<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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.)
800 Boylston Street, Boston, Massachusetts 02199
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(617) 424-2000
--------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
--------------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
None
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 March 30, 2000
--------------------------- ----------------
Common Stock, $25 par value 1,523,200 shares
The Company meets the conditions set forth in General Instruction I(1)(a) and
(b) of Form 10-K as a wholly-owned subsidiary and is therefore filing this Form
with the reduced disclosure format.
Documents Incorporated by Reference Part in Form 10-K
- ----------------------------------- -----------------
None Not Applicable
List of Exhibits begins on page 35 of this report.
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
FORM 10-K DECEMBER 31, 1999
----------------------------
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Business.................................................... 1
General................................................... 1
Electric Industry Restructuring........................... 3
Fuel Supply............................................... 4
Power Contracts........................................... 4
Employees................................................. 6
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 6
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters............................... 7
Item 7. Management's Discussion and Analysis of
Results of Operations..................................... 8
Item 8. Financial Statements and Supplementary Data................. 12
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K....................................... 35
Signatures.............................................................. 43
</TABLE>
-ii-
<PAGE>
Part I.
-------
Item 1. Business
- ------- --------
General
-------
Canal Electric Company (the Company) is a wholesale electric generating
company organized in 1902 under the laws of the Commonwealth of Massachusetts.
The Company assumed its present corporate name in 1966 after the sale to an
affiliated company of its electric distribution and transmission properties
together with the right to do business in the territories served.
The Company is wholly-owned by Commonwealth Energy System (COM/Energy)
that is a wholly owned indirect subsidiary of NSTAR. NSTAR was formed,
effective August 25, 1999, upon completion of a merger transaction between
Commonwealth Energy System and BEC Energy (formerly the parent company of
Boston Edison Company). The merger creates an energy delivery and related
services company, that includes the Company, serving approximately 1.3 million
customers located in Massachusetts including more than one million electric
customers in 81 communities and 240,000 gas customers in 51 communities. NSTAR
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 several other utility and several nonregulated
companies.
The Company has a 3.52% interest in the Seabrook 1 nuclear power plant
located in Seabrook, New Hampshire, to provide for a portion of the capacity
and energy needs of Cambridge Electric Light Company (Cambridge Electric) and
Commonwealth Electric Company (Commonwealth Electric), each of which are retail
distribution companies and wholly-owned subsidiaries of NSTAR. The Seabrook
plant has a rated capacity of 1,150 MW.
The Company owned a generating station located in Sandwich, Massachusetts
at the eastern end of the Cape Cod Canal until December 30, 1998 when the
station was sold to Southern Energy New England, LLC, an affiliate of The
Southern Company of Atlanta, Georgia. The station consists of two electric
generating units: Canal Unit 1 is an oil-fired facility with a rated capacity
of 569 megawatts (MW), that had been wholly-owned by the Company; and Canal
Unit 2 which was converted to dual-fuel capability (oil and natural gas) in
1996, with a rated capacity of 580 MW, that was jointly-owned by the Company
and Montaup Electric Company (Montaup) (an unaffiliated company). Canal Unit 2
was operated by the Company under an agreement with Montaup which provided for
the equal sharing of output, fixed charges and operating expenses. Canal Units
1 and 2 commenced operation in 1968 and in 1976, respectively.
-1-
<PAGE>
The sale was conducted through an auction process initiated during 1997 in
response to electric industry restructuring legislation enacted in
Massachusetts in November 1997. For further information refer to the "Industry
Restructuring" section of Management's Discussion and Analysis of Results of
Operation filed under Item 7 of this report.
For additional information pertaining to the Company's relationship with
NSTAR's retail distribution and transmission companies, together with other
information on the Company's participation in the Seabrook plant and another
source of power procurement, refer to the "Power Contracts" section of this
Item 1.
-2-
<PAGE>
Electric Industry Restructuring
-------------------------------
On November 25, 1997, the Governor of Massachusetts signed into law the
Electric Industry Restructuring Act (the Act). This legislation provided, among
other things, that customers of retail electric utility companies who take
standard offer service receive a 10 percent rate reduction and be allowed to
choose their energy supplier, effective March 1, 1998. The Act also provides
that utilities be allowed full recovery of transition costs subject to review
and an audit process. The 10 percent rate reduction mandated by the legislation
increased to 15 percent effective September 1, 1999 for customers who continue
to take standard offer service.
The Company, together with retail affiliates Cambridge Electric and
Commonwealth Electric, had filed a comprehensive electric restructuring plan
with the Massachusetts Department of Telecommunications and Energy (MDTE) in
November 1997 that was substantially approved by the MDTE in February 1998. The
divestiture of the Company's non-nuclear generation assets was an integral part
of COM/Energy's restructuring plan and is consistent with the Act.
On May 27, 1998, the Company selected Southern Energy to buy Canal Units 1
and 2. The sale was conducted through an auction process that was outlined in
a restructuring plan filed with the MDTE in November 1997 in conjunction with
the state's industry restructuring legislation enacted in 1997. The sale was
approved by the MDTE on October 30, 1998 and by the Federal Energy Regulatory
Commission (FERC) on November 12, 1998. Proceeds from the sale of the
Company's non-nuclear generating assets 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 are being used to reduce transition
costs of Cambridge Electric and Commonwealth Electric 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.
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<PAGE>
On December 23, 1998, the MDTE approved the divestiture filing and
COM/Energy's proposal to establish a special purpose affiliate, Energy
Investment Services, Inc. (EIS), that will administer the above-book value net
proceeds from the sale of the Company's units with the goal of preserving
capital and maximizing earnings for the benefit of retail customers. EIS will
credit the proceeds and any return earned to the accounts of Commonwealth
Electric and Cambridge Electric, resulting in a reduction in the transition
costs to be billed to customers.
Fuel Supply
-----------
The nuclear fuel contract and inventory information for Seabrook 1 has been
furnished to the Company by North Atlantic Energy Services Corporation
(NAESCO), the managing agent responsible for operation of the unit. Sea-
brook's requirement for nuclear fuel components are 100% covered through 2003
by existing contracts.
There are no spent fuel reprocessing or disposal facilities currently
operating in the United States. Instead, commercial nuclear electric
generating units operating in the United States are required to retain spent
fuel on-site. As required by the Nuclear Waste Policy Act of 1982 (the Act),
as amended, the joint-owners entered into a contract with the Department of
Energy for the transportation and disposal of spent fuel and high level
radioactive waste at a national nuclear waste repository or Monitored
Retrievable Storage (MRS) facility. Owners or generators of spent nuclear fuel
or its associated wastes are required to bear the costs for such transportation
and disposal through payment of a fee of approximately 1 mill/KWH based on net
electric generation to the Nuclear Waste Fund. Under the Act, a storage or
disposal facility for nuclear waste was anticipated to be in operation by 1998;
a reassessment of the project's schedule requires extending the completion date
of the permanent facility until at least 2010. Seabrook 1 is currently licensed
for enough on-site storage to accommodate spent fuel expected to be accumulated
through at least the year 2010.
Power Contracts
---------------
Prior to the sale of its nonnuclear generating assets, the Company was a
party to substantially identical life-of-the-unit power contracts with Boston
Edison Company (an affiliated utility as of the date of the merger), Montaup
Electric Company and New England Power Company (unaffiliated utilities), under
which each was severally obligated to purchase one-quarter of the capacity and
energy of Canal Unit 1. Commonwealth Electric and Cambridge Electric were
jointly
-4-
<PAGE>
obligated to purchase the remaining one-quarter of the unit's capacity and
energy. Agreements with Southern Energy to assume responsibility for these
contracts following the sale of the unit were approved by the FERC in early
January 2000. Similar contracts that were in effect between the Company and
Commonwealth Electric and Cambridge Electric under which those companies are
jointly obligated to purchase the Company's entire share of the capacity and
energy of Canal Unit 2 were terminated on December 30, 1998. The price of power
was based on a two-part rate consisting of a demand charge and an energy
charge. The demand charge covered all expenses except fuel costs and included
recovery of the original investment. It also provided for any adjustments to
that investment over the economic lives of the units. The energy charge was
based on the cost of fuel and was billed to each purchaser in proportion to its
purchase of power.
The Company acts as agent for Commonwealth Electric and/or Cambridge
Electric in the procurement of additional capacity, and, prior to December 30,
1998, to sell a portion of each company's entitlement in Unit 2. Exchange
agreements are in place with several utilities whereby, in certain
circumstances, it is possible to exchange capacity so that the mix of power
improves the pricing for dispatch for both the seller and purchaser.
Commonwealth Electric and Cambridge Electric thus secure cost savings for their
respective customers by planning for bulk power supply on a single system
basis. A Capacity Acquisition and Disposition Agreement, which has been
accepted for filing as a rate schedule by the FERC, enables the Company to
recover costs incurred in connection with any transaction covered by such
Agreement. Commonwealth Electric and Cambridge Electric, in turn, bill charges
to retail customers through rates subject to MDTE regulation. Currently,
Agreements are in effect for Seabrook 1 and Phases I and II of the Hydro-Quebec
Project.
The Company is a party to support agreements for Phases I and II of the
Hydro-Quebec Project and is thereby obligated to pay its share of operating and
capital costs for Phase II over a 25 year period ending in 2015. Future
minimum lease payments for Phase II have an estimated present value of $11.4
million at December 31, 1999. In addition, the Company has an equity interest
in Phase II that amounted to $2.8 million in both 1999 and 1998.
-5-
<PAGE>
Employees
---------
Since December 30, 1998, the sale date of the Company's generating assets,
the Company has had no employees.
Item 2. Properties
- ------- ----------
The Company has a 3.52% joint-ownership interest (40.5 MW of capacity) in
Seabrook 1. Prior to the sale of the Company's generating assets to an
affiliate of The Southern Company of Atlanta, Georgia, on December 30, 1998,
the Company had operated a generating station located at the eastern end of the
Cape Cod Canal in Sandwich, Massachusetts. The station consisted of two steam
electric generating units: Canal Unit 1 with a rated capacity of 569 MW,
wholly-owned by the Company; and Canal Unit 2, with a rated capacity of 580 MW,
jointly-owned by the Company and Montaup Electric Company, a wholly-owned
subsidiary of Eastern Utilities Associates.
Item 3. Legal Proceedings
------- -----------------
Pursuant to the terms of the Canal Units 1 and 2 Asset Sale Agreement with
Southern Energy dated May 15, 1998, the Company agreed to fund environment
assessment work up to a $500,000 cap to address a condition of metals
contamination found on the station site. Management is unable at this time to
predict when the resolution of this issue will occur.
The Company is subject to other legal claims and matters arising from its
normal course of business, including its ownership interest in the Seabrook
plant.
-6-
<PAGE>
PART II.
--------
Item 5. Market for the Registrant's Common Stock and Related Stockholder
- ------- ----------------------------------------------------------------
Matters
-------
(a) Principal Market
----------------
Not applicable. The Company is wholly-owned by Commonwealth Energy System
and is a wholly-owned indirect subsidiary of NSTAR.
(b) Number of Shareholders at December 31, 1999
-------------------------------------------
One
(c) Frequency and Amount of Dividends Declared in 1999 and 1998
-----------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------------------------- --------------------------------
Per Share Per Share
Declaration Date Amount Declaration Date Amount
---------------- --------- ---------------- ---------
<S> <C> <C> <C>
January 27, 1999 $124.00 May 11, 1998 $2.65
April 28, 1999 3.10 July 31, 1998 1.90
April 28, 1999 4.29 October 26, 1998 2.20
July 23, 1999 2.00 -----
October 28, 1999 23.00 $6.75
------- =====
$156.39
=======
</TABLE>
(d) Future dividends may vary depending upon the Company's earnings and
capital requirements as well as financial and other conditions existing
at that time.
-7-
<PAGE>
Item 7. 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 Statements of Income and is presented to facilitate an
understanding of the results of operations. This discussion should be read in
conjunction with the Notes to Financial Statements filed under Item 8 of this
report.
In the accompanying statements, Canal Electric Company prior to the
Merger is labeled as the "Predecessor" and after the Merger as the "Successor".
The eight month (predecessor period) and the 4 month (successor period), ended
August 25, 1999 and December 31, respectively, have been combined per the
purpose of comparing the results of the twelve month period ended December 31,
1998 with the twelve month period ended December 31, 1999.
Revenue, Fuel and Purchased Power
---------------------------------
Operating revenues for 1999 decreased $134.5 million (74%) due to the sale
of the Company's Unit 1 and 2 generation facilities on December 30, 1998.
Operating revenues for 1998 decreased by $32.3 million or 15.1%, due primarily
to decreases in fuel used in production and electricity purchased for resale,
somewhat offset by a 3.4% increase in unit sales. The increase in unit sales
was due primarily to the increased availability of Unit 2 and Seabrook 1.
Somewhat offsetting the increase in unit sales was the expiration of contracts
for the purchase of electricity on behalf of affiliated retail distribution
companies.
The significant decline in 1999 of fuel used in production of $88 million
(98.3%) reflects the aforementioned sale of Units 1 and 2. The decrease in fuel
used in production in 1998 represents the lower average cost of fuel oil in
1998 over 1997. Fuel, purchased power and transmission costs (included in other
operation expense) averaged 1.7 cents per kWh in 1999, 1.9 cents per kWh in
1998 and 2.6 cents in 1997.
The following is a summary of unit sales for the periods indicated:
<TABLE>
<CAPTION>
Unit Sales (MWH)
-----------------------------------------------------
Period Ended Canal Seabrook Purchased
December 31, Unit 1 Unit 2 Unit 1 For Resale Total
- ------------ ------ ------ ------ ---------- -----
<S> <C> <C> <C> <C> <C>
1999 - - 306,012 - 306,012
1998 3,136,328 1,485,797 295,539 - 4,917,664
1997 3,219,542 1,098,463 279,941 159,914 4,757,860
</TABLE>
Other Operating Expenses
------------------------
In 1999, other operations expense declined $16.6 million (62.9%) due to the
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<PAGE>
sale of Units 1 and 2. During 1998, other operations decreased approximately
$1.3 million (4.6%) due to the absence of amortization related the abandonment
of Seabrook Unit 2 nuclear unit which resulted in a reduction of $584,000 and
lower insurance and benefits costs of $293,000.
Maintenance expense decreased $10.5 million (84.2%)in 1999 due to the sale
of Units 1 and 2. In 1998, the $2.3 million (22.1%) increase in expense was due
to greater maintenance costs associated with the Unit 1 boiler plant and
related equipment ($3.8 million), which was offset, in part, by lower costs
associated with Unit 2 ($1.4 million).
Depreciation and Taxes
----------------------
The $13.6 million (66%) decline in depreciation in 1999 was due to the sale
of Units 1 and 2. In 1998, depreciation increased 6.9% reflecting a higher
level of plant-in-service and adjustments related to the sale of the Company's
Units 1 and 2.
Federal and state income taxes increased in 1999 due to a higher level of
pre-tax income. Income tax expense declined 11% or approximately $1 million in
1998 due to a lower level of pre-tax income from normal operations.
Other Income
------------
The significant increase in other income, other during 1999 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 million) associated with the
retirement of the Company's long-term debt in 1998. Other income also reflects
the reversal of interest income on a portion of the proceeds associated with
the sale of the Company's generating assets that were ultimately provided to
affiliate Energy Investment Services, Inc. and will ultimately be utilized to
reduce transition costs to be billed to customers of Cambridge Electric and
Commonwealth Electric. All of these adjustments are offset at COM/Energy
reflecting corresponding changes in liabilities to Commonwealth Electric's and
Cambridge Electric's retail customers. The significant increase in other income
during 1998 reflects the net gain ($185.7 million) from the sale of the
Company's Units 1 and 2 on December 30, 1998.
Interest Charges
----------------
The significant decline in total interest charges for 1999 resulted from
the retirement of the Company's long-term debt with a portion of proceeds
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<PAGE>
from the sale of Units 1 and 2, offset, in part, by interest on a higher level
of short-term borrowings. The decrease in total interest charges during 1998
was due primarily to a decrease in short-term interest ($698,000) reflecting a
lower average level of short-term debt.
Merger with BEC Energy
----------------------
NSTAR, an exempt public utility holding company, was created after
completion of a merger transaction between BEC Energy (BEC) and Commonwealth
Energy System (COM/Energy, the former parent of the Company) on August 25,
1999. The 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 utility industry to seek competitive advantages and
other benefits through business combinations. NSTAR is focusing its utility
operations on the transmission and distribution of energy following the sale of
BEC's fossil generating facilities to Sithe Energies in May 1998, BEC's nuclear
generation facility to Entergy Nuclear Generating Company in July 1999 and
substantially all of COM/Energy's generating facilities to The Southern Company
in December 1998.
As a result of the merger, the fourth quarter dividend amounting to
approximately $35 million was reflected as a return of capital and, as a
result, reduced paid-in capital. As of August 25, 1999, approximately $54
million of retained earnings was reclassified as additional paid-in capital.
The utility companies of NSTAR form an energy delivery company serving
approximately 1.3 million customers located in Massachusetts, including more
than one million electric customers in 81 communities and 240,000 gas customers
in 51 communities.
The merger became effective after receipt of various regulatory approvals.
The FERC approved the merger on June 24, 1999. The Nuclear Regulatory
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<PAGE>
Commission approved the transfer of control of the Company's interest in the
Seabrook nuclear plant from COM/Energy to NSTAR on August 11, 1999. The
Securities and Exchange Commission issued its approval on August 24, 1999.
Year 2000
---------
NSTAR's mission critical systems and other important business systems were
considered ready for the year 2000 prior to December 31, 1999. The North
American Electric Reliability Council defined mission critical systems as those
whose mis-operation could result in loss of electric generation, transmission
or load interruption. To date, NSTAR has not experienced any significant year
2000 problems. NSTAR will continue to monitor systems in order to address any
potential continuing risk of non-compliant internal business software, internal
non-business software and embedded chip technology and external noncompliance
of third parties.
Under its year 2000 program NSTAR inventoried mission critical systems that
were date-sensitive and that used embedded technology such as micro-controllers
or microprocessors. Approximately 27% and 20% of BEC's and COM/Energy's
systems, respectively, required modification or replacement.
NSTAR also inventoried important business systems that were date-sensitive
and determined that approximately one-third of BEC's systems and approximately
90% of COM/Energy's systems needed modification or replacement. Plans were
developed and implemented to correct and test all affected systems, with
priorities based on the importance of the supported activity. As systems were
remediated, they were tested for operational and year 2000 readiness in their
own environment. After implementation, the systems were then tested for their
integration and compatibility with other interactive systems.
In addition, all non-critical internal productivity systems were
inventoried and assessed as part of the year 2000 program. Approximately one-
third of BEC's systems and approximately 90% of COM/Energy's systems required
modification or replacement. All of these systems were declared ready by
September 30, 1999.
Costs incurred to upgrade or remediate systems have been expensed as
incurred. In addition, a decision was made to replace some of the less
efficient centralized business systems. Systems replacement costs are being
capitalized and amortized over future periods. NSTAR has expended a total of
approximately $39 million on this project through December 31, 1999. Future
costs are anticipated to be immaterial.
In addition to its internal efforts, BEC and COM/Energy initiated formal
communications with their significant suppliers, service providers and other
vendors to determine the extent to which they may be vulnerable to these
parties' failure to correct their own year 2000 issues. To date, NSTAR has
-11-
<PAGE>
not experienced any significant year 2000 problems associated with its reliance
on third parties.
NSTAR's year 2000 program included contingency plans. If required, these
plans were intended to address both internal risks as well as potential
external risks related to vendors, customers and energy suppliers. Plans were
developed in conjunction with available national and regional guidance and were
based on system emergency plans that were developed and successfully tested
over the past several years. Included within its contingency plans were
procedures for the procurement of short-term power supplies and emergency
distribution system restoration procedures. In the event that a problem is to
arise in 2000 (or beyond), these contingency plans would become effective in
order to remediate the problem.
Environmental Matters
---------------------
The Company is subject to laws and regulations administered by federal,
state and local authorities relating to the quality of the environment. These
laws and regulations affect, among other things, the siting and operation of
electric generating and transmission facilities and can require the
installation of expensive air and water pollution control equipment. These
regulations have had an impact on the Company's operations in the past; however
their impact on future operations, capital costs and construction schedules is
not expected to be significant since all of the Company's non-nuclear
generating assets were sold in 1998.
Safe harbor cautionary statement
--------------------------------
Management occasionally makes forward-looking statements such as forecasts and
projections of expected future performance or statements of its plans and
objectives. These forward-looking statements may be contained in filings with
the Securities and Exchange Commission (SEC), press releases and oral
statements. Actual results could potentially differ materially from these
statements. Therefore, no assurances can be given that the outcomes stated in
such forward-looking statements and estimates will be achieved. The preceding
sections include certain forward-looking statements about operating results,
year 2000 and environmental and legal issues.
The impacts of continued cost control procedures on operating results could
differ from current expectations. The effects of changes in economic
conditions, tax rates, interest rates, technology and the prices and
availability of operating supplies could materially affect the projected
operating results.
The timing and total costs related to the year 2000 plan could differ from
current expectations. Factors that may cause such differences include the
ability to locate and correct all relevant computer codes and the availability
of personnel trained in this area. In addition, management cannot predict the
nature or impact on operations of third party noncompliance.
The impacts of various environmental and legal issues could differ from current
expectations. New regulations or changes to existing regulations could impose
additional operating requirements or liabilities other than expected. The
effects of changes in specific hazardous waste site conditions and cleanup
technology could affect the estimated cleanup liabilities. The impacts of
changes in available information and circumstances regarding legal issues could
affect estimated litigation costs.
Item 8. Financial Statements and Supplementary Data
------- -------------------------------------------
The Company's financial statements required by this item are filed herewith
on pages 13 through 34 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting
------- -----------------------------------------------------------
and Financial Disclosure
------------------------
None
-12-
<PAGE>
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors of Canal Electric Company:
In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) on page 41 present fairly, in all material respects, the financial
position of Canal Electric Company at December 31, 1999, and the results of its
operations and its cash flows for the period from January 1, 1999 through August
24, 1999 and for the period from August 25, 1999 through December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 26, 2000
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of Canal Electric Company:
We have audited the accompanying balance sheets of CANAL ELECTRIC COMPANY (a
Massachusetts corporation and wholly-owned subsidiary of Commonwealth Energy
System) as of December 31, 1998, and the related statements of income, retained
earnings and cash flows for each of the two years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 financial position of Canal Electric Company as of
December 31, 1998, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 18, 1999
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<PAGE>
CANAL ELECTRIC COMPANY
----------------------
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------
PART II.
--------
FINANCIAL STATEMENTS
Balance Sheets at December 31, 1999 and 1998
Statements of Income for the 1999 Periods August 25 to December 31 and January
1 to August 24 and the Years Ended December 31, 1998 and 1997
Statements of Retained Earnings for the Years Ended December 31, 1999, 1998
and 1997
Statements of Cash Flows for the 1999 Periods August 25 to December 31 and
January 1 to August 24 and the Years Ended December 31, 1998 and 1997
Notes to Financial Statements
PART IV.
--------
SCHEDULES OMITTED
Schedules are not submitted because they are not applicable or required or
because the required information is included in the financial statements or
notes thereto.
-14-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1999 AND 1998
--------------------------
ASSETS
------
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in thousands)
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at original cost $265,067 $265,612
Less - Accumulated depreciation
and amortization 79,639 77,081
-------- --------
185,428 188,531
Add - Construction work in progress 2,551 1,852
Nuclear fuel in process 1,875 1,568
-------- --------
189,854 191,951
-------- --------
INVESTMENTS
Equity in corporate joint venture 2,833 2,800
-------- --------
CURRENT ASSETS
Cash and cash equivalents 52 301,179
Accounts receivable -
Affiliated companies 8,960 13,642
Other 95 9,736
Unbilled revenues - 659
Inventories, at average cost 1,311 1,268
Prepaid income taxes - 7,575
Other 954 884
-------- --------
11,372 334,943
-------- --------
DEFERRED CHARGES
Regulatory assets 18,973 18,745
Other 5,419 5,840
-------- --------
24,392 24,585
-------- --------
$228,451 $554,279
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1999 AND 1998
--------------------------
CAPITALIZATION AND LIABILITIES
------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in thousands)
<S> <C> <C>
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized - 2,328,200 shares
Outstanding - 1,523,200 shares, wholly-owned
by Commonwealth Energy System $ 38,080 $ 38,080
Amounts paid in excess of par value 27,088 8,321
Retained earnings 5,390 241,965
-------- --------
70,558 288,366
-------- --------
CAPITAL LEASE OBLIGATIONS 9,988 10,551
-------- --------
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 48,575 -
Advances from affiliates 6,240 -
-------- --------
54,815 -
-------- --------
Other Current Liabilities -
Accounts payable -
Affiliated companies 455 137,965
Other 2,183 31,327
Accrued income taxes 12,855 -
Capital lease obligations 564 568
Accrued interest and other 3,679 3,339
-------- --------
19,736 173,199
-------- --------
74,551 173,199
-------- --------
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C>
DEFERRED CREDITS
Accumulated deferred income taxes 56,258 64,383
Unamortized investment tax credits 8,126 8,427
Other 8,970 9,353
-------- --------
73,354 82,163
-------- --------
COMMITMENTS AND CONTINGENCIES
$228,451 $554,279
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
STATEMENTS OF INCOME
--------------------
<TABLE>
<CAPTION>
For the 1999 Periods
---------------------
August 25 January 1 Years Ended
to to December 31,
December 31 August 24 1998 1997
----------- --------- ----------- ---------
(Successor) (Predecessor)
(Dollars in thousands)
<S> <C> <C> <C> <C>
ELECTRIC OPERATING REVENUES
Sales to affiliated companies $ 16,502 $ 29,437 $ 113,024 $124,903
Sales to non-affiliated companies - 1,349 68,809 89,220
--------- --------- --------- --------
16,502 30,786 181,833 214,123
--------- --------- --------- --------
OPERATING EXPENSES
Fuel used in production 600 944 89,569 115,313
Electricity purchased for resale 169 353 551 5,601
Other operation 2,331 5,027 24,134 24,765
Maintenance 220 1,755 12,468 10,209
Depreciation and amortization 3,249 6,190 22,839 22,156
Taxes -
Income 3,863 9,785 8,168 9,178
Local property 215 720 2,510 2,770
Payroll and other 48 274 732 768
--------- --------- --------- --------
10,695 25,048 160,971 190,760
--------- --------- --------- --------
OPERATING INCOME 5,807 5,738 20,862 23,363
--------- --------- --------- --------
OTHER INCOME
Gain from sale of assets - - 329,603 -
Taxes and transaction costs
related to sale - - (143,856) -
Other 2,978 9,830 776 468
--------- --------- --------- --------
2,978 9,830 186,523 468
--------- --------- --------- --------
INCOME BEFORE INTEREST CHARGES 8,785 15,568 207,385 23,831
--------- --------- --------- --------
INTEREST CHARGES
Long-term debt 2,387 2 7,854 7,910
Other interest charges 1,054 626 533 1,231
Allowance for borrowed funds used
during construction (46) (74) (119) (138)
--------- --------- --------- --------
3,395 554 8,268 9,003
--------- --------- --------- --------
NET INCOME $ 5,390 $ 15,014 $ 199,117 $ 14,828
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
STATEMENTS OF RETAINED EARNINGS
-------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
----------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 241,965 $ 53,130 $ 52,620
Add (Deduct)
Net income - -- 199,117 14,828
January 1, 1999 to August 24, 1999 15,014 -- --
Dividends on common stock - -- (10,282) (14,318)
January 1, 1999 to August 24, 1999 (203,180) -- --
--------- --------- ---------
53,799 241,965 53,130
Reclassification to additional
paid-in capital at August 24, 1999 (53,799) -- --
Add
Net Income -
August 25, 1999 to December 31, 1999 5,390 -- --
========= ========= =========
Balance at end of year $ 5,390 $ 241,965 $ 53,130
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the 1999 Periods
----------------------------
August 25 January 1 Years Ended
to to December 31
December 31 August 24 1998 1997
----------- ------------ ------------ --------
(Successor) (Predecessor)
(Dollars in thousands)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,390 $ 15,014 $ 199,117 $ 14,828
Gain from sale of assets - - (329,603) -
Effects of noncash items -
Depreciation and amortization 3,248 6,190 22,839 22,156
Deferred income taxes (7,188) 630 (7,673) (973)
Investment tax credits (101) (200) (2,539) (526)
Earnings from corporate joint venture (334) (293) (454) (233)
Dividends from corporate joint venture 324 270 729 479
Change in working capital, exclusive
of cash and interim financing -
Accounts receivable (3,808) (18,131) 4,178 (4,872)
Unbilled revenues - (659) (573) 589
Income taxes 23,896 (1,325) 119,658 2,118
Local property and other taxes (269) 239 26 4
Accounts payable and other (2,410) (163,991) 15,266 5,473
All other operating items, net (5,990) (4,781) (6,908) (3,890)
--------- ---------- --------- --------
Net cash provided by (used for) operating activities 12,758 (129,457) 14,063 35,153
--------- ---------- --------- --------
INVESTING ACTIVITIES
Proceeds from sale of generating assets - - 408,017 -
Additions to property, plant and
equipment (exclusive of AFUDC) (283) (626) (5,368) (7,391)
Allowance for borrowed funds used
during construction (46) (74) (119) (138)
--------- ---------- --------- --------
Net cash from (used for)investing activities (329) (700) 402,530 (7,529)
--------- ---------- --------- --------
FINANCING ACTIVITIES
Proceeds from (payment of)
short-term borrowings 26,250 22,325 (20,850) (5,700)
Proceeds from (payment of)
affiliate borrowings (3,780) 10,020 - (7,250)
Payment of dividends - (203,180) (10,282) (14,318)
Return of capital (35,034) - - -
</TABLE>
-20-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Long-term debt issues refunded - - (83,950) -
Retirement of long-term debt through
sinking funds - - (350) (350)
--------- --------- --------- --------
Net cash used for financing activities (12,564) (170,835) (115,432) (27,618)
--------- --------- --------- --------
Net (Decrease) increase in cash and cash equivalents (135) (300,992) 301,161 6
Cash and cash equivalents, beginning of period 187 301,179 18 12
--------- --------- --------- --------
Cash and cash equivalents, end of period $ 52 $ 187 $ 301,179 $ 18
========= ========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid (net of capitalized
amounts) $ 954 $ 542 $ 9,028 $ 8,700
Income taxes paid $ 10,345 $ 5,908 $ 10,796 $ 8,996
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) General Information
-------------------
Canal Electric Company (the Company) is a wholly-owned subsidiary of
Commonwealth Energy System that is a wholly-owned indirect subsidiary of NSTAR.
NSTAR is the new holding company that was formed, effective August 25, 1999 upon
completion of a merger transaction between Commonwealth Energy System
(COM/Energy, formerly the parent of the Company) and BEC Energy (formerly the
parent company of Boston Edison Company). The merger creates an energy delivery
company that includes the Company, serving approximately 1.3 million customers
located in Massachusetts including more than one million electric customers in
81 communities and 240,000 gas customers in 51 communities. NSTAR 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 various other utility and nonregulated companies.
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 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 affiliates Cambridge
Electric Light Company (Cambridge Electric) and Commonwealth Electric Company
(Commonwealth Electric).
The Company had 109 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) Accounting Principles
---------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
-22-
<PAGE>
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.
Certain prior year amounts are reclassified from time to time to conform
with the presentation used in the current year's financial statements.
(b) Merger and Financial Statement Presentation
-------------------------------------------
On August 25, 1999 BEC Energy (BEC) and Commonwealth Energy System (Com/Energy)
merged to form NSTAR as an exempt public utility holding company. NSTAR's
utility subsidiaries include Canal Electric Company (Canal Electric). The
merger was accounted for by NSTAR as an acquisition by BEC of Com/Energy and
all of its subsidiaries including Canal Electric Company under the purchase
method of accounting.
In the accompanying statements, Canal Electric Company prior to the merger is
labeled as the "Predecessor" and after the merger as the "Successor."
As a result of this merger, the fourth quarter dividend amounting to
approximately $35 million was reflected as a return of capital and, as a
result, reduced paid-in capital. As of August 25, 1999, approximately $54
million of retained earnings was reclassified as additional paid-in capital.
(c) Regulatory Assets
-----------------
The Company is regulated as to rates, accounting and other matters by
various authorities, including the Federal Energy Regulatory Commission (FERC)
and the Massachusetts Department of Telecommunications and Energy (MDTE).
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 operations 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 at December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in thousands)
<S> <C> <C>
Seabrook related costs $ 1,572 $ 3,008
Deferred income taxes 17,401 15,737
------- -------
Total regulatory assets $18,973 $18,745
======= =======
</TABLE>
As of December 31, 1999, all of the Company's regulatory assets are
-23-
<PAGE>
reflected in rates charged to customers over a weighted average period of
approximately 11 years beginning in 1998. Seabrook related costs as outlined
above include approximately $20,000 in merger-related costs.
In November 1997, the Commonwealth of Massachusetts enacted the
Massachusetts Electric Restructuring Act. On November 19, 1997, the Company,
along with Cambridge Electric and Commonwealth Electric filed a restructuring
plan with the MDTE that was approved by the MDTE on February 27, 1998.
Commonwealth Electric and Cambridge Electric currently provide their standard
offer customers service at inflation adjusted rates that are 15% lower than
rates in effect prior to March 1, 1998, the retail access date. As part of the
plan, the MDTE 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 legislation gives the MDTE
the authority to determine the amount of strandable costs that will be eligible
for recovery. Costs that will qualify as strandable costs and be eligible for
recovery include, but are not limited to, certain above market costs associated
with generating 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 have been 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 MDTE in November 1997 in conjunction with the
state's industry restructuring legislation enacted in 1997. The sale was
approved by the MDTE on October 30, 1998 and by the FERC on November 12, 1998.
Proceeds from the sale of the Company's non-nuclear generating assets 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
are being used to reduce transition costs of Cambridge Electric and
Commonwealth Electric 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
-24-
<PAGE>
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 are invested in a portfolio of securities that is designed to maintain
principal and earn a reasonable return. Both the principal amount and income
earned are being used to reduce the transition costs that would otherwise be
billed to customers of Cambridge Electric and Commonwealth Electric.
(d) Transactions with Affiliates
----------------------------
Transactions between the Company and other NSTAR companies include
purchases and sales of electricity, including the Company's acquisition and
resale of capacity entitlements and related energy generated by certain units of
other New England utilities. The Company has functioned as the principal
supplier of electric generation capacity for and on behalf of affiliates
Cambridge Electric and Commonwealth Electric, including nonconstruction costs
related to the Seabrook generating unit. In addition, payments for management,
accounting, data processing and other services are made to affiliated companies.
Transactions with other COM/Energy companies are subject to review by the FERC
and the MDTE.
The Company's operating revenues included the following intercompany
amounts for the periods indicated:
<TABLE>
<CAPTION>
Electricity Sales Seabrook Units
Period (Canal Units) Purchased Power and Other
- ----------------------------- ----------------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
January,- August 24, 1999 $ 987 $3,473 $29,146
August 25,- December 31, 1999 - - 13,055
1998 70,283 3,667 39,074
1997 76,859 8,885 39,159
</TABLE>
(e) Other Major Customers
---------------------
Prior to the sale of Canal Units 1 and 2 on December 30, 1998, the Company
was a wholesale electric generating company selling power under life-of-the-unit
contracts that were approved by FERC to Boston Edison Company (an affiliate
since the merger with BEC Energy), Montaup Electric Company and New England
Power Company. Each utility was obligated to purchase one-quarter of the
capacity and energy of Canal Unit 1.
-25-
<PAGE>
(f) Equity Method of Accounting
---------------------------
The Company uses the equity method of accounting for its 3.8% investment in
the New England/Hydro-Quebec Phase II transmission facilities due in part to
its ability to exercise significant influence over operating and financial
policies of the entity. Under this method, it records as income the
proportionate share of the net earnings of this project with a corresponding
increase in the carrying value of the investment. The investment amount is
reduced as cash dividends are received.
(g) Depreciation and Nuclear Fuel Amortization
------------------------------------------
Depreciation is provided using the straight-line method at rates intended to
amortize the original cost and the estimated cost of removal less salvage of
properties over their estimated economic lives. The Company's composite
depreciation rate, based on average depreciable property in service, was 3.01%
in 1999, 4.71% in 1998 and 4.45% in 1997.
The cost of nuclear fuel is amortized to fuel expense based on the quantity
of energy produced. Nuclear fuel expense also includes a provision for the
costs associated with the ultimate disposal of the spent nuclear fuel.
(h) Maintenance
-----------
Expenditures for repairs of property and replacement and renewal of items
determined to be less than units of property were charged to maintenance
expense. Additions, replacements and renewals of property considered to be
units of property, were charged to the appropriate plant accounts. Upon
retirement, accumulated depreciation was charged with the original cost of
property units and the cost of removal net of salvage.
(i) Allowance for Funds Used During Construction
--------------------------------------------
Under applicable rate-making practices, the Company is permitted to include
an allowance for funds used during construction (AFUDC) as an element of its
depreciable property costs. This allowance is based on the amount of
construction work in progress that is not included in the rate base on which
the Company earns a return. An amount equal to the AFUDC capitalized in the
current period is reflected in the accompanying Statements of Income.
-26-
<PAGE>
While AFUDC does not provide funds currently, these amounts are recoverable
in revenues over the service life of the constructed property. The Company
develops rates based upon its current cost of capital and used a compound rate
of 5.75% in 1999, 5.75% in 1998 and 6% in 1997.
(3) Income Taxes
------------
For financial reporting purposes, the Company provides federal and state
income taxes on a separate return basis. However, for federal income tax
purposes, the Company's taxable income and deductions are included in the
consolidated income tax return of NSTAR (COM/Energy prior to the merger) the
Parent and it makes tax payments or receives refunds on the basis of its tax
attributes in the tax return in accordance with applicable regulations.
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS
109 requires the recognition of deferred tax assets and liabilities for the
future tax effects of temporary differences between the carrying amounts and
the tax basis of assets and liabilities
Accumulated deferred income taxes consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in thousands)
<S> <C> <C>
Deferred tax liabilities
Property-related $65,815 $74,585
Seabrook nonconstruction 707 707
All other 611 1,832
------- -------
67,133 77,124
------- -------
Deferred tax assets
Investment tax credits 7,456 7,844
Regulatory liability 2,102 2,102
All other 3,458 2,244
------- -------
13,016 12,190
------- -------
Net accumulated deferred income taxes $54,117 $64,934
======= =======
</TABLE>
Previously deferred investment tax credits are amortized over the estimated
remaining lives of the property giving rise to the credits. The net year-end
deferred income tax liability above includes a current deferred tax liability
of $2,141,000 and $551,000 in 1999 and 1998, respectively, which is
-27-
<PAGE>
included in accrued income taxes in the accompanying Balance Sheets.
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
For the 1999 Periods
--------------------------
August 25 January 1
to to
December 31 August 24 1998 1997
----------- ------------- ---- ----
(Successor) (Predecessor)
(Dollars in thousands)
<S> <C> <C> <C> <C>
Federal:
Current income tax expenses $10,129 $7,806 $109,267 $9,128
Deferred income tax expense (6,834) 514 (6,775) (764)
Investment tax credit amortization (101) (201) (2,539) (526)
------- ------ -------- ------
3,194 8,119 99,953 7,838
------- ------ -------- ------
State:
Current income tax expense 1,023 1,550 21,413 1,558
Deferred income tax expense (354) 116 (776) (133)
------- ------ -------- ------
669 1,666 20,637 1,425
------- ------ -------- ------
120,590 9,263
Amortization of regulatory liability
relating to deferred income taxes -- -- (122) (76)
------- ------ -------- ------
Total $ 3,863 $9,785 $120,468 $9,187
======= ====== ======== ======
Federal and state income taxes
charged to:
Operating expense $ 3,863 $9,785 $ 8,168 $9,178
Other income -- -- 112,300 9
------- ------ -------- ------
$ 3,863 $9,785 $120,468 $9,187
======= ====== ======== ======
</TABLE>
The provision for income taxes in 1998 reflects the current tax related to
the sale of the generating assets.
The effective income tax rates reflected in the accompanying financial
statements and the reasons for their differences from the statutory federal
income tax rate were as follows:
<TABLE>
<CAPTION>
For the 1999 Periods
--------------------------
August 25 January 1
to to
December 31 August 24 1998 1997
----------- ------------- ---- ----
(Successor) (Predecessor)
<S> <C> <C> <C> <C>
Federal statutory tax rate 35% 35% 35% 35%
== == == ==
Federal income tax expense at statutory levels $3,238 $8,680 $111,854 $8,405
Increase (Decrease) from statutory rate:
Tax versus book depreciation 459 730 1,207 1,515
</TABLE>
-28-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
State tax, net of federal tax benefit 435 1,083 13,414 927
Sale of generation assets - - (2,596) -
Amortization of investment tax credits (100) (201) (2,539) (526)
Excess deferred reserves - - (122) (76)
Reversals of capitalized expenses (200) (446) (561) (560)
Other 31 (61) (189) (498)
------ ------- -------- ------
$3,863 $ 9,785 $120,468 $9,187
====== ======= ======== ======
Effective federal tax rate 42% 39% 38% 38%
== == == ==
</TABLE>
(4) Long-Term Debt and Interim Financing
------------------------------------
(a) Long-Term Debt
--------------
On December 30, 1998, upon the sale of the Company's Units 1 and 2, a
portion of the proceeds from the sale was used to retire all of the Company's
long-term debt.
(b) Notes Payable to Banks
----------------------
The Company and other NSTAR companies maintain both committed and
uncommitted lines of credit for the short-term financing of their construction
programs and other corporate purposes. As of December 31, 1999, COM/Energy
companies had $115 million of committed lines of credit that will expire at
varying intervals in 2000. These lines are normally renewed upon expiration
and require annual fees of approximately .1875% of the outstanding balance. At
December 31, 1998, COM/Energy's uncommitted lines of credit totaled $10
million. Interest rates on the Company's outstanding borrowings generally are
money market rates and averaged 5.8% in both 1999 and 1998. The Company had
notes payable to banks of $48,575,000 at December 31, 1999 and no notes
outstanding at December 31, 1998.
(c) Advances from Affiliates
------------------------
The Company had no short-term notes payable to COM/Energy at December 31,
1999 and 1998. These notes are written for a term of up to 11 months and 29
days. Interest is at the prime rate and is adjusted for changes in that rate
during the terms of the notes. This rate averaged 8% in 1999 and 8.3% in 1998.
The Company is a member of the COM/Energy Money Pool (the Pool), an
-29-
<PAGE>
arrangement among the subsidiaries of COM/Energy, whereby short-term cash
surpluses are used to help meet the short-term borrowing needs of the utility
subsidiaries. In general, lenders to the Pool receive a higher rate of return
than they otherwise would on such investments, while borrowers pay a lower
interest rate than that available from banks. Interest rates on the outstanding
borrowings are based on the monthly average rate the Company would otherwise
have to pay banks, less one-half the difference between that rate and the
monthly average U.S. Treasury Bill weekly auction rate. The borrowings are for
a period of less than one year and are payable upon demand. The Company had
$6,240,000 in borrowings from the Pool at December 31, 1999 and had no
outstanding borrowings at December 31, 1998. Rates on these borrowings averaged
5.1% in 1999 and 5.3% in 1998.
(d) Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
The carrying amount of cash, notes payable to banks and advances from
affiliates approximates the fair value due to the short maturity of these
financial instruments.
(5) Commitments and Contingencies
-----------------------------
(a) Seabrook Nuclear Power Station
------------------------------
The Company's 3.52% interest in the Seabrook nuclear power station is to
provide for a portion of the capacity and energy needs of Cambridge Electric
and Commonwealth Electric. The Company is recovering 100% of its Seabrook 1
investment through power contracts pursuant to FERC and MDTE approval.
The Company and the other joint-owners have established a decommissioning
-30-
<PAGE>
fund to cover decommissioning costs. The estimated cost to decommission the
plant is $509.8 million in current dollars. The Company's share of this
liability (approximately $18 million), less its share of the market value of
the assets held in a decommissioning trust (approximately $4 million), is
approximately $14 million at December 31, 1999.
(b) Environmental Matters
---------------------
The Company is subject to laws and regulations administered by federal,
state and local authorities relating to the quality of the environment. These
laws and regulations affect, among other things, the siting and operation of
electric generating and transmission facilities and can require the
installation of expensive air and water pollution control equipment. These
regulations have had an impact on the Company's operations in the past; however
their impact on future operations, capital costs and construction schedules is
not expected to be significant since all of the Company's non-nuclear
generating assets were sold in 1998.
Pursuant to the terms of the Canal Units 1 and 2 Asset Sale Agreement with
Southern Energy dated May 15, 1998, the Company agreed to fund assessment work
up to a $500,000 cap to address a condition of metals contamination found on
the station site. Management is unable at this time to predict when closure on
this issue will be determined.
(6) Employee Benefit Plans
----------------------
Effective December 31, 1999, the pension and other postretirment benefit
plans of BEC and COM/Energy were combined under NSTAR.
(a) Pension
-------
The Company participates with other subsidiaries of NSTAR in a
noncontributory pension plan with certain contributory features covering
substantially all employees of NSTAR. Effective January 1, 2000, the defined
benefit plan was amended to provide management employees lump sum benefits
under a final average pay pension equity formula. Prior to January 1, 2000
these pension benefits were provide under a traditional final average pay
formula. This amendment is reflected in the December 31, 1999 benefit
obligation. It is the Company's policy to fund the Plan in amounts determined
to meet the funding standards established by the Employee Retirement Income
Security Act of 1974.
The funded status of the Plan cannot be presented separately for the
Company since the Company participates in the Plan trust with other
subsidiaries of NSTAR. Plan assets are available to provide benefits for all
Plan participants. And are commingled.
-31-
<PAGE>
The periodic costs (income) allocated to the company was $(20,000),
$554,000 and $537,000 in 1999, 1998 and 1997, respectively. The accrued pension
cost in the Company's statement of financial position was $1,911,000 and
$465,000 in 1999 and 1998, respectively.
(b) Other Postretirement Benefits
-----------------------------
Certain employees are eligible for postretirement benefits if they meet
specific requirements. These benefits could include health and life insurance
coverage and reimbursement of Medicare Part B premiums. Under certain
circumstances, eligible employees are required to make contributions for
postretirement benefits.
To fund postretirement benefits, the Company makes contributions to
various voluntary employees' beneficiary association (VEBA) trusts that were
established pursuant to section 501(c)(9) of the Internal Revenue Code (the
Code). The Company also makes contributions to a subaccount of the COM/Energy
pension plan and its successor pursuant to section 401(h) of the Code to fund a
portion of its postretirement benefit obligation.
The funded status of the Plan cannot be presented separately for the
Company since the Company participates in the Plan trusts and subaccount
with other subsidiaries of NSTAR. Plan assets are available to provide benefits
for all Plan participants who are former employees of the Company and of other
subsidiaries of NSTAR.
-32-
<PAGE>
The net periodic postretirement benefit cost allocated to the Company was
$311,000, $610,000 and $655,000 in 1999, 1998 and 1997, respectively. The
accrued benefit cost in the Company's statement of financial position was
$2,863,000 and $0 at December 31, 1999 and 1998, respectively.
(c) Savings Plan
------------
Prior to the sale of Units 1 and 2, the Company had an Employees Savings
Plan that provided for Company contributions equal to contributions by eligible
employees up to four percent
-33-
<PAGE>
of each employee's compensation rate and up to five percent for those employees
no longer eligible for postretirement health benefits. The Company's
contribution was $244,000 in 1998 and $256,000 in 1997.
(7) Lease Obligations
-----------------
Prior to 1999 the Company leased equipment and office space under
arrangements that are classified as operating leases. These lease agreements are
for terms of one year or longer. These leases contained no provisions that
prohibit the Company from entering into future lease agreements or obligations.
The Company has entered into support agreements with other participating
New England utilities for 3.8% of the Hydro-Quebec Phase II transmission
facilities and makes monthly support payments to cover depreciation and interest
costs.
Future minimum lease payments, by period and in the aggregate, of capital
leases consisted of the following at December 31, 1999:
<TABLE>
<CAPTION>
Capital Leases
--------------
(Dollars in thousands)
<S> <C>
2000 $ 1,699
2001 1,633
2002 1,572
2003 1,511
2004 1,450
Beyond 2004 13,850
-------
Total future minimum lease payments 21,715
Less:Estimated interest element
included therein 11,521
-------
Estimated present value of future
minimum lease payments $10,464
=======
</TABLE>
Total rent expense for all operating leases, except those with terms of a
month or less, amounted to $0 in 1999, $356,000 in 1998 and $575,000 in 1997.
There were no contingent rentals and no sublease rentals for the years 1999,
1998 and 1997.
-34-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
PART IV.
--------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------- ---------------------------------------------------------------
(a) 1. Index to Financial Statements
-----------------------------
Financial statements and notes thereto of the Company together with the
Report of Independent Public Accountants, are filed under Item 8 of this
report and listed on the Index to Financial Statements and Schedule (page
14).
2. Index to Financial Statement Schedules
--------------------------------------
None
3. Exhibits:
---------
Notes to Exhibits -
-----------------
a. Unless otherwise designated, the exhibits listed below are incorporated
by reference to the appropriate exhibit numbers and the Securities and
Exchange Commission file numbers indicated in parentheses.
b. The following is a glossary of COM/Energy acronyms that are used
throughout the following Exhibit Index:
CES.................... Commonwealth Energy System
CE..................... Commonwealth Electric Company
CEL.................... Cambridge Electric Light Company
CEC.................... Canal Electric Company
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the three months ended
December 31, 1999.
Exhibit Index
Exhibit 3. Articles of incorporation and by-laws.
- ---------- --------------------------------------
3.1. Articles of incorporation of CEC (Exhibit 1 to CEC's 1990 Form
10-K, File No. 2-30057).
-35-
<PAGE>
3.2. By-laws of CEC, as amended (Exhibit 2 to the CEC 1990 Form 10-K, File
No. 2-30057).
Exhibit 10. Material Contracts
- ------------------------------
10.1 Power contracts.
10.1.1 Power contracts between CEC and NBGEL and CEL dated December 1, 1965
(Exhibit 13(a)(1-4) to the CEC Form S-1, File No. 2-30057).
10.1.2 Power contract, as amended to February 28, 1990, superseding the Power
Contract dated September 1, 1986 and amendment dated June 1, 1988,
between CEC (seller) and CE and CEL (purchasers) for seller's entire
share of the Net Unit Capability of Seabrook 1 and related energy
(Exhibit 1 to the CEC Form 10-Q (March 1990), File No. 2-30057).
10.1.3 Purchase and Sale Agreement together with an implementing Addendum
dated December 31, 1981 between CEC and CE for the purchase and sale
of the CE 3.52% joint-ownership interest in the Seabrook units, dated
January 2, 1981 (Exhibit 1 to the Company's Form 8-K (January 13,
1982), File No. 2-30057).
10.1.4 Agreement for Joint-Ownership, Construction and Operation of the New
Hampshire Nuclear Units (Seabrook) dated May 1, 1973 and filed by
NBGEL as Exhibit 13(N) on Form S-1 dated October 1973, File No. 2-
49013, and as amended below:
10.1.4.1 First through Fifth Amendments to 10.1.4 dated May 24, 1974, June 21,
1974, September 25, 1974, October 25, 1974, and January 31, 1975,
respectively (Exhibit 13(m) to the NBGEL Form S-1 (November 7, 1975),
File No. 2-54995).
10.1.4.2 Sixth through Eleventh Amendments to 10.1.4 dated April 18, 1979,
April 18, 1979, April 25, 1979, June 8, 1979, October 11, 1979 and
December 15, 1979, respectively (Exhibit 1 to the CEC 1989 Form 10-K,
File No. 2-30057).
10.1.4.3 Twelfth and Thirteenth Amendments to 10.1.4 dated May 16, 1980 and
December 31, 1980, respectively ((Exhibit 1 and 2 to the CE Form 10-Q
(June 1982), File No. 2-7749).
-36-
<PAGE>
10.1.4.4 Fourteenth Amendment to 10.1.4 dated June 1, 1982 (Exhibit 3 to the CE
Form 10-Q (June 1982), File No. 2-7749).
10.1.4.5 Fifteenth and Sixteenth Amendments to 10.1.4 dated April 27, 1984 and
June 15, 1984, respectively (Exhibit 1 to the CEC Form 10-Q (June
1984), File No. 2-30057).
10.1.4.6 Seventeenth Amendment to 10.1.4 dated March 8, 1985 (Exhibit 1 to the
CEC Form 10-Q (March 1985), File No. 2-30057).
10.1.4.7 Eighteenth Amendment to 10.1.4 dated March 14, 1986 (Exhibit 1 to the
CEC Form 10-Q (March 1986), File No. 2-30057).
10.1.4.8 Nineteenth Amendment to 10.1.4 dated May 1, 1986 (Exhibit 1 to the CEC
Form 10-Q (June 1986), File No. 2-30057).
10.1.4.9 Twentieth Amendment to 10.1.4 dated September 19, 1986 (Exhibit 1 to
the CEC Form 10-K for 1986, File No. 2-30057).
10.1.4.10 Twenty-First Amendment to 10.1.4 dated November 12, 1987 (Exhibit 1
to the CEC Form 10-K for 1987, File No. 2-30057).
10.1.4.11 Twenty-Second Amendment and Settlement Agreement to 10.1.4 dated
January 13, 1989 (Exhibit 4 to the CEC 1988 Form 10-K, File No. 2-
30057).
10.1.5 Capacity Acquisition Agreement between CEC, CEL and CE dated September
25, 1980 (Exhibit 1 to the CEC 1991 Form 10-K, File No. 2-30057).
10.1.5.1 Supplement to 10.1.5 consisting of three Capacity Acquisition
Commitments each dated May 7, 1987, concerning Phases I and II of the
Hydro-Quebec Project and electricity acquired from Connecticut Light
and Power Company (CL&P) (Exhibit 1 to the CEC Form 10-Q (September
1987), File No. 2-30057).
10.1.5.2 Amendment to 10.1.5 as amended, and restated, June 1, 1993, henceforth
referred to as the Capacity Acquisition and Disposition Agreement,
whereby CEC, as agent, in addition to acquiring power may also sell
bulk electric power which CEL and/or CE owns or
-37-
<PAGE>
otherwise has the right to sell (Exhibit 1 to the CEC Form 10-Q
(September 1993), File No. 2-30057).
10.1.6 Agreement, dated September 1, 1985, With Respect To Amendment of
Agreement With Respect To Use Of Quebec Interconnection, dated
December 1, 1981, among certain NEPOOL utilities to include Phase II
facilities in the definition of "Project" (Exhibit 1 to the CEC Form
10-Q (September 1985), File No. 2-30057).
10.1.6.1 Amendatory Agreement No.3 with Respect to Use of Quebec
Interconnection dated December 1, 1981, as amended to June 1, 1990,
among certain NEPOOL utilities (Exhibit 1 to the CEC Form 10-Q
(September 1990), File No. 2-30057).
10.1.7 Preliminary Quebec Interconnection Support Agreement - Phase II among
certain New England electric utilities dated June 1, 1984 (Exhibit 6
to the CE Form 10-Q (June 1984), File No. 2-7749).
10.1.7.1 First through Third Amendments to 10.1.7 as amended March 1, 1985,
January 1, 1986 and March 1, 1987, respectively (Exhibit 1 to the CEC
Form 10-Q (March 1987), File No. 2-30057).
10.1.7.2 Fifth through Seventh Amendments to 10.1.7 as amended October 15,
1987, December 15, 1987 and March 1, 1988, respectively (Exhibit 1 to
the CEC Form 10-Q (June 1988), File No. 2-30057).
10.1.7.3 Fourth and Eighth Amendments to 10.1.7 as amended July 1, 1987 and
August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q
(September 1988), File No. 2-30057).
10.1.7.4 Ninth and Tenth Amendments to 10.1.7 as amended November 1, 1988 and
January 15, 1989, respectively (Exhibit 2 to the CEC 1988 Form 10-K,
File No. 2-30057).
10.1.7.5 Eleventh Amendment to 10.1.7 as amended November 1, 1989 (Exhibit 4 to
the CEC 1989 Form 10-K, File No. 2-30057).
10.1.7.6 Twelfth Amendment to 10.1.7 as amended April 1, 1990 (Exhibit 1 to the
CEC Form 10-Q (June 1990) File No. 2-30057).
-38-
<PAGE>
10.1.8 Agreement to Preliminary Quebec Interconnection Support Agreement -
Phase II among Public Service Company of New Hampshire (PSNH), New
England Power Co. (NEP), Boston Edison Co. (BECO), and CEC whereby
PSNH assigns a portion of its interests under the original Agreement
to the other three parties, dated October 1, 1987 (Exhibit 2 to the
CEC 1987 Form 10-K, File No. 2-30057).
10.1.9 Phase II Equity Funding Agreement for New England Hydro Transmission
Electric Company, Inc. (New England Hydro) (Massachusetts), dated June
1, 1985, between New England Hydro and certain NEPOOL utilities
(Exhibit 2 to the CEC Form 10-Q (September 1985), File No. 2-30057).
10.1.10 Phase II Equity Funding Agreement for New England Hydro Transmission
Corporation (New Hampshire Hydro), dated June 1, 1985, between New
Hampshire Hydro and certain NEPOOL utilities (Exhibit 3 to the CEC
Form 10-Q (September 1985), File No. 2-30057).
10.1.10.1 Amendment No. 1 to 10.1.10 as amended May 1, 1986 (Exhibit 6 to the
CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.10.2 Amendment No. 2 to 10.1.10 as amended September 1, 1987 (Exhibit 3 to
the CEC Form 10-Q (September 1987), File No. 2-30057).
10.1.11 Phase II Massachusetts Transmission Facilities Support Agreement,
dated June 1, 1985, refiled as a single agreement incorporating
Amendments 1 through 7 dated May 1, 1986 through January 1, 1989,
respectively, between New England Hydro and certain NEPOOL utilities
(Exhibit 2 to the CEC Form 10-Q (September 1990), File No. 2-30057).
10.1.12 Phase II New Hampshire Transmission Facilities Support Agreement,
dated June 1, 1985, refiled as a single agreement incorporating
Amendments 1 through 8 dated May 1, 1986 through January 1, 1989,
respectively, between New Hampshire Hydro and certain NEPOOL utilities
(Exhibit 3 to the CEC Form 10-Q (September 1990), File No. 2-30057).
10.1.13 Phase II New England Power AC Facilities Support Agreement dated June
1, 1985, between New England Power and certain NEPOOL utilities
(Exhibit 6 to the CEC Form 10-Q (September 1985), File
-39-
<PAGE>
No. 2-30057).
10.1.13.1 Amendments Nos. 1 and 2 to 10.1.13 as amended May 1, 1986 and February
1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (March 1987),
File No. 2-30057).
10.1.13.2 Amendments Nos. 3 and 4 to 10.1.13 as amended June 1, 1987 and
September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q
(September 1987), File No. 2-30057).
10.1.14 Agreement Authorizing Execution of Phase II Firm Energy Contract,
dated September 1, 1985, among certain NEPOOL utilities in regard to
the purchase of power from Hydro Quebec (Exhibit 8 to the CEC Form 10-
Q (September 1985), File No. 2-30057).
10.2 Other agreements.
-40-
<PAGE>
10.2.1 New England Power Pool Agreement (NEPOOL) dated September 1, 1971 as
amended through August 1, 1977, between NEGEA Service Corp. as agent
for CEL, CEC, NBGEL, and various other electric utilities operating in
New England, together with amendments dated August 15, 1978 and
January 31, 1979 and February 1, 1980 (Exhibit 5(c)(13) to the CES
Form S-16 (April 1980), File No. 2-64731).
10.2.1.1 Thirteenth Amendment to 10.2.1 as amended September 1, 1981 (Exhibit 5
to the CES Form 10-K for 1981, File No. 1-7316).
10.2.1.2 Fourteenth through Twentieth Amendments to 10.2.1 as amended December
1, 1981, June 1, 1982, June 15, 1983, October 1, 1983, August 1, 1985,
August 15, 1985 and September 1, 1985, respectively (Exhibit 4 to the
CES Form 10-Q (September 1985), File No. 1-7316).
10.2.1.3 Twenty-first Amendment to the New England Power Pool Agreement dated
September 1, 1971, as amended January 1, 1986 (Exhibit 1 to the CES
Form 10-Q (March 1986), File No. 1-7316).
10.2.1.4 Twenty-second Amendment to 10.2.1 as amended to September 1, 1986
(Exhibit 1 to the CES Form 10-Q (September 1986), File No. 1-7316).
10.2.1.5 Twenty-third Amendment to 10.2.1 as amended to April 30, 1987 (Exhibit
1 to the CES Form 10-Q (June 1987), File No. 1-7316).
10.2.1.6 Twenty-fourth Amendment to 10.2.1 as amended to March 1, 1988 (Exhibit
1 to the CES Form 10-K for 1987, File No. 1-7316).
10.2.1.7 Twenty-fifth Amendment to 10.2.1 as amended to May 1, 1988 (Exhibit 1
to the CES Form 10-Q (March 1988), File No. 1-7316).
10.2.1.8 Twenty-sixth Amendment to 10.2.1 as amended to March 15, 1989 (Exhibit
1 to the CES Form 10-Q (March 1989), File No. 1-7316).
10.2.1.9 Twenty-seventh Amendment to 10.2.1 as amended to October 1, 1990
(Exhibit 3 to the CES 1990 Form 10-K, File No. 1-7316).
-41-
<PAGE>
10.2.1.10 Twenty-eighth Amendment to 10.2.1 as amended September 15, 1992
(Exhibit 1 to the CES Form 10-Q (September 1994), File No. 1-7316).
10.2.1.11 Twenty-ninth Amendment to 10.2.1 as amended May 1, 1993 (Exhibit 2 to
the CES Form 10-Q (September 1994), File No. 1-7316).
Filed herewith:
Exhibit 27.
- -----------
Filed herewith as Exhibit 1 is the Financial Data Schedule for the
year ended December 31, 1999.
-42-
<PAGE>
CANAL ELECTRIC COMPANY
----------------------
FORM 10-K DECEMBER 31, 1999
--------- -----------------
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ THOMAS J. MAY
-----------------
Thomas J. May,
Chairman of the Board
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.
Principal Executive Officers:
/s/ THOMAS J. MAY March 30, 2000
- -------------------------------------
Thomas J. May,
Chairman of the Board and
Chief Executive Officer
/s/ R.D. WRIGHT March 30, 2000
- -------------------------------------
R. D. Wright
President and Chief Operating Officer
Principal Financial Officer:
/s/ ROBERT J. WEAFER, JR March 30, 2000
- -------------------------------------
Robert J. Weafer, Jr.
Vice President, Controller and Chief
Accounting Officer
A majority of the Board of Directors:
/s/ THOMAS J. MAY March 30, 2000
- -------------------------------------
Thomas J. May, Director
/s/ R. D. WRIGHT March 30, 2000
- -------------------------------------
Russell D. Wright, Director
/s/ JAMES J. JUDGE March 30, 2000
- -------------------------------------
James J. Judge, Director
-43-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET STATEMENT OF INCOME, STATEMENT OF RETAINED EARNINGS AND STATEMENT OF CASH
FLOWS CONTAINED IN FORM 10K OF CANAL ELECTRIC COMPANY FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 189,854
<OTHER-PROPERTY-AND-INVEST> 2,833
<TOTAL-CURRENT-ASSETS> 11,372
<TOTAL-DEFERRED-CHARGES> 24,392
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 228,451
<COMMON> 38,080
<CAPITAL-SURPLUS-PAID-IN> 27,088
<RETAINED-EARNINGS> 5,390
<TOTAL-COMMON-STOCKHOLDERS-EQ> 70,558
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 54,815
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 9,988
<LEASES-CURRENT> 564
<OTHER-ITEMS-CAPITAL-AND-LIAB> 92,526
<TOT-CAPITALIZATION-AND-LIAB> 228,451
<GROSS-OPERATING-REVENUE> 47,288
<INCOME-TAX-EXPENSE> 13,648
<OTHER-OPERATING-EXPENSES> 22,095
<TOTAL-OPERATING-EXPENSES> 35,743
<OPERATING-INCOME-LOSS> 11,545
<OTHER-INCOME-NET> 12,808
<INCOME-BEFORE-INTEREST-EXPEN> 24,353
<TOTAL-INTEREST-EXPENSE> 3,949
<NET-INCOME> 20,404
0
<EARNINGS-AVAILABLE-FOR-COMM> 20,404
<COMMON-STOCK-DIVIDENDS> 238,213
<TOTAL-INTEREST-ON-BONDS> 2,389
<CASH-FLOW-OPERATIONS> (116,699)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
