<PAGE>
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, 1995
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, 1995 there
were outstanding 11,631,848 shares of Common Stock, $6 Par Value.
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Form 10-Q
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income and Retained Earnings for
the three and six months ended June 30, 1995 and 1994 3
Consolidated Balance Sheet as of June 30, 1995 and
December 31, 1994 4
Consolidated Statement of Cash Flows for the six months
ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-8
Summarized income statement information for Vermont
Yankee Nuclear Power Corporation 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
PART II. OTHER INFORMATION 16-17
SIGNATURES 18
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<TABLE>
<CAPTION>
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
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating Revenues $62,846 $57,684 $149,709 $141,569
_______ _______ ________ ________
Operating Expenses
Operation
Purchased power 37,691 35,684 76,866 73,377
Production and transmission 5,205 5,531 10,358 10,904
Other operation 10,352 8,906 20,342 17,931
Maintenance 3,146 2,909 5,594 5,309
Depreciation 4,324 4,100 8,511 8,166
Other taxes, principally property taxes 2,429 2,628 5,122 5,301
Taxes on income (615) (1,627) 7,674 6,661
_______ _______ ________ ________
Total operating expenses 62,532 58,131 134,467 127,649
_______ _______ ________ ________
Operating Income (Loss) 314 (447) 15,242 13,920
_______ _______ ________ ________
Other Income and Deductions
Equity in earnings of affiliates 783 797 1,620 1,600
Allowance for equity funds during construction 47 22 153 43
Other income (expenses), net 142 (190) 832 (162)
Benefit (provision) for income taxes 201 309 (27) 320
_______ _______ ________ ________
Total other income and deductions, net 1,173 938 2,578 1,801
_______ _______ ________ ________
Total Operating and Other Income 1,487 491 17,820 15,721
_______ _______ ________ ________
Interest Expense
Interest on long-term debt 2,373 2,367 4,790 4,854
Other interest 210 156 406 317
Allowance for borrowed funds during construction (33) (29) (109) (55)
_______ _______ ________ ________
Total interest expense, net 2,550 2,494 5,087 5,116
_______ _______ ________ ________
Net Income (Loss) (1,063) (2,003) 12,733 10,605
Retained Earnings at Beginning of Period 68,867 69,829 55,575 61,879
_______ _______ ________ ________
67,804 67,826 68,308 72,484
Cash Dividends Declared
Preferred stock 507 577 1,014 1,124
Common stock 2,335 8,319 2,332 12,430
_______ _______ ________ ________
Total dividends declared 2,842 8,896 3,346 13,554
_______ _______ ________ ________
Retained Earnings at End of Period $64,962 $58,930 $ 64,962 $ 58,930
======= ======= ======== ========
Earnings (Losses) Available for Common Stock $(1,570) $(2,580) $ 11,719 $ 9,481
Average Shares of Common Stock Outstanding 11,676,201 11,708,652 11,694,025 11,659,421
Earnings (Losses) per Share of Common Stock $(.13) $(.22) $1.00 $.81
Dividends per Share of Common Stock $ .20 $ .355 $ .40 $.71
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30 December 31
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Utility Plant, at original cost $445,874 $434,059
Less accumulated depreciation 132,932 125,800
________ ________
312,942 308,259
Construction work in progress 11,168 15,099
Nuclear fuel, net 1,469 1,197
________ ________
Net utility plant 325,579 324,555
________ ________
Investments and Other Assets
Investments in affiliates, at equity 26,730 26,765
Non-utility investments 27,883 28,184
Non-utility property, less accumulated depreciation 2,886 2,989
________ ________
Total investments and other assets 57,499 57,938
________ ________
Current Assets
Cash 2,280 1,673
Temporary investments, at market value 6,906 5,886
Accounts receivable 14,058 20,523
Unbilled revenues 4,023 10,696
Materials and supplies, at average cost 4,057 4,182
Prepayments 1,575 3,544
Other current assets 4,822 4,806
________ ________
Total current assets 37,721 51,310
________ ________
Regulatory Assets and Other Deferred Charges 61,438 56,596
________ ________
Total Assets $482,237 $490,399
======== ========
Capitalization and Liabilities
Capitalization
Common stock, $6 par value, authorized
19,000,000 shares; outstanding 11,785,848 shares $ 70,715 $ 70,715
Other paid-in capital 45,240 45,229
Treasury stock (134,300 shares and 56,400 shares,
respectively, at cost) (1,788) (735)
Retained earnings 64,962 55,575
________ ________
Total common stock equity 179,129 170,784
Preferred and preference stock 8,054 8,054
Preferred stock with sinking fund requirements 20,000 20,000
Long-term debt 120,150 120,157
________ ________
Total capitalization 327,333 318,995
________ ________
Long-term Lease Arrangements 19,926 20,467
________ ________
Current Liabilities
Short-term debt 7,474 11,511
Current portion of long-term debt - 4,230
Accounts payable 4,401 5,970
Accounts payable - affiliates 8,440 8,435
Accrued interest 616 671
Accrued income taxes 2,048 3,997
Dividends declared - 2,853
Other current liabilities 23,939 26,002
________ ________
Total current liabilities 46,918 63,669
________ ________
Deferred Credits
Deferred income taxes 55,259 52,710
Deferred investment tax credits 8,199 8,394
Yankee Atomic purchased power contract 10,044 10,725
Environmental cleanup 5,050 5,050
Other deferred credits 9,508 10,389
________ ________
Total deferred credits 88,060 87,268
________ ________
Total Capitalization and Liabilities $482,237 $490,399
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30
1995 1994
<S> <C> <C>
Cash Flows Provided (Used) By
Operating Activities
Net income $12,733 $10,605
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 8,511 8,166
Deferred income taxes and investment tax credits 3,512 2,727
Allowance for equity funds during construction (153) (43)
Net deferral and amortization of nuclear refueling
replacement energy and maintenance costs (6,091) 2,948
Decrease in accounts receivable 13,220 12,966
(Decrease) in accounts payable (1,622) (872)
(Decrease) in accrued income taxes (1,949) (62)
(Increase) decrease in other working capital items (383) 1,893
Other, net 1,781 (843)
_______ _______
Net cash provided by operating activities 29,559 37,485
_______ _______
Investing Activities
Increase in temporary investments (1,020) (7,123)
Construction and plant expenditures (10,200) (9,396)
Conservation and load management expenditures (2,118) (3,087)
Investments in affiliates (47) 66
Non-utility investments 22 1,440
Other investments, net (64) (254)
_______ _______
Net cash used in investing activities (13,427) (18,354)
_______ _______
Financing Activities
Sale of common stock - 3,599
Repurchase of common stock (1,053) -
Short-term debt, net (4,037) (506)
Retirement of preferred stock - (7,000)
Retirement of long-term debt (4,237) (4,359)
Common and preferred dividends paid (6,198) (9,534)
_______ _______
Net cash used in financing activities (15,525) (17,800)
_______ _______
Net Increase in Cash 607 1,331
Cash at Beginning of Period 1,673 823
_______ _______
Cash at end of Period $ 2,280 $ 2,154
======= =======
Supplemental Cash Flow Information
Cash paid during the period for:
Interest (net of amounts capitalized) $ 4,961 $ 4,830
Income taxes (net of refunds) $ 6,119 $ 3,216
</TABLE>
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
Note 1 - Accounting Policies
The Company's significant accounting policies are described in Note 1 of
Notes to Consolidated Financial Statements included in its 1994 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.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of,
effective for fiscal years beginning after December 15, 1995. SFAS No. 121
establishes accounting standards for the impairment of long-lived assets and
requires that regulatory assets which are no longer probable of recovery
through future revenues be charged to earnings. The Company anticipates
adopting SFAS No. 121 beginning January 1, 1996, and based on the current
regulatory rate-making process, the Company does not expect that adoption of
SFAS No 121 will have a material impact on the Company's financial position or
results of operations.
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 inspection and supervision by both state and Federal regulatory
authorities including the United States Environmental Protection Agency (EPA)
(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 retail customers 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 which, 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 was completed and submitted to the
state for review. Following state review, various remediation alternatives
will be investigated. The Company was formally contacted by the EPA in
January 1995 asking for written consent to conduct a site evaluation. The
Company does not believe EPA's evaluation changes its potential liability so
long as reasonable further progress is made in remediating the site. 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 in
the winter of 1994 by counsel for a group of potentially responsible parties
(PRP Group) who were performing an engineering evaluation and cost analysis
(EE/CA) for the site under a settlement agreement with the EPA. The PRP Group
threatened contribution litigation against the Company and others to recover
an equitable share of the approximate $3 million the PRP Group had expended
thus far on the EE/CA. Investigation by the Company thus far suggests that it
is unlikely that it contributed a meaningful amount of hazardous substances,
if any, to the site and thus would not be liable for a significant share of
liability for the EE/CA expenses or site clean up. No litigation by the PRP
Group has yet been initiated against the Company.
In July 1994, the EPA notified the Company that it had reviewed evidence
which, in its opinion, indicated that the Company may have contributed to the
environmental contamination at the site but that a full determination of its
potential liability for the site had not been made. EPA, at that time,
designated the Company a potentially interested party (PIP). Also in July
1994, the EPA notified the PRP Group, the Company and other PIPs that it was
proposing a response action at the site with an estimated total present worth
cost of approximately $9.5 million.
During November 1994, the Company was notified that EPA had information
indicating that the Company was a PRP. The EPA letter also requested that the
Company participate with other PRPs in the response action described above and
further made a demand against the Company and other PRPs for reimbursement of
approximately $.85 million in costs EPA had incurred in responding to
conditions at the site.
The PRP Group is attempting to form a larger group of PRPs to undertake
the remedial response, pay EPA response expenses and obtain reimbursement for
the $3 million it spent on the EE/CA. Representatives of the Company have
been in contact with EPA and the PRP Group and have evaluated the merits of
participation with the larger group. In March 1995, the Company entered into
an agreement to become a part of the larger PRP Group and will also continue
to work with EPA seeking a "de minimis" settlement.
While further investigation is necessary and is continuing, the results
thus far suggest that the Company will defend any contribution action from the
other PRPs and the EPA but will continue to explore settlement options which
appear to be in the overall best interest of the Company. The Company has yet
to determine whether insurance proceeds are available to offset potential
costs for the remediation or other expenses which might be required by the
Company at this site.
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
investigation 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. Last summer, EPA also announced its proposed preferred
remedy for this site with an estimated total present net worth cost of $28.2
million. Final selection of a remedy is anticipated later this year. Thus
far, the Company is considered a PIP, not a PRP, for the site. 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 remains a possibility. The
state of Vermont has reached an agreement with a small group of PRPs to
conduct a site investigation. The Company was contacted by these PRPs 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 PRPs 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 or results
of operations but will continue to monitor activities at the sites.
The Company is not subject to any pending or threatened litigation with
respect to any other sites where remediation expenses could be material, nor
has the EPA or other state or Federal agency sought contribution from the
Company for the study or remediation of any such 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, 1995 and
December 31, 1994, 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).
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 $6.4 million and $5.6 million, respectively, at June 30, 1995
and $4.2 million and $7.8 million, respectively, at December 31, 1994.
Accounts receivable are also reflected net of an allowance for
uncollectible accounts of $1.0 million at June 30, 1995 and December 31, 1994.
Note 4 - Maine Yankee Plant
The Company owns 2% of the common stock of Maine Yankee Atomic Power
Company (MY) and is entitled to approximately 2% of the power output of the
880-megawatt nuclear generating plant (Plant) located in Wiscasset, Maine,
owned and operated by MY.
During the refueling-and-maintenance shutdown that commenced in early
February 1995, MY detected an increased rate of degradation of the Plant's
steam generator tubes well above its expectations and began evaluating several
courses of action.
On May 22, 1995, MY announced its plan to repair the tubes in the plant's
three steam generators by sleeving all 17,000 steam generator tubes. This
process will allow the plant to return to service at its full 880-megawatt
rating by the end of 1995. Sleeving involves inserting a tube of slightly
smaller diameter into the defective tube to cover the area above and below the
crack; the sleeve is welded in place and acts as a new tube. Sleeving is a
proven safe and technically sound option commonly used in plants throughtout
the United States and in other places in the world. MY estimates it will cost
approximately $40 million to resleeve all the steam generator tubes.
The Company owns 2% of the common stock of MY, and estimates its share of
the cost to repair the steam generator tubes will be about $.8 million.
In 1994, MY provided about 3% of the Company's power requirements. The
Company estimates the additional costs for replacement power while MY is not
operating could exceed $1 million.
Costs incurred through June 1995 for replacement power and steam
generator repairs amounting to approximately $.5 million have been included in
the Company's 1995 financial results.
<PAGE>
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
1995 1994 1995 1994
Operating revenues $47,043 $37,093 $98,418 $76,262
Operating expenses 43,187 33,570 90,730 69,096
_______ _______ _______ _______
Operating income 3,856 3,523 7,688 7,166
Other income, net 512 341 1,049 579
_______ _______ _______ _______
Total operating and other income 4,368 3,864 8,737 7,745
Interest expense 2,652 2,269 5,263 4,467
_______ _______ _______ _______
Net income $ 1,716 $ 1,595 $ 3,474 $ 3,278
======= ======= ======= =======
Average shares of common stock
outstanding 392,481 392,481 392,481 392,481
Earnings per share of common stock $4.36 $4.06 $8.85 $8.35
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1995
Earnings Overview
The Company recorded losses of $.13 and $.22 per share of common stock
for the three months ended June 30, 1995 and 1994, respectively. Losses
applicable to common stock for these respective periods were $1.6 million and
$2.6 million. Due to the Company's winter sales peak and higher winter rates,
the Company normally experiences losses in the second and third quarter when
sales are lower and rates are reduced.
For the six months ended June 30, 1995, earnings per share of common
stock were $1.00 compared to $.81 in 1994. Earnings available for common
stock for these respective periods were $11.7 million and $9.5 million.
The increase in earnings for the second quarter and first half is
primarily due to the 5.07% retail rate increase effective November 1, 1994 and
to other factors described in Results of Operations below.
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, 1995 and 1994 (and the related percentage changes from
1994) is set forth below:
<TABLE>
<CAPTION>
Three Months Ended June 30
Percentage Percentage
MWH Increase Revenues (000's) Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Residential 213,608 212,820 0.4 $20,522 $19,535 5.1
Commercial 205,968 203,050 1.4 18,875 18,043 4.6
Industrial 91,381 88,917 2.8 6,358 6,123 3.8
Other retail 1,831 1,874 (2.3) 451 433 4.2
_______ _______ _______ _______
Total retail sales 512,788 506,661 1.2 46,206 44,134 4.7
_______ _______ _______ _______
Resale sales:
Firm 327 4,006 (91.8) 14 50 (72.0)
Entitlement 305,408 157,274 94.2 11,780 7,416 58.8
Other 160,128 241,346 (33.7) 3,704 5,097 (27.3)
_______ _______ _______ _______
Total resale sales 465,863 402,626 15.7 15,498 12,563 23.4
_______ _______ _______ _______
Other revenues - - - 1,142 987 15.7
_______ _______ _______ _______
Total sales 978,651 909,287 7.6 $62,846 $57,684 8.9
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30
Percentage Percentage
MWH Increase Revenues (000's) Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Residential 487,306 508,780 (4.2) $ 53,389 $ 53,005 0.7
Commercial 424,491 419,762 1.1 46,023 43,516 5.8
Industrial 202,655 199,147 1.8 16,300 15,600 4.5
Other retail 3,724 3,790 (1.7) 899 867 3.7
_________ _________ ________ ________
Total retail sales 1,118,176 1,131,479 (1.2) 116,611 112,988 3.2
_________ _________ ________ ________
Resale sales:
Firm 4,042 9,158 (55.9) 192 261 (26.4)
Entitlement 551,224 405,926 35.8 23,869 17,890 33.4
Other 293,411 368,617 (20.4) 6,906 8,135 (15.1)
_________ _________ ________ ________
Total resale sales 848,677 783,701 8.3 30,967 26,286 17.8
_________ _________ ________ ________
Other revenues - - - 2,131 2,295 (7.1)
_________ _________ ________ ________
Total sales 1,966,853 1,915,180 2.7 $149,709 $141,569 5.7
========= ========= ======== ========
</TABLE>
Retail MWH sales for the three months ended June 30, 1995 increased 1.2%
compared to last year. However, retail revenues increased $2.1 million or
4.7% over last year due to a $1.6 million increase in price resulting from the
5.07% retail rate increase and $.5 million associated with the 1.2% increase
in retail MWH sales. For the quarter, residential MWH sales were about the
same as last year while commercial and industrial MWH sales increased 1.4% and
2.8%, respectively.
For the six months ended June 30, 1995, retail MWH sales decreased 1.2%
while retail revenues increased $3.6 million or 3.2% compared to last year.
The revenue increase results from a $5.1 million increase in price due to the
5.07% retail rate increase offset by a $1.5 million decrease associated with
lower retail MWH sales. For the first half of 1995, residential MWH sales
decreased 4.2% and commercial and industrial MWH sales increased 1.1% and
1.8%, respectively.
These variances reflect the mild weather experienced during the first
quarter of 1995 as well as the effectiveness of Conservation and Load
Management programs (C&LM). However, as a result of economic development
activities, the Company is beginning to see some growth in the commercial and
industrial sectors.
In anticipation of a more competitive environment and to align costs with
revenues by rate class, on May 24, 1995, the Company filed with the Vermont
Public Service Board (PSB) a request for a retail rate redesign to be
effective January 1, 1996. The rate redesign, if approved by the PSB, would
decrease the revenue per kilowatt hour for the commercial and industrial
sectors by approximately 4% and would increase the revenue per kilowatt hour
for the residential sector by about 5%.
Due to current market conditions, some of the Company's firm resale
customers chose not to extend their contracts based on compensatory rates.
However, two of those customers are currently purchasing power from the
Company based on market rates.
Entitlement MWH sales increased 94.2% or 148,134 MWH for the second
quarter and 35.8% or 145,298 MWH for the first half of 1995 compared to the
same periods in 1994. These increases result from the sale of Hydro-Quebec
9502 power to Boston Edison Company. However, these increases were partially
offset by decreased MWH sales to UNITIL and Commonwealth Electric under a swap
arrangement due to the scheduled refueling and maintenance shutdown of Vermont
Yankee that began on March 17, 1995.
The decreases in other resale sales of 33.7% or 81,218 MWH for the second
quarter and 20.4% or 75,206 MWH for the first half of 1995 resulted from lower
unit and off-system sales to other utilities in New England as well as
decreased sales to NEPOOL.
The variances in other revenues for the second quarter and first half of
1995 are due to true-up adjustments related to C&LM programs.
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, 1995 and 1994 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30
1995 1994
Units Amount Units Amount
<S> <C> <C> <C> <C>
Purchased:
Capacity (MW) 675 $21,071 589 $20,516
Energy (MWH) 965,237 16,620 840,751 15,168
Production fuel (MWH) 70,859 529 115,236 513
_______ _______
Total purchased power and production
fuel costs 38,220 36,197
Less entitlement and other resale sales (MWH) 465,536 15,484 398,620 12,513
_______ _______
Net purchased power and production
fuel costs $22,736 $23,684
======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30
1995 1994
Units Amount Units Amount
<S> <C> <C> <C> <C>
Purchased:
Capacity (MW) 632 $42,342 583 $41,087
Energy (MWH) 1,913,760 34,524 1,813,219 32,290
Production fuel (MWH) 172,882 1,099 210,913 1,079
_______ _______
Total purchased power and production
fuel costs 77,965 74,456
Less entitlement and other resale sales (MWH) 844,635 30,775 774,543 26,025
_______ _______
Net purchased power and production
fuel costs $47,190 $48,431
======= =======
</TABLE>
The Company's total purchased power and production fuel costs increased
approximately $2.0 million or 5.6% for the second quarter as compared to the
same period last year. The increase is due to a 14.6% and a 14.8% increase in
the amount of MW and MWH purchased. The increase in MW and MWH purchased
totaled $3.0 million and $2.2 million, respectively. These increases were
offset by favorable price variances of $2.4 million for capacity, and $.8
million for energy.
Due to a 23.7% increase in entitlement and other resale sales totaling
approximately $3.0 million, the Company's net purchased power and production
fuel costs for the second quarter decreased 4.0% as compared with the same
period last year.
The increase in purchased power and production fuel costs for the first
half of 1995 is due to an 8.4% and a 5.5% increase in the amount of MW and MWH
purchased totaling $3.5 million and $1.8 million, respectively. The price per
MW purchased decreased 5.1% reducing purchased power costs by $2.3 million.
The price per MWH purchased increased slightly in the first six months
increasing total costs by $.4 million. A $4.8 million increase in entitlement
and other resale revenues was due to both an increase in MWH sales and price.
Due to this increase in sales, net power costs were 2.6% less for the six
months ended June 30, 1995 as compared with the same period in the prior year.
Production fuel costs for the second quarter and first half of 1995 were
relatively the same as last year.
The Company has equity ownership interests in four nuclear generating
companies: Vermont Yankee, Maine Yankee, Connecticut Yankee and Yankee Atomic.
The Company also owns 20 hydroelectric generating units and two gas-fired and
one diesel peaking units. In addition, the Company maintains joint-ownership
interests in Joseph C. McNeil, Wyman #4 and Millstone #3.
Other Operation
The increase of $1.4 million and $2.4 million in other operation expenses
for the second quarter and first half of 1995 results primarily from increased
C&LM costs. These costs are being recovered through retail rates approved by
the Vermont Public Service Board, effective November 1, 1994.
Income Taxes
Federal and state income taxes fluctuate with the level of pre-tax
earnings. The increase in total income tax expense for the three and six
months ended June 30, 1995 results primarily from a 52.3% and 20.6% increase
in pre-tax earnings for the respective periods.
Allowance For Funds Used During Construction
The increase in allowance for equity and borrowed funds used during
construction for the second quarter and first half of 1995 is due to increased
capital expenditures and higher rates used for capitalization of these funds.
Other Income (Expenses), Net
For the three and six months ended June 30, 1995, other income
(expenses), net increased $.3 million and $1.0 million, respectively. These
increases result primarily from higher non-regulated subsidiaries' earnings.
Also, in the first quarter of 1994, the Company wrote-off $.4 million,
representing the non-recoverability portion of the Company's investment in the
Seabrook project from some of the Company's firm resale customers.
Cash Dividends Declared
Preferred
In January 1994, the Company redeemed 280,000 shares of preferred stock
9% dividend series at premium of $.25 per share. This redemption resulted in
a decrease in preferred dividends declared for the second quarter and first
half of 1995 compared to the same periods last year.
Common
In June 1994, the Company's Board of Directors (Board) declared a
quarterly common dividend of approximately $4.2 million payable August 15,
1994 and in December 1994, the Board declared a quarterly common dividend of
approximately $2.3 million payable February 15, 1995. The December
declaration reflected the 44% reduction in dividends paid per share. These
advanced declarations, combined with the 44% reduction, account for the
decrease in common dividends declared for the three and six months ended
June 30, 1995 compared to the same periods of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Competition
As described in Note 1 of Notes to Consolidated Financial Statements
included in the Company's 1994 Annual Report on Form 10-K, management believes
that the Company meets the requirement of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," but continues to evaluate significant
changes in the regulatory and competitive environment to ensure and assess the
Company's overall consistency with the criteria of SFAS No. 71. In the event
the Company determines that it no longer meets the criteria for following SFAS
No. 71, the accounting impact would be an extraordinary non-cash charge to
operations of an amount that could be material. Although these conditions do
not currently exist, the Company anticipates that in the future competition
will place pressure on both unit sales and the price the Company can charge.
As a result, increased competitive pressure in the electric utility industry
may restrict the Company's ability to establish prices to recover embedded
costs and may lead to a significant change in the manner in which rates are
set by regulators from cost-based regulation to a different form of regulation
that approximates market conditions. Singly or together these events may give
rise to the discontinuance of SFAS No. 71 and, in addition, could diminish the
Company's ability to recover its embedded costs of providing service.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of,
effective for fiscal years beginning after December 15, 1995. SFAS No. 121
establishes accounting standards for the impairment of long-lived assets and
requires that regulatory assets which are no longer probable of recovery
through future revenues be charged to earnings. The Company anticipates
adopting SFAS No. 121 beginning January 1, 1996, and based on the current
regulatory rate-making process, the Company does not expect that adoption of
SFAS No. 121 will have a material impact on the Company's financial position
or results of operations.
Construction
The Company's liquidity is primarily affected by the level of cash
generated from operations, power contracts, and the funding requirements of
its ongoing construction and C&LM programs. Cash flows from operating
activities after dividends paid, provided 100% of the Company's construction
and C&LM expenditures of $12.3 million and $12.5 million for the six months
ended June 30, 1995 and 1994, respectively.
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. Short-term borrowings
generally are reduced when long-term debt or equity securities are issued.
The Company's capital structure ratios as of June 30, 1995, consisted of
55% common equity, 9% preferred stock and 36% long-term debt. The Company
has no long-term debt or preferred stock subject to mandatory sinking fund
requirements or maturing within the next twelve-month period. The credit
ratings of the Company's securities as of June 30, 1995, as reaffirmed by
Standard & Poor's Corp. and Duff & Phelps Corp. in mid-1994 are BBB and BBB+,
respectively, for First Mortgage Bonds and BBB- for Preferred Stock.
On November 8, 1994, the Company's Board of Directors (Board) announced a
new dividend policy that targeted future dividends at 60% of earnings. In
light of the new policy, the annual dividend of $1.42 was reduced 44% to $.80
effective with the first quarter dividend paid in February 1995. The dividend
payment level will be reviewed regularly in light of capital needs, projected
earnings' levels and other relevant factors. Also, the Board authorized the
purchase of up to 2 million shares of its outstanding common stock in open
market transactions. As of June 30, 1995, the Company had purchased 134,300
shares at an average price of $13.26 per share. These transactions are
recorded as treasury stock, at cost, in the Company's Consolidated Balance
Sheet.
As of July 31, 1995, the Company had purchased 154,000 shares at an
average price of $13.33 per share.
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 2.442% 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. Expenditures in 1994 were $6.2
million and are expected to be approximately $6.0 million in 1995.
On April 12, 1995, the Company and the Vermont Department of Public
Service jointly filed a Stipulation resolving issues related to the role of
fuel switching as a C&LM resource, promotion of electricity, and C&LM spending
levels for 1995 and 1996. This Stipulation resolves the outstanding material
issues related to C&LM until the end of 1996. It also establishes a process
to remove the return on equity penalty related to "the Company's failed
efforts to acquire all cost-effective energy efficiency resources" imposed by
the PSB in the Company's last rate case. The stipulation becomes effective
upon approval of the PSB which is expected during the third quarter of 1995.
Diversification
Catamount Energy Corporation (Catamount) was formed for the purpose of
investing in non-regulated energy-related projects. Currently, Catamount,
through its wholly owned subsidiaries, has interests in four operating
independent power projects located in Rumford, Maine; East Ryegate, Vermont;
Hopewell, Virginia; and Williams Lake, British Columbia, Canada. Catamount
and its subsidiaries contributed $305,000 and $796,000 to the Company's
earnings for the three and six months ended June 30, 1995, respectively,
compared to a loss of $220,000 and earnings of $91,000 for the three and six
months ended June 30, 1994, respectively.
On February 2, 1995, Catamount's Board of Directors voted to finance,
through wholly owned subsidiaries of Catamount, up to $100,000 of development
capital to complete development of two 10 MW gas-fired cogeneration projects
in the western United States. The Development Capital is to be reimbursed
with interest at the rate of 10% at construction financial closing. Catamount
has committed up to a total of $2.5 million to purchase 50% interests in each
project at construction financial closing.
On July 21, 1995, Catamount sold approximately half of its interest in
the Appomattox Cogeneration Limited Partnership to CIPSCO Investment Company.
The sale will generate capital to fund investments in several other
independent power projects and will add approximately $.08 to earnings per
common share during the third quarter of 1995. Upon closing, Catamount's
ownership percentage in Appomattox Cogeneration Limited Partnership was
reduced to 25.25%.
SmartEnergy Services, Inc. (SmartEnergy) was formed for the purpose of
effectively providing reliable, energy-efficient products and services,
including the rental of electric water heaters. SmartEnergy incurred losses
of $16,000 and $59,000 for the three and six months ended June 30, 1995,
compared to losses of $39,000 and $24,000 for the three and six months ended
June 30, 1994.
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 is considering filing
for a general rate increase during the second half of 1995 to become effective
during 1996 to offset the increasing cost of providing service, primarily
purchased power.
<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.
On December 30, 1994, the Company and its Board of Directors
were named as defendants in a complaint filed in the United States District
Court for the District of Vermont by three shareholders. The complaint
alleges, among other things, (I) that F. Ray Keyser, Jr., Chairman of the
Company's Board of Directors, violated Section 8 of the Clayton Act, 15 U.S.C.
Subchapter 19, which precludes certain interlocking directorships, (ii) that
Mr. Keyser violated his fiduciary duties to the Company's stockholders by
acquiring and operating a series of businesses in competition with the Company
without offering those business opportunities to the Company, (iii) that the
remaining individual defendants violated their fiduciary duties to the
Company's stockholders by failing to analyze, or to cause management to
analyze, diver-sification into propane and fossil fuels, and by failing to
make the Company an effective competitor of alternative fuel companies, and
(iv) that the Company violated the applicable provision of the Vermont General
Corporation Law by failing to provide a list of the Company's stockholders.
The complaint seeks an unspecified amount of damages (including treble damages
against Mr. Keyser), attorney's fees and costs, a list of the Company's
stockholders, and a court order to enjoin the defendants from alleged
continuing violations of the law. Each of the individual defendants and the
Company itself deny the allegations against them and intend to vigorously
defend the complaint.
Items 2 and 4.
None.
Item 5. Other Information.
(a) On March 1, 1995, the Company filed a comprehensive, open access
transmission tariff (Tariff) with the Federal Energy Regulatory Commission
(FERC). The Tariff is designed to provide firm and non-firm network
transmission service, as well as firm point to point service over the
transmission systems of the Company and its wholly owned subsidiary,
Connecticut Valley Electric Company Inc. In addition, the Tariff would permit
customers to make use of the Company's contract rights to the transmission
facilities of the Vermont Electric Power Company, Inc. and New England Power
Company. The Tariff would provide transmission service that is comparable to
that provided to native load customers. Charges for such service would be
based upon the Company's cost of service for transmission.
The Company prepared and filed the Tariff in anticipation of
developing business opportunities in the area of electric transmission
service. In addition, recent FERC orders led the Company to believe that all
electric utilities owning transmission facilities would be required to prepare
and file such a tariff in the near future. FERC issued a Notice Of Proposed
Rulemaking (NOPR) dated March 29, 1995, requiring such utilities to make
available comparable transmission service. The Company's tariff complies with
many requirements proposed by the FERC in its NOPR.
Nine parties intervened in the Company's filing. On April 28,
1995, the FERC issued a deficiency letter asking for more information in a
number of areas.
The company filed a timely response to the deficiency letter on
June 14, 1995. Three parties filed protests in response to the Company
filing, and one additional party filed a request for late intervention. The
FERC is expected to act on the filing by mid-August 1995.
(b) As ordered by the New Hampshire Public Utility Commission
(NHPUC) in the Company's wholly owned subsidiary Connecticut Valley Electric
Company Inc.'s (Connecticut Valley) 1994 Conservation and Load Management
Percentage Adjustment docket, the Company entered into negotiations with the
NHPUC Staff to redesign the RS-2 wholesale rate under which Connecticut Valley
purchases power from the Company. The redesign features marginal cost based
energy and capacity charges for all energy and capacity purchases above or
below a base level. Such negotiations concluded at the end of 1994. A
summary report was filed with the NHPUC on February 13, 1995. The NHPUC
issued an order dated June 28, 1995 approving the principles underlying the
redesign. The Company is preparing a filing of the redesign with the Federal
Energy Regulatory Commission. Connecticut Valley's costs of wholesale power
will be lower than they otherwise would be only if Connecticut Valley's growth
rate exceeds that of the Company's Vermont retail operations.
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,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
(Registrant)
By Jonathan W. Booraem
_______________________________________
Jonathan W. Booraem, Treasurer and
duly authorized officer
By James M. Pennington
_______________________________________
James M. Pennington, Controller and
Principal Accounting Officer
Dated August 11, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from the Consolidated Financial Statements included herein and is qualified in
its entirety by reference to such financial statements (dollars in thousands,
except per share amounts).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 325,579
<OTHER-PROPERTY-AND-INVEST> 57,499
<TOTAL-CURRENT-ASSETS> 37,721
<TOTAL-DEFERRED-CHARGES> 61,438
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 482,237
<COMMON> 68,927
<CAPITAL-SURPLUS-PAID-IN> 45,240
<RETAINED-EARNINGS> 64,962
<TOTAL-COMMON-STOCKHOLDERS-EQ> 179,129
20,000
8,054
<LONG-TERM-DEBT-NET> 120,150
<SHORT-TERM-NOTES> 7,474
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 19,926
<LEASES-CURRENT> 1,094
<OTHER-ITEMS-CAPITAL-AND-LIAB> 126,410
<TOT-CAPITALIZATION-AND-LIAB> 482,237
<GROSS-OPERATING-REVENUE> 149,709
<INCOME-TAX-EXPENSE> 7,674
<OTHER-OPERATING-EXPENSES> 126,793
<TOTAL-OPERATING-EXPENSES> 134,467
<OPERATING-INCOME-LOSS> 15,242
<OTHER-INCOME-NET> 2,578
<INCOME-BEFORE-INTEREST-EXPEN> 17,820
<TOTAL-INTEREST-EXPENSE> 5,087
<NET-INCOME> 12,733
1,014
<EARNINGS-AVAILABLE-FOR-COMM> 11,719
<COMMON-STOCK-DIVIDENDS> 2,332
<TOTAL-INTEREST-ON-BONDS> 8,142
<CASH-FLOW-OPERATIONS> 29,559
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
