<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(3)
REGISTRATION NO. 33-56939
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 29, 1994)
$110,000,000
CENTRAL MAINE POWER COMPANY
MEDIUM-TERM NOTES, SERIES C
DUE FROM NINE MONTHS TO THIRTY YEARS FROM DATE OF ISSUE
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Central Maine Power Company (the "Company") may offer from time to time its
Medium-Term Notes, Series C (the "Notes"), in an aggregate principal amount of
up to $110,000,000. Each Note will mature from nine months to thirty years
from its date of issue, as selected by the initial purchaser and agreed to by
the Company. The Notes are limited to an aggregate principal amount of
$150,000,000, of which $40,000,000 in aggregate principal amount have been
issued as of the date hereof. See "Description of Notes" in this Prospectus
Supplement and the accompanying Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
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<TABLE>
<CAPTION>
Price to Agent's Proceeds to
Public(1) Commission(2) the Company(2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........... 100.00% .125%-1.750% 99.875%-98.250%
- -------------------------------------------------------------------------------
Total.............. $110,000,000 $137,500-$1,925,000 $109,862,500-$108,075,000
</TABLE>
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(1) Unless otherwise specified in the Pricing Supplement relating thereto,
each Note will be issued at 100% of the principal amount thereof.
(2) The Company will pay Lehman Brothers, Lehman Brothers Inc., Bear, Stearns
& Co. Inc., Salomon Brothers Inc, SBC Warburg Dillon Read Inc. or other
agents, (each an "Agent," and collectively, the "Agents"), a commission,
in the form of a discount ranging from .125% to 1.750%, of the principal
amount of any Note sold through such Agent, depending on such Note's
Specified Maturity and the credit rating assigned to the Notes. Any Agent,
acting as principal, may also purchase Notes at a discount for resale to
one or more investors or one or more broker-dealers (acting as principal
for purposes of resale) at varying prices related to prevailing market
prices at the time of resale, as determined by such Agent, or, if so
agreed, at a fixed public offering price. The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities
under the applicable Federal and state securities laws.
(3) Before deducting offering expenses payable by the Company estimated at
$269,867.
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The Notes may be offered on a continuing basis by the Company through the
Agents, each of which has agreed to use its reasonable efforts to solicit
offers to purchase the Notes. The Company also may sell Notes to any Agent
acting as principal for resale to one or more investors, or one or more
broker-dealers. The Company has reserved the right to sell Notes directly to
investors on its own behalf and on such sales no commission will be paid. The
Notes will not be listed on any securities exchange, and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. The Company reserves the
right to withdraw, cancel or modify the offer made hereby without notice. The
Company or any Agent who solicited an offer to purchase Notes may reject any
such offer in whole or in part. See "Plan of Distribution".
------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
SBC WARBURG DILLON READ INC.
The date of this Prospectus Supplement is February 17, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF NOTES FOLLOWING THE PRICING OF THE
OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE NOTES OR FOR THE PURPOSE
OF MAINTAINING THE PRICE OF THE NOTES. FOR A DESCRIPTION OF THESE ACTIVITIES
SEE "PLAN OF DISTRIBUTION".
The following information supplements the information in the accompanying
Prospectus and should be used in conjunction therewith. To the extent that a
statement contained in this Prospectus Supplement modifies or supersedes a
statement in the Prospectus, such a statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
RISK FACTORS
As set forth in the documents filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus, the Company faces major
uncertainties in a number of areas, particularly in connection with its
interest in Maine Yankee Atomic Power Company ("Maine Yankee") and other
nuclear generating plants and with the restructuring of the electric utility
industry in anticipation of full competition. The following is a summary of
certain information contained in such documents and should be read in
conjunction therewith and with any other documents filed with the Commission
under the Exchange Act after the date hereof.
This Prospectus Supplement contains forecast information items that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. All such forward-looking information is necessarily only
estimated. There can be no assurance that actual results will not differ from
expectations. Actual results have varied materially and unpredictably from
expectations.
Factors that could cause actual results to differ materially include, among
other matters, the permanent closure and decommissioning of the Maine Yankee
nuclear generating plant and resulting regulatory proceedings; the actual
costs of decommissioning the Maine Yankee plant; continuing outages at other
generating units in which the Company holds interests; electric utility
restructuring, including the ongoing state and federal activities; the results
of the Company's planned sale of its generating assets; the Company's ability
to recover its costs resulting from the January 1998 ice storms; future
economic conditions; earnings-retention and dividend pay-out policies;
developments in the legislative, regulatory and competitive environments in
which the Company operates, including regulatory treatment of stranded costs;
the Company's investments in unregulated businesses; and other circumstances
that could affect anticipated revenues and costs, such as unscheduled
maintenance or repair requirements at nuclear plants and other facilities and
compliance with laws and regulations.
1997 FINANCIAL RESULTS
On January 30, 1998, the Company announced its financial results for 1997.
The Company reported earnings of $5.2 million ($0.16 per share), including
$3.9 million ($0.12 per share) earned in the fourth quarter. Earnings for 1996
were $50.8 million, or $1.57 per share. Replacement-power costs and other
costs related to the now-closed Maine Yankee nuclear plant were the main
factors that eroded 1997 earnings from their 1996 level.
The Company's electric operating revenues for 1997 were $954.2 million, down
1.3 percent from the 1996 level of $967 million. Lower non-territorial energy
sales resulting from Maine Yankee's being off-line and reducing the Company's
total energy supply were the main factor in the decline in total revenues. See
"Permanent Shutdown of Maine Yankee Plant" below. Revenues from the Company's
service area rose 2.2 percent in 1997 to $890.1 million, on energy sales of
9.35 billion kilowatt-hours, up 1.4 percent from 1996.
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The Company incurred $59.5 million in additional costs to replace Maine
Yankee power and pay its share of increased repair and other operating costs
at Maine Yankee in 1997. With the decommissioning process commencing, the
Company expects that its share of Maine Yankee operating costs could decrease
by as much as $30 million in 1998.
Despite the $75 million in annual Maine Yankee-related costs imbedded in the
current determination of the Company's required revenues for ratemaking
purposes and despite success in controlling other costs, the higher nuclear-
related costs incurred by the Company in 1997 reduced earnings to a level that
triggered the low-earnings bandwidth provisions of the Company's Alternative
Rate Plan ("ARP"). That provision is activated when actual earnings for a year
are outside a bandwidth of 350 basis points above or below a 10.55-percent
current rate-of-return allowance. The Company's earnings for 1997 represent a
rate of return on common equity of 1.04 percent. A return below the low end of
the range provides for additional revenues through rates equal to one-half the
difference between the actual earned rate of return of 1.04 percent and the
7.05-percent (10.55 percent minus 350 basis points) low end of the bandwidth.
The Company's 1998 annual ARP compliance filing with the Maine Public
Utilities Commission ("MPUC") will also contain information for the MPUC on
the Company's costs of restoring service to its customers after the severe ice
storm of January 7 through 9, 1998, and a second ice storm that struck part of
the Company's service territory on January 24, 1998. A January 15 Order of the
MPUC allowed the Company to defer such incremental costs on its books pending
the Company's filing under the ARP, which allows the MPUC to consider and
provide recovery of costs of certain "extraordinary events". The Company
estimates that its total incremental restoration costs from the storms could
total approximately $60 million to $65 million. Such costs were largely labor-
related, as the Company used hundreds of crews from out-of-state utilities,
tree-service companies, and construction firms to repair the unprecedented
damage, which required more than 400,000 service restorations. The Company is
studying available means of mitigating the cost impact of the storms.
The effect of the sharing provision of the ARP on the Company's revenues
will be determined when the MPUC considers the Company's 1998 ARP rate-cap
adjustments upon the Company's next annual ARP compliance filing with the
MPUC, which is scheduled for March 15, 1998. However, the Company cannot
predict the amount of additional revenues that may result, and, in any case,
any entitlement to such revenues under the ARP would not be likely to start
until July 1, 1998.
In announcing its 1997 results, the Company re-affirmed its earlier public
statements that it intended to stand by its objective of holding price
increases at or below the rate of inflation through 1999 in order to attain
its goal of price stability. The Company believes that stable prices continue
to be essential to its ability to retain and promote electricity sales.
AGREEMENT FOR SALE OF COMPANY'S GENERATION ASSETS
On April 28, 1997, the Company announced a plan to seek proposals to
purchase its generating assets and, as part of an auction process, received
final bids on December 10, 1997. On January 6, 1998, the Company announced
that it had reached agreement to sell all of its hydro, fossil and biomass
power plants with a combined generating capacity of 1,185 megawatts for $846
million in cash to Florida-based FPL Group, the winning bidder in the auction
process.
The hydropower assets to be included in the sale represent approximately 373
megawatts of generating capacity. The Company's interest in the William F.
Wyman steam plant in Yarmouth, Maine, the largest of the Company's three
fossil-fueled generating assets included in the sale, is 594 megawatts,
followed by Mason Station in Wiscasset, Maine, at 145 megawatts, and Cape
Station in South Portland, Maine, at 42 megawatts. The sole biomass plant is
the 31-megawatt unit in Fort Fairfield, Maine, owned by a wholly-owned
subsidiary of the Company.
The Company's interests in the power entitlements from approximately 50
power-purchase agreements with non-utility generators representing
approximately 488 megawatts, its 2.5-percent interest in the Millstone III
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<PAGE>
nuclear generating unit in Waterford, Connecticut, its 3.59-percent interest
in the output of the Vermont Yankee nuclear generating plant in Vernon,
Vermont, and its entitlement in the NEPOOL Phase II interconnection with
Hydro-Quebec all attracted insufficient interest to be included in the present
sale. The Company will continue to seek buyers for those assets. The Company
did not offer for sale its interests in the Maine Yankee (Wiscasset, Maine),
Connecticut Yankee (Haddam, Connecticut) and Yankee Atomic (Rowe,
Massachusetts) nuclear generating plants, all of which are in the process of
being decommissioned.
The electric utility restructuring law passed by the Maine Legislature in
the spring of 1997 requires the Company to divest its generating plants and
power-purchase agreements by March 1, 2000, when its customers will be free to
choose among competitive energy suppliers, but the Company elected to conduct
an earlier sale. In addition, as part of its agreement with FPL Group, the
Company entered into energy buy-back agreements to assist in fulfilling its
obligation to supply its customers with power until March 1, 2000.
Substantially all of the generating assets included in the sale are subject
to the lien of the Company's General and Refunding Mortgage Indenture dated as
of April 15, 1976 (the "Indenture"). Therefore, substantially all of the
proceeds from the sale must be deposited with the trustee under the Indenture
at the closing of the sale to free the generating assets from the lien of the
Indenture. Proceeds on deposit with the trustee may be used by the Company to
redeem or repurchase bonds under the terms of the Indenture, including the
possible discharge of the Indenture. In addition, the proceeds could provide
the flexibility to redeem or repurchase outstanding equity securities. The
Company must also provide for payment of applicable taxes resulting from the
sale. The manner and timing of the ultimate application of the sale proceeds
after closing are in any event subject to various factors, including Indenture
provisions, market conditions and terms of outstanding securities.
The bid value in excess of the remaining investment in the power plants will
reduce the Company's stranded costs and other costs, which could lower the
amount that would otherwise be collected from customers by nearly half a
billion dollars. However, the Company will incur incremental costs as a result
of the power buy-back arrangements in excess of the pre-sale costs of capacity
and energy from the plants being sold, which will effectively lower the amount
of sale proceeds available to reduce stranded and other costs. The Company
believes that the reduction in stranded and other costs could permit a
reduction in rates for the Company's customers.
The sale is subject to various closing conditions, including the approval of
state and federal regulatory agencies, which approval process the Company
expects could take approximately six to twelve months, and is subject to
consents or covenant waivers from certain of the Company's lenders. The
Company cannot predict whether or in what form such approvals, consents or
waivers will be obtained.
The Company believes that consummation of the asset sale described above
would constitute significant progress in resolving some of the uncertainties
regarding the effects of electric-utility industry restructuring on the
Company's investors; however, significant risks and uncertainties would
remain. These include, in addition to those enumerated under "Risk Factors"
above, but are not limited to: (1) the possibility that a state or federal
regulatory agency will impose adverse conditions on its approval of the asset
sale; (2) the possibility that new state or federal legislation will be
implemented that will increase the risks to such investors from those
contemplated by current legislation; and (3) the possibility of legislative,
regulatory or judicial decisions that would reduce the ability of the Company
to recover its stranded costs from that contemplated by existing law.
PERMANENT SHUTDOWN OF MAINE YANKEE PLANT
On August 6, 1997, the Board of Directors of Maine Yankee voted to
permanently cease power operations at its nuclear generating plant at
Wiscasset, Maine (the "Plant") and to begin decommissioning the Plant. As
reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997 and its Current Reports
on Form 8-K dated May 15, 1997 and August 1, 1997, the Plant has been shut
down since
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<PAGE>
December 6, 1996. The decision to close the Plant permanently was based on an
economic analysis of the costs, risks and uncertainties associated with
operating the Plant compared to those associated with closing and
decommissioning it.
Costs. The Company has been incurring substantial costs in connection with
its 38% share of Maine Yankee costs, as well as additional costs for
replacement power while the Plant has been out of service. For the twelve
months ended December 31, 1997, such costs amounted to approximately $132.3
million for the Company: $72.8 million due to basic operations and maintenance
costs, $54.0 million due to replacement power costs and $5.5 million
associated with incremental costs of operations and maintenance. The Maine
Yankee Board's decision to close the Plant mitigated the costs the Company
would otherwise have incurred in 1997 through a phasing down of Maine Yankee's
operations and maintenance costs, with Maine Yankee's workforce having been
reduced from approximately 475 to 214 employees as of December 31, 1997, but
did not reduce the need to buy replacement energy and capacity. The amount of
costs for replacement energy and capacity varies based on the Company's power
requirements and market conditions, but the Company expects such costs to be
within a range of approximately $5.0 million to $5.5 million per month during
1998, based on current energy and capacity needs and market conditions. Under
the electric utility restructuring legislation enacted by the Maine
Legislature in May 1997 discussed below, the Company's obligations to provide
replacement power will terminate on March 1, 2000, along with its other power-
supply obligations. In the interim, the termination of a major non-utility
generator ("NUG") contract should result in savings to the Company at an
annual rate of approximately $25 million commencing November 1, 1997.
The impact of the nuclear-related costs on the Company was the major
obstacle to achieving satisfactory results in 1997, despite the approximately
$75 million in annual Maine Yankee-related costs embedded in the current
determination of the Company's required revenues for ratemaking purposes and
despite success in controlling other operating costs. See "1997 Financial
Results" above.
The Company's 38% ownership interest in Maine Yankee's common equity
amounted to $29.8 million as of December 31, 1997, and under Maine Yankee's
Power Contracts and Additional Power Contracts, the Company is responsible for
38% of the costs of decommissioning the Plant. Maine Yankee's most recent
estimate of the cost of decommissioning is $380.4 million, based on a 1997
study by an independent engineering consultant, plus estimated costs of
interim spent-fuel storage of $127.6 million, for an estimated total cost of
$508.0 million (in 1997 dollars). The previous estimate for decommissioning,
by the same consultant, was $316.6 million (in 1993 dollars), which resulted
in approximately $14.9 million being collected annually from Maine Yankee's
sponsors pursuant to a 1994 Federal Energy Regulatory Commission ("FERC") rate
order. Through December 31, 1997, Maine Yankee had collected approximately
$199.5 million for its decommissioning obligations.
On November 6, 1997, Maine Yankee submitted the new estimate to the FERC as
part of a rate case reflecting the fact that the Plant is no longer operating
and has entered the decommissioning phase. If the FERC accepts the new
estimate, the amount of Maine Yankee's collections for decommissioning would
rise from the $14.9 million previously allowed by the FERC to approximately
$36 million per year. Several interested parties have intervened in the FERC
proceeding, including state regulators.
As of September 1, 1997, Maine Yankee has estimated the sum of the future
payments for the closing, decommissioning and recovery of the remaining
investment in Maine Yankee to be approximately $930 million, of which the
Company's 38% share would be approximately $353 million. Legislation enacted
in Maine in 1997 calling for restructuring the electric utility industry
provides for recovery of decommissioning costs, to the extent allowed by
federal regulation, through the rates charged by the transmission and
distribution companies. Based on the legislation and regulatory precedent
established by the FERC in its opinion relating to the decommissioning of the
Yankee Atomic nuclear plant, the Company believes that it is entitled to
recover substantially all of its share of such costs from its customers and as
of December 31, 1997, is carrying on its consolidated balance sheet a
regulatory asset and a corresponding liability in the amount of $329 million,
which is the $353 million discussed above net of the post-September 1, 1997
cost-of-service payments to Maine Yankee.
S-5
<PAGE>
Management Audit. On September 2, 1997, the MPUC released the report of a
consultant it had retained to perform a management audit of Maine Yankee for
the period January 1, 1994, to June 30, 1997. The report contained both
positive and negative conclusions, the latter including: that Maine Yankee's
decision in December 1996 to proceed with the steps necessary to restart the
Plant was "imprudent"; that Maine Yankee's May 27, 1997 decision to reduce
restart expenses while exploring a possible sale of the Plant was
"inappropriate", based on the consultant's finding that a more objective and
comprehensive competitive analysis at that time "might have indicated a
benefit for restarting" the Plant; and that those decisions resulted in Maine
Yankee incurring $95.9 million in "unreasonable" costs. On October 24, 1997,
the MPUC issued a Notice of Investigation initiating an investigation of the
shutdown decision and of the operation of the Plant prior to shutdown, and
announced that it had directed its consultant to extend its review to include
those areas. The Company does not know how the MPUC plans to use the
consultant's report, but believes the report's negative conclusions are
unfounded and may be contradictory. The Company has been charging its share of
the Maine Yankee expenses to income, and believes it would have substantial
constitutional and jurisdictional grounds to challenge any effort in an MPUC
proceeding to alter wholesale Maine Yankee rates made effective by the FERC.
On November 7, 1997, Maine Yankee initiated a legal challenge to the MPUC
investigation in the Maine Supreme Judicial Court alleging that such an
investigation falls exclusively within the jurisdiction of the FERC and that
the MPUC investigation is therefore barred on constitutional grounds. The
Company filed a similar legal challenge on the same day. The MPUC subsequently
stayed its investigation pending the outcome of Maine Yankee's FERC rate case,
with the MPUC's consultant continuing its extended review.
Debt Restructuring. Maine Yankee entered into agreements in August 1997 with
the holders of its outstanding First Mortgage Bonds and its lender banks (the
"Standstill Agreements") under which the bondholders and banks agreed that
they would not assert that the August 1997 voluntary permanent shutdown of the
Plant constituted a covenant violation under Maine Yankee's First Mortgage
Indenture or its two bank credit agreements. The parties also agreed in the
Standstill Agreements to maintain Maine Yankee's bank borrowings at a level
below that of the prior aggregate bank commitments, which level Maine Yankee
considers adequate for its foreseeable needs. The Standstill Agreements, as
extended in October 1997, were to terminate on January 15, 1998, by which date
Maine Yankee was to have reached agreement on restructured debt arrangements
reflecting its decommissioning status. Also as previously reported, on
November 6, 1997, Maine Yankee filed a rate proceeding with the FERC
reflecting the Plant's decommissioning status and requesting an effective date
of January 15, 1998, for the amendments to Maine Yankee's Power Contracts and
Additional Power Contracts, which revise Maine Yankee's wholesale rates and
clarify and confirm the obligations of Maine Yankee's sponsors to continue to
pay their shares of Maine Yankee's costs during the decommissioning period.
On January 15, 1998, Maine Yankee, its bondholders and lender banks revised
the Standstill Agreements and extended their term to April 15, 1998, subject
to satisfying certain milestone obligations during the term of the extension.
One such obligation is that Maine Yankee must accept an underwritten
commitment to refinance its bonds and bank debt by February 12, 1998, which
commitment must be subject only to closing conditions that are reasonably
capable of being satisfied by April 15, 1998, and reasonably satisfactory to
the bondholders and banks. Maine Yankee has reached general agreement on the
structure and basic terms of an underwritten refinancing arrangement which it
believes would satisfy the obligation in the extended Standstill Agreements
upon receipt of a final commitment by the prospective underwriter. The Company
cannot predict whether a satisfactory refinancing arrangement will be
consummated by Maine Yankee.
On January 14, 1998, the FERC issued an "Order Accepting for Filing and
Suspending Power Sales Contract Amendment, and Establishing Hearing
Procedures" (the "FERC Order") in which the FERC accepted for filing the rates
associated with the amended Power Contracts and made them effective January
15, 1998, subject to refund. The FERC also granted intervention requests,
including among others those of the MPUC, Maine Yankee's largest bondholder,
and two of its lender banks, denied the request of an intervenor group to
summarily dismiss part of the filing, and ordered that a public hearing be
held concerning the prudence of Maine Yankee's decision to shut down the Plant
and on the justness and reasonableness of Maine Yankee's proposed rate
amendments. The Company expects the prudence issue to be pursued vigorously by
several intervenors,
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<PAGE>
including among others the MPUC, which stayed its own prudence investigation
pending the outcome of the FERC proceeding after a jurisdictional challenge by
Maine Yankee and the Company. The Company cannot predict the outcome of the
FERC proceeding.
Other Maine Yankee Shareholders. Higher nuclear-related costs are affecting
other stockholders of Maine Yankee in varying degrees. Bangor Hydro-Electric
Company, a Maine-based 7% stockholder, has cited its "deteriorating" financial
condition, suspended its common stock dividend, and sought expedited rate
relief. Maine Public Service Company, a 5% stockholder, cited problems in
satisfying financial covenants in loan documents and reduced its common stock
dividend substantially in early March 1997. Northeast Utilities (20%
stockholder through three subsidiaries), which is also adversely affected by
the substantial additional costs associated with the three shut-down Millstone
nuclear units and the permanently shut-down Connecticut Yankee unit, as well
as significant regulatory issues in Connecticut and New Hampshire, has
implemented an indefinite suspension of its quarterly common stock dividends.
A default by a Maine Yankee stockholder in making payments under its Power
Contract or Capital Funds Agreement could have a material adverse effect on
Maine Yankee, depending on the magnitude of the default, and would constitute
a default under Maine Yankee's bond indenture and its two major credit
agreements unless cured within applicable grace periods by the defaulting
stockholder or other stockholders. The Company cannot predict, however, what
effect, if any, the financial difficulties being experienced by some Maine
Yankee stockholders will have on Maine Yankee or the Company.
INTERESTS IN OTHER NUCLEAR PLANTS
On December 4, 1996, the Board of Directors of Connecticut Yankee Atomic
Power Company voted to permanently shut down the Connecticut Yankee plant for
economic reasons, and to decommission the unit, which had not operated since
July of 1996. The Company has a 6% equity interest in Connecticut Yankee,
totaling approximately $6.6 million at December 31, 1997. The Company incurred
replacement power costs of approximately $5.2 million during the twelve months
ended December 31, 1997. Based on cost estimates provided by Connecticut
Yankee, the Company determined its share of the cost of Connecticut Yankee's
continued compliance with regulatory requirements, recovery of its plant
investments, decommissioning and closing the plant to be approximately $36.9
million and is carrying a regulatory asset and a corresponding liability in
that amount on its consolidated balance sheet as of December 31, 1997. The
Company is currently recovering through rates an amount adequate to recover
these expenses.
The Company has a 2.5% direct ownership interest in Millstone Unit No. 3,
which is operated by Northeast Utilities. This facility has been off-line
since April 1996 due to Nuclear Regulatory Commission ("NRC") concerns
regarding license requirements and the Company cannot predict when it will
return to service. Millstone Unit No. 3, along with two other units at the
same site owned by Northeast Utilities, is on the NRC's "watch list" in
"Category 3", which requires formal NRC action before a unit can be restarted.
The Company incurred replacement power costs related to Millstone Unit No. 3
of approximately $4.9 million during the twelve months ended December 31,
1997. On August 7, 1997, the Company and other minority owners of Millstone
Unit No. 3 filed suit and initiated an arbitration claim against Northeast
Utilities, its trustees, and two of its subsidiaries, alleging mismanagement
of the unit by the defendants. The minority owners are seeking to recover
their additional costs resulting from such mismanagement, including their
replacement power costs. The Company cannot predict the outcome of the
litigation and arbitration.
INDUSTRY RESTRUCTURING AND STRANDABLE COSTS
As discussed in the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's 1996 Form 10-K,
the enactment by Congress of the Energy Policy Act of 1992 accelerated
planning by electric utilities, including the Company, for a transition to a
more competitive industry. Significant legislative steps have already been
taken toward competition in general and non-discriminatory transmission access
as discussed below. A departure from traditional regulation, however, could
have a substantial impact on the value of utility assets and on the ability of
electric utilities to recover their costs through rates. In the absence of
full recovery, utilities would find their above-market costs to be "stranded",
or unrecoverable, in the new competitive setting.
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The Company has substantial exposure to cost stranding relative to its size.
In its January 1996 filing, the Company estimated its net-present-value
strandable costs to be approximately $2 billion as of January 1, 1996. These
costs represented the excess costs of purchased power obligations and the
Company's own generating costs over the market value of the power, and the
costs of deferred charges and other regulatory assets. Of the $2 billion,
approximately $1.3 billion was related to above-market costs of purchased
power obligations arising from the Company's long-term, noncancellable
contracts for the purchase of capacity and energy from NUGs, approximately
$200 million was related to estimated net above-market costs of the Company's
own generation, and the remaining $500 million was related to deferred
regulatory assets.
The MPUC also provided estimates of strandable costs for the Company, which
they found to be within a wide range of a negative $445 million to a positive
$965 million. These estimates were prepared using assumptions that differ from
those used by the Company, particularly a starting date for measurement of
January 1, 2000 versus the measurement starting date of January 1, 1996
utilized by the Company. The MPUC concluded that there is a high degree of
uncertainty that surrounds stranded costs estimates, resulting from having to
rely on projections and assumptions about future conditions. In a filing with
the MPUC on December 5, 1997, using a methodology consistent with that used
earlier by the MPUC, the Company estimated its strandable costs to be
approximately $1.2 billion. The estimate was developed without consideration
for the Company's own generating assets, which are in the process of being
sold by auction in 1998. The Company's strandable costs, therefore, could be
mitigated to some extent by the results of the sale. For further discussion of
the MPUC proceeding in which the estimate was filed, see "Required Divestiture
of Generation Assets: Legislation and Regulatory Proceedings", below. For
further discussion of the planned sale of generating assets by the Company,
see "Agreement for Sale of Company's Generation Assets", above. Given the
inherent uncertainty and volatility of these projections, the Company believes
that an annual estimation of stranded costs could serve to prevent significant
over- or under-collection beginning in the year 2000.
Estimated strandable costs are highly dependent on estimates of the future
market for power. Higher market rates lower stranded cost exposure, while
lower market rates increase it. In addition to market-related impacts, any
estimate of the ultimate level of strandable costs depends on state and
federal regulations; the extent, timing and form that competition for electric
service will take; the ongoing level of the Company's costs of operations;
regional and national economic conditions; growth of the Company's sales; the
timing of any changes that may occur from state and federal initiatives on
restructuring; and the extent to which regulatory policies ultimately address
recovery of strandable costs.
The estimated market rate for power is based on anticipated regional market
conditions and future costs of producing power. The present value of future
purchased-power obligations and the Company's generating costs reflects the
underlying costs of those sources of generation in place today, with
reductions for contract expirations and continuing depreciation. Deferred
regulatory asset totals include the current uncollected balances and existing
amortization schedules for purchased power contract restructuring and buyouts
negotiated by the Company to lessen the impact of these obligations, energy
management costs, financing costs, and other regulatory promises.
REQUIRED DIVESTITURE OF GENERATION ASSETS: LEGISLATION AND REGULATORY
PROCEEDINGS
On May 29, 1997, the Governor of Maine signed into law a bill enacted by the
Maine Legislature that will restructure the electric utility industry in Maine
by March 1, 2000. With respect to the ability of the Company to recover
stranded costs, the legislation requires the MPUC, when retail access begins,
to provide a "reasonable opportunity" to recover stranded costs through the
rates of the transmission and distribution company, comparable to the
utility's opportunity to recover stranded costs before the implementation of
retail access under the legislation. Stranded costs are defined as the
legitimate, verifiable and unmitigatable costs made unrecoverable as a result
of the restructuring required by the legislation and would be determined by
the MPUC as provided in the legislation. The MPUC must conduct separate
adjudicatory proceedings to determine the stranded costs for each utility and
the corresponding revenue requirements and stranded-cost charges to be charged
by each transmission and distribution utility. These proceedings must be
completed by July 1, 1999.
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The MPUC has initiated the proceeding that will determine the Company's
stranded costs, corresponding revenue requirements and stranded-cost charges
to be charged by it when it becomes a transmission-and-distribution utility
and has scheduled completion of the proceeding for the second half of 1998. On
December 5, 1997, the Company filed direct testimony in the proceeding
estimating its future revenue requirements as a transmission-and-distribution
utility and providing an updated estimate of its strandable costs, which are
to be defined by the MPUC later in the proceeding. The Company estimated its
strandable costs at approximately $1.2 billion. The estimate was developed
without consideration of the Company's own generating assets, which are in the
process of being sold by auction in 1998. The Company's strandable costs,
therefore, could be mitigated to some extent by the results of the sale. In
its estimate of strandable costs the Company used a methodology consistent
with that used by the MPUC in its earlier announced estimate, which is
discussed in "Industry Restructuring and Strandable Costs", above. The Company
cannot predict the results of the proceeding.
In addition, the legislation requires utilities to use all reasonable means
to reduce their potential stranded costs and to maximize the value from
generation assets and contracts. The MPUC must consider a utility's efforts to
mitigate its stranded costs in determining the amount of the utility's
stranded costs. Stranded costs will be prospectively adjusted as necessary to
correct substantial inaccuracies in the year 2003 and at least every three
years thereafter.
The principal restructuring provisions of the legislation provide for
customers to have direct retail access to generation services and for
deregulation of competitive electricity providers, commencing March 1, 2000
with transmission and distribution companies continuing to be regulated by the
MPUC. By that date, subject to possible extensions of time granted by the MPUC
to improve the sale value of generation assets, investor-owned utilities are
required to divest all generation assets and generation-related business
activities, with two major exceptions: (1) nonutility generator contracts with
qualifying facilities and contracts with demand-side management or
conservation providers, brokers or hosts; and (2) ownership interests in
nuclear power plants. However, the MPUC can require the Company to divest its
interest in Maine Yankee on or after January 1, 2009. The Company has
submitted its plan to divest its generation assets to the MPUC as required by
the legislation and is proceeding with its previously reported plan to sell
its generation assets in 1998, as discussed above in "Agreement for Sale of
Company's Generation Assets". The bill also requires investor-owned utilities,
after February 28, 2000, to sell their rights to the capacity and energy from
all generation assets, including the purchased-power contracts that had not
previously been divested pursuant to the legislation, with certain minor
exceptions.
Upon the commencement of retail access on March 1, 2000, the Company, as a
transmission and distribution utility, will be prohibited from selling
electric energy to retail customers. Any competitive electricity provider that
is affiliated with the Company would be allowed to sell electricity outside
the Company's service territory without limitation as to amount, but within
the Company's service territory the affiliate would be limited to providing no
more than 33% of the total kilowatt hours sold within the Company's service
territory, as determined by the MPUC.
Other features of the legislation include the following:
(a) After the effective date of the legislation, if an entity purchases
10% or more of the stock of a distribution utility, including the Company,
the purchasing entity and any related entity would be prohibited from
selling generation service to any retail customer in Maine.
(b) The legislation encourages the generation of electricity from
renewable resources by requiring competitive providers, as a condition of
licensing, to demonstrate to the MPUC that no less than 30% of their
portfolios of supply sources for retail sales in Maine are accounted for by
renewable resources.
(c) The legislation requires the MPUC to ensure that standard-offer
service is available to all consumers, but any competitive provider
affiliated with the Company would be limited to providing such service for
only up to 20% of the electric load in the Company's service territory.
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(d) Beginning March 1, 2002, or, by MPUC rule, as early as March 1, 2000,
the providing of billing and metering services will be subject to
competition.
(e) A customer who significantly reduces or eliminates consumption of
electricity due to self-generation, conversion to an alternative fuel, or
demand-side management may not be assessed an exit fee or re-entry fee in
any form for such reduction or elimination of consumption or for the re-
establishment of service with a transmission and distribution utility.
(f) Finally, the legislation provides for programs for low-income
assistance, energy conservation, research and development on renewable
resources, assistance for utility employees laid off as a result of the
legislation, and nuclear plant decommissioning costs, all funded through
transmission and distribution utility rates and charges.
The Company has stated that it supports the legislation ultimately enacted,
which reflects protracted negotiations and compromises among the interested
constituencies, and is evaluating means of mitigating its strandable costs
through the financing of the stranded assets. The Company believes, however,
that some of the limitations imposed on transmission and distribution
utilities in the legislation are unnecessary and inappropriate in the
contemplated competitive environment.
FORMATION OF HOLDING COMPANY
On December 8, 1997, the Company filed an application with the MPUC for
authorization to create a holding company that would have as subsidiaries the
Company, the Company's existing non-utility subsidiaries and other entities.
The Company believes that a holding company structure will facilitate the
Company's transition to a partially deregulated electricity market that
provides open access to electricity for Maine consumers beginning on March 1,
2000. Competing as an electric energy provider in that market as of that date
will require the creation of an energy company that is legally separate from
the Company. Creation of an affiliated energy marketing affiliate is proposed
in the MPUC filing.
The Company's application to the MPUC also requests approval of the creation
of a limited liability company in which a proposed new subsidiary of the
holding company would hold a fifty percent membership interest to participate
in the natural gas distribution business in Maine, with the remaining fifty
percent interest being held by New York State Electric & Gas Corporation
("NYSEG") or its affiliate. The Company and NYSEG have entered into an
agreement to pursue the development of a gas distribution business to serve
Maine consumers who do not have access to gas service.
The proposed holding company formation must also be approved by federal
regulators, including the Commission and the FERC, and by the holders of the
Company's common stock and 6% Preferred Stock. The Company intends to take
steps to pursue these approvals.
PROPOSED FEDERAL INCOME TAX ADJUSTMENTS
On September 3, 1997, the Company received from the Internal Revenue Service
("IRS") a Revenue Agent's Report summarizing all adjustments proposed by the
IRS as a result of its audit of the Company's Federal income tax returns for
the years 1992 through 1994, and the Company has received a notice of
deficiency relating to the proposed disallowances. There are two significant
disallowances among those proposed by the IRS. The first is a disallowance of
the Company's write-off of the under collected balance of fuel and purchased-
power costs and the unrecovered balance of its unbilled Electric Revenue
Adjustment Mechanism ("ERAM") revenues, both as of December 31, 1994, which
were charged to income in 1994 in connection with the adoption of the ARP
effective January 1, 1995. The second major adjustment would disallow the
Company's 1994 deduction of the cost of the buyout of the Fairfield Energy
Venture purchased-power contract by the Company in 1994. The aggregate tax
impact, including both Federal and state taxes, of the unresolved issues
amounts to approximately $39 million, over 90% of which is associated with the
two major disallowances. The two major disallowances relate largely to the
timing of the deductions and would not affect net income except for the
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cumulative interest impact which, through September 30, 1997, amounted to
$11.7 million, or a decrease in net income of $7.0 million, and which is
expected to increase interest expense approximately $433.3 thousand per month
until either the tax deficiency is paid or the issues are resolved in favor of
the Company, in which case no interest is due. If the IRS were to prevail, the
Company would be required to make a tax payment of approximately $33 million,
but the Company believes in that event deductions would be amortized over
periods of up to twenty post-1994 tax years. The Company believes its tax
treatment of the unresolved issues was proper and intends to contest the
proposed adjustments vigorously, and as a result the potential interest has
not been accrued. The Company cannot predict the results of its planned
appeals. In addition, the Company incurred $1.1 million of income tax expense
related to settlements of uncontested items in connection with the 1992-1994
IRS audits, and amended return adjustments for 1995 and 1996.
RATIO OF EARNINGS TO FIXED CHARGES
As computed in accordance with Item 503(d) of Regulation S-K of the
Commission, the Company's unaudited ratio of earnings to fixed charges for the
twelve-month period ended December 31, 1997 was 1.4, and such ratio for each
of the calendar years (the Company's fiscal year being a calendar year) in the
period 1993 through 1997, inclusive, was 2.7, 0.3, 2.0, 2.8 and 1.4,
respectively.
DESCRIPTION OF NOTES
GENERAL
The holders of the Company's Preferred Stock have specifically consented to
the issuance of unsecured medium-term notes in an aggregate principal amount
of $500,000,000 outstanding at any one time. Medium-term notes in such an
amount are therefore not subject to the Company's charter restriction on the
issuance of unsecured securities, which (except in the case of certain
refundings) limits such unsecured securities to an amount equal to 20 percent
of the aggregate of all outstanding secured indebtedness, plus capital and
surplus (with certain adjustments). The Notes offered hereby and the Medium-
Term Notes, Series A, the Medium-Term Notes, Series B and the Medium-Term
Notes, Series C previously issued under the Indenture constitute unsecured
medium-term notes for the purpose of the foregoing consent. In addition, the
Company has created and may offer from time to time up to $400,000,000 in
aggregate principal amount of Medium-Term Notes, Series D. As of the date of
this Prospectus, $43 million in aggregate principal amount of unsecured
medium-term notes is outstanding.
In the event that the aggregate principal amount of unsecured medium-term
notes at any time outstanding (including, without limitation, the Notes, the
Medium-Term Notes, Series A, the Medium-Term Notes, Series B, the Medium-Term
Notes, Series C and the Medium-Term Notes, Series D) exceeds $500,000,000, the
excess of such amount would be subject to the charter restriction described
above. The MPUC has approved the issuance of up to $500,000,000 in aggregate
principal amount of medium-term notes of all series at any one time
outstanding. Issuance of medium-term notes in excess of that amount would
require further approvals.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the
Company, the following summary correctly describes certain United States
Federal income tax considerations as of the date of this Prospectus Supplement
relating to ownership of the Notes that may be relevant to an initial Holder
of a Note. This summary is based on laws, regulations, rulings and decisions
now in effect and which are subject to change. This summary deals only with
Holders that will hold Notes as capital assets, and does not address tax
considerations applicable to investors that may be subject to special tax
rules, such as banks, insurance companies, dealers in securities, tax-exempt
organizations, foreign investors, persons that will hold Notes as a position
in a "straddle" for tax purposes or subsequent holders. This summary does not
purport to cover all the possible tax consequences of the purchase, ownership
and disposition of Notes, and it is not intended as tax
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advice. Investors should consult their own tax advisers in determining the tax
consequences to them of the purchase, ownership and disposition of Notes,
including the application to their particular situation of the tax
considerations discussed below, as well as the application of other Federal,
state, local or other tax laws.
Holders of Original Issue Discount Notes generally will be subject to the
special tax accounting rules for original issue discount obligations provided
by the Internal Revenue Code of 1986 and certain Treasury Regulations issued
thereunder (the "Regulations"). Holders of such Notes should be aware that, as
described in greater detail below, they generally must include original issue
discount in ordinary gross income for Federal income tax purposes as it
accrues, in advance of the receipt of cash attributable to that income.
In general, each Holder of an Original Issue Discount Note, whether such
Holder uses the cash or the accrual method of tax accounting, will be required
to include in ordinary gross income the sum of the "daily portions" of
original issue discount on that Note for all days during the taxable year that
the Holder owns the Note. The daily portions of original issue discount on an
Original Issue Discount Note are determined by allocating to each day in any
"accrual period" a ratable portion of the original issue discount allocable to
that accrual period. The "accrual period" for an Original Issue Discount Note
may be of any length and may vary in length over the term of the Note,
provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the first day or
the last day of an accrual period. In the case of an initial Holder, the
amount of original issue discount on an Original Issue Discount Note allocable
to each accrual period is determined by (i) multiplying the "adjusted issue
price" (as defined below) of the Note by a fraction, the numerator of which is
the annual yield to maturity of the Note and the denominator of which is the
number of accrual periods in a year and (ii) subtracting from that product the
amount (if any) payable as interest at the end of that accrual period. The
"adjusted issue price" of an Original Issue Discount Note at the beginning of
any accrual period is the sum of its issue price (as such term is defined for
Federal income tax purposes (including accrued interest, if any)) and the
amount of original issue discount allocable to all prior accrual periods,
reduced by the amount of all payments other than interest payments (if any)
made with respect to such Note in all prior accrual periods. As a result of
this "constant yield" method of including original issue discount income, the
amounts so includible in income by a Holder in respect of an Original Issue
Discount Note are lesser in the early years and greater in the later years
than the amounts that would be includible on a straight-line basis. In the
case of an Original Issue Discount Note that is a Floating Rate Note, both the
"annual yield to maturity" and the "amount payable as interest" are generally
determined for these purposes as though the Note bore interest in all periods
at a fixed rate equal to the level of the Base Rate (as adjusted by the
applicable Spread or Spread Multiplier, if any) on the Original Issue Date.
Payments of interest on Floating Rate Notes that are not based on current
values of an objective interest index will be considered contingent payments
and subject to special rules under the Regulations. Under the Regulations,
payments of interest on the CD Rate Notes, Commercial Paper Rate Notes,
Federal Funds Rate Notes, LIBOR Notes, Prime Rate Notes and Treasury Rate
Notes should be considered payments based on current values of objective
interest indices, and therefore the special rules concerning contingent
payments should not apply to such Notes. If any Floating Rate Note specifies a
Base Rate other than the CD Rate, Commercial Paper Rate, Federal Funds Rate,
LIBOR, Prime Rate or Treasury Rate, to the extent the Federal income tax
consequences vary from the consequences described herein, such tax
consequences will be described in the applicable Pricing Supplement.
Notes with a Specified Maturity of one year or less will be subject to
certain tax rules which apply to the timing of inclusion in income of interest
on such obligations ("Short-Term Notes"). Generally, as discussed in more
detail below, for Federal income tax purposes, an individual or other cash
method Holder of a Short-Term Note is not required to accrue any discount on
the Short-Term Note unless an election is made to do so and interest payments
on the Short-Term Note will not be includible in gross income until the
taxable year of receipt. Such a Holder may, however, be required to defer
certain interest deductions.
An obligation which is issued for an amount less than its "stated redemption
price at maturity" will generally be considered to be issued at a discount for
Federal income tax purposes. Under the Regulations, all
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payments (including all stated interest) with respect to an obligation will be
included in the stated redemption price at maturity if the obligation is a
Short-Term Note and, thus, Holders will be taxed on discount in lieu of stated
interest. This discount will be equal to the excess of the stated redemption
price at maturity over the "issue price" of each Short-Term Note, unless a
Holder elects to compute this discount as acquisition discount using tax basis
instead of issue price. The issue price of each Short-Term Note will be the
initial offering price to the public at which a substantial amount of the
Short-Term Notes are sold. As previously noted, an individual or other cash
method Holder of a Short-Term Note is not required to accrue any discount for
Federal income tax purposes unless an election is made to do so. Holders who
report income for Federal income tax purposes on the accrual method and
certain other Holders, including banks and dealers in securities, are required
to accrue discount on such Short-Term Notes (as ordinary income) on a
straight-line method unless an election is made to accrue the discount
according to a constant interest method based on daily compounding. The amount
of discount which accrues in respect of a Short-Term Note while held by a
Holder will be added to such Holder's tax basis for such Note to the extent
included in income. In the case of a cash method Holder who is not required,
and does not elect, to include discount in income currently, any gain realized
on the sale, exchange or retirement of the Short-Term Note will be ordinary
income to the extent of the discount accrued on a straight-line basis (or, if
elected, according to a constant interest method based on daily compounding)
through the date of sale, exchange or retirement. In addition, such non-
electing Holders which are not subject to the current inclusion requirement
described in this paragraph will be required to defer deductions for any
interest paid on indebtedness incurred or continued to purchase or carry such
Short-Term Notes in an amount not exceeding the deferred interest income,
until such deferred interest income is realized.
The applicable Pricing Supplement will contain a discussion of any special
United States Federal income tax rules with respect to any Extendible Notes.
In addition, generally, for Federal income tax purposes, the defeasance of
the Indenture pursuant to Section 12.1 thereof should not result in any
Federal income tax consequences to the Holders of the Notes. However, the
Internal Revenue Service could assert that the deposit and discharge of the
Indenture should be treated as a taxable exchange for the amounts deposited
pursuant to Article 12 thereof. If such assertion were made and upheld, each
Holder of the Notes might be required to recognize gain or loss equal to the
difference between the Holder's cost or other tax basis for the Notes and the
value of the Holder's interest in the trust. Such Holders thereafter might be
required to include in income at different times and in a different amount
than would be includible in the absence of the discharge. Holders should
consult their tax advisors in determining the potential tax consequences to
them of a defeasance under the Indenture pursuant to Section 12.1 thereof.
PLAN OF DISTRIBUTION
Under the terms of the Distribution Agreement, as amended, the Notes may be
offered on a continuing basis by the Company through the Agents, each of which
has agreed to use its reasonable efforts to solicit purchases of the Notes.
The Company will pay each Agent a commission of from .125% to 1.750% of the
principal amount of each Note sold through such Agent, depending upon such
Note's Specified Maturity and the credit rating assigned to the Notes.
In connection with the offering, the rules of the Commission permit the
Agents to engage in certain transactions that stabilize the price of the
Notes. Such transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Agents create a short position in the Notes in connection with the
offering (i.e., if they sell a larger principal amount of the Notes than is
set forth in the cover page of this Prospectus Supplement), the Agents may
reduce that short position by purchasing Notes in the open market.
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In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases.
None of the Agents makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Notes. In addition, none of the Agents makes any
representation that the Agents will engage in such transactions or that such
transactions, once commenced will not be discontinued without notice.
LEGAL OPINIONS
Choate, Hall & Stewart, a partnership including professional corporations,
Boston, Massachusetts, from time to time provides legal services to Maine
Yankee Atomic Power Company, an affiliate of the Company.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT,
UNDERWRITER OR DEALER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THOSE DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. EACH OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SPEAKS AS
OF ITS DATE AND NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Supplement
Risk Factors........................................................... S-2
Ratio of Earnings to Fixed Charges..................................... S-11
Description of Notes................................................... S-11
Certain Federal Income Tax Consequences................................ S-11
Plan of Distribution................................................... S-13
Legal Opinions......................................................... S-14
Prospectus
Available Information.................................................. 2
Incorporation of Certain Documents by Reference........................ 2
The Company............................................................ 3
Ratio of Earnings to Fixed Charges..................................... 3
Use of Proceeds........................................................ 3
Description of Notes................................................... 3
Certain Federal Income Tax Consequences................................ 18
Plan of Distribution................................................... 20
Legal Opinion.......................................................... 21
Experts................................................................ 21
</TABLE>
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$110,000,000
CENTRAL MAINE
POWER COMPANY
MEDIUM-TERM NOTES,
SERIES C
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PROSPECTUS SUPPLEMENT
FEBRUARY 17, 1998
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LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
SBC WARBURG DILLON
READ INC.
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