SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO
PROPOSED AMENDMENT OF A CREDIT
FACILITY FOR NUCLEAR FUEL FINANCING
Under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE CONNECTICUT LIGHT AND POWER COMPANY
107 Selden Street
Berlin, Connecticut 06037
WESTERN MASSACHUSETTS ELECTRIC COMPANY
107 Selden Street
Berlin, Connecticut 06037
(Name of companies filing this statement and address of
principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Robert P. Wax, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
David R. McHale Jeffrey C. Miller, Esq.
Assistant Treasurer Northeast Utilities Service Company
Northeast Utilities Service Company P.O. Box 270
P.O. Box 270 Hartford, Connecticut 06141-0270
Hartford, Connecticut 06141-0270
Paula Lacey Herman, Esq.
Day, Berry & Howard
CityPlace I
Hartford, Connecticut 06103-3499
<PAGE>
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
1. The Connecticut Light and Power Company ("CL&P") and Western
Massachusetts Electric Company ("WMECO"), (together, the
"Applicants"), each an electric utility subsidiary of Northeast
Utilities ("NU"), a registered holding company under the Public
Utility Holding Company Act of 1935 (the "Act"), hereby submit a
Declaration/Application to the Commission pursuant to the Act
with respect to proposed modifications of a credit facility for
nuclear fuel financing previously approved by the Commission by
its order dated January 23, 1992 in File No. 70-7875 (HCA
Release No. 35-25458).
2. The Applicants have joint ownership interests in three nuclear
electric generating units located at Millstone Point in
Waterford, Connecticut. CL&P and WMECO have approximately an
81.221% and 18.779% (aggregating 100%) ownership interest,
respectively, in Millstone Unit Nos. 1 and 2. CL&P and WMECO
have a 52.933% and 12.239% (aggregating 65.172%) ownership
interest, respectively, in Millstone Unit No. 3 ("Millstone 3").
Millstone Unit No. 1 ("Millstone 1") has a capacity of
approximately 659,500 kw and was placed in operation in 1970.
Millstone Unit No. 2 ("Millstone 2") has a capacity of
approximately 862,000 kw and was placed in operation in 1975.
Millstone 3 has a capacity of approximately 1,146,000 kw and was
placed in operation in 1986.
3. In order to provide a single, comprehensive, efficient framework
for the financing of nuclear fuel through the burn-up stage of
the nuclear fuel cycle for Millstone 1 and Millstone 2, as well
as the Applicants' approximately 65.172% ownership interest in
the nuclear fuel for Millstone 3, the Applicants entered into
arrangements with Bankers Trust Company, not in its individual
capacity but solely as trustee (the "Trustee") of the Niantic Bay
Fuel Trust (the "Trust") which was specially created for the
purpose of such financing pursuant to a Trust Agreement between
The Connecticut Bank and Trust Company, as trustor, the Trustee
and CL&P, WMECO and The Hartford Electric Light Company (which
merged with and into CL&P on June 30, 1982), as beneficiaries,
dated as of January 4, 1982, as amended and restated by the
Amendment to and Restatement of Trust Agreement dated as of
February 11, 1992 (the "Trust Agreement") between it, State
Street Bank and Trust Company of Connecticut, National
Association (which is the successor trustor to the New
Connecticut Bank and Trust Company, National Association, as
assignee of the Federal Deposit Insurance Corporation, as
receiver of The Connecticut Bank and Trust Company, National
Association), as trustor (the "Trustor"), and CL&P and WMECO, as
beneficiaries. Pursuant to a Nuclear Fuel Lease Agreement (the
"Lease Agreement") dated as of January 4, 1982, as amended and
restated by the Amendment to and Restatement of Nuclear Fuel
Lease Agreement dated as of February 11, 1992, between CL&P and
WMECO, The Hartford Electric Light Company, and the Trustee, the
Applicants have assigned to the Trustee all of their right,
title, and interest in and to all or part of certain nuclear fuel
contracts and nuclear fuel. Under the Lease Agreement, the
Trustee, in turn, has agreed to either reimburse the Applicants
for payments made to contractors under the assigned nuclear fuel
contracts or to make such payments directly to the contractors.
4. Upon making a payment with respect to nuclear fuel, the Trustee
acquires title to such nuclear fuel and the related nuclear fuel
contract rights (or under certain circumstances related to
enrichment contracts with the United States Government, the right
to acquire title in the future). The Lease Agreement obligates
the Trustee to finance the nuclear fuel for the entire period
through acquisition and processing of uranium, fabrication of the
fuel assemblies, delivery of such fuel assemblies to the plant
site, and the insertion and use of such assemblies in the
reactors. Prior to the insertion of fuel into a reactor, finance
charges and administrative expenses are capitalized and added to
the Trustee's investment in the fuel. When the fuel is inserted
in the reactor and heat production begins, the Lease Agreement
requires the Applicants to pay the Trustee quarterly lease
payments which are structured to fully amortize the cost of the
fuel as it is burned up in the reactor. Under Section 5 of the
Lease Agreement, the Applicants' obligation to lease the fuel and
to make such lease payments to the Trustee is absolute and
unconditional and is not subject to any right of setoff,
counterclaim, recoupment, defense, abatement, suspension,
deferment or reduction.
5. By its orders in File No. 70-6639 dated December 30, 1981 and May
19, 1982 (HCA Release Nos. 22342 and 22501, respectively), the
Commission gave necessary approvals for, among other things, the
formation of the Trust, the assignment of nuclear fuel and
nuclear fuel contracts, and the financing for acquisition of
nuclear fuel, including approval for (i) the issuance by the
Trust of intermediate term notes in an aggregate outstanding
principal amount not to exceed $300,000,000 at any one time, and
(ii) the sale of the Trust's commercial paper notes, backed by an
irrevocable master letter of credit issued by The First National
Bank of Boston ("FNBB") and borrowing under revolving credit
loans from FNBB pursuant to a credit agreement dated as of
January 4, 1982 between the Trustee and FNBB, in a combined
aggregate principal amount not to exceed $230,000,000.
6. By its order in File No. 70-7875 dated January 23, 1992 (HCA
Release No. 35-25458), the Commission gave necessary approvals
for, among other things, the substitution of a $230,000,000
revolving credit facility (the "Facility") with a syndicate of
banks to replace the prior revolving credit facility with FNBB in
the same amount and, in connection therewith, a credit agreement
(the "Credit Agreement") dated as of February 11, 1992, as
amended pursuant to a First Amendment dated as of April 30, 1993
and a Second Amendment dated as of May 12, 1995, with Bankers
Trust Company, each of the financial institutions party thereto,
and the First National Bank of Chicago (the "Agent"), as agent
for such financial institutions (as so named and as it may have
been otherwise supplemented or modified through the date hereof).
Such approval extended through December 31, 1998.
7. Under the Credit Agreement, each participating bank is severally
responsible for making advances (each, a "Ratable Advance") in an
amount not to exceed the amount of its commitment, ratably in
proportion to the aggregate commitment of all the participating
banks. Each Ratable Advance bears interest at a rate selected by
the Trustee, as directed by the Applicants, from among three
options: (i) the Eurodollar Rate plus an increment which shall
not exceed 0.50%, (ii) a Fixed CD Rate plus an increment which
shall not exceed 0.875%, or (iii) a Floating Rate equal to the
higher of (a) a rate based on the overnight federal funds rate,
plus 0.50% and (b) the Agent's corporate base rate. The Credit
Agreement provides for an initial term of three years and for
successive extensions in one-year increments upon the request of
the Applicants and the consent of all the banks.
8. The Facility is presently scheduled to mature on February 19,
1998. The Applicants seek the Commission's approval for the
Trust to pay additional fees and interest under the Facility so
that it can be extended for nine months through November 19, 1998
and seek extension of the Commission's authorization through
December 31, 2003. The amount which the Applicants are presently
seeking from the banks under the Facility will be up to
$100,000,000. This is an amount which is realistic in light of
the Applicants' current financial and operational conditions,
including outages at the Millstone nuclear plants, but may have
to be increased after the Millstone units are placed back in
operation up to any amount not exceeding the $230,000,000
presently authorized. It is expected that a more permanent
restructuring of the Facility may occur after the Millstone units
begin to return to service in 1998. In the interest of greater
financial flexibility, the Applicants seek the Commission's
approval to effect future extensions for any intervals of up to
two years through December 31, 2003 with the consent of the banks
and with terms at least as favorable as those approved by the
Commission herein with respect to interest rates.
9. The proposed amendment would (i) increase the maximum spread over
the Eurodollar Rate from 0.50% to 1.625%, (ii) increase the
maximum spread over the Fixed CD Rate from 0.875% to 1.75% and
(iii) under the second Floating Rate option, provide for an
increase from the Agent's corporate base rate to a spread of
0.50% per annum over the Agent's corporate base rate. The higher
interest rates reflect the lower credit ratings of the Companies,
which in turn reflect the Millstone outages, the electric utility
restructuring initiatives in Connecticut and Massachusetts and
general market perceptions of the risk of electric utilities in
general and nuclear operations in particular.
10. Except in accordance with the Act, neither NU nor any subsidiary
thereof (a) has acquired an ownership interest in an exempt
wholesale generator ("EWG") or a foreign utility company ("FUCO")
as defined in Sections 32 and 33 of the Act, or (b) now is or as
a consequence of the transactions proposed herein will become a
party to, or has or will as a consequence of the transactions
proposed herein have a right under, a service, sales, or
construction contract with an EWG or a FUCO. None of the
proceeds from the transactions proposed herein will be used by
the NU system companies to acquire any securities of, or any
interest in, an EWG or a FUCO.
The NU system is in compliance with Rule 53(a), (b), and (c), as
demonstrated by the following determinations:
(i) NU's aggregate investment in EWGs and FUCOs (i.e., amounts
invested in or committed to be invested in EWGs and FUCOs, for which
there is recourse to NU) does not exceed 50% of the NU system's
consolidated retained earnings as reported for the four most recent
quarterly periods on NU's Form 10-K and 10-Qs. At September 30, 1997,
the ratio of such investment ($78 million) to such consolidated
retained earnings ($702 million) was 11.1 percent.
(ii) Central Termica San Miguel de Tucuman, S.A., Ave Fenix and
Plantas Eolicas, S.A. (NU's only EWGs or FUCOs at this time) maintain
books and records, and prepares financial statements in accordance
with Rule 53(a)(2). Furthermore, NU has undertaken to provide the
Commission access to such books and records and financial statements,
as it may request.
(iii) No employees of the NU system's public utility companies have
rendered services to the EWGs/FUCOs.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24
certificate that has been filed with the Commission under Rule 53 and
(b) a copy of Item 9 of the Form U5S and Exhibits G and H thereof to
each state regulator having jurisdiction over the retail rates of the
NU system public utility companies.
(v) Neither NU nor any NU subsidiary has been the subject of a
bankruptcy or similar proceeding unless a plan of reorganization has
been confirmed in such proceeding. In addition, although NU's average
consolidated retained earnings ("CREs") for the four most recent
quarterly periods has decreased by 10% or more from the average for
the previous four quarterly periods (at 9/30/96, NU's CREs were $941
million; at 9/30/97, NU's CREs were $702 million), NU's aggregate
investment in EWGs/FUCOs at such date ($78 million) did not exceed two
percent of NU's consolidated capital invested in utility operations
($133.7 million).
(vi) In the previous fiscal year, NU did not report operating losses
attributable to its investment in Encoe Partners, unless such losses
did not exceed 5 percent of NU's consolidated retained earnings.
ITEM 2. FEES, COMMISSIONS, AND EXPENSES
11. The Companies will pay the following fees in connection with the
proposed amendment of the Facility: (i) a maximum commitment fee
on the average unused commitment equal to 0.50% per annum, (ii)
an amendment fee equal to 0.375% of the total commitment, (iii)
an arrangement fee of $250,000, (iv) an annual administration fee
of $5,000, (v) legal fees of approximately $45,000 and (vi)
Northeast Utilities Service Company (NUSCO) expenses of
approximately $10,000.
12. None of such fees, commissions or expenses is to be paid to any
associate company or affiliate of the Applicants, except for
financial and other services to be performed at cost by NUSCO, an
affiliated service company.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
13. Sections 6(a), 7, 9(a)(1), 10, and 12(d) of the Act and the
related regulations of the Commission are or may be applicable to
the modifications to the Facility as herein proposed.
ITEM 4. REGULATORY APPROVAL
14. CL&P and WMECO have requested that the Connecticut Department of
Public Utility Control ("DPUC"), pursuant to Section 16-43 of the
Connecticut General Statutes, approve the modifications described
herein. WMECO has petitioned the Massachusetts Department of
Telecommunications and Energy ("DTE"), pursuant to Section 17A of
Chapter 164 of the Massachusetts General Laws, for approval of
the modifications described herein. A copy of the request to the
DPUC has been filed herewith as Exhibit D.1. A copy of the
petition to the DTE has been filed herewith as Exhibit D.2. A
copy of the DPUC's order approving the proposed modifications
will be filed by amendment as Exhibit D.3. A copy of the DTE's
order approving the proposed modifications will be filed by
amendment as Exhibit D.4.
15. No other consent or approval of any other State commission or any
Federal commission (other than the Securities and Exchange
Commission) is required for the amendments proposed herein.
ITEM 5. PROCEDURE
16. In order to enable the Applicants to extend the Facility prior to
its maturity on February 19, 1998, Commission action with respect
to this Application is requested on or before January 21, 1998.
17. The Applicants hereby waive a recommended decision by a hearing
officer or other responsible officer of the Commission and
consent that the Division of Corporate Regulation may assist in
the preparation of the Commission's findings and/or order and
hereby request that the Commission's order become effective
forthwith upon issuance.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
a. EXHIBITS
A. Form of Third Amendment to Credit Agreement dated as of
November 13, 1997 with exhibits.
B.1. Form of Nuclear Fuel Lease Agreement. (Incorporated by
reference to Exhibit B.1. to Form U-1, File No. 70-7876
dated April 29, 1991).
B.2. Form of Security Agreement and Assignment of Contracts.
(Incorporated by reference to Exhibit B.2. to
Form U-1, File No. 70-7876 dated April 29, 1991.)
B.3. Form of CP Note. (Incorporated by reference to Exhibit
B.3. to Amendment No. 1 to Form U-1, File No. 70-7876
dated November 27, 1991.)
B.4. Form of Depositary Agreement. (See Exhibit K to Credit
Agreement). (Incorporated by reference to Exhibit B.4.
to Amendment No. 1 to Form U-1, File No. 70-7876 dated
November 27, 1991.)
B.5. Form of Dealer Agreement. (Incorporated by reference to
Exhibit B.5. to Amendment No. 1 to Form U-1,
File No. 70-7876 dated November 27, 1991.)
C. Not Applicable.
D.1. Application to Connecticut Department of Public Utility
Control for approval of amendments proposed herein
pursuant to Section 16-43 of the Connecticut General
Statutes.
D.2. Petition to Massachusetts Department of
Telecommunications and Energy for approval of
amendments proposed herein pursuant to Section 17A of
Chapter 164 of the Massachusetts General Laws.
D.3. Order of Connecticut Department of Public Utility
Control approving amendments proposed herein pursuant
to Section 16-43 of the Connecticut General Statutes.
(To be filed by amendment.)
D.4. Order of Massachusetts Department of Public Utilities
approving amendments proposed herein pursuant to
Section 17A of Chapter 164 of the Massachusetts General
Laws. (To be filed by amendment.)
E. Not applicable.
F. Form of opinion of Day, Berry & Howard. (To be filed
by amendment.)
G. Financial Data Schedules. (To be filed by amendment.)
H. Form of Proposed Notice.
I. Schedules of Fees, Commissions and Expenses. (To be
filed by amendment.)
b. FINANCIAL STATEMENTS (To be filed by amendment.)
1. The Connecticut Light and Power Company
1.1 Balance Sheet, per books and pro forma, as of September
30, 1997.
1.2 Statement of Income and Surplus, per books and pro
forma, 12 months ended September 30, 1997.
2. Western Massachusetts Electric Company
2.1 Balance Sheet, per books and pro forma, as of September
30, 1997.
2.2 Statement of Income and Surplus, per books and pro
forma, 12 months ended September 30, 1997.
3. Northeast Utilities and Subsidiaries
3.1 Consolidated Balance Sheet, per books and pro forma, as
of September 30, 1997.
3.2 Consolidated Statement of Income and Surplus, per books
and pro forma, 12 months ended September 30, 1997.
There has been no material change, not in the ordinary course of
business, in the balance sheets listed above since the date
thereof.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
a. The proposed amendments affect only the arrangements for
financing the nuclear fuel for Millstone 1, 2, and 3. As such,
they will have no environmental impact. Therefore, the issuance
by the Commission of an order with respect to this Application is
not a major federal action significantly affecting the quality of
the human environment and Section 102(2)(c) of the National
Environmental Policy Act, 42 U.S.C. <section> 4232(2)(c), does
not apply in connection with the proposed transaction.
b. No other federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed
transaction.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each of the undersigned companies has duly caused this statement to
be signed on its behalf by the undersigned officer or attorney thereunto
duly authorized.
Date: December 10, 1997
NORTHEAST UTILITIES
THE CONNECTICUT LIGHT AND POWER COMPANY
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By: /S/DAVID R. MCHALE
David R. McHale
Assistant Treasurer
Exhibit A
DRAFT OF 11/13/97
FORM OF THIRD AMENDMENT
THIRD AMENDMENT dated as of January , 1998 (this "Third Amendment") to
the Credit Agreement dated as of February 11, 1992, as amended pursuant to a
First Amendment dated as of April 30, 1993 and a Second Amendment dated as of
May 12, 1995, among Bankers Trust Company, not in its individual capacity but
solely as trustee of the Niantic Bay Fuel Trust under the Trust Agreement
dated as of January 4, 1982, as amended and restated by the Amendment to and
Restatement of Trust Agreement dated as of February 11, 1992, between it,
State Street Bank and Trust Company of Connecticut, National Association
(which is the successor trustor to the New Connecticut Bank and Trust
Company, National Association, as assignee of the Federal Deposit Insurance
Corporation, as receiver of The Connecticut Bank and Trust Company, National
Association), as Trustor, and the Connecticut Light and Power Company and
Western Massachusetts Electric Company, as Beneficiaries, each of the
financial institutions party thereto, and The First National Bank of Chicago,
as agent for such financial institutions (as so amended and as it may have
been otherwise supplemented or modified through the date hereof, the
"Existing Credit Agreement").
RECITALS:
A. The Lessees and the Trustee have requested that the Maturity Date be
extended.
B. The Banks are willing to agree to the requested extension provided
that the Trustee and the Lessees agree to certain amendments to the Existing
Credit Agreement.
Accordingly, the parties hereto wish to amend the Existing Credit
Agreement in certain respects and accordingly hereby agree as follows:
1. Definitions. Unless the context otherwise requires, all terms used
herein which are defined in the Existing Credit Agreement shall have the
meanings assigned to them therein.
2. Amendments to Existing Credit Agreement. Upon the satisfaction of
the conditions precedent set forth in Section 4 of this Third Amendment on or
before [January 31, 1998], the Existing Credit Agreement shall be amended as
follows:
(a) The definition of "Eurodollar Rate" set forth in Article I of
the Existing Credit Agreement shall be amended by deleting the phrase "1/2%
per annum" where it appears therein and inserting the phrase "1-5/8% per
annum" in lieu thereof.
(b) The definition of "Fixed CD Rate" set forth in Article I of
the Existing Credit Agreement shall be amended by deleting the phrase "5/8%
per annum" where it appears therein and inserting the phrase "1-3/4% per
annum" in lieu thereof.
(c) The definition of "Floating Rate" set forth in Article I of
the Existing Credit Agreement shall be amended by deleting clause (b) thereof
and inserting in lieu thereof the following new clause (b):
"(b) the Corporate Base Rate plus 1/2% per annum"
(d) The definition of "Maturity Date" set forth in Article I of
the Existing Credit Agreement shall be amended by deleting it in its entirety
and substituting in lieu thereof the following new definition:
"'Maturity Date' means November 19, 1998."
(e) Section 2.4.3 of the Existing Credit Agreement shall be amended
by deleting the phrase ".135% per annum" where it appears therein and
inserting the phrase ".50% per annum" in lieu thereof.
(f) Section 2.5.6 of the Existing Credit Agreement shall be
amended by deleting it in its entirety and substituting in lieu thereof the
following:
"2.5.6. INTENTIONALLY DELETED AND LEFT BLANK.
(g) Schedule "I" attached to the Existing Credit Agreement shall
be amended by deleting it in its entirety and substituting in lieu thereof
the Schedule "I" attached hereto.
3. Representations and Warranties. The Trustee hereby confirms,
reaffirms and restates as of the Effective Date (as defined in Section 4 of
this Third Amendment) the representations and warranties set forth in Article
V of the Existing Credit Agreement provided that such representations and
warranties shall be and are hereby amended as follows: each reference therein
to "this Credit Agreement" shall be deemed to be a collective reference to
the Existing Credit Agreement, this Third Amendment and the Existing Credit
Agreement as amended by this Third Amendment.
4. Conditions Precedent. This Third Amendment and the provisions
contained herein shall become effective on the date (the "Effective Date") on
or before [January 31, 1998] on which all of the following conditions
precedent shall have been satisfied:
(a) This Third Amendment shall have been duly executed and
delivered by the Bank Agent and the Trustee on one or more counterparts and
all the Banks shall have signed a counterpart or counterparts hereof and
notified the Bank Agent by telex or telecopy that such action has been taken
and that such executed counterpart or counterparts will be mailed or
otherwise delivered to the Bank Agent.
(b) A Ratable Note payable to the order of each Bank shall have
been duly executed and delivered by the Trustee to the Bank Agent.
(c) the Majority Lenders (as defined in the Security Agreement)
shall have executed and delivered to the Collateral Agent a letter agreement
in substantially the form attached hereto as Exhibit "A".
(d) (i) The representations and warranties of the Trustee contained
in Article V of the Existing Credit Agreement, in the Depositary Agreement,
and in the Trust Agreement shall be true and correct in all material respects
on and as of the Effective Date with the same effect as if made on and as of
the Effective Date, (ii) no Event of Default, Unmatured Event of Default or
Event of Termination shall be in existence on the Effective Date or shall
occur as a result of the execution and delivery of this Third Amendment, and
(iii) each of the Basic Agreements shall be in full force and effect without
amendment or modification, except as approved in writing by the Bank Agent
and the Required Banks.
(e) The representations and warranties of the Lessees contained in
Sections 2 and 35 of the Lease Agreement shall be true and correct in all
material respects on and as of the Effective Date with the same effect as if
made on and as of the Effective Date.
(f) The Trustee and the Bank Agent shall have received a
certificate of the Lessees in substantially the form of Exhibit "B" hereto,
appropriately completed and signed by a Vice President, Treasurer or
Assistant Treasurer of each Lessee.
(g) The Lessees shall have paid to the Bank Agent for pro rata
distribution to the Banks based on their respective Commitments an amendment
fee equal to 3/8% of the aggregate Commitments of the Banks.
(h) The Lessees shall have paid to First Chicago Capital Markets,
Inc. for its own account the arrangement fee provided for in the letter
agreement among the Lessees, the Bank Agent and First Chicago Capital
Markets, Inc. with respect to the extension of the Maturity Date.
(i) The Bank Agent shall have received with sufficient copies for
each of the Banks all of the following documents:
(i) A certificate of incumbency signed by an authorized
employee of Bankers Trust Company which shall certify the names of the
employees of Bankers Trust Company authorized to execute any document
hereunder on behalf of the Trustee, together with specimen signatures of each
such employee, and the Bank Agent and each Bank may conclusively rely on such
certificate until it shall receive a further certificate of an authorized
employee of Bankers Trust Company cancelling or amending the prior
certificate and submitting the signatures of the employees named in such
further certificate.
(ii) Copies of each authorization, license, permit, consent,
order or approval of, or registration, declaration or filing with, any
governmental authority (including without limitation the Securities and
Exchange Commission, and the Commonwealth of Massachusetts and the State of
Connecticut and any applicable agency of either thereof) obtained or made or
required to be obtained or made in connection with the transactions
contemplated by this Third Amendment.
(iii) A copy of the consent or waiver given pursuant to the
Credit Agreement dated as of November 21, 1996, as amended, among Northeast
Utilities, the Lessees, the Banks and Co-Agents party thereto, and Citibank,
N.A., as administrative agent, pursuant to which the Lessees are permitted to
reduce the Aggregate Commitment to $100,000,000.
(iv) An opinion of Messrs. Cahill Gordon & Reindel, counsel
for the Trustee, dated the Effective Date and in substantially the form
attached hereto as Exhibit "C".
(v) An opinion of Messrs. Day, Berry and Howard, counsel for
the Lessees, dated the Effective Date and in substantially the form attached
hereto as Exhibit "D".
(vi) An opinion of Messrs. Day, Berry and Howard, counsel for
the Trustor, dated the Effective Date and in substantially the form attached
hereto as Exhibit "E".
5. Amendment to Form U-7D. The Trustee hereby agrees that (i) within
30 days after the Effective Date the Trustee and the Lessees shall file an
amendment (acceptable in form and substance to the Bank Agent and its
counsel) to the Form U-7D previously filed with the Securities and Exchange
Commission in connection with the Lease Agreement and the Existing Credit
Agreement reflecting the extension of the Maturity Date and the other
amendments to the Existing Credit Agreement provided for herein, and (ii) any
failure to file such amendment in accordance with clause (i) of this Section
5 shall constitute an immediate Event of Default under the Existing Credit
Agreement as amended by this Third Amendment.
6. Effect on the Existing Credit Agreement. Except as expressly
amended hereby, all of the representations, warranties, terms, covenants and
conditions of the Existing Credit Agreement and the Bank Notes (a) shall
remain unaltered, (b) shall continue to be, and shall remain, in full force
and effect in accordance with their respective terms, and (c) are hereby
ratified and confirmed in all respects. Upon the effectiveness of this Third
Amendment, all references in the Existing Credit Agreement (including
references in the Existing Credit Agreement as amended by this Third
Amendment) to "this Credit Agreement" (and all indirect references such as
"hereby", "herein", "hereof" and "hereunder") shall be deemed to be
references to the Existing Credit Agreement as amended by this Third
Amendment.
7. Expenses. The Trustee shall reimburse the Bank Agent for any and
all reasonable costs, internal charges and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Bank Agent, which
attorneys may be employees of the Bank Agent) paid or incurred by the Bank
Agent in connection with the preparation, review, execution and delivery of
this Third Amendment.
8. Entire Agreement. This Third Amendment, the Existing Credit
Agreement as amended by this Third Amendment, and the Bank Notes embody the
entire agreement and understanding between the parties hereto and supersede
any and all prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
9. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
10. Counterparts. This Third Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one agreement,
and any of the parties hereto may execute this Third Amendment by signing any
such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed as of the date first above written.
BANKERS TRUST COMPANY,
not in its individual capacity but solely as trustee
of the Niantic Bay Fuel Trust under the Trust
Agreement dated as of January 4, 1982, as
amended and restated by the Amendment to and
Restatement of Trust Agreement dated as of
February 11, 1992, between it and the Trustor
and the Beneficiaries named therein
By:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
individually as Bank Agent and
as Collateral Agent
By:
Title:
THE BANK OF NOVA SCOTIA
By:
Title:
THE BANK OF NEW YORK
By:
Title:
BANKBOSTON, N.A.
By:
Title:
BANK OF MONTREAL
By:
Title:
CIBC, INC.
By:
Title:
THE TORONTO-DOMINION BANK
By:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
Title:
BARCLAYS BANK PLC
By:
Title:
MELLON BANK, N.A.
By:
Title:
FLEET BANK, N.A.
By:
Title:
SWISS BANK CORPORATION
By:
Title:
By:
Title:
EXHIBIT "A"
to Third Amendment
November __, 1997
The Lenders Listed on the Schedule
of Addressees Attached Hereto
Re: CONSENT TO WAIVER
Ladies and Gentlemen:
We refer to that certain Security Agreement and Assignment of Contracts
dated as of January 4, 1982, as theretofore amended and as amended and
restated by the Amendment to and Restatement of Security Agreement and
Assignment of Contracts dated as of February 11, 1992 (as so amended and
amended and restated, the "Security Agreement"), made by Bankers Trust
Company, not in its individual capacity but solely as Trustee of the Niantic
Bay Fuel Trust (in such capacity, the "Trustee") under the Trust Agreement
dated as of January 4, 1982, as amended and restated by the Amendment to and
Restatement of Trust Agreement dated as of February 11, 1992, between it,
State Street Bank and Trust Company of Connecticut, National Association
(which is the successor trustor to The New Connecticut Bank and Trust
Company, National Association, as assignee of the Federal Deposit Insurance
Corporation, as receiver of The Connecticut Bank and Trust Company, National
Association), as Trustor (the "Trustor"), and The Connecticut Light and Power
Company and Western Massachusetts Electric Company, as Beneficiaries, to The
First National Bank of Chicago, as pledgee and collateral agent (in such
capacity, the "Collateral Agent") for the ratable benefit of the secured
parties referred to therein. Unless the context otherwise requires, all
terms used herein which are defined in the Security Agreement shall have the
meanings assigned to them therein.
The Lessees have requested that the Trustee grant certain waivers under
Section 23 of the Lease Agreement by executing and delivering a waiver letter
in substantially the form attached hereto as Annex "I". Pursuant to Section
36(a) of the Lease Agreement the Trustee may not grant a waiver under the
Lease Agreement without the prior written consent of the Collateral Agent.
Accordingly, this is to request that by signing and returning to the
Collateral Agent a copy of this letter agreement you instruct the Collateral
Agent pursuant to Section 11(c) of the Security Agreement to consent to the
Trustee's execution and delivery to the Lessees of a waiver letter in
substantially the form attached hereto as Annex "I".
This letter agreement and the instructions to the Collateral Agent set
forth herein shall become effective as of the date hereof when the Collateral
Agent shall have received counterparts of this letter signed by the Majority
Lenders.
This letter agreement may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the
parties hereto may execute this letter agreement.
Please acknowledge your receipt of this letter agreement and your
agreement with the terms and provisions contained herein by signing and
returning a copy of this letter agreement to the Collateral Agent.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent
By:
Title:
AGREED AND INSTRUCTED:
THE FIRST NATIONAL BANK OF CHICAGO
By:
Title:
THE BANK OF NOVA SCOTIA
By:
Title:
THE BANK OF NEW YORK
By:
Title:
BANKBOSTON, N.A.
By:
Title:
BANK OF MONTREAL
By:
Title:
CIBC, INC.
By:
Title:
THE TORONTO-DOMINION BANK
By:
Title:
UNION BANK CALIFORNIA, N.A.
By:
Title:
BARCLAYS BANK PLC
By:
Title:
MELLON BANK, N.A.
By:
Title:
FLEET BANK, N.A.
By:
Title:
SWISS BANK CORPORATION
By:
Title:
By:
Title:
WHITING & CO.
By:
Title:
TRAL & CO.
By:
Title:
THE PRUDENTIAL INSURANCE COMPANY
By:
Title:
SEINE & CO.
By:
Title:
PRINCIPAL MUTUAL LIFE INSURANCE CO.
By:
Title:
AETNA LIFE INSURANCE
By:
Title:
PLAYPORT & CO.
By:
Title:
NEW YORK LIFE INSURANCE CO.
By:
Title:
KANE & CO.
By:
Title:
BOSTON & CO.
By:
Title:
BOUYCHAIN & CO.
By:
Title:
BEING & CO.
By:
Title:
SCHEDULE OF ADDRESSEES
THE FIRST NATIONAL BANK OF CHICAGO
THE BANK OF NOVA SCOTIA
THE BANK OF NEW YORK
BANKBOSTON, N.A.
BANK OF MONTREAL
CIBC, INC.
THE TORONTO-DOMINION BANK
UNION BANK OF CALIFORNIA, N.A.
BARCLAYS BANK PLC
MELLON BANK, N.A.
FLEET BANK, N.A.
SWISS BANK CORPORATION
WHITING & CO.
TRAL & CO.
THE PRUDENTIAL INSURANCE COMPANY
SEINE & CO.
PRINCIPAL MUTUAL LIFE INSURANCE CO.
AETNA LIFE INSURANCE
PLAYPORT & CO.
NEW YORK LIFE INSURANCE CO.
KANE & CO.
BOSTON & CO.
BOUYCHAIN & CO.
BEING & CO.
ANNEX "I"
to Consent to Waiver
, 1997
The Connecticut Light and Power Company
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
107 Selden Street
Berlin, Connecticut 06037
Attn: Assistant Treasurer
Re: WAIVER LETTER
Ladies and Gentlemen:
We refer to that certain Nuclear Fuel Lease Agreement dated as of
January 4, 1982 as amended and restated by the Amendment to and Restatement
of Nuclear Fuel Lease Agreement dated as of February 11, 1992 (as amended,
supplemented or otherwise modified through the date hereof, the "Lease
Agreement") between Bankers Trust Company, as Trustee of the Niantic Bay Fuel
Trust, as lessor, and The Connecticut Light and Power Company and Western
Massachusetts Electric Company, as Lessees. Unless the context otherwise
requires, each term used herein which is defined in the Lease Agreement shall
have the meaning assigned to it therein.
As you know, the Units have been in extended outages for varying reasons
since various times in 1995 and 1996. Although the Lessees have informed the
Lessor and the Collateral Agent that they believe all the Units have
throughout this period continued to be in commercial operation and in
possession of all necessary licenses, approvals and consents required for the
operation of the Units, the Lessees have nonetheless requested that the
Lessor waive any potential or actual Event of Termination under Section
23(a)(vii) or Section 23(a)(ix) of the Lease Agreement existing through
November 19, 1998 as a result of any of these circumstances.
Accordingly, this is to advise the Lessees that, subject to the terms
and conditions hereof, the Lessor hereby specifically waives any potential or
actual Event of Termination under Section 23(a)(vii) or Section 23(a)(ix) of
the Lease Agreement caused by any of the Units being out of commercial
operation through November 19, 1998 as a result of any of the circumstances
referred to in any of the Lessees' Quarterly Reports on Form 10-Q to the
Securities and Exchange Commission for the quarters ended March 30, 1996,
June 30, 1996, September 30, 1996, March 31, 1997, June 30, 1997 and
September 30, 1997 and the Lessees' Annual Report on Form 10-K to the
Securities and Exchange Commission for the years ended December 31, 1995 and
December 31, 1996.
The waiver set forth herein applies only to the above-specified Events
of Termination under Section 23(a)(vii) or Section 23(a)(ix) of the Lease
Agreement prior to November 20, 1998 and the waiver set forth herein shall
not apply to (i) any Event of Termination which may exist after November 19,
1998 under Section 23(a)(vii) of the Lease Agreement if any of the Units is
not in commercial operation before November 20, 1998, (ii) any Event of
Termination which may exist after November 19, 1998 under Section 23(a)(ix)
of the Lease Agreement if any event described in Section 23(a)(ix) of the
Lease Agreement exists or occurs with respect to any Unit after November 19,
1998, (iii) any Event of Termination under any subsection of Section 23(a) of
the Lease Agreement which may occur after any of the Units is placed in
service between the date hereof and November 19, 1998, and (iv) any Event of
Termination under any subsection of Section 23(a) of the Lease Agreement
other than subsection (vii) or subsection (ix) thereof which may occur, or
may have occurred, at any time before or after the date hereof.
All of the terms, conditions and covenants of the Lease Agreement,
except as specifically waived herein, shall remain unaltered and in full
force and effect and shall continue to be binding upon the Lessees.
This waiver letter and the waiver set forth herein shall become
effective as of the date hereof when (i) the Collateral Agent shall have
received a copy of this waiver letter signed by the Lessor and both of the
Lessees, (ii) the Collateral Agent shall have consented to this waiver letter
by signing and delivering to the Lessor a copy hereof, and (iii) the Lessor
shall have received a copy of this waiver letter signed by both of the
Lessees and consented to by the Collateral Agent.
Please acknowledge your acceptance of this waiver letter and of the
terms and provisions contained herein by signing and returning a copy of this
waiver letter to each of the Lessor and the Collateral Agent.
Very truly yours,
BANKERS TRUST COMPANY,
not in its individual capacity but solely as trustee
of the Niantic Bay Fuel Trust under the Trust Agreement dated as of January
4, 1982, as amended and restated by the Amendment to and Restatement of Trust
Agreement dated as of February 11, 1992, between it and the Trustor and the
Beneficiaries named therein
By:
Title:
ACCEPTED:
THE CONNECTICUT LIGHT AND POWER COMPANY
By:
Title:
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By:
Title:
CONSENTED:
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent
By:
Title:
EXHIBIT "B"
to Third Amendment
CERTIFICATE
OF
THE CONNECTICUT LIGHT AND POWER COMPANY
AND
WESTERN MASSACHUSETTS ELECTRIC COMPANY
This Certificate is being delivered to The First National Bank of
Chicago, as Bank Agent under the Credit Agreement referred to herein (in such
capacity, the "Bank Agent"), and the other financial institutions party to
such Credit Agreement (the "Banks") by The Connecticut Light and Power
Company and Western Massachusetts Electric Company (each of which is
referred to herein individually as a "Company" and collectively as the
"Companies"), pursuant to the Credit Agreement dated as of February 11, 1992
(as amended pursuant to a First Amendment dated as of April 30, 1993, the
Second Amendment dated as of may 12, 1995 and the Third Amendment referred to
below, the "Credit Agreement") among the Bank Agent, the Banks and Bankers
Trust Company, not in its individual capacity but solely as trustee (in such
capacity, the "Trustee") of the Niantic Bay Fuel Trust under the Trust
Agreement dated as of January 4, 1982, as amended and restated by the
Amendment to and Restatement of Trust Agreement dated as of February 11,
1992, between it and the Trustor and Beneficiaries named therein. Terms
defined in the Credit Agreement are used herein with the same meanings
ascribed to them therein, unless otherwise defined herein.
In order to induce the Bank Agent and the Banks to enter into that
certain Third Amendment dated as of January __, 1998 among the Trustee, the
Banks and the Bank Agent (the "Third Amendment") which amends the Credit
Agreement, each Company DOES HEREBY CERTIFY, severally and for itself alone,
that:
1. The execution, delivery and performance, or the acceptance, as the
case may be, by the Trustee, of the Credit Agreement, the Third Amendment,
the Basic Agreements, the Nuclear Fuel Contracts, the Bank Notes and the CP
Notes do not and will not violate any provision of any law or regulation or
of any writ or decree of any court or governmental instrumentality applicable
to the Company or the Trustee, and no consent, license, approval, order or
authorization of, or filing, registration or declaration with, any
governmental authority, bureau or agency or any court or other Person is or
was required in connection with the execution, delivery, performance,
acceptance, validity or enforceability of any of the above-mentioned
documents and instruments or the IT Notes (provided that no representation is
given with respect to the Nuclear Fuel Contracts insofar as the respective
Contractors are concerned), except for (i) a general license to own Nuclear
Fuel from the Nuclear Regulatory Commission (currently granted under 10
C.F.R. Sections 40.21 and 70.20); (ii) a license to possess and use special
nuclear material granted by the Nuclear Regulatory Commission; (iii) orders
of the Securities and Exchange Commission ("SEC") under Sections 7 and 10 of
the Public Utility Holding Company Act of 1935; (iv) the approval of the
Connecticut Department of Public Utility Control under Section 16-43 of the
Connecticut General Statutes; (v) the approval of the Massachusetts
Department of Public Utilities; and (vi) a certificate on Form U-7D filed by
the Trustee with the SEC pursuant to the SEC's Rule 7(d), all of which
licenses, orders and approvals have been duly obtained and, are final and are
in full force and effect, and (except as disclosed in the opinion of Day,
Berry and Howard delivered in connection with the Third Amendment) all
periods of appeal relating thereto have expired, and none of such licenses,
orders and approvals is the subject of any pending or, to the best of our
knowledge, any threatened attack by direct proceedings or otherwise with
respect to which there is a reasonable possibility of a decision which would
have a material adverse effect on (A) the financial condition of the Trustee
or the Company, (B) the ability of the Trustee or the Company to carry on its
business, (C) the ability of the Trustee to perform its obligations under the
Credit Agreement, the Third Amendment, the Basic Agreements, the Nuclear Fuel
Contracts, the Bank Notes, the CP Notes or the IT Notes, or (D) the ability
of the Company to perform its obligations under the Basic Agreements to which
it is a party; provided that no representation is given with respect to
Federal, New York or Massachusetts banking or trust laws or regulations or
the securities or blue sky laws or regulations of any State.
2. The Trustee is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Trustee is not a "public-utility
company" or a "holding company", or an "affiliate" of a "holding company", or
a "subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended. The Security
Agreement is not required to be qualified under the Trust Indenture Act of
1939, as amended, and the creation of the security interest in the Collateral
in favor of the holders of the CP Notes under the Security Agreement did not
require an indenture to be qualified under said Act.
3. The representations and warranties of the Company contained in
Sections 2 and 35 of the Lease Agreement are true and correct in all material
respects on and as of the date hereof.
4. Each of the Basic Agreements is in full force and effect without
amendment or modification, except as approved in writing by the Bank Agent
and the Required Banks.
5. No Event of Default or Unmatured Event of Default has occurred
under the Credit Agreement, and no Event of Termination has occurred under
the Lease Agreement.
6. The Security Agreement is effective to create in favor of the
Collateral Agent for the ratable benefit of the Secured Parties a legal,
valid and enforceable first Lien on and security interest in all of the
Collateral, and a legal, valid and enforceable purchase money security
interest in all Nuclear Fuel Contracts and Inventory, and all filings,
recordings and other action that are necessary in order to establish,
preserve and perfect the Collateral Agent's Lien on and security interest in
the Collateral as a legal, valid and enforceable first Lien and security
interest, or purchase money security interest, as the case may be, have been
duly effected, except that the foregoing representation shall not be deemed
to be violated as a result of (i) the existence or priority of any Lien
permitted by Section 17 of the Lease Agreement or (ii) the failure to file
financing statements under the Uniform Commercial Code of the State of
Tennessee prior to the time Lessees are obligated to pay the indebtedness tax
with respect thereto pursuant to Section 36(c)(ii) of the Lease Agreement.
IN WITNESS WHEREOF, each of the Companies has signed this Certificate,
this day of January, 1998.
THE CONNECTICUT LIGHT AND POWER COMPANY
By:
Title:
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By:
Title:
EXHIBIT "C"
to Third Amendment
OPINION OF MESSRS. CAHILL GORDON & REINDEL
(counsel for the Trustee)
EXHIBIT "D"
to Third Amendment
OPINION OF MESSRS. DAY, BERRY AND HOWARD
(counsel for the Lessees)
EXHIBIT "E"
to Third Amendment
OPINION OF MESSRS. DAY, BERRY AND HOWARD
(counsel for the Trustor)
SCHEDULE "I"
TO
CREDIT AGREEMENT
COMMITMENTS
Bank Commitment
The First National Bank of Chicago $ 15,428,571.43
The Bank of Nova Scotia $ 12,571,428.57
BankBoston, N.A. $ 10,857,142.86
The Bank of New York $ 10,857,142.86
Bank of Montreal $ 8,571,428.57
CIBC, Inc. $ 8,571,428.57
The Toronto-Dominion Bank $ 8,571,428.57
Union Bank of California, N.A. $ 6,285,714.29
Barclays Bank PLC $ 4,571,428.57
Mellon Bank, N.A. $ 4,571,428.57
Fleet Bank, N.A. $ 4,571,428.57
Swiss Bank Corporation $ 4,571,428.57
TOTAL $ 100,000,000.00
Exhibit D.1
November 26, 1997
Mr. Robert J. Murphy
Executive Secretary
Department of Public Utility Control
10 Franklin Square
New Britain, CT 06051
Re: Docket No. 91-06-04 - Application of The Connecticut Light and
Power Company and Western Massachusetts Electric Company with Respect to
Nuclear Fuel Financing Arrangements
Dear Mr. Murphy:
The Connecticut Light and Power Company (CL&P) and Western Massachusetts
Electric Company (WMECO and, together with CL&P, the Companies), each an
electric utility subsidiary of Northeast Utilities and a public service
company as defined in Conn. Gen. Stat. Section 16-1 of the Connecticut
General Statutes, hereby request that the Department reopen the
above-referenced Docket in order to modify its Decision dated July 31, 1991
(the Decision) to approve proposed changes to certain nuclear fuel financing
arrangements utilized by the Niantic Bay Fuel Trust (the Trust) as a part of
the financing arrangements for the Companies' interest in the nuclear fuel
for the Millstone nuclear generating units.
In the Decision, in accordance with Section 16-43 of the Connecticut
General Statutes, the Department approved a restructuring of the nuclear fuel
financing arrangements, which included a $230,000,000 bank revolving credit
facility (the Facility). The Decision authorized the credit agreement for
the Facility (Credit Agreement) for an initial term of three years with
successive extensions in one-year increments upon the request of the
Companies and the consent of the banks. The Facility is currently scheduled
to mature on February 19, 1998.
As detailed in the prepared written testimony of David R. McHale,
submitted herewith, in light of their current financial circumstances, the
Companies are required to reduce the amount of and re-price the Facility in
order to extend the Facility for an additional nine months, until a more
comprehensive restructuring of the Facility can occur in a more favorable
climate, after the Millstone units begin to return to service.
As stated in CL&P's Reply Brief in Docket No. 97-05-12, "DPUC Financial
and Operations Review of The Connecticut Light and Power Company" (pgs. 8-9),
this proposed amendment is a vital part of the Companies' liquidity
arrangements, and the Companies respectfully request prompt attention to this
application.
In light of the changes to the terms of the Credit Agreement, the
Companies are returning to the Department for its approval pursuant to Section
16-43 of the General Statutes of Connecticut of the authorization for the
nuclear fuel financing arrangements described in this letter and accompanying
testimony and exhibits, including the revised terms set forth in the amended
Credit Agreement, in order to permit the Trust to continue to finance the
purchase of nuclear fuel. In order to enable the Companies to extend the
Facility prior to its maturity, the Companies request approval by January 14,
1998.
The Companies request that the service list be modified so that the
name, title, address and telephone number of the persons to whom
correspondence or communications in regard to this request be as follows:
Daniel P. Venora, Esq.
c/o Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141
Telephone: (860) 665-3395
David R. McHale
Assistant Treasurer - Finance
Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141-0270
Telephone: (860) 665-5601
Paula Lacey Herman, Esq.
Day, Berry & Howard
CityPlace I
Hartford, Connecticut 06103-3499
Telephone: (860) 275-0270
Enclosed herewith are one (1) original and ten (10) copies of this
application, together with prepared written testimony and exhibits.
Very truly yours,
THE CONNECTICUT LIGHT AND POWER COMPANY
and
WESTERN MASSACHUSETTS ELECTRIC COMPANY
BY /s/Jane P. Seidl, Esq.
Senior Counsel
Northeast Utilities Service Company
Their Attorney
STATE OF CONNECTICUT
DEPARTMENT OF PUBLIC UTILITY CONTROL
APPLICATION OF
THE CONNECTICUT LIGHT AND POWER COMPANY AND
WESTERN MASSACHUSETTS ELECTRIC COMPANY
WITH RESPECT TO NUCLEAR FUEL FINANCING ARRANGEMENTS
PREPARED TESTIMONY OF DAVID R. McHALE
ON BEHALF OF
THE CONNECTICUT LIGHT AND POWER COMPANY AND
WESTERN MASSACHUSETTS ELECTRIC COMPANY
I. INTRODUCTION
Q. Please state your name.
A. My name is David R. McHale.
Q. Will you please state your position with The Connecticut Light and Power
Company (CL&P) and Western Massachusetts Electric Company (WMECO and,
together with CL&P, the Companies)?
A. I am the Assistant Treasurer - Finance of CL&P and WMECO. I am also the
Assistant Treasurer-Finance of Northeast Utilities Service Company
(NUSCO) and of Northeast Utilities (NU).
Q. Will you please state the relationship of NUSCO to CL&P and WMECO?
A. NUSCO is a service company that provides, among other things, financial
planning services to the affiliated companies of the NU System. The
applicants in this proceeding, CL&P and WMECO, together with Public
Service Company of New Hampshire and Holyoke Water Power Company, are
the largest operating companies in the NU System.
Q. What is the purpose of your testimony?
A. I will describe certain proposed changes in the terms of the credit
agreement (the Credit Agreement) applicable to the financing of nuclear
fuel by the Niantic Bay Fuel Trust (the Trust).
II. BACKGROUND
Q. What is the purpose of the Trust?
A. The Trust was formed in order to provide an efficient framework for the
financing of nuclear fuel for the Millstone nuclear units. CL&P and
WMECO own approximately 81.221% and 18.779% (aggregating 100%),
respectively, of Millstone Unit Nos. 1 and 2 and are responsible for the
fuel costs of those units. CL&P and WMECO own approximately 52.933% and
12.239% (aggregating 65.172%), respectively, of Millstone Unit No. 3
(and are responsible for a like percentage of the fuel costs of
Millstone Unit No. 3). The other joint owners of Millstone Unit No. 3
are responsible for the remainder of the fuel costs for that unit.
Q. What is the role of the Trust in the Companies' nuclear fuel financing?
A. The Trust uses the proceeds of credit financing arrangements to obtain
nuclear fuel. The Trust leases the nuclear fuel to the Companies and
utilizes the Companies' lease payments to service the credit financing.
Q. When did the Department approve the Trust and the nuclear fuel financing
arrangements?
A. The Department initially approved the Trust and the nuclear fuel
financing arrangements in Docket No. 81-09-07 in its Decision dated
October 29, 1981 and Supplemental Decision dated May 12, 1982. The
Department approved structural changes to the financing arrangements in
its Decision dated July 31, 1991 in Docket No. 91-06-04 (the Decision).
Q. Please briefly describe the financing arrangements approved by the
Department in the
Decision.
A. The Department approved the substitution of a $230,000,000 revolving
credit facility with a syndicate of banks (the Facility) agented by
First National Bank of Chicago (the Agent) to replace the prior
revolving credit facility. Under the Credit Agreement, each
participating bank is severally responsible for making advances (each, a
Ratable Advance) in an amount not to exceed the amount of its
commitment, ratably in proportion to the aggregate commitment of all the
participating banks. Each Ratable Advance bears interest at a rate
selected by the Trustee, as directed by the Companies, from among three
options: (i) Eurodollar Rate plus an increment which shall not exceed
0.50%; (ii) a Fixed CD Rate plus an increment which shall not exceed
0.875%; or (iii) a Floating Rate equal to the higher of (A) a rate based
on the overnight federal funds rate, plus 0.50% and (B) the Agent's
corporate base rate. The restructuring of the Trust's financing
arrangements also required numerous changes to the previous
documentation with respect to those arrangements.
III. PROPOSED AMENDMENT TO THE FINANCING ARRANGEMENTS
Q. Please explain why the Companies have requested a modification of the
Decision in this Docket.
A. The Credit Agreement provides for an initial term of three years and for
successive extensions in one-year increments upon the request of the
Companies and the consent of all the banks. The Facility is presently
scheduled to mature on February 19, 1998. The purpose of the proposed
modifications is to seek authority to allow the Trust to pay additional
fees and interest under the Facility so that it can be extended for nine
months. A more permanent restructuring of the Facility can occur after
the Millstone units begin to return to service in 1998.
A draft of the proposed amendment to the Credit Agreement is attached
hereto as Exhibit 1.
Q. What is the amount of the commitment which the Companies are seeking
from the banks?
A. The amount which the Companies are seeking under the Facility through
November 19, 1998 will be up to $100,000,000 limit. This is an amount
which is realistic in light of the Companies' current financial and
operational conditions, but it may have to be increased after the
Millstone units are placed back in operation.
Q. Are you seeking approval to change the intervals for further extensions?
A. Yes. The Decision presently allows the Companies to extend the Facility
in one-year increments from February 19 with the consent of the banks.
This present extension is for nine months, to November 19, 1998. The
Companies seek authority, in the interests of greater financial
flexibility, to effect future extensions for any intervals of up to two
years with the consent of the banks and with terms at least as favorable
as those of the Decision, as modified herein, with respect to interest
rates.
Q. Please describe the changes in the interest rate provisions.
A. The proposed amendment would (i) increase the maximum spread over the
Eurodollar Rate from 0.50% to 1.625%, (ii) increase the maximum spread
over the Fixed CD Rate from 0.875% to 1.75% and (iii) under the second
Floating Rate option, provide for an increase from the Agent's corporate
base rate to a spread of 0.50% per annum over the Agent's corporate base
rate.
Q. Why are the banks requiring a higher maximum increment over the
Eurodollar, Fixed CD and the second Floating Rate option?
A. The higher interest rates reflect the lower credit ratings of the
Companies, which in turn reflect the Millstone outages, the
restructuring initiatives in Connecticut and Massachusetts and general
market perceptions of the risk of electric utilities in general and
nuclear operations in particular.
Q. What fees will the Companies pay in connection with the proposed
amendment of the Facility?
A. The Companies will pay (i) a maximum commitment fee on the average
unused commitment equal to 0.50% per annum, (ii) an amendment fee equal
to .375% of the total commitment, (iii) an arrangement fee of $250,000,
(iv) an annual administration fee of $5,000, (v) legal fees of
approximately $45,000 and (vi) NUSCO expenses of approximately $10,000.
Q. What benefit will the Companies obtain from the proposed amendment?
A. The amendment will permit the Trust to continue to finance the purchase
of nuclear fuel in an efficient and cost effective manner, relative to
current market conditions and operational needs, while the Millstone
units are being returned to service. The Companies hope to reevaluate
the Trust in its entirety in mid-1998, but they believe it would be more
advantageous to do so after the Millstone units begin returning to
service. By deferring a restructuring of the Facility until that
occurs, the Companies hope to find a more receptive bank environment and
more favorable terms than would be available at present.
Q. Will the proposed amendment require the approval of any other
regulatory body?
A. Yes. WMECO will shortly file a Petition with the Massachusetts
Department of Public Utilities and the Companies will shortly file a
Declaration/Application with the Securities and Exchange Commission for
approvals relating to the Facility.
Q. Is it your opinion that the proposed amendment is in the public
interest?
A. Yes.
Q. Does that complete your testimony?
A. Yes.
APPENDIX I
EXHIBITS
1. Form of Third Amendment to Credit Agreement
2. Financial Statements
The Connecticut Light and Power Company
2.1 Balance Sheet of The Connecticut Light and Power Company, per books
and pro forma, as of September 30, 1997. (To be filed by
amendment.)
2.2 Statement of Income and Statement of Retained Earnings of The
Connecticut Light and Power Company, per books and pro forma, 12
months ended as of September 30, 1997. (To be filed by
amendment.)
Western Massachusetts Electric Company
2.3 Balance Sheet of Western Massachusetts Electric Company, per books
and pro forma, as of September 30, 1997. (To be filed by
amendment.)
2.4 Statement of Income and Statement of Retained Earnings of Western
Massachusetts Electric Company, per books and pro forma, 12 months
ended as of September 30, 1997. (To be filed by amendment.)
Northeast Utilities
2.5. The Annual Report on Form 10-K for 1996 for Northeast Utilities,
The Connecticut Light and Power Company and Western Massachusetts
Electric Company.
3. Resolutions of the Boards of Directors of The Connecticut Light and
Power Company and Western Massachusetts Electric Company approving the
proposed amendments to the Credit Agreement. (To be filed by
amendment.)
4. Application/Declaration on Form U-1 filed with the Securities and
Exchange Commission, seeking approval of the amendment to the credit
facility, under the Public Utility Holding Company Act of 1935. (To be
filed by amendment.)
EXHIBIT D.2
[LOGO] Western Massachusetts 260 Franklin Street - 21st floor
Electric Boston, MA 02110-3179
(617) 345-4778
Fax (617) 345-4780
Steve Klionsky
Senior Counsel
December 5, 1997
Mary L. Cottrell, Secretary
Department of Telecommunications and Energy
100 Cambridge Street, 12th Floor
Boston, Massachusetts 02202
Re: Petition of Western Massachusetts Electric Company for Approval of
Proposed Modifications to Certain Nuclear Fuel Financing Arrangements
Dear Ms. Cottrell:
Western Massachusetts Electric Company ("WMECO") hereby requests
approval by the Department of Telecommunications and Energy
("Department"), pursuant to M.G.L. c. 164, <section>17A, of proposed
changes to certain nuclear fuel financing arrangements utilized by the
Niantic Bay Fuel Trust (the "Trust") as a part of the financing
arrangements for WMECO's and The Connecticut Light and Power Company's
(together with WMECO, the "Companies") interest in the nuclear fuel for
the Millstone nuclear generating units.
In D.P.U. 91-129 (December 13, 1991), the Department approved a
restructuring of the nuclear fuel financing arrangements, which included
a $230,000,000 bank revolving credit facility (the "Facility"). The
credit agreement for the Facility provides for an initial term of three
years and for successive extensions in one-year increments upon the
request of the Companies and the consent of all the banks. The Facility
is presently scheduled to mature on February 19, 1998. As detailed in the
attached written testimony of David R. McHale, the purpose of this
application is to seek authority to allow the Trust to pay additional
fees and interest under the Facility so that it can be extended for nine
months. It is expected that a more permanent restructuring of the
Facility can occur after the Millstone units begin to return to service
in 1998.
In order to enable the Companies to extend the Facility prior to its
maturity, WMECO requests approval of this request by January 21, 1998.
Enclosed are one original and nine copies of this application, along
with a filing fee of $100.
Sincerely,
/s/ Stephen Klionsky
Stephen Klionsky
cc: Mike Ernst, General Counsel
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY
PETITION OF WESTERN )
MASSACHUSETTS ELECTRIC )
COMPANY FOR APPROVAL OF ) D.T.E. ______________
PROPOSED MODIFICATIONS )
TO CERTAIN NUCLEAR FUEL )
FINANCING ARRANGEMENTS )
A. INTRODUCTION
1. This is a petition by Western Massachusetts Electric Company
(WMECO or the Petitioner), a subsidiary of Northeast Utilities and an
electric utility company duly organized and existing under the laws of the
Commonwealth and subject to the jurisdiction of the Massachusetts
Department of Telecommunications and Energy (the Department) under
Massachusetts General Laws Chapter 164. The Petitioner is seeking the
Department's approval, under <section> 17A of such Chapter and certain
orders of the Department in prior dockets, identified below, of certain
proposed modifications to the terms of its nuclear fuel financing
arrangements and for extension of the Department's authorization for such
nuclear fuel financing arrangements.
BACKGROUND
2. The Petitioner is an electric company duly organized and existing
under the laws of the Commonwealth.
3. The exact legal name of the Petitioner and its principal place of
business are:
Western Massachusetts Electric Company
174 Brush Hill Avenue
West Springfield, Massachusetts 01089
4. The name, title, address and telephone number of the attorneys or
other persons to whom correspondence or communications in regard to this
application are to be addressed:
David R. McHale
Assistant Treasurer - Finance
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141
Telephone: (860) 665-5601
and
Jane P. Seidl, Esq.
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
P.0. Box 270
Hartford, Connecticut 06141-0270
(860) 665-5051
5. The Petitioner and The Connecticut Light and Power Company (CL&P
and, together with the Petitioner, the Companies) and own approximately
18.779% and 81.221% (aggregating 100%), respectively, of Millstone Unit
Nos. 1 and 2 and are responsible for the fuel costs of those units. The
Petitioner and CL&P own approximately 12.239% and 52.933% (aggregating
65.172%), respectively, of Millstone Unit No. 3 (and are responsible for a
like percentage of the fuel costs of Millstone Unit No. 3). The other
joint owners of Millstone Unit No. 3 are responsible for the remainder of
the fuel costs for that unit.
6. The Niantic Bay Fuel Trust (the Trust) was formed in order to
provide an efficient framework for the financing of the Companies' interest
in the nuclear fuel for the Millstone nuclear units.
7. On December 15, 1981, the Department issued an order in D.P.U.
873 approving WMECO's participation in the Trust. The order required WMECO
to obtain the Department's prior approval of material amendments to the
Trust's arrangements before they become effective. WESTERN MASSACHUSETTS
ELECTRIC COMPANY, D.P.U 873, p. 15 (1981); WESTERN MASSACHUSETTS ELECTRIC
COMPANY, D.P.U. 873-A, p. 1 (1982).
8. In its Order dated December 13, 1991 in Docket No. 91-129 (the
Order), the Department approved a restructuring of the nuclear fuel
financing arrangements, which included a $230,000,000 bank credit facility
(the Facility). The Order authorized the credit agreement for the Facility
(the Credit Agreement) for an initial term of three years with successive
extensions in one year increments upon the request of the Companies and the
consent of the banks.
9. Under the Credit Agreement, each participating bank is severally
responsible for making advances (each, a Ratable Advance) in an amount not
to exceed the amount of its commitment, ratably in proportion to the
aggregate commitment of all the participating banks. Each Ratable Advance
bears interest at a rate selected by the Trustee, as directed by the
Companies, from among three options: (i) Eurodollar Rate plus an increment
which shall not exceed 0.50%; (ii) a Fixed CD Rate plus an increment which
shall not exceed 0.875%; or (iii) a Floating Rate equal to the higher of
(A) a rate based on the overnight federal funds rate, plus 0.50% and (B)
the Agent's corporate base rate. The restructuring of the Trust's
financing arrangements also required numerous changes to the previous
documentation with respect to those arrangements.
10. The Facility is presently scheduled to mature on February 19,
1998. In light of their current financial circumstances, the Companies are
required to reduce the amount of and re-price the Facility in order to
extend the Facility for an additional nine months until a more
comprehensive restructuring of the Facility can occur in a more favorable
climate, after the Millstone units begin to return to service.
11. The modifications to the terms of the Facility will be effected
through an amendment of the Credit Agreement.
C. DESCRIPTION OF PROPOSED CHANGES TO THE CREDIT AGREEMENT
12. The amount of the banks' commitment under the Facility will be
lowered from $230,000,000 to $100,000,000.
13. The Companies will pay a higher interest rate under the Facility.
The proposed amendment would (i) increase the maximum spread over the
Eurodollar Rate from 0.50% to 1.625%, (ii) increase the maximum spread over
the Fixed CD Rate from 0.875% to 1.75% and (iii) under the second Floating
Rate option, provide for an increase from the Agent's corporate base rate
to a spread of 0.50% per annum over the Agent's corporate base rate.
14. The maturity of the Facility will be extended through November
19, 1998. In the interests of greater financial flexibility, the
Petitioner requests that the Department authorize the Petitioner to effect
future extensions for any intervals of up to two years with the consent of
the banks and with terms at least as favorable as those approved in the
Order as modified herein with respect to interest rates.
15. The Companies will pay the following fees in connection with the
proposed amendment of the Facility: (i) a maximum commitment fee on the
average unused commitment equal to 0.50% per annum, (ii) an amendment fee
equal to 0.375% of the total commitment, (iii) an arrangement fee of
$250,000, (iv) an annual administration fee of $5,000, (v) legal fees of
approximately $45,000 and (vi) NUSCO expenses of approximately $10,000.
D. USE OF PROCEEDS
16. The amendment will permit the Trust to continue to finance
the purchase of nuclear fuel in an efficient and cost effective manner,
relative to current market conditions and operational needs, while the
Millstone units are being returned to service. The Facility, modified as
proposed herein, constitutes the most practical and economical method
currently available to meet the Trust's financing needs.
E OTHER APPROVALS
17. The Petitioner is subject to the jurisdiction of the Securities
and Exchange Commission (SEC) under the Public Utility Holding Company Act
of 1935 (1935 Act) and will shortly file an Application/Declaration with
the SEC seeking approval of the proposed modification to the terms of the
Facility. The Department's attention is directed to fact that the practice
of the SEC under the 1935 Act is to not issue its order until the SEC has
received a certified copy of the decision of the Department.
18. The Companies have requested that the State of Connecticut
Department of Public Utilities Control reopen its Docket No. 91-06-04, in
which it approved the 1991 restructuring of the nuclear fuel financing
arrangements, in order to approve the current proposed modifications to the
terms of the Facility.
F. TESTIMONY AND EXHIBITS
19. At least seven days prior to the hearing on this Petition, the
Petitioner will file in support of this Petition the exhibits not listed
with an asterisk in Appendix I hereto. Those exhibits listed with an
asterisk are being filed with this Petition.
WHEREFORE, pursuant to <section> 17A of Chapter 164 of the General
Laws of Massachusetts and the Department's orders dated December 15, 1981
(in D.P.U. 873) and December 13, 1991 (in Docket No. 91-129), the
Petitioner hereby requests:
A. That the Department approve the proposed amendments to the
nuclear fuel financing arrangements. In order to enable the Petitioner to
extend the Facility prior to its maturity, the Petitioner requests such
approval by January 21, 1998.
B. That, in the interests of greater financial flexibility, the
Department authorize the Petitioner to effect future extensions for any
intervals of up to two years with the consent of the banks and with terms
at least as favorable as those approved in the Order as modified herein
with respect to interest rates.
C. That the Department grant such other and further orders,
approvals and consents as it shall deem proper.
Dated this 5th day of December, 1997.
Respectfully submitted,
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By /s/ Stephen Klionsky
Stephen Klionsky, Esq.
Northeast Utilities Service Company
<PAGE>
APPENDIX I
The following testimony and exhibits will be filed as part of the Petition
of Western Massachusetts Electric Company (WMECO) for the Department of
Telecommunications and Energy's approval of proposed modifications to
certain nuclear fuel financing arrangements. Those exhibits noted with an
asterisk are being filed with this initial Petition and the remaining
exhibits will be filed at least seven days prior to a hearing on this
matter.
*1. Testimony of Mr.David R. McHale, Assistant Treasurer - Finance of
WMECO.
2. Financial Statements
2.1 Balance Sheet of Western Massachusetts Electric Company, per
books and pro forma, as of September 30, 1997.
2.2 Statement of Income and Statement of Retained Earnings of Western
Massachusetts Electric Company, per books and pro forma, 12
months ended as of September 30, 1997.
3. Resolutions of the Boards of Directors of Western Massachusetts
Electric Company approving the proposed amendments to the Credit
Agreement.
4. Application/Declaration on form U-1 filed with the Securities and
Exchange Commission, seeking approval of the amendment to the credit
facility, under the Public Utility Holding Company Act of 1935.
*5. Letter to the State of Connecticut Department of Public Utilities
Control requesting the reopening of its Docket No. 91-06-04, in which
it approved the 1991 restructuring of the nuclear fuel financing
arrangements, and accompanying testimony and exhibits.
*6. Form of Amended Credit Agreement.
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY
----------------------------
PETITION OF
WESTERN MASSACHUSETTS ELECTRIC COMPANY
FOR APPROVAL OF PROPOSED AMENDMENTS TO
CERTAIN NUCLEAR FUEL FINANCING ARRANGEMENTS
D.T.E. __________
----------------------------
PREPARED TESTIMONY OF DAVID R. MCHALE
ON BEHALF OF
WESTERN MASSACHUSETTS ELECTRIC COMPANY
I. INTRODUCTION
Q. Please state your name.
A. My name is David R. McHale.
Q. Please state your position with Western Massachusetts Electric Company
(WMECO or the Company).
A. I am the Assistant Treasurer - Finance of WMECO. I am also the
Assistant Treasurer - Finance of The Connecticut Light and Power
Company (CL&P and, together with WMECO, the Companies), Northeast
Utilities Service Company (NUSCO) and of Northeast Utilities (NU).
Q. Will you please state the relationship of NUSCO to WMECO?
A. NUSCO is a service company that provides, among other things,
financial planning services to the affiliated companies of the NU
System. WMECO, together with CL&P, Public Service Company of New
Hampshire and Holyoke Water Power Company, are the largest operating
companies in the NU System.
Q. What is the purpose of your testimony?
A. I will describe certain proposed changes in the terms of the credit
agreement for the Facility (the Credit Agreement) applicable to the
financing of nuclear fuel by the Niantic Bay Fuel Trust (the Trust).
II. BACKGROUND
Q. What is the purpose of the Trust?
A. The Trust was formed in order to provide an efficient framework for
the financing of nuclear fuel for the Millstone nuclear units. WMECO
and CL&P own approximately 18.779% and 81.221% (aggregating 100%),
respectively, of Millstone Unit Nos. 1 and 2 and are responsible for
the fuel costs of those units. WMECO and CL&P own approximately
12.239% and 52.933% (aggregating 65.172%), respectively, of Millstone
Unit No. 3 (and are responsible for a like percentage of the fuel
costs of Millstone Unit No. 3). The other joint owners of Millstone
Unit No. 3 are responsible for the remainder of the fuel costs for
that unit.
Q. What is the role of the Trust in the Companies' nuclear fuel
financing?
A. The Trust uses the proceeds of credit financing arrangements to obtain
nuclear fuel. The Trust leases the nuclear fuel to the Companies and
utilizes the Companies' lease payments to service the credit
financing.
Q. When did the Department approve the Trust and the nuclear fuel
financing arrangements?
A. The Department initially approved WMECO's participation in the Trust
in D.P.U. 873. WESTERN MASSACHUSETTS ELECTRIC COMPANY, D.P.U 873, p.
15 (1981); WESTERN MASSACHUSETTS ELECTRIC COMPANY, D.P.U. 873-A, p. 1
(1982). Those orders required WMECO to obtain prior Department
approval of material amendments to the Trust arrangements. The
Department approved certain material changes to the nuclear fuel
financing arrangements in the Trust in its Order dated December 13,
1991 in Docket No. 91-129 (the Order).
Q. Please briefly describe the financing arrangements approved by the
Department in the Order.
A. The Department approved the substitution of a $230,000,000 revolving
credit facility with a syndicate of banks (the Facility) agented by
First National Bank of Chicago (the Agent) to replace the prior
revolving credit facility. Under the Credit Agreement, each
participating bank is severally responsible for making advances (each,
a Ratable Advance) in an amount not to exceed the amount of its
commitment, ratably in proportion to the aggregate commitment of all
the participating banks. Each Ratable Advance bears interest at a
rate selected by the Trustee, as directed by the Companies, from among
three options: (i) Eurodollar Rate plus an increment which shall not
exceed 0.50%; (ii) a Fixed CD Rate plus an increment which shall not
exceed 0.875%; or (iii) a Floating Rate equal to the higher of (A) a
rate based on the overnight federal funds rate, plus 0.50% and (B) the
Agent's corporate base rate. The restructuring of the Trust's
financing arrangements also required numerous changes to the previous
documentation with respect to those arrangements.
III. PROPOSED AMENDMENT TO THE FINANCING ARRANGEMENTS
Q. Why is WMECO proposing to modify the nuclear fuel financing
arrangements?
A. The Credit Agreement provides for an initial term of three years and
for successive extensions in one-year increments upon the request of
the Companies and the consent of all the banks. The Facility is
presently scheduled to mature on February 19, 1998. The purpose of the
proposed modifications is to seek authority to allow the Trust to pay
additional fees and interest under the Facility so that it can be
extended for nine months. It is expected that a more permanent
restructuring of the Facility can occur after the Millstone units
begin to return to service in 1998.
Q. What is the amount of the commitment which WMECO is seeking from the
banks?
A. The amount which the Companies are seeking under the Facility through
November 19, 1998 will be up to $100,000,000. This is an amount which
is realistic in light of the Companies' current financial and
operational conditions, but it may have to be increased after the
Millstone units are placed back in operation.
Q. Are you seeking approval to change the intervals for further
extensions?
A. Yes. The Order presently allows the Petitioner to extend the Facility
in one-year increments from February 19 with the consent of the banks.
This present extension is for nine months, to November 19, 1998. The
Petitioner seeks authority, in the interests of greater financial
flexibility, to effect future extensions for any intervals of up to
two years with the consent of the banks and with terms at least as
favorable as those approved in the Order as modified herein with
respect to interest rates.
Q. Please describe the changes in the interest rate provisions.
A. The proposed amendment would (i) increase the maximum spread over the
Eurodollar Rate from 0.50% to 1.625%, (ii) increase the maximum spread
over the Fixed CD Rate from 0.875% to 1.75% and (iii) under the
second Floating Rate option, provide for an increase from the Agent's
corporate base rate to a spread of 0.50% per annum over the Agent's
corporate base rate.
Q. Why are the banks requiring a higher maximum increment over the
Eurodollar, Fixed CD and the second floating rate options?
A. The higher interest rates reflect the lower credit ratings of the
Companies, which in turn reflect the Millstone outages, the
restructuring initiatives in Massachusetts and Connecticut and general
market perceptions of the risk of electric utilities in general and
nuclear operations in particular.
Q. What fees will the Companies pay in connection with the proposed
amendment of the Facility?
A. The Companies will pay (i) a maximum commitment fee on the average
unused commitment equal to 0.50% per annum, (ii) an amendment fee
equal to 0.375% of the total commitment, (iii) an arrangement fee of
$250,000, (iv) an annual administration fee of $5,000, (v) legal fees
of approximately $45,000 and (vi) NUSCO expenses of approximately
$10,000.
Q. What benefit will the Companies obtain from the proposed amendment?
A. The amendment will permit the Trust to continue to finance the
purchase of nuclear fuel in an efficient and cost effective manner,
relative to current market conditions and operational needs, while the
Millstone units are being returned to service. The Companies hope to
reevaluate the Trust in its entirety in mid-1998, but they believe it
would be more advantageous to do so after the Millstone units begin
returning to service. By deferring a restructuring of the Facility
until that occurs, the Companies hope to find a more receptive bank
environment and more favorable terms than would be available at
present.
Q. Will the modifications to the Facility affect Petitioner's ability to
restructure if so required?
A. The proposed modifications to the Facility will have essentially no
impact on WMECO's stranded costs or its ability to comply with the
electric industry restructuring legislation. The Facility affects
only nuclear fuel financing requirements and under the new statute it
is assumed that WMECO or an affiliate will continue to have to finance
its nuclear fuel requirements through the Trust, assuming that this
form of financing remains available beyond November 19, 1998.
Q. Will the proposed amendment require the approval of any other
regulatory body?
A. Yes. The Companies have requested the State of Connecticut Department
of Public Utility Control to approve the proposed modifications and
the Companies will shortly file a Declaration/Application with the
Securities and Exchange Commission for such approval.
Q. Is it your opinion that the proposed amendment is in the public
interest?
A. Yes.
Q. Do you have anything that you wish to add?
A. Yes. The extension of the Facility is a vital part of the
Petitioner's liquidity arrangements and, for that reason, the
Petitioner respectfully requests the Department's prompt attention to
this Petition.
Q. Does that complete your testimony?
A. Yes.
EXHIBIT H TO FORM U-1
PROPOSED FORM OF NOTICE
[Release No. ]
THE CONNECTICUT LIGHT AND POWER COMPANY;
WESTERN MASSACHUSETTS ELECTRIC COMPANY
PROPOSAL TO AMEND CREDIT FACILITY
________________, 1997
The Connecticut Light and Power Company, 107 Selden Street, Berlin,
Connecticut 06037, and Western Massachusetts Electric Company, 174 Brush
Hill Road, West Springfield, Massachusetts, 01089 (collectively, the
"Applicants"), each an electric utility subsidiary of Northeast Utilities,
a registered holding company, have filed a Declaration/Application with
this Commission pursuant to sections 6(a), 7, 9(a) (1), 10, and 12(d) of
the Act.
The Applicants have joint ownership interests in three nuclear electric
generating units located at Millstone Point in Waterford, Connecticut,
aggregating 100% in Millstone Unit Nos. 1 and 2 and approximately 65% in
Millstone Unit No. 3. By orders dated December 30, 1981 (HCA Release No.
22342) and May 19, 1982 (HCA Release No. 22501) this Commission authorized
certain nuclear fuel financing arrangements between the Applicants and
Bankers Trust Company, not in its individual capacity but solely as Trustee
(the "Trustee") of the Niantic Bay Fuel Trust (the "Trust"). Under those
arrangements, the Applicants have assigned to the Trustee all of their
right, title, and interest in and to all or part of certain nuclear fuel
contracts and nuclear fuel. Pursuant to a lease agreement, the Trustee
agreed to either reimburse the Applicants for payments made to contractors
under the assigned nuclear fuel contracts or to make such payments
directly. As part of a comprehensive scheme of financing nuclear fuel for
the Millstone Units, the Trustee entered into a $230,000,000 credit
facility with The First National Bank of Boston ("FNBB").
By an order dated January 23, 1992 (HCA Release No. 35-25458), this
Commission authorized, among other things, the substitution of a
$230,000,000 revolving credit facility (the "Facility") with a group of
banks (the "Banks") agented by the First National Bank of Chicago (the
"Agent") to replace the prior revolving credit facility with FNBB, which
was terminated. The initial term of the Facility was three years, which
could be extended with the Banks' consent for one year increments. Under
the credit agreement for the Facility (the "Credit Agreement"), each Bank
is severally responsible for making advances (each, a "Ratable Advance") in
an amount not to exceed the amount of its commitment, ratably in proportion
to the aggregate commitment of all the participating banks. Each Ratable
Advance bears interest at a rate selected by the Trustee, as directed by
the Applicants, from among three options: (i) the Eurodollar Rate plus an
increment which shall not exceed 0.50%, (ii) a Fixed CD Rate plus an
increment which shall not exceed 0.875%, or (iii) a Floating Rate equal to
the higher of (a) a rate based on the overnight federal funds rate, plus
0.50% and (b) the Agent's corporate base rate.
The Facility is presently scheduled to mature on February 19, 1998. The
Applicants have requested the Commission's approval for the Trust to pay
additional fees and interest under the Facility so that it can be extended
for nine months through November 19, 1998 and seek extension of the
Commission's authorization through December 31, 2003. The amount which the
Applicants are presently seeking from the Banks under the Facility will be
up to $100,000,000. This amount reflects the Applicants' current financial
and operational conditions, including outages at the Millstone nuclear
plants, but may have to be increased after the Millstone units are placed
back in operation up to any amount not exceeding the $230,000,000 presently
authorized. It is expected that a more permanent restructuring of the
Facility may occur after the Millstone units begin to return to service in
1998. In the interest of greater financial flexibility, the Applicants
have requested the Commission's approval to effect future extensions for
any intervals of up to two years through December 31, 2003 with the consent
of the banks and with terms at least as favorable as set forth below with
respect to interest rates.
The proposed amendments would (i) increase the maximum spread over the
Eurodollar Rate from 0.50% to 1.625%, (ii) increase the maximum spread over
the Fixed CD Rate from 0.875% to 1.75% and (iii) under the second Floating
Rate option, provide for an increase from the Agent's corporate base rate
to a spread of 0.50% per annum over the Agent's corporate base rate. The
higher interest rates reflect the lower credit ratings of the Applicants
Under the amended Facility, the Applicants will pay a maximum commitment
fee on the average unused commitment equal to 0.50% per annum, an amendment
fee equal to 0.375% of the total commitment, an arrangement fee of
$250,000, and an annual administration fee of $5,000.
The Declaration/Application and any amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit
their views in writing by ____________, 1997 to the Secretary, Securities
and Exchange Commission, Washington, D.C. 20549, and serve a copy on the
Applicants at the addresses specified above. Proof of service (by
affidavit, or in the case of an attorney at law, by certificate) should be
filed with the request. Any request for a hearing shall identify
specifically the issues of fact or law that are disputed. Any person who
so requests will be notified of a hearing, if ordered, and will receive a
copy of any notice or order issued in this matter. After said date, the
amended declaration, as filed or as it may be further amended, may be
granted.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
