10) This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
ATTEST: THE UNITED ILLUMINATING COMPANY
/s/ Mary Ellen Manthey By /s/ George W. Edwards, Jr.
- ------------------------- ----------------------------
Secretary Chairman of the Board
Directors and Chief Executive
Officer
/s/ Robert L. Fiscus
----------------------------
Robert L. Fiscus
- 2 -
<PAGE>
<PAGE>
EXHIBIT 10.16b
AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT, made as of the 23rd day of July, 1990, to
the Employment Agreement, made of the 1st day of January,1988,
(the Agreement) between THE UNITED ILLUMINATING COMPANY, a
Connecticut corporation (the Company) and JAMES F. CROWE, an
individual, (the Executive),
WITNESSETH THAT:
(1) The Company and the Executive hereby agree to amend the
Agreement as set forth in Sections (2) through (8) inclusive,
below:
(2) By deleting Section (1)(b) of the Agreement in its
entirety and by substituting the following therefor:
"(b) Unless and until terminated pursuant to Section
(5)(a), Section 5(b)(i) or section 5(c)(i) hereof, the
employment of the Executive by the Company shall be for
a term expiring on the date specified in a Notice of
Termination pursuant to Section (5)(d) hereof."
(3) By deleting Section (5)(b)(ii) of the Agreement in its
entirety and by substituting the following therefor:
"(ii) Without Cause. The Company may terminate the
Executive's employment without Cause, effective upon at
least three (3) years' prior Notice of Termination
delivered to the Executive pursuant to Section 5(d)
hereof."
(4) By deleting Section (5)(c)(ii) of the Agreement in its
entirety and by substituting the following therefor:
"(ii) Absent Breach by the Company. The Executive may
terminate his employment hereunder in the absence of a
Breach by the Company, effective upon at least six (6)
months' prior Notice of Termination delivered to the
Company pursuant to Section (5)(d) hereof."
(5) By deleting from the fourth line of Section (5)(e) of
the Agreement the words "the Expiration Date" and by substituting
therefor the words "the date specified in the Notice of
Termination."
(6) By deleting from the third and fourth lines of Section
(6)(d)(iv) of the Agreement the words "Expiration Date in effect
on the date the Notice of Termination is delivered" and by
substituting therefor the words "third anniversary of the Date of
Termination."
<PAGE>
<PAGE>
(7) By deleting from the fourth and fifth lines of Section
(6)(d)(v) of the Agreement the words "Expiration Date in effect
on the Date of Termination" and by substituting therefor the
words "third anniversary of the Date of termination".
(8) By deleting from the ninth and tenth lines of Section
(6)(d)(vi) of the Agreement the words "Expiration Date in effect
on the date the Notice of Termination is delivered", by deleting
from the seventeenth and eighteenth lines of said Section
(6)(d)(vi) the words "Expiration Date in effect on said Date of
Termination", and by substituting therefor in each instance the
words "third anniversary of the Date of Termination"; by deleting
from the fourteenth line of said Section (6)(d)(vi) the words
"Expiration Date" and by substituting therefor the words
"anniversary date"; and by deleting from the twenty and twenty-
first lines of said Section (6)(d)(vi) the words "Expiration Date
in effect on his Date of Termination" and by substituting
therefor the words "third anniversary of his Date of
Termination".
(9) All the terms and conditions of the Agreement, as
hereby amended, are and shall remain in full force and effect.
(10) This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
ATTEST: THE UNITED ILLUMINATING COMPANY
/s/ Mary Ellen Manthey By /s/ George W. Edwards, Jr.
- ------------------------ -----------------------------
Secretary Chairman of the Board
Directors and Chief Executive
Officer
/s/ James F. Crowe
-----------------------------
James F. Crowe
- 2 -
<PAGE>
<PAGE>
EXHIBIT 10.18
THE UNITED ILLUMINATING COMPANY
1990 STOCK OPTION PLAN
(as adopted January 22, 1990 and as amended
December 20, 1993, January 24, 1994 and August 22, 1994)
1. Purpose
-------
The purpose of The United Illuminating Company 1990
Stock Option Plan ("the Plan") is to promote the
profitability of The United Illuminating Company ("the
Company") and its Subsidiaries by providing certain key
employees with incentives to contribute to the success of
the Company and by enabling the Company to attract, retain
and reward the best available managerial employees. The
Plan shall be effective on January 22, 1990 (the "Effective
Date"). On and after the Effective Date, the Administrator
shall have the authority to grant Nonqualified Stock
Options, Incentive Stock Options and Stock Appreciation
Rights in accordance with the terms of the Plan.
For purposes of the Plan, the term "Incentive Stock
Option" shall have the meaning set forth in 422A of the
Internal Revenue Code of 1986, as amended ("the Code"); a
"Nonqualified Stock Option" shall be any option to purchase
from the Company a share of its no par value common stock
other than an Incentive Stock Option; "Stock Options" shall
refer collectively to Incentive Stock Options and
Nonqualified Stock Options; and "SARs" shall refer to Stock
Appreciation Rights granted in connection with Stock
Options. The term "Subsidiary" or "Subsidiaries" shall mean
one or more corporations, a majority of the outstanding
shares of voting stock of which is owned directly or
indirectly by the Company.
2. Administration.
--------------
The Plan shall be administered by the Company's Board
of Directors, as it may be constituted from time to time,
excluding any member of said Board who is, or within twelve
(12) months prior to the exercise of any discretion under
this Plan has been, eligible to receive an allocation of any
class of stock of the Company or a grant of Stock Options or
SARs under the Plan or any other plan of the Company or its
Subsidiaries ("the Administrator"). The Administrator is
authorized to interpret the Plan in accordance with its
terms and may, from time to time, prescribe, adopt, amend
and rescind any rules and regulations it deems appropriate
for the administration of the Plan and for the continued
qualification under the Code of any Incentive Stock Options
issued hereunder. Decisions of the Administrator on all
matters relating to the Plan shall be conclusive and binding
on the Company, its shareholders and Plan participants. The
validity, construction and effect of the Plan, and any rules
and regulations relating thereto, shall be determined in
accordance with the laws of Connecticut and applicable
federal law.
<PAGE>
<PAGE>
3. Shares Available For the Plan.
-----------------------------
Subject to the adjustments prescribed in Section 6, a
maximum of seven hundred and fifty thousand (750,000) shares
of no par value common stock of the Company ("Common Stock")
may be purchased pursuant to the Plan. Such shares may be
either authorized but unissued shares or treasury shares, in
the discretion of the Company. If any Stock Option granted
under the Plan expires or terminates unexercised or, for any
reason other than the exercise of a related SAR, becomes
unexercisable, the unpurchased shares represented by such
Stock Option shall thereafter be available for further
grants under the Plan.
4. Participation.
-------------
(a) The Administrator shall, from time to time, select
those officers and key full-time employees of the Company to
whom Stock Options shall be granted ("Optionees"), and shall
determine (i) the number of Stock Options to be granted to
each such individual, (ii) whether such Stock Options shall
be Nonqualified or Incentive Stock Options, or some
combination thereof, (iii) the periods within which such
Stock Options shall be exercisable, and (iv) whether such
Stock Options will have tandem SARs. A grant of Stock
Options or SARs at any time shall neither guarantee nor
preclude a grant to such Optionee at any later time.
(b) Participation in the Plan shall be limited to those
officers and key full-time employees of the Company selected
by the Administrator in its sole discretion. Nothing in the
Plan or in any Stock Option or SAR granted shall confer any
right on an employee to continue in the employ of the
Company or shall interfere in any way with the right of the
Company to terminate an employee's employment at any time.
(c) Directors who are also full-time employees of the
Company shall be eligible to receive Stock Options and SARS
under the Plan. Directors who are not so employed shall be
ineligible to receive grants of Stock Options or SARS under
the Plan and all Directors comprising the Plan Administrator
shall be ineligible to receive Stock Options or SARS under
the Plan.
5. Terms and Conditions of Options.
-------------------------------
The Stock Options granted shall be subject to the
following terms and conditions:
(a) EXERCISE PRICE OF STOCK OPTIONS. Regardless of
whether the Stock Option granted is a Nonqualified or
Incentive Stock Option, the purchase price per share
deliverable upon the exercise of each Stock Option shall not
be less than 100% of the Fair Market Value of shares of
Common Stock on the date the Stock Option is granted. In
the case of the grant of any Incentive Stock Option to an
Optionee who, at the time of the grant, owns more than 10%
of the total combined voting power of all classes of stock
of the Company or any of its Subsidiaries, the option
exercise price per share shall not be less than 110% of the
Fair Market Value of shares of Common Stock on the date the
Stock Option is granted. "Fair Market Value" shall be the
average of the high and low sales price of shares of Common
Stock on the New York Stock Exchange composite tape, or such
other recognized market source as may be designated by the
Administrator from time to time, on the date the Stock
Option is
- 2 -<PAGE>
<PAGE>
granted. If there is no sale on such date, then such
average price on the last previous day on which a sale is
reported shall govern.
(b) PAYMENT. Stock Options may be exercised only upon
payment of the exercise price thereof in full. Such payment
shall be made in cash or by check, or, subject to obtaining
the consent of the holders of a majority of the total par
value of the then outstanding preferred stock of the
Company, in shares of Common Stock having a Fair Market
Value on the date the Stock Option is exercised equal to the
aggregate exercise price of the Stock Options being
exercised, or any combination of cash or check and such
shares.
(c) TERM AND EXERCISABILITY OF STOCK OPTIONS. The
Administrator shall determine the period within which each
Stock Option granted shall be exercisable and may provide
that a number of Stock Options shall become exercisable in
installments; provided, however, that
(i) except as provided in subsection (d)(iv) of
this Section 5, in no event shall any Stock Option be
exercisable less than one year, or more than ten years,
from the date it is granted;
(ii) except as provided in subsection (d)(iv) of
this Section 5, no more than one-third of the number of
Stock Options granted to an Optionee on any date may
first become exercisable in any twelve-month period;
(iii) in the case of the grant of an Incentive
Stock Option to an Optionee who, at the time of the
grant, owns more than 10% of the total combined voting
power of all classes of stock of the Company or any of
its Subsidiaries, in no event shall such Stock Option
be exercisable more than five years from the date of
the grant;
(iv) in the case of Incentive Stock Options,
except as provided in subsection (d)(iv) of this
Section 5, the number of Stock Options granted to an
Optionee on any date which may first become exercisable
in any calendar year shall be limited to $100,000
divided by the exercise price per Stock Option, as
determined in accordance with Section 422A(d) of the
Code and regulations issued thereunder;
(v) an Optionee may exercise Stock Options only
in quantities of 500 or more shares, unless the number
of shares subject to Stock Options exercisable by the
Optionee is less than 500, in which event the Optionee
may exercise all, but not less than all, of such
exercisable Stock Options; and
(vi) no Stock Option shall be exercisable unless
and until the Connecticut Department of Public Utility
Control has approved the issuance of shares of Company
Common Stock pursuant to the Plan.
Except as otherwise provided in subsection (d) of this
Section 5, an Optionee may exercise a Stock Option only (i)
if he or she is, and has continuously been since the date
the Stock Option was granted, a full-time employee of the
Company or one of its Subsidiaries, and (ii) if such Stock
Option was granted in tandem with a dividend equivalent unit
under the Company's 1993 Stock Option
- 3 -<PAGE>
<PAGE>
Dividend Equivalent Program, the Company's Board of
Directors has confirmed the dividend equivalent performance
results for the related dividend equivalent Performance
Period.
Prior to the exercise of a Stock Option and delivery of
the Common Stock shares purchased thereby, the Optionee
shall have no right to dividends nor be entitled to voting
or any other rights on account of such Stock Option.
(d) EXERCISABILITY OF OPTIONS UNDER CERTAIN EVENTS.
Upon the termination of an Optionee's full-time employment,
whether as a result of retirement, death, disability, or
voluntary or involuntary termination, all of the Optionee's
Stock Options which are not then exercisable shall
automatically expire. An Optionee shall be considered
"retired" or "disabled" for purposes of the Plan if he or
she is entitled to a service pension, disability pension,
disability benefit or disability allowance under the
Company's pension or disability plan.
(i) UPON DEATH. If an Optionee's full-time
employment is terminated by death, such Optionee's
legal representative or successor by bequest or the
laws of descent and distribution (each a "Successor in
Interest") may exercise, in whole or in part, Stock
Options exercisable by such Optionee immediately prior
to his or her death, from time to time within one year
after such Optionee's date of death.
(ii) UPON RETIREMENT, OR TERMINATION DUE TO
DISABILITY. If an Optionee's full-time employment is
terminated due to retirement or disability, such
Optionee, or his or her guardian or Successor in
Interest, may exercise, in whole or in part: (A)
Nonqualified Stock Options exercisable by such Optionee
on the date of termination of his or her full-time
employment, from time to time within three years after
such date; and (B) Incentive Stock Options exercisable
by such Optionee on the date of his or her retirement,
from time to time within three months after such date;
and (C) Incentive Stock Options exercisable by such
Optionee on the date of his or her disability, from
time to time within one year after such date.
(iii) UPON VOLUNTARY OR INVOLUNTARY TERMINATION OF
SERVICE. Upon a voluntary or involuntary termination
of full-time employment due to any cause other than the
death, retirement, disability or termination in
connection with an Optionee's acceptance of full-time
employment by another business entity, such Optionee,
or his or her Successor in Interest, may exercise, in
whole or in part: (A) Nonqualified Stock Options
exercisable by such Optionee on the date of termination
of his or her full-time employment, from time to time
within five months after such date; and (B) Incentive
Stock Options exercisable by such Optionee on such
date, from time to time within three months after such
date; provided, however, that if an Optionee is
terminated for cause (as determined by the
Administrator), or if an Optionee, at any time after
his or her voluntary or involuntary termination of full-
time employment, engages in any occupation or business
that, in the opinion of the Administrator, is a
competitor of the Company or any of its Subsidiaries,
all of such Optionee's unexercised Stock Options (and
any tandem SARs) may be canceled by the Administrator.
(iv) UPON A CHANGE OF CONTROL. In the event of a
change of control of the Company, all Stock Options and
any tandem SARs which have been granted and have not
expired or been
- 4 -<PAGE>
<PAGE>
exercised shall become immediately exercisable. Change
in Control of the Company shall mean any of the
following events:
(A) any merger or consolidation of the
Company with any corporate shareholder or group of
corporate shareholders holding twenty-five percent
(.25) or more of the Common Stock of the Company
or with any other corporation or group of
corporations which is or after such merger or
consolidation would be affiliated with a
shareholder owning at least twenty-five percent
(.25) of the Common Stock of the Company; or
(B) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition to or with
any shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common
Stock of the Company, or any affiliate of such
shareholder or group of shareholders, of any
assets of the Company having an aggregate fair
market value of $50 million or more; or
(C) the issuance or sale by the Company
of any securities of the Company to any
shareholder or group of shareholders holding
twenty-five percent (.25) or more of the Common
Stock of the Company, or to any affiliate of such
shareholder or group of shareholders, in exchange
for cash, securities or other consideration having
an aggregate fair market value of $50 million or
more; or
(D) the implementation of any plan or
proposal for the liquidation or dissolution of the
Company proposed by or on behalf of any
shareholder or group of shareholders owning at
least twenty-five percent (.25) of the Common
Stock of the Company, or any affiliate of such
shareholder or group of shareholders; or
(E) any reclassification of securities
(including a reverse stock split), or
recapitalization of the Company or any other
transaction which has the effect, directly or
indirectly, of increasing the proportionate share
of outstanding shares of any class of equity
securities, or securities convertible into any
equity securities, of the Company, which is
directly or indirectly owned by a shareholder or
group of shareholders owning at least twenty-five
percent (.25) of the Common Stock of the Company,
or any affiliate of such shareholder or group of
shareholders.
The Administrator may, from time to time, by the
affirmative vote of not less than a majority of the
entire membership of the Administrator, modify the
phrase "twenty-five percent (.25)" in one or more of
the foregoing subsections (A), (B), (C), (D) and/or (E)
to a lesser percentage, but not less than twenty
percent (.20).
Transfer from the Company to a Subsidiary, from a Subsidiary
to the Company, and from one Subsidiary to another shall not
be considered a termination of employment. Nor shall it be
considered a termination of employment if an Optionee is
placed on a military or sick leave or such other leave of
absence which is considered as continuing intact the
employment relationship; in such a case, the employment
relationship shall be continued until the date when an
employee's right to reemployment shall no longer be
guaranteed either by law or by contract.
- 5 -<PAGE>
<PAGE>
(e) TRANSFERABILITY. No Stock Option or SAR shall be
transferable by the grantee otherwise than by will or the
laws of descent and distribution. During the lifetime of
the grantee, a Stock Option or SAR may be exercised only by
the grantee or the grantee's guardian or legal
representative, and Incentive Stock Options may be exercised
by such guardian or legal representative only if permitted
by Section 422A and related sections of the Code and any
regulations promulgated thereunder.
(f) LISTING, REGISTRATION AND/OR APPROVALS. Each Stock
Option granted shall be subject to the requirement that if
at any time the Administrator determines it is necessary or
desirable to list, register or qualify any shares of Common
Stock subject to such Option upon any securities exchange or
under any state or federal law, or to obtain the consent or
approval of any governmental regulatory body as a condition
of, or in connection with, the granting of such Stock Option
or the issue or purchase of shares of Common Stock
thereunder, no such Option may be exercised in whole or in
part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained,
free of any conditions not acceptable to the Administrator.
(g) OPTION AGREEMENT. Each person to whom a Stock
Option or SAR is granted shall, as a condition to the
receipt thereof, enter into an agreement with the Company,
which shall contain such provisions, consistent with the
provisions of the Plan, as may be prescribed by the
Administrator.
6. Adjustments.
-----------
In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger,
consolidation, distribution of assets, or any other change
in the corporate structure or shares of the Company, the
Administrator shall make such adjustments as it deems
appropriate in the number and kind of shares which may be
purchased pursuant to the Plan, in the number and kind of
shares covered by the Stock Options granted and in the
exercise price of outstanding Stock Options. In the event
of any merger, consolidation or other reorganization in
which the Company is not the surviving or continuing
corporation, all Stock Options and SARs granted hereunder
and outstanding on the date of such event shall be assumed
by the surviving or continuing corporation.
7. Terms and Conditions of Stock Appreciation Rights.
-------------------------------------------------
The Administrator shall have the authority to grant
SARs in connection with the Stock Options under the Plan,
provided that such SARs shall be exercisable only (i) if the
grantee is a person subject to the provisions of Section
16(b) of the Securities Exchange Act of 1934 with respect to
purchases and sales of Common Stock at the time of exercise,
or (ii) in the event of a Change in Control of the Company.
The exercise of a Stock Option shall result in an immediate
forfeiture of any tandem SAR, and the exercise of a SAR
shall cause an immediate forfeiture of its tandem Stock
Option. A SAR shall expire at the same time as its tandem
Stock Option expires and shall be transferable only when and
to the extent that its tandem Stock Option is transferable,
and under the same conditions.
- 6 -<PAGE>
<PAGE>
8. Exercise of Stock Appreciation Rights.
-------------------------------------
(a) SARs shall be exercisable only when the tandem
Stock Option is exercisable. No SAR may be exercised unless
the Fair Market Value of a share of Common Stock on the date
of exercise exceeds the exercise price of the tandem Stock
Option.
(b) Upon the exercise of SARs in all events other than
a Change in Control of the Company, the grantee shall be
entitled to receive that number of whole shares of Common
Stock (disregarding fractional shares) as nearly as possible
having an aggregate Fair Market Value on the date of
exercise equal to the difference between the Fair Market
Value of a share of Common Stock on that date and the
exercise price of the exercised SAR's tandem Stock Option,
multiplied by the number of SARs exercised. Upon the
exercise of a SAR in the event of a Change in Control of the
Company, the grantee shall be entitled to receive a cash
payment equal to the difference between the highest Fair
Market Value of a share of Common Stock on any day within
the sixty days preceding the date of the Change in Control
and the exercise price of the SAR's tandem Stock Option.
(c) The provisions of this subsection (c) shall apply
to SAR grantees who are or who hereafter may be subject to
Section 16(b) of the Securities Exchange Act of 1934. No
SAR may be exercised for cash in complete or partial
settlement of such right unless such exercise shall occur
during a period beginning on the third business day
following the date of release for publication by the Company
of quarterly or annual summary statements of sales and
earnings and ending on the twelfth business day following
such date. No SAR may be exercised for cash in complete or
partial settlement of such right during the first six months
of its term, except in the event that the death or
disability of the grantee occurs prior to the expiration of
such six-month period.
9. Tax Withholding.
---------------
The Company shall have the right to require a payment
in cash or by check from the grantee of a Stock Option or
SAR upon the exercise thereof, to cover any applicable
withholding or other employment taxes due as a result of
such exercise. In addition, the Company may withhold, in
partial or total satisfaction of its tax withholding
obligation, from delivery upon the exercise of a Stock
Option or SAR, such number of shares of Common Stock as have
a Fair Market Value on the exercise date equal as nearly as
possible to the amount of such obligation.
10. Termination and Modification of the Plan.
----------------------------------------
The Board of Directors, without approval of the
shareholders of the Company, may modify or terminate the
Plan and from time to time may suspend, and if suspended,
may reinstate any or all of the provisions of the Plan,
except that no such modification or termination of the Plan
may, without the consent of an Optionee, alter or impair any
Stock Option previously granted under the Plan and that no
modification shall become effective without prior approval
of the Common Stock shareholders of the Company which would:
(a) increase (except in the case of a readjustment of the
Common Stock or a recapitalization) the maximum number of
shares for which Stock Options may be granted under the
Plan; (b) reduce the option price which may be established
under the Plan; (c) extend the maximum option term under the
Plan beyond ten years, or (d) change the Plan's eligibility
requirements. The Compensation and Executive Development
Committee of the Board of Directors of the Company,
- 7 -<PAGE>
<PAGE>
excluding any member of such Committee who is, or within the
twelve months prior to his appointment to such Committee has
been, eligible to receive a grant of a Stock Option
hereunder, shall be authorized to make minor or
administrative modifications to the Plan and modifications
to the Plan which may be dictated by requirements of federal
or state statutes applicable to the Company or authorized or
made desirable by such statutes. Unless previously
terminated, the Plan shall terminate on January 21, 2000.
11. Effective Date.
--------------
The effective date of the Plan shall be January 22,
1990; provided, however, that if the Plan is not approved by
the shareholders of the Company on or before January 21,
1991, the Plan and any and all Stock Options and SARs
granted thereunder shall be and become null and void, and of
no effect, on January 22, 1991.
- 8 -
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 12
Page 1 of 2
THE UNITED ILLUMINATING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS
Net income $ 55,550 $ 56,768 $ 40,481 $ 46,795 $ 50,393
Federal income taxes 20,844 19,276 22,342 34,551 41,951
State income taxes 12,647 16,878 4,645 6,216 12,976
Fixed charges 107,548 109,449 97,928 88,093 83,994
------- ------- ------- ------- -------
Earnings available for
fixed charges $196,589 $202,371 $165,396 $175,655 $189,314
======= ======= ======= ======= =======
FIXED CHARGES
Interest on long-term debt $ 90,296 $ 88,666 $ 80,030 $ 73,772 $ 63,431
Other interest 9,847 12,882 12,260 10,301 16,723
Interest on nuclear fuel burned 2,440 2,963 928 - -
One third of rental charges 4,965 4,938 4,710 4,020 3,840
------- ------- ------- ------- -------
$107,548 $109,449 $ 97,928 $ 88,093 $ 83,994
======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED
CHARGES 1.83 1.85 1.69 1.99 2.25
======= ======= ======= ======= =======
/TABLE
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 12
Page 2 of 2
THE UNITED ILLUMINATING COMPANY
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS
Net income $ 55,550 $ 56,768 $ 40,481 $ 46,795 $ 50,393
Federal income taxes 20,844 19,276 22,342 34,551 41,951
State income taxes 12,647 16,878 4,645 6,216 12,976
Fixed charges 107,548 109,449 97,928 88,093 83,994
------- ------- ------- ------- -------
Earnings available for
combined fixed charges
and preferred stock
dividend requirements $196,589 $202,371 $165,396 $175,655 $189,314
======= ======= ======= ======= =======
FIXED CHARGES AND PREFERRED
STOCK DIVIDEND REQUIREMENTS
Interest on long-term debt $ 90,296 $ 88,666 $ 80,030 $ 73,772 $ 63,431
Other interest 9,847 12,882 12,260 10,301 16,723
Interest on nuclear fuel burned 2,440 2,963 928 - -
One third of rental charges 4,965 4,938 4,710 4,020 3,840
Preferred stock dividend
requirements (1) 7,260 7,100 7,197 6,223 2,778
------- ------- ------- ------- -------
$114,808 $116,549 $105,125 $ 94,316 $ 86,772
======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED
CHARGES AND PREFERRED
STOCK DIVIDEND REQUIREMENTS 1.71 1.74 1.57 1.86 2.18
======= ======= ======= ======= =======
- ------------
<FN>
(1) Preferred Stock Dividends increased to reflect the pre-tax earnings
required to cover such dividend requirements.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT NO. 21
List of Subsidiaries of
The United Illuminating Company
-------------------------------
State or Jurisdiction
of incorporation or Name under which
Name of Subsidiary organization Subsidiary does business
- ------------------ --------------------- ------------------------
United Funding Capital Delaware United Funding Capital
Partnership L.P. Partnership L.P.
Research Center, Inc. Connecticut Research Center, Inc.
United Energy
International, Inc. Connecticut United Energy 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.
______________________
*Subsidiary of United Resources, Inc.
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,345,694
<OTHER-PROPERTY-AND-INVEST> 27,388
<TOTAL-CURRENT-ASSETS> 137,277
<TOTAL-DEFERRED-CHARGES> 475,258
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,985,617
<COMMON> 284,542
<CAPITAL-SURPLUS-PAID-IN> (1,438)
<RETAINED-EARNINGS> 156,877
<TOTAL-COMMON-STOCKHOLDERS-EQ> 439,981
0
10,539
<LONG-TERM-DEBT-NET> 845,684
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 40,800
0
<CAPITAL-LEASE-OBLIGATIONS> 17,508
<LEASES-CURRENT> 291
<OTHER-ITEMS-CAPITAL-AND-LIAB> 630,814
<TOT-CAPITALIZATION-AND-LIAB> 1,985,617
<GROSS-OPERATING-REVENUE> 690,449
<INCOME-TAX-EXPENSE> 59,828
<OTHER-OPERATING-EXPENSES> 503,465
<TOTAL-OPERATING-EXPENSES> 563,293
<OPERATING-INCOME-LOSS> 127,156
<OTHER-INCOME-NET> 1,019
<INCOME-BEFORE-INTEREST-EXPEN> 128,175
<TOTAL-INTEREST-EXPENSE> 74,199
<NET-INCOME> 50,393
1,329
<EARNINGS-AVAILABLE-FOR-COMM> 51,247
<COMMON-STOCK-DIVIDENDS> 39,734
<TOTAL-INTEREST-ON-BONDS> 66,578
<CASH-FLOW-OPERATIONS> 161,491
<EPS-PRIMARY> 3.64
<EPS-DILUTED> 3.64
</TABLE>