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: April 30, 1998
KEYSPAN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 1-14508 11-3344628
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or File Number) Identification No.)
organization)
One MetroTech Center,Brooklyn, New York 11201-3850
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 403-1000
<PAGE>
Item 5. Other Events
The Company is filing this Current Report on Form 8-K to provide
unaudited pro forma combined condensed financial information for
KeySpan and Long Island Lighting Company (LILCO) at December 31,
1997 and for the twelve months ended December 31, 1997 in order to
give effect under the purchase method of accounting to the
transactions summarized in Exhibit 99.1 hereto and in the
assumptions set forth in the notes thereto.
The unaudited pro forma combined condensed financial information
set forth in Exhibit 99.1 to this Current Report on Form 8-K
reflects the condensed consolidated financial information of
KeySpan and LILCO contained in KeySpan's Form 10-Q Report filed
February 13, 1998 and LILCO's Form 10-Q Report filed on February
17, 1998. Exhibit 99.1 is hereby incorporated by reference in
response to this Item 5.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
The unaudited pro forma combined condensed financial information
referred to above in Item 5 and incorporated herein by reference,
is attached hereto as the following Exhibit:
Exhibit
Number
99.1 Unaudited pro forma combined condensed financial
information for KeySpan and LILCO at December 31, 1997
and for the twelve months ended December 31, 1997.
2
<PAGE>
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.
Dated: April 30, 1998
KEYSPAN ENERGY CORPORATION
By: /s/ Vincent D. Enright
-----------------------------
Vincent D. Enright
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
3
<PAGE>
Exhibit Index
Exhibit
Number
99.1 Unaudited pro forma combined condensed financial
information for KeySpan and LILCO at December 31, 1997
and for the twelve months ended December 31, 1997, begins
on page 5.
4
Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
KEYSPAN ENERGY CORP/LILCO COMBINATION AND LIPA TRANSACTION
The following unaudited pro forma financial information reflects
adjustments to the historical financial statements of LILCO to give
effect to the proposed transfer of LILCO's gas and generation
business to subsidiaries of the newly formed Holding Company
(Holding Company), the proposed stock acquisition of LILCO by a
wholly owned subsidiary of LIPA and the proposed Combination
between KeySpan Energy Corporation (KeySpan) and LILCO
(Combination). The unaudited pro forma consolidated condensed
balance sheet at December 31, 1997 gives effect to the proposed
LIPA Transaction and the Combination as if they had occurred at
December 31, 1997. The unaudited pro forma consolidated condensed
statement of income for the twelve month period ended December 31,
1997 gives effect to the proposed LIPA Transaction and the
Combination as if they had occurred at January 1, 1997. These
statements are prepared on the basis of accounting for the
Combination under the purchase method of accounting and are based
on the assumptions set forth in the notes thereto. In April 1997
LILCO changed its year-end from December 31 to March 31.
The following pro forma financial information has been prepared
from, and should be read in conjunction with the historical
consolidated financial statements and related notes thereto of
KeySpan and LILCO. The following information is not necessarily
indicative of the financial position or operating results that
would have occurred had the proposed LIPA Transaction and the
Combination been consummated on the date, or at the beginning of
the period, for which the proposed LIPA Transaction and the
Combination are being given effect nor is it necessarily indicative
of future operating results or financial position.
5
<PAGE>
<TABLE>
KEYSPAN/LILCO HOLDING CORP.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1997
(In Millions)
<CAPTION>
LILCO Adjustments Adjusted Sale to Pro Forma
(Historical) LILCO LIPA (1) Adjustments
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Property
Utility plant
Electric $ 4,005.9 $ - $ 4,005.9 $ 2,911.4 $ -
Gas 1,218.7 - 1,218.7 - -
Common 286.4 - 286.4 - -
Construction work
in progress 116.1 - 116.1 42.0 -
Nuclear fuel in process
and in reactor 16.2 - 16.2 16.2 -
Less - Accumulated depreciation
and amortization (1,847.8) - (1,847.8) (933.3) -
---------- --------- --------- --------- ----------
Total Utility Net Plant 3,795.5 0.0 3,795.5 2,036.3 0.0
Gas exploration and production - - 0.0 - -
Less - Accumulated depletion - - 0.0 - -
---------- --------- --------- --------- ----------
Total Property 3,795.5 0.0 3,795.5 2,036.3 0.0
---------- --------- --------- --------- ----------
Cost in excess of net assets
acquired (Goodwill) - - 0.0 - -
---------- --------- --------- --------- ----------
Regulatory Assets
Base financial component(less accum.
amortization of $858.2) 3,180.6 - 3,180.6 3,180.6 -
Rate moderation component 385.5 - 385.5 385.5 -
Shoreham post-settlement cost 1,003.6 - 1,003.6 1,003.6 -
Regulatory tax asset 1,746.9 - 1,746.9 1,724.4 -
Postretirement benefits
other than pensions 346.1 - 346.1 - (292.2)(2)
Other 422.1 - 422.1 347.8 -
---------- --------- --------- --------- ----------
Total Regulatory Assets 7,084.8 0.0 7,084.8 6,641.9 (292.2)
---------- --------- --------- --------- ----------
Nonutility Property
and Other Investments 49.9 - 49.9 17.7 -
---------- --------- --------- --------- ----------
Current Assets
Cash and cash equivalents 180.0 75.0 (10) 255.0 75.0 2,477.6 (3)
Accounts receivable and
accrued revenues 463.4 - 463.4 314.0 19.4 (2)
Deferred tax asset 11.3 - 11.3 - 119.0 (4)
Other current assets 252.6 - 252.6 55.1 -
---------- --------- --------- --------- ----------
Total Current Assets 907.3 75.0 982.3 444.1 2,616.0
---------- --------- --------- --------- ----------
Deferred Charges 70.2 - 70.2 46.8 -
Contractual receivable
from LIPA - - 0.0 - 272.8 (2)
---------- --------- --------- --------- ----------
Total Assets $ 11,907.7 $ 75.0 $ 11,982.7 $ 9,186.8 $ 2,596.6
========== ========= ========= ========= ==========
See accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
</TABLE>
6
<PAGE>
<TABLE>
KEYSPAN/LILCO HOLDING CORP.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1997
(In Millions)
<CAPTION>
NEWCO
before KeySpan Pro Forma NEWCO
KeySpan (Historical) Adjustments Pro Forma
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Property
Utility plant
Electric $ 1,094.5 $ - $ - $ 1,094.5
Gas 1,218.7 1,855.7 - 3,074.4
Common 286.4 - - 286.4
Construction work
in progress 74.1 - - 74.1
Nuclear fuel in process
and in reactor 0.0 - - 0.0
Less - Accumulated depreciation
and amortization (914.5) (461.6) - (1,376.1)
---------- ----------- --------- ---------
Total Utility Net Plant 1,759.2 1,394.1 0.0 3,153.3
Gas exploration and production 0.0 684.0 - 684.0
Less - Accumulated depletion 0.0 (237.1) - (237.1)
---------- ----------- --------- -----------
Total Property 1,759.2 1,841.0 0.0 3,600.2
---------- ----------- --------- -----------
Cost in excess of net assets
acquired (Goodwill) 0.0 - 241.0 (6) 241.0
---------- ----------- --------- -----------
Regulatory Assets
Base financial component(less accum.
amortization of $858.2) 0.0 - - 0.0
Rate moderation component 0.0 - - 0.0
Shoreham post-settlement cost 0.0 - - 0.0
Regulatory tax asset 22.5 - 68.7 (5) 91.2
Postretirement benefits
other than pensions 53.9 - - 53.9
Other 74.3 - 29.4 (6) 103.7
--------- ------------ --------- ---------
Total Regulatory Assets 150.7 0.0 98.1 248.8
--------- ------------ --------- ---------
Nonutility Property
and Other Investments 32.2 98.6 - 130.8
--------- ------------ --------- ---------
Current Assets
Cash and cash equivalents 2,657.6 39.8 - 2,697.4
Accounts receivable and
accrued revenues 168.8 318.7 - 487.5
Deferred tax asset 130.3 - - 130.3
Other current assets 197.5 165.2 - 362.7
--------- ------------ --------- ---------
Total Current Assets 3,154.2 523.7 0.0 3,677.9
--------- ------------ --------- ---------
Deferred Charges 23.4 154.3 (76.9)(5,6) 100.8
Contractual receivable
from LIPA 272.8 - - 272.8
--------- ------------ --------- ---------
Total Assets $ 5,392.5 $ 2,617.6 $ 262.2 $ 8,272.3
======== ============ ========= =========
See accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
</TABLE>
6a
<PAGE>
<TABLE>
KEYSPAN/LILCO HOLDING CORP.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1997
(In Millions)
<CAPTION>
LILCO Adjustments Adjusted Sale to Pro Forma
(Historical) LILCO LIPA (1) Adjustments
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common Shareholders' Equity $ 2,608.5 $ - $ 2,608.5 $ 2,500.8 $ 2,464.6 (3)
Long-term debt 4,482.7 - 4,482.7 3,434.1 -
Preferred stock 701.0 75.0 (10) 776.0 338.0 -
---------- --------- --------- --------- ----------
Total Capitalization 7,792.2 75.0 7,867.2 6,272.9 2,464.6
---------- --------- --------- --------- ----------
Regulatory Liabilities 407.0 - 407.0 385.8 -
---------- --------- --------- --------- ----------
Current Liabilities
Accounts payable
and accrued liabilities 288.6 - 288.6 101.7 13.0 (3)
Accrued taxes 54.5 - 54.5 - 399.0 (4)
Other current liabilities 336.6 - 336.6 54.0 -
---------- --------- --------- --------- ----------
Total Current Liabilities 679.7 0.0 679.7 155.7 412.0
---------- --------- --------- --------- ----------
Deferred Credits
Deferred federal income tax 2,506.9 - 2,506.9 2,355.9 (280.0)(4)
Other 77.4 - 77.4 18.6 -
---------- --------- --------- --------- ----------
Total Deferred Credits 2,584.3 0.0 2,584.3 2,374.5 (280.0)
---------- --------- --------- --------- ----------
Operating Reserves 444.5 - 444.5 (2.1) -
---------- --------- --------- --------- ----------
Commitments and Contingencies - - 0.0 - -
Minority Interest in
Subsidiary Company - - 0.0 - -
---------- --------- --------- --------- ----------
Total Capitalization
and Liabilities $ 11,907.7 $ 75.0 $ 11,982.7 $ 9,186.8 $ 2,596.6
========== ========= ========= ========= ==========
See accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
</TABLE>
7
<PAGE>
<TABLE>
KEYSPAN/LILCO HOLDING CORP.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
December 31, 1997
(In Millions)
<CAPTION>
NEWCO
before KeySpan Pro Forma NEWCO
KeySpan (Historical) Adjustments Pro Forma
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common Shareholders' Equity $ 2,572.3 $ 1,014.1 $ 200.4 (6) $ 3,786.8
Long-term debt 1,048.6 760.1 - 1,808.7
Preferred stock 438.0 0.0 - 438.0
--------- ------------ --------- ---------
Total Capitalization 4,058.9 1,774.2 200.4 6,033.5
--------- ------------ --------- ---------
Regulatory Liabilities 21.2 - - 21.2
--------- ------------ --------- ---------
Current Liabilities
Accounts payable
and accrued liabilities 199.9 177.6 61.8 (6) 439.3
Accrued taxes 453.5 37.9 - 491.4
Other current liabilities 282.6 152.7 - 435.3
--------- ------------ --------- ---------
Total Current Liabilities 936.0 368.2 61.8 1,366.0
--------- ------------ --------- ---------
Deferred Credits
Deferred federal income tax (129.0) 291.9 - 162.9
Other 58.8 94.8 - 153.6
--------- ------------ --------- ---------
Total Deferred Credits (70.2) 386.7 0.0 316.5
--------- ------------ --------- ---------
Operating Reserves 446.6 - - 446.6
--------- ------------ --------- ---------
Commitments and Contingencies 0.0 - - 0.0
Minority Interest in
Subsidiary Company 0.0 88.5 - 88.5
--------- ------------ --------- ---------
Total Capitalization
and Liabilities $ 5,392.5 $ 2,617.6 $ 262.2 $ 8,272.3
========= ============ ========= =========
See accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
</TABLE>
7a
<PAGE>
<TABLE>
KEYSPAN/LILCO HOLDING COMPANY
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
For the Twelve Months Ended December 31, 1997
(In Millions, Except Per Share Amounts)
<CAPTION>
NEWCO
LILCO Sale to Pro Forma before KeySpan Pro Forma NEWCO
(Historical) LIPA (1) Adjustments KeySpan (Historical) Adjustments Pro Forma
---------- --------- ---------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Electric $ 2,480.5 $ 2,118.4 $ 11.5 (7) $ 373.6 $ - $ - $ 373.6
Gas - utility sales 667.2 - - 667.2 1,356.9 - 2,024.1
Gas production and other - - - - 126.6 - 126.6
---------- --------- ---------- ---------- ------------ --------- ---------
Total Revenues 3,147.7 2,118.4 11.5 1,040.8 1,483.5 - 2,524.3
---------- --------- ---------- ---------- ------------ --------- ---------
Operating Expenses
Operations-fuel & purchased power 965.2 657.4 - 307.8 579.9 - 887.7
Operations-other 390.4 235.0 - 155.4 363.0 - 518.4
Maintenance 113.6 63.2 - 50.4 58.4 - 108.8
Depreciation,depletion and amortization 156.6 94.7 - 61.9 119.8 6.0 (6) 187.7
Base financial component amortization 101.0 101.0 - 0.0 - - 0.0
Rate moderation component amortization 13.5 13.5 - 0.0 - - 0.0
Regulatory liability component amortization (88.5) (88.5) - 0.0 - - 0.0
Other regulatory amortization 56.1 46.5 - 9.6 - - 9.6
Operating taxes 466.7 261.6 - 205.1 154.4 - 359.5
Federal income taxes 224.5 165.0 4.0 (8) 63.5 58.6 - 122.1
---------- --------- ---------- ---------- ------------ --------- ---------
Total Operating Expenses 2,399.1 1,549.4 4.0 853.7 1,334.1 6.0 2,193.8
---------- --------- ---------- ---------- ------------ --------- ---------
Operating Income 748.6 569.0 7.5 187.1 149.4 (6.0) 330.5
Other Income and Deductions (4.3) 15.3 - (19.6) 21.6 - 2.0
---------- --------- ---------- ---------- ------------ --------- ---------
Income Before Interest Charges 744.3 584.3 7.5 167.5 171.0 (6.0) 332.5
Interest Charges 410.3 314.7 - 95.6 44.5 - 140.1
---------- --------- ---------- ---------- ------------ --------- ---------
Net Income 334.0 269.6 7.5 71.9 126.5 (11) (6.0) 192.4
Preferred stock dividend requirements 51.8 23.1 6.0 (10) 34.7 0.2 34.9
---------- --------- ---------- ---------- ------------ --------- ---------
Earnings for Common Stock $ 282.2 $ 246.5 $ 1.5 $ 37.2 $ 126.3 $ (6.0) $ 157.5
========== ========= ========== ========== ============ ========= =========
Average Common Shares Outstanding 121.2 121.2 121.2 121.2 50.4 (14.5)(12) 157.1
========== ========= ========== ========== ============ ========= =========
Earnings per Common
and Equivalent Shares $ 2.33 $ 2.03 $ 0.01 $ 0.31 $ 2.50 $ (0.04) $ 1.00 (9)
========== ========= ========== ========== ============ ========= =========
See accompanying Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
</TABLE>
8
<PAGE>
Notes to Unaudited Pro Forma Consolidated Condensed Financial
Statements
1. The historical financial statements of LILCO have been
adjusted to give effect to the proposed transaction with LIPA,
pursuant to which LILCO will distribute certain of its net
assets relating to its gas and generation business
("Transferred Assets") to subsidiaries of the Holding Company.
LIPA will then acquire LILCO in a stock sale. The adjustments
are based upon a disaggregation of LILCO's balance sheet and
operations as estimated by the management of LILCO, and are
subject to adjustment pursuant to the terms of the LIPA
agreement.
In connection with this transaction, the principal assets to
be acquired by LIPA through its stock acquisition of LILCO
include the electric transmission and distribution system
("The LIPA Transmission and Distribution System"), LILCO's 18%
interest in Nine Mile Point 2 nuclear power station, certain
of LILCO's regulatory assets associated with its electric
business and an allocation of accounts receivable and other
assets. The principal liabilities to be assumed by LIPA
include LILCO's regulatory liabilities associated with its
electric business, a portion of LILCO's long-term debt and an
allocation of accounts payable, accrued expenses, customer
deposits, other deferred credits and claims.
2. In connection with the LIPA Transaction, LIPA is contractually
responsible for reimbursing the Holding Company for
postretirement benefits other than pension costs, related to
employees of LILCO's electric business. A pro forma
adjustment has been reflected to reclassify the associated
regulatory asset for postretirement benefits other than
pensions to current and non-current accounts receivable
pursuant to LIPA's obligation to a subsidiary of the Holding
Company.
3. The Cash Purchase Price to be paid by LIPA in connection with
its stock acquisition of LILCO will be $2,497.5 million. The
Cash Purchase Price was determined based upon the estimated
net book value of the LILCO Retained Assets of $2,500.8
million as estimated by LILCO. In addition, the LIPA
Transaction obligates the Holding Company upon the closing of
the transaction to remit to LIPA $15 million associated with
the recovery through litigation of certain real estate taxes
previously paid and to pay call premiums totaling $4.9 million
on preferred stock series to be redeemed by LIPA. Transaction
costs are currently estimated to be $26 million, $13 million
of which has been incurred to date, leaving a balance of $13
million as a pro forma adjustment to accrued expenses.
Assuming the LIPA Transaction was completed on December 31,
1997, the net cash to be received by the Holding Company would
amount to:
Cash Purchase Price ........................... $2,497.5
Cash Paid to LIPA ............................. (15.0)
Call Premiums ................................. ( 4.9)
---------
Net Cash....................................... $2,477.6
=========
9
<PAGE>
4. The transfer of the Transferred Assets from LILCO to the
Holding Company (which will then transfer the assets to its
subsidiaries)will result in the imposition of federal income
taxes on LILCO. Pursuant to the LIPA Agreement, the
subsidiaries created by the Holding Company will receive the
benefit of the increased tax basis of the Transferred Assets
and will receive the Transferred Assets net of the tax imposed
on LILCO. The tax is derived from the difference between the
fair market value of the Transferred Assets and their existing
tax basis. There are many different ways of valuing assets
which may result in substantially different values. LILCO has
retained professional appraisers to assist it in determining
the fair market value of the Transferred Assets. However, the
valuation determined by LILCO and its appraisers is not
binding on the Internal Revenue Service, which may assert a
higher value and a correspondingly greater tax liability.
Thus, the actual tax liability and the amount of cash that
will be available to LILCO net of such liability cannot be
determined at this time. The unaudited pro forma consolidated
balance sheet as of December 31, 1997, reflects an estimated
tax liability of approximately $399 million based upon an
estimate of the value of the Transferred Assets made at the
time LILCO entered into the LIPA Agreement. For financial
reporting purposes, the subsidiaries reversed the existing
deferred tax liability of $280 million relating to the
Transferred Assets and recorded a $119 million deferred tax
asset, reflecting the estimated income tax effect by which the
tax basis of the Transferred Assets exceeded their book basis.
5. The unaudited pro forma condensed consolidated balance sheet
as of December 31, 1997 reflects the reclassification of $68.7
million of KeySpan regulatory tax assets from deferred charges
to regulatory assets in order to consistently present the
regulatory assets of the Holding Company.
6. The purchase price for KeySpan, which amounted to
approximately $1.255 billion including $40.6 million of direct
transaction costs, has been determined based upon an average
of LILCO's opening and closing stock prices for the two
trading days before and three trading days after December 29,
1996, the transaction date. The purchase price has been
10
<PAGE>
allocated to assets acquired and liabilities assumed based
upon their estimated fair values. It is anticipated that the
fair value of the utility assets acquired is represented by
their book value, which approximates the value of these assets
recognized by the New York State Public Service Commission
(PSC) in establishing rates which are designed to, among other
things, provide for a return on the book value of these assets
and the recovery of costs included as depreciation and
amortization charges. The estimated fair values of KeySpan's
non-utility assets approximate their carrying values.
At December 29, 1996, the transaction date, the purchase price
exceeded the fair value of the net assets acquired by $241.0
million, which will be amortized to income over 40 years. The
actual amount of goodwill to be recorded will be based on the
net assets acquired as of the closing date.
An additional $29.4 million in direct transaction costs will
be recovered through rates of the Holding Company's regulated
subsidiaries. As a result, these costs have been recorded as
a regulatory asset in the consolidated pro forma.
7. The agreement with LIPA includes a provision for the Holding
Company to earn in the aggregate approximately $11.5 million
in annual management service fees from LIPA for the management
of the LIPA Transmission and Distribution System and the
management of all aspects of fuel and power supply. These
agreements also contain certain incentive and penalty
provisions which could materially impact earnings from such
agreements.
8. The net pro forma charge of $4.0 million represents the income
tax effect associated with the recording of the pro forma
adjustments for the $11.5 million management fee (see Note 7).
9. No adjustments have been made to earnings on common stock to
reflect earnings on net available proceeds of approximately
$1.7 billion to be received, after remittances to the Holding
Company's gas and generation subsidiaries for working capital
purposes (see Note 3). If these funds were invested at 5.92%
(the 30 year US Treasury Bond yield based on recent prices),
the Holding Company would have realized additional interest
income, net of taxes, of approximately $65.3 million, or
approximately $.42 per share, on a pro forma consolidated
basis. Each one percent change in the assumed interest rate,
would increase/decrease interest income, net of taxes, by
$11.0 million. LILCO's allowed rate of return on its common
equity for its electric business is currently 11%.
11
<PAGE>
10. LILCO will transfer the Transferred Assets to subsidiaries of
the Holding Company in exchange for shares of the Holding
Company Common Stock and up to $75 million face amount of
Holding Company Preferred Stock. The privately placed
Preferred Stock will be non-voting, non-convertible and have
a five-year term. For purposes of these pro forma financial
statements, it is assumed that the Holding Company will issue
$75 million of Preferred Stock, LILCO will sell the preferred
stock for $75 million in proceeds and will retain the proceeds
(i.e. a Retained Asset).
With a $75 million increase in the Retained Assets, the LIPA
Agreement provides that the Retained Debt will increase by a
corresponding amount. The LIPA Agreement also provides that
if the Holding Company were to issue an amount other than $75
million of Preferred Stock, the incremental difference between
the amount actually issued and $75 million, will result in a
corresponding increase or decrease in the amount of accounts
payable retained by LILCO. These pro forma financial
statements reflect a reduction in interest expense for the
reduced level of subsidiary debt, and an increase in preferred
stock dividend requirements. Finally, for purposes of these
pro forma financial statements, it is assumed that the
dividend rate on this privately placed Preferred Stock will be
7.95%, which is equal to the Company's highest cost preferred
stock.
11. Earnings of KeySpan for the twelve month period ended December
31, 1997 included gains of $15.2 million, or 30 cents per
share, from sales of various cogeneration investments as well
as the sale of residual interests in Canadian assets.
12. The unaudited pro forma consolidated condensed financial
statements reflect the exchange of each share of LILCO Common
Stock outstanding into 0.880 shares of Holding Company Common
Stock and each share of KeySpan Common Stock outstanding into
one share of Holding Company Common Stock, as provided in the
KeySpan/LILCO Agreement.
12
