SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 1, 1998
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THE UNITED ILLUMINATING COMPANY
(Exact name of registrant as specified in its charter)
Connecticut 1-6788 06-0571640
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(State, or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
157 Church Street, New Haven, Connecticut 06506
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
Including Area Code (203) 499-2000
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None
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Item 5. Other Events
On October 2, 1998, the Registrant agreed to sell both of its operating
fossil-fueled generating stations, Bridgeport Harbor Station and New Haven
Harbor Station, to Wisvest-Connecticut, LLC, a single-purpose subsidiary of
Wisvest Corporation. Wisvest Corporation is a non-utility subsidiary of
Wisconsin Energy Corporation, Milwaukee, Wisconsin.
The sale price is $272 million in cash, and the transaction is expected to
close during the spring of 1999. It is contingent upon the receipt of approvals
from the Connecticut Department of Public Utility Control (DPUC), the Federal
Energy Regulatory Commission, and other federal and state agencies.
The Company will realize a small book gain from the sale proceeds net of
taxes and plant investment. Under Connecticut's 1998 electric utility industry
restructuring law (the Restructuring Act), this gain will be offset by a
write-down of DPUC-specified regulated plant costs, such that there will be no
net income effect of the sale. Net proceeds from the sale are expected to be in
the range of $160-165 million. The Registrant anticipates using these proceeds,
partially, to reduce debt, possibly to reduce equity through a special dividend
or stock buyback, and for growth opportunities.
In May of 1998 the Registrant had announced that it would commence
selling, through a two-stage bidding process, all of its non-nuclear generation
assets, in compliance with the Restructuring Act. The October 2, 1998 sale
agreement for Bridgeport Harbor Station and New Haven Harbor Station has
resulted from that bidding process. The Registrant's only other fossil-fueled
generating station is its small deactivated English Station, in New Haven.
English Station was also offered for sale in the bidding process, but it
attracted no bids. Also offered for sale were two long-term contracts for the
purchase of power from refuse-to-energy facilities located in Bridgeport and
Shelton, Connecticut, one long-term contract for the purchase of power from a
small hydroelectric generating station located in Derby, Connecticut, and the
Registrant's 5.45% participating share in the Hydro-Quebec transmission intertie
facility linking New England and Quebec, Canada. None of these contracts
attracted an acceptable bid.
On October 1, 1998, in a filing with the DPUC under the Restructuring Act,
the Registrant had reported that it was in final negotiations to sell Bridgeport
Harbor Station and New Haven Harbor Station as a part of its corporate
unbundling plan to separate all of its generating assets from its transmission
and distribution assets in compliance with the statute. In this corporate
unbundling plan filing with the DPUC, the Registrant stated that the unbundling
plan for the Registrant's nuclear generation ownership interests, 17.5% of
Seabrook Station, in New Hampshire, and 3.685% of Millstone Station Unit No. 3,
in Connecticut, is divestiture by the end of 2003 in accordance with the
Restructuring Act. The divestiture method has not yet been determined. Pending
divestiture, the Registrant proposes to satisfy the Connecticut Restructuring
Act's requirement that nuclear generating assets be legally separated from all
other assets, on a functional basis, by transferring them into separate new
divisions of the Registrant, using
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divisional financial statements and accounting to segregate all revenues,
expenses, assets and liabilities associated with each nuclear ownership
interest.
The Registrant's corporate unbundling plan also proposes to facilitate the
clear functional separation of the Registrant's ongoing regulated transmission
and distribution operations and functions from all of its unregulated operations
and activities by undergoing a corporate restructuring into a holding company
system. In the holding company system proposed, the Registrant will become a
wholly-owned subsidiary of a holding company, and each share of the common stock
of the Registrant will be converted into a share of common stock of the holding
company. In connection with the formation of the holding company system, all of
the Registrant's interests in all of its operating unregulated subsidiaries will
be transferred to the holding company and, to the extent new unregulated
businesses are subsequently acquired or commenced, they will also be financed
and owned by the holding company.
Under the Restructuring Act, all Connecticut electricity customers will be
able to choose their generation service provider after June 30, 2000. The
Registrant will be required to offer service to customers under a regulated
standard offer rate and will also become the default service provider to each
customer who does not choose an alternate generation service provider. In order
to mitigate the financial risk that these regulated service mandates will pose
to the Registrant in an unregulated power generation environment, its corporate
unbundling plan proposes that a purchased power adjustment clause be added to
its regulated rates, effective July 1, 2000. This clause, similar to and based
on the purchased gas adjustment clauses used by Connecticut's natural gas local
distribution companies, would work in tandem with the Registrant's procurement
of power supplies to assure that standard offer customers pay competitive market
rates for generation services even though they do not choose an alternate
electric supplier. A differing cost collection mechanism may be used for default
service.
In addition to approval by the DPUC, the several features of the
Registrant's unbundling plan will be subject to approvals and consents by
federal regulators, state and federal environmental and antitrust agencies, and
the Registrant's common stock shareowners.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE UNITED ILLUMINATING COMPANY
Registrant
10/07/98 By /s/ Robert L. Fiscus
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Robert L. Fiscus
Vice Chairman of the Board of Directors
and Chief Financial Officer
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