UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
001-14786 CMP GROUP, INC. 01-0519429
83 Edison Drive, Augusta, Maine 04336
(207) 623-3521
1-5139 CENTRAL MAINE POWER COMPANY 01-0042740
83 Edison Drive, Augusta, Maine 04336
(207) 623-3521
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Registrant Title of each class on which registered
- ---------- ------------------- -----------------------
CMP Group, Inc. Common Stock, $5 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Registrant Title of each class on which registered
- ---------- ------------------- ---------------------
Central Maine Power Company 6% Preferred Stock -
$100 Par Value (Voting,
Noncallable)
Dividend Series Preferred Stock -
$100 Par Value (Callable)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
CMP Group, Inc. Yes x No _
--
Central Maine Power Company Yes x No _
---
This combined Form 10-K is separately filed by CMP Group, Inc., and Central
Maine Power Company. Information contained herein relating to either individual
registrant is filed by such registrant on its own behalf. Each registrant makes
no representation as to information relating to the other registrant.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
CMP Group, Inc. x
---
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant. The aggregate market value of such common
equity held by non-affiliates of the Company was:
CMP Group, Inc. $905,657,399 on March 1, 2000 (based,
in the case of the common stock of
CMP Group, Inc., on the last reported
sale price thereof on the New York
Stock Exchange on March 1, 2000).
Central Maine Power Company $0 (all held by CMP Group, Inc.)
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
As of March 1, 2000, the number of shares of Common Stock outstanding for each
registrant was as follows:
Registrant Shares
CMP Group, Inc., Common Stock, $5 Par Value 32,442,552
Central Maine Power Company, Common Stock, $5 Par Value (All
held by CMP Group, Inc.) 31,211,471
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated:(1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.
None.
CMP GROUP, INC. and
CENTRAL MAINE POWER COMPANY
INFORMATION REQUIRED IN FORM 10-K
Page
Glossary
Item Number Part I
Item 1. Business 5
Item 2. Properties 17
Item 3. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 27
Part II
Item 5. Market for the Registrant's Common Equity and Related 28
Stockholder Matters
Item 6. Selected Financial Data 28
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations of CMP Group and
Central Maine Power Company 29
Item 7A Quantitative and Qualitative Disclosures
About Market Risk 49
Item 8. Financial Statements and Supplementary Data 50
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 100
Part III
Item 10. Directors and Executive Officers of the Registrant 101
Item 11. Executive Compensation 104
Item 12. Security Ownership of Certain Beneficial Owners
and Management 118
Item 13. Certain Relationships and Related Transactions 120
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 121
Signatures 122
GLOSSARY
The following abbreviations or acronyms are used in the text of this Form 10-K
as defined below:
Term Definition
Form 10-K Annual Report on Form 10-K
ARP Alternative Rate Plan
APB Accounting Principles Board
Assigned Agreements Maine Yankee's Power Contracts, Additional
Power Contracts and Capital Funds Agreements, as
amended, with its Sponsors.
Central Maine Central Maine Power Company, a regulated electric
utility and subsidiary of CMP Group.
Central Securities Central Securities Corporation, a wholly
owned subsidiary of Central Maine which owns and
manages real estate.
CERCLA Comprehensive Environmental Response, Compensation,
and Liability Act.
CMP Group CMP Group, Inc., is the holding company
organized effective September 1, 1998, which owns all
of the common stock of Central Maine Power Company,
Union Water Power Company, MaineCom Services, CNEX,
MainePower, TeleSmart and New England Gas Development.
CMP Group System CMP Group and its wholly-owned and directly and
indirectly controlled subsidiaries.
CMP Natural Gas CMP Natural Gas, L.L.C., a limited-liability company
owned by subsidiaries of CMP Group and Energy East to
distribute natural gas in Maine.
CNEX A wholly owned subsidiary of CMP Group, (previously
called CMP International Consultants), which provides
utility consulting (domestic and international) and
research.
Cumberland Securities Cumberland Securities Corporation, a wholly
owned subsidiary of Central Maine which owns and
manages real estate.
Connecticut Yankee Connecticut Yankee Atomic Power Company
D&P Duff & Phelps Credit Rating Co.
DOE United States Department of Energy
EITF Emerging Issues Task Force of FASB
Energy East Energy East Corporation, a New York holding company
and the parent company of NYSEG effective May 1, 1998
EPA United States Environmental Protection Agency.
EPS Earnings per share
ERAM Electric Revenue Adjustment Mechanism
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FPL FPL Group, Inc.
Indenture General and Refunding Mortgage Indenture between
Central Maine and State Street Bank and Trust Company,
Trustee, dated as of April 15, 1976, as amended and
supplemented.
IPO Initial Public Offering
IRS United States Internal Revenue Service
ISO Independent System Operator
Kwh Kilowatt-hour
MaineCom MaineCom Services, a CMP Group subsidiary which
arranges fiber-optic data service for bulk carriers.
MEPCO Maine Electric Power Company, Inc., a 78-percent owned
subsidiary of Central Maine which owns a 345-KV
transmission line from Wiscasset, Maine, to New
Brunswick, Canada.
MRS Monitored Retrievable Storage
Moody's Moody's Investors Service
MPUC Maine Public Utilities Commission
Maine Yankee Maine Yankee Atomic Power Company, a 38-percent owned
subsidiary of Central Maine.
NB Power New Brunswick Power Corporation.
NEON NorthEast Optic Network, Inc., a corporation of which
MaineCom owns 37.9-percent of the common stock, which
is building a fiber optic network in the northeastern
United States
NEPOOL New England Power Pool
NERC North American Electric Reliability Council
NORVARCO A wholly-owned subsidiary of Central Maine. NORVARCO
is one of two general partners with 50% interests in
Chester SVC Partnership, which owns a static var
compensator facility located in Chester, Maine.
NPCC Northeast Power Coordinating Council
NRC United States Nuclear Regulatory Commission
NYSEG New York State Electric & Gas Corporation, a utility
subsidiary of Energy East.
NUG Non-utility generator
New England Gas New England Gas Development Corporation, a wholly-
Development owned subsidiary of CMP Group created in
September 1998 to hold up to a 50-percent ownership
interest in CMP Natural Gas.
OASIS Open Access Same-time Information System.
OPA Maine Office of the Public Advocate
Plant Maine Yankee nuclear generating plant at Wiscasset,
Maine
PURPA Public Utility Regulatory Policies Act of 1978.
RCRA Resource Conservation and Recovery Act.
SAB Securities and Exchange Commission's Staff Accounting
Bulletin.
S&P Standard & Poor's Corp.
SEC Securities and Exchange Commission
Secondary Purchasers 28 municipal and cooperative utilities that
had purchased Maine Yankee power under identical
contracts with Maine Yankee sponsors.
SFAS Statement of Financial Accounting Standards
TeleSmart A closed wholly owned subsidiary of CMP Group which
provided accounts receivable management.
Union Water The Union Water Power Company, a wholly owned
subsidiary of CMP Group.
Vermont Yankee Vermont Yankee Nuclear Power Corporation.
Waste Act Federal Low-level Radioactive Waste Policy Amendments
Act.
Yankee Atomic Yankee Atomic Electric Company
Basis of Presentation. This Annual Report on Form 10-K is a combined report of
CMP Group and Central Maine, a regulated electric-utility subsidiary of CMP
Group whose financial position and results of operations account for
substantially all of CMP Group's consolidated financial position and results of
operations. The Notes to Consolidated Financial Statements apply to both CMP
Group and Central Maine. CMP Group's consolidated financial statements include
the accounts of CMP Group and its wholly owned or controlled subsidiaries, which
are Central Maine, Union Water, CNEX, TeleSmart and MaineCom. Central Maine's
consolidated financial statements include its accounts as well as those of its
wholly owned or controlled subsidiaries, MEPCO, NORVARCO, Cumberland Securities
and Central Securities. Certain immaterial majority owned subsidiaries, which
were previously accounted for on the equity method, were consolidated in
September 1998.
Note re Forward-Looking Statements
This Report on Form 10-K contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected. We caution readers not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
Form 10-K. We undertake no obligation to republish revised forward-looking
statements to reflect subsequent events or circumstances or to reflect the
occurrence of unanticipated events. We urge readers to carefully review and
consider the factors in the succeeding paragraph.
Factors that could cause actual results to differ materially include, among
other matters, the results of the pending merger with Energy East, electric
utility industry restructuring, including the ongoing state and federal
activities that will determine Central Maine's ability to recover its stranded
costs and the cost of upgrades of transmission facilities to accommodate new
merchant generating plants; future economic conditions, earnings-retention and
dividend-payout policies; developments in the legislative, regulatory, and
competitive environments in which CMP Group and Central Maine operate;
investments in unregulated businesses; and other circumstances that could affect
anticipated revenues and costs, such as unscheduled maintenance and repairs of
transmission and distribution facilities, unanticipated environmental cleanups
and compliance with new or re-interpreted laws and regulations affecting the
operation of the business.
PART I
Item 1. BUSINESS.
- ------ --------
Introduction
General. CMP Group is a holding company organized effective September 1, 1998,
which owns all of the common stock of Central Maine and the former non-utility
subsidiaries of Central Maine. As part of the reorganization, all of the shares
of Central Maine's common stock were converted into an equal number of shares of
CMP Group common stock, which are listed on the New York Stock Exchange under
the symbol CTP. The reorganization was approved by Central Maine's shareholders
on May 21, 1998, and on various dates in 1998 by the appropriate state and
federal regulatory agencies. CMP Group's principal executive offices are located
at 83 Edison Drive, Augusta, Maine, where its general telephone number is (207)
623-3521.
Central Maine is a public utility incorporated in Maine in 1905. Central Maine
is primarily engaged in the business of transmitting and distributing electric
energy generated by others for the benefit of customers in southern and central
Maine. On March 1, 2000, Central Maine's obligation to generate or otherwise
supply electric energy terminated as part of the restructuring of the electric
utility industry in Maine. Its principal executive offices are located at 83
Edison Drive, Augusta, Maine 04336, where its general telephone number is (207)
623-3521.
Central Maine is the largest transmission-and-distribution electric utility in
Maine, serving approximately 541,000 customers in its 11,000 square-mile service
area in southern and central Maine. Central Maine's service area contains most
of Maine's industrial and commercial centers, including Portland (the state's
largest city), and the Lewiston-Auburn, Augusta-Waterville and Bath-Brunswick
areas, and approximately one million people, representing about 80 percent of
the total population of the state. In 1999 large pulp-and-paper industry
customers accounted for approximately 56 percent of Central Maine's industrial
sales and approximately 22 percent of total service-area sales.
The following topics are discussed under the general heading of Business. Where
applicable, the discussions make reference to the various other Items of this
report.
Topic Page
- ----- ----
Proposed Merger with Energy East 6
Regulation 7
Electric-Utility Industry Restructuring 7
Sale of Generation Assets 10
Alternative Rate Plan 11
Storm Damage to Central Maine's System 12
Permanent Shutdown of Maine Yankee Plant 13
Expansion of Lines of Business 14
Non-utility Generation 16
"Year 2000" Computer Issues 16
Financing and Related Considerations 17
Environmental Matters 17
Employee Information 17
Proposed Merger with Energy East
On June 14, 1999, CMP Group, Energy East and EE Merger Corp., a Maine
corporation that is a wholly-owned subsidiary of Energy East, entered into an
Agreement and Plan of Merger, dated as of June 14, 1999, providing for a merger
transaction among CMP Group, Energy East and EE Merger Corp. Energy East is an
energy delivery, products and services holding company doing business in New
York, Massachusetts, Maine, New Hampshire and New Jersey, which delivers
electricity and natural gas to retail customers and provides electricity,
natural gas and energy management and other services to retail and wholesale
customers in the Northeast.
Pursuant to the merger agreement, EE Merger Corp. will merge with and into CMP
Group with CMP Group being the surviving corporation and becoming a wholly-owned
subsidiary of Energy East. We expect the merger, which was unanimously approved
by the respective boards of directors of CMP Group, Energy East and EE Merger
Corp., to occur shortly after all of the conditions to the consummation of the
merger, including the receipt of required regulatory approvals, are satisfied.
Under the terms of the merger agreement, each outstanding share of CMP Group
common stock, $5.00 par value per share, other than any treasury shares or
shares owned by Energy East or any subsidiary of CMP Group or Energy East, will
be converted into the right to receive $29.50 in cash. Pursuant to the merger
agreement, approximately $957 million in cash will be paid to holders of shares
of CMP Group Common Stock, with additional payments being made to holders of
stock options and performance shares awarded under CMP Group's performance
incentive plans.
The merger is subject to certain customary closing conditions, including without
limitation the receipt of all necessary governmental approvals and the making of
all necessary governmental filings. CMP Group's shareholders approved the merger
at a special meeting on October 7, 1999. The MPUC, the U.S. Department of
Justice, the Federal Trade Commission, Federal Communications Commission, the
NRC and the Connecticut DPUC have approved the merger. Other approvals are
pending from the FERC and the SEC. If the remaining approvals are granted, we
estimate that the merger could be completed around mid-2000.
Regulation
General. Central Maine and its public utility affiliates are subject to the
regulatory authority of the MPUC as to retail rates, accounting, service
standards, territory served, the issuance of securities maturing more than one
year after the date of issuance, certification of transmission projects and
various other matters. Central Maine is also subject to the jurisdiction of the
FERC under the Federal Power Act for some phases of its business, including
accounting, rates relating to wholesale sales and to interstate transmission and
sales of energy and certain other matters.
The Maine Yankee Plant and the other nuclear generating facilities in which
Central Maine has an interest are subject to regulation by the NRC. The NRC is
empowered to authorize the siting, construction, operation and decommissioning
of nuclear reactors after consideration of public health, safety, environmental
and antitrust matters.
The United States EPA administers programs which affect Central Maine's
remaining generating facilities. The EPA has broad authority in administering
these programs, including the ability to require installation of
pollution-control and mitigation devices. CMP Group and Central Maine are also
subject to regulation by various state, local and other federal authorities with
regard to land use and other environmental matters. For further discussion of
environmental considerations as they affect CMP Group and Central Maine, see
"Environmental Matters", below, and Item 3, "Legal Proceedings" - "Environmental
Matters." Other activities of CMP Group and Central Maine from time to time are
subject to the jurisdiction of various other state and federal regulatory
agencies, including the SEC with respect to the issuance of securities and
related matters.
Electric-Utility Industry Restructuring
Maine Restructuring Legislation. The Maine Legislature enacted legislation in
1997 to restructure the electric utility industry in Maine effective March 1,
2000. The principal restructuring provisions of the legislation provided for
customers to have direct retail access to generation services and for
deregulation of competitive electric providers, commencing March 1, 2000, with
transmission-and-distribution companies such as Central Maine continuing to be
regulated by the MPUC. By that date, investor-owned utilities were required to
divest all generation assets and generation-related business activities, with
two major exceptions: (1) non-utility 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. As
discussed below under "Sale of Generation Assets," Central Maine completed the
sale of its non-nuclear generating assets on April 7, 1999.
The legislation also required investor-owned utilities to sell their rights to
the capacity and energy from all undivested generation assets after February 29,
2000, including nuclear generation assets and the purchased-power contracts that
had not previously been divested pursuant to the legislation. On July 30, 1999,
Central Maine offered its rights to the capacity and energy from its undivested
generation assets and generation-related business to prospective bidders and in
December 1999 contracted to sell such rights with respect to its undivested
nuclear generation assets (Vermont Yankee and Millstone Unit 3) and its NUG
contract entitlements for a two-year period commencing March 1, 2000.
As a transmission-and-distribution utility since March 1, 2000, Central Maine is
prohibited from selling electric energy to retail customers, except as may be
directed by the MPUC. Any competitive electricity provider affiliated with
Central Maine would be allowed to sell electricity outside Central Maine's
service territory without limitation as to amount, but within Central Maine's
service territory the affiliate would be limited to providing not more than 33
percent of the total kilowatt-hours sold with Central Maine's service territory,
as determined by the MPUC. CMP Group has determined that it does not intend to
create such an affiliate.
For a summary of other provisions of the 1997 legislation, see our Annual Report
on Form 10-K for the twelve months ended December 31, 1998.
MPUC Proceeding on Stranded Costs, Revenue Requirements, and Rate Design. By
order dated March 19, 1999, the MPUC completed the first phase of its proceeding
contemplated by Maine's restructuring legislation to establish the recoverable
amount and timing of Central Maine's stranded costs, its revenue requirements
and the design of its rates effective March 1, 2000. In its Phase I order the
MPUC decided the "principles" by which it would set Central Maine's
transmission-and-distribution rates, but deferred actually calculating the rates
until later in the proceeding because some of the necessary information was not
yet available.
With respect to stranded costs, the MPUC indicated that it would set the amount
of recoverable stranded costs for Central Maine later in the proceeding. The
restructuring statute requires the MPUC to provide transmission-and-distribution
utilities a reasonable opportunity to recover such costs that is equivalent to
the utility's opportunity to recover those costs prior to the commencement of
retail access. The MPUC also reviewed the prescribed methodology for determining
the amount of a utility's stranded costs, including among other factors the
application of excess value from Central Maine's divested generation assets to
offset stranded costs.
In the area of revenue requirements, the Phase I order did not establish
definitive amounts, but did contain the MPUC's conclusion that the appropriate
cost of common equity for Central Maine as a transmission-and-distribution
company was 10.50 percent, with a common-equity component of 47 percent. In
dealing with rate design, the MPUC again limited itself primarily to
establishing principles that would guide it in designing Central Maine's rates
effective March 1, 2000.
On July 1, 1999, Central Maine filed its Phase II case with the MPUC. In that
filing Central Maine updated certain test-year data to reflect known and
measurable changes to its revenue requirement, updated its stranded cost
estimate to reflect actual data from the April 1999 closing of its
generation-asset sale, and proposed its rate design based on the principles
enunciated in the Phase I order. Some of the information needed to establish
rates was still incomplete in that filing, however, since neither the auction of
the output of Central Maine's non-divested generation resources nor the bid
process for "standard-offer" service (for those customers who do not select a
competitive energy supplier) had been completed. In addition, several issues
raised by the Phase I MPUC order remained unresolved, including, among others,
(i) whether the MPUC could require the unamortized investment tax credits and
excess deferred income taxes associated with the sale of Central Maine's
generation assets to be flowed through to ratepayers, and (ii) the rate
treatment of the gain on the sale of Union Water's generation-related assets to
FPL and employee transition costs resulting from the generation-asset sale.
In an order dated December 3, 1999, in a separate but related proceeding, the
MPUC approved Central Maine's plan for the sale of the output of its
non-divested generation assets. In another related proceeding, by order dated
October 25, 1999, the MPUC accepted a competitive energy supplier's bid to
provide standard-offer service to Central Maine's residential and small
commercial customers who did not select a competitive energy supplier after
March 1, 2000. In the same order the MPUC rejected all of the standard-offer
bids for Central Maine's medium and large commercial and industrial customers
and sought a second round of bids. In the December 3 order the MPUC rejected all
of the second round of standard-offer bids for Central Maine's medium and large
classes and ordered that Central Maine arrange such service for those classes.
On January 19, 2000, the MPUC issued its Phase II order determining Central
Maine's revenue requirement as a transmission-and-distribution utility,
effective March 1, 2000. In the order the MPUC disallowed approximately $8
million of the approximately $12 million revenue increase requested in Central
Maine's Phase II filing, which had been based on certain known and measurable
changes to its revenue requirement.
A negotiated settlement approved by the MPUC on January 27, 2000, resolved the
major issues remaining outstanding in the final phase of the ratemaking
proceeding. The settlement confirmed that the $18.2 million of unamortized
investment tax credits and excess deferred income taxes related to Central
Maine's generation-asset sale would flow through to shareholders pursuant to the
normalization rules of the Internal Revenue Code. In addition, Central Maine
agreed not to seek judicial review of an August 2, 1999 MPUC order regarding the
treatment of gains from sales of easements that required Central Maine to
recognize 10 percent of the gain currently with the remaining 90 percent being
amortized over 5 years, effective as of the dates of the 1998 and 1999 sale
transactions. Central Maine also agreed not to seek reconsideration of other
cost-of-service updates in the rate case or to challenge an $4.7 million
disallowance of employee transition costs, and to withdraw its appeal of the
rate treatment of the gain on Union Water's generation-related assets.
The settlement also allowed Central Maine to charge off $88 million on March 1,
2000, representing its entire remaining investment in the Millstone 3 nuclear
unit in Connecticut, against the regulatory Asset Sale Gain Account created in
the ratemaking proceeding to recognize the above-book value realized through
Central Maine's generation-asset sale. This provision reflected a recent
resolution of Central Maine's arbitration and litigation claims against the lead
owners of the jointly-owned Millstone 3 unit, in which Central Maine owns a
2.5-percent interest.
As part of the settlement Central Maine also agreed to a one-time earnings cap
for 1999. Earnings above the cap were deferred in 1999 and will be used to
offset rate increases that would otherwise be required to mitigate stranded
costs and increases in operating expenses through 2001.
Finally, the rate settlement established Central Maine's rates as a
transmission-and-distribution utility effective March 1, 2000. A separate order
fixed the standard-offer prices for Central Maine's medium and large commercial
and industrial customers at levels intended to reflect current market pricing
and to avoid under-collection of Central Maine's costs.
The combined after-tax effect of the provisions of the ratemaking settlement,
including the earnings cap, was to reduce CMP Group's net income for 1999 by $11
million.
Central Maine estimates that customers on its standard residential rate and
small commercial customers will save an average of nine to ten percent on their
total electric bills after March 1, 2000, compared to earlier bills for the same
kwh usage. Central Maine believes that its medium and large commercial and
industrial customers can realize savings ranging from minimal to almost fifteen
percent, with the greater savings going to customers who select a competitive
energy supplier rather than taking the standard-offer service.
Sale of Generation Assets
On April 7, 1999, Central Maine completed the sale of all of its hydro, fossil
and biomass power plants with a combined generating capacity of 1,185 megawatts
for $846 million in cash, including approximately $18 million for assets of
Union Water, to affiliates of Florida-based FPL Group. The related book value
for these assets was approximately $217.3 million. In addition, as part of its
agreement with FPL Group, Central Maine entered into energy buy-back agreements
to assist in fulfilling its obligation to supply its customers with power until
March 1, 2000. Subsequently, an agreement was reached to sell related storage
facilities to FPL Group for an additional $4.6 million ($1.5 million for the
assets and $3.1 million estimated for lease revenue associated with the
properties that Central Maine retained), including $2.0 million for Union Water
assets. The related book value of these assets was approximately $11.4 million.
Central Maine recorded a pre-tax deferred gain of $518.8 million net of selling
costs and certain non-normalized income tax impacts from the sale of generation
assets by establishing a regulatory liability in 1999, which eliminated most
income recognition. Central Maine did record an income impact from the sale
amounting to $18 million associated with the related unamortized investment
credits and excess deferred tax reserves as required by the IRS regulations.
Central Maine also recorded curtailment and special termination deferred charges
of $5.2 million associated with pension and postretirement benefit costs of
employees leaving the company as a result of the generation-asset sale. These
deferred charges are being amortized over a three-year period beginning March 1,
2000, as required by the MPUC. The regulatory liability for the asset sale gain,
including interest, amounted to approximately $548 million at December 31, 1999,
and is being amortized over an 8.5 year period beginning March 1, 2000. The
amortization will vary from year to year.
With the cash proceeds of the sale Central Maine redeemed the remaining $118.7
million of its outstanding General and Refunding Mortgage Bonds on May 10, 1999,
and paid at maturity $47 million of its medium-term notes on May 4, 1999. On
June 1, 1999, Central Maine redeemed $180 million of its medium-term notes, as
well as all of the outstanding $10 million Town of Yarmouth Pollution Control
Revenue Bonds, which had been issued in 1977 and 1978. On August 31 and
September 9, 1999 Central Maine paid at maturity another $40 million of
medium-term notes. Approximately $293.5 million of the proceeds were required
for federal and state income taxes resulting from the sale and $45.4 million for
incremental energy purchases to meet Central Maine's power-supply obligations
until the start of retail competition on March 1, 2000. Central Maine expects to
transfer the balance to its parent, CMP Group.
As required by the Maine restructuring legislation, on July 30, 1999, Central
Maine offered at auction its rights to the capacity and energy from its
undivested generation assets and generation-related business. Upon completion of
the auctions, in December 1999 Central Maine contracted to sell such rights with
respect to its undivested nuclear generation assets (Vermont Yankee and
Millstone Unit No. 3) and its NUG contract entitlements to the successful bidder
for a two-year period commencing March 1, 2000. Central Maine also auctioned its
Hydro-Quebec entitlement to a different buyer for the same period. All of the
auction results were approved by the MPUC.
Alternative Rate Plan
Central Maine's ARP was in effect from January 1, 1995, through December 31,
1999. Instead of rate changes based on the level of costs incurred and capital
investments, the ARP provided for one annual adjustment of an inflation-based
cap on each of Central Maine's rates, with no separate reconciliation and
recovery of fuel and purchased-power costs. Under the ARP, the MPUC continued to
regulate Central Maine's operations and prices, provide for continued recovery
of deferred costs, and specify a range for its rate of return. The MPUC
confirmed in its order approving the ARP that the ARP was intended to comply
with the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation."
The ARP contained a mechanism that provided price caps on Central Maine's retail
rates to be adjusted annually on each July 1, commencing in 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 applied
to all of Central Maine's retail rates.
A specified standard inflation index was the basis for each annual price-cap
change. The inflation index was reduced by the sum of two productivity factors,
a general productivity offset of 1.0 percent, and a second formula-based offset
that started in 1996 and was intended to reflect the limited effect of inflation
on Central Maine's purchased-power costs during the five-year initial term of
the ARP.
The sharing mechanism could adjust the subsequent year's July price-cap change
in the event Central Maine's earnings were outside a range of 350 basis points
above or below Central Maine's allowed return on equity (starting at the 10.55
percent allowed return in 1995 and indexed annually for changes in capital
costs). Outside that range, profits and losses could be shared equally by
Central Maine and its customers in computing the price-cap adjustment. The ROE
used for earnings sharing was increased to 11.5 percent effective with the July
1999 price change.
The ARP also provided for partial flow-through to ratepayers of cost savings
from non-utility generator contract buy-outs and restructuring, recovery of
energy-management costs, and penalties for failure to attain customer-service
and energy-efficiency targets. The ARP also generally defined mandated costs
that would be recoverable by Central Maine notwithstanding the index-based price
cap. To receive such treatment, the annual revenue requirement related to a
mandated cost must have exceeded $3 million and have a disproportionate effect
on Central Maine or the electric-power industry.
The components of the last three ARP price increases are as follows:
1999 1998 1997
---- ---- ----
Inflation Index .89% 1.78% 2.12%
Productivity Offset (1.00) (1.00) (1.00)
Qualifying Facility Offset .04 (.29) (.42)
Earnings Sharing - 1.12 -
Flowthrough and Mandated Items .12 (.28) .40
------- ---- -----
.05% 1.33% 1.10%
======= ==== ====
The 1997 and 1998 price increases were approved by the MPUC and implemented.
Central Maine elected not to increase prices in 1999.
On September 30, 1999, Central Maine submitted to the MPUC a proposed seven-year
rate plan ("ARP2000") to take effect after completion of the merger with Energy
East. The formula for ARP2000 is substantially similar to that of the ARP,
except that the one-percent productivity offset of the ARP would escalate in
annual increments of 0.25 percent from 1.00 percent for the 2001 price change to
1.75 percent in 2004 to 2007. The purpose of the proposed escalation is to
assure that Central Maine's customers benefit from the increased savings
expected from the Energy East merger. In addition, in the mandated-costs
exclusion in ARP2000 only mandated costs over $50,000 would be recognized and
only the excess over $3 million of accumulated mandated cost would be
recoverable, not the entire $3 million non-cumulative cost recoverable under the
1995-1999 ARP. The rate of return on equity of 10.5 percent established by the
MPUC for Central Maine effective March 1, 2000, would be the basis for the
earnings-sharing bandwidth, and not the 11.5 percent under the ARP. ARP2000 is
subject to MPUC approval.
Storm Damage to Central Maine's System
In January 1998, a severe ice storm struck Central Maine's service territory,
causing power outages for approximately 280,000 of Central Maine's 528,000
customers and substantial widespread damage to Central Maine's transmission and
distribution system. To restore its electrical system, Central Maine
supplemented its own crews with utility and tree-service crews from throughout
the northeastern United States and the Canadian maritime provinces, with
assistance from the Maine national guard. In January 1998, the MPUC issued an
order allowing Central Maine to defer on its books the incremental non-capital
costs associated with Central Maine's efforts to restore service in response to
the damage resulting from the storm, amounting to $50.7 million plus accrued
carrying costs.
In the spring of 1998, the U.S. Congress appropriated $130 million for
Presidentially declared disasters in 1998, including storm-damage cost
reimbursement for electric utilities. On November 5, 1998 the United States
Department of Housing and Urban Development ("HUD") announced that of those
funds $2.2 million had been awarded to Maine, with none designated for utility
infrastructure, which Central Maine and the Maine Congressional delegation
protested as inadequate and inconsistent with Congressional intent. HUD later
announced that Maine would receive additional funds and on October 6, 1999,
Central Maine received payment in the amount of $19.6 million from HUD. Central
Maine is recovering the $34.1 million balance of the deferred storm-related
costs, including $3.9 million of carrying costs, through rates over a three-year
period commencing March 1, 2000.
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. The Plant had experienced a
number of operational and regulatory problems and did not operate after 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. The
Plant's operating license from the NRC was scheduled to expire in 2008.
FERC Rate Case. On November 6, 1997, Maine Yankee submitted to FERC for filing
certain amendments to the Power Contracts (the "Amendatory Agreements") and
revised rates to reflect the decision to shut down the Plant and to request
approval of an increase in the decommissioning component of its formula rates.
Maine Yankee's submittal also requested certain other rate changes, including
recovery of unamortized investment (including fuel) and certain changes to its
billing formula, consistent with the non-operating status of the Plant. By Order
dated January 14, 1998, the FERC accepted Maine Yankee's new rates for filing,
subject to refund after a minimum suspension period, and set for hearing Maine
Yankee's Amendatory Agreements, rates, and issues concerning the prudence of the
Plant-shutdown decision that had been raised by intervenors.
During 1998 and early 1999 the active intervenors, including among others the
MPUC Staff, the Maine Office of the Public Advocate ("OPA"), Central Maine and
other owners, municipal and cooperative purchasers of Maine Yankee power (the
"Secondary Purchasers"), and a Maine environmental group (the "Settling
Parties"), engaged in extensive discovery and negotiations, which resulted in
the filing of a settlement agreement with the FERC on January 19, 1999. A
separately negotiated settlement filed with the FERC on February 5, 1999,
resolved the issues raised by the Secondary Purchasers by limiting the amounts
they will pay for decommissioning the Plant and by settling other points of
contention affecting individual Secondary Purchasers. Both settlements were
found to be in the public interest and approved by the FERC on June 1, 1999. The
settlements constitute full settlement of all issues raised in the FERC
proceeding, including decommissioning-cost issues and issues pertaining to the
prudence of the management, operation, and decision to permanently cease
operation of the Plant.
The primary settlement provided for Maine Yankee to collect $33.1 million in the
aggregate annually, effective August 1, 1999, including both decommissioning
costs and costs related to Maine Yankee's planned on-site independent spent fuel
storage installation ("ISFSI"). The 1997 FERC filing had called for an aggregate
annual collection rate of $36.4 million for decommissioning and the ISFSI, based
on a 1997 estimate. Pursuant to the approved settlement the amount collected
annually has been reduced to approximately $25.6 million, effective October 1,
1999, as a result of 1999 Maine legislation allowing Maine Yankee to (1) use for
construction of the ISFSI funds held in trust under Maine law for spent-fuel
disposal, and (2) access approximately $6.8 million held by the State of Maine
for eventual payment to the State of Texas pursuant to a compact for low-level
nuclear waste disposal, the future of which is in question after rejection of
the selected disposal site in west Texas by a Texas regulatory agency.
The settlement also provides for recovery of the unamortized investment
(including fuel) in the Plant, together with a return on equity of 6.50 percent,
effective January 15, 1998, on equity balances up to maximum allowed equity
amounts, which resulted in a pro-rata refund of $9.3 million (including tax
impacts) to the sponsors on July 15, 1999. The Settling Parties also agreed not
to contest the effectiveness of the Amendatory Agreements submitted to FERC as
part of the original filing, subject to certain limitations including the right
to challenge any accelerated recovery of unamortized investment under the terms
of the Amendatory Agreements after a required informational filing with the FERC
by Maine Yankee. In addition, the settlement contains incentives for Maine
Yankee to achieve further savings in its decommissioning and ISFSI-related costs
and resolves issues concerning restoration and future use of the Plant site and
environmental matters of concern to certain of the intervenors in the
proceeding.
As a separate part of the settlement, Central Maine, the other two Maine
utilities which own interests in Maine Yankee, the MPUC Staff, and the OPA
entered into a further agreement resolving retail rate issues and other issues
specific to the Maine parties, including those that had been raised concerning
the prudence of the operation and shutdown of the Plant (the "Maine Agreement").
Under the Maine Agreement Central Maine is recovering its Maine Yankee costs in
accordance with its most recent rate order from the MPUC.
Finally, the Maine Agreement requires Central Maine and the other two Maine
utilities, for the period from March 1, 2000, through December 1, 2004, to hold
their Maine retail ratepayers harmless from the amounts by which the replacement
power costs for Maine Yankee exceed the replacement power costs assumed in the
report to the Maine Yankee Board of Directors that served as a basis for the
Plant shutdown decision, up to a maximum cumulative amount of $41 million.
Central Maine's share of that amount would be $31.2 million for the period.
Based on the results of the two year entitlement auction already completed, the
Company will not incur any liability for this provision in year 2000 and does
not believe that it will incur any liability in 2001.
CMP Group and Central Maine believe that the approved settlement, including the
Maine Agreement, constitutes a reasonable resolution of the issues raised in the
Maine Yankee FERC proceeding, which has eliminated significant uncertainties
concerning CMP Group's and Central Maine's future financial performance.
Expansion of Lines of Business
General. CMP Group has been expanding its business opportunities through
investments that capitalize on core competencies. CMP International Consultants
(d/b/a CNEX), a wholly owned subsidiary of CMP Group, provides management,
planning, consulting and research and information services to foreign and
domestic utilities and government agencies. TeleSmart, a wholly owned subsidiary
of CMP Group, which provided accounts receivable management services for utility
clients was closed by CMP Group on February 14, 2000, after a review of the
subsidiary's prospects. The Union Water-Power Company, a wholly owned subsidiary
of CMP Group, provides utility construction and support services (On Target
division); energy efficiency performance contracting and energy use and
management services (Combined Energies division); and real estate development
services (UnionLand Services division).
Natural Gas Distribution. New England Gas Development Corporation ("New England
Gas"), which is a wholly owned subsidiary of CMP Group, holds approximately a
twenty-two percent interest at December 31, 1999 in CMP Natural Gas, L.L.C.
("CMP Natural Gas"). CMP Natural Gas is a joint venture of New England Gas and
Energy East Enterprises, a wholly owned subsidiary of Energy East, and is
subject to regulation as a public utility by the MPUC. CMP Natural Gas was
formed to construct, own and operate a natural gas distribution system to serve
certain areas of Maine that did not have gas service, utilizing natural gas
delivered to Maine through new interstate pipeline facilities.
CMP Natural Gas began construction of its first local distribution system in
Windham, Maine, in early 1999 and began serving its first customer in May. On
July 8, 1999, CMP Natural Gas and Calpine Corporation, a California-based
independent power company, announced the signing of a 20-year contract for CMP
Natural Gas to provide natural gas delivery service to Calpine's proposed
540-megawatt natural gas-fired power plant under construction in Westbrook,
Maine. CMP Natural Gas expects to commence service to the plant by June 1, 2000,
after MPUC approval and construction of a two-mile lateral pipeline along an
existing Central Maine right of way that would interconnect with the new
interstate pipeline facilities. On December 13, 1999, the MPUC authorized CMP
Natural Gas to provide service to the Calpine plant, as well as the unserved
areas in the town of Gorham and on February 18, 2000, the MPUC approved an
affiliated-interest transaction allowing CMP Natural Gas to construct the
pipeline on Central Maine's transmission corridor.
If the merger of CMP Group and Energy East is completed, CMP Natural Gas will
become a wholly owned subsidiary of Energy East Enterprises, and New England Gas
will cease to exist. During 1999 Energy East also agreed to business
combinations with two established natural gas distribution companies in
Connecticut and one in western Massachusetts, subject to closing conditions,
including shareholder votes and regulatory approvals.
Telecommunications Investment. MaineCom Services, which is wholly owned by CMP
Group, provides telecommunications services, including point-to-point
connections, private networking, consulting, private voice and data transport,
carrier services, and long-haul transport. MaineCom Services also holds, through
wholly owned New England Business Trust, an approximately 38-percent interest in
NorthEast Optic Network, Inc. ("NEON"), a facilities-based provider of
technologically advanced, high-bandwidth, fiber optic transmission capacity for
communications carriers on local loop, inter-city, and interstate facilities.
NEON owns and operates and is expanding a fiber optic network in New England and
New York, utilizing primarily electric utility rights of way, including some of
Central Maine's and some owned by other electric utilities including Northeast
Utilities, another substantial minority stockholder.
On November 23, 1999, NEON announced two major agreements, one with Consolidated
Edison Communications, Inc. ("CEC"), a wholly owned subsidiary of Consolidated
Edison, Inc., and the other with Excelon, a wholly owned subsidiary of PECO
Energy, Inc. The agreements effectively expand the reach of the network to
include the Philadelphia, Baltimore and Washington, D.C., areas. As the
agreements are implemented, CEC will obtain an approximately ten-percent
interest in NEON and Excelon an interest of approximately nine percent.
In August 1998 NEON completed initial public offerings of $48 million of common
stock and $180 million of senior notes. As part of the common-stock offering
Central Maine sold some of the shares it then owned in NEON for approximately
$3.1 million. With some of the proceeds of the offerings NEON repaid
approximately $18 million Central Maine had advanced under an earlier
construction loan agreement.
On February 15, 2000, CMP Group announced that New England Business Trust
intended to sell approximately 2.5 million shares of its 6.177-million-share
common-stock holding in NEON through an underwritten public offering expected to
be completed during the second calendar quarter of 2000. Although the market
value of NEON's common stock has increased substantially since NEON's 1998
initial public offering, CMP Group cannot accurately estimate the amount of
proceeds to be realized through the planned offering.
CMP Group believes that although NEON operated at a loss in 1999, there is a
need for the fiber optic network it is constructing in the northeastern United
States. CMP Group, however, cannot predict the future results of NEON's
operations.
Non-utility Generation
After enactment of the federal Public Utility Regulatory Policies Act of 1978
("PURPA") and companion legislation in Maine, Central Maine became an industry
leader in purchasing supplies of energy from non-utility generators ("NUGs"),
including cogeneration plants and small power producers. These sources supplied
25 billion kilowatt-hours of electricity to Central Maine in 1999, representing
24 percent of total generation, a decrease from 32 percent in 1998. Central
Maine's contracts with non-utility generators, however, which were entered into
pursuant to the mandates of PURPA and vigorous state implementation of its
policies, contributed the largest part of Central Maine's increased costs and
resulting rate increases in the years immediately prior to implementation of the
ARP in 1995, and constitute the largest part of its stranded costs.
PURPA provided substantial economic incentives to NUGs by allowing cogenerators
and small power producers to sell their entire electrical output to an electric
utility at the utility's avoided-cost rate, which has often been substantially
higher than market rates, while purchasing their own electric energy
requirements at the utility's established rate for that customer class. Thus
Central Maine in a number of cases has been required to pay a higher price for
energy purchased from a NUG than the NUG, which in some cases was a large
customer of Central Maine, paid Central Maine for the NUG's energy requirements.
Central Maine has reduced its NUG costs by implementing buyouts and
restructurings of its NUG contracts, whenever practicable. As a result, in
accordance with prior MPUC policy and the ARP, since January 1992 $84.5 million
of buyout or restructuring costs have been included in Deferred Charges and
Other Assets on Central Maine's balance sheet and were being amortized over
their respective fuel savings periods. A significant portion of these were
written off in March 1, 2000 per the rate case settlement. Central Maine will
continue to seek opportunities to reduce its NUG costs, but the most feasible
buyouts and restructurings have been carried out, so the Company cannot predict
what level of additional savings it will be able to achieve. Central Maine
offered to sell its NUG power entitlements as part of the auction of its
generating assets, but the offer attracted insufficient interest to be included
in the April 1999 sale.
"Year 2000" Computer Issues
CMP Group recognized the potential for adverse consequences related to the "Year
2000 computer problem" and, through Central Maine, initiated its Year-2000
remediation efforts in 1996. CMP Group developed and executed a broad-based and
comprehensive project plan, at a cost of $4 million, for identifying and
addressing any Year-2000 related problems. CMP Group systems continued to run
smoothly before, during, and after the Year 2000 transition, with no disruption
of electric service to customers and with no negative financial or operational
impacts.
Financing and Related Considerations
The 1997 expansion of Central Maine's medium-term note program to a maximum of
$500 million in principal amount outstanding at any one time was implemented to
increase Central Maine's financing flexibility in anticipation of industry
restructuring and increased competition. For a discussion of Central Maine's
1999 financing activity and its available financing facilities, see Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"-"Liquidity and Capital Resources," below.
Environmental Matters
Federal, state and local environmental laws and regulations cover air and water
quality, land use, power plant and transmission line siting, noise and
aesthetics, solid and hazardous waste and other environmental matters.
Compliance with these laws and regulations impacts the manner and cost of
electric service by requiring, among other things, changes in the design and
operation of existing facilities and changes or delays in the location, design,
construction and operation of new facilities. In the past, these environmental
regulations most significantly affected Central Maine's electric power
generating facilities, which were sold to FPL Group in April 1999, as discussed
above. In addition, certain environmental proceedings under federal and state
hazardous substance and hazardous waste regulations (such as the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") and the
Resource Conservation and Recovery Act ("RCRA") and similar state statutes) are
discussed below under Item 3, "Legal Proceedings" - "Environmental Matters."
Central Maine estimates that its capital expenditures for improvements needed to
comply with environmental laws and regulations were approximately $9.9 million
for the five years from 1995 through 1999.
Employee Information
A local union affiliated with the International Brotherhood of Electrical
Workers (AFL-CIO) represents operating and maintenance employees in each of
Central Maine's operating divisions, and certain office and clerical employees.
At December 31, 1999, Central Maine had 1,388 full-time employees, of whom
approximately 45 percent were represented by the union. The number of employees
and union members have been reduced as a result of the April 1999 generation
asset sale.
In April 1998 Central Maine and the union agreed to a two-year labor contract
extension that provided for an annual wage increase of 2.5 percent on May 1,
1998 and 2.5 percent on May 1, 1999. Negotiations have commenced on a successor
agreement to be effective May 1, 2000.
Item 2. PROPERTIES.
- ------ ----------
Existing Facilities
Central Maine's electric properties form a single integrated system which is
connected at 345 kilovolts and 115 kilovolts with the lines of Public Service
Company of New Hampshire at the southerly end and at 115 kilovolts with Bangor
Hydro-Electric Company at the northerly end of Central Maine's system. Central
Maine's system is also connected with the system of The New Brunswick Power
Corporation and with Bangor Hydro-Electric Company, in each case through the
345-kilovolt interconnection constructed by MEPCO, a 78 percent-owned subsidiary
of Central Maine. At December 31, 1999, Central Maine had approximately 2,288
circuit-miles of overhead transmission lines, 19,754 pole-miles of overhead
distribution lines and 155 miles of underground and submarine cable.
Prior to April 1999, Central Maine operated 32 hydroelectric generating
stations, of which 31 were owned fully by Central Maine, with an estimated net
capability of 373 megawatts, and it purchased an additional 74 megawatts of
non-utility hydroelectric generation in Maine. Central Maine also operated two
oil-fired steam-electric generating stations, William F. Wyman Station in
Yarmouth, Maine and Mason Station in Wiscasset, Maine. Central Maine's share of
William F. Wyman Station had an estimated net capability of 594 megawatts. Mason
Station had five units totaling 145 megawatts although two of the units (42
megawatts) were retired. These facilities were sold to FPL Group in April 1999.
Central Maine also had internal combustion generating facilities with an
estimated aggregate net capability of 42 megawatts which was sold to FPL on
March 1, 2000.
Central Maine still has ownership interests in five nuclear generating
facilities in New England, three of which have permanently ceased operations.
The largest is a 38-percent interest in Maine Yankee Atomic Power Company
("Maine Yankee") which, as discussed above, has permanently shut down its plant
in Wiscasset, Maine. In addition, the Company owns a 9.5 percent interest in
Yankee Atomic Electric Company ("Yankee Atomic"), discussed below, which has
permanently shut down its plant located in Rowe, Massachusetts, a 6 percent
interest in Connecticut Yankee Atomic Power Company ("Connecticut Yankee"),
discussed below, which has permanently shut down its plant in Haddam,
Connecticut, and a 4 percent interest in Vermont Yankee Nuclear Power
Corporation ("Vermont Yankee"), which owns an operating plant in Vernon, Vermont
(collectively, with Maine Yankee, the "Yankee Companies"). In addition to the
four Yankee Companies, pursuant to a joint-ownership agreement, the Company has
a 2.5 percent direct ownership interest in the Millstone 3 nuclear unit
("Millstone 3") in Waterford, Connecticut.
<TABLE>
<S> <C> <C> <C> <C> <C>
Maine Yankee Connecticut Vermont Millstone
Yankee Atomic Yankee Yankee Unit 3
------ ------ ------- ------- ------
Ownership Share 38% 9.5% 6% 4% 2.5%
Operating Status Permanently shut Permanently shut Permanently shut Operating Operating
down August 6, down February 26, down December 4,
1997 1992 1996
Location Wiscasset, Maine Rowe, Massachusetts Haddam, Connecticut Vernon, Waterford,
Vermont Connecticut
Capacity Share N/A N/A N/A 19 MW 29 MW
Equity Interest at
December 31, 1999 $28.3 million $1.6 million $6.3 million $2.1 million N/A
</TABLE>
Maine Yankee. In August 1997, the Board of Directors of Maine Yankee Atomic
Power Company voted to permanently shut down and decommission the Maine Yankee
plant. The Plant had experienced a number of operational and regulatory problems
and did not operate after December 6, 1996. The decision to close the Plant 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. On June 1, 1999, the FERC approved a settlement of the
issues raised by intervenors in a contested rate proceeding. For further
discussion of issues relating to the Maine Yankee Plant, see Item 1 "Business" -
"Permanent Shutdown of the Maine Yankee Plant," above.
Connecticut Yankee. In December 1996, the Board of Directors of Connecticut
Yankee Atomic Power Company voted to permanently shut down and decommission the
Connecticut Yankee plant for economic reasons. The plant did not operate after
July 22, 1996. Central Maine estimates its share of the cost of Connecticut
Yankee's continued compliance with regulatory requirements, recovery of its
plant investment, decommissioning and closing the plant to be approximately
$25.1 million and has recorded a corresponding regulatory asset and liability on
the consolidated balance sheet. Central Maine is currently recovering through
rates an amount adequate to recover these expenses. Contested issues relating to
Connecticut Yankee's decommissioning rates, as well as the prudence of operating
that plant and the decision to cease operations, remain pending before the FERC.
Yankee Atomic. In 1993 the FERC approved a settlement agreement regarding
recovery of decommissioning costs and plant investment, and all issues with
respect to the prudence of the decision to discontinue operation of the Yankee
Atomic plant. Central Maine estimates its remaining share of the cost of Yankee
Atomic's continued compliance with regulatory requirements, recovery of its
plant investment, decommissioning and closing the plant, to be approximately
$2.4 million. This estimate has been recorded as a regulatory asset and
liability on Central Maine's balance sheet. Central Maine's current share of
costs related to the shutdown of Yankee Atomic is being recovered through rates.
Vermont Yankee. The Vermont Yankee plant is an operating unit. Its NRC operating
license is scheduled to expire in the year 2012. On October 15, 1999, Vermont
Yankee agreed to sell the Vermont Yankee plant for $22 million, subject to
certain adjustments, to AmerGen Energy Company LLC ("AmerGen"). AmerGen agreed,
among other commitments, to assume the decommissioning cost of the unit after it
is taken out of service, and the Vermont Yankee sponsors, including Central
Maine, agreed to fund the uncollected decommissioning cost up to a negotiated
amount at the time of the closing of the sale. The sponsors also agreed either
to enter into a new purchased-power agreement with AmerGen or to buy out such
future power payment obligations by making a fixed payment to AmerGen. Central
Maine elected to enter into a twelve-year purchased-power agreement and intends
to sell its power entitlement at the market rate. The sponsors' obligation to
consummate the sale is conditioned upon the receipt of satisfactory regulatory
approvals.
Millstone Unit 3. Pursuant to a joint ownership agreement, Central Maine has a
2.5 percent direct ownership interest in the Millstone 3 nuclear unit in
Waterford, Connecticut, which is operated by Northeast Utilities. This facility
was off-line from March 31, 1996, to July 1998, due to NRC concerns regarding
license requirements. For a discussion of a lawsuit and arbitration claim filed
by Central Maine and other minority owners of Millstone 3 against the operators
of the unit, see Item 3 "Legal Proceedings"-"Millstone Unit No. 3 Litigation,"
below.
Central Maine is obligated to pay its proportionate share of the operating
expenses, including depreciation and a return on invested capital, of each of
the Yankee Companies referred to above for periods expiring at various dates to
2012. Pursuant to the joint ownership agreement for Millstone 3, Central Maine
is similarly obligated to pay its proportionate share of the operating costs of
Millstone 3. Central Maine is also required to pay its share of the estimated
decommissioning costs of each of the Yankee Companies and Millstone 3. The
estimated decommissioning costs are paid as a cost of energy in the amounts
allowed in rates by the FERC and passed through to Central Maine's ratepayers as
a component of its transmission-and-distribution revenue requirement approved by
the MPUC.
MEPCO. MEPCO owns and operates a 345-kilovolt transmission interconnection,
extending from Central Maine's substation at Wiscasset to the Canadian border
where it connects with a line of The New Brunswick Power Corporation ("NB
Power") under an interconnection agreement. MEPCO transmits power between NB
Power and various New England utilities under MEPCO's Open Access Transmission
Tariff.
New England Power Pool/Hydro-Quebec Facilities. NEPOOL, of which the Company is
a member, contracted in connection with its Hydro-Quebec projects to purchase
power from Hydro-Quebec. The contracts entitle Central Maine to 44.5 megawatts
of capacity credit in the winter and 127.25 megawatts of capacity credit during
the summer. Central Maine also entered into facilities-support agreements for
its share of the related transmission facilities, with its share of the support
responsibility and of associated benefits being approximately 7 percent of the
totals. Central Maine is making facilities-support payments on approximately
$23.8 million, its share of the construction cost for the transmission
facilities incurred through December 31, 1999.
Maine Yankee Spent Fuel
Maine Yankee's spent fuel is currently stored in the spent fuel pool at the
Plant site. Federal legislation enacted in December 1987 directed the DOE to
proceed with the studies necessary to develop and operate a permanent high-level
waste (spent fuel) disposal site at Yucca Mountain, Nevada. The legislation also
provided for the possible development of a Monitored Retrievable Storage ("MRS")
facility and abandoned plans to identify and select a second permanent disposal
site. An MRS facility would provide temporary storage for high-level waste prior
to eventual permanent disposal. The DOE has indicated that the permanent
disposal site is not expected to open before 2010, although originally scheduled
to open in 1998. The United States Congress has been unable to agree on
legislation to reform the federal spent nuclear fuel program.
In 1994 several nuclear utilities other than Maine Yankee filed suit against the
DOE. The utilities sought a declaration from the United States Court of Appeals
for the District of Columbia Circuit that the Nuclear Waste Policy Act of 1982
required the DOE to take responsibility for spent nuclear fuel in 1998. In July
1996 the court held that the DOE was obligated "to start disposing of [spent
nuclear fuel] no later than January 31, 1998." The DOE did not appeal the
decision, but announced in December 1996 that it anticipated it would be unable
to start accepting spent nuclear fuel for disposal by January 31, 1998. A large
number of nuclear utilities and state regulators filed a new lawsuit against the
DOE in January 1997 seeking to force the DOE to honor its obligation to store
spent nuclear fuel and seeking other appropriate relief.
In November 1997 the U.S. Court of Appeals for the District of Columbia Circuit
confirmed the DOE's obligation. In February 1998 Maine Yankee filed a petition
in the same court seeking to compel the DOE to take Maine Yankee's spent fuel
from the Plant site "as soon as physically possible," alleging that removing the
spent fuel on the DOE's indicated schedule would delay the decommissioning of
the Maine Yankee Plant indefinitely. In May 1998 the Court dismissed Maine
Yankee's lawsuit, as well as that of the other nuclear utilities and state
regulators, saying that petitioners' failure to pursue remedies under the
standard contract rendered their appeal not appropriate at that time for review.
In June 1998 Maine Yankee filed a claim for money damages in the U.S. Court of
Federal Claims for the costs associated with the DOE's failure to begin to take
fuel in 1998. In November 1998 the Court granted summary judgment in favor of
Maine Yankee, ruling that the DOE had violated its contractual obligations, but
leaving the amount of damages incurred by Maine Yankee for later determination
by the Court. Since then, the Court has stayed further action pending a ruling
from the Court of Federal Appeals as to the jurisdiction of the Court of Claims
over the matter. Maine Yankee intends to pursue its claim for damages
vigorously, but as an alternative to DOE disposal is planning construction of an
independent spent-fuel storage installation on the Plant site.
Maine Yankee Low-Level Waste Disposal
The federal Low-Level Radioactive Waste Policy Amendments Act (the "Waste Act"),
enacted in 1986, required states either alone or in multistate compacts to
provide for the disposal of low-level radioactive waste generated within their
borders. Subsequently, the states of Maine, Texas and Vermont entered into a
compact for the disposal of low-level waste at a then-planned facility in west
Texas. In return, Maine would be required to pay $25 million, assessed to Maine
Yankee by the State of Maine, payable in two equal installments, the first after
ratification by Congress and the second upon commencement of operation of the
Texas facility. As a possible alternative, the states could agree to a financing
arrangement for the payment, in which case Maine Yankee's share, along with
interest, could be paid out over an extended period of time. In addition, Maine
Yankee would be assessed a total of $2.5 million for the benefit of the Texas
county in which the facility would be located and would also be responsible for
its pro-rata share of the Texas governing commission's operating expenses.
The bill providing for ratification of the compact was before several sessions
of the Congress before finally being approved in September 1998. However, in
October 1998, the Texas Natural Resources Conservation Commission voted to deny
a permit for the proposed west Texas site for the facility and construction of
such a facility in Texas is uncertain.
Since the Maine Yankee Plant has permanently stopped operating, the compact is
less beneficial to Maine Yankee than it would have been if the Plant had
remained in operation, due to the new schedule for Maine Yankee's shipments and
the uncertainty associated with the schedule for opening a Texas facility.
Although other potential sites in Texas have been proposed by various parties,
we cannot predict whether or when a facility in Texas will be licensed and
built. Maine Yankee intends to utilize its on-site storage facility as well as
dispose of low-level waste at an active South Carolina site or other available
sites in the interim and continue to cooperate with the State of Maine in
pursuing all appropriate options.
Nuclear Insurance
The Price-Anderson Act is a federal statute providing, among other things, a
limit on the maximum liability for damages resulting from a nuclear incident.
Coverage for the liability is provided for by existing private insurance and
retrospective assessments for costs in excess of those covered by insurance, up
to $88.095 million for each reactor owned, with a maximum assessment of $10
million per reactor in any year. However, after appropriate exemptive action by
the NRC Maine Yankee, and therefore its sponsors, are not responsible for
retrospective assessments resulting from any event or incident occurring after
January 7, 1999. Based on Central Maine's stock ownership in the Yankee
companies and its 2.5 percent direct ownership interest in the Millstone 3
nuclear unit, Central Maine's retrospective premium for post-January 7, 1999,
events or incidents could be as high as $6 million in any year, for a cumulative
total of $52.9 million.
In addition to the insurance required by the Price-Anderson Act, the nuclear
generating facilities mentioned above carry additional nuclear property-damage
insurance. This additional insurance is provided from commercial sources and
from the nuclear electric utility industry's insurance company through a
combination of current premiums and retrospective premium adjustments. In
recognition of the reduced risk posed by the shutdown of the Maine Yankee Plant
and its defueled reactor, Maine Yankee substantially reduced its property-damage
coverage effective January 19, 1999.
Construction Program
Central Maine's plans for improvements and expansion of its facilities are under
continuing review. Actual construction expenditures depend on the availability
of capital and other resources, load forecasts, customer growth, the number of
merchant generating plants constructed in Central Maine's service territory, and
general business conditions. As discussed above, Central Maine sold its
non-nuclear generation assets in April 1999 in preparation for the commencement
of retail choice of energy suppliers on March 1, 2000. During the five-year
period ended December 31, 1999, Central Maine's construction and acquisition
expenditures amounted to $259 million (including investment in jointly-owned
projects and excluding MEPCO). Approximately $24 million of those expenditures
was for generation projects, a category of expenditures that will not be
incurred in the future.
Beginning in 1999 Central Maine incurred significant capital expenditures,
approximately $23 million, to upgrade its transmission network to handle the
increased power flows from new merchant plants. The merchant plant developers
are currently responsible for providing cash to Central Maine to fund the
associated transmission network enhancements. As of December 31, 1999 Central
Maine had collected approximately $22 million of deposits from merchant plant
developers. FERC is currently finalizing its rules regarding the funding of
network upgrades to accommodate merchant plants. Central Maine could be required
to fund some of the network upgrades, in which case some of the deposits
collected could be returned to developers, requiring significant refinancing. In
that event, transmission rates would increase to recover the upgraded network
costs over time. If the current rules continue to apply, Central Maine would
credit developer deposits to the respective plant accounts. Central Maine cannot
predict what the FERC decision on funding network upgrades expected later this
year will be.
Central Maine currently estimates its overall construction program to be $92
million in 2000. Network upgrades associated with five merchant plants, totaling
1670 MW, that are currently under construction, account for $42 million of the
total. For the period 2001 through 2004, the overall construction program is
estimated to range from $212 million, if no additional merchant plants are
constructed, to $274 million (excluding MEPCO projects), if all four additional
merchant plant projects that are currently proposed (2000 MW) are actually
constructed.
Central Maine estimates that the developers of the five merchant plants
currently under construction will fund from $38 million to $66 million related
to network upgrade costs over the 1999 to 2001 time period. Refunds to
developers of prior deposits could amount to $0 to $28 million depending on
FERC's decision regarding cost responsibility. If all four additional merchant
plant projects that are currently proposed are actually constructed, CMP
estimates that developers will fund from $31 million to $62 million of the $62
million of related network upgrade costs over the 1999 to 2004 time period.
The following table sets forth Central Maine's estimated capital expenditures
for the next five years as discussed above (excluding MEPCO).
(dollars in millions) 2000 2001-2004 Total
---- --------- -----
Transmission $45 $14 to 76 $59 to 121
Distribution 32 135 167
General facilities and other 15 63 78
-- ----------- ---------
Total construction $92 $212 to 274 $304 to 366
== ========== ==========
Energy Conservation
Central Maine's energy conservation initiatives have included programs aimed at
residential, commercial and industrial customers. Among the residential efforts
have been programs that offer free or low-cost weatherization, water heater
wraps and energy-efficient light bulbs. Among the commercial and industrial
efforts, in addition to operating programs that offer energy-efficient lighting
products and water-heater wraps, Central Maine has provided incentives to
customers who install conservation measures of any kind that increase the
efficiency of the use of electricity.
NEPOOL and Regional Open-Access Transmission
In 1996 the FERC issued Order No. 888, which requires all public utilities that
own, control or operate facilities used for transmitting electric energy in
interstate commerce to file open access non-discriminatory transmission tariffs
that offer both load-based, network and contract-based, point-to-point service,
including ancillary service to eligible customers containing minimum terms and
conditions of non-discriminatory service. This service must be comparable to the
service they provide themselves at the wholesale level; in fact, these utilities
must themselves take the wholesale transmission service they provide under the
filed tariffs. The order also permits public utilities and transmitting
utilities the opportunity to recover legitimate, prudent and verifiable
wholesale stranded costs associated with providing open access and certain other
transmission services. It further requires public utilities to functionally
separate transmission from generation marketing functions and communications.
The intent of this order is to promote the transition of the electric utility
industry to open competition. Order No. 888 also clarifies federal and state
jurisdiction over transmission in interstate commerce and local distribution and
provides for deference of certain issues to state recommendations.
In 1996 the FERC also issued Order No. 889, which requires public utilities to
functionally separate their wholesale power marketing and transmission operation
functions and to obtain information about their transmission system for their
own wholesale power transactions in the same way their competitors do through
the Open Access Same-time Information System ("OASIS"). The rule also prescribed
standards of conduct and protocols for obtaining the information. The standards
of conduct are designed to prevent employees of a public utility engaged in
marketing functions from obtaining preferential information.
NEPOOL is a voluntary organization open to any entity engaged in the electric
business, such as investor-owned utilities, municipal and cooperative utilities,
power marketers, brokers and load aggregators. On December 31, 1996, NEPOOL,
responding to the FERC orders on behalf of its participants, filed a
restructuring proposal with FERC. The NEPOOL proposal was the product of over
two years of discussions and negotiations among the over 130 NEPOOL member
participants and many non-participants, including New England state regulators.
The key elements of the NEPOOL restructuring proposal were the implementation of
a regional NEPOOL open access transmission tariff ("NEPOOL Tariff"), the
creation of an independent system operator ("ISO"), and the restatement of the
NEPOOL Agreement to establish a broader governance structure for NEPOOL and to
develop a more open competitive market structure.
The NEPOOL Tariff, which became effective on March 1, 1997, ensures
non-discriminatory open access to the regional transmission network by providing
a single rate for all transactions that utilize NEPOOL's bulk power transmission
facilities. The NEPOOL Tariff promotes competition in the New England power
market through its single transmission rate structure. All regional service
within NEPOOL, except for wheeling through or out, is to be provided as a
network service.
In June 1997 FERC issued an order conditionally authorizing the establishment of
an ISO by NEPOOL ("ISO-New England"), effective July 1, 1997, affirming that the
transfer of control of transmission facilities owned by the public utility
members of NEPOOL to the ISO was consistent with the public interest under
Section 203 of the Federal Power Act.
In April 1998 FERC accepted the NEPOOL Tariff conditioned on NEPOOL's compliance
with a number of issues raised by FERC. On July 22, 1998, NEPOOL made its
compliance filing at FERC. The NEPOOL Tariff changes and amendments to the
Restated NEPOOL Agreement included in the filing effected compliance with the
FERC's April 1998 Order. While there were a large number of changes in the
filing, the principal areas of change related to the addition in the NEPOOL
Tariff of a separately available internal point-to-point service, the addition
of a mechanism to allocate costs to update the regional transmission system, and
the replacement of a non-use charge with an in-service charge across
interconnections. The FERC issued its order accepting a settlement in July 1999
and a compliance filing was completed in September 1999.
To give market participants more choice and to foster competition, the
restructured NEPOOL proposed the unbundling of electric service in the NEPOOL
control area. The restructured NEPOOL called for the development of competitive
wholesale markets for installed capability, operable capability, energy,
automatic generation control, and reserves. These wholesale products are
market-priced, being based on bid-clearing pricing rather than the earlier
cost-based pricing. Market participants meet their responsibility for these
products by buying or selling those services through bilateral transactions or
through the regional power exchange administered through the ISO. In October
1997 FERC issued an order permitting implementation of the installed capability
market, which commenced in April of 1998. On April 6, 1999, FERC issued an order
approving market rules, and on May 1, 1999, the remaining markets (operable
capability, energy, automatic generation control and the reserve markets) were
implemented. In February 2000 FERC accepted an amendment to the Restated NEPOOL
Agreement that terminated the operable capability market effective March 1,
2000.
On May 13, 1999, the FERC issued a notice of proposed rulemaking that would
amend FERC's regulations under the Federal Power Act to facilitate the formation
of regional transmission organizations ("RTO"). On December 20, 1999, the FERC
issued Order No. 2000, which requires all public utilities that own, operate or
control interstate electric transmission to file a proposal for an RTO by
October 15, 2000, or, in the alternative, a description of any efforts by the
utility to participate in an RTO, the reasons for not participating and any
obstacles to participation, and any plans for further work toward such
participation. Order No. 2000 anticipates operational RTOs by December 15, 2001.
Central Maine is reviewing the order to determine, among other matters, its
effects on Central Maine's operations as a transmission-and-distribution utility
and the extent to which changes in the structure and operations of ISO-New
England may be required.
On December 30, 1999, NEPOOL submitted to FERC a proposed plan to manage
congestion on the NEPOOL transmission system. NEPOOL is considering revisions to
its proposal, which, if a consensus of its members can be achieved, it plans to
file by March 31, 2000, for FERC's consideration. Congestion management has
become a complex issue in the new transmission environment due in part to the
large number of merchant generating plants under construction or proposed at
various sites in New England, including sites in Central Maine's service area.
Item 3. LEGAL PROCEEDINGS.
Environmental Matters. CMP Group, Central Maine and certain of their affiliates
are subject to regulation by federal and state authorities with respect to air
and water quality, the handling and disposal of toxic substances and hazardous
and solid wastes, and the handling and use of chemical products. Electric
utility companies generally use or generate in their operations a range of
potentially hazardous products and by-products that are the focus of such
regulation. CMP Group and Central Maine believe that their current practices and
operations are in compliance with all existing environmental laws except for
such non-compliance as would not have a material adverse effect on their
financial positions. Central Maine reviews its overall compliance and measures
the liability quarterly by assessing a range of reasonably likely costs for each
identified site using currently available information, including existing
technology, presently enacted laws and regulations, experience gained at similar
sites, and the probable level of involvement and financial condition of other
potentially responsible parties. These estimates include costs for site
investigations, remediation, operation and maintenance, monitoring and site
closure.
New and changing environmental requirements could hinder the construction or
modification of transmission and distribution lines, substations and other
facilities, and could raise operating costs significantly. As a result, Central
Maine may incur significant additional environmental costs, greater than amounts
reserved, in connection with the transmission of electricity and the storage,
transportation and disposal of by-products and wastes. Central Maine may also
encounter significantly increased costs to remedy the environmental effects of
prior waste handling activities. The cumulative long-term cost impact of
increasingly stringent environmental requirements cannot accurately be
estimated.
Central Maine has recorded a liability, based upon currently available
information, for what it believes are the estimated environmental remediation
costs that it expects to incur for identified waste disposal sites. In most
cases, additional future environmental cleanup costs are not reasonably
estimatable due to a number of factors, including the unknown magnitude of
possible contamination, the appropriate remediation methods, the possible
effects of future legislation or regulation and the possible effects of
technological changes. Central Maine cannot predict the schedule or scope of
remediation due to the regulatory process and involvement of non-governmental
parties. At December 31, 1999, the liability recorded by Central Maine for its
estimated environmental remediation costs amounted to $2.7 million, which
management has determined to be the most probable amount within the range of
$2.1 million to $8.5 million. Such costs may be higher if Central Maine is found
to be responsible for cleanup costs at additional sites or identifiable possible
outcomes change.
Tax Settlement. In September 1997 Central Maine received a notice of deficiency
from the Internal Revenue Service ("IRS") as a result of its audit of Central
Maine's federal income tax returns for the years 1992 through 1994. There were
two significant adjustments among those proposed by the IRS. The first was a
disallowance of Central Maine'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 had been charged to income in 1994 in connection with the adoption of the
ARP effective January 1, 1995. The second major adjustment disallowed Central
Maine's 1994 deduction of the cost of the buyout of the Fairfield Energy Venture
("FEV") purchased-power contract.
In December 1997 Central Maine filed a petition in the United States Tax Court
contesting the entire amount of the deficiencies. Subsequently, Central Maine
sought review of the asserted deficiencies by an IRS Appeals Officer to
determine whether all or part of the dispute could be resolved in advance of a
court determination.
In June 1999, the IRS Appeals Officer and Central Maine reached agreement
resolving all issues. Under the proposed agreement the ERAM component was
allowed as fully deductible in 1994, while $24 million of the fuel and
purchased-power costs was deemed to be deductible in 1994 and the remaining $30
million deductible in 1995. The parties also agreed to increase the tax basis of
the FEV plant from $2 million to $11 million, to be depreciated over 20 years,
and that the remaining FEV contract buyout costs would be fully deductible in
1994.
As a result of the settlement, Central Maine made payments to the IRS and the
State of Maine totaling $11.8 million for the 1992 to 1994 tax deficiencies, as
well as $6.0 million in associated interest. Substantially all of the tax
impacts were normalized, as Central Maine will be deducting any disallowed costs
for tax purposes in future years. Of the $6.0 million interest payment,
approximately $1 million was previously accrued, and $1.8 million associated
with the FEV facility was deferred consistent with regulatory practice. Interest
income of $3.1 million was accrued for the years 1995 through December 1999. Net
income for 1999 was therefore reduced by less than $0.1 million.
Due to the materiality of the amounts involved, approval of the settlement from
the Congress's Joint Committee on Taxation was required, which was granted in
February 2000.
Wyman No. 4 Arbitration - By notice of claim dated June 24, 1999, the
non-operator owners of the Wyman No. 4 oil-fired generating unit in Yarmouth,
Maine, which was approximately 60-percent owned by Central Maine, served notice
on Central Maine that they believe they are entitled to a portion of the
proceeds of the sale of Central Maine's interest in the unit as part of the
April 1999 sale of its non-nuclear generation assets to FPL Energy. The
claimants contend that certain sections of the joint ownership agreement under
which they share in the output of the unit require a pro-rata distribution to
them of part of those proceeds as a result of Central Maine's sale of its
interest in the unit. The joint ownership agreement provides for arbitration of
claims arising under the agreement.
Central Maine believes that although the amount of the claim is substantial (up
to $62 million), the claimants have suffered no loss and are not entitled to any
part of the generation-asset sale proceeds. Central Maine intends to contest any
such claim vigorously, but cannot predict the result of the arbitration
proceeding.
Millstone Unit No. 3 Litigation - In August 1997 Central Maine and the other
minority owners of Millstone Unit No. 3 filed suit in Massachusetts Superior
Court against Northeast Utilities and its trustees, and initiated an arbitration
claim against 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.
Since the filing of the suit and arbitration claim, the parties engaged in
resolving preliminary issues and in extensive pre-hearing discovery. The
arbitration hearing began on November 16, 1999.
On January 28, 2000, Central Maine entered into a settlement agreement with the
defendants and subsequently dismissed its lawsuit and arbitration claim. The
settlement is generally similar to earlier settlements with the defendants by
two joint owners which own in the aggregate approximately sixteen percent of the
unit. It calls for the payment of $4.8 million to Central Maine, which has been
reflected in 1999 net income, and other amounts contingent upon future events,
and would result in Central Maine's 2.5-percent interest in the unit being
included in the auction of the majority interests and certain of the minority
interests in the Millstone units expected to be completed by 2001.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of the stockholders of CMP Group was held on October 7, 1999.
Proxies for the meeting were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934. The meeting did not involve the election of
directors.
The only matter voted on at the meeting was approval of the Merger Agreement
among CMP Group, Energy East, and EE Merger Corp. The Merger Agreement was
approved, with the following vote tabulations:
Votes for - 25,305,650
Votes against - 515,291
Abstentions - 209,756
PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
CMP Group's common stock has been traded on the New York Stock Exchange since
September 1, 1998. Prior to that date the numbers in the table below refer to
Central Maine's common stock. As of December 31, 1999, there were 30,134 holders
of record of CMP Group common stock.
Price Range of and Dividends on Common Stock
Market Price Dividends
High Low Declared
1999
First Quarter $19-9/16 $16-1/4 $0.225
Second Quarter 26-3/4 17-3/4 0.225
Third Quarter 27 26 0.225
Fourth Quarter 27-15/16 26-1/4 0.225
1998
First Quarter $17-13/16 $15 1/4 $0.225
Second Quarter 20-3/8 17-1/16 0.225
Third Quarter 20-1/2 16-15/16 0.225
Fourth Quarter 20 16-3/4 0.225
Under the terms of Central Maine Articles of Incorporation, no dividend may be
paid on the common stock of Central Maine if such dividend would reduce retained
earnings below $29.6 million. At December 31, 1999, Central Maine's retained
earnings were $100.8 million, of which $71.2 million was not so restricted.
There are currently no such restrictions on the payment of dividends by CMP
Group. Future dividend decisions will be subject to future earnings levels and
the financial condition of CMP Group and Central Maine and will reflect the
evaluation by their Board of Directors of then existing circumstances.
Item 6. SELECTED FINANCIAL DATA.
- ------ -----------------------
The following table sets forth selected consolidated financial data of CMP Group
and Central Maine for the five years ended December 31, 1995 through 1999. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and related notes thereto included in Items 7 and 8 hereof.
The selected consolidated financial data for the years ended December 31, 1995
through 1999 are derived from the audited consolidated financial statements of
Central Maine and CMP Group.
Selected Consolidated Financial Data
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CMP Group Central Maine
1999 1998 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
Electric operating revenue $ 953,711 $ 938,739 $ 953,501 $ 938,561 $ 954,176 $ 967,046 $ 916,016
Net income (loss) 54,854 52,910 68,740 54,823 13,422 60,229 37,980
Long-term obligations 122,542 346,281 120,186 343,834 400,923 587,987 622,251
Redeemable preferred stock 910 18,910 910 18,910 39,528 53,528 67,528
Total assets 2,047,260 2,262,884 2,001,834 2,223,480 2,298,966 2,010,914 1,992,919
Earnings (loss) per common
share $1.69 $1.63 $2.10 $1.56 $0.16 $1.57 $0.86
Dividends declared per
common share $0.90 $0.90 $1.305 $0.675* $0.90 $0.90 $0.90
</TABLE>
*1998 fourth quarter dividend of $0.225 per share was declared and paid in
January 1999.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------ ------------------------------------------------------------
AND RESULTS OF OPERATIONS OF CMP GROUP ANDCENTRAL MAINE POWER COMPANY
This is a combined Report on Form 10-K of CMP Group and Central Maine.
Therefore, our Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) applies to both CMP Group and Central Maine. CMP
Group's consolidated financial statements include the accounts of CMP Group and
its wholly owned and controlled subsidiaries, including Central Maine
(collectively, the CMP Group System). Central Maine's consolidated financial
statements include its accounts as well as those of its wholly owned and
controlled subsidiaries. The MD&A should be read in conjunction with the
consolidated financial statements included herein.
Note re Forward-Looking Statements
This Report on Form 10-K contains forecast information items that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. CMP Group
and Central Maine undertake no obligation to republish revised forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Readers are urged to carefully
review and consider the factors in the succeeding paragraph.
Factors that could cause actual results to differ materially include, among
other matters, the results of the pending merger with Energy East, electric
utility industry restructuring, including the ongoing state and federal
activities that will determine Central Maine's ability to recover its stranded
costs and the cost of upgrades of transmission facilities to accommodate new
merchant generating plants; future economic conditions, earnings-retention and
dividend-payout policies; developments in the legislative, regulatory, and
competitive environments in which CMP Group and Central Maine operate;
investments in unregulated businesses; and other circumstances that could affect
anticipated revenues and costs, such as unscheduled maintenance and repairs of
transmission and distribution facilities, unanticipated environmental cleanups
and compliance with new or re-interpreted laws and regulations affecting the
operation of the business.
Formation of Holding Company
General. CMP Group is a holding company organized effective September 1, 1998,
which owns all of the common stock of Central Maine and the former non-utility
subsidiaries of Central Maine. As part of the reorganization, all of the shares
of Central Maine's common stock were converted into an equal number of shares of
CMP Group common stock, which are listed on the New York Stock Exchange under
the symbol CTP. The reorganization was approved by Central Maine's shareholders
on May 21, 1998, and on various dates in 1998 by the appropriate state and
federal regulatory agencies.
Results of Operations
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CMP
Group Central Maine
----- -------------
(dollars in millions)
Net income (loss) Twelve months ended:
December 31, 1999 $54.9 $1.69/share $68.7
December 31, 1998 52.9 $1.63/share $54.8
---- ----
Increase $ 2.0 $13.9
Earnings (loss) applicable to common
stock
Twelve months ended:
December 31, 1999 N/A $65.4 $2.10/share
December 31, 1998 N/A $50.0 $1.56/share
----
Increase $15.4
</TABLE>
Consolidated net income for CMP Group in 1999 was $54.9 million or $1.69 per
share, compared to $52.9 million or $1.63 per share for 1998. Central Maine
provided approximately 96 percent of CMP Group's revenues in 1999 or $65 million
of net income. Central Maine's earnings applicable to common stock increased
$15.4 million over 1998.
Other subsidiary operations and the costs of the pending merger with Energy East
account for the remaining decrease in CMP Group net income. The most significant
portion of the other consolidated subsidiaries operations is a $10 million
non-cash loss associated with the MaineCom subsidiary's 38 percent interest in
Northeast Optic Network, Inc.
Central Maine's operating income was $131 million in 1999 compared to $127
million in 1998. Service area sales were up significantly over 1998, as detailed
below, reflecting the return to normal levels of electric service usage, which
were depressed in 1998 due to a severe January ice storm and economic growth in
the region during 1999. These forces contributed to an overall revenue growth of
3.5 percent before consideration of a negotiated rate case settlement, or 1.4
percent after giving effect to the settlement.
The rate case settlement resolved several ratemaking issues associated with
finalizing Central Maine's revenue requirements and prices for operating as a
non-generating transmission-and-distribution utility upon the advent of retail
customer choice of energy supplier on March 1, 2000. The introduction of retail
choice and the 1999 divestiture of Central Maine's generation were among the
requirements of the Maine electric utility industry restructuring statute that
became law in 1997.
As part of the rate case settlement, Central Maine agreed to a one-time earnings
cap for 1999. Earnings above the cap were deferred in 1999 and will be used to
offset rate increases that would otherwise be required to mitigate stranded
costs and increases in operating expenses through 2001.
Operating expenses increased less than 1 percent, primarily as a result of the
sale of generation assets and prudent cost controls. On April 7, 1999 Central
Maine completed the sale of its non-nuclear generating assets to affiliates of
FPL Group, for $846 million.
The generation sale proceeds substantially exceeded the remaining book value of
the assets. The gain resulting from the sale has been deferred as required by
the MPUC. The deferred gain will be amortized in future years providing Central
Maine with the opportunity to reduce its stranded costs and reduce
transmission-and-distribution rates for customers. Central Maine used cash
proceeds from the sale to reduce long-term debt, thereby reducing interest
costs. Remaining cash proceeds were invested and contributed interest income to
the 1999 results. Overall earnings applicable to common stock was $15 million
higher than 1998.
The future impact of the state-mandated sale of generation assets and the
settlement of the rate case, which established prices for the remaining
transmission-and-distribution services, will be lower overall costs and revenues
for Central Maine. In the future, energy charges will not be part of Central
Maine revenues, except for the standard offer service for large customers, but
will be revenues of the competitive energy providers' operation. The MPUC set
Central Maine's authorized return on common equity at 10.5 percent, with an
equity component of 47 percent of total capital.
As a result of the generation asset sale and the resulting rate treatments,
Central Maine estimates that residential and small general service customers,
who comprise about 90 percent of the company's accounts, will see total-bill
savings for both energy (provided by competitive energy providers) and delivery
charges (provided by Central Maine) of about 10 percent after March 1, 2000.
Because the third party standard offer energy service for large customers was
priced higher than the service for residential and small-business customers,
Central Maine projects that total-bill savings for large customers will be less
than 5 percent unless they select a competitive energy provider. Further,
because energy-supply competition has been slow to develop, Central Maine expect
that total-bill savings for customers will, for a limited time at least,
primarily reflect reductions in its delivery charges rather than in
energy-supply services.
Operating Revenues
CMP Group's electric operating revenue increased by $15.0 million or 1.6 percent
to $953.7 million in 1999, and decreased by $15.4 million or 1.6 percent in 1998
to $938.7 million. Higher sales volume due to positive growth in all customer
classes, except wholesale, and electricity sales to some former Central Maine
generating facilities, now owned by FPL, helped to increase revenues in 1999.
Wholesale customers became customers of FPL at the time of the sale. Revenues
would have been $20 million higher, were it not for the earnings sharing
adjustment in the rate case settlement. See Note 3 of Notes to Consolidated
Financial Statements for more information. The major components of the change in
electric operating revenue are as follows:
1999 1998
Revenue from Central Maine service-area kwh sales $ 30.3 $(20.2)
Rate case settlement (Note 3) (20.0) -
Revenues from non-territorial sales (3.7) 6.2
Other operating revenue 6.1 4.5
MEPCO and other subsidiaries 2.3 (5.9)
---- ----
$ 15.0 $(15.4)
==== ====
Service Area Kwh Sales. Central Maine's service-area sales of electricity
totaled approximately 9.21 billion kilowatt-hours for the year ended December
31, 1999, up from the 9.05 billion kilowatt-hour level of a year ago.
Central Maine's service-area sales for the years 1999, 1998 and 1997 are shown
in the following table:
(Kilowatt-hours in millions)
1999 1998 1997
---- ---- ----
% % %
KWH change KWH change KWH change
--- ------ --- ------ --- ------
Residential ............. 2,859 3.6% 2,761 (2.0)% 2,817 (0.4)%
Commercial .............. 2,701 5.4 2,563 1.3 2,529 1.6
Industrial .............. 3,568 2.3 3,487 (7.8) 3,784 2.6
Wholesale and
lighting .............. 83 (65.7) 242 6.1 228 5.3
----- ----- -----
Total Service-
Area Sales ............ 9,211 1.8% 9,053 (3.2)% 9,358 1.5 %
===== ===== =====
The primary factors in the service-area kilowatt-hour sales overall increase in
1999 were (1) the absence of an ice-storm in 1999 of the kind that caused
widespread customer outages in January 1998, (2) an unusually warm summer, (3) a
cold 1998-1999 winter season, and (4) a strong Maine economy and the company's
marketing efforts.
The average number of residential customers increased by 5,864 in 1999, 4,607 in
1998 and 4,822 in 1997, while average usage per residential customer increased
2.3 percent in 1999, decreased 3.0 percent in 1998 and 1.5 percent in 1997.
The 1999 electricity sales to some former Central Maine generating facilities
now owned by FPL helped to boost sales to the commercial sector. In addition,
increased sales in the retail trade and service sectors which comprise the
largest percentage of commercial sales, were due to continued strength in
Maine's economy.
Industrial sales levels are significantly affected by sales to the
pulp-and-paper industry, which has accounted for approximately 56 percent of
industrial sales and approximately 22 percent of total service-area sales. Sales
to the pulp-and-paper sector increased by 1.4 percent in 1999, decreased 14.4
percent in 1998 and increased by 0.8 percent in 1997. The increase in 1999 was
due primarily to a strong economy. The decrease in 1998 was due primarily to the
closing of two pulp and paper mills and the expiration of a buy-sell contract
with a third paper mill. In addition, weakness in Asian economies progressively
impacted Maine's manufacturing sector in 1998, resulting in lower than expected
kwh sales in the industrial sector. The decrease in 1997 was due primarily to
the permanent shutdown of one paper mill. Sales to all other industrial
customers as a group increased 3.5 percent in 1999, 2.2 percent in 1998 and 8.2
percent in 1997.
Operating Expenses
The sale of Central Maine's generating assets had a significant effect on
operating expenses when comparing 1999 to 1998. Fuel used for company generation
decreased by $20 million, as these expenses were no longer applicable after the
sale. Purchased power - energy increased by $23.5 million after the effects of
several factors. Energy purchases increased after the asset sale due to the need
to purchase power from FPL and higher sales volume. This was offset by lower
non-utility generator purchases, lower oil costs and $27.9 million allowed
amortization of incremental power supply costs from the asset sale.
Purchased power - capacity expense increased by $26.6 million in 1999 over 1998.
Capacity charges were $20 million higher due to the greater volume of purchases.
Contract restructuring of non-utility energy providers accounted for an
additional $20 million in increased costs versus 1998. Partially offsetting
these were decreases in nuclear costs, mostly associated with Maine Yankee,
amounting to $13.4 million, due to lower operating costs.
Other operations expense for CMP Group increased $25.2 million. Approximately
$27 million was due to reporting differences for subsidiary operations in 1999
versus 1998. Subsidiary operations were fully consolidated in 1999, but for 1998
results reflect consolidations from September forward. Prior to September 1998
subsidiaries were accounted for on an equity basis as the results of
consolidating the subsidiaries was deemed immaterial. Power production expenses
decreased by $6.6 million due to the asset sale. Nuclear production expenses
reflects a decrease of $4.8 million as a result of the settlement of the
Millstone Unit 3 litigation. Transmission expenses increased by approximately
$10.7 million due to continuing costs for the ISO and NEPOOL for transitioning
to deregulation. Distribution expenses increased by approximately $4 million due
to temporary increased costs caused by Central Maine's operations personnel
working in a maintenance capacity and to subsequent clean-up efforts that
resulted from the 1998 ice storm. Maintenance expenses reflect the corresponding
decrease of $3.7 million. Other decreases in operating expenses include $2.1
million in uncollectible account charge-offs, and $1.5 million in low-income
program amortization costs which ended in December, 1998.
CMP Group's maintenance expense decreased by $7.8 million, mainly due to the
asset sale. Other activity included an increase of $1.1 million related to
merchant plant activity, and the $3.7 million decrease related to the 1998 ice
storm as described above.
Federal and state income taxes fluctuate with the level of pre-tax earnings and
the regulatory treatment of taxes by the MPUC. This expense increased by $12.4
million compared to 1998 as a result of higher pre-tax earnings in 1999. The
effective tax rate for the year ended December 31, 1999 was 48.2 percent. The
flowthrough of ITC and ARAM significantly decreased the effective tax rate by
approximately 15%. This was offset by the non-provided deferred taxes on the
generation assets sold which increased the effective tax rate by approximately
24%. Another factor causing the effective rate to be higher than the statutory
rate was the reversal of book interest expense related to carrying costs on the
deferred gain on sale of generating assets, which is not deductible for tax
purposes.
Other Income and Expense
Equity in Earnings of Associated Companies for CMP Group decreased by $8.9
million for the year ended December 31, 1999, compared to 1998. The decrease is
due primarily to losses associated with NEON of $10.6 million, which is an
equity investment of MaineCom, a CMP Group subsidiary.
CMP Group's gain on sale of investments and properties decreased in 1999 by
$17.0 million and by $12.6 million for Central Maine. The decrease is due
primarily to the following:
Change 1999/1998
(Dollars in millions) CMP Group Central Maine
--------- -------------
Sale of New England Fibre by MaineCom in 1998 $(9.5) $ -
Sale of stock in NEON in 1998 (3.1) -
Gas pipeline easement sales net of reversals (6.8) (6.8)
Sale of land in 1998 (3.6) (3.6)
Union-Water generating asset sale 5.1 -
Other - miscellaneous .9 (2.2)
------ ------
$(17.0) $(12.6)
====== ======
In 1999, the MPUC ruled that gains from the sales of easements to gas companies
in 1998 and 1999 should be shared between ratepayers and shareholders. CMP
recorded these gains as income in 1998 based on its interpretation of the
appropriate rate treatment. Ratepayers will receive 90 percent of the benefit
amortized over 5 years, while shareowners received 10 percent of the benefit
immediately. The gas pipeline reversals detailed above reflect compliance with
the new MPUC ruling for the 1998 easement sales.
A portion of the gain on sale of generation assets amounting to $28.5 million
was allowed in 1999 by the MPUC to offset the property tax timing differences
for which deferred taxes were never provided. A corresponding charge to income
tax expense resulted in no impact to net income. See Note 2 "Income Taxes" of
Notes to Consolidated Financial Statements for more details.
Interest income increased by $12.8 million due to investments from proceeds of
the generation asset sale.
CMP Group's Other Interest Expense increased by $19.1 million for the year 1999
as compared to 1998. The increase was due primarily to interest accruing to
ratepayers of $16.3 million associated with the deferred gain of $536.4 million
relating to Central Maine's generation asset sale to FPL and $4.9 million due to
the interest expense on the settlement of a tax liability for tax years 1992 to
1994 with the IRS. This increase was offset by lower debt levels and associated
interest costs after proceeds from the generation asset sale were used to redeem
pollution control bonds and medium-term notes.
Other interest expense increased in 1998 over 1997 primarily due to higher
levels of borrowing on Central Maine's revolving credit facility to meet working
capital needs.
On October 1, 1999 Central Maine redeemed $18 million of its 7.999% Preferred
Stock, reducing dividends by approximately $592 thousand for the year ended
December 31, 1999, compared to 1998. On July 1, 1998, Central Maine redeemed the
final $7 million of its 8 7/8% Preferred Stock under the mandatory sinking-fund
provision, reducing dividends in total by approximately $932 thousand for 1998
compared to 1997. On April 1, 1998 Central Maine redeemed all of its 7 7/8%
Preferred Stock ($30 million), reducing dividends by approximately $1.8 million
for the year ended December 31, 1998, compared to 1997. On June 8, 1998, $11.6
million of the outstanding 7.999% Preferred Stock was repurchased, further
reducing dividends by approximately $697 thousand for the year ended December
31, 1998, compared to 1997.
Proposed Merger with Energy East
On June 14, 1999, CMP Group, Energy East and EE Merger Corp., a Maine
corporation that is a wholly-owned subsidiary of Energy East, entered into an
Agreement and Plan of Merger, dated as of June 14, 1999, providing for a merger
transaction among CMP Group, Energy East and EE Merger Corp. Energy East is an
energy delivery, products and services holding company doing business in New
York, Massachusetts, Maine, New Hampshire and New Jersey, which delivers
electricity and natural gas to retail customers and provides electricity,
natural gas and energy management and other services to retail and wholesale
customers in the Northeast.
Pursuant to the merger agreement, EE Merger Corp. will merge with and into CMP
Group with CMP Group being the surviving corporation and becoming a wholly-owned
subsidiary of Energy East. We expect the merger, which was unanimously approved
by the respective boards of directors of CMP Group, Energy East and EE Merger
Corp., to occur shortly after all of the conditions to the consummation of the
merger, including the receipt of required regulatory approvals, are satisfied.
Under the terms of the merger agreement, each outstanding share of CMP Group
common stock, $5.00 par value per share, other than any treasury shares or
shares owned by Energy East or any subsidiary of CMP Group or Energy East, will
be converted into the right to receive $29.50 in cash. Pursuant to the merger
agreement, approximately $957 million in cash will be paid to holders of shares
of CMP Group Common Stock, with additional payments being made to holders of
stock options and performance shares awarded under CMP Group's performance
incentive plans.
The merger is subject to certain customary closing conditions, including without
limitation the receipt of all necessary governmental approvals and the making of
all necessary governmental filings. CMP Group's shareholders approved the merger
at a special meeting on October 7, 1999. The MPUC, the U.S. Department of
Justice, the Federal Trade Commission, Federal Communications Commission, the
NRC and the Connecticut DPUC have approved the merger. Other approvals are
pending from the FERC and the SEC. If the remaining approvals are granted, we
estimate that the merger could be completed around mid-2000.
Alternative Rate Plan
Central Maine's ARP was in effect from January 1, 1995, through December 31,
1999. Instead of rate changes based on the level of costs incurred and capital
investments, the ARP provided for one annual adjustment of an inflation-based
cap on each of Central Maine's rates, with no separate reconciliation and
recovery of fuel and purchased-power costs. Under the ARP, the MPUC continued to
regulate Central Maine's operations and prices, provide for continued recovery
of deferred costs, and specify a range for its rate of return. The MPUC
confirmed in its order approving the ARP that the ARP was intended to comply
with the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation."
The ARP contained a mechanism that provided price caps on Central Maine's retail
rates to be adjusted annually on each July 1, commencing in 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 applied
to all of Central Maine's retail rates.
A specified standard inflation index was the basis for each annual price-cap
change. The inflation index was reduced by the sum of two productivity factors,
a general productivity offset of 1.0 percent, and a second formula-based offset
that started in 1996 and was intended to reflect the limited effect of inflation
on Central Maine's purchased-power costs during the five-year initial term of
the ARP.
The sharing mechanism could adjust the subsequent year's July price-cap change
in the event Central Maine's earnings were outside a range of 350 basis points
above or below Central Maine's allowed return on equity (starting at the 10.55
percent allowed return in 1995 and indexed annually for changes in capital
costs). Outside that range, profits and losses could be shared equally by
Central Maine and its customers in computing the price-cap adjustment. The ROE
used for earnings sharing was increased to 11.5 percent effective with the July
1999 price change.
The ARP also provided for partial flow-through to ratepayers of cost savings
from non-utility generator contract buy-outs and restructuring, recovery of
energy-management costs, and penalties for failure to attain customer-service
and energy-efficiency targets. The ARP also generally defined mandated costs
that would be recoverable by Central Maine notwithstanding the index-based price
cap. To receive such treatment, the annual revenue requirement related to a
mandated cost must have exceeded $3 million and have a disproportionate effect
on Central Maine or the electric-power industry.
The components of the last three ARP price increases are as follows:
1999 1998 1997
---- ---- ----
Inflation Index .89% 1.78% 2.12%
Productivity Offset (1.00) (1.00) (1.00)
Qualifying Facility Offset .04 (.29) (.42)
Earnings Sharing - 1.12 -
Flowthrough and Mandated Items .12 (.28) .40
----- ---- -----
.05% 1.33% 1.10%
===== ==== ====
The 1997 and 1998 price increases were approved by the MPUC and implemented.
Central Maine elected not to increase prices in 1999.
On September 30, 1999, Central Maine submitted to the MPUC a proposed seven-year
rate plan ("ARP2000") to take effect after completion of the merger with Energy
East. The formula for ARP2000 is substantially similar to that of the ARP,
except that the one-percent productivity offset of the ARP would escalate in
annual increments of 0.25 percent from 1.00 percent for the 2001 price change to
1.75 percent in 2004 to 2007. The purpose of the proposed escalation is to
assure that Central Maine's customers benefit from the increased savings
expected from the Energy East merger. In addition, in the mandated-costs
exclusion in ARP2000 only mandated costs over $50,000 would be recognized and
only the excess over $3 million of accumulated mandated cost would be
recoverable, not the entire $3 million non-cumulative cost recoverable under the
1995-1999 ARP. The rate of return on equity of 10.5 percent established by the
MPUC effective March 1, 2000, would be the basis for the earnings-sharing
bandwidth, and not the 11.5 percent under the ARP. ARP2000 is subject to MPUC
approval.
Electric-Utility Industry Restructuring
Maine Restructuring Legislation. The Maine Legislature enacted legislation in
1997 to restructure the electric utility industry in Maine effective March 1,
2000. The principal restructuring provisions of the legislation provided for
customers to have direct retail access to generation services and for
deregulation of competitive electric providers, commencing March 1, 2000, with
transmission-and-distribution companies such as Central Maine continuing to be
regulated by the MPUC. By that date, investor-owned utilities were required to
divest all generation assets and generation-related business activities, with
two major exceptions: (1) non-utility 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. As
discussed below under "Sale of Generation Assets," Central Maine completed the
sale of its non-nuclear generating assets on April 7, 1999.
The legislation also required investor-owned utilities to sell their rights to
the capacity and energy from all undivested generation assets after February 29,
2000, including nuclear generation assets and the purchased-power contracts that
had not previously been divested pursuant to the legislation. On July 30, 1999,
Central Maine offered its rights to the capacity and energy from its undivested
generation assets and generation-related business to prospective bidders and in
December 1999 contracted to sell such rights with respect to its undivested
nuclear generation assets (Vermont Yankee and Millstone Unit 3) and its NUG
contract entitlements for a two-year period commencing March 1, 2000.
As a transmission-and-distribution utility since March 1, 2000, Central Maine is
prohibited from selling electric energy to retail customers, except as may be
directed by the MPUC. Any competitive electricity provider affiliated with
Central Maine would be allowed to sell electricity outside Central Maine's
service territory without limitation as to amount, but within Central Maine's
service territory the affiliate would be limited to providing not more than 33
percent of the total kilowatt-hours sold with Central Maine's service territory,
as determined by the MPUC. CMP Group has determined that it does not intend to
create such an affiliate.
For a summary of other provisions of the 1997 legislation, see our Annual Report
on Form 10-K for the twelve months ended December 31, 1998.
MPUC Proceeding on Stranded Costs, Revenue Requirements, and Rate Design. By
order dated March 19, 1999, the MPUC completed the first phase of its proceeding
contemplated by Maine's restructuring legislation to establish the recoverable
amount and timing of Central Maine's stranded costs, its revenue requirements
and the design of its rates to be effective March 1, 2000. In its Phase I order
the MPUC decided the "principles" by which it would set Central Maine's
transmission-and-distribution rates, but deferred actually calculating the rates
until later in the proceeding because all of the necessary information was not
yet available.
With respect to stranded costs, the MPUC indicated that it would set the amount
of recoverable stranded costs for Central Maine later in the proceeding pursuant
to its mandate under the restructuring statute to provide
transmission-and-distribution utilities a reasonable opportunity to recover such
costs that is equivalent to the utility's opportunity to recover those costs
prior to the commencement of retail access. The MPUC also reviewed the
prescribed methodology for determining the amount of a utility's stranded costs,
including among other factors the application of excess value from Central
Maine's divested generation assets to offset stranded costs.
In the area of revenue requirements, the Phase I order did not establish
definitive amounts, but did contain the MPUC's conclusion that the appropriate
cost of common equity for Central Maine as a transmission-and-distribution
company was 10.50 percent, with a common-equity component of 47 percent. In
dealing with rate design, the MPUC again limited itself primarily to
establishing principles that would guide it in designing Central Maine's rates
to be effective March 1, 2000.
On July 1, 1999, Central Maine filed its Phase II case with the MPUC. In that
filing Central Maine updated certain test-year data to reflect known and
measurable changes to its revenue requirement, updated its stranded cost
estimate to reflect actual data from the April 1999 closing of its
generation-asset sale, and proposed its rate design based on the principles
enunciated in the Phase I order. Some of the information needed to establish
rates was still incomplete in that filing, however, since neither the auction of
the output of Central Maine's non-divested generation resources nor the bid
process for "standard-offer" service (for those customers who do not select a
competitive energy supplier) had been completed. In addition, several issues
raised by the Phase I MPUC order remained unresolved, including, among others,
(i) whether the MPUC could require the unamortized investment tax credits and
excess deferred income taxes associated with the sale of Central Maine's
generation assets to be flowed through to ratepayers, and (ii) the rate
treatment of the gain on the sale of Union Water's generation-related assets to
FPL and employee transition costs resulting from the generation-asset sale.
In an order dated December 3, 1999, in a separate but related proceeding, the
MPUC approved Central Maine's plan for the sale of the output of its
non-divested generation assets. In another related proceeding, by order dated
October 25, 1999, the MPUC accepted a competitive energy supplier's bid to
provide standard-offer service to Central Maine's residential and small
commercial customers who did not select a competitive energy supplier after
March 1, 2000. In the same order the MPUC rejected all of the standard-offer
bids for Central Maine's medium and large commercial and industrial customers
and sought a second round of bids. In the December 3 order the MPUC rejected all
of the second round of standard-offer bids for Central Maine's medium and large
classes and ordered that Central Maine arrange such service for those classes.
On January 19, 2000, the MPUC issued its Phase II order determining Central
Maine's revenue requirement as a transmission-and-distribution utility,
effective March 1, 2000. In the order the MPUC disallowed approximately $8
million of the approximately $12 million revenue increase requested in Central
Maine's Phase II filing, which had been based on certain known and measurable
changes to its revenue requirement.
A negotiated settlement approved by the MPUC on January 27, 2000, resolved the
major issues remaining outstanding in the final phase of the ratemaking
proceeding. The settlement confirmed that the $18.2 million of unamortized
investment tax credits and excess deferred income taxes related to Central
Maine's generation-asset sale would flow through to shareholders pursuant to the
normalization rules of the Internal Revenue Code. In addition, Central Maine
agreed not to seek judicial review of an August 2, 1999 MPUC order regarding the
treatment of gains from sales of easements that required Central Maine to
recognize 10 percent of the gain currently with the remaining 90 percent being
amortized over 5 years, effective as of the dates of the 1998 and 1999 sale
transactions. Central Maine also agreed not to seek reconsideration of other
cost-of-service updates in the rate case or to challenge an $4.7 million
disallowance of employee transition costs, and to withdraw its appeal of the
rate treatment of the gain on Union Water's generation-related assets.
The settlement also allowed Central Maine to charge off $88 million on March 1,
2000, representing its entire remaining investment in the Millstone 3 nuclear
unit in Connecticut, against the regulatory Asset Sale Gain Account created in
the ratemaking proceeding to recognize the above-book value realized through
Central Maine's generation-asset sale. This provision reflected a recent
resolution of Central Maine's arbitration and litigation claims against the lead
owners of the jointly-owned Millstone 3 unit, in which Central Maine owns a
2.5-percent interest.
As part of the settlement Central Maine also agreed to a one-time earnings cap
for 1999. Earnings above the cap were deferred in 1999 and will be used to
offset rate increases that would otherwise be required to mitigate stranded
costs and increases in operating expenses through 2001.
Finally, the rate settlement established Central Maine's rates as a
transmission-and-distribution utility effective March 1, 2000. A separate order
fixed the standard-offer prices for Central Maine's medium and large commercial
and industrial customers at levels intended to reflect current market pricing
and to avoid under-collection of Central Maine's costs.
The combined after-tax effect of the provisions of the ratemaking settlement,
including the earnings cap, was to reduce CMP Group's net income for 1999 by $11
million.
Central Maine estimates that customers on its standard residential rate and
small commercial customers will save an average of nine to ten percent on their
total electric bills after March 1, 2000, compared to earlier bills for the same
kwh usage. Central Maine believes that its medium and large commercial and
industrial customers can realize savings ranging from minimal to almost fifteen
percent, with the greater savings going to customers who select a competitive
energy supplier rather than taking the standard-offer service.
Sale of Generation Assets
On April 7, 1999, Central Maine completed the sale of all of its hydro, fossil
and biomass power plants with a combined generating capacity of 1,185 megawatts
for $846 million in cash, including approximately $18 million for assets of
Union Water, to affiliates of Florida-based FPL Group. The related book value
for these assets was approximately $217.3 million. In addition, as part of its
agreement with FPL Group, Central Maine entered into energy buy-back agreements
to assist in fulfilling its obligation to supply its customers with power until
March 1, 2000. Subsequently, an agreement was reached to sell related storage
facilities to FPL Group for an additional $4.6 million ($1.5 million for the
assets and $3.1 million estimated for lease revenue associated with the
properties that Central Maine retained), including $2.0 million for Union Water
assets. The related book value of these assets was approximately $11.4 million.
Central Maine recorded a pre-tax deferred gain of $518.8 million net of selling
costs and certain non-normalized income tax impacts from the sale of generation
assets by establishing a regulatory liability in 1999, which eliminated most
income recognition. Central Maine did record an income impact from the sale
amounting to $18 million associated with the related unamortized investment
credits and excess deferred tax reserves as required by the IRS regulations.
Central Maine also recorded curtailment and special termination deferred charges
of $5.2 million associated with pension and postretirement benefit costs of
employees leaving the company as a result of the generation-asset sale. These
deferred charges are being amortized over a three-year period beginning March 1,
2000, as required by the MPUC. The regulatory liability for the asset sale gain,
including interest, amounted to approximately $548 million at December 31, 1999,
and is being amortized over an 8.5 year period beginning March 1, 2000. The
amortization will vary from year to year.
With the cash proceeds of the sale Central Maine redeemed the remaining $118.7
million of its outstanding General and Refunding Mortgage Bonds on May 10, 1999,
and paid at maturity $47 million of its medium-term notes on May 4, 1999. On
June 1, 1999, Central Maine redeemed $180 million of its medium-term notes, as
well as all of the outstanding $10 million Town of Yarmouth Pollution Control
Revenue Bonds, which had been issued in 1977 and 1978. On August 31 and
September 9, 1999 Central Maine paid at maturity another $40 million of
medium-term notes. Approximately $293.5 million of the proceeds were required
for federal and state income taxes resulting from the sale and $45.4 million for
incremental energy purchases to meet Central Maine's power-supply obligations
until the start of retail competition on March 1, 2000. Central Maine expects to
transfer the balance to its parent, CMP Group.
As required by the Maine restructuring legislation, on July 30, 1999, Central
Maine offered at auction its rights to the capacity and energy from its
undivested generation assets and generation-related business. Upon completion of
the auctions, in December 1999 Central Maine contracted to sell such rights with
respect to its undivested nuclear generation assets (Vermont Yankee and
Millstone Unit No. 3) and its NUG contract entitlements to the successful bidder
for a two-year period commencing March 1, 2000. Central Maine also auctioned its
Hydro-Quebec entitlement to a different buyer for the same period. All of the
auction results were approved by the MPUC.
Expansion of Lines of Business
General. CMP Group has been expanding its business opportunities through
investments that capitalize on core competencies. CMP International Consultants
(d/b/a CNEX), a wholly owned subsidiary of CMP Group, provides management,
planning, consulting and research and information services to foreign and
domestic utilities and government agencies. TeleSmart, a wholly owned subsidiary
of CMP Group, which provided accounts receivable management services for utility
clients was closed by CMP Group on February 14, 2000, after a review of the
subsidiary's prospects. The Union Water-Power Company, a wholly owned subsidiary
of CMP Group, provides utility construction and support services (On Target
division); energy efficiency performance contracting and energy use and
management services (Combined Energies division); and real estate development
services (UnionLand Services division).
Telecommunications. MaineCom Services, which is wholly owned by CMP Group,
provides telecommunications services, including point-to-point connections,
private networking, consulting, private voice and data transport, carrier
services, and long-haul transport. MaineCom Services also holds, through wholly
owned New England Business Trust, an approximately 38-percent interest in
NorthEast Optic Network, Inc. ("NEON"), a facilities-based provider of
technologically advanced, high-bandwidth, fiber optic transmission capacity for
communications carriers on local loop, inter-city, and interstate facilities.
NEON owns and operates and is expanding a fiber optic network in New England and
New York, utilizing primarily electric utility rights of way, including some of
Central Maine's and some owned by other electric utilities including Northeast
Utilities, another substantial minority stockholder.
On November 23, 1999, NEON announced two major agreements, one with Consolidated
Edison Communications, Inc. ("CEC"), a wholly owned subsidiary of Consolidated
Edison, Inc., and the other with Excelon, a wholly owned subsidiary of PECO
Energy, Inc. The agreements effectively expand the reach of the network to
include the Philadelphia, Baltimore and Washington, D.C., areas. As the
agreements are implemented, CEC will obtain an approximately ten-percent
interest in NEON and Excelon an interest of approximately nine percent.
In August 1998 NEON completed initial public offerings of $48 million of common
stock and $180 million of senior notes. As part of the common-stock offering
Central Maine sold some of the shares it then owned in NEON for approximately
$3.1 million. With some of the proceeds of the offerings NEON repaid
approximately $18 million Central Maine had advanced under an earlier
construction loan agreement.
On February 15, 2000, CMP Group announced that New England Business Trust
intended to sell approximately 2.5 million shares of its 6.177-million-share
common-stock holding in NEON through an underwritten public offering expected to
be completed during the second calendar quarter of 2000. Although the market
value of NEON's common stock has increased substantially since NEON's 1998
initial public offering, CMP Group cannot accurately estimate the amount of
proceeds to be realized through the planned offering.
CMP Group believes that although NEON operated at a loss in 1999, there is a
need for the fiber optic network it is constructing in the northeastern United
States. CMP Group, however, cannot predict the future results of NEON's
operations.
Natural Gas Distribution. New England Gas Development Corporation ("New England
Gas"), which is a wholly owned subsidiary of CMP Group, held approximately a
twenty-two percent interest at December 31, 1999 in CMP Natural Gas, L.L.C.
("CMP Natural Gas"). CMP Natural Gas is a joint venture of New England Gas and
Energy East Enterprises, a wholly owned subsidiary of Energy East. CMP Natural
Gas was formed to construct, own and operate a natural gas distribution system
to serve certain areas of Maine that did not have gas service, utilizing natural
gas delivered to Maine through new interstate pipeline facilities.
CMP Natural Gas began construction of its first local distribution system in
Windham, Maine, in early 1999 and began serving its first customer in May. On
July 8, 1999, CMP Natural Gas and Calpine Corporation, a California-based
independent power company, announced the signing of a 20-year contract for CMP
Natural Gas to provide natural gas delivery service to Calpine's proposed
540-megawatt natural gas-fired power plant under construction in Westbrook,
Maine. CMP Natural Gas expects to commence service to the plant by June 1, 2000,
after MPUC approval and construction of a two-mile lateral pipeline along an
existing Central Maine right of way that would interconnect with the new
interstate pipeline facilities. On December 13, 1999, the MPUC authorized CMP
Natural Gas to provide service to the Calpine plant, as well as the unserved
areas in the town of Gorham and on February 18, 2000, the MPUC approved an
affiliated-interest transaction allowing CMP Natural Gas to construct the
pipeline on Central Maine's transmission corridor.
If the merger of CMP Group and Energy East is completed, CMP Natural Gas will
become a wholly owned subsidiary of Energy East Enterprises, and New England Gas
will cease to exist. In April and June, 1999, Energy East also agreed to
business combinations with two established natural gas distribution companies in
Connecticut, subject to closing conditions, including shareholder votes and
regulatory approvals.
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. The Plant had experienced a
number of operational and regulatory problems and did not operate after 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. The
Plant's operating license from the NRC was scheduled to expire in 2008.
FERC Rate Case. On November 6, 1997, Maine Yankee submitted to FERC for filing
certain amendments to the Power Contracts (the "Amendatory Agreements") and
revised rates to reflect the decision to shut down the Plant and to request
approval of an increase in the decommissioning component of its formula rates.
Maine Yankee's submittal also requested certain other rate changes, including
recovery of unamortized investment (including fuel) and certain changes to its
billing formula, consistent with the non-operating status of the Plant. By Order
dated January 14, 1998, the FERC accepted Maine Yankee's new rates for filing,
subject to refund after a minimum suspension period, and set for hearing Maine
Yankee's Amendatory Agreements, rates, and issues concerning the prudence of the
Plant-shutdown decision that had been raised by intervenors.
During 1998 and early 1999 the active intervenors, including among others the
MPUC Staff, the Maine Office of the Public Advocate ("OPA"), Central Maine and
other owners, municipal and cooperative purchasers of Maine Yankee power (the
"Secondary Purchasers"), and a Maine environmental group (the "Settling
Parties"), engaged in extensive discovery and negotiations, which resulted in
the filing of a settlement agreement with the FERC on January 19, 1999. A
separately negotiated settlement filed with the FERC on February 5, 1999,
resolved the issues raised by the Secondary Purchasers by limiting the amounts
they will pay for decommissioning the Plant and by settling other points of
contention affecting individual Secondary Purchasers. Both settlements were
found to be in the public interest and approved by the FERC on June 1, 1999. The
settlements constitute full settlement of all issues raised in the FERC
proceeding, including decommissioning-cost issues and issues pertaining to the
prudence of the management, operation, and decision to permanently cease
operation of the Plant.
The primary settlement provided for Maine Yankee to collect $33.1 million in the
aggregate annually, effective August 1, 1999, including both decommissioning
costs and costs related to Maine Yankee's planned on-site independent spent fuel
storage installation ("ISFSI"). The 1997 FERC filing had called for an aggregate
annual collection rate of $36.4 million for decommissioning and the ISFSI, based
on a 1997 estimate. Pursuant to the approved settlement the amount collected
annually has been reduced to approximately $25.6 million, effective October 1,
1999, as a result of 1999 Maine legislation allowing Maine Yankee to (1) use for
construction of the ISFSI funds held in trust under Maine law for spent-fuel
disposal, and (2) access approximately $6.8 million held by the State of Maine
for eventual payment to the State of Texas pursuant to a compact for low-level
nuclear waste disposal, the future of which is in question after rejection of
the selected disposal site in west Texas by a Texas regulatory agency.
The settlement also provides for recovery of the unamortized investment
(including fuel) in the Plant, together with a return on equity of 6.50 percent,
effective January 15, 1998, on equity balances up to maximum allowed equity
amounts, which resulted in a pro-rata refund of $9.3 million (including tax
impacts) to the sponsors on July 15, 1999. The Settling Parties also agreed not
to contest the effectiveness of the Amendatory Agreements submitted to FERC as
part of the original filing, subject to certain limitations including the right
to challenge any accelerated recovery of unamortized investment under the terms
of the Amendatory Agreements after a required informational filing with the FERC
by Maine Yankee. In addition, the settlement contains incentives for Maine
Yankee to achieve further savings in its decommissioning and ISFSI-related costs
and resolves issues concerning restoration and future use of the Plant site and
environmental matters of concern to certain of the intervenors in the
proceeding.
As a separate part of the settlement, Central Maine, the other two Maine
utilities which own interests in Maine Yankee, the MPUC Staff, and the OPA
entered into a further agreement resolving retail rate issues and other issues
specific to the Maine parties, including those that had been raised concerning
the prudence of the operation and shutdown of the Plant (the "Maine Agreement").
Under the Maine Agreement Central Maine is recovering its Maine Yankee costs in
accordance with its most recent rate order from the MPUC.
Finally, the Maine Agreement requires Central Maine and the other two Maine
Utilities, for the period from March 1, 2000, through December 1, 2004, to hold
their Maine retail ratepayers harmless from the amounts by which the replacement
power costs for Maine Yankee exceed the replacement power costs assumed in the
report to the Maine Yankee Board of Directors that served as a basis for the
Plant shutdown decision, up to a maximum cumulative amount of $41 million.
Central Maine's share of that amount would be $31.2 million for the period.
Based on the results of the two year entitlement auction already completed, the
Company will not incur any liability for this provision in year 2000 and does
not believe that it will incur any liability in 2001.
CMP Group and Central Maine believe that the approved settlement, including the
Maine Agreement, constitutes a reasonable resolution of the issues raised in the
Maine Yankee FERC proceeding, which eliminated significant uncertainties
concerning CMP Group's and Central Maine's future financial performance.
Interests in Other Nuclear Plants
Connecticut Yankee. In December 1996, the Board of Directors of Connecticut
Yankee Atomic Power Company voted to permanently shut down and decommission the
Connecticut Yankee plant for economic reasons. The plant did not operate after
July 22, 1996. Central Maine estimates its share of the cost of Connecticut
Yankee's continued compliance with regulatory requirements, recovery of its
plant investment, decommissioning and closing the plant to be approximately
$25.1 million and has recorded a corresponding regulatory asset and liability on
the consolidated balance sheet. Central Maine is currently recovering through
rates an amount adequate to recover these expenses. Contested issues relating to
Connecticut Yankee's decommissioning rates, as well as the prudence of operating
that plant and the decision to cease operations, remain pending before the FERC.
Yankee Atomic. In 1993 the FERC approved a settlement agreement regarding
recovery of decommissioning costs and plant investment, and all issues with
respect to the prudence of the decision to discontinue operation of the Yankee
Atomic plant. Central Maine estimates its remaining share of the cost of Yankee
Atomic's continued compliance with regulatory requirements, recovery of its
plant investment, decommissioning and closing the plant, to be approximately
$2.4 million. This estimate has been recorded as a regulatory asset and
liability on Central Maine's balance sheet. Central Maine's current share of
costs related to the shutdown of Yankee Atomic is being recovered through rates.
Vermont Yankee. The Vermont Yankee plant is an operating unit. Its NRC operating
license is scheduled to expire in the year 2012. On October 15, 1999, Vermont
Yankee agreed to sell the Vermont Yankee plant for $22 million, subject to
certain adjustments, to AmerGen Energy Company LLC ("AmerGen"). AmerGen agreed,
among other commitments, to assume the decommissioning cost of the unit after it
is taken out of service, and the Vermont Yankee sponsors, including Central
Maine, agreed to fund the uncollected decommissioning cost up to a negotiated
amount at the time of the closing of the sale. The sponsors also agreed either
to enter into a new purchased-power agreement with AmerGen or to buy out such
future power payment obligations by making a fixed payment to AmerGen. Central
Maine elected to enter into a twelve-year purchased-power agreement and intends
to sell its power entitlement at the market rate. The sponsors' obligation to
consummate the sale is conditioned upon the receipt of satisfactory regulatory
approvals.
Millstone Unit 3. Pursuant to a joint ownership agreement, Central Maine has a
2.5 percent direct ownership interest in the Millstone 3 nuclear unit in
Waterford, Connecticut, which is operated by Northeast Utilities. This facility
was off-line from March 31, 1996, to July 1998, due to NRC concerns regarding
license requirements. In August 1997 Central Maine and the other minority owners
of Millstone Unit No. 3 filed suit in Massachusetts Superior Court against
Northeast Utilities and its trustees, and initiated an arbitration claim against
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. Since the filing of
the suit and arbitration claim, the parties engaged in resolving preliminary
issues and in extensive pre-hearing discovery. The arbitration hearing began on
November 16, 1999.
On January 28, 2000, Central Maine entered into a settlement agreement with the
defendants and subsequently dismissed its lawsuit and arbitration claim. The
settlement is generally similar to earlier settlements with the defendants by
two joint owners which own in the aggregate approximately sixteen percent of the
unit. It calls for the payment of $4.8 million to Central Maine and other
amounts contingent upon future events, and would result in Central Maine's
2.5-percent interest in the unit being included in the auction of the majority
interests and certain of the minority interests in the Millstone units expected
to be completed by 2001.
Central Maine is obligated to pay its proportionate share of the operating
expenses, including depreciation and a return on invested capital, of each of
the Yankee Companies referred to above for periods expiring at various dates to
2012. Pursuant to the joint ownership agreement for Millstone 3, Central Maine
is similarly obligated to pay its proportionate share of the operating costs of
Millstone 3. Central Maine is also required to pay its share of the estimated
decommissioning costs of each of the Yankee Companies and Millstone 3. The
estimated decommissioning costs are paid as a cost of energy in the amounts
allowed in rates by the FERC and passed through to Central Maine's ratepayers as
a component of its transmission-and-distribution revenue requirement approved by
the MPUC.
Non-Utility Generators
In accordance with prior MPUC policy and the ARP, $84.5 million of
power-purchase contract buy-out or restructuring costs incurred since January
1992 are included in Deferred Charges and Other Assets on Central Maine's
balance sheet and were being amortized over their respective fuel savings
periods. A significant portion of these costs were written off on March 1, 2000
per the rate case settlement.
During 1999 Central Maine purchased or restructured three power-purchase
contracts which it expects will result in savings to its customers the
equivalent of approximately $30.3 million in net present value.
NEPOOL and Regional Open-Access Transmission
In 1996 the FERC issued Order No. 888, which requires all public utilities that
own, control or operate facilities used for transmitting electric energy in
interstate commerce to file open access non-discriminatory transmission tariffs
that offer both load-based, network and contract-based, point-to-point service,
including ancillary service to eligible customers containing minimum terms and
conditions of non-discriminatory service. This service must be comparable to the
service they provide themselves at the wholesale level; in fact, these utilities
must themselves take the wholesale transmission service they provide under the
filed tariffs. The order also permits public utilities and transmitting
utilities the opportunity to recover legitimate, prudent and verifiable
wholesale stranded costs associated with providing open access and certain other
transmission services. It further requires public utilities to functionally
separate transmission from generation marketing functions and communications.
The intent of this order is to promote the transition of the electric utility
industry to open competition. Order No. 888 also clarifies federal and state
jurisdiction over transmission in interstate commerce and local distribution and
provides for deference of certain issues to state recommendations.
In 1996 the FERC also issued Order No. 889, which requires public utilities to
functionally separate their wholesale power marketing and transmission operation
functions and to obtain information about their transmission system for their
own wholesale power transactions in the same way their competitors do through
the Open Access Same-time Information System ("OASIS"). The rule also prescribed
standards of conduct and protocols for obtaining the information. The standards
of conduct are designed to prevent employees of a public utility engaged in
marketing functions from obtaining preferential information.
NEPOOL is a voluntary organization open to any entity engaged in the electric
business, such as investor-owned utilities, municipal and cooperative utilities,
power marketers, brokers and load aggregators. On December 31, 1996, NEPOOL,
responding to the FERC orders on behalf of its participants, filed a
restructuring proposal with FERC. The NEPOOL proposal was the product of over
two years of discussions and negotiations among the over 130 NEPOOL member
participants and many non-participants, including New England state regulators.
The key elements of the NEPOOL restructuring proposal were the implementation of
a regional NEPOOL open access transmission tariff ("NEPOOL Tariff"), the
creation of an independent system operator ("ISO"), and the restatement of the
NEPOOL Agreement to establish a broader governance structure for NEPOOL and to
develop a more open competitive market structure.
The NEPOOL Tariff, which became effective on March 1, 1997, ensures
non-discriminatory open access to the regional transmission network by providing
a single rate for all transactions that utilize NEPOOL's bulk power transmission
facilities. The NEPOOL Tariff promotes competition in the New England power
market through its single transmission rate structure. All regional service
within NEPOOL, except for wheeling through or out, is to be provided as a
network service.
In June 1997 FERC issued an order conditionally authorizing the establishment of
an ISO by NEPOOL ("ISO-New England"), effective July 1, 1997, affirming that the
transfer of control of transmission facilities owned by the public utility
members of NEPOOL to the ISO was consistent with the public interest under
Section 203 of the Federal Power Act.
In April 1998 FERC accepted the NEPOOL Tariff conditioned on NEPOOL's compliance
with a number of issues raised by FERC. On July 22, 1998, NEPOOL made its
compliance filing at FERC. The NEPOOL Tariff changes and amendments to the
Restated NEPOOL Agreement included in the filing effected compliance with the
FERC's April 1998 Order. While there were a large number of changes in the
filing, the principal areas of change related to the addition in the NEPOOL
Tariff of a separately available internal point-to-point service, the addition
of a mechanism to allocate costs to update the regional transmission system, and
the replacement of a non-use charge with an in-service charge across
interconnections. The FERC issued its order accepting a settlement in July 1999
and a compliance filing was completed in September 1999.
To give market participants more choice and to foster competition, the
restructured NEPOOL proposed the unbundling of electric service in the NEPOOL
control area. The restructured NEPOOL called for the development of competitive
wholesale markets for installed capability, operable capability, energy,
automatic generation control, and reserves. These wholesale products are
market-priced, being based on bid-clearing pricing rather than the earlier
cost-based pricing. Market participants meet their responsibility for these
products by buying or selling those services through bilateral transactions or
through the regional power exchange administered through the ISO. In October
1997 FERC issued an order permitting implementation of the installed capability
market, which commenced in April of 1998. On April 6, 1999, FERC issued an order
approving market rules, and on May 1, 1999, the remaining markets (operable
capability, energy, automatic generation control and the reserve markets) were
implemented. In February 2000 FERC accepted an amendment to the Restated NEPOOL
Agreement that terminated the operable capability market effective March 1,
2000.
On May 13, 1999, the FERC issued a notice of proposed rulemaking that would
amend FERC's regulations under the Federal Power Act to facilitate the formation
of regional transmission organizations ("RTO"). On December 20, 1999, the FERC
issued Order No. 2000, which requires all public utilities that own, operate or
control interstate electric transmission to file a proposal for an RTO by
October 15, 2000, or, in the alternative, a description of any efforts by the
utility to participate in an RTO, the reasons for not participating and any
obstacles to participation, and any plans for further work toward such
participation. Order No. 2000 anticipates operational RTOs by December 15, 2001.
Central Maine is reviewing the order to determine, among other matters, its
effects on Central Maine's operations as a transmission-and-distribution utility
and the extent to which changes in the structure and operations of ISO-New
England may be required.
On December 30, 1999, NEPOOL submitted to FERC a proposed plan to manage
congestion on the NEPOOL transmission system. NEPOOL is considering revisions to
its proposal, which, if a consensus of its members can be achieved, it plans to
file by March 31, 2000, for FERC's consideration. Congestion management has
become a complex issue in the new transmission environment due in part to the
large number of merchant generating plants under construction or proposed at
various sites in New England, including sites in Central Maine's service area.
"Year 2000" Computer Issues
CMP Group recognized the potential for adverse consequences related to the "Year
2000 computer problem" and, through Central Maine, initiated its Year-2000
remediation efforts in 1996. CMP Group developed and executed a broad-based and
comprehensive project plan, at a cost of $4 million, for identifying and
addressing any Year-2000 related problems. CMP Group systems continued to run
smoothly before, during, and after the Year 2000 transition, with no disruption
of electric service to customers and with no negative financial or operational
impacts.
Liquidity and Capital Resources
From 1995 through 1999 increases in Central Maine's retail rates were limited by
Central Maine's ARP. For a discussion of the features of the ARP, see Note 3,
"Regulatory Matters" - "Alternative Rate Plan."
Approximately $105.6 million and $119.6 million of cash were provided during the
year ended December 31, 1999 for CMP Group and Central Maine, respectively, from
net income before non-cash items, primarily depreciation, amortization and
deferred income taxes. During that period approximately $44.5 million and $36.6
million of cash were used for fluctuations in certain assets and liabilities and
from other operating activities for CMP Group and Central Maine, respectively.
In addition $38.4 million of incremental power costs was incurred due to the
sale of generation assets.
The major components include the following:
CMP Group investing activities provided approximately $500.5 million of cash for
the year ended December 31, 1999. The major components include the following:
proceeds of $850.6 million from the generation asset sale, utilization of $291.9
million for tax payments and $17.9 million for selling expenses associated with
the sale, proceeds of $14 million from the sale of investments and properties,
and construction expenditures, which utilized $72.2 million in cash for the year
ended December 31, 1999. Central Maine received $13.9 million in deposits from
customers relating to pending merchant plant activity. Central Maine could be
required in the future to refund some or all of the customer deposits associated
with merchant plant pending finalization of FERC rules regarding the
responsibility for funding associated network upgrades. In order to accommodate
existing and future loads on its electric system Central Maine is engaged in a
continuing construction program. Central Maine's plans for improvements and
expansions, its load forecasts and its power-supply sources are under a process
of continuing review. Actual construction expenditures depend upon the
availability of capital and other resources, load forecasts, customer growth,
the number of merchant plants constructed in Central Maine territory, and
general business conditions. The ultimate nature, timing and amount of financing
for Central Maine's total construction programs, refinancing, and
energy-management capital requirements will be determined in light of market
conditions, earnings and other relevant factors.
During 1999 CMP Group paid dividends on common stock of $29.2 million, while
preferred-stock dividends, paid by Central Maine, utilized $3.2 million of cash.
Central Maine's Articles of Incorporation limit the unsecured indebtedness that
may be outstanding to 20 percent of capitalization, as defined, without the
consent of the holders of Central Maine's preferred stock; 20 percent of defined
capitalization amounted to $119 million as of December 31, 1999. Unsecured
indebtedness, as defined, amounted to $57 million as of December 31, 1999.
Central Maine's $500 million medium-term note program, having received the
consent of Central Maine's preferred stockholders in May 1997, is not included
in "unsecured indebtedness" for purposes of the 20-percent limitation. On
December 31, 1999, Central Maine had $70 million of its medium-term notes
outstanding.
On May 10, 1999, Central Maine redeemed its last two series of General and
Refunding Mortgage Bonds. On July 27, 1999, Central Maine discharged its General
and Refunding Mortgage Indenture, leaving no class of secured debt then
outstanding,
To support its short-term capital requirements, in October 1996, Central Maine
entered into a $125 million Credit Agreement with several banks, with
BankBoston, N.A., and The Bank of New York acting as agents for the lenders. The
arrangement originally had two credit facilities: a $75 million, 364-day
revolving credit facility and a $50-million, 3-year revolving credit facility.
Effective December 15, 1998, the banks' commitments under the 364-day facility
were reduced from $75 million to $25 million by agreement of the parties, and
other provisions were amended to reflect the reorganization of Central Maine
into a holding-company structure and recognize other changed circumstances.
Central Maine terminated the two facilities on October 21, 1999.
On December 31, 1999, Central Maine entered into a new $75 million three-year
secured revolving-credit facility with three banks, with The Bank of New York
acting as administrative agent. The facility provides for LIBOR-priced and
base-rate-priced loans, which are secured by a security interest in Central
Maine's accounts receivable. The arrangement also requires the payment of
customary fees, based in large part on Central Maine's credit ratings. The
amount of Central Maine's short-term borrowing will fluctuate with day-to-day
operational needs, the timing of long-term financing, and market conditions. No
loans were outstanding under the new facility at December 31, 1999.
On February 15, 2000, CMP Group announced that New England Business Trust
intended to sell approximately 2.5 million shares of its 6.177-million-share
common-stock holding in NEON through an underwritten public offering expected to
be completed during the second calendar quarter of 2000. Although the market
value of NEON's common stock has increased substantially since NEON's 1998
initial public offering, CMP Group cannot accurately estimate the amount of
proceeds to be realized through the planned offering.
In August 1998, the MPUC approved Central Maine's application to purchase up to
11 million shares of its outstanding common stock over a three-year period, with
a limitation of three million shares that may be repurchased prior to the
closing of the sale of Central Maine's generating assets. The amount of any
stock purchases and their timing by Central Maine or CMP Group will depend on
the need for equity in the respective Company's capital structure, investment
opportunities and other considerations. Neither Central Maine nor CMP Group has
adopted a formal stock-purchase plan.
For further details on the financing activities of Central Maine and CMP Group
during 1999, see Item 8, "Notes to Consolidated Financial Statements" - Note 10,
"Capitalization and Interim Financing," below.
Environmental Matters
CMP Group and its subsidiaries assess compliance with laws and regulations
related to hazardous substance remediation on an ongoing basis. At December 31,
1999, Central Maine had an accrued liability of $2.7 million for remediation
costs at various sites. The costs at identified sites may be significantly
higher if, among other things, other potentially responsible parties are not
financially able to contribute to these costs or identified possible outcomes
change. See Note 4, "Commitments and Contingencies." - "Legal and Environmental
Matters" for further discussion.
Storm Damage Central Maine's System
In January 1998, a severe ice storm struck Central Maine's service territory,
causing power outages for approximately 280,000 of Central Maine's 528,000
customers and substantial widespread damage to Central Maine's transmission and
distribution system. To restore its electrical system, Central Maine
supplemented its own crews with utility and tree-service crews from throughout
the northeastern United States and the Canadian maritime provinces, with
assistance from the Maine national guard. In January 1998, the MPUC issued an
order allowing Central Maine to defer on its books the incremental non-capital
costs associated with Central Maine's efforts to restore service in response to
the damage resulting from the storm, amounting to $50.7 million plus accrued
carrying costs.
In the spring of 1998, the U.S. Congress appropriated $130 million for
Presidentially declared disasters in 1998, including storm-damage cost
reimbursement for electric utilities. On November 5, 1998 the United States
Department of Housing and Urban Development ("HUD") announced that of those
funds $2.2 million had been awarded to Maine, with none designated for utility
infrastructure, which Central Maine and the Maine Congressional delegation
protested as inadequate and inconsistent with Congressional intent. HUD later
announced that Maine would receive additional funds and on October 6, 1999,
Central Maine received payment in the amount of $19.6 million from HUD. Central
Maine is recovering the $34.1 million balance of the deferred storm-related
costs, including $3.9 million of carrying costs, through rates over a three-year
period commending March 1, 2000.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
CMP Group is exposed to interest rate risk through the use of fixed-rate and
variable-rate debt and preferred stock as sources of capital. As of December 31,
1999, Central Maine had $70 million of medium-term notes outstanding, $10
million of which were floating, LIBOR-based rates.
Variable Long Term Fixed Long Term
Weighted Average Rates 9.12% 7.16%
Balance at December 31, 1999 $35,010 $195,950
Maturity Period 2001-2019 2000-2021
Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
Index to Financial Statements and Financial Statement Schedules
Management report on responsibility for financial reporting 51
Report of Independent Accountants 52
Consolidated Financial Statements 53
CMP Group, Inc.
Consolidated Statement of Earnings for the three years
ended December 31, 1999, 1998 and 1997 53
Consolidated Balance Sheet as of December 31, 1999 and 1998 54
Consolidated Statement of Capitalization and Interim
Financing as of December 31, 1999 and 1998 56
Consolidated Statement of Changes in Stockholders' Equity
for the three years ended December 31, 1999, 1998 and 1997 57
Consolidated Statement of Cash Flows for the three years
ended December 31, 1999, 1998 and 1997 58
Central Maine Power Company
Consolidated Statement of Earnings for the three years ended
December 31, 1999, 1998 and 1997 59
Consolidated Balance Sheet as of December 31, 1999 and 1998 60
Consolidated Statement of Capitalization and Interim
Financing as of December 31, 1999 and 1998 62
Consolidated Statement of Changes in Stockholders'
Equity for the three years ended December 31, 1999, 1998 and 1997 63
Consolidated Statement of Cash Flows for the three years ended
December 31, 1999, 1998 and 1997 64
Notes to Consolidated Financial Statements - CMP Group,
Inc. and Central Maine Power Company 65
Financial Statement Schedule:
Central Maine Power Company
Schedule II - Valuation and Qualifying Accounts 140
Report of Management
The Managements of CMP Group and its subsidiaries ("CMP Group") and Central
Maine Power Company and its subsidiaries ("Central Maine") are responsible for
the consolidated financial statements and the related financial information
appearing in this annual report. The financial statements are prepared in
conformity with generally accepted accounting principles and include amounts
based on informed estimates and judgments of management. The financial
information included elsewhere in this report is consistent, where applicable,
with the financial statements.
CMP Group and Central Maine maintain a system of internal accounting controls
that are designed to provide reasonable assurance that the respective assets are
safeguarded, transactions are executed in accordance with management's
authorization, and the financial records are reliable for preparing the
financial statements. While no system of internal accounting controls can
prevent the occurrence of errors or irregularities with absolute assurance,
management's objective is to maintain a system of internal accounting controls
that meets their goals in a cost-effective manner.
CMP Group and Central Maine have policies and procedures in place to support and
document the internal accounting controls that are revised on a continuing
basis. Internal auditors conduct reviews, provide ongoing assessments of the
effectiveness of selective internal controls, and report their findings and
recommendations for improvement to management.
The Board of Directors of CMP Group has established an Audit Committee, composed
entirely of outside directors, which oversees the financial reporting process on
behalf of the Board of Directors. The Audit Committee meets periodically with
management, internal auditors, and the independent public accountants to review
accounting, auditing, internal accounting controls, and financial reporting
matters. The internal auditors and the independent public accountants have full
and free access to meet with the Audit Committee, with or without management
present, to discuss auditing or financial reporting matters.
PricewaterhouseCoopers LLP, independent public accountants, has been retained to
audit CMP Group and Central Maine's consolidated financial statements. The
accompanying report of independent public accountants is based on their audit,
conducted in accordance with auditing standards generally accepted in the United
States, including a review of selected internal accounting controls and tests of
accounting procedures and records.
David T. Flanagan Sara J. Burns
CMP Group, Inc. Central Maine Power Company
President and Chief Executive Officer President
Arthur W. Adelberg Curtis I. Call
CMP Group, Inc. Central Maine Power Company
Chief Financial Officer Treasurer
Report of Independent Accountants
To the Shareholders and Directors of
CMP Group, Inc. and the Shareholders and
Directors of Central Maine Power Company
In our opinion, the accompanying consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the consolidated
financial position of CMP Group, Inc. and its subsidiaries ("CMP Group") at
December 31, 1999 and 1998, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1999 and the consolidated financial position of Central Maine Power Company and
its subsidiaries ("Central Maine") at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of management
of CMP Group and Central Maine; our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Portland, Maine
January 27, 2000
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
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CMP Group, Inc. and Subsidiaries
Consolidated Statement Of Earnings
For the years ended December 31, 1999, 1998 and
1997 (Dollars in thousands, except per-share
amounts)
1999 1998 1997
Revenues (Notes 1 and 3)
Electric operating revenues $953,711 $938,739 $954,176
Other non-utility revenues 38,945 11,588 2,070
-------- -------- ---------
Total Revenues 992,656 950,327 956,246
------- ------- -------
Operating Expenses
Fuel used for company generation (Notes 1 and 9) 10,842 30,898 34,946
Purchased power
Energy (Notes 1 and 9) 392,878 369,411 419,144
Other (capacity) (Note 9) 111,871 85,321 112,810
Other operation 238,703 213,489 210,513
Maintenance 33,180 41,051 33,973
Depreciation and amortization (Note 1) 50,593 56,493 54,132
Taxes other than income taxes 22,374 27,783 28,303
-------- -------- --------
Total Operating Expenses 860,441 824,446 893,821
------- ------- -------
Operating Income 132,215 125,881 62,425
------- ------- --------
Other Income (Expense)
Equity in earnings of associated companies (Note 9) (8,945) (60) 6,260
Allowance for equity funds used during construction (Note 1) 716 653 642
Interest income 15,877 3,089 4,411
Recovery of non-provided deferred income taxes on asset sale
(Note 2) 28,480 - -
Other, net (7,793) (1,706) (772)
Minority interest in consolidated net income (719) (205) (233)
Gain on sale of investments and properties, net 5,901 22,912 418
--------- -------- ----------
Total Other Income (Expense) 33,517 24,683 10,726
-------- -------- --------
Interest Charges
Long-term debt (Note 10) 26,353 43,276 44,346
Other interest (Note 10) 27,425 8,366 7,660
Allowance for borrowed funds used during construction (Note 1) (307) (495) (439)
---------- ---------- ----------
Total Interest Charges 53,471 51,147 51,567
-------- -------- --------
Income Before Income Taxes and Preferred Dividends 112,261 99,417 21,584
Income taxes (Notes 2 and 3) 54,092 41,698 8,162
Dividends on Preferred Stock of Subsidiary 3,315 4,809 8,209
--------- --------- ---------
Net Income $ 54,854 $ 52,910 $ 5,213
======== ======== =========
Weighted Average Number Of Shares Of Common
Stock Outstanding 32,442,552 32,442,685 32,442,752
Earnings Per Share Of Common Stock - Basic $1.69 $1.63 $0.16
Earnings Per Share Of Common Stock - Diluted $1.68 $1.63 $0.16
Dividends Declared Per Share Of Common Stock $0.90 $0.90 $0.90
</TABLE>
The accompanying notes are an integral part of these financial statements
<TABLE>
<S> <C> <C>
CMP Group, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1999 and 1998
(Dollars in thousands)
ASSETS 1999 1998
---- ----
Current Assets
Cash and cash equivalents $ 129,950 $ 30,540
Accounts receivable, less allowance for uncollectible accounts of $2,904
in 1999 and $3,136 in 1998
Service - billed 86,599 81,169
- unbilled (Notes 1 and 3) 51,124 53,296
Other accounts receivable 21,662 13,753
Inventories, at average cost
Fuel oil 177 5,879
Materials and supplies 10,390 13,126
Prepayments and other current assets 9,716 10,269
------------ -----------
Total Current Assets 309,618 208,032
---------- ----------
Electric Property, at original cost (Notes 9 and 10) 1,335,674 1,750,837
Less: Accumulated depreciation (Notes 1 and 9) 551,014 694,410
---------- ----------
Net electric property in service 784,660 1,056,427
---------- ---------
Construction work in progress (Note 4) 33,681 19,538
Nuclear fuel, less accumulated amortization of $9,996 in 1999 and $9,316
in 1998 1,418 1,147
Property, non utility 18,487 23,244
Less: Accumulated Depreciation 5,574 6,802
------------ ------------
Net non-utility property 12,913 16,442
----------- -----------
Total net property 832,672 1,093,554
Investments In Associated Companies, at equity (Notes 1 and 9) 51,059 71,880
----------- -----------
Total Net Property and Investments in Associated Companies 883,731 1,165,434
---------- ---------
Deferred Charges And Other Assets
Recoverable costs of Seabrook 1 and abandoned projects, net (Note 1)
73,052 78,539
Yankee Atomic purchased-power contract (Note 9) 2,350 7,761
Connecticut Yankee purchased-power contract (Note 9) 25,054 29,913
Maine Yankee purchased-power contract (Note 9) 242,907 273,895
Regulatory assets-nuclear impairment 77,489 -
Regulatory assets - deferred taxes (Note 2) 204,994 235,451
Other deferred charges and other assets (Notes 1 and 3) 228,065 263,859
---------- ----------
Deferred Charges and Other Assets, Net 853,911 889,418
---------- ----------
Total Assets $2,047,260 $2,262,884
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<S> <C> <C> <C>
CMP Group, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1999 and 1998
(Dollars in thousands)
STOCKHOLDERS' EQUITY AND LIABILITIES 1999 1998
---- ----
Current Liabilities and Interim Financing
Interim financing (see separate statement) (Note 10) $ 60,199 $ 297,173
Sinking-fund requirements (Note 10) 11,937 12,638
Accounts payable 104,581 90,960
Dividends payable 7,412 7,304
Accrued interest 2,678 7,524
Accrued income taxes (Note 2) - 19,911
Miscellaneous current liabilities 16,731 15,909
----------- -----------
Total Current Liabilities and Interim Financing 203,538 451,419
---------- ----------
Commitments and Contingencies (Notes 4 and 9)
Reserves and Deferred Credits
Accumulated deferred income taxes (Note 2) 66,472 376,043
Unamortized investment tax credits (Note 2) 13,926 29,064
Yankee Atomic purchased-power contract (Note 9) 2,350 7,761
Connecticut Yankee purchased-power contract (Note 9) 25,054 29,913
Maine Yankee purchased-power contract (Note 9) 242,907 273,895
Regulatory liabilities-deferred taxes (Note 2) 60,564 58,376
Deferred gain on generation asset sale (Note 3) 536,368 -
Other reserves and deferred credits (Note 5) 194,162 116,805
---------- ----------
Total Reserves and Deferred Credits 1,141,803 891,857
--------- ----------
Long-Term Debt (see separate statement) (Note 10)
Mortgage debt - 117,683
Other long-term obligations 122,542 228,598
---------- ----------
Total Long-Term Obligations 122,542 346,281
---------- ----------
Redeemable Preferred Stock 910 18,910
------------- -----------
Stockholders' Equity (see separate statement) (Note 10)
Common-stock 162,213 162,213
Other paid in capital 284,330 285,835
Reacquired common stock (642) (827)
Retained earnings 97,038 71,668
Preferred stock 35,528 35,528
----------- -----------
Total Stockholders' Equity 578,467 554,417
---------- ----------
Total Stockholders' Equity and Liabilities $2,047,260 $2,262,884
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
CMP Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CAPITALIZATION AND INTERIM FINANCING
(Dollars in thousands)
December 31
-----------
1999 1998
---- ----
Amount % Amount %
------ - ------ -
Capitalization (Note 10)
Common-Stock Investment:
Common stock, par value $5 per share:
Authorized - 80,000,000 shares
Outstanding - 32,442,552 shares in 1999
and in 1998 $162,213 $ 162,213
Other paid-in capital 284,330 285,835
Reacquired common stock, at cost (39,418 shares) (642) (827)
Retained earnings 97,038 71,668
-------- -----------
Total Common-Stock Investment 542,939 71.2% 518,889 42.6%
------- ----- ---------- ------
Preferred Stock - not subject to mandatory redemption
35,528 4.7 35,528 2.9
-------- ----- ----------- ------
Redeemable Preferred Stock - subject to mandatory
redemption 9,910 27,910
Less: current sinking fund requirements 9,000 9,000
--------- ------------
Redeemable Preferred Stock - subject to mandatory
redemption 910 .1 18,910 1.6
---------- ----- ----------- ------
Long-Term Obligations:
Mortgage bonds - 118,717
Less: unamortized debt discount - 1,034
-------------- ------------
Total Mortgage Bonds - 117,683
-------------- ----------
Total Medium-Term Notes 70,000 327,000
-------- ----------
Other Long-Term Obligations:
Lease obligations 31,040 32,773
Pollution-control facility and other notes 84,439 154,463
-------- ----------
Total Other Long-Term Obligations 115,479 187,236
------- ----------
Less: Current Sinking Fund Requirements and Current
Maturities 62,937 285,638
-------- ----------
Total Long-Term Obligations 122,542 16.1 346,281 28.5
------- ----- ---------- ------
Total Capitalization 701,919 92.1 919,608 75.6
------- ----- ---------- ------
Interim Financing (Note 10):
Short-term obligations 199 15,000
Current maturities of long-term obligations 60,000 282,173
-------- ----------
Total Interim Financing 60,199 7.9 297,173 24.4
-------- ------ ---------- ------
Total Capitalization and Interim Financing $762,118 100.0% $1,216,781 100.0%
======= ===== ========= =====
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CMP Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
For the three years ended December 31, 1999
Other Reacquired
Amount at paid-in common Retained Preferred
Shares par value capital stock earnings Shares Stock Total
------ --------- ------- ----- -------- ------ ----- -----
Balance - December 31, 1996 32,422,752 $162,214 $276,818 $ - $72,546 655,713 $65,571 $577,149
---------- -------- -------- ------- ------- ------- ------- --------
Net Income 13,422 13,422
Dividends declared:
Common stock (29,199) (29,199)
Preferred stock (8,209) (8,209)
Reacquired preferred stock 348 (348) -
Capital stock expense 2 2
---------- -------- -------- ------- ------- ------- ------- --------
Balance - December 31, 1997 32,422,752 162,214 277,168 - 48,212 655,713 65,571 553,165
---------- -------- -------- ------- ------- ------- ------- --------
Net Income 52,910 52,910
Dividends declared:
Common stock (29,198) (29,198)
Common stock (200) (1) (2) (1) (4)
Reacquired common stock (827) (827)
Increase in equity of investee
(Note 8) 9,413 9,413
Preferred stock (300,430) (30,043) (30,043)
Reacquired preferred stock (771) (255) (1,026)
Capital stock expense 27 27
---------- -------- -------- ------- ------- ------- ------- --------
Balance - December 31, 1998 32,442,552 162,213 285,835 (827) 71,668 355,283 35,528 554,417
---------- -------- -------- ------- ------- ------- ------- --------
Net Income 54,854 54,854
Dividends declared:
Common stock (29,197) (29,197)
Reacquired common stock (1,021) (1,021)
Shares issued-employee incentive
plans (578) 1,206 628
Loans to employees for exercising
stock options (1,214) (1,214)
Reacquired preferred stock 287 (287) -
---------- -------- -------- ------- ------- ------- ------- --------
Balance - December 31, 1999 32,442,552 $162,213 $284,330 $ (642) $97,038 355,283 $35,528 $578,467
========== ======== ======== ======= ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C>
CMP Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year ended December 31
----------------------
1999 1998 1997
CASH FROM OPERATION
Net income $ 54,854 $ 52,910 $ 5,213
Items not requiring (not providing) cash:
Depreciation 39,245 47,130 44,170
Amortization 41,187 38,873 34,291
Deferred income taxes and investment tax credits, net (28,984) 20,016 (2,204)
Allowance for equity funds used during construction (716) (653) (642)
Preferred stock dividends of subsidiary 3,315 4,809 8,209
Gain on sale of investments and properties (5,901) (19,108) -
Power supply costs recovered with asset sale (38,434) - -
Changes in certain assets and liabilities:
Accounts receivable (11,167) (2,999) 1,257
Other current assets 1,390 (1,158) 390
Inventories (120) (1,836) 4,259
Accounts payable 9,729 (9,785) 4,617
Accrued taxes (22,059) 16,910 3,265
Accrued interest (4,846) (3,677) (409)
Miscellaneous current liabilities 549 147 (5,580)
Deferred ice storm cost 20,462 (52,433) -
Changes in deferred balances and related carrying costs 36,114 (2,615) (1,940)
Restructuring of purchased power contract - (22,500) -
Maine Yankee outage accrual - - (10,350)
MaineCom equity losses in subsidiaries 10,555 6,664 568
Other, net 6,441 6,530 7,096
--------- -------- --------
Net Cash Provided by Operating Activities 111,614 77,225 92,210
------- ------- -------
INVESTING ACTIVITIES
Construction expenditures (72,162) (42,405) (40,306)
Customer deposits for construction 13,940 - -
Investments in and loans to affiliates - (17,800) (4,769)
Repayment of loan by affiliates - 17,800 -
Central Maine sale of assets 850,561 - -
Tax payments related to sale of assets (291,900) - -
Selling expense for sale of generation assets (17,884) - -
Proceeds from sale of investments and properties 14,018 21,347 -
Changes in accounts payable - investing activities 3,892 3,665 (734)
--------- -------- ---------
Net Cash Provided (Used) by Investing Activities 500,465 (17,393) (45,809)
------- ------- --------
FINANCING ACTIVITIES
Issuances:
Revolving credit agreement - 50,000 52,500
Medium-term notes - 302,000 -
Short-term obligations, net - 10,000 -
Redemptions:
Mortgage bonds (118,717) (302,283) -
Preferred stock (18,000) (48,618) (14,000)
Medium-term notes (257,000) (18,000) (25,000)
Revolving credit agreement (50,000) - -
Finance Authority of Maine (8,000) (7,400) (6,800)
Other long-term obligations (13,758) (6,049) (645)
Short-term obligations, net (14,973) (55,000) -
Funds on deposit with trustee - 61,693 (2,182)
Purchase of treasury stock 185 (827) -
Dividends:
Common stock (29,198) (28,943) (29,220)
Preferred stock of subsidiary (3,208) (6,706) (8,520)
--------- --------- --------
Net Cash Used by Financing Activities (512,669) (50,133) (33,867)
------- -------- -------
Net Increase in Cash 99,410 9,699 12,534
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,540 20,841 8,307
------ ------ -----
CASH AND CASH EQUIVALENTS, END OF PERIOD $129,950 $ 30,540 $ 20,841
For purposes of the statement of cash flows, the Company considers all highly
liquid instruments purchased having a maturity of three months or less to be
cash equivalents.
The accompanying notes are an integral part of these financial statements.
</TABLE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C>
Central Maine Power Company and Subsidiaries
Consolidated Statement Of Earnings
For the years ended December 31, 1999, 1998 and 1997
(Dollars in thousands, except per-share amounts)
1999 1998 1997
---- ---- ----
Revenues (Notes 1 and 3)
Electric operating revenues $953,501 $938,561 $954,176
Other non-utility revenues 962 2,969 2,070
---------- --------- ---------
Total Revenues 954,463 941,530 956,246
------- ------- -------
Operating Expenses
Fuel used for company generation (Notes 1 and 9) 10,842 30,898 34,946
Purchased power
Energy (Notes 1 and 9) 392,878 369,411 419,144
Other (capacity) (Note 9) 111,871 85,321 112,810
Other operation 203,479 204,286 210,513
Maintenance 32,150 40,961 33,973
Depreciation and amortization (Note 1) 49,517 56,257 54,132
Taxes other than income taxes 22,291 27,747 28,303
-------- -------- --------
Total Operating Expenses 823,028 814,881 893,821
------- ------- -------
Operating Income 131,435 126,649 62,425
------- ------- --------
Other Income (Expense)
Equity in earnings of associated companies (Note 9) 2,399 1,762 6,260
Allowance for equity funds used during construction (Note 1) 716 653 642
Interest Income 15,462 2,954 4,411
Recovery of non-provided deferred income taxes on asset sale
(Note 2) 28,480 - -
Other, net (4,477) (857) (772)
Minority interest in consolidated net income (719) (205) (233)
Gain on sale of investments and properties, net 709 13,314 418
---------- -------- ----------
Total Other Income (Expense) 42,570 17,621 10,726
------- -------- --------
Interest Charges
Long-term debt (Note 10) 26,160 43,223 44,346
Other interest (Note 10) 27,322 8,286 7,660
Allowance for borrowed funds used during construction (Note 1) (307) (495) (439)
--------- ---------- ----------
Total Interest Charges 53,175 51,014 51,567
-------- -------- --------
Income Before Income Taxes 120,830 93,256 21,584
Income taxes (Notes 2 and 3) 52,090 38,433 8,162
-------- -------- ---------
Net Income 68,740 54,823 13,422
Dividends on Preferred Stock 3,315 4,809 8,209
--------- --------- ---------
Earnings Applicable to Common Stock $ 65,425 $ 50,014 $ 5,213
======== ======== =========
Weighted Average Number Of Shares Of Common
Stock Outstanding 31,211,471 32,113,357 32,442,752
Earnings Per Share Of Common Stock (Basic and Diluted) $2.10 $1.56 $0.16
Dividends Declared Per Share Of Common Stock $1.305 $0.675* $0.90
</TABLE>
*1998 fourth quarter dividend of $0.225 per share was declared and paid in
January 1999.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<S> <C> <C>
Central Maine Power Company and Subsidiaries
Consolidated Balance Sheet
December 31, 1999 and 1998
(Dollars in thousands)
ASSETS 1999 1998
---- ----
Current Assets
Cash and cash equivalents ................................ $ 112,872 $ 22,628
Accounts receivable, less allowance for
uncollectible accounts of $2,904
in 1999 and $3,136 in 1998
Service ..- billed 86,455 81,082
- unbilled (Notes 1 and 3) .................. 51,124 53,110
Other accounts receivable ............................. 19,647 12,698
Inventories, at average cost
Fuel oil .............................................. 177 5,879
Materials and supplies ................................ 9,927 12,755
Prepayments and other current assets ..................... 8,393 10,162
Total Current Assets ............................... 288,595 198,314
Electric Property, at original cost (Notes 9 and 10) ......... 1,335,670 1,750,777
Less: Accumulated depreciation (Notes 1 and 9) ........... 550,990 694,463
Net electric property in service ................... 784,680 1,056,314
Construction work in progress (Note 4) ................... 32,357 19,483
Nuclear fuel, less accumulated amortization of $9,996
in 1999 and $9,316 in 1998 ............................... 1,418 1,147
Property, non utility ........................................ 10,430 15,895
Less: Accumulated Depreciation ........................... 3,069 4,150
Net non-utility property ........................... 7,361 11,745
Total net property ................................. 825,816 1,088,689
Investments In Associated Companies, at equity (Notes 1 and 9) 38,236 48,406
Total Net Property and Investments in Associated Companies 864,052 1,137,095
Deferred Charges And Other Assets
Recoverable costs of Seabrook 1 and abandoned projects,
net (Note 1) 73,052 78,539
Yankee Atomic purchased-power contract (Note 9) .......... 2,350 7,761
Connecticut Yankee purchased-power contract (Note 9) ..... 25,054 29,913
Maine Yankee purchased-power contract (Note 9) ........... 242,907 273,895
Regulatory asset-nuclear impairment ...................... 77,489 --
Regulatory assets - deferred taxes (Note 2) .............. 204,994 235,451
Other deferred charges and other assets (Notes 1 and 3) .. 223,341 262,512
Deferred Charges and Other Assets, Net ............. 849,187 888,071
Total Assets ....................................... $2,001,834 $2,223,480
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<S> <C> <C> <C>
Central Maine Power Company and Subsidiaries
Consolidated Balance Sheet
December 31, 1999 and 1998
(Dollars in thousands)
STOCKHOLDERS' EQUITY AND LIABILITIES 1999 1998
Current Liabilities and Interim Financing
Interim financing (see separate statement) (Note 10) $ 60,000 $ 297,000
Sinking-fund requirements (Note 10) 11,937 12,638
Accounts payable 107,600 93,012
Dividends payable 112 5
Accrued interest 2,678 7,491
Income taxes payable to parent company (Note 2) - 20,822
Miscellaneous current liabilities 15,855 15,455
Total Current Liabilities and Interim Financing 198,182 446,423
Commitments and Contingencies (Notes 4 and 9)
Reserves and Deferred Credits
Accumulated deferred income taxes (Note 2) 63,792 372,243
Unamortized investment tax credits (Note 2) 13,926 29,064
Yankee Atomic purchased-power contract (Note 9) 2,350 7,761
Connecticut Yankee purchased-power contract (Note 9) 25,054 29,913
Maine Yankee purchased-power contract (Note 9) 242,907 273,895
Regulatory liabilities-deferred taxes (Note 2) 60,564 58,376
Deferred gain on generation asset sale (Note 3) 536,368 -
Other reserves and deferred credits (Note 5) 181,348 111,506
Total Reserves and Deferred Credits 1,126,309 882,758
Long-Term Debt (see separate statement) (Note 10)
Mortgage debt - 117,683
Other long-term obligations 120,186 226,151
Total Long-Term Obligations 120,186 343,834
Redeemable Preferred Stock 910 18,910
Stockholders' Equity (see separate statement) (Note 10)
Common-stock 162,213 162,213
Other paid in capital 276,709 276,422
Reacquired common stock (19,000) (19,000)
Retained earnings 100,754 76,349
Preferred stock 35,571 35,571
Total Stockholders' Equity 556,247 531,555
Total Stockholders' Equity and Liabilities $2,001,834 $2,223,480
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<S> <C> <C> <C> <C>
Central Maine Power Company and Subsidiaries
CONSOLIDATED STATEMENT OF CAPITALIZATION AND INTERIM FINANCING
(Dollars in thousands)
December 31
1999 1998
Amount % Amount %
Capitalization (Note 10)
Common-Stock Investment:
Common stock, par value $5 per share:
Authorized - 80,000,000 shares
Outstanding - 31,211,471 shares in 1999 and 1998 $162,213 $ 162,213
Other paid-in capital 276,709 276,422
Reacquired common stock (1,231,081 shares) (19,000) (19,000)
Retained earnings 100,754 76,349
Total Common-Stock Investment 520,676 70.6% 495,984 41.6%
Preferred Stock - not subject to mandatory redemption
35,571 4.8 35,571 3.0
Redeemable Preferred Stock - subject to mandatory
redemption 9,910 27,910
Less: current sinking fund requirements 9,000 9,000
Redeemable Preferred Stock - subject to mandatory
redemption 910 .1 18,910 1.6
Long-Term Obligations:
Mortgage bonds - 118,717
Less: unamortized debt discount - 1,034
Total Mortgage Bonds - 117,683
Total Medium-Term Notes 70,000 327,000
Other Long-Term Obligations:
Lease obligations 31,040 32,773
Pollution-control facility and other notes 83,266 152,016
Total Other Long-Term Obligations 114,306 184,789
Less: Current Sinking Fund Requirements and Current
Maturities 64,120 285,638
Total Long-Term Obligations 120,186 16.3 343,834 28.9
Total Capitalization 677,343 91.8 894,299 75.1
Interim Financing (Note 10):
Short-term obligations - 15,000
Current maturities of long-term obligations 60,000 282,000
Total Interim Financing 60,000 8.2 297,000 24.9
Total Capitalization and Interim Financing $737,343 100.0% $1,191,299 100.0%
</TABLE>
The accompanying notes are an integral part of these financial statements
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Central Maine Power Company and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
For the three years ended December 31, 1999
Other Reacquired
Amount at paid-in common Retained Preferred
Shares par value capital stock earnings Shares Stock Total
Balance - December 31, 1996 32,442,752 $162,214 $276,818 $ $ 72,546 655,713 $65,571 $577,149
---------- -------- -------- -------- -------- ------- ------- --------
Net income 13,422 13,422
Dividends declared:
Common stock (29,199) (29,199)
Preferred stock (8,209) (8,209)
Reacquired preferred stock 348 (348) -
Capital stock expense 2 2
---------- -------- -------- -------- -------- ------- ------- --------
Balance - December 31, 1997 32,442,752 162,214 277,168 48,212 655,713 65,571 553,165
---------- -------- -------- -------- -------- ------- ------- --------
Net income 54,823 54,823
Dividends declared:
Common stock (21,622) (21,622)
Preferred stock (4,809) (4,809)
Common stock - Retired (200) (1) (2) (1) (4)
Reacquired common stock (1,231,081) (19,000) (19,000)
Preferred stock (300,000) (30,000) (30,000)
Reacquired preferred stock (771) (254) (1,025)
Capital stock expense 27 27
---------- -------- -------- -------- -------- ------- ------- --------
Balance - December 31, 1998 31,211,471 162,213 276,422 (19,000) 76,349 355,713 35,571 531,555
---------- -------- -------- -------- -------- ------- ------- --------
Net income 68,740 68,740
Dividends declared:
Common stock (40,731) (40,731)
Preferred stock (3,315) (3,315)
Reacquired preferred stock 287 (289) (2)
---------- -------- -------- -------- -------- ------- ------- --------
Balance - December 31, 1999 31,211,471 $162,213 $276,709 $(19,000) $100,754 355,713 $35,571 $556,247
========== ======== ======== ======== ======== ======= ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C>
Central Maine Power Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year ended December 31
1999 1998 1997
CASH FROM OPERATION
Net income $ 68,740 $ 54,823 $ 13,422
Items not requiring (not providing) cash:
Depreciation 38,186 47,130 44,170
Amortization 41,171 38,868 34,291
Deferred income taxes and investment tax credits, net (27,795) 19,653 (2,204)
Allowance for equity funds used during construction (716) (653) (642)
Gain on sale of investments and properties (709) (9,545) -
Power supply costs recovered with asset sale (38,434) - -
Changes in certain assets and liabilities:
Accounts receivable (10,336) (513) 1,257
Other current assets 1,687 (1,051) 390
Inventories (28) (1,465) 4,259
Accounts payable 10,696 (7,764) 4,617
Accrued taxes (22,071) 17,821 3,265
Accrued Interest (4,813) (3,710) (409)
Miscellaneous current liabilities 127 (307) (5,580)
Deferred ice storm costs 20,462 (52,433) -
Changes in deferred balances and related carrying costs 36,114 (2,615) (1,940)
Maine Yankee outage accrual - - (10,350)
Restructuring of purchased power contract - (22,500) -
Other, net 5,452 1,016 7,664
------- ------ ------
Net Cash Provided by Operating Activities 117,733 76,755 92,210
------- ------ ------
INVESTING ACTIVITIES
Construction expenditures (68,982) (42,384) (40,306)
Customer deposits for construction 13,940 - -
Sale of generating assets 850,561 - -
Tax payments related to sale of assets (291,900) - -
Selling expense for sale of generation assets (17,884) - -
Investments in loans to affiliates - (18,661) (4,769)
Repayment of loan by affiliates - 17,800 -
Sale of subsidiaries to CMP Group, Inc. - 20,093 -
Proceeds from sale of investments and properties 7,813 10,347 -
Changes in accounts payable - investing activities 3,892 3,696 (734)
------- ------ ------
Net Cash Provided (Used) by Investing Activities 497,440 (9,109) (45,809)
------- ------ ------
FINANCING ACTIVITIES
Issuances:
Revolving credit agreement - 50,000 52,500
Medium-term notes - 302,000 -
Short-term obligations, net - 10,000 -
Redemptions:
Mortgage bonds (118,717) (302,283) -
Preferred stock (18,000) (48,618) (14,000)
Medium-term notes (257,000) (18,000) (25,000)
Finance Authority of Maine (8,000) (7,400) (6,800)
Other long-term obligations (13,666) (3,602) (645)
Revolving credit agreement (50,000) - -
Short-term obligations, net (15,000) (55,000) -
Funds on deposit with trustee - 61,693 (2,182)
Treasury stock - (19,000) -
Dividends:
Common stock (41,338) (28,943) (29,220)
Preferred stock (3,208) (6,706) (8,520)
------- ------ ------
Net Cash Used by Financing Activities (524,929) (65,859) (33,867)
------- ------ ------
Net Increase in Cash 90,244 1,787 12,534
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,628 20,841 8,307
------- ------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $112,872 $ 22,628 $ 20,841
======== ========= =========
</TABLE>
For purposes of the statement of cash flows, the Company considers all highly
liquid instruments purchased having a maturity of three months or less to be
cash equivalents. The accompanying notes are an integral part of these financial
statements
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
General Description
CMP Group was organized effective September 1, 1998, at which time all of the
shares of common stock of Central Maine were converted into an equal number of
shares of common stock of CMP Group. CMP Group owns all of the shares of common
stock of Central Maine and the former non-utility subsidiaries of Central Maine
(TeleSmart, MaineCom, CNEX and Union Water Power Company) in addition to New
England Gas Development Corporation, a subsidiary organized in 1998.
Central Maine is primarily engaged in the business of transmitting and
distributing electric energy generated by others for the benefit of customers in
southern and central Maine. On March 1, 2000, Central Maine's obligation to
generate or otherwise supply electric energy terminated as part of the
restructuring of the electric utility industry in Maine, except as directed by
the MPUC to secure a supply of energy for the default standard offer, for medium
and large customers.
Financial Statements
CMP Group's consolidated financial statements include the accounts of CMP Group
and its wholly owned and controlled subsidiaries, including Central Maine.
Central Maine's consolidated financial statements include its accounts as well
as those of its wholly owned and controlled subsidiaries. Certain immaterial
majority owned subsidiaries, which were previously accounted for on the equity
method, have been consolidated since September 1, 1998. Central Maine's
financial position and results of operations account for substantially all of
CMP Group's consolidated financial position and results of operations. For all
periods prior to September 1, 1998, the historical financial position and
results of operations of CMP Group reflect the activity of Central Maine. All
intercompany accounts and transactions have been eliminated in the consolidated
financial statements. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Stock-Based Compensation
CMP Group accounts for employee stock-based compensation in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation". This statement encourages
companies to adopt a fair value approach to valuing stock options that would
require compensation cost to be recognized based on the fair value of stock
options granted. CMP Group has elected, as permitted by the standard, to
continue to follow the intrinsic value based method of accounting for stock
options consistent with APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the intrinsic method, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the company's
stock at the measurement date over the exercise price.
Earnings per Share
Stock options and performance shares granted to date under CMP Group's long-term
incentive plan resulted in potential incremental shares of common stock
outstanding for purposes of computing both basic and diluted earnings per share
for the twelve months ending December 31, 1999. These incremental shares were
not material in the periods presented and caused diluted earnings per share to
differ from basic earnings per share by $.01 in 1999, and no difference in 1998.
Reclassification
Certain amounts from prior years financial statements have been reclassified to
conform to the current year presentation.
Impact of New Accounting Standards
FAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" became effective for periods beginning after December 15, 1997.
This pronouncement provides disclosure requirements as well as guidance for
determining reportable segments. Based on the operating results regularly
reviewed by the entities' chief operating decision-makers, CMP Group and Central
Maine have determined that there are no material reportable segments.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivatives and
Hedging Activities. The new standard applies to all entities and is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000, with
earlier adoption encouraged. It requires companies to record derivatives on the
balance sheet at their fair value depending on the intended use of the
derivative. Based on CMP Group and Central Maine's current business practices
the adoption of this standard is not anticipated to have a significant impact on
their financial statements.
Regulation
The rates, operations, accounting, and certain other practices of Central Maine
and MEPCO are subject to the regulatory authority of the MPUC and the FERC.
Restructuring of the electric utility industry in Maine resulted in the
deregulation of generation services effective March 1, 2000 (see Note 3). CMP
Natural Gas is also subject to MPUC regulation.
Electric Operating Revenues
Electric operating revenues include amounts billed to customers and an estimate
of unbilled sales, for services rendered but not yet billed.
Utility Plant
Utility plant is stated at original cost of construction. The costs of
replacements of property units are capitalized. Maintenance and repairs and
replacements of minor items are expensed as incurred. The original cost of
property retired, net of salvage value, and the related costs of removal are
charged to accumulated depreciation.
Central Maine and its subsidiaries utility plant in service as of December 31
was as follows:
Average
Average Remaining
Service Service Life
(Dollars in thousands) 1999 1998 Life* 12/31/99
Generation** ....... $ 102,779 $ 535,550 37.6 years 3.5 years
Transmission ....... 278,623 282,677 41.6 years 16.6 years
Distribution ....... 739,863 724,224 37.7 years 26.5 years
General ............ 214,405 208,326 18.6 years 9.0 years
---------- ----------
$1,335,670 $1,750,777
========== ==========
*Based on Central Maine's last depreciation represcription study as of
December 31, 1992.
**Generation plant includes the book value of Central Maine's
share of Millstone Unit 3 of $98.9 million.
This asset is considered impaired, and therefore the depreciation reserve was
increased to $97.4 million to reflect the impaired value.
Depreciation
Depreciation of electric property is calculated using the straight-line method.
The weighted average composite rate was 2.8 percent in 1999, 3.1 percent in 1998
and 3.0 percent in 1997.
Allowance for Funds Used During Construction (AFC)
Central Maine and its subsidiaries capitalize AFC as part of construction costs.
AFC represents the composite interest and equity costs of capital funds used to
finance that portion of construction costs not yet eligible for inclusion in
rate base. AFC is capitalized in "Utility plant" with offsetting noncash credits
to "Other income" and "Interest." The composite AFC rates were 9.0 percent, 8.8
percent, and 9.7 percent in 1999, 1998, and 1997, respectively.
Deferred Charges and Other Assets
CMP Group defers and amortizes certain costs in a manner consistent with
authorized or probable ratemaking treatment. CMP Group capitalizes carrying
costs as a part of certain deferred charges, principally energy-management
costs, and classifies such carrying costs as other income. The following table
depicts the components of deferred charges and other assets at December 31,
1999, and 1998:
(Dollars in thousands) 1999 1998
NUG contract buy-outs and restructuring (Note 9) ..... $ 84,547 $ 98,753
1998 ice storm costs ................................. 34,122 52,433
Energy-management costs .............................. 23,582 28,418
Postretirement benefits (Note 5) ..................... 18,069 19,604
Financing costs ...................................... 15,651 17,121
Environmental site clean-up costs (Note 4) ........... 9,828 8,766
Property taxes ....................................... 2,623 4,349
Workers compensation ................................. 3,950 4,650
Millstone decommissioning fund ....................... 4,088 3,512
Employee transition and curtailment .................. 5,215 --
Interest receivable - IRS ............................ 3,110 --
Sale of generation ................................... 1,229 5,962
NEPOOL reorganization cost ........................... 3,145 3,120
Other ................................................ 14,182 15,824
-------- --------
Sub-Total Central Maine ............................ 223,341 262,512
CMP Group - Other .................................... 4,724 1,347
-------- --------
Total - CMP Group .................................. $228,065 $263,859
======== ========
Certain costs are being amortized and recovered in rates over periods ranging
from three to 30 years. The December 31, 1999 balance of the regulatory assets
to be written off March 1, 2000 in conjunction with the MPUC rate case
settlement was $95.2 million. This amount was written off against the gain
realized on the generation asset sale, which was also deferred on the balance
sheet. Amortization expense for the next five years is shown below:
(Dollars in thousands) Amount
2000 $25,154
2001 22,287
2002 20,867
2003 9,171
2004 6,847
Recoverable Costs of Seabrook I and Abandoned Projects
The recoverable after-tax investments in Seabrook I and abandoned projects are
reported as assets, pursuant to May 1985 and February 1991 MPUC rate orders. CMP
Group is allowed a current return on these assets based on Central Maine's
authorized rate of return. In accordance with these rate orders, the deferred
taxes related to these recoverable costs are amortized over periods of four to
10 years. As of December 31, 1999, substantially all deferred taxes related to
Seabrook I have been amortized. The recoverable investments as of December 31,
1999, and 1998 are as follows:
December 31 Recovery
(Dollars in thousands) 1999 1998 periods ending
Recoverable costs of:
Seabrook I ..............................$ 141,084 $ 141,084 2015*
Other Projects .......................... 57,491 57,491 2001*
--------- ---------
198,575 198,575
--------- ---------
Less: accumulated amortization .......... 125,687 119,861
Less: related income taxes .............. (164) 175
--------- ---------
Total Net Recoverable Investment ......$ 73,052 $ 78,539
========= =========
*Effective March 1, 2000 these costs were written off and an offsetting amount
were amortized from the gain on the generation asset sale that was deferred in
1999.
Note 2: Income Taxes
The components of federal and state income-tax provisions reflected in CMP
Group's Consolidated Statement of Earnings are as follow:
Year ended December 31.
(Dollars in thousands) 1999 1998 1997
Federal:
Current ................................. $ 268,010 $ 17,640 $ 8,534
Deferred ................................ (205,602) 14,837 (5,922)
Investment tax credits, net ............. (15,137) (1,469) (1,455)
Regulatory deferred ..................... (17,638) 2,054 5,390
--------- --------- ---------
Total Federal Taxes ................... 29,633 33,062 6,547
--------- --------- ---------
State:
Current ................................. $ 78,485 $ 4,052 $ 1,831
Deferred ................................ (39,019) 3,933 (1,720)
Regulatory deferred ..................... (15,007) 651 1,504
--------- --------- ---------
Total State Taxes ..................... 24,459 8,636 1,615
--------- --------- ---------
Total Federal and State Income Taxes .. $ 54,092 $ 41,698 $ 8,162
========= ========= =========
Current and deferred federal and state income taxes increased significantly over
1998 due primarily to the taxable gain associated with the April 1999 generation
asset sale to FPL. Tax timing differences that were not normalized in the past
associated with generation assets flowed through in 1999. The MPUC allowed
amortization of an offsetting amount ($28.5 million) of the asset sale gain that
is included in Other Income in 1999. Additionally, the Company flowed through
all unamortized investment tax credits and excess tax reserves associated with
the generation assets sold consistent with a Private Letter Ruling sought by the
Company at the request of the MPUC and affirmed by the MPUC in its approval of
the negotiated rate case settlement on January 27, 2000.
Federal income tax, excluding federal regulatory deferred taxes, differs from
the amount of tax computed by multiplying income before federal tax by the
statutory federal rate. The following table reconciles the statutory federal
rate to a rate determined by dividing the total federal income-tax expense by
income before that expense:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31
1999 1998 1997
Amount % Amount % Amount %
(Dollars in thousands)
Income tax expense at statutory federal
rate .............................................. $ 30,731 35.0 $ 31,773 35.0% $ 6,990 35.0%
Permanent differences:
Investment tax-credit amortization ................ (15,137) (17.2) (1,469) (1.6) (1,469) (7.3)
Dividend-received deduction and equity
in earnings (losses) of associated
companies ......................................... 3,288 3.7 394 .4 (1,911) (9.6)
Nondeductible merger costs ........................ 1,535 1.7 -- -- -- --
Officer stock payout-value differential ........... (393) (0.4) -- -- -- --
Other, net ........................................ (122) (0.1) 168 0.2 (80) (.4)
19,902 22.7 30,866 34.0 3,530 17.7
Effect of timing differences for items
which receive flow through treatment:
Tax-basis repairs ................................. (876) (1.0) (559) (0.6) (1,020) (5.1)
Depreciation differences flowed through
in prior years .................................... 2,440 2.8 3,127 3.4 2,923 14.6
Accelerated flowback of deferred taxes
on loss on abandoned generating projects .......... 1,673 1.9 1,673 1.8 1,673 8.4
Benefits related to Section 1245 Losses ........... (875) (1.0) (1,210) (1.3) (1,818) (9.1)
Asset sale carrying costs ......................... 5,709 6.5 -- -- -- --
IRS audit resolution regarding
depreciation methods .............................. -- -- -- -- 852 4.3
Loss on Reacquired Debt ........................... 472 0.5 436 0.5 540 2.7
Flowback of Excess Federal Deferred
Taxes due to TRA86 ................................ (5,002) (5.7) (1,129) (1.2) (1,005) (5.0)
Generating asset sale-book over tax
basis (state impact) .............................. 9,424 10.7 -- -- -- --
Exempt interest ................................... (1,532) (1.7) -- -- -- --
State Impact on Federal ........................... (378) (.4) 179 .2 301 1.5
Other, net ........................................ (1,324) (1.5) (321) (.4) 571 2.8
Federal Income Tax Expense and
Effective Rate .................................. $ 29,633 33.8% $ 33,062 36.4% $ 6,547 32.8%
</TABLE>
CMP Group and Central Maine record deferred income-tax expense in accordance
with regulatory authority; they also defer investment and energy tax credits and
amortize them over the estimated lives of the assets that generated the credits.
A valuation allowance has not been recorded at December 31, 1999, and 1998, as
CMP Group expects that all deferred income tax assets will be realized in the
future.
<TABLE>
<S> <C> <C>
Accumulated deferred income taxes consisted of the following in 1999 and 1998:
(Dollars in thousands) 1999 1998
Deferred tax assets resulting from:
Investment tax credits, net ............................... $ 9,599 $ 20,034
Regulatory liabilities .................................... 46,296 29,081
Alternative minimum tax ................................... -- 6,135
Deferred gain-generation asset sale ....................... 211,705 --
All other ................................................. 50,420 35,073
318,020 90,323
Deferred tax liabilities resulting from:
Property .................................................. 238,242 300,996
Abandoned plant ........................................... 50,356 54,138
Regulatory assets ......................................... 95,730 111,407
384,328 466,541
Accumulated deferred income taxes, end of year, net ....... $ 66,308 $ 376,218
Accumulated deferred income taxes, recorded as:
Accumulated deferred income taxes ......................... 66,472 $ 376,043
Recoverable costs of Seabrook 1 and abandoned projects, net (164) 175
$ 66,308 $ 376,218
</TABLE>
Note 3: Regulatory Matters
Proposed Merger with Energy East
On June 14, 1999, CMP Group, Energy East and EE Merger Corp., a Maine
corporation that is a wholly-owned subsidiary of Energy East, entered into an
Agreement and Plan of Merger, dated as of June 14, 1999, providing for a merger
transaction among CMP Group, Energy East and EE Merger Corp. Energy East is an
energy delivery, products and services holding company doing business in New
York, Massachusetts, Maine, New Hampshire and New Jersey, which delivers
electricity and natural gas to retail customers and provides electricity,
natural gas and energy management and other services to retail and wholesale
customers in the Northeast.
Pursuant to the merger agreement, EE Merger Corp. will merge with and into CMP
Group with CMP Group being the surviving corporation and becoming a wholly-owned
subsidiary of Energy East. We expect the merger, which was unanimously approved
by the respective boards of directors of CMP Group, Energy East and EE Merger
Corp., to occur shortly after all of the conditions to the consummation of the
merger, including the receipt of required regulatory approvals, are satisfied.
Under the terms of the merger agreement, each outstanding share of CMP Group
common stock, $5.00 par value per share, other than any treasury shares or
shares owned by Energy East or any subsidiary of CMP Group or Energy East, will
be converted into the right to receive $29.50 in cash. Pursuant to the merger
agreement, approximately $957 million in cash will be paid to holders of shares
of CMP Group Common Stock, with additional payments being made to holders of
stock options and performance shares awarded under CMP Group's performance
incentive plans.
The merger is subject to certain customary closing conditions, including without
limitation the receipt of all necessary governmental approvals and the making of
all necessary governmental filings. CMP Group's shareholders approved the merger
at a special meeting on October 7, 1999. The MPUC, the U.S. Department of
Justice, the Federal Trade Commission, Federal Communications Commission, the
NRC and the Connecticut DPUC have approved the merger. Other approvals are
pending from the FERC and the SEC. If the remaining approvals are granted, we
estimate that the merger could be completed around mid-2000.
Alternative Rate Plan
Central Maine's ARP was in effect from January 1, 1995, through December 31,
1999. Instead of rate changes based on the level of costs incurred and capital
investments, the ARP provided for one annual adjustment of an inflation-based
cap on each of Central Maine's rates, with no separate reconciliation and
recovery of fuel and purchased-power costs. Under the ARP, the MPUC continued to
regulate Central Maine's operations and prices, provide for continued recovery
of deferred costs, and specify a range for its rate of return. The MPUC
confirmed in its order approving the ARP that the ARP was intended to comply
with the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation."
The ARP contained a mechanism that provided price caps on Central Maine's retail
rates to be adjusted annually on each July 1, commencing in 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 applied
to all of Central Maine's retail rates.
A specified standard inflation index was the basis for each annual price-cap
change. The inflation index was reduced by the sum of two productivity factors,
a general productivity offset of 1.0%, and a second formula-based offset that
started in 1996 and was intended to reflect the limited effect of inflation on
Central Maine's purchased-power costs during the five-year initial term of the
ARP.
The sharing mechanism could adjust the subsequent year's July price-cap change
in the event Central Maine's earnings were outside a range of 350 basis points
above or below Central Maine's allowed return on equity (starting at the 10.55%
allowed return in 1995 and indexed annually for changes in capital costs).
Outside that range, profits and losses could be shared equally by Central Maine
and its customers in computing the price-cap adjustment. The ROE used for
earnings sharing was increased to 11.5% effective with the July 1999 price
change.
The ARP also provided for partial flow-through to ratepayers of cost savings
from non-utility generator contract buy-outs and restructuring, recovery of
energy-management costs, and penalties for failure to attain customer-service
and energy-efficiency targets. The ARP also generally defined mandated costs
that would be recoverable by Central Maine notwithstanding the index-based price
cap. To receive such treatment, the annual revenue requirement related to a
mandated cost must have exceeded $3 million and have a disproportionate effect
on Central Maine or the electric-power industry.
The components of the three ARP price increases are as follows:
1999 1998 1997
Inflation Index ............................ .89% 1.78% 2.12%
Productivity Offset ........................ (1.00) (1.00) (1.00)
Qualifying Facility Offset ................. .04 (.29) (.42)
Earnings Sharing ........................... -- 1.12 --
Flowthrough and Mandated Items ............. .12 (.28) .40
.05% 1.33% 1.10%
The 1997 and 1998 price increases were approved by the MPUC and implemented.
Central Maine elected not to increase prices in 1999.
On September 30, 1999, Central Maine submitted to the MPUC a proposed seven-year
rate plan ("ARP2000") to take effect after completion of the merger with Energy
East. The formula for ARP2000 is substantially similar to that of the ARP,
except that the one-percent productivity offset of the ARP would escalate in
annual increments of 0.25 percent from 1.00 percent for the 2001 price change to
1.75 percent in 2004 to 2007. The purpose of the proposed escalation is to
assure that Central Maine's customers benefit from the increased savings
expected from the Energy East merger. In addition, in the mandated-costs
exclusion in ARP2000 only mandated costs over $50,000 would be recognized and
only the excess over $3 million of accumulated mandated cost would be
recoverable, not the entire $3 million non-cumulative cost recoverable under the
1995-1999 ARP. The rate of return on equity of 10.5 percent established by the
MPUC for Central Maine effective March 1, 2000, would be the basis for the
earnings-sharing bandwidth, and not the 11.5 percent under the ARP. ARP2000 is
subject to MPUC approval.
Electric-Utility Industry Restructuring
Maine Restructuring Legislation. The Maine Legislature enacted legislation in
1997 to restructure the electric utility industry in Maine effective March 1,
2000. The principal restructuring provisions of the legislation provided for
customers to have direct retail access to generation services and for
deregulation of competitive electric providers, commencing March 1, 2000, with
transmission-and-distribution companies such as Central Maine continuing to be
regulated by the MPUC. By that date, investor-owned utilities were required to
divest all generation assets and generation-related business activities, with
two major exceptions: (1) non-utility 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. As
discussed below under "Sale of Generation Assets," Central Maine completed the
sale of its non-nuclear generating assets on April 7, 1999.
The legislation also required investor-owned utilities to sell their rights to
the capacity and energy from all undivested generation assets after February 29,
2000, including nuclear generation assets and the purchased-power contracts that
had not previously been divested pursuant to the legislation. On July 30, 1999,
Central Maine offered its rights to the capacity and energy from its undivested
generation assets and generation-related business to prospective bidders and in
December 1999 contracted to sell such rights with respect to its undivested
nuclear generation assets (Vermont Yankee and Millstone Unit 3) and its NUG
contract entitlements for a two-year period commencing March 1, 2000.
As a transmission-and-distribution utility, Central Maine is prohibited from
selling electric energy to retail customers, except as may be directed by the
MPUC. Any competitive electricity provider affiliated with Central Maine would
be allowed to sell electricity outside Central Maine's service territory without
limitation as to amount, but within Central Maine's service territory the
affiliate would be limited to providing not more than 33 percent of the total
kilowatt-hours sold with Central Maine's service territory, as determined by the
MPUC. CMP Group has determined that it does not intend to create such an
affiliate.
MPUC Proceeding on Stranded Costs, Revenue Requirements, and Rate Design. By
order dated March 19, 1999, the MPUC completed the first phase of its proceeding
contemplated by Maine's restructuring legislation to establish the recoverable
amount and timing of Central Maine's stranded costs, its revenue requirements
and the design of its rates effective March 1, 2000. In its Phase I order the
MPUC decided the "principles" by which it would set Central Maine's
transmission-and-distribution rates, but deferred actually calculating the rates
until later in the proceeding because some of the necessary information was not
yet available.
With respect to stranded costs, the MPUC indicated that it would set the amount
of recoverable stranded costs for Central Maine later in the proceeding. The
restructuring statute requires the MPUC to provide transmission-and-distribution
utilities a reasonable opportunity to recover such costs that is equivalent to
the utility's opportunity to recover those costs prior to the commencement of
retail access. The MPUC also reviewed the prescribed methodology for determining
the amount of a utility's stranded costs, including among other factors the
application of excess value from Central Maine's divested generation assets to
offset stranded costs.
In the area of revenue requirements, the Phase I order did not establish
definitive amounts, but did contain the MPUC's conclusion that the appropriate
cost of common equity for Central Maine as a transmission-and-distribution
company was 10.50 percent, with a common-equity component of 47 percent. In
dealing with rate design, the MPUC again limited itself primarily to
establishing principles that would guide it in designing Central Maine's rates
effective March 1, 2000.
On July 1, 1999, Central Maine filed its Phase II case with the MPUC. In that
filing Central Maine updated certain test-year data to reflect known and
measurable changes to its revenue requirement, updated its stranded cost
estimate to reflect actual data from the April 1999 closing of its
generation-asset sale, and proposed its rate design based on the principles
enunciated in the Phase I order. Some of the information needed to establish
rates was still incomplete in that filing, however, since neither the auction of
the output of Central Maine's non-divested generation resources nor the bid
process for "standard-offer" service (for those customers who do not select a
competitive energy supplier) had been completed. In addition, several issues
raised by the Phase I MPUC order remained unresolved, including, among others,
(i) whether the MPUC could require the unamortized investment tax credits and
excess deferred income taxes associated with the sale of Central Maine's
generation assets to be flowed through to ratepayers, and (ii) the rate
treatment of the gain on the sale of Union Water's generation-related assets to
FPL and employee transition costs resulting from the generation-asset sale.
In an order dated December 3, 1999, in a separate but related proceeding, the
MPUC approved Central Maine's plan for the sale of the output of its
non-divested generation assets. In another related proceeding, by order dated
October 25, 1999, the MPUC accepted a competitive energy supplier's bid to
provide standard-offer service to Central Maine's residential and small
commercial customers who did not select a competitive energy supplier after
March 1, 2000. In the same order the MPUC rejected all of the standard-offer
bids for Central Maine's medium and large commercial and industrial customers
and sought a second round of bids. In the December 3 order the MPUC rejected all
of the second round of standard-offer bids for Central Maine's medium and large
classes and ordered that Central Maine arrange such service for those classes.
On January 19, 2000, the MPUC issued its Phase II order determining Central
Maine's revenue requirement as a transmission-and-distribution utility,
effective March 1, 2000. In the order the MPUC disallowed approximately $8
million of the approximately $12 million revenue increase requested in Central
Maine's Phase II filing, which had been based on certain known and measurable
changes to its revenue requirement.
A negotiated settlement approved by the MPUC on January 27, 2000, resolved the
major issues remaining outstanding in the final phase of the ratemaking
proceeding. The settlement confirmed that the $18.2 million of unamortized
investment tax credits and excess deferred income taxes related to Central
Maine's generation-asset sale would flow through to shareholders pursuant to the
normalization rules of the Internal Revenue Code. In addition, Central Maine
agreed not to seek judicial review of an August 2, 1999 MPUC order regarding the
treatment of gains from sales of easements that required Central Maine to
recognize 10 percent of the gain currently with the remaining 90 percent being
amortized over 5 years, effective as of the dates of the 1998 and 1999 sale
transactions. Central Maine also agreed not to seek reconsideration of other
cost-of-service updates in the rate case or to challenge an $4.7 million
disallowance of employee transition costs, and to withdraw its appeal of the
rate treatment of the gain on Union Water's generation-related assets.
The settlement also allowed Central Maine to charge off $88 million on March 1,
2000, representing its entire remaining investment in the Millstone 3 nuclear
unit in Connecticut, against the regulatory Asset Sale Gain Account created in
the ratemaking proceeding to recognize the above-book value realized through
Central Maine's generation-asset sale. This provision reflected a recent
resolution of Central Maine's arbitration and litigation claims against the lead
owners of the jointly-owned Millstone 3 unit, in which Central Maine owns a
2.5-percent interest.
As part of the settlement Central Maine also agreed to a one-time earnings cap
for 1999. Earnings above the cap were deferred in 1999 and will be used to
offset rate increases that would otherwise be required to mitigate stranded
costs and increases in operating expenses through 2001.
Finally, the rate settlement established Central Maine's rates as a
transmission-and-distribution utility effective March 1, 2000. A separate order
fixed the standard-offer prices for Central Maine's medium and large commercial
and industrial customers at levels intended to reflect current market pricing
and to avoid under-collection of Central Maine's costs.
The combined after-tax effect of the provisions of the ratemaking settlement,
including the earnings cap, was to reduce CMP Group's net income for 1999 by $11
million.
Sale of Generation Assets
On April 7, 1999, Central Maine completed the sale of all of its hydro, fossil
and biomass power plants with a combined generating capacity of 1,185 megawatts
for $846 million in cash, including approximately $18 million for assets of
Union Water, to affiliates of Florida-based FPL Group. The related book value
for these assets was approximately $217.3 million. In addition, as part of its
agreement with FPL Group, Central Maine entered into energy buy-back agreements
to assist in fulfilling its obligation to supply its customers with power until
March 1, 2000. Subsequently, an agreement was reached to sell related storage
facilities to FPL Group for an additional $4.6 million ($1.5 million for the
assets and $3.1 million estimated for lease revenue associated with the
properties that Central Maine retained), including $2.0 million for Union Water
assets. The related book value of these assets was approximately $11.4 million.
As required by the MPUC, Central Maine recorded a pre-tax deferred gain of
$518.8 million net of selling costs and certain non-normalized income tax
impacts from the sale of generation assets by establishing a regulatory
liability in 1999, which eliminated most income recognition. Central Maine did
record an income impact from the sale amounting to $18 million associated with
the related unamortized investment credits and excess deferred tax reserves as
required by the IRS regulations. Central Maine also recorded curtailment and
special termination deferred charges of $4.1 million associated with pension and
postretirement benefit costs of employees leaving the company as a result of the
generation-asset sale. These deferred charges are being amortized over a
three-year period beginning March 1, 2000, as required by the MPUC. The
regulatory liability for the asset sale gain, including interest, amounted to
approximately $548 million at December 31, 1999, and is being amortized over an
8.5 year period beginning March 1, 2000. The amortization will vary from year to
year.
As required by the Maine restructuring legislation, on July 30, 1999, Central
Maine offered at auction its rights to the capacity and energy from its
undivested generation assets and generation-related business. Upon completion of
the auctions, in December 1999 Central Maine contracted to sell such rights with
respect to its undivested nuclear generation assets (Vermont Yankee and
Millstone Unit 3) and its NUG contract entitlements to the successful bidder for
a two-year period commencing March 1, 2000. Central Maine also auctioned its
Hydro-Quebec entitlement to a different buyer for the same period. All of the
auction results were approved by the MPUC.
Storm Damage to Central Maine's System
In January 1998, a severe ice storm struck Central Maine's service territory,
causing power outages for approximately 280,000 of Central Maine's 528,000
customers and substantial widespread damage to Central Maine's transmission and
distribution system. To restore its electrical system, Central Maine
supplemented its own crews with utility and tree-service crews from throughout
the northeastern United States and the Canadian maritime provinces, with
assistance from the Maine national guard. In January 1998, the MPUC issued an
order allowing Central Maine to defer on its books the incremental non-capital
costs associated with Central Maine's efforts to restore service in response to
the damage resulting from the storm, amounting to $50.7 million plus accrued
carrying costs.
In the spring of 1998, the U.S. Congress appropriated $130 million for
Presidentially declared disasters in 1998, including storm-damage cost
reimbursement for electric utilities. On November 5, 1998 the United States
Department of Housing and Urban Development ("HUD") announced that of those
funds $2.2 million had been awarded to Maine, with none designated for utility
infrastructure, which Central Maine and the Maine Congressional delegation
protested as inadequate and inconsistent with Congressional intent. HUD later
announced that Maine would receive additional funds and on October 6, 1999,
Central Maine received payment in the amount of $19.6 million from HUD. Central
Maine is recovering the $34.1 million balance of the deferred storm-related
costs, including $3.9 million of carrying costs, through rates over a three-year
period commencing March 1, 2000.
Meeting the Requirements of SFAS No. 71
Central Maine continues to meet the requirements of SFAS No. 71 for transmission
and distribution. The standard provides specialized accounting for regulated
enterprises, which requires recognition of "regulatory" assets and liabilities
that enterprises in general could not record. Examples of regulatory assets
include deferred income taxes associated with previously flowed through items,
NUG buyout costs, losses on abandoned plants, deferral of postemployment benefit
costs, and losses on debt refinancing. If an entity no longer meets the
requirements of SFAS No. 71, then regulatory assets and liabilities must be
written off.
The ARP provided incentive-based rates intended to recover the cost of service
plus a rate of return on Central Maine's investment together with a sharing of
the costs or earnings between ratepayers and the shareholders should the
earnings be less than or exceed a target rate of return. Central Maine has
received recognition from the MPUC that the rates implemented as a result of the
ARP continue to provide specific recovery of costs deferred in prior periods.
The 1997 legislation enacted in Maine providing for industry restructuring
addressed the issue of cost recovery of regulatory assets stranded as a result
of industry restructuring. Specifically, the legislation requires the MPUC, when
retail access begins, to provide a "reasonable opportunity" for the recovery of
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. As provided for in EITF
97-4, "Deregulation of the Pricing of Electricity," Central Maine will continue
to record regulatory assets in a manner consistent with SFAS No. 71 as long as
future recovery is probable, since the Maine legislation provides the
opportunity to recover regulatory assets including stranded costs through the
rates of the transmission-and-distribution company. Central Maine discontinued
SFAS No. 71 for any remaining generation segment of its business in 1999, based
on current generally accepted accounting principles. Management believes that
SFAS No. 71 will continue to apply to the regulated distribution and
transmission segments of its business. Future regulatory rules or other
circumstances could cause the application of SFAS No. 71 to be discontinued,
which could result in a non-cash write-off of previously established regulatory
assets.
Note 4: Commitments and Contingencies
Construction Program
Central Maine's plans for improving and expanding generating, transmission,
distribution facilities, and power-supply sources are under continuing review.
Actual construction expenditures will depend upon the availability of capital
and other resources, load forecasts, customer growth, the construction of
merchant generating plants in Central Maine's service territory, and general
business conditions. FERC is currently finalizing its rules regarding the
funding of network upgrades to accommodate merchant plant developers.
The amount Central Maine will be required to fund is therefore not known.
Central Maine's current forecast of capital expenditures for the five-year
period 2000 through 2004, is as follows:
(Dollars in millions) 2000 2001-2004 Total
Type of Facilities:
Transmission ................................... $45 $14-76 $59-121
Distribution ................................... 32 135 167
General facilities and other ................... 15 63 78
Total Estimated Capital Expenditures ........... $92 $212-274 $304-366
Central Maine currently estimates its overall construction program to be $92
million in 2000. Network upgrades associated with five merchant plants, totaling
1670 MW, that are currently under construction, account for $42 million of the
total. For the period 2001 through 2004, the overall construction program is
estimated to range from $212 million, if no additional merchant plants are
constructed, to $274 million (excluding MEPCO projects), if all four additional
merchant plant projects that are currently proposed (2000 MW) are actually
constructed.
Operating Lease Obligations
Central Maine has a number of operating-lease agreements primarily involving
computer and other office equipment, land, and telecommunications equipment.
These leases are noncancelable and expire on various dates through 2007.
Following is a schedule by year of future minimum rental payments required under
the operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1999:
(Dollars in thousands) Amount
2000 $ 3,891
2001 3,621
2002 3,484
2003 3,418
2004 3,401
Thereafter 512
$18,327
Rent expense under all operating leases was approximately $6.8 million, $6.3
million, and $6.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
Legal and Environmental Matters
CMP Group, Central Maine and certain of their affiliates are subject to
regulation by federal and state authorities with respect to air and water
quality, the handling and disposal of toxic substances and hazardous and solid
wastes, and the handling and use of chemical products. Electric utility
companies generally use or generate in their operations a range of potentially
hazardous products and by-products that are the focus of such regulation. CMP
Group and Central Maine believe that their current practices and operations are
in compliance with all existing environmental laws except for such
non-compliance as would not have a material adverse effect on their financial
positions. Central Maine reviews its overall compliance and measures the
liability quarterly by assessing a range of reasonably likely costs for each
identified site using currently available information, including existing
technology, presently enacted laws and regulations, experience gained at similar
sites, and the probable level of involvement and financial condition of other
potentially responsible parties. These estimates include costs for site
investigations, remediation, operation and maintenance, monitoring and site
closure.
New and changing environmental requirements could hinder the construction and/or
modification of transmission and distribution lines, substations and other
facilities, and could raise operating costs significantly. As a result, Central
Maine may incur significant additional environmental costs, greater than amounts
reserved, in connection with the transmission of electricity and the storage,
transportation and disposal of by-products and wastes. Central Maine may also
encounter significantly increased costs to remedy the environmental effects of
prior waste handling activities. The cumulative long-term cost impact of
increasingly stringent environmental requirements cannot accurately be
estimated.
Central Maine has recorded a liability, based upon currently available
information, for what it believes are the estimated environmental remediation
costs that it expects to incur for identified waste disposal sites. In most
cases, additional future environmental cleanup costs are not reasonably
estimatable due to a number of factors, including the unknown magnitude of
possible contamination, the appropriate remediation methods, the possible
effects of future legislation or regulation and the possible effects of
technological changes. Central Maine cannot predict the schedule or scope of
remediation due to the regulatory process and involvement of non-governmental
parties. At December 31, 1999, the liability recorded by Central Maine for its
estimated environmental remediation costs amounted to $2.7 million, which
management has determined to be the most probable amount within the range of
$2.1 million to $8.5 million. Such costs may be higher if Central Maine is found
to be responsible for cleanup costs at additional sites or identifiable possible
outcomes change.
Tax Settlement
In September 1997 Central Maine received a notice of deficiency from the
Internal Revenue Service ("IRS") as a result of its audit of Central Maine's
federal income tax returns for the years 1992 through 1994. There were two
significant adjustments among those proposed by the IRS. The first was a
disallowance of Central Maine'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 had been charged to income in 1994 in connection with the adoption of the
ARP effective January 1, 1995. The second major adjustment disallowed Central
Maine's 1994 deduction of the cost of the buyout of the Fairfield Energy Venture
("FEV") purchased-power contract.
In December 1997 Central Maine filed a petition in the United States Tax Court
contesting the entire amount of the deficiencies. Subsequently, Central Maine
sought review of the asserted deficiencies by an IRS Appeals Officer to
determine whether all or part of the dispute could be resolved in advance of a
court determination.
In June 1999, the IRS Appeals Officer and Central Maine reached agreement
resolving all issues. Under the proposed agreement the ERAM component was
allowed as fully deductible in 1994, while $24 million of the fuel and
purchased-power costs was deemed to be deductible in 1994 and the remaining $30
million deductible in 1995. The parties also agreed to increase the tax basis of
the FEV plant from $2 million to $11 million, to be depreciated over 20 years,
and that the remaining FEV contract buyout costs would be fully deductible in
1994.
As a result of the settlement, Central Maine made payments to the IRS and the
State of Maine totaling $11.8 million for the 1992 to 1994 tax deficiencies, as
well as $6.0 million in associated interest. Substantially all of the tax
impacts were normalized, as Central Maine will be deducting any disallowed costs
for tax purposes in future years. Of the $6.0 million interest payment,
approximately $1 million was previously accrued, and $1.8 million associated
with the FEV facility was deferred consistent with regulatory practice. Interest
income of $3.1 million was accrued for the years 1995 through December 1999. Net
income for 1999 was therefore reduced by less than $0.1 million.
Due to the materiality of the amounts involved, approval of the settlement from
the Congress's Joint Committee on Taxation was required, which was granted in
February 2000.
Nuclear Insurance
The Price-Anderson Act is a federal statute providing, among other things, a
limit on the maximum liability for damages resulting from a nuclear incident.
Coverage for the liability is provided for by existing private insurance and
retrospective assessments for costs in excess of those covered by insurance, up
to $88.095 million for each reactor owned, with a maximum assessment of $10
million per reactor in any year. However, after appropriate exemptive action by
the NRC Maine Yankee, and therefore its sponsors, are not responsible for
retrospective assessments resulting from any event or incident occurring after
January 7, 1999. Based on Central Maine's stock ownership in the Yankee
companies and its 2.5 percent direct ownership interest in the Millstone 3
nuclear unit, Central Maine's retrospective premium for post-January 7, 1999,
events or incidents could be as high as $6 million in any year, for a cumulative
total of $52.9 million.
In addition to the insurance required by the Price-Anderson Act, the nuclear
generating facilities mentioned above carry additional nuclear property-damage
insurance. This additional insurance is provided from commercial sources and
from the nuclear electric utility industry's insurance company through a
combination of current premiums and retrospective premium adjustments. In
recognition of the reduced risk posed by the shutdown of the Maine Yankee Plant
and its defueled reactor, Maine Yankee substantially reduced its property-damage
coverage effective January 19, 1999.
Natural Gas Distribution
New England Gas Development Corporation ("New England Gas"), which is a wholly
owned subsidiary of CMP Group, held approximately a twenty-two percent interest
at December 31, 1999 in CMP Natural Gas, L.L.C. ("CMP Natural Gas"). CMP Natural
Gas is a joint venture of New England Gas and Energy East Enterprises, a wholly
owned subsidiary of Energy East. CMP Natural Gas was formed to construct, own
and operate a natural gas distribution system to serve certain areas of Maine
that did not have gas service, utilizing natural gas delivered to Maine through
new interstate pipeline facilities.
CMP Natural Gas began construction of its first local distribution system in
Windham, Maine, in early 1999 and began serving its first customer in May. On
July 8, 1999, CMP Natural Gas and Calpine Corporation, a California-based
independent power company, announced the signing of a 20-year contract for CMP
Natural Gas to provide natural gas delivery service to Calpine's proposed
540-megawatt natural gas-fired power plant under construction in Westbrook,
Maine. CMP Natural Gas expects to commence service to the plant by June 1, 2000,
after MPUC approval and construction of a two-mile lateral pipeline along an
existing Central Maine right of way that would interconnect with the new
interstate pipeline facilities. On December 13, 1999, the MPUC authorized CMP
Natural Gas to provide service to the Calpine plant, as well as the unserved
areas in the town of Gorham and on February 18, 2000, the MPUC approved an
affiliated-interest transaction allowing CMP Natural gas to construct the
pipeline on Central Maine's transmission corridor.
If the merger of CMP Group and Energy East is completed, CMP Natural Gas will
become a wholly owned subsidiary of Energy East Enterprises, and New England Gas
will cease to exist. During 1999 Energy East also agreed to business
combinations with two established natural gas distribution companies in
Connecticut and one in western Massachusetts, subject to closing conditions,
including shareholder votes and regulatory approvals.
Note 5: Pension and Other Benefits
Pension Benefits
CMP Group has two separate non-contributory, defined-benefit plans that cover
substantially all of its union and non-union employees. CMP Group funding policy
is to contribute amounts to the separate plans that are sufficient to meet the
funding requirements set forth in the Employee Retirement Income Security Act
(ERISA), plus such additional amounts as CMP Group may determine to be
appropriate. Plan benefits under the non-union retirement plan are based on
average final earnings, as defined within the plan, and length of employee
service; benefits under the union plan are based on average career earnings and
length of employee service.
A curtailment occurred due to the sale of Central Maine's generation assets
effective April 7, 1999. In addition, special termination benefits were provided
to certain employees affected by the sale. A portion of the impact of the
curtailment and special termination benefits, $(1.0 million), was deferred in
connection with the gain on the sale of assets. Refer to Note 3 "Regulatory
Matters".
A summary of the components of net periodic pension cost for the non-union and
union defined-benefit plans in 1999, 1998 and 1997 follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
Non- Non- Non-
(Dollars in thousands) union Union union Union union Union
Service cost $2,646 $1,888 $2,791 $1,969 $2,375 $1,694
Interest cost 6,213 4,440 6,170 4,170 5,727 3,973
Expected return on plan
assets (7,575) (4,923) (6,364) (3,987) (5,734) (3,519)
Amortization on
unrecognized transition
(asset)/obligation 26 (270) 29 (270) 29 (270)
Amortization of
unrecognized prior
service cost 141 114 155 129 155 129
Amortization of
unrecognized (gain)/
loss (283) - - - (14) -
Net periodic
pension cost 1,168 1,249 2,781 2,011 2,538 2,007
Gain/loss recognition due
to curtailment (2,851) (1,912) - - - -
Special termination
benefit cost 4,136 3,088 - - - -
Curtailment and special
termination deferred 522 482 - - - -
Total net periodic
Pension cost $2,975 $2,907 $2,781 $2,011 $2,538 $2,007
Assumptions used in accounting for the non-union and union defined-benefit plans
in 1999, 1998 and 1997 are as follows:
</TABLE>
1999 1998 1997
Weighted average discount rate ...................... 7.75% 6.50% 7.00%
Rate of increase in future compensation levels ...... 4.50% 4.50% 4.50%
Expected long-term return on assets ................. 8.75% 8.75% 8.75%
Remeasurement discount rate as of May 1, 1999 ....... 6.75% -- --
The following table sets forth the change in benefit obligations, the change in
plan assets, and the funded status on CMP Group balance sheet at December 31,
1999, and 1998:
<TABLE>
<S> <C> <C> <C> <C>
Non-Union Union
(Dollars in thousands) 1999 1998 1999 1998
Change in Benefit Obligation
Projected Benefit Obligation at Beginning of Year $ 101,620 $ 87,607 $ 68,686 $ 60,807
Service Cost .................................... 2,646 2,791 1,888 1,969
Interest Cost ................................... 6,213 6,170 4,440 4,170
Effects of Curtailment .......................... (3,066) -- (2,113) --
Special Termination Benefits .................... 4,136 -- 3,088 --
Actuarial (Gain)/Loss ........................... (21,948) 9,812 (11,871) 4,839
Benefits Paid ................................... (4,917) (4,760) (3,373) (3,099)
Projected Benefit Obligation at End of Year ..... $ 84,684 $ 101,620 $ 60,745 $ 68,686
Change in Plan Assets
Fair Value of Assets at Beginning of Year ....... $ 99,612 $ 85,707 $ 65,960 $ 54,803
Actual Return on Plan Assets .................... 12,961 15,698 8,677 10,249
Employer Contributions .......................... 2,420 2,967 2,371 4,007
Benefits Paid ................................... (4,917) (4,760) (3,372) (3,099)
Fair Value of Assets at End of Year ............. $ 110,076 $ 99,612 $ 73,636 $ 65,960
Funded Status at December 31 .................... $ 25,392 $ (2,008) $ 12,891 $ (2,726)
Unrecognized Transition (Asset)/Obligation ...... 65 105 (864) (1,134)
Unrecognized Prior Service Cost ................. 1,132 1,474 908 1,223
Unrecognized (Gain)/Loss ........................ (42,587) (15,537) (21,931) (6,307)
Net Amount Recognized - Accrued Benefit Cost .... $ (15,998) $ (15,966) $ (8,996) $ (8,944)
</TABLE>
Savings Plan
CMP Group offers an employee savings plan to all eligible employees. The
non-union plan allows participants to invest from 2% to 15% of their salaries
among several alternatives. The employer contribution equals 60% of the first 5%
(total of 3%) of the employees' contribution.
As part of the collective bargaining agreement, effective in May 1997, the union
plan allows maximum deferrals of up to 16% of their salaries among several
alternatives. The employer contribution equals 60% of the first 5% and 50% of
the next 2% invested, bringing the maximum employer contribution to 4% if an
employee defers 7% of compensation.
CMP Group's contributions to the savings plan trust were $2.0 million in 1999,
$1.9 million in 1998 and $1.8 million in 1997.
Post-Retirement Benefits
In addition to pension and savings-plan benefits, CMP Group provides certain
health-care and life-insurance benefits for substantially all of its retired
employees.
The MPUC approved a rulemaking on SFAS No. 106, effective July 20, 1993, that
adopted the accrual method of accounting for the expected cost of such benefits
during the employees' years of service, and authorized the establishment of a
regulatory asset for the deferral of such costs until they are "phased-in" for
ratemaking purposes. The effect of the change can be reflected in annual
expenses over the active service life of employees or a period of 20 years,
rather than in the year of adoption.
The MPUC prescribes the maximum amortization period of the average remaining
service life of active employees or 20 years, whichever is longer, for the
transition obligation. CMP Group is utilizing a 20 year amortization period.
Segregation in an external fund is required for amounts collected in rates.
Central Maine (CMP Group was not formed until September 1998) funded $3 million
in 1997, 1998, and 1999 and plans to monitor and fund the same amount annually
in order to meet its obligation.
As a result of the MPUC order, CMP Group records the cost of these benefits by
charging expense in the period recovered through rates. The annual
post-retirement benefit expense is currently included in rates as well as an
amount designed to recover the deferred balance over a period of 20 years. The
amounts included in rates in 1999, 1998 and 1997 were $10.6, $11.3 and $9.7
million, respectively. With the reduction in the deferred account of $1.5
million in 1999 and, $1.5 million in 1998, the total amount deferred as a
regulatory asset as of December 31, 1999 and 1998 was $18.1 million and $19.6
million, respectively. A curtailment occurred due to the sale of Central Maine's
generation assets effective April 7, 1999. In addition, special termination
benefits were provided to certain employees affected by the sale. A portion of
the impact of the curtailment and special termination benefits, $5.1 million,
was deferred in connection with the gain on the sale of assets. Refer to Note 3
"Regulatory Matters". A summary of the components of net periodic postretirement
benefit cost for the plan in 1999, 1998 and 1997 follows:
<TABLE>
<S> <C> <C> <C>
(Dollars in thousands) 1999 1998 1997
Service cost ..................................... $ 1,937 $ 1,867 $ 1,201
Interest cost .................................... 5,554 5,438 4,702
Expected return on plan assets ................... (655) (360) --
Amortization of unrecognized transition obligation 3,348 3,704 3,704
Amortization of unrecognized (gain)/loss ......... (79) (80) (1,029)
Curtailment and special termination .............. 5,674 -- --
Curtailment and special termination deferred ..... (5,099) -- --
Postretirement Benefit Expense Recognized in the
Statement of Earnings .......................... $ 10,680 $ 10,569 $ 8,578
</TABLE>
The following table sets forth the change in benefit obligation, change in plan
assets and the funded status of the plan, and the liability recognized on CMP
Group's balance sheet at December 31, 1999 and 1998:
(Dollars in thousands) 1999 1998
Change in Benefit Obligation
Benefit obligation at beginning of year ............ $ 86,952 $ 69,749
Service cost ....................................... 1,937 1,867
Interest cost ...................................... 5,554 5,438
Curtailment ........................................ (512) --
Special termination benefits ....................... (1,145) --
Estimated benefits paid ............................ (6,031) (6,334)
Actuarial (gain)/loss .............................. (13,279) 16,232
Benefit obligation at end of year .................. 73,476 86,952
Change in Plan Assets
Fair value of plan assets at beginning of year ..... 6,502 3,025
Actual return on plan assets ....................... 1,145 711
Employer contribution .............................. 9,031 9,100
Estimated benefits paid ............................ (6,031) (6,334)
Fair value of plan assets at end of year ........... 10,647 6,502
Funded Status ...................................... (62,829) (80,450)
Unrecognized transition (asset)/obligation ......... 41,181 51,859
Unrecognized prior service cost .................... 2 4
Unrecognized actuarial (gain)/loss ................. (17,408) (3,718)
Accrued benefit cost ............................... $(39,054) $(32,305)
The assumed health-care cost-trend rate was an average gross medical trend of
approximately 6% for 1999 reducing to 5% overall in the year 2020. Rates range
from 5.3% to 5.9% for 1999 reducing to 5.0% overall over a period of 25 years.
Rates range from 5.5% to 6.3% for 1998, reducing to 5.0% overall, over a period
of 25 years. The effect of a one-percentage-point increase in the assumed
health-care cost-trend rate for each future year would increase the aggregate of
the service and interest-cost components of the net periodic postretirement
benefit cost by $1.2 million and the accumulated postretirement benefit
obligation ("APBO") by $9.4 million. The effect of a one-percentage-point
decrease in the assumed healthcare cost-trend rate for each future year would
decrease the aggregate of the service and interest-cost components of the net
periodic postretirement benefit cost by $974 thousand and the APBO by $8.0
million. Additional assumptions used in accounting for the postretirement
benefit plan in 1999, 1998 and 1997 are as follows:
1999 1998 1997
Weighted-average discount rate ...................... 7.75% 6.50% 7.00%
Rate of increase in future compensation levels ...... 4.50% 4.50% 4.50%
CMP Group is exploring alternatives for mitigating the cost of postretirement
benefits and for funding its obligations. These alternatives include mechanisms
to fund the obligation prior to actual payment of benefits, plan-design changes
to limit future expense increases, and additional cost-control and cost-sharing
programs.
Note 6: Incentive Compensation
The Company has a Long-Term Incentive Plan in which officers and key employees
participate. The Plan includes a stock option component and a performance share
component. The Plan is intended to focus attention more sharply on a performance
objective that is designed to increase value to shareholders over the longer
term.
Stock options granted are exercisable at the market price of the common stock on
the date of the grant. They expire seven years from their grant date. One third
of the options vest annually, commencing on the first anniversary of the option
grant date. Upon vesting stock options are exercisable during periods of active
employment or within thirty (30) days after termination of employment, provided
termination did not occur due to cause.
Stock option activity was as follows:
<TABLE>
<S> <C> <C> <C> <C>
1999 1998
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
Outstanding at beginning of year 241,996 $17.3750
Granted during the year 262,480 $18.1875 253,925 $17.375
Expired/canceled during the year 16,813 $17.7701 11,929 $17.375
Exercised during the year 57,343 $17.3750 $
Outstanding at end of year 430,320 $17.8550 241,996 $17.375
Exercisable at end of year 260,784 $17.6391 $
</TABLE>
The outstanding options expire at various dates through April, 2005.
The stock options were granted with a grant date fair value of $2.28 in 1998 and
$2.92 in 1999. The fair value was estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
1999 1998
Expected option life ......................... 7 Years 7 Years
Risk free interest rate ...................... 5.41% 6.00%
Expected volatility .......................... 0.204% 0.154%
Dividend yield ............................... 4.98% 5.10%
CMP Group uses the intrinsic value based method to recognize compensation
expense related to stock options. No compensation expense was recognized in 1999
or 1998 related to stock options granted, since they contained an exercise price
equal to the fair market value on the date of the grant. Had compensation costs
for stock options been determined based on the fair value at the grant dates for
awards under this plan consistent with the method of SFAS No. 123, the CMP
Group's net income and earnings per share would have been reduced to the pro
forma amounts indicated as follows:
1999 1998
Net Income:
As Reported ........................ $ 54,854 $ 52,910
Pro Forma .......................... $ 54,635 $ 52,801
Earnings Per Share:
As Reported ........................ $ 1.69 $ 1.63
Pro Forma .......................... $ 1.68 $ 1.63
Performance Shares - Performance shares are shares of CMP Group stock granted at
the end of a 3-year performance cycle, based on achievement of performance goals
that are directly linked to increasing shareholder value. If the goals are not
achieved at the end of the 3-year cycle, the performance shares are forfeited.
Contingently issuable performance shares for the three year periods beginning in
1997, 1998 and 1999 totaled 59,125, 64,518 and 67,150, respectively. In 1999,
88,691 performance shares were issued to employees, which represented a payout
of 150% per the Plan objectives.
CMP Group is accruing the compensation expense associated with these shares over
the applicable three year period. The total expense recognized in 1999 and 1998
was approximately $3.6 million and $743 thousand, respectively.
Note 7: Transactions with Affiliated Companies
Central Maine provides certain services to CMP Group and its subsidiaries,
including administrative support services and pension and employee benefit
arrangements. Charges related to those services have been determined based on a
combination of direct charges and allocations designed to recover Central
Maine's cost. These assessments are reflected as an offset to Central Maine's
expenses and totaled approximately $7.2 million and $3 million for the year
ended December 31, 1999 and 1998, respectively.
CMP Group provides certain managerial services to its subsidiaries. Charges
related to those services have been determined based on a combination of direct
charges and allocation in order to recover the majority of their expenses. These
assessments are reflected as an offset to CMP Group's expenses and totaled
approximately $14.8 million and $1.2 million for the year ended December 31,
1999 and 1998, respectively.
In addition, a subsidiary of CMP Group provides certain real estate and (prior
to April 7, 1999) river management services charged to Central Maine at cost and
environmental, engineering, utility locator and construction services based on a
contracted rate. These expenses amounted to $5.3 million for the year ended
December 31, 1999.
As of December 31, 1999, Central Maine's accounts receivable and accounts
payable balances include the following balances with affiliated companies:
(dollars in thousands)
Accounts Receivable Accounts Payable
CMP Group ........................... $3,043 $7,939
CNEX ................................ 65 23
MaineCom ............................ 37 --
TeleSmart ........................... 46 39
Union Water ......................... 888 398
New England Gas ..................... 1 --
$4,080 $8,399
Note 8: Telecommunications Investment
MaineCom Services, which is wholly owned by CMP Group, provides
telecommunications services, including point-to-point connections, private
networking, consulting, private voice and data transport, carrier services, and
long-haul transport. MaineCom Services also holds, through wholly owned New
England Business Trust, approximately 38% interest in NorthEast Optic Network,
Inc. ("NEON"), a facilities-based provider of technologically advanced,
high-bandwidth, fiber optic transmission capacity for communications carriers on
local loop, inter-city, and interstate facilities. NEON owns and operates and is
expanding a fiber optic network in New England and New York, utilizing primarily
electric utility rights of way including some of Central Maine's and some owned
by other electric utilities including Northeast Utilities, another substantial
minority stockholder.
On November 23, 1999, NEON announced two major agreements, one with Consolidated
Edison Communications, Inc. ("CEC"), a wholly owned subsidiary of Consolidated
Edison, Inc., and the other with Excelon, a wholly owned subsidiary of PECO
Energy, Inc. The agreements effectively expand the reach of the network to
include the Philadelphia, Baltimore and Washington, D.C., areas. As the
agreements are implemented, CEC will obtain an approximately ten-percent
interest in NEON and Excelon an interest of approximately nine percent.
In August 1998 NEON completed initial public offerings of $48 million of common
stock and $180 million of senior notes. As part of the common-stock offering
Central Maine sold some of the shares it then owned in NEON for approximately
$3.1 million. With some of the proceeds of the offerings NEON repaid
approximately $18 million Central Maine had advanced under an earlier
construction loan agreement.
In accordance with the SEC's Staff Accounting Bulletins ("SAB") 51 and 84
MaineCom increased additional paid in capital by $9.4 million and deferred tax
reserve liability by $6.5 million. CMP Group's accounting policy for such
transactions is to recognize a gain in income. However, the above transaction
was reflected in additional paid in capital as required by the SEC SAB's.
On February 15, 2000, CMP Group announced that New England Business Trust
intended to sell approximately 2.5 million shares of its 6.177-million-share
common-stock holding in NEON through an underwritten public offering expected to
be completed during the second calendar quarter of 2000. Although the market
value of NEON's common stock has increased substantially since NEON's 1998
initial public offering, CMP Group cannot accurately estimate the amount of
proceeds to be realized through the planned offering.
MaineCom's equity losses in NEON were $10.6 million, $6.7 million and $0.6
million for 1999, 1998 and 1997, respectively.
Note 9: Capacity Arrangements
Power Agreements
Central Maine, through certain equity interests, is entitled to a portion of the
generating capacity and energy production of four nuclear generating facilities
(the Yankee companies), three of which have been permanently shut down, and is
obligated to pay its proportionate share of costs, which include fuel,
depreciation, operation-and-maintenance expenses, a return on invested capital,
and the estimated cost of decommissioning the nuclear plants.
Pertinent data related to these power agreements as of December 31, 1999, are as
follows:
<TABLE>
<S> <C> <C> <C> <C>
(Dollars in thousands) Maine Yankee Vermont Connecticut Yankee Atomic
Yankee Yankee
Ownership share 38% 4% 6% 9.5%
Operating Status Permanently Operating Permanently Permanently
shutdown shutdown shutdown
August 6, 1997 December 4, February 26,
1996 1992
Contract expiration date 2008 2012 1998 2000
Capacity (MW) - 531 - -
Company's share of: Capacity (MW) - 19 - -
1999 energy and capacity costs $ 26,634 $ 7,483 $ 3,400 $ 4,604
Long-term obligations and redeemable
preferred stock $ 77,647 $ 8,245 $ 8,064 -
Estimated decommissioning obligation $242,907 $15,142 $25,054 $ 2,350
Accumulated decommissioning fund $ 68,816 $ 8,385 $12,271 $15,201
</TABLE>
Under the terms of its agreements, Central Maine pays its ownership share (or
entitlement share) of estimated decommissioning expense to each of the Yankee
companies and records such payments as a cost of purchased power.
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. The Plant had experienced a
number of operational and regulatory problems and did not operate after 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. The
Plant's operating license from the NRC was scheduled to expire in 2008.
FERC Rate Case. On November 6, 1997, Maine Yankee submitted to FERC for filing
certain amendments to the Power Contracts (the "Amendatory Agreements") and
revised rates to reflect the decision to shut down the Plant and to request
approval of an increase in the decommissioning component of its formula rates.
Maine Yankee's submittal also requested certain other rate changes, including
recovery of unamortized investment (including fuel) and certain changes to its
billing formula, consistent with the non-operating status of the Plant. By Order
dated January 14, 1998, the FERC accepted Maine Yankee's new rates for filing,
subject to refund after a minimum suspension period, and set for hearing Maine
Yankee's Amendatory Agreements, rates, and issues concerning the prudence of the
Plant-shutdown decision that had been raised by intervenors.
During 1998 and early 1999 the active intervenors, including among others the
MPUC Staff, the Maine Office of the Public Advocate ("OPA"), Central Maine and
other owners, municipal and cooperative purchasers of Maine Yankee power (the
"Secondary Purchasers"), and a Maine environmental group (the "Settling
Parties"), engaged in extensive discovery and negotiations, which resulted in
the filing of a settlement agreement with the FERC on January 19, 1999. A
separately negotiated settlement filed with the FERC on February 5, 1999,
resolved the issues raised by the Secondary Purchasers by limiting the amounts
they will pay for decommissioning the Plant and by settling other points of
contention affecting individual Secondary Purchasers. Both settlements were
found to be in the public interest and approved by the FERC on June 1, 1999. The
settlements constitute full settlement of all issues raised in the FERC
proceeding, including decommissioning-cost issues and issues pertaining to the
prudence of the management, operation, and decision to permanently cease
operation of the Plant.
The primary settlement provided for Maine Yankee to collect $33.1 million in the
aggregate annually, effective August 1, 1999, including both decommissioning
costs and costs related to Maine Yankee's planned on-site independent spent fuel
storage installation ("ISFSI"). The 1997 FERC filing had called for an aggregate
annual collection rate of $36.4 million for decommissioning and the ISFSI, based
on a 1997 estimate. Pursuant to the approved settlement the amount collected
annually has been reduced to approximately $25.6 million, effective October 1,
1999, as a result of 1999 Maine legislation allowing Maine Yankee to (1) use for
construction of the ISFSI funds held in trust under Maine law for spent-fuel
disposal, and (2) access approximately $6.8 million held by the State of Maine
for eventual payment to the State of Texas pursuant to a compact for low-level
nuclear waste disposal, the future of which is in question after rejection of
the selected disposal site in west Texas by a Texas regulatory agency.
The settlement also provides for recovery of the unamortized investment
(including fuel) in the Plant, together with a return on equity of 6.50 percent,
effective January 15, 1998, on equity balances up to maximum allowed equity
amounts, which resulted in a pro-rata refund of $9.3 million (including tax
impacts) to the sponsors on July 15, 1999. The Settling Parties also agreed not
to contest the effectiveness of the Amendatory Agreements submitted to FERC as
part of the original filing, subject to certain limitations including the right
to challenge any accelerated recovery of unamortized investment under the terms
of the Amendatory Agreements after a required informational filing with the FERC
by Maine Yankee. In addition, the settlement contains incentives for Maine
Yankee to achieve further savings in its decommissioning and ISFSI-related costs
and resolves issues concerning restoration and future use of the Plant site and
environmental matters of concern to certain of the intervenors in the
proceeding.
As a separate part of the settlement, Central Maine, the other two Maine
utilities which own interests in Maine Yankee, the MPUC Staff, and the OPA
entered into a further agreement resolving retail rate issues and other issues
specific to the Maine parties, including those that had been raised concerning
the prudence of the operation and shutdown of the Plant (the "Maine Agreement").
Under the Maine Agreement Central Maine is recovering its Maine Yankee costs in
accordance with its most recent rate order from the MPUC.
Finally, the Maine Agreement requires Central Maine and the other two Maine
utilities, for the period from March 1, 2000, through December 1, 2004, to hold
their Maine retail ratepayers harmless from the amounts by which the replacement
power costs for Maine Yankee exceed the replacement power costs assumed in the
report to the Maine Yankee Board of Directors that served as a basis for the
Plant shutdown decision, up to a maximum cumulative amount of $41 million.
Central Maine's share of that amount would be $31.2 million for the period.
Based on the results of the two year entitlement auction already completed, the
Company will not incur any liability for this provision in year 2000 and does
not believe that it will incur any liability in 2001.
CMP Group and Central Maine believe that the approved settlement, including the
Maine Agreement, constitutes a reasonable resolution of the issues raised in the
Maine Yankee FERC proceeding, which has eliminated significant uncertainties
concerning CMP Group's and Central Maine's future financial performance.
Condensed financial information on Maine Yankee Atomic Power Company is as
follows:
(Dollars in thousands) 1999 1998 1997
Earnings:
Operating revenues ......................... $ 69,439 $ 110,608 $ 238,586
Operating income ........................... 12,689 13,430 18,170
Net income ................................. 6,198 6,295 9,037
Earnings applicable to common stock ........ 4,863 4,916 7,613
Central Maine's Equity Share of Net Earnings $ 1,848 $ 1,868 $ 2,893
Investment:
Net electric property and nuclear fuel ..... $ 685 $ 687 $ 17,938
Current assets ............................. 23,086 20,896 71,098
Deferred charges and other assets .......... 1,068,179 1,161,715 1,279,107
Total Assets ............................... 1,091,950 1,183,298 1,368,143
Less:
Redeemable preferred stock ................. 15,000 16,800 17,400
Long-term obligations ...................... 193,535 201,614 270,299
Current liabilities ........................ 22,163 15,122 35,518
Reserves and deferred credits .............. 786,858 870,856 966,561
Net Assets ................................. $ 74,394 $ 78,906 $ 78,365
Company's Equity in Net Assets ............. $ 28,270 $ 29,984 $ 29,779
Other Investments
Connecticut Yankee. In December 1996, the Board of Directors of Connecticut
Yankee Atomic Power Company voted to permanently shut down and decommission the
Connecticut Yankee plant for economic reasons. The plant did not operate after
July 22, 1996. Central Maine estimates its share of the cost of Connecticut
Yankee's continued compliance with regulatory requirements, recovery of its
plant investment, decommissioning and closing the plant to be approximately
$25.1 million and has recorded a corresponding regulatory asset and liability on
the consolidated balance sheet. Central Maine is currently recovering through
rates an amount adequate to recover these expenses. Contested issues relating to
Connecticut Yankee's decommissioning rates, as well as the prudence of operating
that plant and the decision to cease operations, remain pending before the FERC.
Yankee Atomic. In 1993 the FERC approved a settlement agreement regarding
recovery of decommissioning costs and plant investment, and all issues with
respect to the prudence of the decision to discontinue operation of the Yankee
Atomic plant. Central Maine estimates its remaining share of the cost of Yankee
Atomic's continued compliance with regulatory requirements, recovery of its
plant investment, decommissioning and closing the plant, to be approximately
$2.4 million. This estimate has been recorded as a regulatory asset and
liability on Central Maine's balance sheet. Central Maine's current share of
costs related to the shutdown of Yankee Atomic is being recovered through rates.
Vermont Yankee. The Vermont Yankee plant is an operating unit. Its NRC operating
license is scheduled to expire in the year 2012. On October 15, 1999, Vermont
Yankee agreed to sell the Vermont Yankee plant for $22 million, subject to
certain adjustments, to AmerGen Energy Company LLC ("AmerGen"). AmerGen agreed,
among other commitments, to assume the decommissioning cost of the unit after it
is taken out of service, and the Vermont Yankee sponsors, including Central
Maine, agreed to fund the uncollected decommissioning cost up to a negotiated
amount at the time of the closing of the sale. The sponsors also agreed either
to enter into a new purchased-power agreement with AmerGen or to buy out such
future power payment obligations by making a fixed payment to AmerGen. Central
Maine elected to enter into a twelve-year purchased-power agreement and intends
to sell its power entitlement at the market rate. The sponsors' obligation to
consummate the sale is conditioned upon the receipt of satisfactory regulatory
approvals.
Millstone Unit 3. Pursuant to a joint ownership agreement, Central Maine has a
2.5 percent direct ownership interest in the Millstone 3 nuclear unit in
Waterford, Connecticut, which is operated by Northeast Utilities. This facility
was off-line from March 31, 1996, to July 1998, due to NRC concerns regarding
license requirements.
Central Maine is obligated to pay its proportionate share of the operating
expenses, including depreciation and a return on invested capital, of each of
the Yankee Companies referred to above for periods expiring at various dates to
2012. Pursuant to the joint ownership agreement for Millstone 3, Central Maine
is similarly obligated to pay its proportionate share of the operating costs of
Millstone 3. Central Maine is also required to pay its share of the estimated
decommissioning costs of each of the Yankee Companies and Millstone 3. The
estimated decommissioning costs are paid as a cost of energy in the amounts
allowed in rates by the FERC and passed through to Central Maine's ratepayers as
a component of its transmission-and-distribution revenue requirement approved by
the MPUC.
MEPCO. MEPCO owns and operates a 345-kilovolt transmission interconnection,
extending from Central Maine's substation at Wiscasset to the Canadian border
where it connects with a line of The New Brunswick Power Corporation ("NB
Power") under an interconnection agreement. MEPCO transmits power between NB
Power and various New England utilities under MEPCO's Open Access Transmission
Tariff.
Central Maine had approximately a 60% ownership interest in the jointly owned,
Company-operated, 620-megawatt oil-fired W. F. Wyman Unit No. 4. Wyman 4 was
sold to FPL group as part of its sale of generation assets on April 7, 1999. See
Note 3, "Regulatory Matters" - "Sale of Generation Assets." Central Maine also
has a 2.5% ownership interest in the Millstone Unit No. 3 nuclear plant operated
by Northeast Utilities, and is entitled to approximately a 29-megawatt share of
that unit's capacity. Central Maine's plant in service, nuclear fuel,
decommissioning fund, and related accumulated depreciation and amortization
attributable to these units as of December 31, 1999, and 1998 were as follows:
Wyman 4 Millstone 3
(Dollars in thousands) 1999 1998 1999 1998
Plant in service, nuclear
fuel and decommissioning fund $ - $116,075 $114,696 $112,907
Accumulated depreciation
and amortization - 69,028 111,728 45,433
Power-Pool Agreements
The New England Power Pool, of which Central Maine is a member, has contracted
in its Hydro-Quebec Projects to purchase power from Hydro-Quebec. The contracts
entitle Central Maine to 44.5 megawatts of capacity credit in the winter and
127.25 megawatts of capacity credit during the summer. Central Maine has entered
into facilities-support agreements for its share of the related transmission
facilities. Central Maine's share of the support responsibility and of
associated benefits is approximately 7%.
Central Maine is making facilities-support payments on approximately $23.8
million, its remaining share of the construction cost for these transmission
facilities incurred through December 31, 1999. These obligations are reflected
on the Company's consolidated balance sheet as lease obligations with a
corresponding charge to electric property.
Non-Utility Generators
Central Maine has entered into a number of long-term, non-cancelable contracts
for the purchase of capacity and energy from non-utility generators (NUG). The
agreements generally have terms of five to 17 years, with expiration dates
ranging from 2000 to 2016. They require Central Maine to purchase the energy at
specified prices per kilowatt-hour, which are often above market prices. As of
December 31, 1999, facilities having 587 megawatts of capacity covered by these
contracts were in-service. The costs of purchases under all of these contracts
amounted to $207.8 million in 1999, $265 million in 1998, and $306.4 million in
1997.
Central Maine's estimated contractual obligations with NUGs as of December 31,
1999, are as follows:
(Dollars in millions) Amount
2000 $ 269
2001 252
2002 257
2003 261
2004 261
2005 - 2016 1,523
$2,823
The aggregate above market costs associated with these contracts is estimated to
be approximately $1 billion, based on one of many market price assumptions.
Note 10: Capitalization and Interim Financing
Retained Earnings
Under terms of the most restrictive test in Central Maine's Articles of
Incorporation, no dividend may be paid on the common stock of Central Maine if
such dividend would reduce retained earnings below $29.6 million. At December
31, 1999, Central Maine's retained earnings were $100.8 million, of which $71.2
million were not so restricted. There are no such restrictions on CMP Group.
Future dividend decisions will be subject to future earnings levels and the
financial condition of CMP Group and Central Maine and will reflect the
evaluation by their Board of Directors of then existing circumstances.
Mortgage Bonds
Substantially all of Central Maine's electric-utility property and franchises
were subject to the lien of the General and Refunding Mortgage until its
discharge on July 27, 1999.
Mortgage Bonds outstanding as of December 31, 1999, and 1998 were as follows:
Central Maine Power Company
General and Refunding Mortgage Bonds:
Interest
Series Maturity rate 1999 1998
(Dollars in thousands)
P Redeemed April 7, 1999 7.66% - $ 43,717
Q Redeemed April 7, 1999 7.05 - 75,000
Total Mortgage Bonds $ - $118,717
During 1999, Central Maine redeemed the following principal amounts of its
General and Refunding Mortgage Bonds: on May 10, $43.7 million of Series P
7.66%, Due 2000; on the same day $75 million of Series Q 7.05%, Due 2008. No
premiums were paid by Central Maine for the bonds.
Limitations on Unsecured Indebtedness
Central Maine's Articles of Incorporation limit certain unsecured indebtedness
that may be outstanding to 20 percent of capitalization, as defined, without the
consent of the holders of Central Maine's preferred stock; 20 percent of defined
capitalization amounted to $119 million as of December 31, 1999. Unsecured
indebtedness, as defined, amounted to $57 million as of December 31, 1999.
Central Maine's $500 million medium-term note program, having received the
consent of Central Maine's preferred stockholders in May 1997, is not included
in "unsecured indebtedness" for purposes of the 20-percent limitation.
Medium-Term Notes
At the annual meeting of the stockholders of Central Maine on May 15, 1997, the
holders of Central Maine's outstanding preferred stock consented to the issuance
of $350 million in principal amount of Central Maine's medium-term notes in
addition to the $150 million in principal amount to which they had previously
consented in 1989. As of December 31, 1999, $70 million of medium-term notes
were outstanding. Interest on fixed-rate notes is payable on March 1 and
September 1, while interest on floating-rate notes is payable on the dates
indicated thereupon.
Medium-Term Notes outstanding as of December 31, 1999, and 1998 were as follows:
(Dollars in thousands)
Maturity Interest rate 1999 1998
Series A:
2000 9.65% $ 5,000 $ 5,000
Series C:
2000-2001 6.38% - 7.21% 40,000 127,000
Series D:
2000 6.50% 25,000 205,000
Medium-Term Notes 70,000 337,000
Less: Amount Due Within One Year 60,000 10,000
Total Medium-Term Notes $10,000 $327,000
Pollution-Control Facility and Other Notes
Pollution-control facility and other notes outstanding as of December 31, 1999,
and 1998 were as follows:
<TABLE>
<S> <C> <C> <C> <C>
(Dollars in thousands)
Series Interest rate Maturity 1999 1998
Central Maine Power Company:
Yarmouth Installment Notes 6 3/4% Redeemed June 1, 1999 $ - $ 9,330
Yarmouth Installment Notes 6 3/4 Redeemed June 1, 1999 - 1,000
Industrial Development
Authority of the State of
New Hampshire Notes 7 3/8 May 1, 2014 19,500 19,500
Finance Authority of Maine 8.16 January 1, 2005 37,929 45,929
Revolving Credit Agreement Variable* October 22, 1999 - 50,000
Maine Electric Power Company, Inc.:
Promissory Notes Variable** November 1, 2000 - 420
NORVARCO: Promissory Note 10.48 November 1, 2020 22,973 24,090
NORVARCO: Senior Note 7.05 November 1, 2020 1,681 1,747
Union Water Power Company-Bank Notes 7.99 December 2011 1,110 1,163
Union Water Power Company-Bank Notes Variable*** October 2018 1,246 1,284
Total Pollution-Control Facility and Other Notes $84,439 $154,463
*The average rate was 6.1125% in 1998.
**The average rate was 6.48% in 1998.
***The average rate was 7.75% in 1999 and 8.25% in 1998.
</TABLE>
The bonds issued by the Industrial Development Authority of the State of New
Hampshire are supported by loan agreements between Central Maine and the
Authority. The bonds are subject to redemption at the option of Central Maine at
their principal amount plus accrued interest and premium, beginning in 2001.
On October 26, 1994, FAME issued $79.3 million of Taxable Electric Rate
Stabilization Revenue Notes Series 1994A (FAME notes). FAME and Central Maine
entered into a loan agreement under which Central Maine issued FAME a note for
approximately $66.4 million, evidencing a loan in that amount. The remaining
$12.9 million of FAME-notes proceeds over the $66.4 million was placed in a
capital-reserve account. The amount in the capital-reserve account is equal to
the highest amount of principal and interest on the FAME notes to accrue and
come due in any year the FAME notes are outstanding. The amounts invested in the
capital reserve account are initially invested in government securities designed
to generate interest income at a rate equal to the interest on the FAME notes.
Under the terms of the loan agreement, Central Maine is also responsible for or
receives the benefit from the interest rate differential and investment gains
and losses on the capital reserve account.
NORVARCO, a wholly owned subsidiary of Central Maine, owns a fifty-percent
interest in Chester SVC Partnership. In December 1990, Chester entered into a
non-recourse long-term debt financing of $33 million at a fixed annual interest
rate of 10.48%, payable monthly over a 30-year term. The debt is redeemable
commencing December 20, 2000, at its principal amount plus accrued interest and
a yield maintenance premium based on market interest rates at the time of
redemption. In 1995, Chester entered into an agreement with the existing note
holder to finance $2.1 million in construction commitments. That note agreement
requires principal and interest payments on a monthly basis over the remaining
years of the original financing agreement and has a fixed interest rate of
7.05%. Central Maine's share of the loan payments is 7.1 percent under a support
agreement with other utilities that use the facility.
Capital Lease Obligations
CMP Group leases some of its buildings and equipment under lease arrangements,
and accounts for certain transmission agreements as capital leases using periods
expiring between 2006 and 2021. The net book value of property under capital
leases was $27.5 million and $29.4 million at December 31, 1999, and 1998,
respectively. Assets acquired under capital leases are recorded as electric
property at the lower of fair-market value or the present value of future lease
payments, in accordance with practices allowed by the MPUC, and are amortized
over their contract terms. The related obligation is classified as other
long-term debt. Under the terms of the lease agreements, executory costs are
excluded from the minimum lease payments.
Estimated future minimum lease payments for the five years ending December 31,
2004, together with the present value of the minimum lease payments, are as
follows:
(Dollars in thousands) Amount
2000 $ 5,093
2001 4,924
2002 4,755
2003 4,587
2004 4,418
Thereafter 42,842
Total minimum lease payments 66,619
Less: amounts representing interest 35,579
Present Value of Net Minimum Lease Payments $31,040
Sinking-Fund Requirements
Consolidated sinking-fund requirements for long-term obligations, including
capital lease payments and maturing debt issues, for the five years ending
December 31, 2004, are as follows:
(Dollars in thousands)
Sinking fund Maturing debt Total
2000 $ 2,937 $60,000 $62,937
2001 11,547 10,000 21,547
2002 12,258 - 12,258
2003 13,071 - 13,071
2004 12,915 - 12,915
Disclosure of Fair Value of Financial Instruments
The methods and assumptions used to estimate the fair value of each class of
financial instruments for which it is practicable are discussed below. The
carrying amounts of cash and temporary investments approximate fair value
because of the short maturity of these investments. The fair value of redeemable
preferred stock and pollution-control facility and other notes is based on
quoted market prices as of December 31, 1999 and 1998. The fair value of
long-term obligations is based on quoted market prices for the same or similar
issues, or on the current rates offered to the particular company based on the
weighted average life of each class of instruments.
The estimated fair values of the CMP Group's financial instruments as of
December 31, 1999, and 1998 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1999 1998
Carrying Carrying
(Dollars in thousands) amount Fair value amount Fair value
Redeemable preferred stock ............... $ 9,910 $ 9,712 $ 27,910 $ 28,747
Mortgage bonds ........................... -- -- 118,717 120,782
Medium-term notes ........................ 70,000 70,402 327,000 326,226
Pollution-control facility and other notes 84,439 91,006 154,463 157,771
</TABLE>
Cumulative Preferred Stock
Preferred-stock balances outstanding as of December 31, 1999 and 1998 were as
follows:
(Dollars in thousands,
except per-share amounts)
Current shares
outstanding 1999 1998
Preferred Stock - Not Subject to
Mandatory Redemption:
$25 par value - authorized 2,000,000
shares; outstanding: None $ - $ -
$100 par value noncallable -authorized
5,713 shares; outstanding 6% voting 5,713 571 571
$100 par value callable - authorized
2,300,000* shares; outstanding:
3.50% series (redeemable at $101) 220,000 22,000 22,000
4.60% series (redeemable at $101) 30,000 3,000 3,000
4.75% series (redeemable at $101) 50,000 5,000 5,000
5.25% series (redeemable at $102) 50,000 5,000 5,000
6% stock owned by CMP Group, Inc. 533 (43) (43)
Total $35,528 $35,528
Redeemable Preferred Stock - Subject to
Mandatory Redemption:
Flexible Money Market Preferred Stock,
Series A - 7.999% (99,100 shares in 1999,
279,100 shares in 1998) 9,910 9,910 27,910
Total $ 9,910 $27,910
*Total authorized $100 par value callable is 2,300,000 shares. Shares
outstanding are classified as Not Subject to Mandatory Redemption and Subject to
Mandatory Redemption.
In connection with the Central Maine common stock conversion, a number of
holders of the 6% preferred stock requested payment at fair value for their
shares pursuant to section 910 of the Maine Business Corporation Act. CMP Group
purchased 533 shares from various shareholders of Central Maine 6% preferred
stock.
Sinking-fund provisions for the Flexible Money Market Preferred Stock, Series A,
7.999%, require Central Maine to redeem all shares at par plus an amount equal
to dividends accrued to the redemption date on the basis of 90,000 shares
annually beginning in October 1999. Central Maine also has the non-cumulative
right to redeem up to an equal number of shares annually beginning in 1999, at
par plus an amount equal to dividends accrued to the redemption date. The
Company redeemed $18 million of these shares at par October 1, 1999. The
sinking-fund requirement for 2000 is $9 million with a final sinking fund
requirement of $910 thousand in 2001.
Interim Financing and Credit Agreements
Central Maine uses funds obtained from short-term borrowing to provide initial
financing for construction and other corporate purposes.
To support its short-term capital requirements, in October 1996, Central Maine
entered into a $125 million Credit Agreement with several banks, with
BankBoston, N.A., and The Bank of New York acting as agents for the lenders. The
arrangement originally had two credit facilities: a $75 million, 364-day
revolving credit facility and a $50-million, 3-year revolving credit facility.
Effective December 15, 1998, the banks' commitments under the 364-day facility
were reduced from $75 million to $25 million by agreement of the parties, and
other provisions were amended to reflect the reorganization of Central Maine
into a holding-company structure and recognize other changed circumstances.
Central Maine terminated the two facilities on October 21, 1999.
On December 31, 1999, Central Maine entered into a new $75 million three-year
secured revolving-credit facility with three banks, with The Bank of New York
acting as administrative agent. The facility provides for LIBOR-priced and
base-rate-priced loans, which are secured by a security interest in Central
Maine's accounts receivable. The arrangement also requires the payment of
customary fees, based in large part on Central Maine's credit ratings. The
amount of Central Maine's short-term borrowing will fluctuate with day-to-day
operational needs, the timing of long-term financing, and market conditions. No
loans were outstanding under the new facility at December 31, 1999.
CMP Group and its subsidiaries had a total of $0.2 million outstanding, made up
of short-term financings as of December 31, 1999.
Note 11: Quarterly Financial Data (Unaudited)
CMP Group's unaudited, consolidated quarterly financial data pertaining to the
results of operations are shown below.
(Dollars in thousands, except per-
share amounts) Quarter ended
March 31 June 3 September 30 December 31
1999
Electric operating revenues ........ $270,694 $214,686 $238,898 $229,433
Operating income ................... 66,882 14,327 30,417 20,589
Net income (loss) .................. 33,257 4,041 8,703 8,853
Earnings (loss) per common share ... 1.03 .12 .27 .27
1998
Electric operating revenues ........ $248,745 $208,216 $234,056 $247,722
Operating income ................... 39,934 14,326 26,370 45,251
Net income (loss) .................. 16,398 572 17,440 18,500
Earnings (loss) per common share* .. .51 .02 .54 .57
*Same results as Central Maine for first two quarters. CMP Group was formed
September 1, 1998.
Central Maine's unaudited, consolidated quarterly financial data pertaining to
the results of operations are shown below.
<TABLE>
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(Dollars in thousands, except per-
share amounts) Quarter ended
March 31 June 30 September 30 December 31
1999
Electric operating revenues ..... $ 270,570 $ 214,737 $ 238,887 $ 229,307
Operating income ................ 67,133 14,064 29,691 20,547
Net income (loss) ............... 37,647 3,254 12,928 14,911
Earnings (loss) per common share* 1.18 .07 .38 .46
1998
Electric operating revenues ..... $ 248,745 $ 208,216 $ 234,027 $ 247,573
Operating income ................ 39,934 14,326 25,753 46,636
Net income (loss) ............... 18,295 1,646 13,135 21,747
Earnings (loss) per common share* .51 .02 .38 .67
1997
Electric operating revenues ..... $ 268,367 $ 210,074 $ 226,134 $ 249,601
Operating income ................ 27,513 8,881 7,394 19,491
Net income (loss) ............... 16,027 (2,539) (5,845) 5,779
Earnings (loss) per common share* .43 (.15) (.24) .12
*Earnings per share are computed using the weighted-average number of common
shares outstanding during the applicable quarter.
</TABLE>
Material adjustments of $11 million made during the fourth quarter of 1999
relate primarily to the negotiated settlement with the MPUC, as disclosed in
Footnote 3, "MPUC Proceeding on Stranded Costs, Revenue Requirements, and Rate
Design."
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers of CMP Group, Inc. The following are the present executive
officers of CMP Group with all positions and offices held. There are no family
relationships between any of them, nor are there any arrangements or
understandings pursuant to which any were selected as officers.
Name, Age, and Year First
Became Officer Office
David M. Jagger, 58, 1998 Chairman of the Board of Directors
Charles H. Abbott, 64, 1998 Vice Chairman of the Board of Directors
David T. Flanagan, 52, 1998 President and Chief Executive Officer
Arthur W. Adelberg, 48, 1998 Executive Vice President and Chief Financial
Officer
F. Michael McClain, 50, 1998 Vice President, Corporate Development
Anne M. Pare, 46, 1998 Treasurer, Corporate Counsel and Secretary
Executive Officers of Central Maine Power Company. The following are the present
executive officers of Central Maine with all positions and offices held. There
are no family relationships between any of them, nor are there any arrangements
or understandings pursuant to which any were selected as officers.
Name, Age, and Year First
Became Officer Office
David M. Jagger, 58, 1996 Chairman of the Board of Directors
Charles H. Abbott, 64, 1996 Vice Chairman of the Board of Directors
Sara J. Burns, 44, 1997 President
Michael R. Cutter, 46, 1997 Vice President
Curtis I. Call, 46, 1997 Treasurer
Anne M. Pare, 46, 1996 Secretary
Each of the executive officers of CMP Group and Central Maine has for the past
five years been an officer or employee of CMP Group, Central Maine, or an
affiliate company, except Messrs. Jagger and Abbott, who have been non-employee
directors since 1988, and Mr. McClain. Mr. McClain joined Central Maine on
February 23, 1998. Prior to his employment with Central Maine, he was Group Vice
President and Chief Operating Officer, Petroleum Group, Dead River Company from
1981 to 1996.
Directors. The Board of Directors of CMP Group has twelve members, and the
Central Maine Board has thirteen members. All Central Maine Board members also
serve on the Board of Directors of CMP Group, other than Sara J. Burns, the
President of Central Maine, who serves only on the Central Maine Board. The
Boards of Directors of CMP Group and Central Maine are each divided into three
classes, with one class of CMP Group and Central Maine directors being elected
at the respective annual meetings of shareholders for a three-year term.
Set forth below is information about each director. The class designations
listed are for CMP Group and Central Maine, respectively.
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Principal Occupations and Business
Experience During Past Five Years and First Became a Term
Name and Age Current Directorships of Public Companies Director Expires
Class II/I:
Charles H. Abbott (64) Skelton, Taintor & Abbott, P.A., Auburn, Maine 1988 2000
(Attorneys); Vice Chairman of the Boards of CMP Group
and Central Maine
William J. Ryan (56) Chairman, President and Chief Executive Officer, Peoples 1996 2000
Heritage Financial Group, Inc., Portland, Maine
Kathryn M. Weare (51) Owner and Manager, The Cliff House, Ogunquit, Maine 1992 2000
(Resort and conference center)
Lyndel J. Wishcamper (57) President, Wishcamper Properties, Inc., Portland, Maine 1996 2000
(Real estate)
Class III/II:
Lawrence A. Bennigson (62) Executive Director, Toffler Associates, Boston, 1999 2001
Massachusetts (strategic management advising) (1998);
Senior Fellow, Harvard Business School Executive
Development Center (executive education) (1998);
independent management consultant (1994 through 1997);
Director, SBS Technologies, Inc.
Sara J. Burns (44) President (from September 1, 1998) and Chief Operating 1998 2001
Officer, Distribution Services (from May 1, 1997) of
Central Maine; prior thereto, held various
non-executive positions with Central Maine
Duane D. Fitzgerald (60) Non-executive Chairman of the Board, Bath Iron Works 1996 2001
Corporation, Bath, Maine (Shipbuilding) (from March 1,
1996); Corporate Vice President, General Dynamics
Corporation (September 1995 to March 1, 1996);
President and Chief Executive Officer, Bath Iron Works
Corporation (September 1991 to March 1, 1996)
David M. Jagger (58) President and Treasurer, Jagger Brothers, Inc., 1988 2001
Springvale, Maine (Textiles); Chairman of the Boards
of CMP Group and Central Maine
Lee M. Schepps (59) Retired (1998) President, The Julius Schepps Co., 1999 2001
Dallas, Texas (Wholesale beverage distribution and
real estate management)
Class I/III:
Charleen M. Chase (51) Executive Director, Community Concepts, Inc., South 1985 2002
Paris, Maine (Community action agency)
David T. Flanagan (52) President and Chief Executive Officer of CMP Group, from 1994 2002
September 1, 1998; President and Chief Executive
Officer of Central Maine from January 1, 1994
Robert H. Gardiner (55) President, Maine Public Broadcasting Corporation, 1992 2002
Lewiston, Maine (Public television)
Peter J. Moynihan (56) Retired (1999) Senior Vice President and Chief 1995 2002
Investment Officer, UNUM (now UNUMProvident)
Corporation, Portland, Maine (Insurance)
</TABLE>
Section 16(a) Beneficial Reporting Compliance. After review, CMP Group believes
that during 1999 all filing requirements under Section 16(a) of the Securities
Exchange Act were satisfied by the directors and executive officers.
Item 11. EXECUTIVE COMPENSATION.
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SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Restricted
Stock LTIP All Other
Bonus Award(s) Securities Payouts Compensation
Name and ($) ($) Underlying ($)
Principal Position Year Salary ($) (5) (6) Options (#) (7) ($)
David T. Flanagan 1999 348,994 174,497 232,678 74,764 911,547 8,166 (8)
President and Chief 1998 335,571 70,195 31,648 78,983 0 2,720
Executive Officer, 1997 315,000 218,531 97,125 0 0 2,603
CMP Group
Arthur W. Adelberg 1999 228,338 68,501 91,328 17,470 196,383 7,154 (9)
Executive Vice President 1998 213,993 31,654 14,271 17,988 0 5,121
and Chief Financial Officer, 1997 189,818 79,125 35,167 0 0 5,037
CMP Group (1)
F. Michael McClain 1999 182,000 54,600 72,793 13,925 0 0
Vice President, Corporate 1998 150,527 25,102 11,306 14,711 0 9,765
Development, CMP Group (2)
Anne M. Pare 1999 121,399 45,525 20,240 7,740 93,905 0
Treasurer, Corporate 1998 116,730 17,441 7,863 8,177 0 0
Counsel and Secretary, 1997 109,000 22,500 10,029 0 0 0
CMP Group; Secretary,
Central Maine
David E. Marsh 1999 218,824 102,752 45,678 17,470 196,383 802,483 (10)
Former Chief Financial 1998 213,993 31,654 14,271 17,988 0 12,589
Officer, CMP Group (3) 1997 189,818 79,125 35,167 0 0 4,387
Gerald C. Poulin 1999 175,024 65,748 58,438 13,973 163,528 647,149 (11)
Former Vice President, 1998 175,610 25,976 11,697 14,762 0 3,861
Generation, CMP Group (4) 1997 158,200 61,935 27,527 0 0 3,571
Sara J. Burns 1999 212,714 63,815 84,552 16,275 143,683 6,400 (12)
President, Central Maine 1998 175,000 28,239 12,727 14,711 0 3,063
1997 139,000 56,250 25,000 0 0 2,601
Michael R. Cutter 1999 145,600 43,680 57,884 11,140 126,098 5,728 (13)
Vice President, Central 1998 140,000 16,735 22,649 11,769 0 3,025
Maine 1997 120,820 25,000 33,352 0 0 2,869
Curtis I. Call 1999 123,767 30,942 40,991 7,891 89,551 4,951 (14)
Treasurer, Central Maine 1998 112,515 9,527 12,904 7,882 0 3,376
1997 104,000 22,000 29,341 0 0 3,120
</TABLE>
(1) Mr. Adelberg was elected to the additional position of Chief Financial
Officer effective December 16, 1999.
(2) Mr. McClain's employment began on February 23, 1998.
(3) Mr. Marsh's employment terminated effective December 15, 1999.
(4) Mr. Poulin's employment terminated effective December 16, 1999.
(5) Amounts are performance-based cash awards under the Annual Incentive Plan.
(6) Amounts are performance-based awards in the form of restricted shares of
CMP Group common stock under the Annual Incentive Plan. At December 31,
1999, the number and value of the aggregate restricted stock holdings for
each of the named executive officers were as follows: Mr. Flanagan, 7,744
shares and $213,444; Mr. Adelberg, 2,968 shares and $81,806; Mr. McClain,
656 shares and $18,081; Ms. Pare, 1,065 shares and $29,354; Mr. Marsh,
2,968 shares and $81,806; Mr. Poulin, 2,353 shares and $64,855; Ms. Burns,
2,259 shares and $62,264; Mr. Cutter, 3,341 shares and $92,086; and Mr.
Call, 2,532 shares and $69,788. All shares listed in the Restricted Stock
Awards column will vest on the date of consummation of the pending merger
between CMP Group and Energy East. Dividends on shares of restricted stock
are earned at the same rate as dividends on unrestricted shares of CMP
Group common stock and are reinvested in additional shares of common stock
that are subject to the same restrictions as the shares on which dividends
are earned.
(7) Amounts are performance-based awards in the form of shares of CMP Group
common stock under the Long-Term Incentive Plan.
(8) Includes $6,400 Company matching contribution under the Employee Savings
and Investment Plan for Non-Union Employees ("401(k) Plan") and $1,766
value of term life insurance premium paid under a universal life insurance
policy whose cash value was intended, if certain conditions were satisfied,
to offset retirement benefits payable by CMP Group under the Supplemental
Executive Retirement Plan ("SERP"). Effective as of the end of 1999, CMP
Group cancelled Mr. Flanagan's universal life insurance policy and similar
policies for Messrs. Adelberg, Marsh and Poulin (with respect to each, the
"Cancelled Policy") and the participation of these four executive officers
in the SERP. See "Employment and Termination of Employment Arrangements"
for a description of current retirement and life insurance benefits for
these four executive officers.
(9) Includes $6,400 Company matching contribution under the 401(k) Plan and
$754 value of term life insurance premium under the Cancelled Policy.
(10) Includes $761,797 severance payment after termination of employment due to
Change of Control as defined in Mr. Marsh's employment agreement, $19,028
non-compete installment payment under a provision of his employment
agreement, $13,998 in lieu of accrued vacation time, $1,260 value of term
life insurance premium under the Cancelled Policy, and $6,400 Company
matching contribution under the 401(k) Plan.
(11) Includes $613,778 severance payment after termination of employment due to
Change of Control as defined in Mr. Poulin's employment agreement, $15,220
non-compete installment payment under a provision of his employment
agreement, $10,496 in lieu of accrued vacation time, $1,728 value of term
life insurance premium under the Cancelled Policy, and $5,928 Company
matching contribution under the 401(k) Plan.
(12) Company matching contribution under the 401(k) Plan.
(13) Company matching contribution under the 401(k) Plan.
(14) Company matching contribution under the 401(k) Plan.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Option Term (2)
Grants
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date (1) 5% ($) 10% ($)
David T. Flanagan 74,764 29.40% 18.1875 1/12/06 553,560 1,290,038
Arthur W. Adelberg 17,470 6.87% 18.1875 1/12/06 129,350 301,441
F. Michael McClain 13,925 5.47% 18.1875 1/12/06 103,102 240,273
Anne M. Pare 7,740 3.04% 18.1875 1/12/06 57,308 133,552
David E. Marsh 17,470 6.87% 18.1875 1/12/06 129,350 301,441
Gerald C. Poulin 13,973 5.49% 18.1875 1/12/06 103,457 241,101
Sara J. Burns 16,275 6.40% 18.1875 1/12/06 120,502 280,822
Michael R. Cutter 11,140 4.38% 18.1875 1/12/06 82,482 192,218
Curtis I. Call 7,891 3.10% 18.1875 1/12/06 58,426 136,158
</TABLE>
(1) The options grant provided for vesting in increments of one-third on the
first, second and third anniversaries of the January 12, 1999 grant date.
Under the merger agreement between CMP Group and Energy East, all
outstanding options will be cancelled immediately prior to the
consummation of the merger, and upon consummation of the merger, each
option holder will be entitled to the payment of $11.3125, less applicable
withholding taxes, for each option held. This amount is the difference
between the merger consideration of $29.50 per share of CMP Group common
stock and the $18.1875 exercise price of the options granted on January
12, 1999.
(2) See note 1 to the Option/SAR Grants table above for information on the
option term and maximum value in connection with the pending merger
between CMP Group and Energy East.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities Underlying Value of Unexercised
Shares Value Unexercised Options/SARs at In-the-Money Options/SARs
Acquired on Realized Fiscal Year-End (#) at Fiscal Year-End ($) (1)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
David T. Flanagan 0 0 78,983/74,764 804,639/700,913
Arthur W. Adelberg 0 0 17,988/17,470 183,253/163,781
F. Michael McClain 14,711 148,200 0/13,925 0/130,547
Anne M. Pare 0 0 8,177/7,740 83,303/72,563
David E. Marsh 17,988 181,213 0/17,470 0/163,781
Gerald C. Poulin 14,762 148,714 0/13,973 0/130,997
Sara J. Burns 0 0 14,711/16,275 149,868/152,578
Michael R. Cutter 2,000 20,148 9,769/11,140 99,522/104,438
Curtis I. Call 7,882 79,404 0/7,891 0/73,978
(1) Options are "in the money" if the market value of the underlying stock
exceeds the exercise or base price of the option.
</TABLE>
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LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
under Non-Stock Price-Based Plans
(a) (b) (c) (d) (e) (f)
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation or Threshold Target Maximum
Name Rights (#) (1) Payout (2) (#) (#) (#)
David T. Flanagan 19,742 1999-2001 9,871 19,742 29,613
Arthur W. Adelberg 4,613 1999-2001 2,307 4,613 6,920
F. Michael McClain 3,677 1999-2001 1,839 3,677 5,516
Anne M. Pare 2,044 1999-2001 1,022 2,044 3,066
David E. Marsh 4,613 1999-2001 2,307 4,613 6,920
Gerald C. Poulin 3,690 1999-2001 1,845 3,690 5,535
Sara J. Burns 4,297 1999-2001 2,149 4,297 6,446
Michael R. Cutter 2,942 1999-2001 1,471 2,942 4,413
Curtis I. Call 2,084 1999-2001 1,042 2,084 3,126
</TABLE>
(1) Performance shares are granted at the beginning of a three-year
performance period and are paid out in the form of CMP Group common stock
if performance goals established for that three-year period are attained.
For the performance period from January 1, 1999 through December 31, 2001,
performance is measured by reference to total shareholder return and by
the ranking of Central Maine compared to other electric utilities
represented in the EEI Index. All outstanding performance shares will vest
on the date of consummation of the pending merger between CMP Group and
Energy East.
(2) See note 1 to the Long-Term Incentive Plan Awards table above for
information on the vesting of the performance shares in connection with
the pending merger between CMP Group and Energy East.
PENSION PLAN TABLE AND EMPLOYMENT ARRANGEMENTS
Basic Pension Plan. CMP Group and Central Maine make payments to the Retirement
Income Plan for Non-Union Employees (the "Basic Pension Plan") for full-time
non-union employees, including the executive officers. Estimated annual
retirement benefits payable under the Basic Pension Plan, assuming retirement on
December 31, 1999 at age 65, for average salary levels and credited years of
service specified in the following Basic Pension Plan Table are as set forth in
the Table.
Average Annual
Salary for
5 Highest
Consecutive
Years
Preceding Years of Service
Retirement 15 20 25 30 35
$125,000 $ 28,344 $ 37,793 $ 47,241 $ 56,689 $ 58,637
150,000 34,719 46,293 57,866 69,439 72,012
175,000 37,269 49,693 62,116 74,539 77,362
200,000 37,269 49,693 62,116 74,539 77,362
225,000 37,269 49,693 62,116 74,539 77,362
250,000 37,269 49,693 62,116 74,539 77,362
275,000 37,269 49,693 62,116 74,539 77,362
300,000 37,269 49,693 62,116 74,539 77,362
325,000 37,269 49,693 62,116 74,539 77,362
350,000 37,269 49,693 62,116 74,539 77,362
375,000 37,269 49,693 62,116 74,539 77,362
400,000 37,269 49,693 62,116 74,539 77,362
425,000 37,269 49,693 62,116 74,539 77,362
450,000 37,269 49,693 62,116 74,539 77,362
475,000 37,269 49,693 62,116 74,539 77,362
500,000 37,269 49,693 62,116 74,539 77,362
525,000 37,269 49,693 62,116 74,539 77,362
550,000 37,269 49,693 62,116 74,539 77,362
575,000 37,269 49,693 62,116 74,539 77,362
600,000 37,269 49,693 62,116 74,539 77,362
For Ms. Pare and Messrs. Cutter and Call, compensation covered by the Basic
Pension Plan consists of base salary, including base salary shown in the Salary
column of the Summary Compensation Table. Because the amount of compensation
that could be taken into account in determining retirement benefits under the
Basic Pension Plan was limited by federal tax law to $160,000 in 1999, the 1999
covered compensation under the Basic Pension Plan for Messrs. Flanagan,
Adelberg, McClain, Marsh and Poulin and Ms. Burns was limited to that amount of
their respective base salaries. Years of service for purposes of the Basic
Pension Plan are as follows: Mr. Flanagan, 15 years; Mr. Adelberg, 14 years; Mr.
Marsh, 26 years; Mr. Poulin, 29 years; Ms. Burns, 12 years; Mr. Cutter, 23
years; Mr. Call, 13 years; and Ms. Pare, 12 years. Benefits listed in the Basic
Pension Plan Table are payable as a single life annuity and reflect an offset
for estimated Social Security benefits payable upon attainment of age 65.
Employment and Termination of Employment Arrangements
Existing Employment Agreements. All of the named executive officers have
employment agreements that provide for a specified minimum base salary and for
participation in compensation and benefit plans in accordance with the terms of
those plans. Each agreement provides for severance benefits if the executive
officer's employment is terminated without cause after a change of control. In
addition, the agreements for Messrs. Flanagan, Adelberg, Marsh and Poulin
provide for retirement benefits that are incremental to those provided in the
Basic Pension Plan. These incremental retirement benefits replace benefits that
would have been payable under the Supplemental Executive Retirement Plan
("SERP"), which was terminated by CMP Group with respect to these four executive
officers at the end of 1999. To replace the term life insurance available in
connection with the SERP, CMP Group has also purchased term life insurance
policies in an equivalent amount for these four executive officers on which it
will pay premiums for a specified period.
The employment agreements for Messrs. Flanagan, Adelberg, McClain, Marsh and
Poulin provide severance benefits if, within 36 months after a change of
control, CMP Group terminates their employment other than for cause or
disability or they terminate their employment for any of the reasons specified
in their agreements. Under the agreements, shareholder approval of the merger
between CMP Group and Energy East constituted a change of control. The
employment agreements for these five executive officers provide the following
severance benefits for a termination after a change of control: (1) 1.99 times
their respective base salaries and 2.99 times the three-year average of annual
incentive compensation, (2) continuation of medical and other benefits available
under group benefit plans, and (3) limited outplacement services. When change of
control severance payments are triggered under these agreements, these executive
officers also receive an amount equal to their respective annual base salaries,
paid in 12 equal monthly installments, as reasonable compensation for their
agreement not to compete, subject to forfeiture if they compete during that
12-month period. Pursuant to their employment agreements, both Messrs. Marsh and
Poulin received the severance benefits set forth in the Summary Compensation
Table in connection with CMP Group's termination of their employment after the
occurrence of a change of control due to shareholder approval of the merger
between CMP Group and Energy East.
Under his employment agreement, Mr. Flanagan is entitled to an incremental
retirement benefit, beginning at age 55, that, when added to the benefit payable
to him under the Basic Pension Plan, provides an aggregate annual retirement
benefit of 65 percent of his base salary earned during the 12 months preceding
the termination of his employment for reasons other than death or cause plus the
three-year average of annual incentive compensation, not to exceed $200,000 per
year. Mr. Flanagan's retirement benefit will be fully funded through a rabbi
trust upon the closing of the pending merger between CMP Group and Energy East.
Mr. Flanagan will also be entitled to retiree medical benefits equal to those
available under Central Maine's retiree medical benefits plan.
The retirement benefit for Mr. Adelberg vests if he continues his employment
until June 30, 2000. In that case, the benefit paid to Mr. Adelberg, beginning
at the later of age 55 or termination of employment, will be the greater of (i)
2.6 percent of his average base salary over a three-year period times his years
of service, offset by benefits payable under the Basic Pension Plan, or (ii) the
benefits he would have received under the SERP. Mr. Marsh's employment agreement
provides that he will receive, beginning at age 55, a benefit equal to the
greater of (i) 50 percent of the average of his final three years of base
salary, offset by benefits payable under the Basic Pension Plan, or (ii)
intended SERP benefits. Based on the provisions of his employment agreement and
his termination of employment effective as of December 15, 1999, Mr. Marsh's
total annual retirement benefit will be $132,491, which is an amount equal to
intended SERP benefits. Of this amount, $27,010 will be paid from the Basic
Pension Plan and the remainder under his employment agreement. Mr. Marsh is also
entitled to retiree medical benefits equal to those available under Central
Maine's retiree medical benefits plan. Mr. Poulin is entitled to an incremental
retirement benefit under his employment agreement equal to intended SERP
benefits. Mr. Poulin elected to begin receiving his retirement benefits on
January 1, 2000 in the form of a joint and survivor annuity payable annually in
the amount of $145,461, of which $69,633 will be paid from the Basic Pension
Plan. He is also entitled to retiree medical benefits.
If within 12 months following the consummation of a change of control, Central
Maine terminates the employment of Ms. Burns, Mr. Cutter or Mr. Call, or CMP
Group terminates Ms. Pare's employment, other than for cause or disability, or
they terminate their employment for any of the reasons specified in their
employment agreements, Ms. Burns will be entitled to 1.99 times her base salary,
and the remaining named executive officers will be entitled to one times their
respective base salaries, plus the continuation of medical and other benefits
under group benefit plans and limited outplacement services. The closing of the
merger between CMP Group and Energy East would constitute the consummation of a
change of control under these agreements. If these executive officers become
entitled to change of control severance payments, they will also receive an
amount equal to one times their respective base salaries as non-compete payments
on the terms described above.
If severance benefits paid in connection with a change of control constituted
"excess parachute payments" under federal tax law, they would be reduced to
avoid the imposition of an excise tax on the executive officer receiving the
benefits, but only if the amount of the reduction was less than the excise tax
that the executive would otherwise be required to pay. No such reductions are
anticipated for severance benefits paid to Mr. Poulin, but some reduction may be
required with regard to Mr. Marsh.
The agreements for Ms. Burns, Mr. Cutter, Mr. Call and Ms. Pare provide for
retention payments equal to one-half of their then-current base salaries if they
continue their employment until the earlier of May 31, 2000 or a specified
change of control event.
The employment agreements for all of the named executive officers are
automatically extended for successive one-year periods from their initial
expiration dates unless the employer or the executive officer gives notice of
non-renewal. The agreements for Messrs. Flanagan, Adelberg, Marsh, Poulin and
McClain provide for one final three-year extension after a change of control. As
a result of the occurrence of a change of control on October 7, 1999, due to
shareholder approval of the merger between CMP Group and Energy East, the
agreements for these five executive officers will expire no later than October
31, 2002. The agreements for the other named executive will remain in effect for
one year after the consummation of the change of control.
Energy East and CMP Group have entered into new employment agreements with
Messrs. Flanagan, Adelberg and McClain, and Energy East and Central Maine have
entered into a new agreement with Ms. Burns, that will become effective upon the
closing of the merger. At that time, these new employment agreements will
replace and terminate the existing employment agreements for these four
executive officers. The rights and obligations of these four executive officers
will be governed by these new agreements after the completion of the merger.
New Employment Agreements. The term of Mr. Flanagan's new employment agreement
is three years, beginning on the effective date of the merger, and will be
automatically extended each month unless either Energy East or Mr. Flanagan
gives notice that the agreement will not be extended. Under the terms of his
employment agreement, Mr. Flanagan will become the president of Energy East and
the chairman, president and chief executive officer of CMP Group. Mr. Flanagan's
base salary will be $550,000 and may be increased by the Energy East board of
directors. Mr. Flanagan will also participate in all incentive compensation,
fringe benefit and employee benefit plans on the same basis as other executives
and key management employees. He will be entitled to receive a life insurance
benefit that is not less than two and one-half times his annual compensation and
will also be entitled to certain other death and disability benefits. Energy
East will also pay the premiums, up to $7,800 annually, on a term life insurance
policy with a face amount of $700,000. The agreement provides for a "gross-up"
payment to Mr. Flanagan if any payment, benefit or distribution constitutes an
"excess parachute payment" under federal tax law on which Mr. Flanagan is
required to pay excise tax.
Under Mr. Flanagan's new employment agreement, Energy East, CMP Group or Mr.
Flanagan may terminate his employment at any time. If Energy East or CMP Group
terminates Mr. Flanagan's employment other than for cause or disability, or if
Mr. Flanagan terminates his employment for good reason, he will receive, for the
remainder of the term of his employment agreement, his base salary, incentive
compensation calculated as specified in the agreement, and employee welfare
benefits. He will also receive outplacement services costing up to $10,000 and a
payment equal to the value of fringe benefits he would have received through the
term of his employment agreement.
If Mr. Flanagan voluntarily terminates his employment on or after June 1, 2001,
or if Energy East terminates his employment without cause, he is entitled to a
fully vested guaranteed minimum annual retirement benefit, taking into account
any other retirement benefits provided by Energy East or CMP Group, of 45
percent of his base salary. This amount is payable as a joint and survivor
annuity and is reduced by any proceeds of the $700,000 term life insurance
policy.
The term of the new employment agreements for Messrs. Adelberg and McClain and
Ms. Burns is also three years, and each agreement will be automatically extended
each month unless the employer or the executive gives notice that the agreement
will not be extended. Mr. Adelberg's employment agreement provides that he will
become the chief financial officer and a senior vice president of Energy East
and will serve on the board of directors of CMP Group. His base salary will be
$425,000. Mr. McClain will serve as the president of one or more non-utility
subsidiaries of Energy East and/or CMP Group at a base salary of $200,000. Ms.
Burns will continue to serve as Central Maine's president, and her base salary
will be $300,000. The base salaries of these three executives may be increased
by the Energy East board. They will participate in all incentive compensation,
fringe benefit and employee benefit plans on the same basis as other executives
and key management employees.
Under the employment agreements for Messrs. Adelberg and McClain and Ms. Burns,
the employer or the executive may terminate the executive's employment at any
time. If the employer terminates the employment of the executive other than for
cause or disability or the executive terminates his or her employment for good
reason, he or she will receive the same benefits, in amounts reflecting his or
her compensation, as would be provided to Mr. Flanagan in those circumstances.
Messrs. Adelberg and McClain and Ms. Burns are also entitled to "gross-up"
payments on the terms described for Mr. Flanagan.
Mr. Adelberg is entitled to additional benefits under his employment agreement.
If Energy East requires him to spend more than half of his working time in
Portland, Maine, he will be entitled to relocation benefits. Mr. Adelberg is
also entitled to a life insurance benefit that is not less than two times his
annual compensation and to certain other death and disability benefits. In
addition, if he is employed by Energy East or CMP Group on June 30, 2000, he
will have a fully vested right to a guaranteed minimum annual retirement benefit
of 2.6 percent of his average base salary for the three prior years times his
years of service with Energy East and CMP Group, which will be paid in the form
of a joint and survivor annuity.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview. The objectives of the Compensation and Benefits Committee in
administering executive compensation programs for CMP Group and Central Maine
executives are to assure that total compensation opportunities are competitive
with those available in the utility industry and general industry and contain
significant pay-for-performance elements to align more closely the interests of
the executive officers and shareholders by supporting and increasing shareholder
value.
The Committee believes that the three existing components of total direct
compensation for executive officers, namely, base salary, annual incentives and
long-term incentives, are appropriate means of achieving these objectives. These
items of compensation are designed to be leveraged for performance and
shareholder value enhancement and to be more competitive in a changing business
environment. This performance-oriented compensation approach is designed to
support the attainment of CMP Group's strategic goals and to balance the focus
on short and long-term performance goals.
On an overall basis, the elements of direct compensation are aligned with a
competitive market that includes electric utilities in the Edison Electric
Institute ("EEI") Index of Investor-Owned Electrics used in the performance
graph below and companies from general industry selected from a published survey
compiled by the Committee's independent compensation consultant based on
business diversity and complexity, competitive similarities, revenue size and
geography. This blended market takes into account that Central Maine's electric
utility business is the principal business of its holding company parent CMP
Group and also reflects the formation of the holding company to facilitate the
pursuit of appropriate non-utility business ventures. The Committee believes
that this expanded market better enables CMP Group and Central Maine to attract
and retain executive talent that is essential in aggressively managing changing
business requirements in a competitive climate.
Total compensation opportunities provided by base salary and annual and
long-term incentives are designed to reflect median compensation levels for
positions with comparable responsibilities in the targeted blended market. The
mix of these compensation elements is performance leveraged to support and
enhance shareholder value by tying earnings opportunities to performance
results.
Base Salary. Base salaries of the executive officers are measured against median
base salary levels for positions with comparable functional responsibilities in
the identified market, adjusted to take into account individual abilities and
skills in light of the business challenges requiring those attributes. In
setting 1999 base salaries for the executive officers, the Committee relied on
the EEI executive compensation survey of comparable positions and information
from its independent compensation consultant. Based on this process and after
taking into account individual factors, the Committee adjusted the base salaries
of the executive officers other than Mr. Flanagan and Ms. Burns an average 5.7
percent to bring their salaries within 90 to 95 percent of the market for their
positions. The Committee adjusted Mr. Flanagan's base salary by approximately
6.5 percent, which maintained the average 80 percent variance between the salary
for his position and the higher salary level for the blended utility and general
industry market. Ms. Burns received a 22 percent salary increase to reflect her
assumption of additional duties when she became President of Central Maine in
September 1998 as part of the holding company restructuring of Central Maine.
Annual Incentives. In 1999, the annual incentive compensation program for
executive officers, including Mr. Flanagan, reflected several important
strategic corporate objectives focused on (i) the transition to competition
resulting from federal and state regulatory and legislative initiatives that
have opened the generation and transmission markets to competition and (ii) the
enhancement of shareholder value through a business alliance or combination and
through investments in non-utility businesses. These objectives and their
weighting were as follows: completing Central Maine's generation asset sale,
40%; developing and obtaining Board approval of a strategy designed to maximize
the value of CMP Group's electric transmission and distribution business, 40%;
developing and obtaining Board approval of a performance-based rate plan to
replace the Alternative Rate Plan, which expired at the end of 1999, 10%; and
achieving specified earnings levels relating to investments in certain
subsidiaries, 10%. The Committee determined that all of these objectives were
fully achieved.
In addition to these four corporate goals, a combination of return on equity and
share prices was used to determine the percentage of the target award pool
available for awards. Based on return on equity and share price performance
levels previously established by the Committee, the Committee determined that
the maximum of two times the target pool would be available for awards.
The result of these combined performance levels and performance under individual
goals was that the maximum of 200 percent of targeted short-term incentive
compensation was earned under the plan by each of the named executive officers
in 1999. Targeted annual incentive compensation for Mr. Flanagan is 50 percent
of his base salary. Based on 1999 performance results, he received an award
equal to one times his base salary. Targeted annual incentive compensation for
the other executive officers ranges from 25 to 30 percent of their base
salaries. For 1999, these executive officers received awards ranging from 50 to
60 percent of their base salaries.
Awards under the Annual Incentive Plan are paid in cash for 75 percent of the
total award, and 25 percent in the form of CMP Group common stock purchased at a
25 percent discount for the remaining portion. Plan participants may also elect
to take up an additional 25 percent of the total award in stock, which is also
purchased at a 25 percent discount.
Long-Term Incentive Compensation. The Long-Term Incentive Plan ("LTIP"), in
which the executive officers participate, is intended to focus attention more
sharply on shareholder value enhancement. Target long-term compensation
opportunities range from 168 percent of base salary for Mr. Flanagan and from 50
to 60 percent of base salary for the other executive officers.
The first three-year performance period under the LTIP was completed at the end
of 1999. The performance measure previously established by the Committee for
that period was that Central Maine must rank at the median of the other
utilities in the EEI Index, which ranks utilities based on their cumulative
total shareholder return. The Committee also established threshold and maximum
performance levels for that three-year performance cycle. Central Maine's
cumulative total shareholder return of 163 percent for that period placed it
second in rank in the EEI Index. For this reason, the Committee awarded shares
of CMP Group common stock at the maximum level of 150 percent of the number of
performance shares granted at target performance levels at the beginning of the
three-year period.
In 1999, both performance shares for a three-year performance period running
until the end of the year 2001 and stock options were granted to the executive
officers as shown on the Long-Term Incentive Plan Awards table and the
Option/SAR Grants table above. Performance shares represented 63 percent of
targeted long-term incentive compensation, and stock options represented the
remaining 37 percent. These proportions reflect the limit on the number of
available shares for awards under the LTIP approved by the shareholders.
Under the LTIP, performance shares are paid out in the form of CMP Group common
stock if performance goals are attained. For the performance period from 1999 to
the end of 2001, performance will be measured by reference to total shareholder
return and by the ranking of Central Maine compared to other electric utilities
represented in the EEI Index for threshold, target and maximum levels of
performance.
Each option granted in 1999 represents the right to purchase one share of common
stock at the price of $18.1875 per share, the market value of the common stock
on the date of the grant. Under the LTIP, the options vest in one-third
increments on the first, second and third anniversaries of the grant. In 1999,
options were granted based on the Binomial Option Valuation Model, using a
binomial value of 15.7 percent of the market value of the stock, which the
Committee believes properly captures the value of an executive's right of early
exercise before the end of the option term.
Under the merger agreement between CMP Group and Energy East, all outstanding
options will be cancelled immediately prior to the consummation of the merger,
and upon consummation of the merger, each option holder will be entitled to the
payment of the difference between the merger consideration of $29.50 per share
of CMP Group common stock and the exercise price of the options. All outstanding
performance shares will also vest at the time of the consummation of the merger.
Other Policies. A provision of federal tax law denies a tax deduction to any
publicly-held company for compensation paid to any named executive officer that
exceeds one million dollars in a taxable year, except for certain
performance-based compensation. The Committee has not adopted a specific policy
with respect to these compensation limits, but notes that awards under the
Annual Incentive Plan and the LTIP are performance-based.
Compensation and Benefits Committee
Charles H. Abbott, Chair
Duane D. Fitzgerald
Peter J. Moynihan
Lyndel J. Wishcamper
SHAREHOLDER RETURN COMPARISON
The graph below compares the cumulative total shareholder return on the common
stock of CMP Group with the cumulative total return on the S&P 500 Index and the
Edison Electric Institute Index of Investor-owned Electrics ("EEI Index") at
December 31 for each of the last five fiscal years (assuming the investment of
$100 in CMP Group's common stock, the S&P 500 Index and the EEI Index on
December 31, 1994, and the reinvestment of all dividends).
December 31
1994 1995 1996 1997 1998 1999
CMP Group ................ $100 $114 $ 99 $139 $180 $273
S&P 500 Index ............ $100 $137 $169 $226 $290 $351
EEI Index ................ $100 $131 $133 $169 $192 $157
DIRECTOR COMPENSATION
In accordance with the established guidelines for the Board of Directors of CMP
Group, the Chairman of the Board receives an annual retainer of $25,200, the
Vice Chairman of the Board receives an annual retainer of $10,300, and each
director (other than the Chairman or Vice Chairman) who is the Chair of a
committee of the Board and not an executive officer of CMP Group receives an
annual retainer of $8,400. Each other outside director receives an annual
retainer of $6,800. All retainers are payable quarterly. In addition to ordinary
travel expenses, all outside directors receive $600 for each meeting of the
Board attended, and all outside directors serving on a committee of the Board
receive $300 for each committee meeting attended on a day on which they have
also attended a meeting of the full Board or another committee and $600 for any
other committee meeting attended. A fee of $150 is paid to outside directors for
participating in a meeting of the Board or one of its committees by telephone
if, in the opinion of the person presiding at the meeting, substantial action is
taken or matters of importance are resolved.
Since each outside director serves on both the CMP Group and Central Maine
Boards and the same committees of each Board, the annual retainer applies to
service on both Boards and separate meeting fees for Central Maine are paid only
if a meeting of that Board or one of its committees is held on a day when no CMP
Group meeting is held. The usual practice is to hold meetings of the CMP Group
and Central Maine Boards, or their committees, on the same day so that meeting
fees are limited.
Outside directors may participate in a voluntary deferred compensation plan
under which a director may elect to have all or part of his or her retainer (but
not meeting fees) credited to a deferred compensation account, maintained at the
election of the director either as a cash account or an account in units based
on the value of CMP Group common stock ("Compensation Units"). The number of
Compensation Units credited to a director's account is equal to the number of
shares of CMP Group common stock that could have been purchased as of the middle
of a calendar quarter with the amount of the retainer deferred for that quarter.
CMP Group matches Compensation Units in a director's account with one-half the
number of Compensation Units in the account. Whenever dividends are paid on CMP
Group's common stock, each account maintained in Compensation Units is credited
with additional Compensation Units equal to the number of shares that could have
been purchased if a cash dividend had been paid on the Compensation Units in the
account.
Effective January 1, 1998, the Board terminated the retirement plan for outside
directors that had been in effect since September 1991. With the assistance of
an independent compensation consultant, the Board adopted amendments to its
deferred compensation plan that aligns the interests of the directors more
closely with the interests of shareholders by tying the Board's compensation to
the value of CMP Group common stock. Accrued benefits under the former
retirement plan were converted for all directors serving on the Board as of
January 1, 1998, to Compensation Units under the deferred compensation plan. In
addition, at the beginning of each year, each outside director receives a fixed
grant of 500 Compensation Units. Dividend equivalents are added to Compensation
Units on dividend payment dates for CMP Group common stock. There is no company
match for Compensation Units other than those representing deferred retainers.
The deferred compensation plan currently provides that all deferred compensation
is paid solely in cash following retirement from the Board. The value of the
Compensation Units in a director's account at the time a payment is made will be
equal to the market value of the same number of shares of CMP Group common stock
on the payment date. The number of Compensation Units in the accounts of
directors under the deferred compensation plan as of March 1, 2000, is shown in
the table that appears in Item 12 below.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<S> <C> <C> <C> <C>
Number of Shares
Shares Beneficially Owned
Compensation Units Beneficially Owned Subject to Options Total Shares
Directors and Named (as of (as of Exercisable as of Beneficially
Executive Officers March 1, 2000) March 1, 2000) March 1, 2000 Owned
Charles H. Abbott 19,705 7,281 - 7,281
Lawrence A. Bennigson 906 300 - 300
Sara J. Burns - 11,669 20,136 31,805
Charleen M. Chase 11,127 1,432 - 1,432
Duane D. Fitzgerald 5,723 500 - 500
David T. Flanagan - 46,138 103,904 150,042
Robert H. Gardiner 11,749 1,000 - 1,000
David M. Jagger 24,534 1,000 - 1,000
Peter J. Moynihan 7,088 1,390 - 1,390
William J. Ryan 2,378 1,000 - 1,000
Lee M. Schepps 906 1,500 - 1,500
Kathryn M. Weare 10,916 1,292 - 1,292
Lyndel J. Wishcamper 5,782 - - -
Arthur W. Adelberg - 14,979 23,811 38,790
F. Michael McClain - 19,038 4,642 23,680
Anne M. Pare - 1,801 10,757 12,558
David E. Marsh - 32,690 5,823 38,513
Gerald C. Poulin - 29,623 4,658 34,281
Michael R. Cutter - 8,544 13,482 22,026
Curtis I. Call - 12,863 2,630 15,493
All directors and executive
officers as a group 100,814 194,040 189,843 383,883
</TABLE>
The number of shares of CMP Group common stock beneficially owned as of March 1,
2000 by each of the directors and named executive officers, and the aggregate
number beneficially owned as of that date by all of the directors and executive
officers of CMP Group and Central Maine as a group, constituted less than 1.5
percent of the total shares of that class then outstanding. As of March 1, 2000,
Mr. Abbott's spouse held sole voting and investment power over 800 shares of the
total number of shares listed for Mr. Abbott, and all shares listed for Ms.
Chase were held jointly. Of the shares listed for Mr. Poulin, 201 shares were
held jointly as of that date. The total number of shares held jointly for all
directors and executive officers as a group as of March 1, 2000, was 1,633
shares.
The following table sets forth the name and address of each shareholder believed
to be the beneficial owner of 5 percent or more of the outstanding shares of CMP
Group common stock, the number of shares beneficially owned, and the percentage
of shares owned as of March 1, 2000.
Shares of Common Stock Percentage
Name and Address Beneficially Owned of Class
President and Fellows of Harvard College 3,200,000 (1) 9.86% (1)
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
The following table sets forth the name and address of each shareholder known to
be the beneficial owner of 5 percent or more of the outstanding shares of
Central Maine 6% Preferred Stock, the number of shares beneficially owned, and
the percentage of shares owned as of March 1, 2000.
Shares of 6% Preferred Stock Percentage
Name and Address Beneficially Owned of Class
Christine M. Nyhan, Trustee 1,675 29.31% (2)
1825 Spindrift Drive
La Jolla, CA 92037
CMP Group, Inc. 533 9.3% (3)
83 Edison Drive
Augusta, ME 04336
(1) Based solely on a Schedule 13G dated February 7, 2000. The Schedule 13G
indicated that the President and Fellows of Harvard College had sole power
to vote and dispose of all of these shares.
(2) Shares held by Christine M. Nyhan, trustee, represent 29.31 percent of the
voting power of the Central Maine 6% Preferred Stock and approximately .05
percent of the combined voting power of the Central Maine common stock (all
of which is held by CMP Group) and 6% Preferred Stock.
(3) Shares held by CMP Group represent 9.3 percent of the voting power of the
6% Preferred Stock. As a result of its ownership of all 31,211,471 issued
and outstanding shares of Central Maine common stock, representing
3,121,147 votes, and its 533 shares of Central Maine 6% Preferred Stock,
representing 533 votes, CMP Group holds 99.8 percent of the combined voting
power of the Central Maine common stock and 6% Preferred Stock.
On June 14, 1999, CMP Group, Energy East and EE Merger Corp. entered into an
Agreement and Plan of Merger, dated as of June 14, 1999, providing for a merger
transaction among CMP Group, Energy East and EE Merger Corp. Pursuant to the
merger agreement, EE Merger Corp. will merge with and into CMP Group, with CMP
Group being the surviving corporation and becoming a wholly-owned subsidiary of
Energy East. After the merger is completed, the common stock of Central Maine
will continue to be directly owned by CMP Group.
Under the terms of the merger agreement, each outstanding share of CMP Group
common stock, other than any treasury shares or shares owned by Energy East or
any subsidiary of CMP Group or Energy East, will be converted into the right to
receive $29.50 in cash. Pursuant to the merger agreement, approximately $957
million in cash will be paid to holders of shares of CMP Group common stock,
with additional payments being made to holders of stock options and performance
shares awarded under CMP Group's performance incentive plans.
The merger is subject to certain customary closing conditions, including without
limitation the receipt of all necessary governmental approvals and the making of
all necessary governmental filings. CMP Group's shareholders approved the merger
at a special meeting on October 7, 1999. The MPUC, the U.S. Department of
Justice, the Federal Trade Commission, the Federal Communications Commission,
the NRC and the Connecticut DPUC have approved the merger. Other approvals are
pending from the FERC and the SEC. If the remaining approvals are granted, we
estimate that the merger could be completed around mid-2000.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
Indebtedness of Management. On December 29, 1999, CMP Group entered into
separate loan agreements with a current and two former executive officers of CMP
Group and two executive officers of Central Maine. These loans were made
pursuant to a loan program authorized by the Board of Directors of CMP Group for
the purpose of providing funds for the exercise of stock options granted to
these executive officers under a performance incentive plan of CMP Group and for
the payment of related withholding taxes. The amounts borrowed by these
executive officers, excluding interest, which accrues at an annual rate of 5.74
percent, are as follows: David E. Marsh, $374,969.44; F. Michael McClain,
$327,406.67; Gerald C. Poulin, $307,721.74; Curtis I. Call, $164,304.49; and
Michael R. Cutter, $41,691.06. These loans, which are evidenced by promissory
notes, are secured with the shares of common stock of CMP Group acquired through
the exercise of the stock options. CMP Group holds the stock certificates for
these shares as well as a stock power executed by these executive officers.
Under the loan agreements, the outstanding principal amounts of these loans and
all accrued interest are due upon the earliest to occur of the sale of the stock
collateral, the completion of the pending merger between CMP Group and Energy
East, any termination of the merger agreement between CMP Group and Energy East,
and the first anniversary of the loan.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
- -------
AND REPORTS ON FORM 8-K.
(a) List of documents filed as part of this report:
(1) Financial Statements and Supplementary Data
See the Index to Financial Statements and Schedules under Item 8
in Part II hereof, where these documents are listed, on page 56.
(2) Exhibits - see (c) below.
(b) Reports on Form 8-K. The Company filed the following reports on Form
8-K during the last quarter of 1999 and thereafter to date:
Date of Report Items Reported
January 27, 2000 Item 5
CMP Group and Central Maine reported that on January 27, 2000, CMP Group had
issued a release reporting on (a) its 1999 operating results and a related
January 27, 2000, settlement of an MPUC regulatory proceeding involving several
Central Maine ratemaking issues, and (b) progress in obtaining regulatory
approvals for its planned merger with Energy East, and quoted relevant parts of
the release..
Date of Report Items Reported
February 17, 2000 Item 5
CMP Group reported that on February 17, 2000, it had issued a release announcing
a change in its annual meeting date from May 18, 2000, to October 31, 2000, and
quoted the release.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.
CMP GROUP, INC.
Date: March 17, 2000 By /s/ Arthur W. Adelberg
---------------- -----------------------
Arthur W. Adelberg
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
CENTRAL MAINE POWER COMPANY
Date: March 17, 2000 By /s/ Curtis I. Call
---------------- -------------------
Curtis I. Call
Treasurer
(Duly Authorized Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrants and
in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
CMP Group, Inc.:
/s/ David T. Flanagan President and Chief Executive Officer; Director March 17, 2000
- ------------------------------
David T. Flanagan
(Principal Executive Officer)
/s/ Arthur W. Adelberg Executive Vice President and Chief Financial Officer March 17, 2000
- ----------------------------
Arthur W. Adelberg
(Principal Financial Officer)
/s/ Michael W. Caron March 17, 2000
- -----------------------------
Michael W. Caron
(Principal Accounting Officer)
Central Maine Power Company:
/s/ Sara J. Burns President; Director March 17, 2000
- -----------------------------------
Sara J. Burns
(Principal Executive Officer)
/s/ Curtis I. Call Treasurer March 17, 2000
- -------------------------------------
Curtis I. Call
(Principal Financial Officer)
/s/ Michael W. Caron Comptroller March 17, 2000
- ------------------------------
Michael W. Caron
(Principal Accounting Officer)
CMP Group, Inc. and Central Maine Power Company:
/s/ David M. Jagger Chairman of the Board of Directors March 17, 2000
- --------------------------------
David M. Jagger
/s/ Charles H. Abbott Vice Chairman of the Board of Directors March 17, 2000
- -------------------------------
Charles H. Abbott
/s/ Lawrence A. Bennigson Director March 17, 2000
- --------------------------
Lawrence A. Bennigson
/s/ Charleen M. Chase Director March 17, 2000
- ------------------------------
Charleen M. Chase
/s/ Duane D. Fitzgerald Director March 17, 2000
- -------------------------------
Duane D. Fitzgerald
/s/ David T. Flanagan Director March 17, 2000
- -------------------------------
David T. Flanagan
/s/ Robert H. Gardiner Director March 17, 2000
- -------------------------------
Robert H. Gardiner
/s/ Peter J. Moynihan Director March 17, 2000
- ------------------------------
Peter J. Moynihan
/s/ William J. Ryan Director March 17, 2000
- -------------------------------
William J. Ryan
/s/ Lee M. Schepps Director March 17, 2000
- ------------------------------
Lee M. Schepps
/s/ Kathryn M. Weare Director March 17, 2000
- ----------------------------
Kathryn M. Weare
/s/ Lyndel J. Wishcamper Director March 17, 2000
- -------------------------
Lyndel J. Wishcamper
</TABLE>
EXHIBIT INDEX
The following designated exhibits, as indicated below, are either filed herewith
or have heretofore been filed with the Securities and Exchange Commission under
the Securities Act of 1933, the Securities Exchange Act of 1934 or the Public
Utility Holding Company Act of 1935 and are incorporated herein by reference to
such filings. Reference is made to Item 8 of this Form 10-K for a listing of
certain financial information and statements incorporated by reference herein.
NOTE: In this exhibit index the "Company" or "Central Maine" refers to Central
Maine Power Company. "CMP Group" refers to CMP Group, Inc. All exhibits are
Central Maine exhibits unless otherwise designated.
<TABLE>
<S> <C> <C> <C>
Prior
Exhibit Description of Exhibit
No. Document SEC Docket No.
EXHIBIT 2: PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT,
LIQUIDATION OR SUCCESSION
Not Applicable.
2-1 Form Of Agreement And Plan Of Merger 333-49677 2
2-2 Agreement and Plan of Merger dated as of June 14, Current Report on Form 8-K 10
1999 dated June 14, 1999
EXHIBIT 3: ARTICLES OF INCORPORATION AND BY-LAWS
Incorporated herein by reference:
3-1 Articles of Incorporation, as amended. Annual Report on Form 10-K 3.1
for year ended December 31,
1992
3-1.1 Form of Articles of Amendment of CMP Group 333-49677 3.1
3-2 Bylaws, as amended. Annual Report on Form 10-K 3.2
for year ended December 31,
1996
3-2.1 Form of By laws of CMP Group 333-49677 3.2
EXHIBIT 4: INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Incorporated herein by reference:
4-1 General and Refunding Mortgage between the Company 2-58251 2.18
and The First National Bank of Boston, as Trustee,
dated as of April 15, 1976, relating to the Series
A Bonds.
4-2 First Supplemental Indenture dated as of March 15, 2-60786 2.19
1977 to the General and Refunding Mortgage.
4-3 Supplemental Indenture to the General and Annual Report on Form 10-K A
Refunding Mortgage Indenture dated as of October for the year ended December
1, 1978 relating to the Series B Bonds. 31, 1978
4-4 Supplemental Indenture to the General and Quarterly Report on Form A
Refunding Mortgage Indenture dated as of October 10-Q for the quarter ended
1, 1979, relating to the Series C Bonds. September 30, 1979
4.10 Supplemental Indenture to the General and 33-9232 4.16
Refunding Mortgage Indenture dated as of December
1, 1986, relating to the Series I Bonds.
4.14 Indenture, dated as of August 1, 1989, between the 33-29626 4.1
Company and The Bank of New York, Trustee,
relating to the Medium-Term Notes.
4.15 First Supplemental Indenture, dated as of August Current Report on Form 8-K 4.15
7, 1989, relating to the Medium-Term Notes, Series dated August 16, 1989
A, and supplementing the Indenture relating to the
Medium-Term Notes.
4.15.1 Second Supplemental Indenture, dated as of January Current
Report on Form 8-K 4.1 10, 1992, relating to the
Medium-Term Notes, dated January 28, 1992 Series B, and
supplementing the Indenture relating to the Medium-Term
Notes.
4.15.2 Third Supplemental Indenture, dated as of December Annual
Report on Form 10-K 4.15.2 15, 1994, relating to the
Medium-Term Notes, for year ended December 31, Series C,
and supplementing the Indenture relating 1994 to the
Medium-Term Notes.
4.15.3 Fourth Supplemental Indenture, dated as of 333-35235 4.4
February 26, 1998, relating to the Medium-Term
Notes, Series D, and supplementing the Indenture
relating to the Medium-Term Notes.
4.17 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of dated September 17, 1991
September 15, 1991, relating to the Series N Bonds.
4.18 Supplemental Indenture to the General and Current Report on Form 8-K 1.2
Refunding Mortgage Indenture, dated as of December dated December 10, 1991
1, 1991, relating to the Series O Bonds.
4.19 Supplemental Indenture to the General and Annual Report on Form 10-K 4.19
Refunding Mortgage Indenture, dated as of December for year ended December 31,
15, 1992, relating to the Series P Bonds. 1992
4.20 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of February dated March 1, 1993
15, 1993, relating to the Series Q Bonds.
4.21 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of May 20, dated May 20, 1993
1993, relating to the Series R Bonds.
4.22 Supplemental Indenture to the General and Current Report on Form 8-K 4.1
Refunding Mortgage Indenture, dated as of August dated November 30, 1993
15, 1993, relating to the Series S Bonds.
4.23 Supplemental Indenture to the General and Current Report on Form 8-K 4.2
Refunding Mortgage Indenture, dated as of November dated November 30, 1993
1, 1993, relating to the Series T Bonds.
4.24 Supplemental Indenture to the General and Annual Report on Form 10-K 4.24
Refunding Mortgage Indenture, dated as of April for year ended December 31,
12, 1994, relating to the Series U Bonds. 1994
4.26 Supplemental Indenture to the General and Annual Report on Form 10-K 4.26
Refunding Mortgage Indenture, dated as of February for year ended December 31,
15, 1996, evidencing the succession of State 1995
Street Bank and Trust Company as Trustee
EXHIBIT 9: VOTING TRUST AGREEMENT
Not applicable.
EXHIBIT 10: MATERIAL CONTRACTS
Incorporated herein by reference:
10-1 Agreement dated April 1, 1968 between the Company 2-30554 4.27
and Northeast Utilities Service Company relating
to services in connection with the New England
Power Pool and NEPEX.
10-2 Form of New England Power Pool Agreement dated as 2-55385 4.8
of September 1, 1971 as amended to November 1,
1975.
10-3 Agreement setting forth Supplemental NEPOOL 2-50198 5.10
Understandings dated as of April 2, 1973.
10-4 Sponsor Agreement dated as of August 1, 1968 among 2-32333 4.27
the Company and the other sponsors of Vermont
Yankee Nuclear Power Corporation.
10-5 Power Contract dated as of February 1, 1968 2-32333 4.28
between the Company and Vermont Yankee Nuclear
Power Corporation.
10-6 Amendment to Exhibit 10.5 dated as of June 1, 1972. 2-46612 13-21
10-7 Capital Funds Agreement dated as of February 1, 2-32333 4.29
1968 between the Company and Vermont Yankee
Nuclear Power Corporation.
10-8 Amendment to Exhibit 10.7 dated as of March 12, 70-4611 B-3
1968.
10-9 Stockholder Agreement dated as of May 20, 1968 2-32333 4.30
among the Company and the other stockholders of
Maine Yankee Atomic Power Company.
10-10 Power Contract dated as of May 20, 1968 between 2-32333 4.31
the Company and Maine Yankee Atomic Power Company.
10-10.1 Amendment No. 1 to Exhibit 10-10 dated as of March Annual Report on Form 10-K 10-1.1
1, 1984. for the year ended December
31, 1985 of Maine Yankee
Atomic Power company (File
No. 1-6554)
10-10.2 Amendment No. 2 to Exhibit 10-10 dated as of Annual Report on Form 10-K 10-1.2
January 1, 1984. for the year ended December
31, 1985 of Maine Yankee
Atomic Power Company (File
No. 1-6554)
10-10.3 Amendment No. 3 to Exhibit 10-10 dated as of Annual Report on Form 10-K 10-1.3
October 1, 1984. for the year ended December
31, 1985 of Maine Yankee
Atomic Power Company (File
No. 1-6554)
10-10.4 Additional Power Contract between the Company and Annual Report on Form 10-K 10-1.4
Maine Yankee Atomic Power Company dated February for the year ended December
1, 1984. 31, 1985 of Maine Yankee
Atomic Power Company (File
No. 1-6554)
10-11 Capital Funds Agreement dated as of May 20, 1968 2-32333 4.32
between the Company and Maine Yankee Atomic Power
Company.
10-11.1 Amendment No. 1 to Exhibit 10-11 dated as of Annual Report on Form 10-K 10-2.1
August 1, 1985. for the year ended December
31, 1985 of Maine Yankee
Atomic Power Company (File
No. 1-6554)
10-25 Agreement dated as of May 1, 1973 for Joint 2-48966 13-57
Ownership, Construction and Operation of New
Hampshire Nuclear Units among Public Service
Company of New Hampshire and certain other
utilities, including the Company.
10-42 Twentieth Amendment to Exhibit 10-25 dated as of Annual Report on Form 10-K 10-42
September 19, 1986. for the year ended December
31, 1986
10-46 Participation Agreement, dated June 20, 1969 among 2-35073 4.23.1
Maine Electric Power Company, Inc., the Company
and certain other utilities.
10-47 Power Purchase and Transmission Agreement dated 2-35073 4.23.2
August 1, 1969, among Maine Electric Power
Company, Inc., the Company and certain other
utilities, relating to purchase and transmission
of power from The New Brunswick Electric Power
Commission.
10-48 Agreement amending Exhibit 10-47 dated June 24, 2-37987 4.41
1970.
10-49 Agreement supplementing Exhibit 10-47 dated 2-51545 5.7.4
December 1, 1971.
10-50 Assignment Agreement dated March 20, 1972, between 2-51545 5.7.5
Maine Electric Power Company, Inc., and the New
Brunswick Electric Power Commission.
10-51 Capital Funds Agreement dated as of September 1, 2-24123
4.19.1 1964 among Connecticut Yankee Atomic Power Company,
the Company and certain other utilities.
10-52 Power Contract dated as of July 1, 1964 among 2-24123
4.19.2 Connecticut Yankee Atomic Power Company, the
Company and certain other utilities.
10-53 Stockholder Agreement dated as of July 1, 1964 2-24123
4.19.3 among the stockholders of Connecticut Yankee Atomic
Power Company, including the Company.
10-54 Connecticut Yankee Transmission Agreement dated as 2-24123 4.19.4
of October 1, 1964 among the stockholders of
Connecticut Yankee Atomic Power Company, including
the Company.
10-55 Agreements with Yankee Atomic Electric Company each dated
June 30, 1959, as follows:
10-55.1 Stock Agreement. 2-15553 4.17.1
10-55.2 Power Contract. 2-15553 4.17.2
10.55.3 Research Agreement. 2-15553 4.17.3
10-56 Transmission Agreement with Cambridge Electric 2-15553 4.18
Light Company and other sponsoring stockholders of
Yankee Atomic Electric Company.
10-57 Agreement for Joint Ownership, Construction and 2-52900 5.16
Operation of Wyman Unit No. 4 dated November 1,
1974 among the Company and certain utilities.
10-58 Amendment to Exhibit 10-57 dated as of June 30, 2-55458 5.48
1975.
10-59 Amendment to Exhibit 10-57 dated as of August 16, 2-58251 5.19
1976.
10-60 Amendment to Exhibit 10-57 dated as of December 2-68184 5.31
31, 1978.
10-61 Transmission Agreement dated November 1, 1974 2-54449 13-57
among the Company and certain other utilities,
relating to Wyman Unit No. 4.
10-62 Sharing Agreement--1979 Connecticut Nuclear Unit 2-50142 2.43
dated September 1, 1973 among the Company and
certain other utilities, relating to Millstone
Unit No. 3.
10-63 Amendment to Exhibit 10-62 dated as of August 1, 2-51999 5.16
1974, relating to Millstone Unit
No. 3.
10-64 Agreement dated as of February 25, 1977 among the 2-58251 5.24
Company, the Connecticut Light and Power Company,
the Hartford Electric Light Company and Western
Massachusetts Electric Company, relating to
Millstone Unit No. 3.
10-70 Project Agreement dated December 5, 1984 among the Annual Report on Form 10-K 10-69
Company, the Cities of Lewiston and Auburn, Maine for the year ended December
and certain other parties, relating to development 31, 1984
of hydro-electric plant.
10-73 Trust Indenture dated as of June 1, 1977 between 2-60786 5.27
the Town of Yarmouth and Casco Bank & Trust
Company, as trustee, relating to the Town of
Yarmouth's 6 3/4% Pollution Control Revenue Bonds
(Central Maine Power Company, 1977 Series A).
10-74 Installment Sale Agreement dated as of June 1, 2-60786 5.28
1977 between the Town of Yarmouth and the Company.
10-75 Agreements Relating to $11,000,000 Floating/Fixed
Rate Pollution Control Revenue Refunding Bonds:
10-75.1 Bond Purchase Agreement dated as of May 1, 1984. Quarterly Report on Form 28.3
10-Q for the quarter ended
June 30, 1984
10-75.2 Loan Agreement dated as of May 1, 1984. Quarterly Report on Form 28.4
10-Q for the quarter ended
June 30, 1984
10-76 Agreements Relating to $8,500,000 Floating/Fixed
Rate Pollution Control Revenue Bonds:
10-76.1 Bond Purchase Agreement dated December 28, 1984. Annual Report on Form 10-K 10-77.1
for year ended December 31,
1984
10-76.2 Loan Agreement dated as of December 1, 1984. Annual Report on Form 10-K 10-77.2
for year ended December 31,
1984
10-77.1 Indenture of Trust dated as of March 14, 1988 Annual Report on Form 10-K 10-1.4
between Maine Yankee Atomic Power Company and for year ended December 31,
Maine National Bank relating to decommissioning 1987, of Maine Yankee Atomic
trust funds. Power Company (1-6554)
10-77.1(a) Amended and Restated Indenture of Trust dated as Annual Report on Form 10-K 10-6.1
of January 1, 1993 between Maine Yankee Atomic for year ended December 31,
Power Company and The Bank of New York relating to 1992, of Maine Yankee Atomic
decommissioning trust funds. Power Company (1-6554)
10-77.2 Indenture of Trust dated as of October 16, 1985 Annual Report on Form 10-K 10-7
between the Company and Norstar Bank of Maine for year ended December 31,
relating to the spent fuel disposal funds. 1985, of Maine Yankee Atomic
Power Company (1-6554)
10-78 Form of Agreement of Purchase and Sale dated Annual Report on Form 10-K 10.79
February 19, 1986 between the Company and Eastern for the year ended December
Utilities Associates, relating to the sale of the 31, 1985
Company's Seabrook Project interest.
10-79 Addendum to Agreement of Purchase and Sale dated Quarterly Report on Form 2.1
June 23, 1986, among the Company, Eastern 10-Q for the quarter ending
Utilities Associates and EUA Power Corporation, June 30, 1986
amending Exhibit 10-78.
10-80 Agreement, dated as of October 29, 1986, between Quarterly Report on Form 2.1
the Company and EUA Power Corporation, relating to 10-Q for the quarter ended
the sale of the Company's interest in the Seabrook September 30, 1986
Project.
10-81 Credit Agreement, dated as of October 15, 1986, Quarterly Report on Form 2.2
among the Company, various banks and Continental 10-Q for the quarter ended
Illinois National Bank and Trust Company of September 30, 1986
Chicago, as agent, establishing the terms of a $40
million unsecured credit facility.
10-86 Labor Agreement dated as of May 1, 1989 between Annual Report on Form 10-K 10.86
the Company (Northern, Western and Southern for the year ended December
Division) and Local 1837 of the International 31, 1989
Brotherhood of Electrical Workers.
10-86.1 Agreement dated as of November 25, 1991 extending Annual Report on Form 10-K 10.86.1
Labor Contract. for year ended December 31,
1991
10-89 1987 Executive Incentive Plan, as amended January Annual Report on Form 10-K 10.89
20, 1993.* for year ended December 31,
1992
10-90 Deferred Compensation Plan for Non-Employee Annual Report on Form 10-K 10.90
Directors, as amended and restated effective for year ended December 31,
February 1, 1992.* 1992
10-91 Retirement Plan for Outside Directors, as amended Annual Report on Form 10-K 10.91
and restated effective April 24, 1991.* for year ended December 31,
1992
10-93 Central Maine Power Company Long-Term Incentive Annual Report on Form 10-K 10.93
Plan.* for year ended December 31,
1993.
10-93.1 Transfer of 10-93 to CMP Group 333-49643 -
10-94.1 Central Maine Power Company Supplemental Executive Annual Report on Form 10-K 10-94.1
Retirement Plan, as Amended and Restated Effective for
year ended December 31, January 1, 1993, and as further
Amended Effective 1995 January 1, 1996.*
10-95 Competitive Advance and Revolving Credit Facility Annual Report on Form 10-K 10.95
between the Company and Chemical Bank dated as of for year ended December 31,
November 7, 1994. 1994
10-98 Credit Agreement dated as of October 23, 1996, Annual Report on Form 10-K 10-98
between the Company and certain banks. for year ended December 31,
1996
10-98.1 Amendment of 10-98 dated as of December 15, 1998 Annual Report on Form 10-K 10-98.1
for year ended December 31,
1998
10-98.2 Credit Agreement dated as of December 15, 1998, Annual Report on Form 10-K 10-98.2
between Central Maine and certain banks for year ended December 31,
1998
10-98.3 Credit Agreement dated as of December 23, 1999, Filed herewith
between Central Maine and certain banks
10-99 Asset Purchase Agreement, dated as of January 6, 333-35235 99.2
1998, by and between the Company, other sellers,
and National Energy Holdings, Inc.
10.100 Employment Agreement between CMP Group and David Annual Report on Form 10-K 10.100
T. Flanagan dated December 31, 1997 for year ended December 31,
1997
10-100.1 First Amendment to the Employment Agreement Filed herewith -
between CMP Group and David T. Flanagan dated
December 31, 1997
10.101 Employment Agreement between CMP Group and Arthur Annual Report on Form 10-K 10.101
W. Adelberg dated January 1, 1998 for year ended December 31,
1997
10-101.1 First Amendment to the Employment Agreement Filed herewith -
between CMP Group and Arthur W. Adelberg dated
January 1, 1998
10.102 Employment Agreement between CMP Group and David Annual Report on Form 10-K 10.102
E. Marsh dated January 1, 1998 for year ended December 31,
1997
10-102.1 First Amendment to the Employment Agreement Filed herewith -
between CMP Group and David E. Marsh dated January
1, 1998
10.103 Employment Agreement between CMP Group and Gerald Annual Report on Form 10-K 10.103
C. Poulin dated January 1, 1998 for year ended December 31,
1997
10.103.1 First Amendment to the Employment Agreement Filed herewith -
between CMP Group and Gerald C. Poulin dated
January 1, 1998
10.104 Employment Agreement between the Company and Sara Annual Report on Form 10-K 10.104
J. Burns dated June 30, 1997 for year ended December 31,
1997
10.104.1 First Amendment to the Employment Agreement Filed herewith -
between Central Maine Power Company and Sara J.
Burns dated June 30, 1997
10-105 Employment Agreement between CMP Group and F. Annual Report on Form 10-K 10-105
Michael McClain dated August 26, 1998 for year ended December 31,
1998
10.105.1 First Amendment to the Employment Agreement Filed herewith -
between CMP Group and F. Michael McClain dated
August 26, 1998
10-106 Employment Agreement between Central Maine and Annual Report on Form 10-K 10-106
Michael R. Cutter dated June 30, 1997 for year ended December 31,
1998
10-106.1 First Amendment to the Employment Agreement Filed herewith -
between Central Maine Power Company and Michael R.
Cutter dated June 30, 1997
10-107 Employment Agreement between Central Maine and Annual Report on Form 10-K 10-107
Curtis I. Call dated June 30, 1997 for year ended December 31,
1998
10.107.1 First Amendment to the Employment Agreement Filed herewith -
between Central Maine Power Company and Curtis I.
Call dated June 30, 1997
10-108 Employment Agreement between CMP Group and Anne M. Annual Report on Form 10-K 10-108
Pare dated June 30, 1997 for year ended December 31,
1998
10-108.1 First Amendment to the Employment Agreement Filed herewith -
between CMP Group and Ann M. Pare dated June 30,
1997
*Management contract or compensatory plan or arrangement required to be filed in
response to Item 14(c) of Form 10-K.
EXHIBIT 11: STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Not Applicable.
EXHIBIT 12: STATEMENTS RE COMPUTATION OF RATIOS
Not Applicable.
EXHIBIT 13: ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR
QUARTERLY REPORT TO SECURITY HOLDERS
Not Applicable.
EXHIBIT 16: LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
Not Applicable.
EXHIBIT 18: LETTER RE CHANGE IN ACCOUNTING PRINCIPLES
Not Applicable.
EXHIBIT 21: SUBSIDIARIES OF THE REGISTRANTS Filed herewith
EXHIBIT 22: PUBLISHED REPORT CONCERNING MATTERS SUBMITTED TO
VOTE OF SECURITY HOLDERS
Not Applicable.
EXHIBIT 23: CONSENTS OF EXPERTS AND COUNSEL
23-1 Consent of PricewaterhouseCoopers LLP to the Filed herewith
incorporation by reference of their reports
included or incorporated by reference herein in
the Company's Registration Statements (File Number
33-36679, 33-39826, 33-44754, 33-51611, 33-56939
and 333-35235) and CMP Group's Registration
Statements (File Number 333-49677, 333-49643, and
33-39826).
EXHIBIT 24: POWER OF ATTORNEY
Not Applicable.
EXHIBIT 27: FINANCIAL DATA SCHEDULE Filed herewith
EXHIBIT 28: INFORMATION FROM REPORTS FURNISHED TO STATE
INSURANCE REGULATORY AUTHORITIES
Not Applicable.
EXHIBIT 99: ADDITIONAL EXHIBITS
To be filed under cover of a Form 10-K/A amendment of this
Form 10-K within 180 days after December 31, 1999,
pursuant to Rule 15d-21 under the Securities Exchange Act
of 1934:
99-1 and -2 Information, financial statements and exhibits
required by Form 11-K with respect to certain employee
savings plans maintained by the Company.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Central Maine Power Company
Form 10-K - 1999
Schedule II
Page 1 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1999
(Dollars in Thousands)
Additions
Charged Charged to
Balance to costs other Balance
at Beginning and accounts- Deductions at end
Description of Period Expenses describe -describe of period
Reserves deducted from
assets to which they apply:
Uncollectible accounts $3,136 $3,576 $ $3,808 (A) $2,904
===== ===== ========= ===== =====
Reserves not applied against assets:
Casualty and insurance $ 2,363 $ 666 $ $1,029 (C) $ 2,000
Workers' compensation 8,494 1,548 467 (B) 2,015 (C) 8,494
Hazardous material
clean-up 1,928 (765) 1,535 (D) 2,698
------- ------ ----- ---------- -------
Total $12,785 $1,449 $2,002 $3,044 $13,192
====== ===== ===== ===== ======
Notes: (A) Amounts charged off as uncollectible after deducting customers'
deposits and recoveries of accounts previously charged off.
(B) Amounts transferred to capital and billable accounts.
(C) Principally payments for various injuries and damages and
expenses in connection therewith.
(D) Amounts charged to regulatory asset and regulatory liability
accounts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Central Maine Power Company
Form 10-K - 1999
Schedule II
Page 2 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1998
(Dollars in Thousands)
Additions
Charged Charged to
Balance to costs other Balance
at Beginning and accounts- Deductions at end
Description of Period Expenses describe -describe of period
- ----------- --------- -------- -------- --------- ---------
Reserves deducted from
assets to which they apply:
Uncollectible accounts $ 2,400 $5,644 $ - $4,908(A) $ 3,136
====== ===== ======= ===== ======
Reserves not applied against assets:
Casualty and insurance $ 1,500 $ 1,379 $ $ 516(C) $ 2,363
Workers' compensation 8,494 1,485 294(B) 1,779(C) 8,494
Hazardous material
clean-up 2,108 (368) (188)(D) 1,928
------- ------ ------ ------ -------
Total $12,102 $2,496 $294 $2,107 $12,785
====== ===== === ===== ======
Notes: (A) Amounts charged off as uncollectible after deducting customers'
deposits and recoveries of accounts previously charged off.
(B) Amounts transferred to capital and billable accounts.
(C) Principally payments for various injuries and damages and
expenses in connection therewith.
(D) Amounts charged to regulatory asset account.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Central Maine Power Company
Form 10-K - 1999
Schedule II
Page 3 of 3
Central Maine Power Company
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1997
(Dollars in Thousands)
Additions
Charged Charged to
Balance to costs other Balance
at Beginning and accounts- Deductions at end
Description of Period Expenses describe -describe of period
- ----------- --------- -------- -------- --------- ---------
Reserves deducted from
assets to which they apply:
Uncollectible accounts $ 4,177 $5,514 $ - $7,291(A) $ 2,400
====== ===== ======= ===== ======
Reserves not applied against assets:
Casualty and insurance $ 1,275 $ 1,862 $ $ 1,637(C) $ 1,500
Workers' compensation 7,994 1,692 423(B) 1,615(C) 8,494
Hazardous material
clean-up 3,639 1,069 2,600(D) 2,108
------- ----- ------- ----- -------
Total $12,908 $4,623 $423 $5,852 $12,102
====== ===== === ===== ======
Notes: (A) Amounts charged off as uncollectible after deducting customers'
deposits and recoveries of accounts previously charged off.
(B) Amounts transferred to capital and billable accounts.
(C) Principally payments for various injuries and damages and expenses
in connection therewith.
(D) Amounts charged to regulatory asset account.
</TABLE>
EXHIBIT 10-98.3
CREDIT AGREEMENT
dated as of December 23, 1999
among
CENTRAL MAINE POWER COMPANY,
as Borrower
The Lenders Party Hereto
FLEET NATIONAL BANK,
as Syndication Agent,
and
THE BANK OF NEW YORK,
as Administrative Agent
---------------------------
BNY CAPITAL MARKETS, INC.
as Lead Arranger and Book Runner
<PAGE>
CREDIT AGREEMENT, dated as of December 23, 1999, among CENTRAL MAINE POWER
COMPANY, the LENDERS party hereto, FLEET NATIONAL BANK, as Syndication Agent,
and THE BANK OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms
As used in this Credit Agreement, the following terms have the meanings
specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means BNY, in its capacity as administrative agent
for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin": means, at all times during which the applicable
Pricing Level set forth below is in effect, (i) with respect to Eurodollar
Borrowings, the percentage set forth below under the heading "Eurodollar
Margin", (ii) with respect to facility fees payable under Section 3.3(a), the
percentage set forth below under the heading "Facility Fee Margin", and (iii)
with respect to utilization fees payable under Section 3.3(b), the percentage
set forth below under the heading "Utilization Fee Margin":
================================================================================
Pricing Level Eurodollar Margin Facility Fee Margin Utilization Fee Margin
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I 0.300% 0.100% 0.050%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II 0.375% 0.125% 0.100%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
III 0.500% 0.150% 0.100%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IV 0.575% 0.175% 0.125%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
V 0.650% 0.225% 0.125%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VI 0.750% 0.250% 0.250%
================================================================================
Pricing Level I will be applicable for so long as the Borrower's senior
unsecured long-term debt ratings (the "Senior Debt Rating") from either S&P or
Moody's is A+ or higher by S&P or A1 or higher by Moody's.
Pricing Level II will be applicable for so long as the Senior Debt Rating
is A- or higher by S&P or A3 or higher by Moody's and Pricing Level I is not
applicable.
Pricing Level III will be applicable for so long as the Senior Debt Rating
is BBB+ or higher by S&P or Baa1 or higher by Moody's and neither Pricing Level
I nor II is applicable.
Pricing Level IV will be applicable for so long as the Senior Debt Rating
is BBB or higher by S&P or Baa2 or higher by Moody's and Pricing Levels I, II
and III are not applicable.
Pricing Level V will be applicable for so long as the Senior Debt Rating is
BBB- or higher by S&P or Baa3 or higher by Moody's and Pricing Levels I, II, III
and IV are not applicable.
Pricing Level VI will be applicable for so long as the Senior Debt Rating
is less than or equal to BB+ by S&P or less than or equal to Ba1 by Moody's and
Pricing Levels I, II, III, IV and V are not applicable.
Changes in the Applicable Margin resulting from a change in the Pricing
Level shall become effective on the effective date of any change in the Senior
Debt Rating of the Borrower by S&P or Moody's. Notwithstanding anything herein
to the contrary, in the event of a split in the Senior Debt Rating of the
Borrower from S&P and Moody's that would otherwise result in the application of
more than one Pricing Level (had the provisions regarding the applicability of
other Pricing Levels contained in the definitions thereof not been given
effect), then the Applicable Margin shall be determined using, in the case of a
split by one rating category, the higher Pricing Level, and in the case of a
split by more than one rating category, the Pricing Level that is one level
lower than the Pricing Level within which the higher of the two rating
categories would otherwise fall.
"Applicable Percentage" means, with respect to any Lender, the percentage
of the total Commitments represented by such Lender's Commitment. If the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Approved Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.4), and accepted by the Administrative Agent,
substantially in the form of Exhibit A or any other form approved by the
Administrative Agent.
"Availability Period" means the period from and including the Effective
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"BNY" means The Bank of New York and its successors.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America.
"Borrower" means Central Maine Power Company, a Maine corporation.
"Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.3.
"Borrowing" means Loans of the same Type made, converted or continued on
the same date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed, provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capitalization Ratio" means, as of any date, the quotient of (i)
Consolidated Total Debt as of such date divided by (ii) the sum as of such date
of Consolidated Total Debt plus the total of stockholders' equity of the
Borrower and the Subsidiaries determined in accordance with GAAP on a
consolidated basis.
"Capitalized Lease" means any lease which is required to be capitalized on
the balance sheet of the lessee in accordance with GAAP, including to the extent
applicable Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
"Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including to the extent
applicable Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Change in Control" means (i) the ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder as in effect on the date hereof), of shares representing
20% or more of the aggregate ordinary voting power or economic interests
represented by the issued and outstanding equity securities of the Borrower or
the Parent on a fully diluted basis, (ii) the occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Borrower or the
Parent by Persons who were neither (x) nominated by the board of directors of
the Borrower or the Parent, as applicable, nor (y) appointed by directors so
nominated, or (iii) the failure of the Parent to own directly, beneficially and
of record, 100% of the aggregate ordinary voting power represented by the issued
and outstanding equity securities other than the 6% preferred stock of the
Borrower on a fully diluted basis. Notwithstanding the foregoing, the
consummation of the Merger shall not constitute a Change in Control.
"Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Credit Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Credit Agreement or (c) compliance by any Credit Party
(or, for purposes of Section 3.5(b), by any lending office of such Credit Party
or by such Credit Party's holding company, if any) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Credit Agreement.
"CMP Group" means CMP Group, Inc., a Maine corporation.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means any and all "Collateral", as defined in Security
Agreement.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Credit Exposure hereunder, as such commitment
may be reduced from time to time pursuant to Section 2.5 or reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 10.4. The initial amount of each Lender's Commitment is set forth on
Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender
shall have assumed its Commitment, as applicable. The initial aggregate amount
of the total Commitments is $75,000,000.
"Consolidated EBIT" means, for any period, Consolidated Net Income for such
period, plus, without duplication and to the extent deducted in determining such
Consolidated Net Income, the sum of (i) Consolidated Interest Expense for such
period, plus (ii) taxes based upon or measured by net income for such period,
plus (iii) dividends paid during such period on preferred stock.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest, including commitment fees, facility fees, utilization fees,
payments in the nature of interest under Capitalized Leases and net payments
under Hedging Agreements, accrued by the Borrower and the Subsidiaries (whether
such interest is reflected as an item of expense or capitalized) in accordance
with GAAP on a consolidated basis.
"Consolidated Net Income" means, for any period, the net income (or loss)
applicable to common stock of the Borrower and the Subsidiaries, determined in
accordance with GAAP on a consolidated basis. provided, however, that
Consolidated Net Income shall not include (i) extraordinary and non-recurring
gains or losses, and (ii) any after-tax gains or losses attributable to returned
surplus assets of any Plan or Multiemployer Plan.
"Consolidated Operating Income" means, for any period, the Consolidated Net
Income for such period plus, without duplication and to the extent deducted in
determining such Consolidated Net Income, the sum of (i) depreciation and
amortization, plus (ii) interest on, and commitment fees, facility fees and
utilization fees, with respect to, Indebtedness (including payments in the
nature of interest under Capitalized Leases and Hedging Agreements), plus (iii)
taxes based upon or measured by net income, plus (iv) dividends on preferred
stock.
"Consolidated Total Debt" means, as of any date, the sum of (i) the
aggregate principal amount of all Indebtedness of the Borrower and the
Subsidiaries that would be reflected as liabilities on a consolidated balance
sheet of the Borrower and the Subsidiaries as of such date prepared in
accordance with GAAP plus (ii) all obligations (contingent or otherwise) of the
Borrower or any Subsidiary in respect of Disqualified Stock valued at the
maximum fixed repurchase price plus accrued and unpaid dividends.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "Controlling" and "Controlled" have meanings correlative thereto.
"Credit Exposure" means, with respect to any Lender at any time, the sum of
the aggregate outstanding principal amount of such Lender's Loans at such time.
"Credit Parties" means the Administrative Agent and the Lenders.
"Default" means any event or condition which constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 4.6 or in the Pre-Closing 1934 Act
Reports.
"Disqualified Stock" means any capital stock of any Person that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part.
"Distribution Plant" means, with respect to the Borrower, the distribution
assets of the Borrower as reported from time to time by the Borrower to the
Federal Energy Regulatory Commission on F.E.R.C. Form 1.
"dollars" or "$" refers to lawful money of the United States of America.
"Energy East" means Energy East Corporation, a New York corporation.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
limitation, (i) any and all Claims by Governmental Authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (ii) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief in connection with alleged injury or threat of injury to
health, safety or the environment due to the presence of Hazardous Materials.
"Environmental Law" means any Federal, state, foreign or local statute,
law, rule, regulation, ordinance, code, guideline, written policy and rule of
common law now or hereafter in effect, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to the environment, employee health and safety or
Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, 33 U.S.C.ss. 1251 et seq.; the Toxic Substances
Control Act, 15 U.S.C.ss. 2601 et seq.; the Clean Air Act, 42 U.S.C.ss. 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C.ss. 3803 et seq.; the Oil Pollution
Act of 1990, 33 U.S.C.ss. 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C.ss. 11001 et seq.; the Hazardous Material
Transportation Act, 49 U.S.C.ss. 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C.ss. 651 et seq.; and any state and local counterparts or
equivalents.
"Effective Date" has the meaning assigned to such term in Section 10.13.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.
"ERISA Event" means (i) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (ii) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iii)
the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (iv) the incurrence by the Borrower or any ERISA Affiliate of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(v) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (vi) the incurrence by the
Borrower or any ERISA Affiliate of any liability with respect to the withdrawal
or partial withdrawal from any Plan or Multiemployer Plan; or (vii) the receipt
by the Borrower or any ERISA Affiliate of any notice concerning the imposition
of Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article 8.
"Exchange Act" means the Securities and Exchange Act of 1934.
"Existing Credit Agreement" means the Credit Agreement, dated as of October
23, 1996, by and among the Borrower, the lenders party thereto, BankBoston, N.A.
(formerly, The First National Bank of Boston) and BNY, as Managing Agents.
"Excluded Taxes" means, with respect to any Credit Party or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower under any Loan Document, (i) income or franchise taxes imposed on (or
measured by) its net income by the United States of America, or by any other
jurisdiction, (ii) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower is located and (iii) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 3.8(b)), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Credit Agreement (or designates
a new lending office) or is attributable to such Foreign Lender's failure to
comply with Section 3.7(e), except to the extent that such Foreign Lender (or
its assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 3.7(a).
"FAME Loan Agreement" means the Loan Agreement dated as of October 19, 1994
between Finance Authority of Maine and the Borrower relating to the $79,300,000
Finance Authority of Maine Taxable Electric Rate Stabilization Revenue Notes,
Series 1994A (Central Maine Power Company).
"Federal Funds Effective Rate" means, for any day, a rate per annum
(expressed as a decimal, rounded upwards, if necessary, to the next higher 1/100
of 1%) equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (i) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Effective Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Effective
Rate for such day shall be the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower or any vice president of the
Borrower whose primary responsibility is for financial matters.
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means a Subsidiary that is organized under the laws
of, and conducting its business primarily in a jurisdiction outside of, the
United States of America.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States of America.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (i) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (ii) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (iii) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor as to enable the primary obligor to pay such
Indebtedness or other obligation or (iv) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation, provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guaranteed" has a meaning correlative thereto.
"Hazardous Materials" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (ii) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous materials," "extremely
hazardous substances," "restricted hazardous waste," "toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar import, under
any applicable Environmental Law; and (ii) any other chemical, material or
substance, the Release of which is prohibited or regulated by any Governmental
Authority as toxic or hazardous.
"Hedging Agreement" means any interest rate protection agreement, or other
interest swap, cap, collar, hedging or other like arrangement.
"Indebtedness" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (iv) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable within six months after the incurrence thereof in the ordinary course of
business), (v) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (vi) all Guarantees by such
Person of Indebtedness of others, (vii) all Capital Lease Obligations of such
Person, (viii) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty, (ix) the
principal balance outstanding under any synthetic lease, tax retention operating
lease, off-balance sheet Loan or similar off-balance sheet financing product of
the Borrower or any Subsidiary where such transaction is considered borrowed
money indebtedness for tax purposes but is classified as an operating lease
under GAAP, (x) all obligations of such Person to pay a specified purchase price
for goods or services whether or not delivered or accepted (e.g., take-or-pay
obligations) or similar obligations and (xi) all obligations, contingent or
otherwise, of such Person in respect of bankers' acceptances. The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to such term in Section 10.3(b).
"Interest Coverage Ratio" means, as of the end of any fiscal quarter, the
quotient of (i) Consolidated EBIT for the period of four consecutive fiscal
quarters ending thereon divided by (ii) Consolidated Interest Expense for such
period.
"Interest Election Request" means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 3.2.
"Interest Payment Date" means (i) with respect to any ABR Loan, the last
day of each March, June, September and December, (ii) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Loan with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period, and (iii) as to all Loans, the
Maturity Date.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, provided that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, unless, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, and (ii) any Interest
Period that commences on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
"Investments" has the meaning assigned to such term in Section 7.4.
"Lenders" means the Persons listed on Schedule 2.1 and any other Person
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate does
not appear on such Page 3750 (or on any such successor or substitute page, or
any successor to or substitute for such Service) at such time for any reason,
then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest
Period shall be the rate at which dollar deposits of $5,000,000 and for a
maturity comparable to such Interest Period are offered by the principal London
office of the Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (i) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (ii) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement relating to such
asset and (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
"Loan" means a Loan referred to in Section 2.1(a) and made pursuant to
Section 2.4.
"Loan Documents" means this Credit Agreement, the Notes and the Security
Agreement.
"Margin Stock" has the meaning assigned to such term in Regulation U.
"Material Adverse Effect" means a material adverse effect on (a) the
financial condition, operations or properties of the Borrower (on an individual
basis) or the Borrower and the Subsidiaries, taken as a whole, whether as a
result of (i) general economic conditions affecting the electric power industry,
(ii) difficulties in obtaining supplies and raw materials, (iii) fire, flood or
other natural calamities, (iv) environment pollution, (v) regulatory changes,
judicial decisions, war or other governmental action or (vi) any other event or
development, whether or not related to those enumerated above, (b) the ability
of the Borrower to perform any of its obligations under any Loan Document or
(iii) the rights of or benefits available to any Credit Party under any Loan
Document.
"Material Agreements" means, collectively, (i) the FAME Loan Agreement,
(ii) the Unsecured Medium Term Note Indenture and (iii) all other financing
documents evidencing Material Indebtedness.
"Material Indebtedness" means Indebtedness (other than Indebtedness under
the Loan Documents) or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and the Subsidiaries in an aggregate
principal amount exceeding $10,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Subsidiary in respect of any Hedging Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary, as applicable, would be required to pay if such Hedging
Agreement were terminated at such time.
"Maturity Date" means December 23, 2002.
"Merger" means the merger of EE Merger Corp., a wholly-owned subsidiary of
Energy East with and into CMP Group, with CMP Group as the survivor.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of June
14, 1999, among CMP Group, EE Merger Corp. and Energy East.
"Merger Corp." means EE Merger Corp., a Maine corporation and a
wholly-owned subsidiary of Energy East.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"More Favorable Provision" has the meaning set forth in Section 7.1(b).
"Multiemployer Plan" means, at any time, a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Borrower or an ERISA Affiliate
contributed or was required to contribute within the six years prior to any date
of determination.
"Notes" means, with respect to each Lender, a promissory note evidencing
such Lender's Loans payable to the order of such Lender (or, if required by such
Lender, to such Lender and its registered assigns) substantially in the form of
Exhibit C.
"Obligations" means (a) the due and punctual payment of (i) principal of
and premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, and (ii) all other monetary
obligations, including fees, commissions, costs, expenses and indemnities,
whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Borrower to the Credit Parties, or that
are otherwise payable to any Credit Party, under this Credit Agreement and the
other Loan Documents, and (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents.
"Other Taxes" means any and all current or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, the Loan Documents, provided that in no event
shall "Other Taxes" include Excluded Taxes.
"Parent" means (i) prior to the Merger, CMP Group, and (ii) on and after
the Merger, Energy East.
"Participant" has the meaning assigned to such term in Section 10.4(e).
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex 1 to the
Security Agreement or any other form approved by the Administrative Agent.
"Permitted Encumbrances" means:
(a) Liens for taxes or other governmental assessments, charges or
levies if payment shall not at the time be required to be made or if the
Borrower, at its expense and in its name, shall be in good faith contesting
its obligations to comply therewith;
(b) Liens incurred in the ordinary course of business in respect of
pledges or deposits (i) under workman's compensation laws or similar
legislation, and (ii) in connection with surety, appeal and similar bonds
incidental to the conduct of litigation; mechanics', laborers' or
materialmen's and similar Liens which in the case of any Lien material to
the Borrower or a Significant Subsidiary, as the case may be, is not then
delinquent; and Liens incidental to the conduct of the business of the
Borrower which were not incurred in connection the borrowing of money or
the obtaining of advances or credit;
(c) minor defects and irregularities in title (including easements,
rights of way, restrictions and other similar non-monetary charges) to any
real property of the Borrower or any Significant Subsidiary which have no
material adverse effect on the use or disposition thereof by the Borrower
or such Significant Subsidiary;
(d) leases by the Borrower or a Significant Subsidiary, as lessor, of
any property of the Borrower or such Significant Subsidiary to another
Person as lessee;
(e) Liens securing obligations neither assumed by the Borrower nor on
account of which it customarily pays interest, existing at the date hereof,
or, as to property hereafter acquired, at the time of acquisition by the
Borrower, upon real property or rights in or relating to real property
acquired by the Borrower for right of way purposes;
(f) party-wall agreements, agreements for and obligations relating to
the joint or common use of property owned solely by the Borrower or of
property owned by the Borrower in common or Jointly with one or more
persons;
(g) attachment, judgment and other similar Liens arising in connection
with court proceedings, provided, however, that the execution or other
enforcement thereof is effectively stayed and the claims secured thereby
are being contested at the time in good faith;
(h) the burdens of any law or governmental regulation or permit
requiring the Borrower to maintain certain facilities or perform certain
acts as a condition of the construction, occupancy or use of any of its
property, or its interference with any public or private lands or highways
or any river or stream or other waters;
(i) any right which any municipal or governmental authority may have
by virtue of any franchise, grant, license, permit, contract or statute to
purchase, or designate a purchaser of or order the sale of, any property of
the Borrower or to terminate any franchise, grant, license or other rights
or to regulate the property and business of the Borrower;
(j) zoning laws and ordinances;
(k) any duties or obligations affecting any property of the Borrower
to any municipal or governmental authority with respect to any franchise,
grant, license or permit; and
(l) restrictions under federal and state securities laws on the
transfer of securities.
"Permitted Investments" means the types of Investments listed on Schedule
7.4(a)(i).
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pre-Closing 1934 Act Reports" means, collectively, the Borrower's report
on Form 10-K for the fiscal year 1998, its Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1999, June 30, 1999 and September 30,1999 and its
Reports on Form 8-K dated January 19, 1999, April 7, 1999 and June 14, 1999,
each as furnished to the Lenders prior to the date hereof.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by BNY as its prime commercial lending rate; each change in the
Prime Rate being effective from and including the date such change is publicly
announced as being effective. The Prime Rate is not intended to be lowest rate
of interest charged by BNY in connection with extensions of credit to borrowers.
"RCRA" means the federal Resource Conservation and Act, 42 U.S.C.ss.6901 et
seq.
"Register" has the meaning assigned to such term in Section 10.4(c).
"Regulation T" means Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" means the disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, pouring or migrating,
into or upon any land or water or air, or otherwise entering into the
environment.
"Required Lenders" means, at any time, Lenders having Credit Exposures and
unused Commitments representing more than 51% of the sum of the total Credit
Exposures and unused Commitments at such time.
"Restricted Payment" means, as to any Person:
(a) the declaration or payment (in cash, securities or other property)
of any dividend or distribution on or in respect of any class of capital
stock of or other equity interests in such Person;
(b) the purchase, redemption or other retirement of any shares of any
class of capital stock of, or other equity interest in, such Person, or of
options, warrants or other rights for the purchase of such shares,
directly, indirectly through a Subsidiary or otherwise;
(c) any other distribution on or in respect of any shares of any class
of capital stock of or equity or other beneficial interest in such Person;
(d) any payment of principal or interest with respect to, or any
purchase, redemption or defeasance of any Indebtedness of such Person which
by its terms or the terms of any agreement is subordinated to the payment
of the Obligations; and
(e) any payment, loan or advance by such Person to, or any other
Investment by such Person in, the holder of any shares of any class of
capital stock of or equity interest in such Person, or any Affiliate of
such holder (including the payment of management and transaction fees and
expenses);
provided, that the term "Restricted Payment" shall not include (i) dividends
payable in perpetual common stock of, or other similar equity interests in, such
Person or (ii) payments in the ordinary course of business in respect of (A)
reasonable compensation paid to employees, officers and directors, (B) advances
and reimbursements to employees for travel expenses, drawing accounts and
similar expenditures, (C) rent paid to, or accounts payable for services
rendered or goods sold by, non-Affiliates that own capital stock of or other
equity interests in such Person or (D) payments of principal, interest and other
amounts required under the FAME Loan Agreement.
"Sale and Leaseback Transaction" means any arrangement, directly or
indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred.
"SEC" means the Securities and Exchange Commission and any successor entity
performing similar functions.
"S&P" means Standard & Poor's Rating Group, a division of The McGraw-Hill
Companies, or any successor thereto.
"Secured Parties" means the "Secured Parties" as defined in the Security
Agreement.
"Security Agreement" has the meaning assigned to such term in Section
5.1(g).
"Significant Subsidiary" means, at the time any determination thereof is to
be made, any Subsidiary which (i) as of the end of the next preceding quarter
had assets which comprised not less than 10% of the aggregate book value of the
consolidated assets of the Borrower and the Subsidiaries, determined in
accordance with GAAP, as of the end of such quarter or (ii) for the period of
four consecutive fiscal quarters most recently ended had operating income which
comprised not less than 10% of the Consolidated Operating Income of the Borrower
and the Subsidiaries for such period.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held by the parent or one or more subsidiaries of the
parent.
"Subsidiary" means any subsidiary of the Borrower.
"Super Majority Lenders" means, at any time, Lenders having Credit
Exposures and unused Commitments representing more than 66-2/3% of the sum of
the total Credit Exposures and unused Commitments at such time.
"Syndication Agent" means Fleet National Bank, in its capacity as
syndication agent hereunder.
"Taxes" means any and all current or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"Transactions" means (i) the execution, delivery and performance by the
Borrower of each Loan Document, (ii) the borrowing of the Loans, and (iii) the
use of the proceeds of the Loans and such Indebtedness.
"Type", when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference in the case of a Borrowing, the Adjusted LIBO Rate or
the Alternate Base Rate.
"Unsecured Medium Term Note Indenture" means the Indenture, dated as of
August 1, 1989, between the Borrower and BNY, as Trustee.
"Unsecured Medium Term Notes" means unsecured Indebtedness of the Borrower
denominated "Medium Term Notes" and issued or to be issued pursuant to the
Unsecured Medium Term Note Indenture.
"Wholly Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally (other than directors' qualifying shares and, in the case of
Foreign Subsidiaries, shares required by applicable law to be held by foreign
nationals) is owned by the Borrower (or other specified Person) directly, or
indirectly through one or more Wholly Owned Subsidiaries.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
"Year 2000 Issue" means the failure of computer software, hardware and
firmware systems and equipment containing embedded computer chips to properly
receive, transmit, process, manipulate, store, retrieve, re-transmit or in any
other way utilize data and information due to the occurrence of the year 2000 or
the inclusion of dates on or after January 1, 2000.
Section 1.2 Classification of Loans and Borrowings
For purposes of this Credit Agreement, Loans and Borrowings may be
classified and referred to by Type (e.g., a "Eurodollar Loan" or "Eurodollar
Borrowing").
Section 1.3 Terms Generally
The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (ii) any definition of or reference to any law shall be
construed as referring to such law as from time to time amended and any
successor thereto and the rules and regulations promulgated from time to time
thereunder, (iii) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (iv) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Credit Agreement in its entirety and not to any particular provision
hereof, (v) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Credit Agreement and (vi) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
Section 1.4 Accounting Terms; GAAP
Except as otherwise expressly provided herein, all terms of an accounting
or financial nature shall be construed in accordance with GAAP, as in effect
from time to time, provided that, if the Borrower notifies the Administrative
Agent that the Borrower requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date hereof in GAAP or in
the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith. Unless the context otherwise requires, any reference to a
fiscal period shall refer to the relevant fiscal period of the Borrower.
ARTICLE 2. THE CREDITS
Section 2.1 Commitments
Subject to the terms and conditions set forth herein, each
Lender agrees to make Loans to the Borrower in dollars from time to time during
the Availability Period in an aggregate principal amount that will not result in
such Lender's Credit Exposure exceeding such Lender's Commitment. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Loans.
Section 2.2 Loans and Borrowings
(a) Each Loan shall be made as part of a Borrowing consisting of Loans made
by the Lenders ratably in accordance with their respective Commitments. The
failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder, provided that the
Commitments of the Lenders are several, and no Lender shall be responsible for
any other Lender's failure to make Loans as required.
(b) Subject to Section 3.4, each Borrowing shall be comprised entirely of
(i) Loans and (ii) ABR Loans or Eurodollar Loans, as applicable, in each case as
the Borrower may request in accordance herewith. Each Lender at its option may
make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate
of such Lender to make such Loan, provided that any exercise of such option
shall not affect the obligation of the Borrower to repay such Loan in accordance
with the terms of this Credit Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $500,000 and not less than $1,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $500,000 and not less than $1,000,000, provided that an ABR
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments. Borrowings of more than one Type may be
outstanding at the same time, provided that there shall not at any time be more
than a total of ten Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Credit Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
Section 2.3 Requests for Borrowings
(a) To request a Borrowing, the Borrower shall notify the Administrative
Agent of such request by telephone (i) in the case of a Eurodollar Borrowing,
not later than 10:30 a.m., New York City time, three Business Days before the
date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not
later than 10:30 a.m., New York City time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Borrowing Request in a form approved by the Administrative Agent
signed by the Borrower. Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.2:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.4.
(b) If no election as to the Type of Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
Section 2.4 Funding of Borrowings
(a) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:30
p.m., New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders. Subject to
Section 5.2, the Administrative Agent will make such Loans available to the
Borrower by promptly crediting or otherwise transferring the amounts so
received, in like funds, to an account of the Borrower designated by the
Borrower in the applicable Borrowing Request.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section,
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then such
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
that would be otherwise applicable to such Borrowing. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.
(c) If a Lender makes a new Loan to the Borrower on a borrowing date on
which the Borrower is to repay a Loan of such Lender, such Lender shall apply
the proceeds of such new Loan to make such repayment, and only the excess of the
proceeds of such new Loan over the Loan being repaid need be made available to
the Administrative Agent.
Section 2.5 Termination and Reduction of Commitments
(a) Unless previously terminated, the Commitments shall terminate on the
earlier of (i) the occurrence of a Change in Control or (ii) the Maturity Date.
(b) The Borrower may at any time terminate, or from time to time reduce,
the Commitments, provided that the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.7, the sum of the Credit Exposures would exceed the
total Commitments, and (ii) each such reduction shall be in an amount that is an
integral multiple of $1,000,000 and not less than $2,000,000.
(c) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (c) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable, provided that a notice of termination of
the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Commitments hereunder shall be
permanent. Each reduction of the Commitments hereunder shall be made ratably
among the Lenders in accordance with their respective Commitments.
Section 2.6 Repayment of Loans; Evidence of Debt
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the debt of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (d)
or (e) of this Section shall, to the extent not inconsistent with any entries
made in any promissory note, be prima facie evidence of the existence and
amounts of the obligations recorded therein, provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Credit Agreement.
(e) Any Lender may request that the Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender, (i) a promissory note payable to the order of such Lender, each
substantially in the form of Exhibit C. In addition, if requested by a Lender,
its promissory note or notes may be made payable to such Lender and its
registered assigns in which case all Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 10.4) be represented by one or more promissory notes in like form
payable to the order of the payee named therein and its registered assigns.
Section 2.7 Prepayment of Borrowings
(a) The Borrower shall have the right at any time and from time to time to
prepay any Borrowing in whole or in part, subject to the requirements of this
Section.
(b) In the event of any partial reduction or termination of the
Commitments, then (i) at or prior to the date of such reduction or termination,
the Administrative Agent shall notify the Borrower and the Lenders of the sum of
the Credit Exposures after giving effect thereto and (ii) if such sum would
exceed the total Commitments after giving effect to such reduction or
termination, then the Borrower shall, on the date of such reduction or
termination, prepay Borrowings in an amount sufficient to eliminate such excess.
Without limiting the foregoing, on the occurrence of a Change of Control the
Borrower shall repay the outstanding principal balance of all Borrowings
together with all accrued and unpaid interest, fees and other amounts due under
the Loan Documents.
(c) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 10:30 a.m., New York City
time, three Business Days before the date of prepayment or (ii) in the case of
prepayment of an ABR Borrowing, not later than 10:30 a.m., New York City time,
on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid, provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.5, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.5. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing under Section 2.7(a) shall, when added to the amount of each
concurrent reduction of the Commitments and prepayment of Borrowings under such
Sections, be in an integral multiple of $500,000 and not less than $1,000,000.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 3.1.
Section 2.8 Payments Generally; Pro Rata Treatment; Sharing of Setoffs
(a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal of Loans,
interest or fees, or of amounts payable under Sections 3.5, 3.6, 3.7 or 10.3, or
otherwise) prior to 3:00 p.m., New York City time, on the date when due, in
immediately available funds, without setoff or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its office at One Wall Street, New
York, New York, or such other domestic office as to which the Administrative
Agent may notify the other parties hereto, and except that payments pursuant to
Sections 3.5, 3.6, 3.7 and 10.3 shall be made directly to the Persons entitled
thereto. The Administrative Agent shall distribute any such payments received by
it for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment hereunder shall be due on a day that
is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal of Loans, interest,
fees and commissions then due hereunder, such funds shall be applied (i) first,
towards payment of interest, fees and commissions then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest,
fees and commissions then due to such parties and (ii) second, towards payment
of principal of Loans then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal of Loans then due to such
parties.
(c) If any Lender shall, by exercising any right of setoff or counterclaim
or otherwise, obtain payment in respect of any principal of, or interest on, any
of its Loans resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of, and accrued interest on, their respective Loans,
provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment made by the Borrower pursuant to and in
accordance with the express terms of this Credit Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the applicable Credit Parties hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to such Credit Parties the amount
due. In such event, if the Borrower has not in fact made such payment, then each
such Credit Party severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Credit Party with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Credit Party shall fail to make any payment required to be made
by it pursuant to Section 2.4(b) then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Credit
Party to satisfy such Credit Party's obligations under such Sections until all
such unsatisfied obligations are fully paid.
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC.
Section 3.1 Interest
(a) The Loans comprising each ABR Borrowing shall bear interest at the
Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus
the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or interest on any
Loan or any fee or other amount payable by the Borrower hereunder is not paid
when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the Alternate
Base Rate plus the Applicable Margin.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan, provided that (i) interest accrued pursuant
to paragraph (c) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than the prepayment of an ABR
Loan prior to the end of the Availability Period), accrued interest on the
principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment, and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360
days, except that interest computed by reference to the Alternate Base Rate at
times when the Alternate Base Rate is based on the Prime Rate shall be computed
on the basis of a year of 365 days (or 366 days in a leap year), and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate, Adjusted
LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent clearly demonstrable error.
Section 3.2 Interest Elections
(a) Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section. The Borrower
may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall notify
the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.3 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.2:
(i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing
(in which case the information to be specified pursuant to clauses (iii)
and (iv) of this paragraph shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such
Interest Period, such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default has
occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies the Borrower, then, so long as an Event
of Default is continuing, (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of
the Interest Period applicable thereto.
Section 3.3 Fees
(a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender, a facility fee, which shall accrue at a rate per
annum equal to the Applicable Margin on the daily amount of the Commitment
of such Lender (regardless of usage) during the period from and including
the Effective Date to but excluding the date on which such Commitment
terminates; provided that, if such Lender continues to have any Credit
Exposure after its Commitment terminates, then such facility fee shall
continue to accrue on the daily amount of such Lender's Credit Exposure
from and including the date on which such Lender's Commitment terminates to
but excluding the date on which such Lender ceases to have any Credit
Exposure. Accrued facility fees shall be payable in arrears on the last day
of March, June, September and December of each year, each date on which the
Commitments are permanently reduced and on the date on which the
Commitments terminate, commencing on the first such date to occur after the
date hereof, provided that all unpaid facility fees shall be payable on the
date on which the Commitments terminate. All commitment fees shall be
computed on the basis of a year of 365 days (or 366 days in a leap year)
and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
(b) The Borrower agrees to pay to the Administrative Agent, for the
pro rata account of the Lenders in accordance with their Applicable
Percentages, a utilization fee at a rate per annum equal to the Applicable
Margin on the total Credit Exposures for each day during the Availability
Period on which such Credit Exposure exceeds 25% of the total Commitments
of all Lenders. The utilization fees shall be payable in arrears on the
fifteenth day of March, June, September and December of each year and on
the date on which the Commitments terminate, commencing on the first such
date to occur after the date hereof, provided that all unpaid utilization
fees shall be payable on the date on which the Commitments terminate. All
utilization fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, the administrative agency fee and other amounts payable in the
amounts and at the times separately agreed upon between the Borrower and
the Administrative Agent.
(d) All fees and other amounts payable hereunder shall be paid on the
dates due, in immediately available funds, to the Administrative Agent for
distribution, in the case of facility and utilization fees, to the Lenders.
Section 3.4 Alternate Rate of Interest
If prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO Rate
or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by any Lender that the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period will not adequately and fairly reflect the cost to such Lender
of making or maintaining its Loan included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
Section 3.5 Increased Costs; Illegality
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Credit Party
(except any such reserve requirement reflected in the Adjusted
LIBO Rate);
(ii) impose on any Credit Party or the London interbank
market any other condition affecting this Credit Agreement, any
Eurodollar Loans made by such Credit Party or any participation
therein,
and the result of any of the foregoing shall be to increase the cost to such
Credit Party of making or maintaining any Eurodollar Loan hereunder or to
increase the cost to such Credit Party or to reduce the amount of any sum
received or receivable by such Credit Party hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to such Credit Party such
additional amount or amounts as will compensate such Credit Party for such
additional costs incurred or reduction suffered.
(b) If any Credit Party determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Credit Party's capital or on the capital of such Credit Party's holding company,
if any, as a consequence of this Credit Agreement or the Loans made by such
Credit Party to a level below that which such Credit Party or such Credit
Party's holding company could have achieved but for such Change in Law (taking
into consideration such Credit Party's policies and the policies of such Credit
Party's holding company with respect to capital adequacy), then from time to
time the Borrower will pay to such Credit Party such additional amount or
amounts as will compensate such Credit Party or such Credit Party's holding
company for any such reduction suffered.
(c) A certificate of a Credit Party setting forth the amount or amounts
necessary to compensate such Credit Party or its holding company, as applicable,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Credit Party the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Credit Party to demand compensation
pursuant to this Section shall not constitute a waiver of such Credit Party's
right to demand such compensation; provided that the Borrower shall not be
required to compensate a Credit Party pursuant to this Section for any increased
costs or reductions incurred more than 90 days prior to the date that such
Credit Party notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Credit Party's intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 90-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
(e) Notwithstanding any other provision of this Credit Agreement, if, after
the date of this Credit Agreement, any Change in Law shall make it unlawful for
any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter
(for the duration of such unlawfulness) be made by such Lender hereunder
(or be continued for additional Interest Periods and ABR Loans will not
thereafter (for such duration) be converted into Eurodollar Loans),
whereupon any request for a Eurodollar Borrowing or to convert an ABR
Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing,
as applicable, for an additional Interest Period shall, as to such Lender
only, be deemed a request for an ABR Loan (or a request to continue an ABR
Loan as such for an additional Interest Period or to convert a Eurodollar
Loan into an ABR Loan, as applicable), unless such declaration shall be
subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such Eurodollar
Loans shall be automatically converted to ABR Loans, as of the effective
date of such notice as provided in the last sentence of this paragraph.
In the event any Lender shall exercise its rights under (i) or (ii) of this
paragraph, all payments and prepayments of principal that would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans, as applicable. For purposes of this
paragraph, a notice to the Borrower by any Lender shall be effective as to each
Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest
Period currently applicable to such Eurodollar Loan; in all other cases such
notice shall be effective on the date of receipt by the Borrower.
Section 3.6 Break Funding Payments
In the event of (a) the payment or prepayment (voluntary or otherwise)
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto (regardless of whether such notice may
be revoked under Section 2.7(d) and is revoked in accordance therewith), or
(d) the assignment of any Eurodollar Loan other than on the last day of the
Interest Period or maturity date applicable thereto as a result of a
request by any Borrower pursuant to Section 3.8(b), then, in any such
event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest that would have accrued on the principal amount of such Loan had
such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been
the Interest Period for such Loan), over (ii) the amount of interest that
would accrue on such principal amount for such period at the interest rate
that such Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market. A certificate of any Lender setting forth
any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender the amount shown
as due on any such certificate within 10 days after receipt thereof.
Section 3.7 Taxes
(a) Any and all payments by or on account of any obligation of the Borrower
hereunder and under any other Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes, provided that, if
the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable shall be increased as necessary so
that, after making all required deductions (including deductions applicable to
additional sums payable under this Section), the applicable Credit Party
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify each Credit Party, within ten days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by such Credit Party on or with respect to any payment by or on
account of any obligation of the Borrower under the Loan Documents (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Credit Party, or by the
Administrative Agent on its own behalf or on behalf of a Credit Party, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under the Loan Documents shall deliver to the Borrower (with a copy to
the Administrative Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by applicable law
or reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.
Section 3.8 Mitigation Obligations
(a) If any Lender requests compensation under Section 3.5, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.7,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans (or any participation therein) hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.5
or 3.7, as applicable, in the future and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 3.5, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.7, in
an aggregate amount in excess of $25,000, then the Borrower may, at its sole
option and expense (including the fees referred to in Section 10.4(b)) and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 10.4), all its interests, rights and
obligations under the Loan Documents to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section 3.5
or payments required to be made pursuant to Section 3.7, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Credit Parties that:
Section 4.1 Organization; Powers
Each of the Borrower and the Significant Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
Section 4.2 Authorization; Enforceability
The Transactions are within the corporate powers of the Borrower and have
been duly authorized by all necessary corporate and, if required, equityholder
action. Each Loan Document has been duly executed and delivered by the Borrower
and constitutes a legal, valid and binding obligation thereof, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.
Section 4.3 Governmental Approvals; No Conflicts
(a) On or prior to the date on which the Lenders are obligated to make the
initial Loans hereunder in accordance with Section 5.1, (i) the State of Maine
Public Utilities Commission and the Federal Energy Regulatory Commission have
each taken all action necessary to authorize the Borrower to enter into the Loan
Documents, to incur the Indebtedness hereunder, and to take all actions
contemplated thereby or in connection therewith and (ii) the State of
Connecticut Department of Public Utility Control shall have waived jurisdiction
over the foregoing, and such authorizations and waiver shall remain in full
force and effect in the form issued. No other consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
is required for the due execution, delivery and performance by the Borrower of
the Loan Documents.
(b) The execution and delivery of this Credit Agreement (i) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any order of any Governmental
Authority, (ii) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any of the
Significant Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by the Borrower or any of the Significant
Subsidiaries and (iii) will not result in the creation or imposition of any Lien
on any asset of the Borrower or any of the Significant Subsidiaries (other than
Liens permitted by Section 7.2).
(c) On and after the receipt of the authorizations, waiver and consents
referred to in Sections 5.1(j) and (m), the performance by the Borrower of each
Loan Document, the borrowing of the Loans, and the use of the proceeds of the
Loans (i) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of the Borrower or any order of any
Governmental Authority, (ii) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of the
Significant Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by the Borrower or any of the Significant
Subsidiaries and (iii) will not result in the creation or imposition of any Lien
on any asset of the Borrower or any of the Significant Subsidiaries (other than
Liens permitted by Section 7.2).
Section 4.4 Financial Condition; No Material Adverse Change
(a) The Borrower has heretofore furnished to the Credit Parties (i) the
combined Form 10-K for the fiscal year ended December 31, 1998 of CMP Group and
the Borrower as filed with the SEC, containing the consolidated balance sheet of
the Borrower and the consolidated Subsidiaries as of and for the fiscal years
ended December 31, 1998 and December 31, 1997, the related consolidated
statement of earnings, capitalization and interim financing, changes in
stockholders' equity and cash flows as of and for the fiscal years ended
December 31, 1998, December 31, 1997 and December 31, 1996, reported on by
PriceWaterhouseCoopers LLP independent public accountants, and (ii) the combined
Form 10-Q of CMP Group and the Borrower as filed with the SEC, for the fiscal
year quarter ended September 30, 1999, containing the consolidated balance sheet
of the Borrower and the consolidated Subsidiaries and statements of earnings,
stockholders' equity and liabilities and cash flows as of and for such fiscal
quarter and for the portion of the fiscal year then, certified by its chief
financial officer. The consolidated financial statements referred to in clauses
(i) and (ii) above present fairly, in all material respects, the financial
position and results of operations and cash flows of the Borrower and the
Subsidiaries as of such dates and for the indicated periods in accordance with
GAAP and are consistent with the books and records of the Borrower (which books
and records are correct and complete), subject to year-end audit adjustments and
the absence of footnotes in the case of the statements referred to in clause
(ii) above.
(b) Except as disclosed in the Pre-Closing 1934 Act Reports, since December
31, 1998, there has been no material adverse change in the financial condition,
operations or properties of the Borrower (on an individual basis) or the
Borrower and the Subsidiaries, taken as a whole.
Section 4.5 Properties
(a) Each of the Borrower and the Significant Subsidiaries has good title
to, or valid leasehold interests in, all its real and personal property material
to its business, except for minor defects in title that do not interfere with
its ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Borrower and the Significant Subsidiaries owns, or is
entitled to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and the Significant Subsidiaries does not infringe upon the rights of
any other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
Section 4.6 Litigation and Environmental Matters
(a) There are no actions, suits or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of the Significant
Subsidiaries (i) that could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any Loan Document or the Transactions.
(b) The Borrower and each of its Significant Subsidiaries have complied
with and are in compliance with, all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws except for such
non-compliance as could not reasonably be expected to result in a Material
Adverse Effect. Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect:
(i) there are no pending or, to the Borrower's knowledge, threatened
Environmental Claims against the Borrower or any of its Significant
Subsidiaries (including any such claim arising out of the ownership, lease
or operation by the Borrower or any of its Significant Subsidiaries of any
real property no longer owned, leased or operated by the Borrower or any of
its Significant Subsidiaries) or any real property owned, leased or
operated by the Borrower or any of its Significant Subsidiaries, and
(ii) there are no facts, circumstances, conditions or occurrences
known to the Borrower with respect to the business or operations of the
Borrower or any of its Significant Subsidiaries, or any real property
owned, leased or operated by the Borrower or any of its Significant
Subsidiaries (including any real property formerly owned, leased or
operated by the Borrower or any of its Significant Subsidiaries but no
longer owned, leased or operated by the Borrower or any of its Significant
Subsidiaries) or any property adjoining or adjacent to any such real
property that could be expected (A) to form the basis of an Environmental
Claim against the Borrower or any of its Significant Subsidiaries or any
real property owned, leased or operated by the Borrower or any of its
Significant Subsidiaries or (B) to cause any real property owned, leased or
operated by the Borrower or any of its Significant Subsidiaries to be
subject to any restrictions on the ownership, occupancy or transferability
of such real property by the Borrower or any of its Significant
Subsidiaries under any applicable Environmental Law; and
(c) Hazardous Materials have not at any time been generated, used, treated
or stored on, or transported to or from, any real property owned, leased or
operated by the Borrower or any of its Subsidiaries where such generation, use,
treatment or storage has violated any applicable Environmental Law and Hazardous
Materials have not at any time been Released on or from any real property owned,
leased or operated by Borrower or any of its Subsidiaries where such Release has
violated any applicable Environmental Law, except for such violations as could
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(d) Since the date of this Credit Agreement, there has been no change in
the status of the Disclosed Matters or the Pre-Closing 1934 Act Reports that,
individually or in the aggregate, has resulted in, or materially increased the
likelihood of, a Material Adverse Effect.
Section 4.7 Compliance with Laws and Agreements
Each of the Borrower and the Significant Subsidiaries is in compliance with
all laws, regulations and orders of any Governmental Authority applicable to it
or its property and all indentures, agreements and other instruments binding
upon it or its property, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
Section 4.8 Investment and Holding Company Status
Neither the Borrower nor any of the Significant Subsidiaries is an
investment company as defined in, or subject to regulation under, the Investment
Company Act of 1940. The Borrower is a "holding company" for the purposes of the
Public Utility Holding Company Act of 1935 by reason of its ownership of the
stock of certain corporations, but is exempt pursuant to an order of the SEC
under the Public Utility Holding Company Act of 1935 from all of the provisions
thereof except Section 9(a)(2) relating to the acquisition of securities of
public utility affiliates. Neither the Borrower nor any of the Significant
Subsidiaries is subject to any statute or regulation which regulates the
incurring by the Borrower of the Obligations, except for (i) regulation by the
State of Maine Public Utilities Commission and the Federal Energy Regulatory
Commission, which on or before the date the Lenders are obligated to make Loans
to the Borrower pursuant to Article 5 hereunder shall have taken all actions
necessary for the Borrower to incur the Obligations, and (ii) regulation by the
State of Connecticut Department of Public Utility Control, which on or before
the date the Lenders are obligated to make Loans to the Borrower pursuant to
Article 5 hereunder shall have waived jurisdiction over the Transactions.
Section 4.9 Taxes
Each of the Borrower and the Significant Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the Borrower or such Subsidiary, as applicable, has set aside on its
books adequate reserves to the extent such reserves are required by GAAP or (b)
to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
Section 4.10 ERISA
Each Plan and, to the knowledge of the Borrower without special inquiry,
each Multiemployer Plan, is in material compliance with the applicable
provisions of ERISA and the Code. Except to the extent that a failure to do so
has resulted or could reasonably be expected to result in a Material Adverse
Effect, the minimum funding standards of Section 412 of the Code and Section 302
of ERISA have been met in connection with all Plans and, to the knowledge of the
Borrower, no condition exists with respect to which the institution of
proceedings to terminate any Plan under Section 4042 of ERISA could reasonably
be expected. To the knowledge of the Borrower without special inquiry, no
Multiemployer Plan is currently insolvent or in reorganization or has been
terminated within the meaning of ERISA, pursuant to which the Borrower has
incurred or could reasonably be expected to incur material liability.
Section 4.11 Disclosure
The Borrower has disclosed to the Credit Parties all agreements,
instruments and corporate or other restrictions to which it or any of the
Significant Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower or any
Significant Subsidiary to any Credit Party in connection with the negotiation of
the Loan Documents or delivered thereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
Section 4.12 Significant Subsidiaries
Schedule 4.12 sets forth the name of, and the direct or indirect ownership
interest of the Borrower in, each Subsidiary and identifies each Subsidiary that
is a Significant Subsidiary, in each case as of the Effective Date.
Section 4.13 Labor Matters
As of the Effective Date, there are no strikes, lockouts or slowdowns
against the Borrower or any Significant Subsidiary pending or, to the knowledge
of the Borrower, threatened. The consummation of the Transactions will not give
rise to any right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Borrower or any
Significant Subsidiary is bound.
Section 4.14 Security Agreement
The Security Agreement is effective to create in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and when (i) the financing statements in appropriate form
are filed in the offices specified on Schedule 6 to the Perfection Certificate
and (ii) all other applicable filings under the Uniform Commercial Code or
otherwise that are required under the Loan Documents are made, in each case as
permitted by the Security Agreement, the Security Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the grantors thereunder in such Collateral, in each case prior and superior
in right to any other Person, other than with respect to Liens expressly
permitted by Section 7.2.
Section 4.15 Federal Reserve Regulations
(a) Neither the Borrower nor any of the Subsidiaries are engaged
principally, or as one of their important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase,
acquire or carry any Margin Stock or for any purpose that entails a violation
of, or that is inconsistent with, the provisions of the regulations of the
Board, including Regulation T, U or X.
Section 4.16 Year 2000 Issue
Each of the Borrower and each of the Significant Subsidiaries has reviewed
the effect of the Year 2000 Issue on the computer software, hardware and
firmware systems and equipment containing embedded microchips owned or operated
by or for the Borrower and each Subsidiary or used or relied upon in the conduct
of their business (including systems and equipment supplied by others or with
which such computer systems of the Borrower and the Significant Subsidiaries
interface). The costs to the Borrower and the Significant Subsidiaries of any
reprogramming required as a result of the Year 2000 Issue to permit the proper
functioning of such systems and equipment and the proper processing of data, and
the testing of such reprogramming, and of the reasonably foreseeable
consequences of the Year 2000 Issue to the Borrower or any of the Significant
Subsidiaries (including reprogramming errors and the failure of systems or
equipment supplied by others) are not reasonably expected to result in a Default
or Event of Default or to have a Material Adverse Effect.
ARTICLE 5. CONDITIONS
Section 5.1 First Loans
In addition to the conditions precedent set forth in Section 5.2, the
obligation of each Lender to make Loans on the first borrowing date shall be
subject to the fulfillment of the following conditions (or the waiver thereof in
accordance with Section 10.2):
(a) This Credit Agreement shall have become effective in accordance with
Section 10.13.
(b) The Administrative Agent shall have received a Note for each Lender
signed on behalf of the Borrower.
(c) The Administrative Agent shall have received a favorable written
opinion (addressed to the Credit Parties and dated the earlier of the first
borrowing date and date on which the conditions set forth in this Section 5.1
are satisfied) from (i) LeBoeuf, Lamb, Greene & MacRae, LLP, special counsel to
the Borrower, and (ii) William M. Finn, Corporate Counsel of the Borrower, each
in form and substance satisfactory to the Administrative Agent. The Borrower
hereby requests such counsel to deliver such opinion.
(d) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Borrower, the
authorization of the Transactions and any other legal matters relating to the
Borrower, the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.
(e) The Administrative Agent shall have received evidence that the Existing
Credit Agreement has been terminated, all amounts due thereunder have been paid,
all guarantees, if any, thereof have been terminated and all security interests,
if any, securing the obligations thereunder have been released.
(f) The Administrative Agent shall have received a certificate, dated the
earlier of the first borrowing date and date on which the conditions set forth
in this Section 5.1 are satisfied and signed by the President, a Vice President
or a Financial Officer of the Borrower, (i) confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 5.2 and (ii)
certifying that except as disclosed in the Pre-Closing 1934 Act Reports, since
December 31, 1998, there has been no material adverse change in the financial
condition, operations or properties of the of the Borrower (on an individual
basis) or the Borrower and the Subsidiaries, taken as a whole.
(g) The Administrative Agent shall have received counterparts of a security
agreement, in form and substance satisfactory to the Administrative Agent (the
"Security Agreement") signed on behalf of the Borrower, together with the
following:
(i) all instruments and other documents, including Uniform Commercial
Code financing statements, required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded to create or
perfect the Liens intended to be created under the Security Agreement; and
(ii) a completed Perfection Certificate, dated the earlier of the
first borrowing date and date on which the conditions set forth in this
Section 5.1 are satisfied and signed by the President, a Vice President or
a Financial Officer and the chief legal officer of the Borrower, together
with all attachments contemplated thereby, including the results of a
search of the Uniform Commercial Code (or equivalent) filings made with
respect to the Borrower in the jurisdictions contemplated by the Perfection
Certificate and copies of the financing statements (or similar documents)
disclosed by such search and evidence reasonably satisfactory to the
Administrative Agent that the Liens indicated by such financing statements
(or similar documents) are permitted by Section 7.2 or have been released.
(h) The performance by the Borrower of its obligations under each Loan
Document shall not (i) violate any applicable law, statute, rule or regulation
or (ii) conflict with, or result in a default or event of default under, any
Material Agreement, and the Administrative Agent shall have received a legal
opinion and/or officer's certificate to such effect, satisfactory to the
Administrative Agent.
(i) The Administrative Agent shall have received an officer's certificate
of the Borrower attaching a true and complete copy of each Material Agreement.
(j) The Administrative Agent shall have received, with copies and executed
counterparts for each Lender, true and correct copies (in each case certified as
to authenticity on such date on behalf of the Borrower) of the order entered by
the State of Maine Public Utilities Commission, the waiver of jurisdiction by
the State of Connecticut Department of Public Utility Control, and the
authorization of the Federal Energy Regulatory Commission as referred to in
Section 4.3, and the foregoing shall be satisfactory in form and substance to
the Administrative Agent and shall be in full force and effect.
(k) After giving effect to the Transactions occurring on the earlier of the
first borrowing date and date on which the conditions set forth in this Section
5.1 are satisfied, none of the Borrower or any of the Significant Subsidiaries
shall have outstanding any Indebtedness, other than (i) Indebtedness incurred
under the Loan Documents and (ii) Indebtedness set forth on Schedule 7.1.
(l) The Administrative Agent shall have received a certificate, dated the
earlier of the first borrowing date and date on which the conditions set forth
in this Section 5.1 are satisfied and signed by a Financial Officer of the
Borrower, setting forth reasonably detailed calculations demonstrating
compliance with Sections 7.11 and 7.12 on a pro forma basis immediately after
giving effect to the Transactions occurring on such date.
(m) The Administrative Agent shall have received a consent of Energy East
and Merger Corp. to the extent required by the Merger Agreement and of the
Finance Authority of Maine to the extent required by the Fame Loan Agreement to
the execution, delivery and performance of the Loan Documents by the Borrower,
including the incurrence of the Indebtedness and the granting of the security
interest in the Collateral thereunder.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans
hereunder shall not become effective unless except as provided below, each of
the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or
prior to 3:00 p.m., New York City time, on January 31, 2000 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time), provided, however, that so long as the Borrower is diligently
seeking the authorization of the Federal Energy Regulatory Commission as
referred to in Section 4.3 in good faith, the Borrower need not satisfy the
conditions set forth in Section 5.1(j) to the extent related to such
authorization until February 29, 2000.
Section 5.2 Each Credit Event
The obligation of each Lender to make a Loan on the occasion of any
Borrowing is subject to the satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set forth in this
Credit Agreement shall be true and correct on and as of the date of such
Borrowing with the same effect as though such representations and warranties had
been made on such date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties shall have been true and correct on and as of such earlier date.
(b) At the time of and immediately after giving effect to such Borrowing,
no Default shall have occurred and be continuing.
(c) The Administrative Agent shall have received such other documentation
and assurances as shall be reasonably required by it in connection therewith.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs (a)
and (b) of this Section.
ARTICLE 6. AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees and other amounts payable under the Loan
Documents shall have been paid in full, the Borrower covenants and agrees with
the Lenders that:
Section 6.1 Financial Statements and Other Information
The Borrower will furnish to the Administrative Agent and each Lender:
(a) within 100 days after the end of each fiscal year, a copy of its
audited consolidated balance sheet and related statements of income,
stockholders' equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by PriceWaterhouseCoopers or other independent public
accountants of recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, provided that the Borrower
may satisfy the requirements of this subsection (a) by the delivery of its Form
10-K filed with the SEC;
(b) within 55 days after the end of each of the first three fiscal quarters
of each fiscal year, a copy of its consolidated balance sheet and related
statements of earnings, stockholders' equity and cash flows as of the end of and
for such fiscal quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results
of operations of the Borrower and the consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes, provided that
the Borrower may satisfy the requirements of this subsection (b) by the delivery
of its Form 10-Q filed with the SEC;
(c) concurrently with any delivery of financial statements under clause (a)
or (b) above, a certificate of a Financial Officer (i) certifying as to whether
a Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance with
Sections 7.11 and 7.12, (iii) setting forth the name of each Subsidiary which is
a Significant Subsidiary (including reasonably detailed calculations
demonstrating that other Subsidiaries are not Significant Subsidiaries), and
(iv) stating whether any material change in GAAP or in the application thereof
in any material respect has occurred since the date of the audited financial
statements referred to in Section 4.4 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;
(d) promptly upon request after the same become publicly available, copies
of all periodic and other reports, proxy statements, registration statements and
other materials filed by the Borrower or any Subsidiary with the Securities and
Exchange Commission, or with any national securities exchange, or distributed by
the Borrower to its public shareholders generally, as the case may be; and
(e) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Significant Subsidiary, or compliance with the terms of the Loan
Documents, as the Administrative Agent or any Lender may reasonably request.
Section 6.2 Notices of Material Events
The Borrower will furnish to the Administrative Agent and each Lender
prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that could in the good faith opinion of the
Borrower reasonably be expected to result in a Material Adverse Effect; and
(c) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
Section 6.3 Existence; Conduct of Business
The Borrower will, and will cause each of the Significant Subsidiaries to,
do or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business, provided that
the foregoing shall not prohibit any merger, consolidation, liquidation,
dissolution, sale or disposition permitted under Section 7.3 and 7.5.
Section 6.4 Payment of Obligations
The Borrower will, and will cause each of the Significant Subsidiaries to,
pay its obligations, including Tax liabilities, that, if not paid, could result
in a Material Adverse Effect before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Significant
Subsidiary has set aside on its books adequate reserves with respect thereto to
the extent required by GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.
Section 6.5 Maintenance of Properties
The Borrower will, and will cause each of the Significant Subsidiaries to,
keep and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted, provided, however,
that the foregoing shall not prohibit any sale, disposition, merger,
consolidation, liquidation or dissolution permitted by Section 7.3 or 7.5.
Section 6.6 Books and Records; Inspection Rights
The Borrower will, and will cause each of the Significant Subsidiaries to,
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of the Significant
Subsidiaries to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
Section 6.7 Compliance with Laws
The Borrower will, and will cause each of the Significant Subsidiaries to,
comply with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
Section 6.8 Use of Proceeds
The proceeds of the Loans will be used only for general corporate purposes
not inconsistent with the terms hereof, including commercial paper backup. No
part of the proceeds of any Loan will be used, whether directly or indirectly,
and whether immediately, incidentally or ultimately, to purchase, acquire or
carry any Margin Stock or for any purpose that entails a violation of any of the
regulations of the Board, including Regulations T, U and X.
Section 6.9 Information Regarding Collateral
(a) The Borrower will furnish to the Administrative Agent prompt written
notice of any change in (i) the legal name of the Borrower or in any trade name
used to identify it in the conduct of its business or in the ownership of its
properties, (ii) the location of the chief executive office of the Borrower, its
principal place of business, any office in which it maintains books or records
relating to Collateral, (iii) the identity or organizational structure of the
Borrower such that a filed financing statement becomes misleading or (iv) the
Federal Taxpayer Identification Number of the Borrower. On and after the date on
which the Administrative Agent elects to perfect its security interest pursuant
to the Security Agreement, the Borrower agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have been made
under the Uniform Commercial Code or otherwise that are required in order for
the Administrative Agent to continue at all times following such change to have
a valid, legal and on perfected security interest in all the Collateral.
(b) Each year, at the time of delivery of annual financial statements with
respect to the preceding fiscal year pursuant to paragraphs (a) and (b) of
Section 6.1, the Borrower shall deliver to the Administrative Agent a
certificate of a Financial Officer and the chief legal officer of the Borrower,
(i) setting forth the information required pursuant to Sections 1 and 2 of the
Perfection Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate or the date of the most
recent certificate delivered pursuant to this Section and (ii) on and after the
date on which the Administrative Agent elects to perfect its security interest
pursuant to the Security Agreement, certifying that all Uniform Commercial Code
financing statements or other appropriate filings, including all refilings,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (i) above, and all other actions have been taken,
to the extent necessary to protect and perfect the security interests under the
Security Agreement for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
Section 6.10 Insurance
The Borrower will, and will cause each of the Significant Subsidiaries to,
maintain, with financially sound and reputable insurance companies, adequate
insurance for its insurable properties, all to such extent and against such
risks, including fire, casualty, business interruption and other risks insured
against by extended coverage, as is customary with companies in the same or
similar businesses operating in the same or similar locations.
Section 6.11 Further Assurances
The Borrower will execute any and all further documents, financing
statements, agreements and instruments, and take all such further actions
(including the filing and recording of financing statements and other
documents), that may be required under any applicable law, or which the
Administrative Agent or the Required Lenders may reasonably request, to
effectuate the transactions contemplated by the Loan Documents or to grant,
preserve, protect or, on and after the date on which the Administrative Agent
elects to perfect its security interest pursuant to the Security Agreement,
perfect the Liens created or intended to be created by the Security Agreement or
the validity or priority of any such Lien, all at the expense of the Borrower.
The Borrower also agrees to provide to the Administrative Agent, from time to
time upon request, evidence reasonably satisfactory to the Administrative Agent
as to the perfection and priority of the Liens created or intended to be created
by the Security Agreement.
Section 6.12 Environmental Compliance
The Borrower shall, and shall cause each of its Significant Subsidiaries
to, use and operate all of its facilities and property in compliance with all
Environmental Laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in effect
and remain in compliance therewith, and handle all Hazardous Materials in
compliance with all applicable Environmental Laws, except where noncompliance
with any of the foregoing could not reasonably be expected to have a Material
Adverse Effect.
ARTICLE 7. NEGATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees and other amounts payable under the Loan
Documents shall have been paid in full, the Borrower covenants and agrees with
the Lenders that:
Section 7.1 Indebtedness
(a) The Borrower will not, and will not permit any Significant Subsidiary
to, create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness existing on the date hereof and set forth in
Schedule 7.1 and all renewals and extensions thereof (except with respect
to Indebtedness in respect of the Existing Credit Agreement which is being
terminated on or prior to the Effective Date) in an aggregate principal
amount not in excess of the aggregate principal amount thereof outstanding
immediately prior to such renewal or extension;
(iii) Indebtedness incurred to finance the acquisition, construction
or improvement of any fixed or capital assets, including Capital Lease
Obligations and any Indebtedness assumed in connection with the acquisition
of any such assets or secured by a Lien on any such assets prior to the
acquisition thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof,
provided that (A) such Indebtedness is incurred prior to or within 120 days
after such acquisition or the completion of such construction or
improvement and (B) the aggregate principal amount of Indebtedness
permitted by this clause (iii) shall not exceed $40,000,000 at any time
outstanding;
(iv) Indebtedness, provided that (A) no Default shall exist
immediately before and after giving effect thereto and all of the
representations and warranties contained in Article 4 shall be true and
correct as if then made, (B) such Indebtedness shall be unsecured except to
the extent permitted by Section 7.2(j) and (C) in the case of Indebtedness
of (1) the Borrower, such Indebtedness is subordinated to the Indebtedness
under the Loan Documents on terms approved in writing by Super Majority
Lenders and (2) a Significant Subsidiary, the aggregate principal amount of
such Indebtedness outstanding at any time shall not exceed $10,000,000;
(v) other unsecured Indebtedness of the Borrower, including the
Indebtedness of the Borrower in respect of the Unsecured Medium Term Notes
and commercial paper, provided that at no time shall the sum of the
aggregate outstanding principal amount of all Indebtedness permitted by
this clause (v) plus the total Credit Exposure exceed $575,000,000; and
(vi) Guarantees (A) of the Obligations, (B) of Indebtedness permitted
by Section 7.1(a) (other than this clause (vi), (C) given, entered into or
created in connection with or as an inducement to (1) the purchase or sale
of capacity or energy (including support arrangements with respect to
generating plants and transmission and distribution facilities, and
contracts for the purchase of capacity and/or energy) or of fuel, (2) the
installation of energy-saving devices and taking of other energy-saving
measures, and (3) other operational matters in the ordinary course of
business; provided, that no individual Guarantee permitted under this
clause (3) may present a liability or exposure to the Borrower or a
Subsidiary in an amount greater than $10,000,000; and provided, further,
that this Section 7.1(a)(v) shall not permit the giving, entering into or
creation, after the date hereof, of any Guarantee (other than as required
under contracts existing on the date hereof) providing support for the
acquisition by the Borrower or a Subsidiary of generating capacity or a
generating plant (other than in connection with buyouts by the Borrower of
non-utility generating operations, in connection with power purchases
required by law or in connection with exchanges of capacity or plant
entitlements within the ordinary course of ensuring an adequate power
supply to mitigate the Borrower's risk, provided that no such exchange
shall exceed three years in duration) which individually presents a
liability or exposure to the Borrower or a Subsidiary in an amount greater
than $10,000,000.
(b) In any transaction providing for Indebtedness in excess of $1,000,000,
the Borrower will not enter into or become bound by any credit agreement or
other document or instrument which (i) contains financial covenants or events of
default that are more restrictive or onerous on the Borrower than those
covenants or events of default contained in this Credit Agreement or (ii)
provides for, or permits the exercise of, remedies upon the occurrence of an
event of default thereunder which are not provided for in, or permitted to be
exercised under or in respect of, this Credit Agreement (each such covenant,
event of default and provision described in the preceding clauses (i) and (ii)
being herein called a "More Favorable Provision"), unless, prior to or
simultaneously, (x) the Borrower executes and delivers to the Administrative
Agent an amendment to this Credit Agreement and such other documents and
instruments as the Administrative Agent shall reasonably request, in each case
reasonably satisfactory in form and substance to the Administrative Agent, which
modify the provisions of this Credit Agreement and the terms of the transactions
contemplated hereby and by the Loan Documents so as to give the Lenders the
benefits of each More Favorable Provision, and (y) the Borrower furnishes to the
Administrative Agent and the Lenders a copy of such credit agreement, or other
document or instrument.
Section 7.2 Liens
The Borrower will not, and will not permit any Significant
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrower or any Subsidiary
existing on the date hereof and set forth in Schedule 7.2, provided that (i)
such Lien shall not apply to any other property or asset of the Borrower or any
Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and any extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;
(d) purchase money Liens securing Indebtedness permitted by Section
7.1(a)(iii) incurred in connection with the acquisition after the date hereof of
any property by the Borrower or any Significant Subsidiary, provided that such
Indebtedness shall not exceed in any case 90% of the cost to the Borrower or
such Significant Subsidiary of the property acquired and each such Lien shall
cover only such property acquired (and renewals, replacements and improvements
thereof and thereto);
(e) Liens on nuclear fuel, or rights to purchase or use nuclear fuel, which
are created to secure, and only to secure, Indebtedness incurred for the purpose
of purchasing or arising as a result of leasing nuclear fuel for use in plants
in which the Borrower or a Significant Subsidiary as an interest;
(f) Liens on coal and fuel oil and proceeds thereof (excluding accounts
receivable arising from the sale of electrical energy) to secure, and only to
secure, Indebtedness incurred for the purpose of purchasing or storing such
fuels for use in plants of the Borrower or a Significant Subsidiary;
(g) Liens on computer and related equipment, vehicles, automotive equipment
and construction equipment, and the office and service buildings of the Borrower
or a Significant Subsidiary to secure Indebtedness permitted by Section
7.1(a)(iii) incurred for the financing or refinancing of the cost thereof,
provided that such Indebtedness shall not exceed in any case the cost to the
Borrower or such Significant Subsidiary of such property;
(h) any Lien, moneys sufficient for the discharge of which have been
deposited in trust with the trustee or mortgagee under the instrument evidencing
such Lien, with irrevocable authority to such trustee or mortgagee to apply such
moneys to the discharge of such Lien to the extent required for such purpose;
(i) rights reserved to or vested in others to take or receive any part of
the gas, by-products of gas or steam or electricity generated or produced by or
from any properties of the Borrower or any Subsidiary or with respect to any
other rights concerning supply, transportation or storage of a commodity which
is used in the ordinary course of business; and
(j) Liens in addition to those permitted by clauses (a) through (i) above
securing Indebtedness in an aggregate unpaid principal amount not in excess of
$15,000,000.
Section 7.3 Fundamental Changes
(a) The Borrower will not, and will not permit any Significant Subsidiary
to merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or all or substantially all of the equity
securities of any of the Significant Subsidiaries (in each case, whether now
owned or hereafter acquired), or liquidate or dissolve, except that, if at the
time thereof and immediately after giving effect thereto, no Default shall have
occurred and be continuing:
(i) any Significant Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving entity, any Significant
Subsidiary may merge into any Wholly-Owned Subsidiary in a transaction in
which such Wholly-Owned Subsidiary is the surviving entity;
(ii) any Significant Subsidiary may merge with any Person in a
transaction that is not permitted by clause (i) of this Section 7.3(a),
provided that such merger is permitted by Sections 7.4 or 7.5, as
applicable;
(iii) any Significant Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to any Wholly-Owned
Subsidiary;
(iv) the Borrower or any Significant Subsidiary may sell, transfer,
lease or otherwise dispose of its assets in a transaction that is not
permitted by clause (iii) of this Section 7.3(a), provided that such sale,
transfer, lease or other disposition is also permitted by Section 7.5.; and
(v) any Significant Subsidiary may liquidate or dissolve if the
Borrower determines in good faith that such liquidation or dissolution is
in the best interests of the Borrower and is not materially disadvantageous
to the Lenders.
(b) The Borrower will not, and will not permit any of the Significant
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and the Significant
Subsidiaries on the date of execution of this Credit Agreement and businesses
directly related thereto.
Section 7.4 Investments, Loans, Advances, Guarantees and Acquisitions
(a) The Borrower will not, and will not permit any of the Significant
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger)
any capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any Loans or advances to, make or permit to exist any Guarantees
of any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions (including pursuant to any merger)) any
assets of any other Person constituting a business unit (collectively,
"Investments"), except:
(i) Permitted Investments;
(ii) Investments existing on the date hereof and set forth in Schedule
7.4(a)(ii);
(iii) Guarantees permitted by Section 7.1(a)(v); and
(iv) other Investments, provided that immediately after giving effect
thereto, (A) no Default shall have occurred or be continuing and (B) the
aggregate book value of the assets of the Subsidiaries shall not exceed 15%
of the aggregate book value of the assets of the Borrower and the
Subsidiaries on a consolidated assets determined in accordance with GAAP,
provided, further that after the date hereof, neither the Borrower nor any
Subsidiary shall acquire any ownership interest in any nuclear energy
generating plants.
(b) Notwithstanding the foregoing, the following shall not be considered
Investments prohibited or limited by this Section 7.4(a): (i) current trade and
customer accounts receivable for property leased, goods furnished or services
rendered in the ordinary course of business and payable in accordance with
customary trade terms, (ii) deposits, advances or prepayments to suppliers for
property leased or licensed, goods furnished and services rendered in the
ordinary course of business, (iii) advance to employees for relocation and
travel expenses, drawing accounts and similar expenditures, (iv) stock or other
securities acquired in connection with the satisfaction or enforcement of
Indebtedness or claim due to the Borrower or any Subsidiary or as security for
any such Indebtedness or claim or (v) demand deposits in banks or similar
financial institutions.
(c) In determining the amount of outstanding Investments:
(i) the amount of any Investments shall be the cost thereof minus any
returns of capital in cash on such Investment (determined in accordance
with GAAP without regard to amounts realized as income on such Investment);
(ii) the amount of acquisition shall include the amount of any
Indebtedness assumed in connection with such purchase or secured by any
asset acquired in such purchase (whether or not any Indebtedness is
assumed) or for which any Person that becomes a Subsidiary is liable on the
date on which the securities of such Person are acquired; and
(iii) no Investment shall be increased as the result of an increase in
the undistributed retained earnings of the Person in which the Investment
was made or decreased as a result of an equity interest in the losses of
such Person.
Section 7.5 Asset Sales
The Borrower will not, and will not permit any of the Significant
Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant
to a merger) of any asset, including any equity securities, or enter into any
Sale and Leaseback Transaction, except:
(a) sales, transfers, leases and other dispositions of inventory, used or
surplus equipment and Permitted Investments, in each case in the ordinary course
of business;
(b) sales, transfers, leases and other dispositions of inventory and
Permitted Investments, in each case in the ordinary course of business;
(c) sales, transfers, leases and other dispositions of tangible assets no
longer used or useful or advantageous to the conduct of the business which are
to be replaced in the ordinary course of business to the extent necessary by
other tangible assets of equal or greater value;
(d) grants of licenses of products and intangible assets for fair value in
the ordinary course of business;
(e) grants of easements and other similar rights to use its real estate and
properties;
(f) other sales, transfers, leases and other dispositions and Sale and
Leaseback Transactions, provided that at the time thereof and immediately after
giving effect thereto, (i) no Default shall have occurred and be continuing,
(ii) the aggregate fair market value of all assets, sold, transferred, leased or
otherwise disposed of and all Sale and Leaseback Transactions in reliance upon
this subsection (f) shall not exceed $20,000,000 in the aggregate in any period
of 12 consecutive months, and (iii) all sales, transfers, leases and other
dispositions and all Sale and Leaseback Transactions permitted by this
subsection (f) shall be made for fair value;
(g) sales, transfers, leases and other dispositions of nuclear assets, any
generation assets, including contracts for the supply of generations; and
(h) entitlements to the Hydro-Quebec tie line.
Section 7.6 Hedging Agreements
The Borrower will not, and will not permit any of the Subsidiaries to,
enter into any Hedging Agreement, other than Hedging Agreements entered into in
the ordinary course of business to hedge or mitigate risks to which the Borrower
or any Subsidiary is exposed in the conduct of its business or the management of
its liabilities, including an interest rate risk management program.
Section 7.7 Restricted Payments
The Borrower will not declare or make, or agree to pay for or make,
directly or indirectly, any Restricted Payment, except that the Borrower may
declare and make Restricted Payments provided that immediately before and after
giving effect to such declaration or payment, no Event of Default shall have
occurred and be continuing.
Section 7.8 Transactions with Affiliates
The Borrower will not, and will not permit any of the Subsidiaries to,
sell, transfer, lease or otherwise dispose (including pursuant to a merger) any
property or assets to, or purchase, lease or otherwise acquire (including
pursuant to a merger) any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except on terms and conditions
not less favorable to the Borrower or such Subsidiary than could be obtained on
an arms-length basis from unrelated third parties, provided that this Section
shall not apply to any transaction that is permitted under Section 7.1, 7.3,
7.4, 7.5 or 7.8 between or among the Borrower and not involving any other
Affiliate.
Section 7.9 Restrictive Agreements
The Borrower will not, and will not permit any of the Significant
Subsidiaries to, directly or indirectly, enter into, incur or permit to exist
any agreement or other arrangement that prohibits, restricts or imposes any
condition upon (a) the ability of the Borrower to perform its obligations under
the Security Agreement or (b) the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its equity securities or to
make or repay Loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary, provided that
the foregoing shall not apply to restrictions and conditions imposed by (i)
applicable law, (ii) the Loan Documents, (iii) the FAME Loan Agreement, (iv)
covenants in documents creating Liens permitted by Section 7.2(d) prohibiting
further Liens on the assets encumbered thereby, and (v) immaterial agreements,
instruments, deeds and leases.
Section 7.10 Amendment of Material Documents
The Borrower will not, and will not permit any Significant Subsidiary to,
amend, modify or waive any of its rights under any Material Agreement or its
certificate of incorporation, by-laws or other organizational documents, other
than amendments, modifications or waivers that would not reasonably be expected
to adversely affect the Credit Parties.
Section 7.11 Interest Coverage Ratio
The Borrower will not permit the Interest Coverage Ratio as of the end of
any fiscal quarter to be less than 1.75:100.
Section 7.12 Capitalization Ratio
The Borrower will not permit the Capitalization Ratio at any time to be
greater than 0.65:1.00. This covenant will be tested as of the last day of each
fiscal quarter.
ARTICLE 8. EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee,
commission or any other amount (other than an amount referred to in clause (a)
of this Article) payable under any Loan Document, when and as the same shall
become due and payable, and such failure shall continue unremedied for a period
of five days.
(c) any representation or warranty made or deemed made by or on behalf of
the Borrower or by the Borrower on behalf of any Subsidiary in or in connection
with any Loan Document or any amendment or modification hereof or waiver
thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment
or modification hereof or waiver thereunder, shall prove to have been incorrect
in any material respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant, condition
or agreement contained in Sections, 6.3 or 6.8 or in Article 7;
(e) the Borrower shall fail to observe or perform any covenant, condition
or agreement contained in any Loan Document to which it is a party (other than
those specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after the Borrower shall or
reasonably should, have obtained knowledge thereof;
(f) the Borrower or any Subsidiary shall fail to make any payment (whether
of principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable (after giving
effect to any applicable grace period);
(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity, provided that this clause (g) shall not apply to secured Indebtedness
that becomes due solely as a result of the voluntary sale or transfer of the
property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Subsidiary or its debts, or of a substantial part
of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall be
entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in writing
its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate amount
in excess of $10,000,000 shall be rendered against the Borrower or any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Subsidiary to enforce any such
judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect;
(m) (i) any Loan Document shall cease, for any reason, to be in full force
and effect, or the Borrower shall so assert in writing or shall disavow any of
its obligations thereunder or (ii) any representation, warranty, covenant or
other obligation for the benefit of the Borrower or any of its Affiliates
contained in any Loan Document that, by its terms, survives for any period shall
cease, for any reason, to so survive; or
(n) any Lien purported to be created under the Security Agreement shall
cease to be, or shall be asserted by the Borrower not to be, a valid and after
the Administrative Agent has elected to perfect its security interest under the
Security Agreement, perfected Lien on any Collateral, with the priority required
by the Security Agreement, except as a result of the sale or other disposition
of the applicable Collateral in a transaction permitted under the Loan
Documents;
then, and in every such event (other than an event described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued under the Loan Documents, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the
Borrower accrued under the Loan Documents, shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
ARTICLE 9. THE ADMINISTRATIVE AGENT
Each Credit Party hereby irrevocably appoints the Administrative Agent as
its agent and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof, together with such actions and powers as are reasonably
incidental thereto.
The Person serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such
Person and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that the
Administrative Agent is required to exercise in writing by the Required Lenders
(or such other number or percentage of the Credit Parties as shall be necessary
under the circumstances as provided in Section 10.2), and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of the Subsidiaries that is communicated to or
obtained by the Person serving as Administrative Agent or any of its Affiliates
in any capacity. The Administrative Agent shall not be liable for any action
taken or not taken by it with the consent or at the request of the Required
Lenders (or such other number or percentage of the Credit Parties as shall be
necessary under the circumstances as provided in Section 10.2) or in the absence
of its own gross negligence or willful misconduct. The Administrative Agent
shall be deemed not to have knowledge of any Default unless and until written
notice thereof is given to the Administrative Agent by the Borrower or a Credit
Party (and, promptly after its receipt of any such notice, it shall give each
Credit Party and the Borrower notice thereof), and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with any Loan
Document, (ii) the contents of any certificate, report or other document
delivered thereunder or in connection therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth therein, (iv) the validity, enforceability, effectiveness or genuineness
thereof or any other agreement, instrument or other document or (v) the
satisfaction of any condition set forth in Article 5 or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent, provided that no such delegation shall serve as a release
of the Administrative Agent or waiver by the Borrower of any rights hereunder.
The Administrative Agent and any such sub-agent may perform any and all its
duties and exercise its rights and powers through their respective Related
Parties. The exculpatory provisions of the preceding paragraphs shall apply to
any such sub-agent and to the Related Parties of the Administrative Agent and
any such sub-agent, and shall apply to their respective activities in connection
with the syndication of the credit facilities provided for herein as well as
activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Credit Parties and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Credit Parties, appoint
a successor Administrative Agent which shall be a bank with an office in New
York, New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 10.3 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
Each Credit Party acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Credit Party and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement. Each Credit Party
also acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Credit Party and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon any Loan
Document, any related agreement or any document furnished thereunder.
Notwithstanding anything in any Loan Document to the contrary, the
Syndication Agent in such capacity shall not have any right, duty or obligation
under the Loan Documents.
ARTICLE 10. MISCELLANEOUS
Section 10.1 Notices
Except in the case of notices and other communications expressly permitted
to be given by telephone, all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 83 Edison Drive, Augusta, Maine 04336,
Attention of Curtis Call, Treasurer (Telephone No. (207) 626-9755); Telecopy No.
(207) 626-9588);
(b) if to the Administrative Agent, to it at One Wall Street, New York, New
York 10286, Attention of: Pina Impeduglia (Telephone No. (212) 635-4696);
Telecopy No. (212) 635-6365 or 6366 or 6367, with a copy to The Bank of New
York, at One Wall Street, New York, New York 10286, Attention of: John W. Hall
(Telephone No. (212) 635-7581; Telecopy No. (212) 635-7923; and
(c) if to any other Credit Party, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Credit Agreement shall be deemed to have been given on
the date of receipt.
Section 10.2 Waivers; Amendments
(a) No failure or delay by any Credit Party in exercising any right or
power under any Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Credit Parties under the Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan
shall not be construed as a waiver of any Default, regardless of whether any
Credit Party may have had notice or knowledge of such Default at the time.
(b) Neither this Credit Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders, provided that no
such agreement shall (i) increase any Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan, or
reduce the rate of interest thereon, or reduce any fees or other amounts payable
under the Loan Documents, or reduce the amount of any scheduled reduction of the
Commitments, without the written consent of each Credit Party affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any
Loan, or any interest thereon, or any fees or other amounts payable under the
Loan Documents, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of reduction or expiration of the Commitments, or
extend the final expiration of date of any Letter of Credit beyond the Maturity
Date, without the written consent of each Credit Party affected thereby, (iv)
change any provision hereof in a manner that would alter the pro rata sharing of
payments required by any Loan Document, without the written consent of each
Credit Party, (v) change any of the provisions of this Section or the definition
of "Required Lenders" or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
make any determination or grant any consent hereunder, without the written
consent of each Lender, (vii) release any of the Collateral from the Liens of
the Loan Documents (except as expressly provided in the Security Agreement),
without the consent of each Lender, and provided, further, that (x) no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent.
Section 10.3 Expenses; Indemnity; Damage Waiver
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Credit Agreement or any
amendments, modifications or waivers of the provisions of any Loan Document
(whether or not the transactions contemplated thereby shall be consummated) and
(ii) all out-of-pocket expenses incurred by any Credit Party, including the
fees, charges and disbursements of any counsel for any Credit Party, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loans made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans.
(b) The Borrower shall indemnify each Credit Party and each Related Party
thereof (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all actual losses, claims, damages,
liabilities and related reasonable expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties to the Loan Documents of
their respective obligations thereunder or the consummation of the Transactions
or any other transactions contemplated thereby, (ii) any Loan or the use of the
proceeds thereof, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
the Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of the Subsidiaries or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required to be
paid by it to the Administrative Agent under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Administrative Agent an
amount equal to the product of such unpaid amount multiplied by a fraction, the
numerator of which is such Lender's Commitment and the denominator of which is
the total of all Lenders' Commitments (in each case determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of,
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as applicable, was incurred by or asserted against
the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct and actual damages) arising out of, in connection with, or as a result
of, any Loan Document or any agreement, instrument or other document
contemplated thereby, the Transactions or any Loan or the use of the proceeds
thereof.
(e) All amounts due under this Section shall be payable promptly but in no
event later than ten days after written demand therefor.
Section 10.4 Successors and Assigns
(a) The provisions of this Credit Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Credit Party (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void). Nothing in this Credit Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each
Credit Party) any legal or equitable right, remedy or claim under or by reason
of any Loan Document.
(b) Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Credit Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it), provided that (i)
except in the case of an assignment to a Lender or an Affiliate or an Approved
Fund of a Lender, each of the Borrower and the Administrative Agent must give
its prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender or
an Affiliate or an Approved Fund of a Lender or an assignment of the entire
remaining amount of the assigning Lender's Commitment, the amount of the
Commitment of the assigning Lender subject to each such assignment (determined
as of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 unless
the Borrower and the Administrative Agent otherwise consent, (iii) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance together with, unless otherwise agreed by the
Administrative Agent, a processing and recordation fee of $3,500, and (iv) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
an Administrative Questionnaire, and provided further, that any consent of the
Borrower otherwise required under this paragraph shall not be required if a
Default has occurred and is continuing. Subject to acceptance and recording
thereof pursuant to paragraph (d) of this Section, from and after the effective
date specified in each Assignment and Acceptance, the assignee thereunder shall
be a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under the Loan
Documents, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under the Loan Documents (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
the Loan Documents, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 3.5, 3.6, 3.7 and 10.3). Any
assignment or transfer by a Lender of rights or obligations under the Loan
Documents that does not comply with this paragraph shall be treated for purposes
of the Loan Documents as a sale by such Lender of a participation in such rights
and obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in New York City a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be conclusive absent
clearly demonstrable error, and the Borrower and each Credit Party may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding
notice to the contrary. The Register shall be available for inspection by the
Borrower and any Credit Party, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Acceptance
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Credit Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or any Credit
Party, sell participations to one or more banks or other entities (each such
bank or other entity being called a "Participant") in all or a portion of such
Lender's rights and obligations under the Loan Documents (including all or a
portion of its Commitment and the Loans owing to it), provided that (i) such
Lender's obligations under the Loan Documents shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower and the Credit Parties
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under the Loan Documents. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce the Loan Documents and
to approve any amendment, modification or waiver of any provision of any Loan
Documents, provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 10.2(b) that
affects such Participant. Subject to paragraph (f) of this Section, the Borrower
agrees that each Participant shall be entitled to the benefits of Sections 3.5
and 3.6 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to paragraph (b) of this Section. To the extent permitted
by law, each Participant also shall be entitled to the benefits of Section 10.8
as though it were a Lender, provided that such Participant agrees to be subject
to Section 2.10(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater payment
under Section 3.5 or 3.7 than the Lender would have been entitled to receive
with respect to the participation sold to such Participant, unless the sale of
the participation to such Participant is made with the Borrower's prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 3.7 unless the Borrower is notified
of the participation sold to such Participant and such Participant agrees, for
the benefit of the Borrower, to comply with Section 3.7(e) as though it were a
Lender.
(g) Any Lender may at any time pledge or assign a security interest in all
or any portion of its rights under the Loan Documents to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest, provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations under the
Loan Documents or substitute any such pledgee or assignee for such Lender as a
party hereto.
Section 10.5 Survival
All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Credit Agreement or any other
Loan Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of any Loan Document and the
making of any Loans, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that any Credit Party may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under the Loan Documents is outstanding and
unpaid and so long as the Commitments have not expired or terminated. The
provisions of Sections 3.5, 3.6, 3.7 and 10.3 and Article 9 shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans and the termination
of the Commitments or the termination of this Credit Agreement or any provision
hereof.
Section 10.6 Counterparts; Integration
This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which, when taken together, shall constitute but one contract. This
Agreement and any separate letter agreements with respect to fees payable to any
Credit Party constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.
Section 10.7 Severability
In the event any one or more of the provisions contained in this Credit
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
Section 10.8 Right of Setoff
If an Event of Default shall have occurred and be continuing, each of the
Lenders and their respective Affiliates is hereby authorized at any time and
from time to time, to the fullest extent permitted by applicable law, to setoff
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations at any time owing by it to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Credit
Agreement held by it, irrespective of whether or not it shall have made any
demand under this Credit Agreement and although such obligations may be
unmatured. The rights of each the Lenders and their respective Affiliates under
this Section are in addition to other rights and remedies (including other
rights of setoff) that it may have.
Section 10.9 Governing Law; Jurisdiction; Consent to Service of Process
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Credit Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted by
applicable law, in such Federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Credit Agreement shall affect any right that
the Administrative Agent or any other Credit Party may otherwise have to bring
any action or proceeding relating to this Credit Agreement or the other Loan
Documents against the Borrower, or any of its property, in the courts of any
jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Credit Agreement or the other Loan Documents
in any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(d) Each party to this Credit Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.1. Nothing in this
Credit Agreement will affect the right of any party to this Credit Agreement to
serve process in any other manner permitted by law.
Section 10.10 WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
Section 10.11 Headings
Article and Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Credit Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Credit Agreement.
Section 10.12 Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges and other
amounts that are treated as interest on such Loan under applicable law
(collectively the "charges"), shall exceed the maximum lawful rate (the "maximum
rate") that may be contracted for, charged, taken, received or reserved by the
Lender holding such Loan in accordance with applicable law, the rate of interest
payable in respect of such Loan hereunder, together with all of the charges
payable in respect thereof, shall be limited to the maximum rate and, to the
extent lawful, the interest and the charges that would have been payable in
respect of such Loan but were not payable as a result of the operation of this
Section shall be cumulated, and the interest and the charges payable to such
Lender in respect of other Loans or periods shall be increased (but not above
the maximum rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds Effective Rate to the date of repayment, shall have
been received by such Lender.
Section 10.13 Effective Date
This Agreement shall be effective at such time (the "Effective Date") as
(i) executed counterparts of this Credit Agreement shall have been delivered to
the Administrative Agent by the Borrower and each Lender and the Administrative
Agent shall have delivered an executed counterpart of this Credit Agreement to
the Borrower and each Lender and (ii) all fees payable to the Administrative
Agent and the Lenders in connection herewith on or prior to the Effective Date
shall have been paid. Delivery of an executed counterpart of this Credit
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart of this Credit Agreement.
Section 10.14 Treatment of Certain Information
Each Credit Party agrees to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature, all non-public information supplied
by the Borrower or any Subsidiary pursuant to this Credit Agreement which (a) is
clearly identified by such Person as being confidential at the time the same is
delivered to such Credit Party, or (b) constitutes any financial statement,
financial projections or forecasts, budget, compliance certificate, audit
report, management letter or accountants' certification delivered hereunder
("Information"), provided, however, that nothing herein shall limit the
disclosure of any such Information (i) to such of their respective Related
Parties as need to know such Information, (ii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, or
requested by any bank regulatory authority, (iii) on a confidential basis, to
prospective lenders or their counsel, (iv) to auditors or accountants, and any
analogous counterpart thereof, (v) to any other Credit Party, (vi) in connection
with any litigation to which any one or more of the Credit Parties is a party,
(vii) to the extent such Information (A) becomes publicly available other than
as a result of a breach of this Credit Agreement, (B) becomes available to any
of the Credit Parties on a non-confidential basis from a source other than the
Borrower or any Subsidiary, or (C) was available to the Credit Parties on a
non-confidential basis prior to its disclosure to any of them by the Borrower or
any Subsidiary; and (viii) to the extent the Borrower shall have consented to
such disclosure in writing.
<PAGE>
CENTRAL MAINE POWER COMPANY
CREDIT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
CENTRAL MAINE POWER COMPANY
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
<PAGE>
CENTRAL MAINE POWER COMPANY
CREDIT AGREEMENT
THE BANK OF NEW YORK, individually
and as Administrative Agent
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
<PAGE>
FLEET NATIONAL BANK, individually and
as Syndication Agent
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
<PAGE>
PEOPLES HERITAGE BANK
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
<PAGE>
iii
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.......................................................1
SECTION 1.1 DEFINED TERMS.................................................1
SECTION 1.2 CLASSIFICATION OF LOANS AND BORROWINGS.......................18
SECTION 1.3 TERMS GENERALLY..............................................18
SECTION 1.4 ACCOUNTING TERMS; GAAP.......................................19
ARTICLE 2. THE CREDITS......................................................19
SECTION 2.1 COMMITMENTS..................................................19
SECTION 2.2 LOANS AND BORROWINGS.........................................19
SECTION 2.3 REQUESTS FOR BORROWINGS......................................20
SECTION 2.4 FUNDING OF BORROWINGS........................................21
SECTION 2.5 TERMINATION AND REDUCTION OF COMMITMENTS.....................21
SECTION 2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT.........................22
SECTION 2.7 PREPAYMENT OF BORROWINGS.....................................23
SECTION 2.8 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS...23
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC............................25
SECTION 3.1 INTEREST.....................................................25
SECTION 3.2 INTEREST ELECTIONS...........................................26
SECTION 3.3 FEES27
SECTION 3.4 ALTERNATE RATE OF INTEREST...................................28
SECTION 3.5 INCREASED COSTS; ILLEGALITY..................................28
---------------------------
SECTION 3.6 BREAK FUNDING PAYMENTS.......................................30
SECTION 3.7 TAXES........................................................31
SECTION 3.8 MITIGATION OBLIGATIONS.......................................31
ARTICLE 4. REPRESENTATIONS AND WARRANTIES...................................32
SECTION 4.1 ORGANIZATION; POWERS.........................................32
SECTION 4.2 AUTHORIZATION; ENFORCEABILITY................................33
SECTION 4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS.........................33
SECTION 4.4 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE..............34
SECTION 4.5 PROPERTIES...................................................34
SECTION 4.6 LITIGATION AND ENVIRONMENTAL MATTERS.........................34
SECTION 4.7 COMPLIANCE WITH LAWS AND AGREEMENTS..........................36
SECTION 4.8 INVESTMENT AND HOLDING COMPANY STATUS........................36
SECTION 4.9 TAXES........................................................36
SECTION 4.10 ERISA.......................................................36
SECTION 4.11 DISCLOSURE..................................................37
SECTION 4.12 SIGNIFICANT SUBSIDIARIES....................................37
SECTION 4.13 LABOR MATTERS...............................................37
SECTION 4.14 SECURITY AGREEMENT..........................................37
SECTION 4.15 FEDERAL RESERVE REGULATIONS.................................38
SECTION 4.16 YEAR 2000 ISSUE.............................................38
ARTICLE 5. CONDITIONS.......................................................38
SECTION 5.1 FIRST LOANS..................................................38
SECTION 5.2 EACH CREDIT EVENT............................................41
ARTICLE 6. AFFIRMATIVE COVENANTS............................................41
SECTION 6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION...................41
SECTION 6.2 NOTICES OF MATERIAL EVENTS...................................42
SECTION 6.3 EXISTENCE; CONDUCT OF BUSINESS...............................43
SECTION 6.4 PAYMENT OF OBLIGATIONS.......................................43
SECTION 6.5 MAINTENANCE OF PROPERTIES....................................43
SECTION 6.6 BOOKS AND RECORDS; INSPECTION RIGHTS.........................43
SECTION 6.7 COMPLIANCE WITH LAWS.........................................44
SECTION 6.8 USE OF PROCEEDS..............................................44
SECTION 6.9 INFORMATION REGARDING COLLATERAL.............................44
SECTION 6.10 INSURANCE...................................................45
SECTION 6.11 FURTHER ASSURANCES..........................................45
SECTION 6.12 ENVIRONMENTAL COMPLIANCE....................................45
ARTICLE 7. NEGATIVE COVENANTS...............................................45
SECTION 7.1 INDEBTEDNESS.................................................46
SECTION 7.2 LIENS........................................................47
SECTION 7.3 FUNDAMENTAL CHANGES..........................................48
SECTION 7.4 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS....49
SECTION 7.5 ASSET SALES..................................................50
SECTION 7.6 HEDGING AGREEMENTS...........................................51
SECTION 7.7 RESTRICTED PAYMENTS..........................................51
SECTION 7.8 TRANSACTIONS WITH AFFILIATES.................................52
SECTION 7.9 RESTRICTIVE AGREEMENTS.......................................52
SECTION 7.10 AMENDMENT OF MATERIAL DOCUMENTS.............................52
SECTION 7.11 INTEREST COVERAGE RATIO.....................................52
SECTION 7.12 CAPITALIZATION RATIO........................................52
ARTICLE 8. EVENTS OF DEFAULT................................................53
ARTICLE 9. THE ADMINISTRATIVE AGENT.........................................55
ARTICLE 10. MISCELLANEOUS...................................................57
SECTION 10.1 NOTICES.....................................................57
SECTION 10.2 WAIVERS; AMENDMENTS.........................................58
SECTION 10.3 EXPENSES; INDEMNITY; DAMAGE WAIVER..........................59
SECTION 10.4 SUCCESSORS AND ASSIGNS......................................60
SECTION 10.5 SURVIVAL....................................................62
SECTION 10.6 COUNTERPARTS; INTEGRATION...................................62
SECTION 10.7 SEVERABILITY................................................63
SECTION 10.8 RIGHT OF SETOFF.............................................63
SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS..63
SECTION 10.10 WAIVER OF JURY TRIAL.......................................64
SECTION 10.11 HEADINGS...................................................64
SECTION 10.12 INTEREST RATE LIMITATION...................................64
SECTION 10.13 EFFECTIVE DATE.............................................65
SECTION 10.14 TREATMENT OF CERTAIN INFORMATION...........................65
SCHEDULES:
============================== ========================================
Schedule 2.1 List of Commitments
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Schedule 4.6 Disclosed Matters
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Schedule 4.12 List of Subsidiaries
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Schedule 7.1 List of Existing Indebtedness
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Schedule 7.2 List of Existing Liens
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Schedule 7.4(a)(i) List of Permitted Investments
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Schedule 7.4(a)(ii) List of Existing Investments
============================== ========================================
EXHIBITS:
============================== ========================================
Exhibit A Form of Assignment and Acceptance
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Exhibit B Reserved
- ------------------------------ ----------------------------------------
- ------------------------------ ----------------------------------------
Exhibit C Form of Note
============================== ========================================
<PAGE>
Exhibit 10-100.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CMP GROUP, INC. (the "Company") and
DAVID T. FLANAGAN of Manchester, Maine (the "Executive").
WHEREAS, Central Maine Power Company and the Executive entered into an
Employment Agreement dated December 31, 1997 (the "Employment Agreement"); and
WHEREAS, CMP Group, Inc. is the successor employer to Central Maine
Power Company; and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) The term "Company" in the Employment Agreement shall henceforth
refer to CMP Group, Inc.
(2) Section 4.a. is hereby amended by adding a new Subsection 4.a.(v)
thereto:
"(v) Life Insurance Contract. The Company has decided to terminate the
SERP in 1999. In consideration of the Executive's agreement to assign
to the Company his rights to the insurance contract on his life
maintained under the split dollar arrangement connected to the SERP,
the Company agrees to procure a term life insurance policy on the
Executive's life with a face amount equal to or greater than the face
amount of the policy being assigned and to pay the premiums on said
policy until the later of the date the Executive terminates his
employment with the Company, or until the end of the Severance Period.
In the event that the Executive dies while this replacement insurance
policy is in force and while the Company is paying the premiums,
payment of the face amount to the Executive's beneficiaries shall
constitute a benefit payable under the SERP and that amount shall be
credited to reduce the payment obligations of the Company under Section
4.d. below."
(3) Section 4.d. is hereby added by adding the following sentence after
the first sentence thereof:
"The parties further agree that for purposes of calculating the
Executive's Final Average Earnings under the SERP: (a) no more than
three (3) annual incentive bonus payment amounts shall be included in
the 36 month calculation, notwithstanding the fact that the
Compensation and Benefits Committee may have accelerated the payment
due in February of 2000 into December of 1999, and (b) the term
"Earnings" shall include any bonuses paid under the Annual Incentive
Plan, including any mandatory deferrals and the value of any discounts
on the purchase of Company stock, but excluding any amounts paid under
the Long Term Incentive Plan (both stock options and performance
shares)."
(4) Section 5.a.(i) is hereby amended by changing the phrase "2.99
times (a)" in lines 3 and 4 to "(a) 1.99 times" and adding the words "2.99
times" after the letter (b) in line 5.
(5) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(6) Section 7.a. is hereby deleted in its entirety.
(7) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after his termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(8) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.d., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(9) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written. CMP GROUP, INC.
By:_________________________________ _____________________________
Chairman, Board of Directors David T. Flanagan
Exhibit 10-101.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CMP GROUP, INC. (the "Company") and
ARTHUR W. ADELBERG (the "Executive").
WHEREAS, Central Maine Power Company and the Executive entered into an
Employment Agreement dated January 15, 1998 (the "Employment Agreement"); and
WHEREAS, CMP Group, Inc. is the successor employer to Central Maine
Power Company; and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) The term "Company" in the Employment Agreement shall henceforth
refer to CMP Group, Inc.
(2) Section 4.a.(v) is hereby deleted and shall be replaced with the
following provision:
"(v) Life Insurance Contract. The Company has decided to terminate the
SERP in 1999. In consideration of the Executive's agreement to assign
to the Company his rights to the insurance contract on his life
maintained under the split dollar arrangement connected to the SERP,
the Company agrees to procure a term life insurance policy on the
Executive's life with a face amount equal to or greater than the face
amount of the policy being assigned and to pay the premiums on said
policy until the later of the date the Executive terminates his
employment with the Company, or until the end of the Severance Period.
In the event that the Executive dies while this replacement insurance
policy is in force and while the Company is paying the premiums,
payment of the face amount to the Executive's beneficiaries shall
constitute a benefit payable under the SERP and that amount shall be
credited to reduce the payment obligations of the Company under Section
4.a.(vi) below."
(3) Section 4.a.(vi) is hereby amended by deleting the first two
sentences thereof and replacing them with the following sentences:
"Special Retirement Benefit. In the event that the Executive is
actively employed by the Company on June 30, 2000, he shall have a 100%
vested right to a special retirement benefit described below. The
special retirement benefit shall be calculated as a single life annuity
payable over the lifetime of the Executive (except as provided below)
and shall be the greater of (a) an amount equal to two and six-tenths
percent (2.6%) for each year of employment with the Company multiplied
by the Executive's highest three (3) consecutive years' average annual
base salary from the Company, minus any amounts (denominated for this
calculation as a single life annuity under each plan, program or
agreement on the assumption that the payments would commence on the
same date), payable to the Executive under the Retirement Income Plan
for Non-Union Employees of Central Maine Power company (the "Basic
Plan"), and any successor defined benefit plan to the Basic Plan, or
(b) the annual retirement benefit the Executive would have received
under the Supplemental Executive Retirement Plan (the "SERP") based
upon the terms of the SERP as of March 17, 1999; provided, however,
that the SERP calculation shall only be made if the Executive
terminates after attaining age 55 or receives constructive credit for
service through age 55. The parties further agree that for purposes of
calculating the Executive's Final Average Earnings under the SERP: (a)
no more than three (3) annual incentive bonus payment amounts shall be
included in the 36 month calculation, notwithstanding the fact that the
Compensation and Benefits Committee may have accelerated the payment
due in February of 2000 into December of 1999, and (b) the term
"Earnings" shall include any bonuses paid under the Annual Incentive
Plan, including any mandatory deferrals and the value of any discounts
on the purchase of Company stock, but excluding any amounts paid under
the Long Term Incentive Plan (both stock options and performance
shares). Payments shall commence hereunder on the first day of the
calendar month following the later of (a) the Employee's 55th birthday,
(b) the last day of the thirty-six (36) month period for which the
Executive is receiving severance pay under Section 5.a. below, or (c)
his date of termination of employment with the Company."
(4) Section 5.a.(i) is hereby amended by changing the phrase "2.99
times (a)" in line 4 to "(a) 1.99 times" and adding the words "2.99 times" after
the letter (b) in line 6.
(5) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(6) Section 7.a. is hereby deleted in its entirety.
(7) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after his termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(8) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(9) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written. CMP GROUP, INC.
By:_________________________________ _____________________________
Chairman, Board of Directors Arthur W. Adelberg
Exhibit 10-102.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CMP GROUP, INC. (the "Company") and
DAVID E. MARSH of Augusta, Maine (the "Executive").
WHEREAS, Central Maine Power Company and the Executive entered into an
Employment Agreement dated January 1, 1998 (the "Employment Agreement"); and
WHEREAS, CMP Group, Inc. is the successor employer to Central Maine
Power Company; and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) The term "Company" in the Employment Agreement shall henceforth
refer to CMP Group, Inc.
(2) Section 4.a.(v) is hereby deleted and shall be replaced with the
following provision:
"(v) Life Insurance Contract. The Company has decided to terminate the
SERP in 1999. In consideration of the Executive's agreement to assign
to the Company his rights to the insurance contract on his life
maintained under the split dollar arrangement connected to the SERP,
the Company agrees to procure a term life insurance policy on the
Executive's life with a face amount equal to or greater than the face
amount of the policy being assigned and to pay the premiums on said
policy until the later of the date the Executive terminates his
employment with the Company, or until the end of the Severance Period.
In the event that the Executive dies while this replacement insurance
policy is in force and while the Company is paying the premiums,
payment of the face amount to the Executive's beneficiaries shall
constitute a benefit payable under the SERP and that amount shall be
credited to reduce the payment obligations of the Company under Section
4.a.(vi) below."
(3) Section 4.a.(vi) is hereby amended by deleting the first two
sentences thereof and replacing them with the following sentences:
"Special Retirement Benefit. Acknowledging the fact that the SERP will
be terminated in 1999, the Company agrees to provide the Executive with
a 100% vested right to a special retirement benefit payable as of the
first day of the month after he attains age 55 equal to the greater of
(a) fifty percent (50%) of his highest three (3) consecutive years'
average annual base salary from the Company, minus any amounts payable
under the Basic Plan, or (b) the annual retirement benefit he would
have been entitled to receive under the Supplemental Executive
Retirement Plan (the "SERP") as it existed on March 17, 1999, with the
application of the terms of this Employment Agreement as of March 17,
1999, which the parties agree is equal to 42.25% of the Executive's
Final Average Earnings, reduced by other benefits in accordance with
the terms of the SERP. The parties further agree that for purposes of
calculating the Executive's Final Average Earnings under the SERP: (i)
no more than three (3) annual incentive bonus payment amounts shall be
included in the 36 month calculation, notwithstanding the fact that the
Compensation and Benefits Committee may have accelerated the payment
due in February of 2000 into December of 1999, and (ii) the term
"Earnings" shall include any bonuses paid under the Annual Incentive
Plan, including any mandatory deferrals and the value of any discounts
on the purchase of Company stock, but excluding any amounts paid under
the Long Term Incentive Plan (both stock options and performance
shares). The special retirement benefit shall be calculated as a single
life annuity payable over the lifetime of the Executive (except as
provided below), and the reduction of the Basic Plan benefit specified
above shall be made by denominating each such benefit as a single life
annuity commencing on the same date."
(4) Section 5.a.(i) is hereby amended by changing the phrase "2.99
times (a)" in line 4 to "(a) 1.99 times" and adding the words "2.99 times" after
the letter (b) in line 6.
(5) Section 5.b. is hereby amended by adding the following sentences at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(6) Section 7.a. is hereby deleted in its entirety.
(7) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition is defined in Section a.(i) above) for a period
of one (1) year after his termination of employment, and in
consideration for such agreement not to compete and as reasonable
compensation therefor, the Company shall pay the Executive one (1)
times the Executive's then-current base salary in twelve (12) equal
monthly installments payable on the first day of each calendar month
commencing on the first day of the month following termination of
employment. In the event the Executive breaches this provision during
the one year payment period, the Company shall cease making additional
payments hereunder."
(8) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, and disclosure of this
requirement to the Executor or Personal Representative of the
Executive's Estate (if the Executive is then deceased), the Company
shall be relieved of all obligations to make any post-termination
payments of any kind or nature under this Agreement."
(9) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
CMP GROUP, INC.
By:_________________________________ _____________________________
Chairman, Board of Directors David E. Marsh
Exhibit 10-103.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CMP GROUP, INC. (the "Company") and
GERALD C. POULIN (the "Executive").
WHEREAS, Central Maine Power Company and the Executive entered into an
Employment Agreement dated January 1, 1998 (the "Employment Agreement"); and
WHEREAS, CMP Group, Inc. is the successor employer to Central Maine
Power Company; and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) The term "Company" in the Employment Agreement shall henceforth
refer to CMP Group, Inc.
(2) Section 4.a.(v) is hereby deleted and shall be replaced with the
following provision:
"(v) Life Insurance Contract. The Company has decided to terminate the
SERP in 1999. In consideration of the Executive's agreement to assign
to the Company his rights to the insurance contract on his life
maintained under the split dollar arrangement connected to the SERP,
the Company agrees to procure a term life insurance policy on the
Executive's life with a face amount equal to or greater than the face
amount of the policy being assigned and to pay the premiums on said
policy until the later of the date the Executive terminates his
employment with the Company, or until the end of the Severance Period.
In the event that the Executive dies while this replacement insurance
policy is in force and while the Company is paying the premiums,
payment of the face amount to the Executive's beneficiaries shall
constitute a benefit payable under the SERP and that amount shall be
credited to reduce the payment obligations of the Company under Section
4.a.(vi) below."
(3) Section 4.a.(vi) is hereby amended by adding a new sentence
thereto:
"Acknowledging the fact that the SERP will be terminated in 1999, the
Company and the Executive hereby agree that the special retirement
benefit described in the third sentence of this Section shall be
calculated using the formula contained in the SERP as it existed on
March 17, 1999. The parties further agree that for purposes of
calculating the Executive's Final Average Earnings under the SERP: (a)
no more than three (3) annual incentive bonus payment amounts shall be
included in the 36 month calculation, notwithstanding the fact that the
Compensation and Benefits Committee may have accelerated the payment
due in February of 2000 into December of 1999, and (b) the term
"Earnings" shall include any bonuses paid under the Annual Incentive
Plan, including any mandatory deferrals and the value of any discounts
on the purchase of Company stock, but excluding any amounts paid under
the Long Term Incentive Plan (both stock options and performance
shares)."
(4) Section 5.a.(i) is hereby amended by changing the "phrase "2.99
times (a)" in line 4 to "(a) 1.99 times" and adding the words "2.99 times" after
the letter (b) in line 6.
(5) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(6) Section 7.a. is hereby deleted in its entirety.
(7) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition is defined in Section a.(i) above) for a period
of one (1) year after his termination of employment, and in
consideration for such agreement not to compete and as reasonable
compensation therefor, the Company shall pay the Executive one (1)
times the Executive's then-current base salary in twelve (12) equal
monthly installments payable on the first day of each calendar month
commencing on the first day of the month following termination of
employment. In the event the Executive breaches this provision during
the one year payment period, the Company shall cease making additional
payments hereunder."
(8) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, and disclosure of this
requirement to the Executor or Personal Representative of the
Executive's Estate (if the Executive is then deceased), the Company
shall be relieved of all obligations to make any post-termination
payments of any kind or nature under this Agreement."
(9) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written. CMP GROUP, INC.
By:_________________________________ _____________________________
Chairman, Board of Directors Gerald C. Poulin
Exhibit 10-104.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CENTRAL MAINE POWER COMPANY (the
"Company") and SARA J. BURNS of Augusta, Maine (the "Executive").
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated June 30, 1997 (the "Employment Agreement); and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) Section 1.a. is hereby deleted and shall henceforth provide as
follows:
"a. Term. The term of this Agreement shall begin on June 1, 1997
(hereinafter referred to as the "Effective Date") and shall expire on
May 31, 2000; provided, however, that on May 31, 2000 and on each May
31 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless not later than the
preceding January 31st, either the Company or the Executive shall have
given notice that such party does not wish to extend the term of this
Agreement. If a Change of Control occurs during the original term of
this Agreement or any extension, the term of this Agreement shall be
automatically extended for 365 days after the consummation of the
Change of Control (the "Extended Expiration Date"), which shall be
deemed for this purpose to be a date on which all action necessary to
complete a Change of Control shall have been accomplished, including
any regulatory approvals."
(2) Section 1.b.(iii) is hereby deleted and shall henceforth provide as
follows:
"(iii) the normal or Extended Expiration Date as specified in Section
a above."
(3) Section 5.a.(i) is hereby amended by changing the term "2.99 times"
to "1.99 times".
(4) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(5) Section 7.a. is hereby deleted in its entirety.
(6) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after her termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(7) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(8) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
CENTRAL MAINE POWER COMPANY
By:_________________________________ _____________________________
Chairman, Board of Directors Sara J. Burns
Exhibit 10-105.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CMP GROUP, INC. (the "Company") and
F. MICHAEL McCLAIN, JR. (the "Executive").
WHEREAS, Central Maine Power Company and the Executive entered into an
Employment Agreement dated August 26, 1998 (the "Employment Agreement"); and
WHEREAS, CMP Group, Inc. is the successor employer to Central Maine
Power Company; and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) The term "Company" in the Employment Agreement shall henceforth
refer to CMP Group, Inc.
(2) Section 5.a.(i) is hereby amended by changing the "phrase "2.99
times (a)" in line 4 to "(a) 1.99 times" and adding the words "2.99 times" after
the letter (b) in line 6.
(3) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(4) Section 7.a. is hereby deleted in its entirety.
(5) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after his termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(6) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(7) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
CMP GROUP, INC.
By:_________________________________ _____________________________
Chairman, Board of Directors F. Michael McClain, Jr.
Exhibit 10-106.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CENTRAL MAINE POWER COMPANY (the
"Company") and MICHAEL R. CUTTER of Winthrop, Maine (the "Executive").
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated June 30, 1997 (the "Employment Agreement); and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) Section 1.a. is hereby deleted and shall henceforth provide as
follows: "a. Term. The term of this Agreement shall begin on June 1,
1997 (hereinafter referred to as the "Effective Date") and shall
expire on May 31, 2000; provided, however, that on May 31, 2000 and on
each May 31 thereafter, the term of this Agreement shall automatically
be extended for one (1) additional year unless not later than the
preceding January 31st, either the Company or the Executive shall have
given notice that such party does not wish to extend the term of this
Agreement. If a Change of Control occurs during the original term of
this Agreement or any extension, the term of this Agreement shall be
automatically extended for 365 days after the consummation of the
Change of Control (the "Extended Expiration Date"), which shall be
deemed for this purpose to be a date on which all action necessary to
complete a Change of Control shall have been accomplished, including
any regulatory approvals."
(2) Section 1.b.(iii) is hereby deleted and shall henceforth provide as
follows:
"(iii) the normal or Extended Expiration Date as specified in Section
a above."
(3) Section 5.a.(i) is hereby amended by changing the term "2.0 times"
to "1.0 times".
(4) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(5) Section 7.a. is hereby deleted in its entirety.
(6) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after his termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(7) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(8) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
CENTRAL MAINE POWER COMPANY
By:_________________________________ _____________________________
Chairman, Board of Directors Michael R. Cutter
Exhibit 10-107.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CENTRAL MAINE POWER COMPANY (the
"Company") and CURTIS I. CALL of Augusta, Maine (the "Executive").
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated June 30, 1997 (the "Employment Agreement);
and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) Section 1.a. is hereby deleted and shall henceforth provide as
follows:
"a. Term. The term of this Agreement shall begin on June 1, 1997
(hereinafter referred to as the "Effective Date") and shall expire on
May 31, 2000; provided, however, that on May 31, 2000 and on each May
31 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless not later than the
preceding January 31st, either the Company or the Executive shall have
given notice that such party does not wish to extend the term of this
Agreement. If a Change of Control occurs during the original term of
this Agreement or any extension, the term of this Agreement shall be
automatically extended for 365 days after the consummation of the
Change of Control (the "Extended Expiration Date"), which shall be
deemed for this purpose to be a date on which all action necessary to
complete a Change of Control shall have been accomplished, including
any regulatory approvals."
(2) Section 1.b.(iii) is hereby deleted and shall henceforth provide as
follows:
"(iii) the normal or Extended Expiration Date as specified in Section
a above."
(3) Section 5.a.(i) is hereby amended by changing the term "2.0 times"
to "1.0 times".
(4) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(5) Section 7.a. is hereby deleted in its entirety.
(6) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after his termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(7) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(8) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written.
CENTRAL MAINE POWER COMPANY
By:_________________________________ _____________________________
Chairman, Board of Directors Curtis I. Call
Exhibit 10-108.1
FIRST AMENDMENT
TO THE
EMPLOYMENT AGREEMENT
This Amendment approved by the Board of Directors and executed as of
the 18th day of March, 1999, by and between CMP GROUP, INC. (the "Company") and
ANNE M. PARE of Augusta, Maine (the "Executive").
WHEREAS, Central Maine Power Company and the Executive entered into an
Employment Agreement dated June 30, 1997 (the "Employment Agreement"); and
WHEREAS, CMP Group, Inc. is the successor employer to Central Maine
Power Company; and
WHEREAS, the Company and the Executive hereby mutually agree to amend
the contract.
NOW, THEREFORE, the Employment Agreement is hereby amended as follows
effective as of the date first above written:
(1) The term "Company" in the Employment Agreement shall henceforth
refer to CMP Group, Inc.
(2) Section 1.a. is hereby deleted and shall henceforth provide as
follows:
"a. Term. The term of this Agreement shall begin on June 1, 1997
(hereinafter referred to as the "Effective Date") and shall expire on
May 31, 2000; provided, however, that on May 31, 2000 and on each May
31 thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year unless not later than the
preceding January 31st, either the Company or the Executive shall have
given notice that such party does not wish to extend the term of his
Agreement. If a Change of Control occurs during the original term of
this Agreement or any extension, the term of this Agreement shall be
automatically extended for 365 days after the consummation of the
Change of Control (the "Extended Expiration Date"), which shall be
deemed for this purpose to be the date on which all action necessary to
complete a Change of Control shall have been accomplished, including
any regulatory approvals."
(3) Section 1.b.(iii) is hereby deleted and shall henceforth provide as
follows:
"(iii) the normal or Extended Expiration Date as specified in Section
a above."
(4) Section 5.a.(i) is hereby amended by changing the term "2.0 times"
to "1.0 times".
(5) Section 5.b. is hereby amended by adding the following sentence at
the end of the first sentence thereof:
"Notwithstanding the foregoing, the reduction provided for herein shall
be made only if the amount of the reduction in the payments specified
in Section 5.a. is less than the excise tax imposed pursuant to Section
4999 of the Code on the portion of the Total Payments which constitute
"excess parachute payments"."
(6) Section 7.a. is hereby deleted in its entirety.
(7) A new Section 8.b. is hereby added which shall henceforth provide
as follows:
"b. In the event the Executive is entitled to Severance Benefits under
Section 5.a. above, the Executive agrees not to compete with the
Company (as competition defined in Section a.(i) above) for a period of
one (1) year after her termination of employment, and in consideration
for such agreement not to compete and as reasonable compensation
therefor, the Company shall pay the Executive one (1) times the
Executive's then-current base salary in twelve (12) equal monthly
installments payable on the first day of each calendar month commencing
on the first day of the month following termination of employment. In
the event the Executive breaches this provision during the one year
payment period, the Company shall cease making additional payments
hereunder."
(8) A new Section 18 is hereby added which shall henceforth provide as
follows:
"18. General Release. The obligations of the Company to make any
post-termination payments under this Agreement (including, without
limitation, under Sections 4.a., 5.a., 5.c. and 8.b.) are contingent
upon the prior receipt by the Company of a general release reasonably
satisfactory to the Company releasing the Company, and all parties
connected therewith, from any and all claims and liabilities which the
Executive may have against the Company, including any claims arising
out of or in any way connected with the Executive's employment
relationship with the Company and its affiliates, and the termination
of said employment relationship. In the event that the Executive (or
the Executive's estate, in the event of the death of the Executive)
fails to execute and deliver the general release described above within
60 days of the date of receipt of the release, the Company shall be
relieved of all obligations to make any post-termination payments of
any kind or nature under this Agreement."
(9) In all other respects, the Employment Agreement will continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first above written. CMP GROUP, INC.
By:_________________________________ _____________________________
Chairman, Board of Directors Anne M. Pare
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANTS
Name State of Organization
I. Subsidiaries of CMP Group, Inc.:
Central Maine Power Company Maine
CMP International Consultants Maine
(d/b/a CNEX)
MaineCom Services Maine
New England Investment Corporation Delaware
New England Business Trust Massachusetts
New England Security Corp. Massachusetts
New England Gas Development Corporation Maine
TeleSmart Maine
The Union Water-Power Company Maine
(d/b/a On Target, Combined Energies,
UnionLand Services)
II. Subsidiaries of Central Maine Power Company:
Maine Electric Power Company, Inc. Maine
Central Securities Corporation Maine
Cumberland Securities Corporation Maine
NORVARCO Maine
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
CMP Group, Inc. and Central Maine Power Company on Form S-3 (File Nos. 33-35235;
333-56939; 33-36679; 33-39826; 333-49677; and 33-51511) and Form S-8 (File Nos.
333-49643 and 33-44754) of our reports dated January 27, 2000, on our audits of
the consolidated financial statements of CMP Group, Inc. and its subsidiaries as
of Dcember 31, 1999 and 1998, and for each of the three years in the period
ended December 31, 1999, and the consolidated financial statements and financial
statement schedule of Central Maine Power Company and its subsidiaries as of
December 31, 1999 and 1998, and for each of the three years in the period ended
December 31, 1999, which report is included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Portland, Maine
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from CMP
Group, Inc. Consolidated Statement of Earnings, Consolidated Balance
Sheet and Consolidated Statement of Cash Flows and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> Per-Book
<TOTAL-NET-UTILITY-PLANT> $819,759
<OTHER-PROPERTY-AND-INVEST> $51,059
<TOTAL-CURRENT-ASSETS> $309,618
<TOTAL-DEFERRED-CHARGES> $823,752
<OTHER-ASSETS> $43,072
<TOTAL-ASSETS> $2,047,260
<COMMON> $161,571
<CAPITAL-SURPLUS-PAID-IN> $284,330
<RETAINED-EARNINGS> $97,038
<TOTAL-COMMON-STOCKHOLDERS-EQ> $542,939
$910
$35,528
<LONG-TERM-DEBT-NET> $91,502
<SHORT-TERM-NOTES> $199
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $61,183
$9,000
<CAPITAL-LEASE-OBLIGATIONS> $31,040
<LEASES-CURRENT> $1,754
<OTHER-ITEMS-CAPITAL-AND-LIAB> $1,273,205
<TOT-CAPITALIZATION-AND-LIAB> $2,047,260
<GROSS-OPERATING-REVENUE> $992,656
<INCOME-TAX-EXPENSE> $54,092
<OTHER-OPERATING-EXPENSES> $860,441
<TOTAL-OPERATING-EXPENSES> $860,441
<OPERATING-INCOME-LOSS> $132,215
<OTHER-INCOME-NET> $33,517
<INCOME-BEFORE-INTEREST-EXPEN> $111,640
<TOTAL-INTEREST-EXPENSE> $53,471
<NET-INCOME> $58,169
$3,315
<EARNINGS-AVAILABLE-FOR-COMM> $54,854
<COMMON-STOCK-DIVIDENDS> $29,198
<TOTAL-INTEREST-ON-BONDS> $3,079
<CASH-FLOW-OPERATIONS> $111,614
<EPS-BASIC> 1.69
<EPS-DILUTED> 1.68
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