SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-Q
|_x_| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
|___| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________to________
Commission file number 1-8222
Central Vermont Public Service Corporation
(Exact name of registrant as specified in its charter)
Incorporated in Vermont 03-0111290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 Grove Street, Rutland, Vermont 05701
(Address of principal executive offices) (Zip Code)
802-773-2711
(Registrant's telephone number, including area code)
__________________________________________________________________
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
As of July 31, 1994 there were outstanding 11,779,374 shares of
Common Stock, $6 Par Value.<PAGE>
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Form 10-Q
Table of Contents
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
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Consolidated Statement of Income and Retained
Earnings for the three and six months ended
June 30, 1994 and 1993 3
Consolidated Balance Sheet as of June 30, 1994
and December 31, 1993 4
Consolidated Statement of Cash Flows for the
six months ended June 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 6-9
Summarized income statement information for
Vermont Yankee Nuclear Power Corporation 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-18
PART II. OTHER INFORMATION 19-21
SIGNATURE 22
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Revenues $57,684 $56,975 $141,569 $142,294
Operating Expenses
Operation
Purchased power 35,684 34,947 73,377 70,758
Production and transmission 5,531 5,218 10,904 10,585
Other operation 8,906 8,470 17,931 17,516
Maintenance 2,909 2,978 5,309 5,228
Depreciation 4,100 3,771 8,166 7,507
Other taxes, principally
property taxes 2,628 2,389 5,301 4,929
Taxes on income (1,627) (1,058) 6,661 8,664
Total operating expenses 58,131 56,715 127,649 125,187
Operating Income (Loss) (447) 260 13,920 17,107
Other Income and Deductions
Equity in earnings of
affiliates 797 911 1,600 1,895
Allowance for equity funds
during construction 22 4 43 23
Other income (expenses), net (190) 453 (162) (18)
Benefit (provision) for income
taxes 309 (83) 320 (77)
Total other income
and deductions, net 938 1,285 1,801 1,823
Total Operating and
Other Income 491 1,545 15,721 18,930
Interest Expense
Interest on long-term debt 2,367 2,324 4,854 4,781
Other interest 156 148 317 284
Allowance for borrowed funds
during construction (29) (7) (55) (43)
Total interest expense, net 2,494 2,465 5,116 5,022
Net Income (Loss) (2,003) (920) 10,605 13,908
Retained Earnings
at Beginning of Period 69,829 69,552 61,879 55,438
67,826 68,632 72,484 69,346
Cash Dividends Declared
Preferred stock 577 667 1,124 1,331
Common stock 8,319 4,016 12,430 4,066
Total dividends declared 8,896 4,683 13,554 5,397
Retained Earnings at
end of Period $58,930 $63,949 $ 58,930 $ 63,949
Earnings (Losses) Available
for Common Stock $ (2,580) $ (1,587) $ 9,481 $ 12,577
Average shares of common
stock outstanding 11,708,652 11,340,966 11,659,421 11,291,695
Earnings (Losses) Per
Share of Common Stock $(.22) $(.14) $.81 $1.11
Dividends Per Share of
Common Stock $.355 $.355 $.71 $.71
/TABLE
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30 December 31
1994 1993
(Unaudited)
<S> <C> <C>
Assets
Utility Plant, at original cost $428,130 $421,929
Less accumulated depreciation 119,820 112,299
308,310 309,630
Construction work in progress 10,157 8,388
Nuclear fuel, net 1,073 1,390
Net utility plant 319,540 319,408
Investments and Other Assets
Investments in affiliates, at equity 26,972 26,963
Non-utility investments 28,683 30,123
Non-utility property,
less accumulated depreciation 3,187 3,203
Total investments and other assets 58,842 60,289
Current Assets
Cash 2,154 823
Temporary investments, at market value 8,285 1,162
Accounts receivable 12,077 18,614
Unbilled revenues 4,456 10,959
Materials and supplies, at average cost 4,958 4,641
Prepayments 1,616 3,098
Other current assets 4,548 4,821
Total current assets 38,094 44,118
Regulatory Assets and Other
Deferred Charges 62,370 56,335
Total Assets $478,846 $480,150
Capitalization and Liabilities
Capitalization
Common stock, $6 par value, authorized
19,000,000 shares; outstanding
11,760,073 shares and 11,562,219
shares, respectively $ 70,560 $ 69,373
Other paid-in capital 44,996 42,584
Retained earnings 58,930 61,879
Total common stock equity 174,486 173,836
Preferred and preference stock 8,054 15,054
Preferred stock with sinking
fund requirements 20,000 20,000
Long-term debt 117,680 122,419
Total capitalization 320,220 331,309
Long-term Lease Arrangements 21,010 21,553
Current Liabilities
Short-term debt 850 1,356
Current portion of long-term debt 5,230 4,850
Accounts payable 5,802 7,002
Accounts payable - affiliates 7,390 7,488
Accrued interest 676 564
Accrued income taxes 726 788
Dividends declared 4,682 664
Other current liabilities 25,425 23,913
Total current liabilities 50,781 46,625
Deferred Credits
Deferred income taxes 54,713 52,028
Deferred investment tax credits 8,590 8,785
Yankee Atomic purchased power contract 8,845 9,768
Environmental cleanup 4,900 4,900
Other deferred credits 9,787 5,182
Total deferred credits 86,835 80,663
Total Capitalization and Liabilities $478,846 $480,150
/TABLE
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30
1994 1993
<S> <C> <C>
Cash Flows Provided (Used) By
Operating Activities
Net income $10,605 $13,908
Adjustments to reconcile net income to net cash
provided by operating activities
Deferred revenues - (3,363)
Depreciation 8,166 7,507
Deferred income taxes and investment
tax credits 2,727 3,654
Allowance for equity funds during
construction (43) (23)
Net deferral and amortization of nuclear
refueling replacement energy and
maintenance costs 2,948 1,429
Amortization of property losses 533 1,171
Amortization of nuclear fuel 316 366
Decrease in accounts receivable 12,966 13,711
Decrease in accounts payable (872) (5,037)
Decrease in accrued income taxes (62) (106)
Decrease in other working capital items 1,893 2,736
Other, net (1,692) (968)
Net cash provided by operating activities 37,485 34,985
Investing Activities
Increase in temporary investments (7,123) (429)
Construction and plant expenditures (9,396) (9,758)
Conservation and load management expenditures (3,087) (2,760)
Investments in affiliates 66 (106)
Non-utility investment 1,440 (3,463)
Other investments, net (254) (596)
Net cash used in investing activities (18,354) (17,112)
Financing Activities
Sale of common stock 3,599 4,477
Short-term debt, net (506) (2,100)
Retirement of preferred stock (7,000) -
Retirement of long-term debt (4,359) (12,319)
Common and preferred dividends paid (9,534) (8,655)
Other - (51)
Net cash used in financing activities (17,800) (18,648)
Net Increase (Decrease) in Cash 1,331 (775)
Cash at Beginning of Period 823 1,730
Cash at end of Period $ 2,154 $ 955
Supplemental Cash Flow Information
Cash paid during the year for:
Interest (net of amounts capitalized) $ 4,830 $ 5,024
Income taxes (net of refunds) $ 3,216 $ 4,697
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
Note 1 - Accounting Policies
The Company's significant accounting policies are described
in Note 1 of Notes to Consolidated Financial Statements included
in its 1993 Annual Report on Form 10-K filed with the Securities
and Exchange Commission. For interim reporting purposes, the
Company follows these same basic accounting policies but
considers each interim period as an integral part of an annual
period.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 112, Employer's
Accounting for Postemployment Benefits. See Note 4.
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting of
normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of results for the
interim periods.
Note 2 - Environmental
The Company is engaged in various operations and activities
which subject it to a wide range of environmental and land use
laws and regulations (hereinafter "environmental laws"). It is
Company policy to comply with these environmental laws to the
extent currently applicable and effective against it. The
Company has implemented various procedures and internal controls
to assess and assure compliance. If non-compliance is
discovered, corrective action is taken. Based on these efforts
and the oversight of those regulatory agencies having
jurisdiction, the Company believes it conforms, in all material
respects, with these environmental laws.
Company operations occasionally result in unavoidable and
inadvertent spills or releases of regulated substances or
materials, such as the rupture of a pole mounted transformer,
broken hydraulic line, or other similar occurrences. When the
Company learns of such spills and releases from ongoing
operations, they are cleaned up to meet Federal and state
requirements. Except as discussed in the following paragraphs,
the Company is not aware of any instances where it has caused,
permitted or suffered a release or spill on or about its
properties or otherwise which will likely result in any material
environmental liabilities to the Company.
The Company is an amalgamation of more than 100 predecessor
companies engaged in various operations and activities prior to
their being incorporated in the Company. At least two of these
companies were involved in the production of gas from coal to
sell and distribute to customers at retail at three different
locations. These activities were discontinued by the Company in
the late 1940's or early 1950's. In addition, these predecessor
companies and the Company itself may have historically engaged
in other waste disposal activities, while legal and consistent
with commercially accepted practices at the time, may not meet
modern standards and thus represent potential liability. The
Company continues to discover, investigate, evaluate, monitor
and, where appropriate, remediate contaminated sites related to
these historic activities. The Company's policy is to accrue a
liability for those sites where costs for remediation,
monitoring and other future activities are probable and can be
reasonably estimated.
Based on these investigations and policies, coal tar
deposits were discovered at the Company's Cleveland Avenue
property located in the City of Rutland, a site where one of its
predecessors operated a coal-gasification facility. Due to the
presence of these deposits and uncertainties as to potential
contamination migration off-site, the Company conducted studies
to determine the magnitude and extent of the coal tar releases.
The Company engaged a consultant to assist in evaluating clean-up
methodologies and provide cost estimates. Those studies
indicated the cost to remediate the site would be approximately
$5 million. This was charged to expense in the fourth quarter of
1992. This was followed by an assessment of potential health,
safety and ecological risks. Other site issues are still under
evaluation. A final risk assessment report should be completed
soon and submitted to the state for review. Following state
review, various remediation alternatives will be investigated.
The Company has yet to determine whether insurance proceeds are
available to offset the cost of any remediation required at this
site.
The Company is currently investigating its potential
liability regarding three former municipal landfills: the
Bennington Landfill, the Parker Landfill, and the Trafton-
Hoisington Landfill. The Bennington Landfill is a superfund site
located in Bennington, Vermont. The Company was contacted this
winter by Potentially Responsible Parties (PRP's) who performed
an engineering evaluation/cost analysis (EE/CA) at this site.
They have threatened litigation against the Company and others
seeking contribution for the cost of conducting this study. The
EPA has recently circulated a public notice indicating it has
selected a preferred partial remedy for the site and is seeking
public comment. While the Company is not a PRP, EPA has
designated the Company a Potentially Interested Party (PIP) with
respect to the site in the context of offering it the opportunity
to comment on the preferred alternative. The Company conducted
investigations of its waste disposal practices in the Bennington
area in 1990 and again this past winter. Both concluded the
Company sent no significant amounts of hazardous substances to
the site. Based on the information received thus far, the
Company will vigorously defend any contribution action from the
PRP's and will monitor the EPA's intentions with respect to the
Company's status as a PIP.
The Parker Landfill is a superfund site located in
Lyndonville, Vermont. In 1989, the Company received an
information request from the EPA seeking to determine if the
Company sent any hazardous substances to the site. An investi-
gation conducted at the time concluded general trash was
occasionally sent to the site but the Company had not sent
hazardous substances to the site. In May of 1994, the Company
received a second request seeking additional information
regarding disposal practices. A renewed investigation by the
Company again concluded no significant amounts of hazardous
substances were sent to the site. EPA has recently announced its
preferred remedy for this site and is currently seeking public
comment. Final selection of a remedy is anticipated later this
year. Thus far, the Company is considered a PIP, not a PRP, for
the site and has been offered the opportunity to comment on the
proposed remedy. The Company has complied with the information
request and will monitor EPA activities at the site.
The Trafton-Hoisington Landfill was a municipal and
industrial landfill in the Town of Windsor, Vermont. The site is
presently a state lead site although placement on the National
Priorities List (NPL) remains a possibility. The state of
Vermont has reached an agreement with a small group of PRP's to
conduct a site investigation. The Company was contacted by these
PRP's seeking contribution toward the cost of the site
investigation. The Company conducted an investigation and
concluded no significant amounts of hazardous substances were
sent to the site. The Company has advised the PRP's it will not
voluntarily contribute under these circumstances.
At this time, the Company does not believe these sites
represent the potential for a material adverse effect on its
financial condition but will continue to monitor activities at
the sites.
Note 3 - Accounts Receivable
In 1988 the Company entered into an agreement to sell up to
$20 million of certain accounts receivable and unbilled revenues.
At June 30, 1994 and December 31, 1993, a total of $12 million of
accounts receivable and unbilled revenues were sold under an
accounts receivable facility. A portion of the fee for using the
facility is based on London Inter Bank Offered Rate (LIBOR). In
order to stabilize this portion of its obligation, the Company
executed a SWAP transaction which sets the LIBOR based fee at
3.985% for the period September 29, 1992 to September 29, 1994.
Accounts receivable and unbilled revenues that have been
sold were transferred with limited recourse. A pool of assets,
varying between 3% to 5% of the accounts receivable and unbilled
revenues sold, were set aside for this recourse liability.
Accounts receivable and unbilled revenues are reflected net of
sales of $7.0 million and $5.0 million, respectively, at June 30,
1994 and $4.7 million and $7.3 million, respectively, at December
31, 1993.
Accounts receivable are also reflected net of an allowance
for uncollectible accounts of $1.4 million at June 30, 1994 and
$.9 million at December 31, 1993.
Note 4 - Postemployment Benefits
Effective January 1, 1994, the Company adopted SFAS No. 112,
Employer's Accounting for Postemployment Benefits. The
accumulated postemployment benefit obligation of approximately
$1.1 million, consisting of long-term disability benefits is
reflected in the accompanying balance sheet both as a regulatory
asset and deferred postemployment benefit obligation (current and
non-current). The post-employment benefit cost to be charged to
expense in 1994 is estimated to be $200,000. The Company
believes it is probable that the SFAS No. 112 treatment of
postemployment benefits will be allowed for rate-making purposes,
therefore, no material effect on financial position or on results
of operation is expected in connection with the adoption.
Note 5 - Voluntary Retirement and Severance Programs
In the first quarter of 1994, the Company offered and
recorded an obligation related to a Voluntary Retirement Program
(VRP). The VRP was accepted by 42 employees. The estimated
benefit obligation for the VRP as of June 30, 1994 is about
$4.5 million. This amount consists of pension benefits and
postretirement medical benefits of $2.2 million and $2.3 million,
respectively. Additionally, 32 employees accepted a Voluntary
Severance Program (VSP) offered by the Company. Eligible
employees had until April 22, 1994 to apply. The Company also
announced a layoff of 20 employees on May 9, 1994. The VRP, VSP
and layoff combined with attrition since mid-1993, yields a total
work force reduction of approximately 14%. The 1994 benefit
obligation for the VSP and for employees affected by the layoff
is about $.8 million and $.2 million, respectively. VSP and
layoff obligations were recorded in the second quarter of 1994.
The Company received an Accounting Order from the PSB dated
March 11, 1994, requiring the Company to defer all of these
program costs and amortize them over a five-year period beginning
June 1, 1994 through May 31, 1999, subject to a determination
that these costs may be recovered in rates in the Company's
current rate proceedings.
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Summarized income statement information for Vermont Yankee
Nuclear Power Corporation follows (dollars in thousands, except
per share amounts):
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating revenues $37,093 $40,919 $76,262 $80,568
Operating expenses 33,570 36,815 69,096 72,397
Operating income 3,523 4,104 7,166 8,171
Other income, net 341 236 579 455
Total operating and other income 3,864 4,340 7,745 8,626
Interest expense 2,269 2,192 4,467 4,341
Net income $ 1,595 $ 2,148 $ 3,278 $ 4,285
Average shares of common stock
outstanding 392,481 392,481 392,481 392,481
Earnings per share of common stock $4.06 $5.47 $8.35 $10.92
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1994
Earnings Overview
The Company's rates charged to retail consumers are higher
during the peak period (December through March) and lower during
the off-peak (April through November). Under this rate
structure, the Company often experiences losses in the second and
third quarters offset by higher earnings in the first and fourth
quarters. Accordingly, the Company recorded losses of $.22 and
$.14 per share of common stock for the three months ended June
30, 1994 and 1993, respectively. Losses applicable to common
stock for these respective periods were $2.6 million and
$1.6 million.
For the six months ended June 30, 1994, earnings per share
of common stock were $.81 compared to $1.11 in 1993. Earnings
available for common stock for these respective periods were
$9.5 million and $12.6 million.
Weak sales due to economic and competitive pressure is the
primary contributor to the reduced earnings, as well as other
factors described in results of operations below.
On March 28, 1994, the Vermont Public Service Board (PSB)
held a hearing and subsequently approved the Vermont Department
of Public Service's (DPS) motion, filed on March 21, 1994, to
consolidate two open dockets: 1) a PSB ordered investigation into
the Company's cost of service and resulting rates opened in
November 1993 and 2) the Company's request for an 8.9% general
rate increase filed February 15, 1994. Hearings were held in
early July 1994. Currently, the Company and the DPS have reached
a settlement regarding the power cost component of the request.
However, the PSB has opened an investigation regarding the
prudency of the Company's purchased power activities during the
last five years. Other components of the request still pending
are allowed return on equity, recovery of Conservation and Load
Management (C&LM) costs, and recovery of other operating and
maintenance costs. The final outcome of the rate increase
request including the resolution of these unresolved issues will
directly effect the level of earnings for 1994. Although the
Company cannot assess the potential earnings impact at this time,
a final decision from the PSB on these pending issues is expected
before November 1, 1994.
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RESULTS OF OPERATIONS
Operating Revenues and MWH Sales
A summary of MWH sales and operating revenues for the three
and six months ended June 30, 1994 and 1993 (and the related
percentage changes from 1993) is set forth below:
Three Months Ended June 30
Percentage Percentage
MWH Increase Revenues (000's) Increase
1994 1993 (Decrease) 1994 1993 (Decrease)
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Residential 212,820 213,344 (0.2) $19,535 $18,971 3.0
Commercial 203,050 195,475 3.9 18,043 17,101 5.5
Industrial 88,917 87,711 1.4 6,123 6,095 0.5
Other retail 1,874 1,891 (0.9) 433 434 (0.2)
Total retail sales 506,661 498,421 1.7 44,134 42,601 3.6
Less: DPS sales - 8,694 (100.0) - 453 (100.0)
Total Company retail
sales 506,661 489,727 3.5 44,134 42,148 4.7
Resale sales:
Firm 4,006 15,795 (74.6) 50 63 (92.1)
Entitlement 157,274 215,675 (27.1) 7,416 9,222 (19.6)
Other 241,346 80,709 199.0 5,097 1,692 201.2
Total resale sales 402,626 312,179 29.0 12,563 11,544 8.8
Other revenues - - - 987 3,283 (69.9)
Total sales 909,287 801,906 13.4 $57,684 $56,975 1.2
Six Months Ended June 30
Percentage Percentage
MWH Increase Revenues (000's) Increase
1994 1993 (Decrease) 1994 1993 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Residential 508,780 505,359 0.7 $ 53,005 $52,944 0.1
Commercial 419,762 415,619 1.0 43,516 43,180 0.8
Industrial 199,147 197,896 0.6 15,600 15,769 (1.1)
Other retail 3,790 3,737 1.4 867 853 1.6
Total retail sales 1,131,479 1,122,611 .8 112,988 112,746 .2
Less: DPS sales - 22,785 (100.0) - 1,406 (100.0)
Total Company retail
sales 1,131,479 1,099,826 2.9 112,988 111,340 1.5
Resale sales:
Firm 9,158 38,695 (76.3) 261 1,580 (83.5)
Entitlement 405,926 484,929 (16.3) 17,890 20,143 (11.2)
Other 368,617 123,066 199.5 8,135 2,661 205.7
Total resale sales 783,701 646,690 21.2 26,286 24,384 7.8
Other revenues - - - 2,295 6,570 (65.1)
Total sales 1,915,180 1,746,516 9.7 $141,569 $142,294 (.5)
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Retail MWH sales and revenues for the second quarter ended
June 30, 1994 increased 1.7% and 3.6%, respectively, compared to
last year's second quarter.
The Company's retail MWH sales increased 3.5% and related
revenues increased 4.7% due to the 250 KWH DPS block which
effective September 1, 1993 is being supplied by the Company at
the non-seasonal uniform rate of 8.811 cents per KWH.
From February 1, 1993, through August 31, 1993, the PSB
approved, on an interim basis, a 150 KWH/month joint block
supplied by both the Company and the DPS, whereby the DPS
provided residential customers with the first 25 KWH and the
Company provided the remaining 125 KWH. The 125 KWH were sold at
the non-seasonal uniform rate of 9.009 cents per KWH.
For the six months ended June 30, 1994, retail sales and
revenues were about the same as those reported for the same
period in 1993.
Although the commercial and industrial sectors are beginning
to show some growth, overall retail MWH sales and revenues
continue to reflect the state's sluggish economy and the
effectiveness of C&LM programs.
Due to current market conditions, some of the Company's firm
resale customers chose not to extend their contracts beyond
October 1993. However, one of those customers opted to purchase
power from the Company based on market rates.
For the second quarter and first half of 1994, Entitlement
Sales decreased 58,401 MWH (27.1%) and 79,003 MWH (16.3%),
respectively, and related revenues decreased $1.8 million (19.6%)
and $2.2 million (11.2%), respectively. These decreases are
mostly attributable to the reduced sell-back of the Hydro-Quebec
Schedules C-1 and C-2 power.
Other resale sales increased 160,637 MWH ($3.4 million) for
the second quarter and 245,551 MWH ($5.5 million) for the first
half of 1994 resulting from increased sales to NEPOOL and other
utilities in New England.
The second quarter and first half of 1993 included
approximately $1.5 million and $3.4 million of revenues deferred
from 1991 to 1993. This was the primary reason for a decrease
of 69.9% and 65.1% in other revenues for the second quarter and
first half of 1994, respectively.
Net Purchased Power and Production Fuel Costs
The components of net purchased power and production fuel
costs for the three and six months ended June 30, 1994 and 1993,
are as follows (dollars in thousands):
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<CAPTION>
Three Months Ended June 30
1994 1993
Units Amount Units Amount
<S> <C> <C> <C> <C>
Purchased:
Capacity (MW) 589 $20,516 483 $21,221
Energy (MWH) 840,751 15,168 749,048 13,726
Production fuel (MWH) 115,236 513 97,267 319
Total purchased power and
production fuel costs 36,197 35,266
Less entitlement and other resale
sales (MWH) 398,620 12,513 296,384 10,914
Net purchased power and
production fuel costs $23,684 $24,352
Six Months Ended June 30
1994 1993
Units Amount Units Amount
<S> <C> <C> <C> <C>
Purchased:
Capacity (MW) 583 $41,087 484 $41,821
Energy (MWH) 1,813,219 32,290 1,660,148 28,937
Production fuel (MWH) 210,913 1,079 182,810 955
Total purchased power and
production fuel costs 74,456 71,713
Less entitlement and other resale
sales (MWH) 774,543 26,025 607,995 22,804
Net purchased power and
production fuel costs $48,431 $48,909
</TABLE>
The Company's net purchased power and production fuel costs
for the second quarter of 1994 have decreased 2.7% compared to
the same period last year. The increase of approximately
$1.6 million in energy and production fuel costs is offset by a
decrease in capacity costs of $.7 million and an increase of
$1.6 million in Entitlement and other resale sales.
The increase in energy and production fuel costs is due
mostly to a 12.2% or 91,703 increase in the amount of MWH
purchased. MWH generated also increased by 18.5% or 17,969 MWH
resulting from increased generation by the Company's
hydroelectric facilities. Net purchased power and production
fuel costs for the first half of 1994 are relatively equal
compared to the same period last year. However, energy and
production fuel costs increased $3.5 million offset by a decrease
in capacity costs of about $.7 million and an increase of
approximately $3.2 million in entitlement and other resale sales.
The increase in energy and production fuel costs for the
first half of 1994 is due to a 9% or 153,071 MWH increase in the
amount of MWH purchased, as well as an increase of 13.3% or
28,103 in the amount of MWH generated mostly by the Company's
hydroelectric generating stations.
The decrease in capacity costs results from a 20% increase
in MW purchased amounting to $8.6 million offset by an 18%
decrease in price amounting to $9.3 million.
The Company has equity ownership interests in four nuclear
generating companies: Vermont Yankee, Maine Yankee, Connecticut
Yankee and Yankee Atomic. The Company also owns 18 hydroelectric
generating units, two gas-fired and one diesel peaking units, and
leases and operates two hydroelectric generating stations from
wholly owned subsidiaries. In addition, the Company maintains
joint-ownership interests in Joseph C. McNeil, Wyman #4 and
Millstone #3.
The purchased power and production fuel costs described
above are partially offset for ratemaking purposes by revenues
from sales to NEPOOL, Hydro-Quebec and other utilities in New
England.
Depreciation
The increase in depreciation expense for the three and six
months ended June 30, 1994 is due to property additions and the
installation of new Computer Systems in the second half of 1993.
Other Taxes, Principally Property Taxes
The increases in other taxes of $239,000 and $372,000 for
the second quarter and first half of 1994 result from higher real
estate taxes.
Income Taxes
Federal and state income taxes fluctuate with the level of
pre-tax earnings. These taxes decreased as a result of lower
pre-tax earnings for the second quarter and first half of 1994
compared with the same periods in 1993.
Equity in Earnings of Affiliates
Equity in earnings of affiliates decreased 12.5% and 15.6%
for the three and six months ended June 30, 1994, as compared
with the same periods in 1993. These decreases are attributable
to a lower rate of return allowed by the Federal Energy
Regulatory Commission to some of the Company's nuclear generating
affiliates.
Other Income (Expenses), Net
For the three and six months ended June 30, 1994, other
income (expenses), net decreased $643,000 and $144,000,
respectively. These decreases resulted primarily from lower
income from the non-utility subsidiaries.
Cash Dividends Declared
Preferred
In January 1994, the Company redeemed at premium
280,000 shares of preferred stock 9% dividend series. This
redemption resulted in a decrease in preferred dividends declared
for the second quarter and first half of 1994 compared to the
same periods last year.
Common
In November 1992, the Company's Board of Directors (Board)
declared a quarterly common dividend of approximately
$4.0 million payable February 12, 1993 and, in June 1994, the
Board declared a quarterly common dividend of approximately
$4.2 million payable August 15, 1994. These advanced
declarations account for the increase in common dividends
declared for the second quarter and first half of 1994 compared
to 1993.
LIQUIDITY AND CAPITAL RESOURCES
Construction
The Company's liquidity is primarily affected by the level
of cash generated from operations and the funding requirements of
its ongoing construction program. Cash flows from operating
activities after dividends paid, provided 100% of the Company's
construction and Conservation and Load Management expenditures of
$12.5 million for the six months ended June 30, 1994 and 1993.
Financing and Capitalization
Utility
The level of short-term borrowings fluctuates based on
seasonal corporate needs, the timing of long-term financings and
market conditions. Short-term borrowings are supported by
committed lines of credit and uncommitted loan facilities with
several banks totaling $44 million.
In January 1994, the Company redeemed $7 million of the
9.00% Series Preferred Stock, $25 Par Value.
The Company's capital structure has remained consistent with
the Company's long-range financial objectives: a debt ratio of
45% or lower and an equity ratio higher than 45%. At June 30,
1994, the Company's capitalization, including the current portion
of long-term debt, consisted of 54% common equity, 8% preferred
stock and 38% long-term debt.
On July 21, 1994, Duff & Phelps Rating Co. lowered its
rating on the Company's First Mortgage Bonds to "BBB+" from "A-"
and Preferred Stock to "BBB-" from "BBB". Duff & Phelps stated
that the downgrade reflects its concerns about the continuing
recession in New England, intensifying competition in the utility
industry and excess power in the northeastern region, as well as
the Company's loss of wholesale revenues.
On August 5, 1994, Standard & Poor's Corporation (S&P) also
lowered its rating on the Company's securities to "BBB" from
"BBB+" for First Mortgage Bonds and to "BBB-" from "BBB" for
Preferred Stock. At the same time, S&P revised its ratings
outlook on the Company to "stable" from "negative." S&P stated
"the downgrade reflects the Company's weak financial profile,
adjusted for off-balance sheet obligations, primarily associated
with purchased power, combined with the Company's low average
business position." S&P also stated "restrictive Vermont
regulation, the State of Vermont economy, nuclear asset
concentration and increasing investments into non-regulated
businesses are other factors impacting the Company's business
position."
Non-Utility
Catamount Energy Corporation, a wholly owned subsidiary of
the Company, maintains an Irrevocable Standby Letter of Credit
with a bank to borrow up to an aggregate amount of $2.3 million
to replace its share of cash in the Appomattox Cogeneration
Limited Partnership's Project Debt Service Reserve Fund. This
Letter of Credit is for a one year term with annual extensions
available and requires fees totaling 2.375% of credit available.
SmartEnergy Services, Inc., also a wholly owned subsidiary
of the Company, maintains a $1.0 million revolving line of credit
with a bank to provide working capital and financing assistance
for investment purposes.
Financial obligations of the non-utility wholly owned
subsidiaries are non-recourse to the Company.
Conservation and Load Management (C&LM) Programs
The primary purpose of these programs is to offset the need
for long-term power supply and delivery resources that are more
expensive to purchase or develop than customer-efficiency
programs. C&LM expenditure levels are adjusted annually, based
on the cost-effectiveness of programs compared to other options.
Expenditures in 1993 were $9.5 million and are expected to
approximate $6.0 million in 1994. Presently, C&LM expenditure
levels, as well as the recovery of deferred C&LM expenditures and
related lost revenues from 1991 to the present, are before the
PSB in the Company's request for an 8.9% general rate increase
filed on February 15, 1994.
In addition, the Company is involved in several cases in
Vermont related to C&LM activities including the role of fuel
switching as a C&LM resource and the level of externalities for
electricity.
Diversification
In January 1994, Catamount Energy Corporation (CEC) purchased
an additional 4.185% limited partnership interest in Rumford
Cogeneration Company. Currently, CEC has four wholly owned
subsidiaries with four operating projects in place. CEC and its
subsidiaries contributed $91,000 to the Company's earnings for
the six months ended June 30, 1994.
SmartEnergy Services, Inc.'s (SES) purpose is to cost
effectively provide reliable, energy efficient products and
services, including the rental of electric water heaters. In
1993, SES purchased a 5% interest in Green Technologies, Inc. of
Bolder, Colorado. Green Technologies manufactures various
energy-saving products, including the GreenPlug electricity
saver. SES is marketing the GreenPlug and other energy-saving
products to utilities in the United States and Canada.
Rates
The Company recognizes that adequate and timely rate relief
is necessary if the Company is to maintain its financial
strength, particularly since Vermont regulatory rules do not
allow for changes in purchased power and fuel costs to be passed
on to consumers through rate adjustment clauses. The Company's
practice of reviewing costs periodically will continue and rate
increases will be requested when warranted. The Company filed
for an 8.9% general rate increase on February 15, 1994 to become
effective November 1, 1994. See Earnings Overview for additional
information regarding this matter.
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 20, 1992, Sunnyside Cogeneration Associates filed suit
in the United States District Court for the District of Vermont against
the Company, CV Energy Resources, Inc. (CVER) and a subsidiary of CVER
alleging damages in excess of five million dollars resulting from the
parties' inability to come to agreement on the terms of CVER's proposed
investment in the plaintiff's waste coal generation facility under
construction in Sunnyside, Utah. The Company has filed an answer
denying the allegations and does not expect the resolution of the case
to have a material effect on the business or financial condition of the
Company.
Items 2. through 3.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Registrant held its Annual Meeting of Stockholders on
May 3, 1994.
(b) Directors elected whose terms will expire in 1997:
Votes For Votes Withheld
Frederic H. Bertrand 10,336,696 253,061
Mary Alice McKenzie 10,329,781 259,976
Robert D. Stout 10,379,814 209,943
Other Directors whose terms will expire in 1996:
Robert P. Bliss, Jr.
Elizabeth Coleman
Preston Leete Smith
Thomas C. Webb
Other Directors whose terms will expire in 1995:
Luther F. Hackett
F. Ray Keyser, Jr.
Gordon P. Mills
Item 4. Submission of Matters to a Vote of Security Holders --
continued.
(c) In addition to electing directors, the stockholders approved
the following:
To Amend the Articles of Incorporation to include the Fair Price
Provision:
For 7,788,860
Against 1,046,178
Abstain 162,923
Broker Non-Votes 1,591,796
To Amend the Articles of Incorporation to limit liability of
Directors:
For 9,754,470
Against 610,480
Abstain 224,807
To amend the By-Laws to modify the indemnification protection
afforded Directors, Officers and Employees:
For 9,759,545
Against 585,149
Abstain 245,063
(d) Not applicable.
Item 5. Other Information.
(a) On July 21, 1994, Duff & Phelps Corp. lowered its rating on
the Company's First Mortgage Bonds to "BBB+" from "A-" and
preferred stock to "BBB-" from "BBB". Duff & Phelps stated that
the downgrade reflects its concerns about the continuing
recession in New England, intensifying competition in the utility
industry and excess power in the Northeastern region, as well as
the Company's loss of wholesale revenues.
On August 5, 1994, Standard & Poor's Corporation (S&P) lowered
its rating on the Company's Securities to "BBB" from "BBB+" for
First Mortgage Bonds and to "BBB-" from "BBB" for Preferred
Stock. At the same time, S&P revised its ratings outlook on the
Company to "stable" from "negative." S&P stated "the downgrade
reflects the Company's weak financial profile, adjusted for off-
balance sheet obligations, primarily associated with purchased
power, combined with the Company's low average business
position." S&P also stated "restrictive Vermont regulation, the
State of Vermont economy, nuclear asset concentration and
increasing investments into non-regulated businesses are other
factors impacting the Company's business position."
(b) On August 1, 1994, the Board of Directors appointed
Frederick S. Potter to the position of Vice President of Finance
and Administration and Chief Financial Officer.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) There were no reports on Form 8-K for the quarter ended
June 30, 1994.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By James M. Pennington
James M. Pennington, Controller
(Authorized Officer and
Chief Accounting Officer)
Dated August 12, 1994
