<TABLE>
<S> <C> <C> <S>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1995
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 1-5139
CENTRAL MAINE POWER COMPANY
(Exact name of registrant as specified in its charter)
Incorporated in Maine 01-0042740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Edison Drive, Augusta, Maine 04336
(Address of principal executive offices) (Zip Code)
207-623-3521
(Registrant's telephone number including area code)
(Former name, former address and former 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 the filing
requirements for at least 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.
Shares Outstanding
Class as of August 10, 1995
Common Stock, $5 Par Value 32,442,752<PAGE>
</TABLE>
Central Maine Power Company
INDEX
Page No.
Part I. Financial Information
Consolidated Statement of Earnings for the Three Months
Ended June 30, 1995 and 1994 1
Consolidated Statement of Earnings for the Six Months
Ended June 30, 1995 and 1994 2
Consolidated Balance Sheet - June 30, 1995 and
December 31, 1994:
Assets 3
Stockholders' Investment and Liabilities 4
Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information 16<PAGE>
<TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Central Maine Power Company
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
For the Three Months
Ended
June 30,
1995 1994
ELECTRIC OPERATING REVENUES $202,584 $212,336
OPERATING EXPENSES
Fuel Used for Company Generation 4,944 3,683
Purchased Power
Energy 92,346 91,778
Capacity (Note 2) 34,123 19,875
Other Operation 48,008 35,122
Maintenance 8,599 7,775
Depreciation and Amortization 14,037 13,916
Federal and State Income Taxes (8,207) 9,131
Taxes Other Than Income Taxes 6,716 5,980
Total Operating Expenses 200,566 187,260
EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 2,034 1,533
OPERATING INCOME 4,052 26,609
OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used
During Construction 154 203
Other, Net 1,688 1,271
Income Taxes Applicable to Other
Income (Expense) (703) (377)
Total Other Income (Expense) 1,139 1,097
INCOME BEFORE INTEREST CHARGES 5,191 27,706
INTEREST CHARGES
Long-Term Debt 12,798 11,386
Other Interest 1,140 1,137
Allowance for Borrowed Funds Used
During construction (128) (124)
Total Interest Charges 13,810 12,399
NET INCOME (LOSS) (8,619) 15,307
DIVIDENDS ON PREFERRED STOCK 2,609 2,628
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $(11,228) $ 12,679
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 32,442,752 32,442,752
EARNINGS (LOSS) PER SHARE OF COMMON STOCK $(0.34) $0.39
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.225 $0.225
The accompanying notes are an integral part of these financial
statements.<PAGE>
Central Maine Power Company
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
For the Six Months Ended
June 30,
1995 1994
ELECTRIC OPERATING REVENUES $465,896 $453,362
OPERATING EXPENSES
Fuel Used for Company Generation 9,554 9,071
Purchased Power
Energy 206,704 214,710
Capacity (Note 2) 55,168 34,945
Other Operation 89,477 72,074
Maintenance 14,939 14,825
Depreciation and Amortization 28,314 27,797
Federal and State Income Taxes 8,435 17,459
Taxes Other Than Income Taxes 13,369 12,652
Total Operating Expenses 425,960 403,533
EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 3,477 3,013
OPERATING INCOME 43,413 52,842
OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used
During Construction 310 424
Other, Net 2,946 (3,086)
Income Taxes Applicable to Other
Income (Expense) (1,243) 1,135
Total Other Income (Expense) 2,013 (1,527)
INCOME BEFORE INTEREST CHARGES 45,426 51,315
INTEREST CHARGES
Long-Term Debt 25,617 22,506
Other Interest 2,308 2,344
Allowance for Borrowed Funds Used
During construction (256) (258)
Total Interest Charges 27,669 24,592
NET INCOME 17,757 26,723
DIVIDENDS ON PREFERRED STOCK 5,141 5,256
EARNINGS APPLICABLE TO COMMON STOCK $ 12,616 $ 21,467
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 32,442,752 32,442,058
EARNINGS PER SHARE OF COMMON STOCK $0.39 $0.66
DIVIDENDS DECLARED PER SHARE OF
COMMON STOCK $0.45 $0.45
The accompanying notes are in integral part of these financial
statements.<PAGE>
Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
June 30, Dec. 31,
1995 1994
(Unaudited)
ASSETS
ELECTRIC PROPERTY, at Original Cost $1,589,222 $1,579,632
Less: Accumulated Depreciation 539,953 521,645
Electric Property in Service 1,049,269 1,057,987
Construction Work in Progress 15,277 13,647
Net Nuclear Fuel 1,925 2,181
Net Electric Property and Nuclear Fuel 1,066,471 1,073,815
INVESTMENTS IN ASSOCIATED COMPANIES, at Equity 52,492 49,602
Net Electric Property, Nuclear Fuel
and Investments in Associated
Companies 1,118,963 1,123,417
CURRENT ASSETS
Cash and Temporary Cash Investments 77,368 58,112
Accounts Receivable, Less Allowance for
Uncollectible Accounts of $3,353 in 1995
and $3,301 in 1994
Service - Billed 68,684 81,289
- Unbilled 30,877 38,153
Other Accounts Receivable 8,855 12,088
Prepaid Income Taxes 29,490 28,068
Inventories, at Average Cost
Fuel Oil 3,349 4,113
Materials and Supplies 14,386 13,026
Funds on Deposit With Trustee 27,910 27,820
Prepayments and Other Current Assets 5,383 9,337
Total Current Assets 266,302 272,006
DEFERRED CHARGES AND OTHER ASSETS
Recoverable Costs of Seabrook 1 and Abandoned
Projects, Net 98,028 101,976
Regulatory Assets-Deferred Taxes 234,013 233,234
Yankee Atomic Purchase Power Contract 35,051 38,777
Other Deferred Charges and Other Assets 263,755 276,597
Deferred Charges and Other Assets, Net 630,847 650,584
TOTAL ASSETS $2,016,112 $2,046,007
The accompanying notes are an integral part of these financial
statements.<PAGE>
Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
June 30, Dec. 31,
1995 1994
(Unaudited)
STOCKHOLDERS' INVESTMENT AND LIABILITIES
CAPITALIZATION
Common Stock Investment $ 489,745 $ 491,323
Preferred Stock 65,571 65,571
Redeemable Preferred Stock 74,528 80,000
Long-Term Obligations 658,076 638,841
Total Capitalization 1,287,920 1,275,735
CURRENT LIABILITIES AND INTERIM FINANCING
Interim Financing 28,000 63,000
Sinking Fund Requirements 2,582 2,580
Accounts Payable 79,696 97,800
Dividends Payable 9,823 9,932
Accrued Interest 12,491 14,102
Maine Yankee Sleeving Accrual 12,151 -
Miscellaneous Current Liabilities 18,675 10,535
Total Current Liabilities and
Interim Financing 163,418 197,949
COMMITMENTS AND CONTINGENCIES
RESERVES AND DEFERRED CREDITS
Accumulated Deferred Income Taxes 356,395 348,287
Unamortized Investment Tax Credits 33,361 34,167
Regulatory Liabilities-Deferred Taxes 55,001 53,937
Yankee Atomic Purchase Power Contract 35,051 38,777
Other Reserves and Deferred Credits 84,966 97,155
Total Reserves and Deferred Credits 564,774 572,323
TOTAL STOCKHOLDERS' INVESTMENT
AND LIABILITIES $2,016,112 $2,046,007
The accompanying notes are an integral part of these financial
statements.<PAGE>
Central Maine Power Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
(Note 1)
For the Six Months
Ended
June 30,
1995 1994
CASH FROM OPERATIONS
Net Income $ 17,757 $ 26,723
Items Not Requiring (Not Providing) Cash:
Depreciation and Amortization 41,161 35,780
Deferred Income Taxes and Investment Tax
Credits, Net 6,708 3,843
Maine Yankee Sleeving Accrual 12,151 -
Allowance for Equity Funds Used During
Construction (310) (424)
Changes in Certain Assets and Liabilities:
Accounts Receivable 23,114 23,521
Other Current Assets 3,864 3,313
Inventories (596) 3,605
Retail Fuel Costs 29,564
Accounts Payable (15,475) (12,114)
Accrued Interest (1,611) 337
Prepaid Income Taxes (1,422) 8,134
Miscellaneous Current Liabilities 8,140 720
Deferred Energy Management Costs (1,865) (2,747)
Maine Yankee Outage Accrual (8,814) (4,178)
Purchase Power Contracts (4,550) (12)
Other, Net 1,435 5,055
Net Cash Provided by Operating Activities 79,687 121,120
INVESTING ACTIVITIES
Construction Expenditures (17,468) (16,221)
Changes in Accounts Payable-Investing Activities (2,629) (3,708)
Net Cash Used by Investing Activities (20,097) (19,929)
FINANCING ACTIVITIES
Issuances:
Common Stock - 927
Mortgage Bonds - 25,000
Medium-Term Notes 20,000 -
Redemptions:
Short-Term Obligations - (25,500)
Other Long-Term Obligations - (21,000)
Preferred Stock (5,472) -
Medium-Term Notes (35,000) -
Dividends:
Common Stock (14,611) (14,611)
Preferred Stock (5,251) (4,806)
Net Cash (Used) Provided by Financing
Activities (40,334) (39,990)
Net Increase (Decrease) in Cash 19,256 61,201
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 58,112 1,956
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 77,368 $ 63,157
The accompanying notes are an integral part of these financial statements.<PAGE>
</TABLE>
Central Maine Power Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted in
this Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. However, the disclosures
herein should be read with the Annual Report on Form 10-K for the
year ended December 31, 1994 (Form 10-K), and are adequate to
make the information presented herein not misleading.
The consolidated financial statements include the accounts of
Central Maine Power Company (the Company) and its 78 percent-
owned subsidiary, Maine Electric Power Company, Inc. (MEPCO).
The Company accounts for its investments in associated companies
not subject to consolidation using the equity method.
The Company's significant accounting policies are contained in
Note 1 of Notes to Consolidated Financial Statements in the
Company's Form 10-K. For interim accounting periods the policies
are the same. The interim financial statements reflect all
adjustments that are, in the opinion of management, necessary to
a fair statement of results for the interim periods presented.
All such adjustments are of a normal recurring nature.
The adoption of the Alternative Rate Plan (ARP), effective
January 1, 1995, eliminated the reconcilable fuel clause used
under traditional rate-of-return regulation to account for and
collect fuel and purchased-power energy costs. Fuel revenues are
now recorded as they are billed rather than deferred and
reflected in revenues over time periods established by the Maine
Public Utilities Commission (MPUC). These effects complicate
quarter-to-quarter comparisons, but seasonality issues will not
affect calendar year comparisons.
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased having
maturities of three months or less to be cash equivalents.
Supplemental Cash Flow Disclosure - Cash paid for the six months
ended June 30, 1995 and 1994 for interest, net of amounts
capitalized, amounted to $27.4 million and $22.1 million,
respectively. Income taxes paid, net of amounts refunded,
amounted to $4.5 million and $4.4 million for the six months
ended June 30, 1995 and June 30, 1994, respectively. Income
taxes amounting to $4.4 million were refunded in the first
quarter of 1995. The Company incurred no new capital lease
obligations in either period.
2. Commitments and Contingencies
(a) Maine Yankee Atomic Power Company Steam Generator Tubes -
The Company, through its equity investment totaling
approximately $26.1 million at June 30, 1995, owns a 38-
percent stock interest in Maine Yankee Atomic Power Company
(Maine Yankee), which owns and operates an 860-megawatt
nuclear generating plant in Wiscasset, Maine (the Maine
Yankee Plant or the Plant), and is entitled under a cost-
based power contract to an approximately equal percentage of<PAGE>
the Plant's output. The Maine Yankee Plant, like other
pressurized water reactors, has been experiencing
degradation of its steam generator tubes, principally in the
form of circumferential cracking, which, until early 1995,
was believed to be limited to a relatively small number of
tubes. During the refueling-and-maintenance shutdown that
commenced in early February 1995, Maine Yankee detected
through new inspection methods increased degradation of the
steam generator tubes at the Plant well above its
expectations, and assessed the extent of degradation and
evaluated available courses of action to address the matter.
The substantial increase in the number of degraded tubes
will result in substantial additional costs to Maine
Yankee, with the Company being responsible for its pro-rata
share. In addition, the Company is also incurring
substantial replacement power costs, the amount depending on
the duration of the outage and the prices paid for the
replacement power.
With the termination of the reconcilable fuel-and-purchased-
power adjustment under the ARP, costs of replacement power
during a Maine Yankee outage will in general be treated like
other Company expenses, i.e., limited by the ARP's price-
index mechanism, and will not be deferred and collected
through a specific fuel-rate adjustment, as under pre-1995
ratemaking. Under the ARP no additional price increase
other than the 2.43 percent increase effective July 1, 1995,
associated with the price index will take effect in 1995 as
a result of the Maine Yankee outage. Although the ARP
contains provisions that could result in rate adjustments
based on low earnings or the incurring of extraordinary
costs by the Company, neither provision will affect prices
in 1995.
After a careful assessment of the extent of the tube
degradation, Maine Yankee concluded that close to 60 percent
of the Plant's 17,000 steam-generator tubes could be
degraded to some degree. That conclusion eliminated the
possibility of mitigating the degradation by plugging
additional tubes and rendered most feasible the option of
repairing the degraded tubes by welding short metal-alloy
reinforcing sleeves in all the steam-generator tubes.
Similar repairs have been undertaken at other nuclear plants
in the United States and abroad, but not on the scale of the
Maine Yankee project.
On May 22, 1995, the NRC issued a license approving the
sleeving process of Westinghouse Electric Corporation
(Westinghouse) for the Plant. On the same day the Board of
Directors of Maine Yankee authorized management to undertake
the sleeving project, and on May 24, 1995, Maine Yankee
selected Westinghouse as the contractor for the project.
The sleeving project started in early June and could be
completed in time for the Plant to return to service by the
end of 1995.
Maine Yankee is recording the sleeving costs as maintenance
expense. The Company estimates its share of such costs to
be $15.0 million and has recorded a one-time charge for that
amount to purchased power capacity expense in the second
quarter of 1995. Maine Yankee has billed the Company $2.8
million as of June 30, 1995, for costs incurred. In<PAGE>
addition, the Company expects to incur additional fuel costs
over and above what it would have incurred if the Maine
Yankee Plant had continued to operate, in the range of
approximately $3.5 million to $4.5 million per month while
the outage persists, and both the Company and Maine Yankee
have implemented cost-reduction measures to partially offset
the additional costs.
The Company cannot predict how long the Plant will be out of
service. The impact of the Company's replacement-power
costs and its share of the Maine Yankee sleeving costs will
have a material adverse effect on the Company's financial
results for 1995.
(b) Legal and Environmental Matters - The Company is a party in
legal and administrative proceedings that arise in the
normal course of business. As discussed in Note 4 of Notes
to Consolidated Financial Statements in the Company's Form
10-K, in connection with one such proceeding, the Company
has been named a potentially responsible party and has been
incurring costs to determine the best method of cleaning up
an Augusta, Maine, site formerly owned by a salvage company
and identified by the Environmental Protection Agency (EPA)
as containing soil contaminated by polychlorinated biphenyls
(PCBs) from equipment originally owned by the Company.
In July 1994 the EPA approved changes to the remedy it had
previously selected, the principal change being to adjust
the soil cleanup standard to ten parts per million from the
one part per million established in the EPA's 1989 Record of
Decision, on the part of the site where PCBs were found in
their highest concentration. The EPA stated that the
purpose of adjusting the standard of cleanup was to
accommodate the selected technology's inability to reduce
PCBs and other chemical components on the site to the
original standard.
In June 1995, after discussions between the Company and the
EPA, design work on the selected remedy was suspended, and
on July 7, 1995, the Company formally requested that the EPA
abandon that remedy. If that remedy is abandoned, an
already-designated alternative remedy that the Company
believes could result in substantially lower costs is likely
to be selected.
Pending resolution of the uncertainties associated with the
possible abandonment of the selected remedy, the Company
believes that its share of the remaining costs of the
cleanup will total between $11 million and $15 million,
depending on the cleanup remedy finally implemented, the
level of cleanup ultimately required, and other variable
factors. Such estimate is net of an agreed partial
insurance recovery and includes the 1993 court-ordered
contribution of 41 percent from Westinghouse Electric Corp.,
but excludes contributions from the other insurance carriers
the Company has sued, or any other third parties. As a
result, the Company has recorded an estimated minimum
liability of $11 million and an equal regulatory asset,
reflecting an accounting order to defer such costs and the
anticipated ratemaking recovery of such costs when
ultimately paid.
The Company cannot predict with certainty the level and<PAGE>
timing of the cleanup costs, the extent they will be covered
by insurance, or the ratemaking treatment of such costs, but
believes it should recover substantially all of such costs
through insurance and rates. The Company also believes that
the ultimate resolution of the legal and environmental
proceedings in which it is currently involved will not have
a material adverse effect on its financial condition.
3. Regulatory Matters
Alternative Rate Plan - In December 1994, the MPUC approved a
stipulation signed by most of the parties to the Company's ARP
proceeding. See Note 3 to Consolidated Financial Statements
included in the Company's Form 10-K for a detailed description of
the ARP. This follow-up proceeding to the Company's 1993 base-
rate case was ordered by the MPUC in an effort to develop a five-
year plan containing price-cap, profit-sharing, and pricing-
flexibility components. Although the ARP is a major reform, the
MPUC will continue to regulate the Company's operations and
prices and provide for continued recovery of deferred costs.
The Company believes, as stated in the MPUC's order approving the
ARP, that operation under the ARP continues to meet the criteria
of SFAS No. 71. In its order, the MPUC reaffirmed the
applicability of previous accounting orders allowing the Company
to reflect amounts as deferred charges and regulatory assets. As
a result, the Company will continue to apply the provisions of
SFAS No. 71 to its accounting transactions and in its future
financial statements.
The ARP contains a mechanism that provides price-caps on the
Company's retail rates to increase annually on July 1, commencing
July 1, 1995, by a percentage combining (1) a price index, (2) a
productivity offset, (3) a sharing mechanism, and (4) flow-
through items and mandated costs. The price cap applies to all of
the Company's retail rates, including the Company's fuel-and-
purchased power cost, which previously had been treated
separately. Under the ARP, fuel expense is no longer subject to
reconciliation or specific rate recovery, but is subject to the
annual indexed price-cap changes.
The ARP also provides for partial flow-through to ratepayers of
cost savings from non-utility generator contract buy-outs and
restructuring, recovery of energy-management costs, penalties for
failure to attain customer-service and energy-efficiency targets,
and specific recovery of half the costs of the transition to the
accounting method required by Statement of Financial Accounting
Standards No. 106, "Accounting for Postretirement Benefits Other
Than Pensions" (SFAS No. 106), the remaining 50 percent to be
recovered through the annual price-cap change. The ARP also
generally defines mandated costs that would be recoverable by the
Company notwithstanding the index-based price cap. To receive
such treatment, a mandated cost's revenue requirement must exceed
$3 million and have a disproportionate effect on the Company or
the electric power industry.
The ARP also contains provisions to protect the Company and
ratepayers against unforeseen adverse results from its operation.
These include review by the MPUC if the Company's actual return
on equity falls outside the designated range two years in a row,
a mid-period review of the ARP by the MPUC in 1997 (including
possible modification or termination), and a "final" review by
the MPUC in 1999 to determine whether or with what changes the<PAGE>
ARP should continue in effect after 1999.
On July 1, 1995, the Company's first annual increase in rates and
rate-element caps under the ARP of 2.43% became effective. The
components of the increase included the inflation index of 2.92%,
reduced by a productivity offset of 0.5% and increased by 0.01%
for flowthrough items and mandated costs. Under prior long-term
agreements, price discounts for competitively targeted customer
classes are not affected by the increase.
4. Capitalization and Interim Financing
On July 19, 1995, the Board of Directors of the Company
terminated, effective immediately, the right to exercise the
Rights issued to its shareholders pursuant to the Shareholder
Rights Plan adopted by the Company on September 28, 1994, (see
Note 7 of Notes to Consolidated Financial Statements in the
Company's Form 10-K) and ordered the redemption of the Rights.
The Board directed payment of the redemption price of $.01 per
Right on August 28, 1995, to holders of record at the close of
business on August 14, 1995. This one-time payment amounts to
$324,428. On May 24, 1995, the shareholders of the Company, by a
vote of 50.36 percent to 49.64 percent, had approved a
shareholder proposal at the Company's annual meeting of
shareholders recommending redemption of the rights and
termination of the Shareholder Rights Plan. The Shareholder
Rights Plan was meant to provide protection against abusive or
discriminatory takeover tactics.
5. Pensions and Other Post-Employment Benefits
In May 1995, the Company announced a Special Retirement Offer
(SRO) to all employees aged 50 or more who had at least five
years of continuous service. The goal of the SRO was to help the
Company achieve financial savings and make the organizational
changes it needs to be an effective competitor in the energy
marketplace. Approximately 200 employees accepted the SRO as of
June 30, 1995.
As a result of the SRO, the Company incurred a one-time charge of
$4.8 million in the second quarter of 1995. The SRO included
certain permanent enhancements for all employees, the cost of
which will be amortized to pension expense over the remaining
service life of active employees. <PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results
The second quarter of 1995 generated a net loss of $8.6 million
compared to net income of $15.3 million for the corresponding
period in 1994. Year-to-date net income was $17.8 million versus
$26.7 million for the 1994 period.
Net Income was affected by one-time, pre-tax charges of $15.0
million for the Company's entire estimated cost of tube sleeving
at Maine Yankee (see Note 2 "Commitments and Contingencies -
Maine Yankee Atomic Power Company Steam Generator Tubes"), and
$4.8 million of costs associated with the Special Retirement
Offer (SRO) that reduced the work force by 200 for employees
accepting the offer as of June 30, 1995 (see Note 5 "Pensions and
Other Post Employment Benefits"). The Maine Yankee charge was
recorded in the second quarter; actual billings from Maine Yankee
will continue for several months.
Loss Applicable to Common Stock was $11.2 million or $0.34 per
share for the second quarter compared to earnings of $12.7
million or $0.39 per share for the comparable period in 1994.
Year-to-date earnings applicable to Common Stock were $12.6
million or $0.39 per share and $21.5 million or $0.66 per share
in 1994. The one-time charges, net of tax, were $8.9 million or
$0.27 per Common Share for Maine Yankee tube-sleeving and $2.8
million or $0.09 per share for the SRO.
Operating Revenues increased by $12.5 million or 2.8% to $466
million in the first half of 1995. Operating Revenues for the
second quarter of 1995 of $203 million were 4.6% less than the
second quarter of 1994.
Revenues were affected by lower kilowatt-hour sales, a 1994 price
increase for most customers, price discounts for competitively
targeted customer classes and the elimination under the
Alternative Rate Plan (ARP) that took effect January 1, 1995, of
reconciliation treatment for fuel and purchased-power expenses.
The adoption of the ARP effective January 1, 1995 had a
significant impact on the results of operations for the first
half of 1995 when compared to 1994. The ARP price-cap method of
ratemaking eliminates the reconcilable fuel clause used under
traditional rate-of-return regulation to account for and collect
fuel and purchased-power energy costs. One impact of this change
is that seasonality in prices and certain accounting treatments
for fuel revenues can produce more volatility in quarterly
results than occurred under the prior ratemaking treatment.
These effects complicate quarter-to-quarter comparisons, but
seasonality issues will not affect calendar year comparisons.
Under that discontinued mechanism, fluctuations in fuel costs
required the Company to record unbilled fuel revenue for any fuel
costs incurred in excess of the amounts actually collected in
each respective period. If fuel collections exceeded fuel costs
a charge to revenue was made during that period. The effect of
the fuel cost adjustment mechanism was to ensure that all fuel
costs incurred were ultimately collected from customers at some
time in the future. This fuel mechanism also resulted in the
allocation of a greater portion of the customers' rates to fuel
revenues in the winter months and traditionally resulted in a<PAGE>
charge to revenues in the winter months as fuel revenues
collected normally exceed fuel costs. With the elimination of
the reconcilable fuel mechanism under the ARP, fuel revenues are
now recorded as they are billed. Therefore, the traditional
charge to revenues for fuel overcollections in the winter months
no longer occurs, resulting in the increase in revenues for the
first half of 1995.
Service-area sales for the second quarter of 1995 totaled
approximately 2.1 billion kilowatt-hours and were 5.0 percent
less than the second quarter of 1994. Service-area sales of
electricity totaled approximately 4.5 billion kilowatt-hours for
the six-month period ended June 30, 1995, a decrease of 4.9
percent compared to the first six months of 1994.
<TABLE>
<C> <C> <C> <C> <C> <C>
Service Area Kilowatt-hour Sales (Millions of KWHs)
Period Ended June 30,
Three Months Six Months
% %
1995 1994 Change 1995 1994 Change
Residential 634.5 664.3 (4.5)% 1,451.4 1,542.7 (5.9)%
Commercial 565.2 573.9 (1.5) 1,209.0 1,220.7 (1.0)
Industrial 876.7 945.4 (7.3) 1,744.4 1,861.7 (6.3)
Other 32.3 36.7 (11.9) 67.8 79.1 (14.3)
2,108.7 2,220.3 (5.0)% 4,472.6 4,704.2 (4.9)%
</TABLE>
The changes in service area kilowatt-hour sales reflect the
following:
Kilowatt-hour sales to residential customers decreased by
4.5% in the second quarter and by 5.9% for the six months
ended June 30, 1995 compared to 1994; usage per customer was
down 5.5 percent in the second quarter and by 7.0 percent
for the six months ended June 30, 1995. Warmer than normal
winter temperatures and declines in the space and water
heating subclass usage contributed to this decrease.
Commercial sales decreased by 1.5% and 1.0% for the three-
and six-month periods from 1994, reflecting decreases or
flat sales in most sectors.
Industrial kilowatt-hour sales decreased by 7.3% in the
second quarter and by 6.3% for the six-months ended June 30,
1995 compared to 1994 due primarily to decreased sales to
the pulp and paper industry of 12.5% in the second quarter
and 11.5% for the six-month period ended June 30, 1995.
This sector accounts for approximately 60% of the industrial
sales category. The primary factor in the decline in sales
to this industry was the loss of 127 million kilowatt-hours
of sales formerly made to a customer who began taking
service from another utility in late 1994. See Note 4 to
Consolidated Financial Statements in the Company's Form 10-K
for a detailed discussion of this matter. A sales increase
of 2.7% for the second quarter and 3.9% for the six-months
ended June 30, 1995 occurred in all other industrial
customers as a group.
The components of the change in electric operating revenues for
the six months ended June 30, 1995, as compared to the same
period in 1994, are as follows:
Three Six<PAGE>
Months Months
(Dollars in Millions)
Revenues from Kilowatt-hour Sales:
Total Service-Area Base Revenues $ (3,158) $(4,058)
Fuel Revenues (10,321) 11,809
Non-Territorial Base Revenues (799) (534)
Revenues from Kilowatt-hour Sales (14,278) 7,217
Other Operating Revenues, including
Maine Electric Power Company, Inc. 4,526 5,317
Total Change in Electric Operating
Revenues $ (9,752) $ 12,534
Total service-area base revenues decreased for the second quarter
and the six months ended June 30, 1995 reflecting lower kilowatt-
hour sales, a December 1994 annual price decrease totaling $5.6
million, and the discounted rates given competitively positioned
customers effective with the ARP. For a complete discussion of
discounted rates, see Note 4 to consolidated Financial Statements
in the Company's Form 10-K.
Fuel revenue changes reflect the elimination under the ARP of the
reconcilable fuel clause, discussed above. Seasonal fluctuations
in fuel revenues will continue throughout the remainder of 1995.
MEPCO's electric sales and transmission revenues from New England
utilities other than the Company (included in other operating
revenues in the preceding table) amounted to $2.8 million and
$1.0 million in the second quarters of 1995 and 1994,
respectively. These same totals for the six-months ended June
30, 1995 and 1994 were $4.5 million and $2.8 million,
respectively. Under a Participation Agreement that terminates in
1996, all of MEPCO's costs, including a return on invested
capital, are paid by the participating utilities (Participants),
which include the Company and most of the larger New England
electric companies. The level of MEPCO's revenues and expenses
changes depending upon the level of energy purchases by
Participants.
Purchased power-capacity expense increased by $14.2 million in
the second quarter of 1995 and by $20.2 million in the six months
ended June 30, 1995. Both periods included the one-time pre-tax
charge of $15.0 million for the Company's entire estimated cost
of the tube sleeving at Maine Yankee. The Maine Yankee charge,
which represents CMP's share of the previously reported estimated
total repair cost of $40.0 million, was accrued as of June 30,
1995; actual billings for repair work will continue for several
months. Other charges in the six month period included higher
nuclear capacity expense at two other nuclear plants in which the
Company has an equity interest. The year-to-date expense
comparison also includes the 1994 credit for the reversal of a
$4.1 million "capacity deficiency fund". A January 1994 MPUC-
approved stipulation favorably resolved all issues related to
that fund.
Other operation and maintenance expenses increased by $13.7
million compared to the second quarter of 1994 and $17.5 million
compared to the first half of 1994. These increases primarily
reflect significantly higher monthly charges for amortization of
purchased-power contract buy-outs and the one-time pre-tax charge
of $4.8 million for costs associated with the Company's SRO.
Transmission and distribution expenses increased slightly in both<PAGE>
periods. Salaries expense decreased by $1.9 million for the six
months ended June 30, 1995.
Federal and state income taxes decreased by $17.0 million in the
second quarter and by $6.6 million for the six months ended June
30, 1995. Federal and state income taxes fluctuate with the
level of pre-tax earnings and the regulatory treatment of taxes
by the MPUC. Lower pre-tax earnings were attributable to lower
sales levels and the one-time charges for Maine Yankee tube
sleeving and the SRO. The tax effect, applicable to both the
second quarter and the six months ended June 30, 1995, of these
one-time charges were decreases of $6.1 million for Maine Yankee
tube sleeving and $2.0 million for the SRO.
Interest on long-term debt during the second quarter of 1995
increased by approximately $1.4 million and $3.1 million for the
first six months of 1995 while other interest expense remained
flat compared to 1994. The increase reflects higher levels of
outstanding long-term debt when compared to 1994. The increased
debt results from the issuance of additional mortgage bonds
during 1994 and the note to the Finance Authority of Maine issued
to finance the buy-out of a large non-utility generator contract
in 1994.
Liquidity and Capital Resources
Approximately $77.5 million of cash was provided during the first
half of 1995 from net income before non-cash items, primarily
depreciation and amortization and the accrual of the estimated
cost of the Maine Yankee tube sleeving. During such period,
approximately $2.2 million of cash was provided by fluctuations
in certain assets and liabilities and from other operating
activities.
During the first six months of 1995, the Company reduced the
level of preferred stock outstanding by $5.5 million through
normal sinking fund requirements. Dividends paid on common stock
were $14.6 million, while preferred-stock dividends utilized $5.3
million of cash. Medium Term Notes were reduced by $15.0
million.
Investing activities, primarily construction expenditures,
utilized $20.1 million in cash during the first half of 1995 for
generating projects, transmission, distribution, and general
construction expenditures.
In order to accommodate existing and future loads on its electric
system the Company is engaged in a continuing construction
program. The Company's plans for improvements and expansions,
its load forecast and its power-supply sources are under a
process of continuing review. Actual construction expenditures
will depend upon the availability of capital and other resources,
load forecasts, customer growth and general business conditions.
The ultimate nature, timing and amount of financing for the
Company's total construction programs, refinancing and energy-
management capital requirements will be determined in light of
market conditions, earnings and other relevant factors.
To support its short-term capital requirements, the Company
maintains an unsecured $50-million revolving credit agreement
with several banks that can be used to support commercial paper
borrowing or as short-term financing. However, access to<PAGE>
commercial paper markets has been substantially reduced, if not
eliminated, as a result of the downgrading of the Company's
credit ratings during 1993. The amount of outstanding short-term
borrowing will fluctuate with day-to-day operational needs, the
timing of long-term financing, and market conditions.
On November 9, 1994, the Company entered into a Competitive
Advance and Revolving Credit Facility (Revolving Credit
Facility), with several banks and Chemical Bank, as agent for the
lenders, to provide up to $80 million of revolving credit loans.
The Revolving Credit Facility supplements the existing $50
million revolving-credit agreement and replaced the Company's $73
million of individual lines of credit.
Several credit-rating actions relating to the Company's
securities took place in early 1995, when the Company's actions
taken during 1994 with respect to cost control, NUG cost
reductions, the regulatory reform under the ARP, and the
competitive pricing agreements with large customers, were
recognized by Moody's Investors Service (Moody's) which upgraded
the Company's ratings on preferred stock and commercial paper,
and Duff & Phelps Credit Rating Co. (Duff & Phelps), which
upgraded its preferred stock rating. After announcement of the
Maine Yankee steam generator tube issues Duff & Phelps placed the
Company on "credit watch" for possible downgrade, but on May 25,
1995, removed the Company's fixed-income securities from "Rating
Watch--Down" and reaffirmed the Company's ratings. Moody's
reaffirmed its ratings of the Company's securities on June 19,
1995, including its negative rating outlook. Standard and Poor's
Corp. continues to monitor the Maine Yankee situation and its
impact on its ratings of the Company's securities.<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Environmental Matters. For a discussion of administrative and
judicial proceedings concerning cleanup of a site containing soil
contaminated by PCB's from equipment originally owned by the
Company, see Note 2, "Commitments and Contingencies," "Legal and
Environmental Matters," which is incorporated herein by
reference.
Regulatory Matters. For a discussion of certain other Regulatory
matters affecting the Company, see Note 3, "Regulatory Matters,"
which is incorporated herein by reference.
Item 2. through Item 3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the stockholders of the Company was held on
May 24, 1995. Proxies for the meeting were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934. There
was no solicitation in opposition to the management's nominees as
listed in the proxy statement, and all of such nominees were
elected.
Three matters were voted on at the meeting. One was the election
of four directors to Class II of the Company's Board of Directors
for a three-year term. All four nominees were elected, with the
following vote tabulations:
E. James Dufour:
Votes for - 2,334,820
Votes withheld - 85,162
Abstentions - 594,642
Broker nonvotes - 235,364
David M. Jagger:
Votes for - 2,337,274
Votes withheld - 82,708
Abstentions - 594,642
Broker nonvotes - 235,364
Charles E. Monty:
Votes for - 2,333,924
Votes withheld - 86,058
Abstentions - 594,642
Broker nonvotes - 235,364
Robert H. Reny:
Votes for - 2,330,116
Votes withheld - 89,866
Abstentions - 594,642
Broker nonvotes - 235,364<PAGE>
Two other matters voted on at the meeting were:
1. Approval of the appointment of Coopers & Lybrand L.L.P.,
Boston Massachusetts, as the Company's auditors for the year
1995. The appointment was approved, with the following vote
tabulations:
Votes for - 2,369,070
Against - 21,016
Votes withheld - 594,642
Abstentions - 29,896
Broker nonvotes - 235,364
2. Approval of a shareholder proposal recommending redemption of
rights issued under Shareholder Rights Plan and termination of
the Plan. The proposal was approved, with the following vote
tabulations:
Votes for - 929,636
Against - 916,342
Votes withheld - 1,047,027
Abstentions - 121,619
Broker nonvotes - 235,364
Item 5. Other Events
Maine Yankee Steam Generator Tubes. For a discussion of issues
arising from the discovery of a large number of degraded steam
generator tubes at the Maine Yankee plant see Note 2,
"Commitments and Contingencies," "Maine Yankee Atomic Power
Company Steam Generator Tubes," which is incorporated herein by
reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. The Company filed the following
reports on Form 8-K during the second quarter of 1995
and thereafter to date:
Date of Report Items Reported
May 22, 1995 Item 5
(a) The Company reported that the Nuclear Regulatory Commission
had approved two sleeving processes for the Maine Yankee Atomic
Power Company ("Maine Yankee") nuclear generating plant steam
generator tubes and that Maine Yankee had selected Westinghouse
Electric Corp. as the contractor for the tube sleeving project.
(b) The Company also reported that at its annual meeting of
stockholders on May 24, 1995, the stockholders had approved a
shareholder proposal recommending redemption of the rights issued
by the Company under its Shareholder Rights Plan and termination
of the Plan, re-elected four incumbent directors, and approved
the appointment of Coopers & Lybrand L.L.P. as the Company's
auditors for 1995.
(c) Finally, the Company reported that Duff & Phelps Credit
Rating Co. had removed the Company's fixed-income securities from
"Rating Watch--Down" and reaffirmed the Company's ratings.<PAGE>
Date of Report Items Reported
July 19, 1995 Item 5
(a) The Company announced its second-quarter financial results,
pointing out specifically that one-time accounting charges for
the costs of the steam-generator tube sleeving project at the
Maine Yankee plant and the costs of an early retirement program
at the Company had resulted in an $11.2 million second-quarter
loss for the Company.
(b) The Company also reported that on July 19, 1995, its Board
of Directors had terminated the right to exercise the rights
issued under its Shareholder Rights Plan, effective immediately,
and that it would pay the redemption price of one cent per right
on August 28, 1995, to holders of record on August 14, 1995.
(c) The Company also reported that Robert E. Tuoriniemi had been
elected Comptroller of the Company, effective August 1, 1995, to
fill the vacancy caused by a retirement.
<PAGE>
Signatures
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.
CENTRAL MAINE POWER COMPANY
(Registrant)
Date: August 11, 1995 /S/Robert E. Tuoriniemi
Robert E. Tuoriniemi, Comptroller (Chief
Accounting Officer)
/S/David E. Marsh
David E. Marsh, Vice President, Corporate
Services and Chief Financial Officer
(Principal Financial Officer and duly
authorized officer)<PAGE>
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<TOTAL-NET-UTILITY-PLANT> 1,066,471
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<TOTAL-ASSETS> 2,016,112
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74,528
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<EARNINGS-AVAILABLE-FOR-COMM> 12,616
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<PAGE>
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