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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-30057
CANAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1733577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
(617) 225-4000
(Registrant's telephone number, including area code)
(Former name, address and fiscal year, if changed since last report.)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock August 1, 1999
Common Stock, $25 par value 1,523,200 shares
The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CANAL ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
ASSETS
(Dollars in thousands)
June 30, December 31,
1999 1998
(Unaudited)
PROPERTY, PLANT AND EQUIPMENT, at original cost $266,351 $265,612
Less - Accumulated depreciation and
amortization 76,627 77,081
189,724 188,531
Add - Construction work in progress 2,187 1,852
Nuclear fuel in process 1,702 1,568
193,613 191,951
INVESTMENTS
Equity in corporate joint venture 2,756 2,800
CURRENT ASSETS
Cash and cash equivalents 18 258,944
Advances to affiliates - 42,235
Accounts receivable-
Affiliates 4,230 13,642
Other 914 9,736
Inventories 1,213 1,268
Prepaid income taxes 8,500 7,575
Other 977 1,543
15,852 334,943
DEFERRED CHARGES
Regulatory assets 18,134 18,745
Other 5,817 5,840
23,951 24,585
$236,172 $554,279
See accompanying notes.
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CANAL ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
CAPITALIZATION AND LIABILITIES
(Dollars in thousands)
June 30, December 31,
1999 1998
(Unaudited)
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized - 2,328,200 shares
Outstanding - 1,523,200 shares,
wholly-owned by Commonwealth
Energy System (Parent) $ 38,080 $ 38,080
Amounts paid in excess of par value 8,321 8,321
Retained earnings 56,464 241,965
102,865 288,366
CAPITAL LEASE OBLIGATIONS 10,269 10,551
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 27,875 -
Advances from affiliates 4,515 -
32,390 -
Other Current Liabilities -
Accounts payable -
Affiliates 339 137,965
Other 3,866 31,327
Capital lease obligations 566 568
Accrued taxes and other 3,470 3,339
8,241 173,199
40,631 173,199
DEFERRED CREDITS
Accumulated deferred income taxes 64,867 64,383
Unamortized investment tax credits and other 17,540 17,780
82,407 82,163
COMMITMENTS AND CONTINGENCIES
$236,172 $554,279
See accompanying notes.
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CANAL ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
1999 1998 1999 1998
ELECTRIC OPERATING REVENUES 11,385 42,371 23,633 90,618
OPERATING EXPENSES
Fuel used in production 214 17,942 640 43,710
Electricity purchased for resale 125 133 269 281
Other operation and maintenance 3,497 11,088 6,561 19,806
Depreciation 1,748 5,038 3,459 10,077
Taxes -
Income 2,173 2,012 5,307 4,076
Local property 270 604 540 1,300
Payroll and other 49 200 243 417
8,076 37,017 17,019 79,667
OPERATING INCOME 3,309 5,354 6,614 10,951
OTHER INCOME
Additional gain from sale
of assets, net - - 6,533 -
Other 248 223 1,754 352
248 223 8,287 352
INCOME BEFORE INTEREST CHARGES 3,557 5,577 14,901 11,303
INTEREST CHARGES
Long-term debt - 1,976 - 3,954
Other interest charges 296 120 270 298
296 2,096 270 4,252
NET INCOME 3,261 3,481 14,631 7,051
RETAINED EARNINGS -
Beginning of period 64,458 56,700 241,965 53,130
Dividends on common stock (11,255) (4,036) (200,132) (4,036)
RETAINED EARNINGS -
End of period $56,464 $56,145 $ 56,464 $ 56,145
See accompanying notes.
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CANAL ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in thousands)
(Unaudited)
1999 1998
OPERATING ACTIVITIES
Net income $ 14,631 $7,051
Additional gain from sale of assets (10,750) -
Effects of noncash items -
Depreciation and amortization 4,526 11,220
Deferred income taxes and investment
tax credits, net 355 (900)
Earnings from corporate joint venture (140) (223)
Dividends from corporate joint venture 184 240
Change in working capital, exclusive of cash and
cash equivalents, advances to affiliates and
interim financing (147,028) 3,313
All other operating items 528 (661)
Net cash provided by (used for) operating activities (137,694) 20,040
INVESTING ACTIVITIES
Payments from affiliates 42,235 -
Additions to property, plant and equipment (208) (2,089)
Net cash provided by (used for)
investing activities 42,027 (2,089)
FINANCING ACTIVITIES
Proceeds from (payment of) short-term borrowings 27,875 (19,475)
Payment of dividends (200,132) (4,036)
Reimbursement of transaction costs 4,483 -
Advances from affiliates 4,515 5,660
Net cash used for financing activities (163,259) (17,951)
Net decrease in cash and cash equivalents (258,926) -
Cash and cash equivalents at beginning of period 258,944 18
Cash at end of period $ 18 $ 18
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized amounts) $ 257 $ 4,111
Income taxes $ 5,908 $ 4,779
See accompanying notes.
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CANAL ELECTRIC COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) General Information
Canal Electric Company (the Company) is a wholly-owned subsidiary of
Commonwealth Energy System (the Parent). The Parent together with its
subsidiaries is referred to as "COM/Energy." The Parent is an exempt
public utility holding company under the provisions of the Public Utility
Holding Company Act of 1935 and, in addition to its investment in the
Company, has interests in other utility and several nonregulated compa-
nies. In December 1998, the Parent signed an Agreement and Plan of
Merger with BEC Energy, the parent company of Boston Edison Company, that
will create an energy delivery company, that includes the Company,
serving approximately 1.3 million customers located entirely within
Massachusetts including more than one million electric customers in 81
communities and 240,000 gas customers in 51 communities.
The Company is a wholesale electric generating company organized in
1902 under the laws of the Commonwealth of Massachusetts. On December
30, 1998, in response to the significant changes that have taken place in
the utility industry, COM/Energy sold substantially all of its non-
nuclear generating assets, including the Company's generating station, to
affiliates of The Southern Company of Atlanta, Georgia. The Company's
generating stations, located in Sandwich, Massachusetts consisted of two
units: Canal Unit 1, wholly-owned by the Company; and Canal Unit 2,
jointly-owned by the Company and Montaup Electric Company (Montaup) (an
unaffiliated company). The Company continues to have a 3.52% interest in
the Seabrook 1 nuclear power plant to provide a portion of the capacity
and energy needs of Cambridge Electric Light Company (Cambridge) and
Commonwealth Electric Company (Commonwealth).
The Company had 109 regular employees prior to the sale of Canal
Units 1 and 2 on December 30, 1998; however, following the sale, the
Company no longer has any employees.
(2) Significant Accounting Policies
(a) Principles of Accounting
The Company's significant accounting policies are described in Note 2
of Notes to Financial Statements included in its 1998 Annual Report on
Form 10-K filed with the Securities and Exchange Commission. For interim
reporting purposes, the Company follows these same basic accounting
policies but considers each interim period as an integral part of an
annual period and makes allocations of certain expenses to interim
periods based upon estimates of such expenses for the year.
The unaudited financial statements for the periods ended June 30,
1999 and 1998, reflect, in the opinion of the Company, all adjustments
necessary to summarize fairly the results for such periods. In addition,
certain prior period amounts are reclassified from time to time to
conform with the presentation used in the current period's financial
statements.
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CANAL ELECTRIC COMPANY
Income tax expense is recorded using the statutory rates in effect
applied to book income subject to tax recorded in the interim period.
(b) Regulatory Assets
The Company is regulated as to rates, accounting and other matters by
various authorities, including the FERC and the Massachusetts Department
of Telecommunications and Energy (DTE).
Based on the current regulatory framework, the Company accounts for
the economic effects of regulation in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting
for the Effects of Certain Types of Regulation." The Company has
established various regulatory assets in cases where the FERC has
permitted or is expected to permit recovery of specific costs over time.
In the event the criteria for applying SFAS No. 71 are no longer met, the
accounting impact would be an extraordinary, non-cash charge to opera-
tions of an amount that could be material. Criteria that give rise to
the discontinuance of SFAS No. 71 include: 1) increasing competition
restricting the Company's ability to establish prices to recover specific
costs, and 2) a significant change in the current manner in which rates
are set by regulators from cost-based regulation to another form of
regulation. These criteria are reviewed on a regular basis to ensure the
continuing application of SFAS No. 71 is appropriate. Based on the
current evaluation of the various factors and conditions that are
expected to impact future cost recovery, the Company believes that its
regulatory assets are probable of future recovery.
The principal regulatory assets included in deferred charges were as
follows:
June 30, December 31,
1999 1998
(Dollars in thousands)
Deferred income taxes $15,737 $15,737
Seabrook related costs 2,397 3,008
$18,134 $18,745
In November 1997, the Commonwealth of Massachusetts enacted a
comprehensive electric utility industry restructuring bill. On November
19, 1997, the Company, together with Cambridge and Commonwealth filed a
restructuring plan with the DTE. The plan, approved by the DTE on
February 27, 1998, provides that Commonwealth and Cambridge, beginning
March 1, 1998, initiate a ten percent rate reduction for all customer
classes and allow customers to choose their energy supplier. As part of
the plan, the DTE authorized the recovery of certain strandable costs and
provides that certain future costs may be deferred to achieve or maintain
the rate reductions that the restructuring bill mandates. The legisla-
tion gives the DTE the authority to determine the amount of strandable
costs that is eligible for recovery. Costs that qualify as strandable
costs and are eligible for recovery include, but are not limited to,
certain above market costs associated with generation
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CANAL ELECTRIC COMPANY
facilities, costs associated with long-term commitments to purchase power
at above market prices from independent power producers and regulatory
assets and associated liabilities related to the generation portion of
the electric business.
(c) Divestiture of Generation Assets
The cost of transitioning to competition will be mitigated, in part,
by the sale of COM/Energy's non-nuclear generating assets. On May 27,
1998, COM/Energy agreed to sell substantially all of its non-nuclear
generating assets (984 MW) to affiliates of The Southern Company of
Atlanta, Georgia. The sale was conducted through an auction process that
was outlined in a restructuring plan filed with the DTE in November 1997
in conjunction with the state's industry restructuring legislation enact-
ed in 1997. The sale was approved by the DTE on October 30, 1998 and by
the FERC on November 12, 1998. Proceeds from the sale of the Company's
non-nuclear generating assets, after construction-related adjustments at
the closing that occurred on December 30, 1998, amounted to approximately
$395 million or 6 times their book value of approximately $65.4 million.
The proceeds from the sale, net of book value, transaction costs and
certain other adjustments amounted to approximately $298 million and will
be used to reduce transition costs of Cambridge and Commonwealth related
to electric industry restructuring that otherwise would have been
collected through a non-bypassable transition charge. An adjustment of
$5.1 million was recorded in the first quarter of 1999 that reduced the
book value to $60.3 million. The Company has determined that this
transaction was not a taxable event because it provided no economic
benefit to the Company.
COM/Energy established Energy Investment Services, Inc. as the
vehicle to invest the net proceeds from the sale of the Company's
generation assets. These proceeds will be invested in a conservative
portfolio of securities that is designed to maintain principal and earn a
reasonable return. Both the principal amount and income earned will be
used to reduce the transition costs that would otherwise be billed to
customers of Cambridge and Commonwealth.
(3) Commitments and Contingencies
Construction
The Company is engaged in a continuous construction program presently
estimated at $9.7 million for the five-year period 1999 through 2003. Of
that amount, $1.2 million is estimated for 1999. As of June 30, 1999,
construction expenditures, including an allowance for funds used during
construction were minimal. The Company expects to finance these expendi-
tures with internally generated funds and short-term borrowings that are
ultimately expected to be repaid with proceeds from the issuance of long-
term debt and equity securities.
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CANAL ELECTRIC COMPANY
Item 2. Management's Discussion and Analysis of Results of Operations
The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods
included in the accompanying condensed statements of income. This discussion
should be read in conjunction with the Notes to Condensed Financial Statements
appearing elsewhere in this report.
A summary of the period to period changes in the principal items included
in the Condensed Statements of Income for the three and six months ended June
30, 1999 and 1998 and unit sales for these periods is shown below:
Three Months Ended Six Months Ended
June 30, June 30,
1999 and 1998 1999 and 1998
Increase (Decrease)
(Dollars in thousands)
Electric Operating Revenues $(30,986) (73.1)% $(66,985) (73.9)%
Operating Expenses -
Fuel used in production (17,728) (98.8) (43,070) (98.5)
Electricity purchased
for resale (8) (6.0) (12) (4.3)
Other operation and maintenance (7,591) (68.5) (13,245) (66.9)
Depreciation (3,290) (65.3) (6,618) (65.7)
Taxes -
Federal and state income 161 8.0 1,231 30.2
Local property and other (485) (60.3) (934) (54.4)
(28,941) (78.2) (62,648) (78.6)
Operating Income (2,045) (38.2) (4,337) (39.6)
Other Income 25 11.2 7,935 2,254.3
Income Before Interest Charges (2,020) (38.2) (4,337) (39.6)
Interest Charges (1,800) (85.9) (3,982) (93.7)
Net Income $ (220) 6.3 $ 7,580 107.5
Unit Sales (MWH) Decrease (950,298) (95.7) (2,120,349) (94.4)
Three Months Ended Six Months Ended
June 30, June 30,
MWH Unit Sales 1999 1998 1999 1998
Canal Unit 1 - 495,880 - 1,391,111
Canal Unit 2 - 357,394 - 713,554
Seabrook 1 42,652 69,676 125,544 141,228
42,652 992,950 125,544 2,245,893
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CANAL ELECTRIC COMPANY
Revenue, Fuel and Purchased Power
Operating revenues for the three and six months ended June 30, 1999
decreased $31 million (73.1%) and $67 million (73.9%), respectively, due to
the sale of the Company's Unit 1 and 2 generation facilities on December 30,
1998. The sale of these units was an integral part of COM/Energy's restruc-
turing plan as approved by the DTE. The significant decrease in unit sales
results from the absence of power from Units 1 and 2 following their sale.
The change in unit sales also reflects the decreased availability of Seabrook.
The significant decline in fuel used in production of $17.7 million
(98.8%) and $43.1 million (98.5%) during the current three and six-month
periods reflects the aforementioned sale of Units 1 and 2.
Other Operating Expenses
The decreases in other operation and maintenance and depreciation for the
three and six months ended June 30, 1999 resulted from the sale of Units 1 and
2. Federal and state income taxes increased in both current periods due to a
higher level of pre-tax income. The decrease for the current quarter and six-
month periods in local property and other taxes reflects lower property taxes
($334,000 and $760,000) and payroll and other taxes ($153,000 and $176,000),
respectively, due to the sale of Units 1 and 2.
Other Income
The significant increase in other income during the six-month period was
primarily due to an additional gain, related to the sale of the Company's
generating assets, that resulted from certain adjustments to the assets' book
value ($5.1 million), and a reduction in transaction costs ($4.5 million)
associated with the retirement of the Company's long-term debt in 1998. The
increase in interest income ($200,000 and $1.6 million) related to advances to
affiliates and short-term investments also had a positive impact on other
income in the three and six-month periods, respectively.
Interest Charges
The significant decline in total interest charges for the current quarter
and six-month period resulted from the retirement of the Company's long-term
debt with a portion of the proceeds from the sale of Units 1 and 2.
Merger with BEC Energy
The electric utility industry has continued to change in response to
legislative and regulatory mandates that are aimed at lowering prices for
energy by creating a more competitive marketplace. These pressures have
resulted in an increasing trend in the electric industry to seek competitive
advantages and other benefits through business combinations. On December 5,
1998, COM/Energy and BEC Energy (BEC), headquartered in Boston, Massachusetts,
entered into an Agreement and Plan of Merger (the Merger Agreement). Pursuant
to the Merger Agreement, COM/Energy and BEC will be merged into a new holding
company to be known as NSTAR. The merger will create an energy delivery
company serving approximately 1.3 million customers located entirely within
Massachusetts, including more than one million electric customers in 81
communities and 240,000 gas customers in 51 communities. The merger is
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CANAL ELECTRIC COMPANY
expected to occur shortly after the satisfaction of certain conditions,
including the receipt of the required approvals. On June 24, 1999, common
shareholders of COM/Energy and BEC approved the merger. On June 30, 1999, the
FERC approved the merger. On July 27, 1999, the DTE approved the rate plan
filed by the retail utility subsidiaries of the two companies that is an
integral part of the merger. On August 16, 1999, the Massachusetts Attorney
General's Office and a group of four intervenors filed appeals of the DTE's
rate plan order with the Massachusetts Supreme Judicial Court. Significant
elements of the rate plan include a four-year distribution rate freeze for
each of the NSTAR retail utility subsidiaries and the recovery of all merger-
related costs including an acquisition premium of approximately $516 million.
On August 11, 1999, the Nuclear Regulatory Commission approved the transfer of
control of the Company's interest in the Seabrook nuclear generating plant
from COM/Energy to NSTAR. The remaining merger approval from the Securities
and Exchange Commission is expected to be issued in August.
The Merger Agreement may be terminated under certain circumstances,
including by any party if the merger is not consummated by December 5, 1999,
subject to an automatic extension of six months if the requisite regulatory
approvals have not yet been obtained by such date. The merger will be
accounted for as an acquisition of COM/Energy by BEC using the purchase method
of accounting.
Upon effectiveness of the merger, Thomas J. May, BEC's current Chairman,
President and Chief Executive Officer (CEO), will become the Chairman and CEO
of NSTAR. Russell D. Wright, COM/Energy's current President and CEO, will
become the President and Chief Operating Officer of NSTAR and will serve on
NSTAR's board of trustees. Also, upon effectiveness of the merger, NSTAR's
board of trustees will consist of the Parent's and BEC's current trustees.
Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any computer
program that has date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a temporary
inability to process transactions or engage in normal business activities.
COM/Energy has been involved in Year 2000 compliancy since 1996.
COM/Energy, on a coordinated basis and with the assistance of RCG Infor-
mation Technologies and other consultants, is addressing the Year 2000 issue.
COM/Energy has followed a five-phase process in its Year 2000 compliance
efforts, as follows: Awareness (through a series of internal announcements to
employees and through contacts with vendors); Inventory (all computers,
applications and embedded systems that could potentially be affected by the
Year 2000 problem); Assessment (all applications or components and the impact
on overall business operations and a plan to correct deficiencies and the cost
to do so); Remediation (the modification, upgrade or replacement of deficient
hardware and software applications and infrastructure modifications); and
Testing (a detailed, comprehensive testing program for the modified critical
component, system or software that involves the planning, execution and
analysis of results).
COM/Energy's inventory phase required an assessment of all date sensitive
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CANAL ELECTRIC COMPANY
information and transaction processing computer systems and determined that
approximately 90% of its software systems needed some modifications or
replacement. Plans were developed, implemented, and all of these systems have
been modified, upgraded or replaced. COM/Energy is currently at a 98%
completion level in its five-phase process for all systems, with completion of
the last stages of its extensive testing process for the final six systems
expected by September 30, 1999.
COM/Energy has also inventoried its non-information technology systems
that may be date sensitive (facilities, electric and gas operations, energy
supply/production and distribution) that use embedded technology such as
micro-controllers and micro-processors. COM/Energy has completed its assess-
ment of these non-information technology systems and determined that 20% of
these systems required remediation or replacement. COM/Energy has reported to
the North American Electric Reliability Council (NERC) that it met the NERC
target date of June 30, 1999 for 100% readiness of all its mission critical
components required for the continued safe and reliable delivery of electrici-
ty into the Year 2000. COM/Energy's gas and other operations are also at a
100% completion level for all mission critical issues regarding Year 2000
readiness. Overall, the non-information technology systems are at a 99%
completion level, with the final items scheduled for completion by August 31,
1999.
Modifying and testing COM/Energy's information and transaction processing
systems from 1996 through 2000 is currently expected to cost approximately
$10.2 million, including approximately $900,000, $3.1 million and $3.2 million
incurred through 1997, 1998 and the first half of 1999, respectively.
Approximately $3 million is expected to be spent during the remainder of 1999
and in 2000. Year 2000 costs have been expensed as incurred and will continue
to be funded from operations.
In addition to its internal efforts, COM/Energy has initiated formal
communications with its significant suppliers to determine the extent to which
COM/Energy may be vulnerable to its suppliers' failure to correct their own
Year 2000 issues. COM/Energy has ranked its vendors in terms of importance,
and as of June 30, 1999 has received adequate responses from 100% of its
"critical" and "high" rated vendors. Failure of COM/Energy's significant
suppliers to address Year 2000 issues could have a material adverse effect on
COM/Energy's operations, although it is not possible at this time to quantify
the amount of business that might be lost or the costs that could be incurred
by COM/Energy. Contact with all other vendors is continuing and inadequate
responses are being pursued by COM/Energy. COM/Energy is prepared to replace
certain suppliers or to initiate other contingency plans for any vendor not
responding to COM/Energy's satisfaction.
In addition, parts of the global infrastructure, including national
banking systems, electrical power grids, gas pipelines, transportation
facilities, communications and governmental activities, may not be fully
functional after 1999. Infrastructure failures could significantly reduce
COM/Energy's ability to acquire energy and its ability to serve its customers
as effectively as they are now being served. COM/Energy has identified the
elements of the infrastructure that are critical to its operations and has
requested and obtained information as to the expected Year 2000 readiness of
these elements.
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CANAL ELECTRIC COMPANY
COM/Energy has completed the development of its Year 2000 contingency
plans for all operational areas that may be effected by Year 2000 issues.
COM/Energy's gas and electric operations currently have emergency operating
plans, as well as information technology disaster recovery plans, as compo-
nents of their standard operating procedures. These plans have been enhanced,
identifying potential Year 2000 risks to normal operations and the appropriate
response to these potential failures. These plans also include actions to be
taken in the event of third party and infrastructure failures with regard to
the Year 2000 event, although in certain cases, there may be no practical
alternative course of action available to COM/Energy. The implementation of
the contingency plans will continue throughout the remainder of 1999.
COM/Energy is working with other energy industry entities, both regional-
ly and nationally, with respect to Year 2000 readiness and is cooperating in
the development of local and wide-scale contingency planning.
While COM/Energy believes its efforts to address the Year 2000 issue will
allow it to be successful in avoiding any material adverse effect on
COM/Energy's operations or financial condition, it recognizes that failing to
resolve Year 2000 issues on a timely basis would, in a "most reasonably likely
worst case scenario," significantly limit its ability to acquire and distrib-
ute energy and process its daily business transactions for a period of time,
especially if such failure is coupled with third party or infrastructure
failures. Similarly, COM/Energy could be significantly effected by the
failure of one or more significant suppliers, customers or components of the
infrastructure to conduct their respective operations after 1999. Adverse
affects on COM/Energy could include, among other things, business disruption,
increased costs, loss of business and other similar risks.
The foregoing discussion regarding Year 2000 project timing, effective-
ness, implementation and costs includes forward-looking statements that are
based on management's current evaluation using available information. Factors
that might cause material changes include,but are not limited to, the avail-
ability of key Year 2000 personnel, the readiness of third parties, and
COM/Energy's ability to respond to unforeseen Year 2000 complications.
Forward-Looking Statements
This discussion contains statements which, to the extent it is not a
recitation of historical fact, constitute "forward-looking statements" and is
intended to be subject to the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995. A number of important factors
affecting the Company's business and financial results could cause actual
results to differ materially from those stated in the forward-looking state-
ments. Those factors include developments in the legislative, regulatory and
competitive environment, certain environmental matters, demands for capital
expenditures and the availability of cash from various sources.
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CANAL ELECTRIC COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Filed herewith as Exhibit 1 is the Financial Data Schedule for the
six months ended June 30, 1999.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended June 30,
1999.
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CANAL ELECTRIC COMPANY
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 thereunto duly authorized.
CANAL ELECTRIC COMPANY
(Registrant)
Principal Financial Officer:
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: August 16, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income and statement of cash flows contained in
Form 10-Q of Canal Electric Company for the six months ended June 30, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000016906
<NAME> CANAL ELECTRIC COMPANY
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<S> <C>
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0
0
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0
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0
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</TABLE>
