File No. 70-7875
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO.1
(Amendment No. 3)
to
FORM U-1
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
174 Brush Hill Avenue
West Springfield, Massachusetts 01089
(Name of companies filing this statement and address of principal executive
offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Cheryl W. Grise, 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:
Randy A. Shoop Jeffrey C. Miller, Esq.
Assistant Treasurer-Finance Assistant General Counsel
Northeast Utilities Service Company Northeast Utilities Service Company
P.O. Box 270 P.O. Box 270
Hartford, Connecticut 06141-0270 Hartford, Connecticut 06141-0270
ITEM 1. DESCRIPTION OF NIANTIC BAY FUEL TRUST
FINANCING ARRANGEMENTS AND PROPOSED MODIFICATIONS
1. The Connecticut Light and Power Company ("CL&P") and Western
Massachusetts Electric Company ("WMECO", collectively, the "Applicants" or
"Lessees"), 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 supplement and amend their
Application/Declaration in this proceeding, as heretofore amended
("Application"), in order to seek the Commission's approval for certain
proposed modifications to existing nuclear fuel financing arrangements (the
"Nuclear Fuel Financing Arrangements"), all as hereinafter described.
A. BACKGROUND
2. The Applicants hereby submit this Post-Effective Amendment No. 1 to
the Application to the Commission in File No. 70-7875, with respect to a
proposed modification of and amendment to (the "Modification") the Nuclear
Fuel Lease Agreement (the "Lease"), dated as of January 4, 1982, as amended
and restated as of February 11, 1992, between the Lessees and Bankers Trust
Company, in its capacity as Lessor (the "Lessor"). The Lease and certain
amendments thereto were previously approved by the Commission in its orders
dated December 30, 1981 (HCA Release No. 35-22342) and May 19, 1982 (HCA
Release No. 35-22501) in File No. 70-6639, January 23, 1992 in File No. 70-
7875 (HCA Release No. 35-25458) and March 4, 1998 (HCA Release No. 35-26836)
in this File.
3. 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 1 and
Millstone Unit 2 ("Unit 1" and "Unit 2"). CL&P and WMECO have a 52.933% and
12.239% (aggregating 65.172%) ownership interest, respectively, in Millstone
Unit 3 ("Unit 3"). The Applicants are responsible for a like percentage of
the fuel costs for each unit.
4. In order to provide a single comprehensive and efficient framework
for the financing of nuclear fuel through the burn-up stage of the nuclear
fuel cycle for Unit 1 and Unit 2, as well as the Applicants' approximately
65.172% ownership interest in the nuclear fuel for Unit 3, the Applicants
entered into arrangements in July 1982 with Bankers Trust Company, not in its
individual capacity but solely as Trustee (the "Trustee") of the Niantic Bay
Fuel Trust (the "Trust") for the purpose of nuclear fuel financing.
5. Upon making a payment with respect to nuclear fuel, the Trust
acquires title to such nuclear fuel and the related nuclear fuel contract
rights. Pursuant to the Lease, the Trust then leases the nuclear fuel to the
Applicants and utilizes the Applicants' lease payments to service the credit
financing.
6. In July 1998, the Applicants announced their intention to
permanently cease operations at Unit 1 and notified the Nuclear Regulatory
Commission ("NRC") of that decision. The Applicants subsequently caused all
nuclear fuel to be permanently removed from the reactor vessel of Unit 1 and
so notified the NRC. Consequently, they are no longer authorized to operate
Unit 1 or retain nuclear fuel in its reactor. Under Section 23(a)(ix) of the
Lease, the foregoing events could constitute an Event of Termination.
Although Events of Termination may trigger termination of the Lease and
certain payments by the Applicants to the Trust, Section 23(a)(ix) of the
Lease provides for a partial termination with respect only to the affected
unit (in this case, Unit 1) unless the triggering event does, or will have, a
material adverse effect on the financial condition or business prospects of
CL&P or WMECO, as determined by the Lessor and The First National Bank of
Chicago, in its capacity as Collateral Agent (the "Collateral Agent") under a
security agreement between the Trustee and the Collateral Agent. The
Applicants do not believe the cessation of operations at Unit 1 has had such
an effect, nor have they received any notice from the Collateral Agent that
this has occurred. Accordingly, the Applicants propose to treat the
cessation of operations by Unit 1 as causing a partial termination of the
Lease.
7. In the event of a partial termination of the Lease, the Lessees are
currently required to obtain the release of the nuclear fuel located at or
intended to be used in the unit (in this case, Unit 1) to which partial
termination applies (in this case, defined as "Unit 1 Nuclear Fuel"). To
obtain the release of the Unit 1 Nuclear Fuel from the Lease, the Lessees are
required to pay to the Lessor an amount equal to the stipulated loss value of
the Unit 1 Nuclear Fuel, which is defined for these purposes as certain
unamortized costs allocable to the Unit 1 Nuclear Fuel, currently
approximately $80 million. The Applicants propose to amend the Lease so as to
terminate it as to Unit 1 and the Unit 1 Nuclear Fuel in return for the
Applicants depositing with the Trustee an aggregate principal amount of $80.2
million of new first mortgage bonds approximately ratably with their
respective interests in Unit 1 for the benefit of the investors.
8. Except as otherwise set forth in Section 24(c)(v) of the Lease, as
amended by the Modification, which provides for certain conforming
definitions under the Lease, the proposed amendment to the Lease will be
applicable only to the partial termination of the Lease in connection with
the permanent cessation of operations at Unit 1, and in no event shall be
applicable to any other Event of Termination.
9. As required by the Lease, written consent for the proposed
Modification has been received from the holders of at least 66 2/3% in
principal amount of the Series G Intermediate Term Secured Notes (the
"Series G Noteholders").
B. AMENDMENT TO APPLICATION
10. Paragraph 6 of the Application is hereby amended by adding the
following language to the end thereof to reflect the proposed modifications
to the Nuclear Fuel Financing Arrangements:
"The Trustee and the Collateral Agent have consented to a modification of and
amendment to the Lease Agreement (the "Modification") and a Second Supplement
and Amendment to the Security Agreement (the "Second Supplement"). The
Modification will effect a partial termination of the Lease with respect to
Millstone 1, and a release and conveyance back to the Lessees, on a pro rata
basis according to their respective ownership interests in Millstone 1, of
the Nuclear Fuel intended to be used in Millstone 1 ("Millstone 1 Nuclear
Fuel") upon the issuance by the Applicants to the Trustee of an aggregate
principal amount of $80.2 million of collateral first mortgage bonds (the
"1999 Collateral Bonds"). This arrangement is in lieu of the Applicants
providing the Trustee and the Collateral Agent with an amount of cash equal
to the stipulated loss value of the Millstone 1 Nuclear Fuel, or $80 million.
Of the $80.2 million aggregate principal amount of the 1999 Collateral Bonds
to be issued, approximately 81%, or a maximum of $64.8 million, will be
issued by CL&P and approximately 19%, or a maximum of $15.4 million, will be
issued by WMECO. The Trustee will then pledge the 1999 Collateral Bonds to
the Collateral Agent pursuant to the Second Supplement. The Applicants are
seeking approval of their respective state utility regulators for issuance of
their respective 1999 Collateral Bonds; if these approvals are received, such
issuances will be exempted from Commission review pursuant to Rule 52 under
the Act."
11. The Applicants hereby further amend and supplement the Application
by adding the following paragraph:
19A. "The Applicants believe that Sections 6(a), 7 and 12 of the
Act and Rule 52 thereunder are, or may be, applicable to the transactions
proposed herein, and by virtue of Rule 52, CL&P and WMECO are exempt from the
provisions of Section 6(a) as it relates to their issuance of the 1999
Collateral Bonds, as required to secure their obligations under the Lease."
C. OTHER MATTERS
12. 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 NU and its
subsidiaries to acquire any securities of, or any interest in, an EWG or a
FUCO.
NU and its subsidiaries are 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 NU's and its subsidiaries' consolidated retained
earnings as reported for the four most recent quarterly periods on NU's Form
10-K and 10-Qs. At December 31, 1998, the ratio of such investment ($ 51
million) to such consolidated retained earnings ($606 million) was 8.5
percent.
(ii) Ave Fenix (NU's only EWG or FUCO at this time) maintains 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 NU's public utility subsidiaries 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 NU's public utility subsidiaries.
(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 have decreased
by 10% or more from the average for the previous four quarterly periods (at
December 31, 1997, NU's CREs were $ 733 million; at December 31, 1998 NU's
CREs were $606 million), NU's aggregate investment in EWGs/FUCOs at such date
($51 million) did not exceed two percent of NU's consolidated capital
invested in utility operations ($125.7 million).
(vi) In the previous fiscal year, NU did not report operating losses
attributable to its investment in EWGs/FUCOs, unless such losses did not
exceed 3 percent of NU's consolidated retained earnings.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
13. Estimated fees are filed as Exhibit G.4.
ITEM 4. REGULATORY APPROVAL
14. CL&P has applied to the Connecticut Department of Public Utility
Control ("DPUC") for approval of the transactions proposed herein, including
the issuance of the 1999 Collateral Bonds. WMECO has filed a petition with
the Massachusetts Department of Telecommunications & Energy ("DTE") for
approval of the transactions proposed herein, including the issuance of the
1999 Collateral Bonds, and an application with the DPUC seeking a waiver of
approval for the proposed transactions. A copy of the applications to the
DPUC and the petition to the DTE are filed herewith as exhibits. A copy of
the respective orders issued by the DPUC and the DTE will be filed by
amendment.
ITEM 5. PROCEDURE
15. The Applicants respectfully request that the Commission issue its
order permitting this post-effective amendment to become effective as soon as
practicable, and in any event no later than May 12, 1999. The Applicants
hereby waive any recommended decision by a hearing officer or by any other
responsible officer of the Commission and waive the 30-day waiting period
between issuance of the Commission's order and the date on which it is to
become effective, since it is desired that the Commission's order, when
issued, become effective immediately.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
16. The list of exhibits in Item 6 is amended by adding the following:
(a) Exhibits
B.7. Proposed Modification and Amendment of Nuclear Fuel Lease
B.8. Proposed Second Supplement and Amendment to the Security Agreement
D.5. Application of CL&P to the Connecticut Department of Public Utility
Control for Approval of Certain Modifications to Nuclear Fuel Financing
Arrangements
D.6. Petition of WMECO to the Massachusetts Department of Telecommunications
and Energy for Approval of Proposed Modifications to Nuclear Fuel Financing
Arrangements
D.7. Application of WMECO to Connecticut Department of Public Utility Control
for Waiver of Approval of Certain Modifications to Nuclear Fuel Financing
Arrangements
D.8. Order of the Connecticut Department of Public Utility Control Approving
Certain Modifications to Nuclear Fuel Financing Arrangements (To be filed by
amendment)
D.9. Order of the Massachusetts Department of Telecommunications and Energy
Approving Certain Modifications to Nuclear Fuel Financing Arrangements (To be
filed by amendment)
D.10. Order of the Connecticut Department of Public Utility Control Granting
Waiver of Approval of Certain Modifications to Nuclear Fuel Financing
Arrangements (To be filed by amendment)
G.4. Schedule of Fees, Commissions and Expenses
H.2. Form of Notice
I. Financial Data Schedules
a) The Connecticut Light and Power Company and Subsidiaries
b) Western Massachusetts Electric Company and Subsidiaries
c) Northeast Utilities and Subsidiaries
(b) Financial Statements
1a. The Connecticut Light and Power Company and Subsidiaries
1.1a Balance Sheet, per books and pro forma, as of December 31, 1998
1.2a Statement of Income and Surplus, per books and pro forma, 12 months
ended December 31, 1998
2a. Western Massachusetts Electric Company and Subsidiaries
2.1a Balance Sheet, per books and pro forma, as of December 31, 1998
2.2a Statement of Income and Surplus, per books and pro forma, 12 months
ended December 31, 1998
3a. Northeast Utilities and Subsidiaries
3.1a Consolidated Balance Sheet, per books and pro forma, as
of December 31, 1998
3.2a Consolidated Statement of Income and Surplus, per books and pro forma,
12 months ended December 31, 1998
There has been no material change, not in the ordinary course of
business, in any of the balance sheets listed above since the date thereof.
17. The Applicants respectfully request the Commission's approval of all
transactions described herein, whether under the sections of the Act and
rules thereunder enumerated herein or otherwise.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
18. (a) The financial transactions described herein do not involve a major
Federal action significantly affecting the quality of the human environment.
(b) No Federal agency has prepared or is preparing an environmental impact
statement with respect to the subject transactions.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned Applicants have duly caused this Post-
Effective Amendment to the Application/Declaration to be signed on their
behalf by their undersigned officer thereunto duly authorized.
Dated this 8th day of April, 1999
NORTHEAST UTILITIES
THE CONNECTICUT LIGHT AND POWER COMPANY
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By: /s/ Randy A. Shoop
Assistant Treasurer-Finance
EXHIBIT B.7
MODIFICATION AND AMENDMENT OF NUCLEAR FUEL LEASE
This Modification and Amendment is to the Nuclear Fuel Lease dated as of
January 4, 1982, as amended and restated as of February 11, 1992, between
BANKERS TRUST COMPANY, not in its individual capacity but solely as Trustee
(herein in such capacity called "Lessor") under the Trust Agreement dated as
of January 4, 1982, as amended and restated as of February 11, 1992, between
it and State Street Bank and Trust Company of Connecticut, N.A., as Trustor,
and The Connecticut Light and Power Company and Western Massachusetts
Electric Company, as beneficiaries, and THE CONNECTICUT LIGHT AND POWER
COMPANY and WESTERN MASSACHUSETTS ELECTRIC COMPANY, as lessees (herein
collectively called "Lessees").
W I T N E S S E T H :
WHEREAS, Lessor and Lessees entered into a Nuclear Fuel Lease Agreement dated
as of January 4, 1982 which was amended as of March 1, 1983 (the "Original
Nuclear Fuel Lease"); and
WHEREAS, Lessor and Lessees amended and restated the Original Nuclear Fuel
Lease effective as of February 11, 1992 (as so amended and restated, the
"Lease"); and
WHEREAS, the Lessees announced as of July 17, 1998 their intention to
permanently cease operations at Millstone Unit No. 1 ("Unit 1") and on July
21, 1998 gave certification of such decision to the U.S. Nuclear Regulatory
Commission (the "NRC"); and
WHEREAS, the Lessees have also given certification to the NRC that fuel has
been permanently removed from the reactor vessel of Unit 1; and
WHEREAS, upon docketing of such certifications by the NRC, the Unit 1 license
from the NRC no longer authorizes operation of the reactor or emplacement of
or retention of fuel in the reactor vessel; and
WHEREAS, Section 23(a)(ix) of the Lease provides, inter alia, (i) that it
shall be an Event of Termination under the Lease if any license, approval or
consent granted to any Lessee and required for the operation of any Unit
shall be revoked, withdrawn or withheld and such revocation, withdrawal or
withholding shall remain effective, or in Lessees' reasonable judgment which
shall be exercised within ninety days following such revocation, withdrawal
or withholding, is likely to remain effective for a period of eighteen
consecutive calendar months after its date of issuance, and Lessor shall have
given notice to Lessees that Lessor desires to terminate the Lease, and (ii)
that unless Lessor and the Collateral Agent shall have determined in their
reasonable judgment that such revocation, withdrawal or withholding does or
will have a material adverse affect on the financial condition or business
prospects of any Lessee, Lessor may only give notice to Lessees that it
wishes to partially terminate the Lease in accordance with Section 24(a)(vi)
thereof as it applies only to the Unit or Units affected by such revocation,
withdrawal or withholding; and
WHEREAS, the Lessor, the Collateral Agent and Lessees have determined in
their reasonable judgment that it is appropriate that the Lease be partially
terminated pursuant to Section 24(a)(vi) thereof with respect to Unit 1 only;
and
WHEREAS, pursuant to Section 24(a)(vi) of the Lease the Lessees are required
on the Final Settlement Date established pursuant to Section 24(a)(ii) of the
Lease to obtain the release pursuant to Section 12(b) of all Nuclear Fuel
located at or intended to be used in the Unit or Units as to which any
partial termination applies; and
WHEREAS, pursuant to Section 12(b) of the Lease the Lessees are required,
inter alia, in order to obtain the release from the Lease of a portion (but
not all) of the Nuclear Fuel, to pay to Lessor an amount equal to the SLV for
such portion of the Nuclear Fuel to be released; and
WHEREAS, the Majority Lenders (which also constitute the holders of 66 2/3%
in aggregate principal amount of all IT Notes outstanding) and the Collateral
Agent have consented to the modification and amendment of the terms of the
Lease to provide for the partial termination of the Lease with respect to the
Unit 1 Nuclear Fuel (as defined below) and the release of such Unit 1 Nuclear
Fuel from the Lease upon alternative terms as set forth below.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, receipt of which is hereby acknowledged, Lessor and Lessees
hereby agree as follows:
1. Unless the context otherwise requires, all capitalized terms used in
this Agreement and not defined herein shall have the meanings specified
therefor in the Lease.
2. Subject to receipt of required regulatory approvals, effective as of
July 17, 1998, the Lease is hereby modified and amended by adding to Section
24 thereof the following new provision:
(c) Special Partial Termination with Respect to Unit 1.
Notwithstanding any provision to the contrary included in this Lease
including, without limitation, any provision included in Section 12(b),
Section 23(a)(ix), Section 24(a)(ii) or Section 24(a)(vi), this Lease may be
partially terminated with respect to the Nuclear Fuel located at or intended
to be used at Unit 1 (the "Unit 1 Nuclear Fuel") pursuant to Section
23(a)(ix) upon the following terms:
(i) The Lease may be partially terminated with respect to Unit 1 (the "Unit
1 Partial Termination") in accordance with the provisions of Section
23(a)(ix) upon the issuance by The Connecticut Light and Power Company of
Sixty-Four Million Eight Hundred Thousand Dollars ($64,800,000) of collateral
first mortgage bonds (the "CL&P Collateral First Mortgage Bonds) to the
Trustee, which CL&P Collateral First Mortgage Bonds shall be substantially in
the form of Exhibit A-1 hereto, and the issuance by Western Massachusetts
Electric Company of Fifteen Million Four Hundred Thousand Dollars
($15,400,000) of collateral first mortgage bonds (the "WMECO Collateral First
Mortgage Bonds" and, together with the CL&P Collateral First Mortgage Bonds,
the "Collateral First Mortgage Bonds") to the Trustee, which WMECO Collateral
First Mortgage Bonds shall be substantially in the form of Exhibit A-2
hereto;
(ii) The Final Settlement Date with respect to the Unit 1 Partial Termination
shall be the date of the issuance of the Collateral First Mortgage Bonds, and
no amount shall be required to be paid to the Lessor pursuant to Section
24(a)(iii) on such date;
(iii) On the Final Settlement Date, the Unit 1 Nuclear Fuel shall be
released from this Lease pursuant to the provisions of Section 12(b) without
the receipt by the Lessor of any payment with respect to such Unit 1 Nuclear
Fuel;
(iv) Except as set forth in Section 24(c)(v), this Section 24(c) shall be
applicable only to the partial termination of this Lease in connection with
the permanent cessation of operations at Unit 1 and in no event shall be
applicable to any other Event of Termination occurring hereunder;
(v) (A) for purposes only of certain calculations required under this Lease,
"SLV" or "Stipulated Loss Value" shall include Deferred Unit 1 SLV, if any,
and (B) for purposes only of presentation of certain calculations required
under this Lease, the term "Batch" shall be deemed to include an entry which
identifies the amount of Deferred Unit 1 SLV, if any.
3. Subject to the receipt of required regulatory approvals, effective as of
July 17, 1998, the Lease is hereby further modified and amended as follows:
(a) Annex 1 to Schedule F to the Lease is deleted in its entirety and the
amended Annex 1 to Schedule F attached hereto as Attachment 1 is substituted
in lieu thereof.
(b) The definition of "Batch" in Section 1(a) is amended by adding the
following sentence immediately following the last sentence thereof:
"For purposes only of presentation of certain computations under this Lease,
the Deferred Unit 1 SLV shall be deemed to constitute a "Batch"; provided,
however, that no allocation of Fuel Cost or Additional Rent shall be made
pursuant to Section 7 of this Lease to such a Batch which consists of
Deferred Unit 1 SLV."
(c) The definition of "SLV" or "Stipulated Loss Value" in Section 1(a) of
the Lease is amended by adding thereto the following sentence:
"In addition, SLV or Stipulated Loss Value shall include for any date as of
which the same is required to be determined the Deferred Unit 1 SLV as of
such date, if any."
(d) Section 1(a) of the Lease shall be further amended by adding thereto the
following additional definitions:
"Deferred Unit 1 SLV" shall mean for any date on or after July 17, 1998 as of
which the same is required to be determined an amount equal to Original
Deferred Unit 1 SLV less the aggregate amount, if any, of Deferred Unit 1 SLV
Payments received by the Lessor as of such date.
"Deferred Unit 1 SLV Payment" shall mean any amount paid by a Lessee as
Additional Rent (i) in order to discharge, fully or in part, its payment
obligation under this Lease, and (ii) which relates to or is allocable to the
Nuclear Fuel which was located at or intended for use in Unit 1 as of July
17, 1998 and the SLV of which is included in Original Deferred Unit 1 SLV.
"Original Deferred Unit 1 SLV" shall mean an amount equal to $81,065,950.68,
which represents the aggregate SLV of all Nuclear Fuel which as of July 17,
1998 was located at or intended to be used at Unit 1.
4. This Agreement of Modification and Amendment shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.
5. Except as specifically modified and amended by this Agreement of
Modification and Amendment, the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Modification and
Amendment to be duly executed by their duly authorized officers as of the
day of , 1999.
THE CONNECTICUT LIGHT AND POWER COMPANY
By:/s/
Its:
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By:/s/
Its:
BANKERS TRUST COMPANY, not in its individual capacity, but solely as Trustee
of the Niantic Bay Fuel Trust under Trust Agreement dated as of January 4,
1982, as amended and restated by an Amendment to and Restatement of Trust
Agreement dated as of February 11, 1992, between it and the Trustor and the
beneficiaries named therein
By:/s/
Its:
Attachment 1
Amended Annex 1
to Schedule F
ANNEX 1 TO SLV CONFIRMATION SCHEDULE
BASIC RENT PERIOD ENDING , 19
1. Batch Identification
Unit 1&2
UF6 Pool
Unit 3
UF6 Pool
Unit 1&2
U308 Pool
Unit 3
U308 Pool
Deferred Unit 1 SLV Batch
Batch No.
Aggregate For All Batches
2. Description of Nuclear Fuel State
3. Physical Location of Fuel
4. Person in Possession
5. Contract for Possession
6. SLV of each Batch as of the end of the prior Basic Rent Period (Item 13
on Annex 1 to last previous SLV Confirmation Schedule)
Unit 1&2
$
Aggregate For All Batches
$
7. Add: Fuel Cost Incurred or paid by or on behalf of Lessor for each Batch
during this Basic Rent Period (exclusive of capitalized Quarterly Lease
Charges and Additional Rent)
Unit 1&2
$
Aggregate For All Batches
$
7a. Add: Fuel Costs (transferred and assigned to new Batch)
Unit 1&2
$
Aggregate For All Batches
$
8. Add: Capitalized Quarterly Lease Charges for each Batch (amounts
allocated to Fuel Cost pursuant to Section 7(b) of the Fuel Lease)
Unit 1&2
$
Aggregate For All Batches
$
9. (a) Add: Additional Rent for each Batch (amounts allocated to Fuel Cost
pursuant to Section 7(b) of the Fuel Lease)
Unit 1&2
$
Aggregate For All Batches
$
(b) Add: Original Deferred Unit 1 SLV
Unit 1&2
$
(c) Less: Deferred Unit 1 SLV Payment during the Basic Rent Period
Unit 1&2
$
(d) Deferred Unit 1 SLV (Item 9(b)-Item 9(c))
Unit 1&2
$
10. Item 6 + Item 7 + Item 8 + Item 9(a) + Item 9(d)
Unit 1&2
$
Aggregate For All Batches
$
11. Less: Burn-up Charge for each Batch for this Basic Rent Period
Unit 1&2
$
Aggregate For All Batches
$
12. Less: SLV of Nuclear Fuel removed from the Fuel Lease pursuant to
Section 12(b) thereof during this Basic Rent Period
Unit 1&2
$
Aggregate For All Batches
$
13. SLV of each Batch at the end of this Basic Rent Period (Item 10 - Item
11 - Item 12)
Unit 1&2
$
Aggregate For All Batches
$
Notes:
Items 1, 6, 7, 9, 11 and 12 are to be inserted by Lessor. All other items
are to be inserted by Lessees.
Item 2 is to include whether the Batch was in Heat Production during the
Basic Rent Period.
Item 8 is to be taken from Line 1, Column 3 and Line 2, Column 2 of Annex 2
to the Basic Rent Schedule.
Item 11 is to be taken from Item 12 of Annex 1 to the Basic Rent Schedule.
EXHIBIT A-1
FORM OF CL&P COLLATERAL FIRST MORTGAGE BOND
EXHIBIT A-2
FORM OF WMECO COLLATERAL FIRST MORTGAGE BOND
EXHIBIT B.8
SECOND SUPPLEMENT AND AMENDMENT
This Second Supplement and Amendment dated as of [ , 1999] (this
"Second Supplement") is between 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, and
The Connecticut Light and Power Company ("CL&P"), and Western Massachusetts
Electric Company ("WMECO"), as Beneficiaries, and The First National Bank of
Chicago, as Collateral Agent (in such capacity, the "Collateral Agent") for
the ratable benefit of the secured parties referred to therein.
W I T N E S S E T H:
WHEREAS, the Trustee and the Collateral Agent entered into that certain
Security Agreement and Assignment of Contracts dated as of January 4, 1982,
as amended and restated by the Amendment to and Restatement of Security
Agreement and Assignment of Contracts dated as of February 11, 1992, and as
further supplemented and amended by the First Supplement and Amendment (the
"First Supplement") dated as of May 1, 1998 (as so amended and supplemented,
the "Existing Security Agreement", and the Existing Security Agreement, as
further supplemented and amended hereby, is hereinafter referred to as the
"Security Agreement"); and
WHEREAS, the Trustee, CL&P and WMECO are parties to a 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 so amended and restated, the "Existing Nuclear Fuel
Lease Agreement"), between the Trustee, as Lessor (the "Lessor"), and CL&P
and WMECO, as Lessees (the "Lessees"); and
WHEREAS, the Lessor and the Lessees have entered into that certain
Modification and Amendment of Nuclear Fuel Lease dated as of February __,
1999 (the "Modification and Amendment"), which Modification and Amendment
amends the Existing Nuclear Fuel Lease Agreement to provide, inter alia, for
the release of all Unit 1 Nuclear Fuel (as defined in the Modification and
Amendment) in exchange for the issuance by CL&P and WMECO of $80,000,000 of
collateral first mortgage bonds to the Trustee; and
WHEREAS, CL&P (i) pursuant to the CL&P Indenture (as hereinafter defined), is
securing its obligations under the Existing Nuclear Fuel Lease Agreement, as
modified and amended by the Modification and Amendment, by issuing a
$64,800,000 Collateral First Mortgage Bond, (ii) has agreed in the Lessees'
Collateral Bond Consent (as hereinafter defined) to the Trustee's pledge to
the Collateral Agent of all of the Trustee's rights under such Collateral
First Mortgage Bond, and (iii) is making such Collateral First Mortgage Bond
payable to the Collateral Agent in order to facilitate such pledge; and
WHEREAS, WMECO (i) pursuant to the WMECO Indenture (as hereinafter defined),
is securing its obligations under the Existing Nuclear Fuel Lease Agreement,
as modified and amended by the Modification and Amendment, by issuing a
$15,200,000 Collateral First Mortgage Bond, (ii) has agreed in the Lessees'
Collateral Bond Consent (as hereinafter defined) to the Trustee's pledge to
the Collateral Agent of all of the Trustee's rights under such Collateral
First Mortgage Bond, and (iii) is making such Collateral First Mortgage Bond
payable to the Collateral Agent in order to facilitate such pledge; and
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained and for other good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions.
(a) Unless the context otherwise requires, each term used herein which is
defined in the Security Agreement shall have the meaning assigned to it in
the Security Agreement.
(b) Unless the context otherwise specifies or requires, each term defined in
this Section 1(b) shall, when used in this Second Supplement, have the
meaning indicated below. To the extent that certain of the terms defined in
this Section 1(b) are defined by cross-reference to documents which may not
be in full force and effect during the entire term of this Second Supplement
and the Security Agreement, the definitions contained in such documents shall
be and remain effective for purposes of implementing this Second Supplement
and the Security Agreement during the entire term of the Security Agreement.
"CL&P Indenture" shall mean that certain Indenture of Mortgage and Deed of
Trust dated as of May 1, 1921 from CL&P to Bankers Trust Company, as trustee,
as previously and hereafter amended and supplemented.
"Collateral First Mortgage Bond" shall mean (i) with respect to CL&P, that
certain $72,900,000 First and Refunding Mortgage Bond, 1998 Series A, issued
by CL&P as of May 1, 1998 pursuant to the CL&P Indenture to the Collateral
Agent for the benefit of the Lenders, in substantially the form of Exhibit
"A" attached to the First Supplement, that certain $64,800,000 First and
Refunding Mortgage Bond, 1999 Series A, issued by CL&P on the date hereof
pursuant to the CL&P Indenture to the Collateral Agent for the benefit of the
Lenders, in substantially the form of Exhibit "A" attached hereto, and such
other collateral mortgage bonds as may be issued by CL&P from time to time
pursuant to the CL&P Indenture to the Collateral Agent for the benefit of the
Lenders, as the same may be amended, supplemented or otherwise modified from
time to time, and (ii) with respect to WMECO, that certain $17,300,000 First
Mortgage Bond, 1998 Series A, issued by WMECO as of May 1, 1998 pursuant to
the WMECO Indenture to the Collateral Agent for the benefit of the Lenders in
substantially the form of Exhibit "B" attached to the First Supplement, that
certain $15,200,000 First Mortgage Bond, 1999 Series A, issued by WMECO on
the date hereof pursuant to the WMECO Indenture to the Collateral Agent for
the benefit of the Lenders, in substantially the form of Exhibit "B" attached
hereto, and such other collateral mortgage bonds as may be issued by WMECO
from time to time pursuant to the WMECO Indenture to the Collateral Agent for
the benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Lessees" Collateral Bond Consent" shall mean a Third Amended and Restated
Lessees' Consent and Agreement duly executed and delivered by both of the
Lessees in substantially the form of Exhibit "C" attached hereto, as it may
be amended, supplemented or otherwise modified from time to time.
"WMECO Indenture" shall mean that certain First Mortgage Indenture and Deed
of Trust dated as of August 1, 1954 from WMECO to State Street Bank and Trust
Company, as successor trustee, as previously and hereafter amended and
supplemented.
Section 2. Amendments to the Existing Security Agreement. Effective on the
execution of this Second Supplement by the Trustee and the Collateral Agent
and the execution and delivery by the Lessees to the Collateral Agent of the
Lessees' Collateral Bond Consent, the Existing Security Agreement shall be
amended as follows:
A. The definition of "Collateral First Mortgage Bonds" set forth in Section
1 of the Existing Security Agreement shall be amended by deleting it in its
entirety and substituting in lieu thereof the following new definition:
"'Collateral First Mortgage Bonds' shall have the meaning specified in
Section 1(b) of the Second Supplement."
B. Section 1 of the Existing Security Agreement shall be amended by adding
thereto between the existing definitions of "Ratable Loan" and "Secured
Obligations" the following new definition of "Second Supplement":
"'Second Supplement' shall mean the Second Supplement and Amendment dated as
of [ , 1999] between the Trustee and the Collateral Agent which
supplemented and amended this Security Agreement."
Section 3. Concerning Trustee. (a) Bankers Trust Company, in its capacity
as Trustee, is entering into this Second Supplement solely as trustee under
the Trust Agreement and pursuant to instructions contained therein, and not
in its individual capacity and in no case whatsoever shall Bankers Trust
Company (or any entity acting as successor trustee, co-trustee or separate
trustee under the Trust Agreement) be personally liable on, or for any loss
in respect of, any of the statements, representations, warranties, agreements
or obligations of the Trustee hereunder, or for any losses the Trust may
suffer, as to all of which the Collateral Agent, on behalf of the Secured
Parties, agrees to look solely to the Trust, except for any loss caused by
the Trustee's willful misconduct or gross negligence (provided that this
exception shall not be deemed to apply to the extent that the Trustee has
followed instructions given to it, or which it is authorized to accept,
pursuant to this Second Supplement, the Security Agreement and the Trust
Agreement).
(b) The Collateral Agent, on behalf of the Secured Parties, agrees that if a
successor trustee is appointed in accordance with the terms of the Trust
Agreement, such successor trustee shall, without further act, succeed to all
the rights, duties, immunities and obligations of the Trustee hereunder and
the predecessor trustee shall be released from all further duties and
obligations hereunder, all without in any way altering the terms of this
Second Supplement or the Trustee's obligations hereunder.
Section 4. Notices. All notices and other communications provided to any
party hereto under this Second Supplement shall be given as provided for in
Section 15 of the Security Agreement.
Section 5. Effect on the Existing Security Agreement. Except as expressly
amended hereby, all of the representations, warranties, terms, covenants and
conditions of the Existing Security Agreement (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 Second Supplement,
all references in the Existing Security Agreement (including references in
the Existing Security Agreement as amended by this Second Supplement) to
"this Security Agreement" (and all indirect references such as "hereby",
"herein", "hereof" and "hereunder") shall be deemed to be references to the
Existing Security Agreement as supplemented and amended by this Second
Supplement.
Section 6. Expenses. The Trustee shall reimburse the Collateral Agent,
solely from Trust funds, for any and all reasonable costs, internal charges
and out-of-pocket expenses (including attorneys' fees and time charges of
attorneys for the Collateral Agent, which attorneys may be employees of the
Collateral Agent) paid or incurred by the Collateral Agent in connection with
the preparation, review, execution and delivery of this Second Supplement.
Section 7. Entire Agreement This Second Supplement and the Existing
Security Agreement as supplemented and amended by this Second Supplement
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.
SECTION 8. GOVERNING LAW. THIS SECOND SUPPLEMENT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 9. Counterparts. This Second Supplement 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 Second Supplement
by signing any such counterpart.
IN WITNESS WHEREOF, each of the Trustee and the Collateral Agent have
executed and delivered this Second Supplement and Amendment as of the date
first set forth above.
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: /s/
Title: /s/
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent
By: /s/
Title: /s/
EXHIBIT D.5
March 12, 1999
Ms. Louise Rickard
Acting 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 for Approval of Certain Modifications to Nuclear Fuel Financing
Arrangements - Request For Reopening
Dear Ms. Rickard:
The Connecticut Light and Power Company ("CL&P"), an electric utility
subsidiary of Northeast Utilities and a public service company as defined in
Connecticut General Statutes ("Conn. Gen. Stat.") Section 16-1, hereby
requests that the Department of Public Utility Control (the "Department")
reopen the above-referenced docket for the limited purpose of approving
certain proposed modifications to the terms of its nuclear fuel financing
arrangements for the financing of its interest in the nuclear fuel for the
Millstone nuclear units.
More specifically, CL&P is seeking authority to:
(i) modify certain terms of its (a) Nuclear Fuel Lease Agreement (the
"Lease"), dated as of January 4, 1982, as amended and restated as of February
11, 1992, between Bankers Trust Company, in its capacity as Lessor (the
"Lessor"), State Street Bank and Trust Company of Connecticut, N.A., as
Trustor (the "Trustor"), and CL&P and Western Massachusetts Electric Company
("WMECO"), collectively as Lessees (the "Lessees"), and (b) Security
Agreement and Assignment of Contracts (the "Security Agreement"), dated as of
January 4, 1982, as amended and restated by the Amendment to and Restatement
of Security Agreement and Assignment of Contracts dated February 11, 1992,
and as further supplemented by the First Supplement and Amendment dated as of
May 1, 1998 between Bankers Trust Company in its capacity as Trustee (the
"Trustee") and The First National Bank of Chicago, as Collateral Agent (the
"Collateral Agent");
(ii) issue up to an additional $64.8 million aggregate principal amount
of its first mortgage bonds as collateral under the Lease (the "1999 CL&P
Collateral Bonds"); and
(iii) extend the term of the outstanding $72.9 million aggregate
principal amount of the 1998 Series A first mortgage bonds, which were
previously approved by the Department and issued as collateral under the
Lease (the "1998 CL&P Collateral Bonds").
I. Overview
CL&P and WMECO (collectively, the "Companies") have announced their intention
to permanently cease operations at Millstone Unit 1 ("Unit 1") and have
notified the Nuclear Regulatory Commission (the "NRC") of that decision.
Under Section 23(a)(ix) of the Lease, the foregoing events could constitute
an Event of Termination. Although Events of Termination may trigger
termination of the Lease and certain payments by the Companies to the Niantic
Bay Fuel Trust (the "Trust"), Section 23(a)(ix) of the Lease provides for a
partial termination with respect only to the affected Unit (in this case,
Unit 1) unless the Lessor under the Lease, and the Collateral Agent under the
Security Agreement, shall have determined in their reasonable judgment that
the triggering event does or will have a material adverse effect on the
financial condition or business prospects of CL&P or WMECO. Such
determination has not been made. In the event of a partial termination of
the Lease, the Companies presently would be required to obtain the release of
the nuclear fuel located at or intended to be used at Unit 1 (the "Unit 1
Nuclear Fuel"). In connection with such release of nuclear fuel from the
Lease, the Companies would be required to pay to the Lessor an amount equal
to the stipulated loss value of the Unit 1 Nuclear Fuel (the "SLV"), defined
for these purposes as certain unamortized costs allocable to the Unit 1
Nuclear Fuel, currently approximately $80 million.
II. Modification of Lease and Second Supplement and Amendment to Security
Agreement
The Companies have requested that the Lessor and the Collateral Agent consent
to a Modification of and Amendment to the Lease (the "Modification"). The
Modification will effect a partial termination of the Lease with respect to
Unit 1, and a release of the Unit 1 Nuclear Fuel, upon terms different from
those currently provided for in the Lease. The Modification will alter the
partial termination provision of the Lease to effect the release of the Unit
1 Nuclear Fuel upon the issuance by the Companies to the Trustee of $80
million aggregate principal amount of collateral first mortgage bonds, rather
than effecting the release of the Unit 1 Nuclear Fuel upon a payment by the
Companies to the Lessor of the SLV. The Companies will be required to each
issue a new series of first mortgage bonds in an aggregate principal amount
not to exceed $80 million. Of this $80 million aggregate principal amount of
new bonds to be issued, 81%, or a maximum of $64.8 million, will be issued by
CL&P and 19%, or a maximum of $15.2 million, will be issued by WMECO (the
"1999 WMECO Collateral Bonds"). The Trustee will then pledge such collateral
first mortgage bonds to the Collateral Agent pursuant to a Second Supplement
and Amendment to the Security Agreement and Assignment of Contracts between
the Trust and the Collateral Agent (the "Second Supplement").
In accordance with the issuance of the 1999 CL&P Collateral Bonds, the
definition of "Collateral First Mortgage Bond" will be amended in the
Security Agreement to reflect the definition as will be specified in the
Second Supplement, to include as collateral under such definition the 1999
CL&P Collateral Bonds, and any such other collateral mortgage bonds as may be
issued by CL&P, from time to time in connection with the Trust. CL&P seeks
Department approval for the Lease Modification, the amendment to the Security
Agreement and for the related issuance of the 1999 CL&P Collateral Bonds, as
discussed more fully below.
By separate application, WMECO is requesting the Department's waiver pursuant
to Conn. Gen. Stat. Section 16-246c(c) of the requirements of Conn. Gen.
Stat. Section 16-43 with respect to the Lease Modification and the amendment
to the Security Agreement.
III. Issuance of New Series of Collateral Bonds
The 1999 CL&P Collateral Bonds will be substantially similar to the $72.9
million in aggregate principal amount of the 1998 CL&P Collateral Bonds
previously approved by the Department in its Decision dated April 23, 1998 in
this docket. CL&P requests the Department's approval for the issuance of up
to $64.8 million of the 1999 CL&P Collateral Bonds at a maximum interest rate
of eleven percent (11%) per annum with a maturity date of June 1, 2000.
By separate application, WMECO is requesting the Department's waiver pursuant
to Conn. Gen. Stat. Section 16-246c(c) of the requirements of Conn. Gen.
Stat. Section 16-43 with respect to the issuance of the 1999 WMECO Collateral
Bonds.
IV. Extension of Maturity Date of 1998 CL&P Collateral Bonds
The terms of the Series G Intermediate Term Notes (the "Series G Notes"), the
issuance of which was approved by the Department in its Decision dated May
27, 1998 in this docket, require the Trust's best efforts to extend the
maturity date of the 1998 CL&P Collateral Bonds until such bonds are rated
"Investment Grade" by either Moody's Investor Service, Inc. or Standard &
Poor's Corporation. The 1998 CL&P Collateral Bonds are currently rated below
Investment Grade. The terms of the Series G Notes further require the
Trustee to provide notice to the Series G Noteholders, no later than sixty
days prior to the stated maturity date of June 1, 1999, confirming that
everything necessary for the maturity date's extension has been or will be
satisfied by June 1, 1999. The failure of the Trust to provide such notice,
or the inability to extend the term of maturity, may result in the Series G
Noteholders' exercising their right to have the Trustee repurchase their
Notes in full. CL&P therefore requests Department approval for a one year
extension of the June 1, 1999 maturity date of the 1998 CL&P Collateral
Bonds.
By separate application, WMECO is requesting the Department's waiver pursuant
to Conn. Gen. Stat. Section 16-246c(c) of the requirements of Conn. Gen.
Stat. Section 16-43 with respect to the extension of the June 1, 1999
maturity date of its portion of the 1998 collateral bonds (the "1998 WMECO
Collateral Bonds"), which is also required under the terms of the Notes.
The consent of a majority of the Series G Noteholders is required to effect
the proposed Modification and issuance of the 1999 CL&P Collateral Bonds, as
described above. An accommodation fee of $64,800 will be paid by CL&P as
consideration for the Series G Noteholders' consent.
V. Additional Information
In support of CL&P's requested approval for the proposed modifications to the
nuclear fuel financing arrangements, CL&P submits the prepared testimony of
Randy A. Shoop, Assistant Treasurer, attached hereto. In addition, the
following information is supplied as part of this application:
1. The exact legal name of the applicant and its principal place of
business is:
The Connecticut Light & Power Company
107 Selden Street
Berlin, CT 06037
CL&P is a corporation organized and existing under the laws of the State of
Connecticut.
2. The name, title, address and telephone number of the attorneys and other
persons to whom correspondence or communication in regard to this application
are to be addressed:
A. Jane P. Seidl, Esq.
Senior Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Telephone: (860) 665-5051
B. Randy A. Shoop
Assistant Treasurer - Finance
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Telephone: (860) 665-3258
C. Kenneth M. Burke
Senior Regulatory Planning Analyst
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Telephone: (860) 665-5558
3. The Department's attention is respectfully directed to the fact that the
Companies must give notice to the Series G Noteholders no later than April 1,
1999, confirming that everything necessary for an extension of the maturity
date of the 1998 CL&P Collateral Bonds and the 1998 WMECO Collateral Bonds
has been or will be satisfied by June 1, 1999. The failure to provide such
notice, or the inability to extend the term of maturity, may result in the
Series G Noteholders exercising their right to have the Trustee repurchase
their Notes in full. Under these conditions, time is of the essence and
accordingly the Companies respectfully request that the Department grant the
requested approvals at the earliest date it is able to do so, not later than
May 1, 1999.
Very truly yours,
THE CONNECTICUT LIGHT AND POWER COMPANY
By:
/s/Randy A. Shoop
Assistant Treasurer-Finance
cc: Service List
EXHIBIT D.6
COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY
PETITION OF WESTERN )
MASSACHUSETTS ELECTRIC )
COMPANY FOR APPROVAL OF ) D.T.E.
PROPOSED MODIFICATIONS )
TO NUCLEAR FUEL )
FINANCING ARRANGEMENTS )
A. INTRODUCTION
1. This is a petition by Western Massachusetts Electric Company ("WMECO" or
"Petitioner"), a subsidiary of Northeast Utilities ("NU") and an electric
utility company duly organized and existing under the laws of the
Commonwealth of Massachusetts (the "Commonwealth"), 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 14 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 for the financing of its interest in the nuclear fuel
for the Millstone nuclear units. Specifically, WMECO is seeking authority
to: (i) modify certain terms of (a) its Nuclear Fuel Lease Agreement (the
"Lease"), dated as of January 4, 1982, as amended and restated as of February
11, 1992, between Bankers Trust Company, in its capacity as Lessor (the
"Lessor"), and The Connecticut Light and Power Company ("CL&P") and WMECO,
collectively as Lessees, and (b) the Security Agreement and Assignment of
Contracts, dated as of January 4, 1982, as amended and restated by the
Amendment to and Restatement of Security Agreement and Assignment of
Contracts dated as of February 11, 1992, and as further supplemented by the
First Supplement and Amendment dated as of May 1, 1998 (the "Security
Agreement"), as related to the Niantic Bay Fuel Trust (the "Trust"), between
Bankers Trust Company in its capacity as Trustee (the "Trustee"), and The
First National Bank of Chicago, as Collateral Agent (the "Collateral Agent");
(ii) issue up to an additional $15.4 million aggregate principal amount of
its first mortgage bonds as collateral under the Lease (the "1999 WMECO
Collateral Bonds"); and (iii) extend the term of the outstanding $17.3
million aggregate principal amount of first mortgage bonds (the "1998 WMECO
Collateral Bonds"), which were previously approved by the Department and
issued as collateral under the Lease.
B. 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:
A. Stephen Klionsky, Esq.
Western Massachusetts Electric Company
260 Franklin Street
Boston, Massachusetts 02110-3179
Telephone: (617) 345-4778
B. Jane P. Seidl, Esq.
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141
Telephone: (860) 665-5051
C. Randy A. Shoop
Assistant Treasurer - Finance
Western Massachusetts Electric Company
c/o Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141
Telephone: (860) 665-3258
5. The Petitioner has issued and outstanding 1,072,471 shares of its
Common Stock with a par value of $25 per share; 200,000 shares of 7.72%
Preferred Stock, Series B, with a par value of $100 per share and 780,000
shares of 7.6% Class A Preferred Stock, 1987 Series, with a par value of $25
per share.
6. As of December 31, 1998, the Petitioner had issued and outstanding long-
term debt and other long-term obligations in the aggregate principal amount
of approximately $349,314,210:
(a) first mortgage bonds in the aggregate principal amount of $255,000,000
(including current portion) consisting of five outstanding series: Series V
through Y and the 1997 Series B, with maturity dates from 1999 to 2024 and
interest rates ranging from 6.25 percent for the Series X bonds to 7.75
percent for the Series V and Y bonds;
(b) pollution control notes in the aggregate principal amount of
$53,800,000 due in 2028;
(c) long term obligations of approximately $41,354,766 for spent fuel
disposal costs; and
(d) unamortized premium/discounts: ($840,556).
C. OVERVIEW
7. The Petitioner and CL&P (collectively, the "Companies") own
approximately 18.779% and 81.221% (aggregating 100%), respectively, of
Millstone Unit 1 and Millstone Unit 2 ("Unit 1" and "Unit 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 3 ("Unit 3"). The Companies are responsible for a like
percentage of the fuel costs of Unit 3. The other joint owners of Unit 3 are
responsible for the remainder of the fuel costs for Unit 3.
8. 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.
9. On December 15, 1981, the Department issued an order in D.P.U. 873 (the
"1981 Order") approving WMECO's participation in the Trust. The 1981 Order
required WMECO to obtain the Department's prior approval of material
amendments to the Trust's Lease 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).
10. In July, 1998, the Companies announced their intention to permanently
cease operations at Unit 1 and notified the Nuclear Regulatory Commission
("NRC") of that decision. The Companies have also notified the NRC that all
nuclear fuel has been permanently removed from the reactor vessel of Unit 1.
Consequently, they are no longer authorized to operate Unit 1 or retain
nuclear fuel in its reactor. Under Section 23(a)(ix) of the Lease, the
foregoing events could constitute an Event of Termination. Although Events
of Termination may trigger termination of the Lease and certain payments by
the Companies to the Trust, Section 23 (a)(ix) of the Lease provides for a
partial termination with respect only to the affected Unit (in this case,
Unit 1) unless the triggering event does, or will have, a material adverse
effect on the financial condition or business prospects of WMECO or CL&P, as
determined by the Lessor and the Collateral Agent.
11. In the event of a partial termination of the Lease, the Companies
presently would be required to obtain the release of the nuclear fuel located
at or intended to be used at Unit 1 (the "Unit 1 Nuclear Fuel"). In
connection with such release of nuclear fuel from the Lease, the Companies
would be required to pay to the Lessor an amount equal to the Unit 1 Nuclear
Fuel Stipulated Loss Value (the "SLV"), defined for these purposes as certain
unamortized costs allocable to the Unit 1 Nuclear Fuel. The current SLV is
approximately $80 million.
D. MODIFICATION OF LEASE AND SECOND SUPPLEMENT AND AMENDMENT OF SECURITY
AGREEMENT
12. The Companies have requested that the Lessor and Collateral Agent
consent to a modification of and amendment to the Lease (the "Modification"),
which Modification will effect a partial termination of the Lease with
respect to Unit 1, and a release of the Unit 1 Nuclear Fuel, upon the
issuance by the Companies of an aggregate principal amount of $80.2 million
of collateral first mortgage bonds (the "1999 Collateral Bonds") to the
Trustee. The Trustee will pledge the bonds to the Collateral Agent
pursuant to a Second Supplement and Amendment to the Security Agreement (the
"Second Supplement") between the Trustee and the Collateral Agent.
13. Pursuant to the Modification, the Companies will each be required to
issue a new series of first mortgage bonds in an aggregate principal amount
not to exceed $80.2 million. Of the $80.2 million aggregate principal amount
of the new bonds to be issued, approximately 19%, or $15.4 million, will be
issued by WMECO (the "1999 WMECO Collateral Bonds"), and approximately 81%,
or $64.8 million, will be issued by CL&P (the "1999 CL&P Collateral Bonds").
The proposed terms of the 1999 WMECO Collateral Bonds are addressed in
Section E below.
14. In accordance with the issuance of the 1999 WMECO Collateral Bonds, the
definition of "Collateral First Mortgage Bond" will be amended in the
Security Agreement to reflect the definition as specified in Section 1(b) of
the Second Supplement, which provides:
"'Collateral First Mortgage Bond' shall mean (i) with respect to CL&P,
certain $72,900,000 First and Refunding Mortgage Bond, 1998 Series A, issued
by CL&P as of May 1, 1998 pursuant to the CL&P Indenture to the Collateral
Agent for the benefit of the Lenders, in substantially the form of Exhibit
'A' attached to the First Supplement, that certain $64,800,000 First and
Refunding Mortgage Bond, 1999 Series A, issued by CL&P on the date hereof
pursuant to the CL&P Indenture to the Collateral Agent for the benefit of the
Lenders, in substantially the form of Exhibit 'A' attached hereto, and such
other collateral mortgage bonds as may be issued by CL&P from time to time
pursuant to the CL&P Indenture to the Collateral Agent for the benefit of the
Lenders, as the same may be amended, supplemented or otherwise modified from
time to time; and (ii) with respect to WMECO, that certain $17,300,000 First
Mortgage Bond, 1998 Series A, issued by WMECO as of May 1, 1998 pursuant to
the WMECO Indenture to the Collateral Agent for the benefit of the Lenders in
substantially the form of Exhibit 'B' attached to the First Supplement, that
certain $15,400,000 First Mortgage Bond, 1999 Series A, issued by WMECO on
the date hereof pursuant to the WMECO Indenture to the Collateral Agent for
the benefit of the Lenders, in substantially the form of Exhibit 'B' attached
hereto, and such other collateral mortgage bonds as may be issued by WMECO
from time to time pursuant to the WMECO Indenture to the Collateral Agent for
the benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time."
15. Except as expressly amended, all of the representations, warranties,
terms, covenants and conditions contained in both the existing Lease and the
existing Security Agreement shall remain unaltered and shall continue to be
in full force and effect in accordance with their respective terms, as
previously approved by the Department.
16. Furthermore, except as otherwise set forth in Section 24(c)(v) of the
Lease, the proposed Modification shall be applicable only to the partial
termination of the Lease in connection with the permanent cessation of
operations at Unit 1, and in no event shall be applicable to any other Event
of Termination.
17. The Companies believe that the issuance of the 1999 Collateral Bonds, is
a more favorable approach than effecting the release of the Unit 1 Nuclear
Fuel upon a payment by the Companies to the Lessor of the SLV, because a cash
payment of this magnitude would adversely affect the Companies' liquidity
position -- an integral part of their financial strategy as the restart of
Unit 3 begins to improve their financial condition. Were the Companies
required to pay the SLV of the Unit 1 Nuclear Fuel, they would have no
immediate way to utilize the cash held by the Trust in light of both the non-
call provisions of the outstanding $180 million Series G Intermediate Term
Secured Notes due 2003 (the "Series G Notes") and the projected near-term
nuclear fuel requirements for the Millstone units.
18. The Trustee has obtained the required consent from the holders of at
least 66 2/3% in principal amount of the Series G Notes (the "Noteholders")
for the proposed Modification.
E. ISSUANCE OF NEW SERIES OF COLLATERAL BONDS
19. The Petitioner is also requesting approval to issue to the Collateral
Agent a new series of first mortgage bonds in an aggregate principal amount
of $15.4 million. WMECO's proposed new bond series, the 1999 WMECO Collateral
Bonds, will be substantially similar to the outstanding 1998 WMECO Collateral
Bonds, previously approved by the Department in its order dated April 29,
1998 in D.P.U 98-29.
20. The Petitioner plans to utilize some of its previously issued first
mortgage bonds which have been retired by WMECO and are available for reissue
as the basis for the issuance of the 1999 WMECO Collateral Bonds. The
interest rate on the 1999 WMECO Collateral Bonds, which is based upon the
rate of such retired first mortgage bonds, is expected to be a maximum of
6.25% per annum. The series of collateral bonds to be issued will be
designated the "First Mortgage Bonds, 1999 Series A." The 1999 WMECO
Collateral Bonds will be issued under and secured by the First Mortgage
Indenture and Deed of Trust dated August 1, 1954, between WMECO and State
Street Bank and Trust Company, as Trustee, as supplemented and amended by
indentures supplemental thereto, and as to be further supplemented by a
supplemental indenture setting out the terms of the 1999 WMECO Collateral
Bonds (the "Indenture"). All outstanding bonds are secured equally and
ratably by a direct first mortgage lien on substantially all of the
properties and franchises owned by WMECO. The 1999 WMECO Collateral Bonds
will rank pari passu with all other first mortgage bonds of WMECO and be
entitled to all of the benefits of the Indenture. The 1999 WMECO Collateral
Bonds will have a maturity date not later than June 1, 2000.
21. The 1999 WMECO Collateral Bonds are being issued to evidence and secure
WMECO's obligations pursuant to the Lease, it being understood that the
actual indebtedness evidenced by these bonds as of any time shall be limited
to approximately 19% of the amount of outstanding debt less the aggregate
outstanding principal amount of the 1998 WMECO Collateral Bonds, if any.
22. The structure of the arrangements existing among the Trust, the
Collateral Agent and the Companies allows for a revolving credit facility to
be established and a corresponding credit agreement to be entered into
between the Companies and the Trustee. The most recent credit facility
expired on July 31, 1998. To the extent that a credit agreement exists on
some future date, all outstanding debt under such agreement, including the
1999 WMECO Collateral Bonds, will be secured equally and ratably, and will,
under the Security Agreement and the Series G Intermediate Term Secured Note
Agreement (the "Note Agreement"), rank pari passu with all the Trust's then
outstanding obligations. Interest will accrue on the 1999 WMECO Collateral
Bonds if, and to the extent that, WMECO fails to meet its obligations under
any credit agreement or under the Note Agreement.
23. There will be no proceeds from the issuance of the 1999 WMECO
Collateral Bonds.
F. PROPOSED EXTENSION OF MATURITY DATE OF THE 1998 WMECO COLLATERAL BONDS
24. By Petition dated December 5, 1997 in D.P.U. 97-108, WMECO sought the
Department's approval for proposed changes to the Trust's financing
arrangements in connection with the extension of the then-existing credit
facility, which was scheduled to expire on February 19, 1998. In order to
induce the participating banks to extend the credit facility through July 31,
1998, the Companies were required to provide the banks with additional
collateral in the form of first mortgage bonds by May 1, 1998. Specifically,
the Companies were required to issue an aggregate principal amount of $50
million in first mortgage bonds to the banks, representing 50 percent of the
banks' commitment under the credit facility, as collateral for the Companies'
obligations under the Lease. Further, the holders of the Trust's then
outstanding $80 million Series F Intermediate Term Secured Notes (the "Series
F Notes") were contractually entitled to equal treatment with the banks. In
order to satisfy this requirement, the Companies also provided an additional
approximate $40 million aggregate principal amount of first mortgage bonds as
collateral, representing 50 percent of the outstanding principal amount under
the Series F Notes. WMECO issued approximately 19% of the approximate $90
million aggregate principal amount of such first mortgage bonds, or $17.3
million. CL&P issued the remaining approximate 81%, or $72.9 million (the
"1998 CL&P Collateral Bonds").
25. The 1998 WMECO Collateral Bonds have an interest rate of 6.89% per
annum and are secured equally and ratably by a direct first mortgage lien on
substantially all of the properties and franchises owned by WMECO. The 1998
WMECO Collateral Bonds have a maturity date of June 1, 1999, and interest
will accrue on these collateral bonds only if, and to the extent, WMECO fails
to meet its obligations under the Note Agreement or under any credit
agreement that may exist in the future.
26. On June 2, 1998, the Department approved the issuance of the Series G
Notes to replace the Series F Notes, which matured on June 5, 1998. The
Series G Notes were issued on June 5, 1998 to allow the Companies to continue
to finance their respective interests in the nuclear fuel for the Millstone
units and to repay the (i) Series F Notes upon maturity and (ii)
approximately $90 million outstanding on the existing bank credit facility.
The Series G Notes rank pari passu with all obligations under any bank
facility relating to nuclear fuel financing arrangements with respect to both
payment priority and collateral.
27. The Petitioner is now seeking authority to extend the term of the 1998
WMECO Collateral Bonds beyond their June 1, 1999 maturity date due to two
provisions of the Note Agreement:
a) Section 7.28 of the Note Agreement states that until the 1998 CL&P
Collateral Bonds are rated "investment grade" by either Moody's Investor
Service, Inc. or Standard & Poor's Corporation, the Trustee shall use its
best efforts and shall cause the Companies to use their best efforts, subject
to the required regulatory approval, to have the maturity date of the 1998
WMECO Collateral Bonds and the 1998 CL&P Collateral Bonds extended or have
the bonds themselves replaced, so that such bonds remain outstanding with the
same effect as on the date of issuance; and
b) Section 5.1.3 of the Note Agreement mandates that, if the term of the
1998 WMECO Collateral Bonds and the 1998 CL&P Collateral Bonds is required
to be extended or the bonds are required to be replaced in accordance with
Section 7.28 of the Note Agreement, the Trustee shall give notice to the
Noteholders no later than sixty (60) days prior to the stated maturity date
of the collateral bonds, confirming that everything necessary for such
extension or replacement has been or will be satisfied by the date such
extension or replacement is required. The failure to provide this notice, or
the inability to extend the term of maturity, may result in the Noteholders
exercising their right to have the Trustee repurchase their Series G Notes in
full.
28. To date, the 1998 CL&P Collateral Bonds have not reached 'investment
grade,' and thus WMECO respectfully seeks Department approval for a one year
extension of the maturity date of the 1998 WMECO Collateral Bonds, from June
1, 1999 to June 1, 2000.
G. NET PLANT TEST
29. The Petitioner believes that the net plant test does not apply because
the 1999 WMECO Collateral Bonds are contingent obligations as to which the
Petitioner will have no payment requirement unless the underlying debt to
which they relate is not paid. Thus, the $15.4 million issuance of the 1999
WMECO Collateral Bonds will cause no change in the outstanding stock and
long-term debt of WMECO. However, even if the net plant test were to apply to
the issuance of the $15.4 million aggregate principal amount of collateral
bonds referred to herein, the Petitioner would meet the net plant test as of
December 31, 1998 because its net utility plant (utility plant less
accumulated depreciation), which includes nuclear fuel and fossil
inventories, is equal to or in excess of its total capitalization. Based on
the Petitioner's December 31, 1998 financial statements, WMECO had a net
utility plant of approximately $723.7 million. Including the proposed
issuance of $15.4 million of collateral bonds would change WMECO's total
capitalization to $622.5 million, which is less than WMECO's net utility
plant. (see Exhibit 10).
30. WMECO will pay the following fees and expenses in connection with the
proposed Modifications to the Lease and the issuance and extension of the
term of its collateral mortgage bonds: (i) an accommodation fee of $15,200 as
consideration for the consent of the Noteholders to effect the proposed
Modification of the Lease and the amendment to the Security Agreement; (ii)
legal fees of approximately $14,250; (iii) Northeast Utilities Service
Company expenses of approximately $9,500; (iv) bond issuance expenses of
$3,000; (v) distribution expenses of $3,800; (vi) trustees fees of $950; and
(vii) miscellaneous expenses of $950 (see Exhibit 11).
H. OTHER APPROVALS
31. The Petitioner is subject to the jurisdiction of the Securities and
Exchange Commission ("SEC") under the Public Utility Holding Company Act of
1935, as amended ("1935 Act"). WMECO is filing a Post-Effective Amendment to
its Application /Declaration on Form U-1 with the SEC for approval of the
Modification to the Lease and the amendment to the Security Agreement.
However, so long as the Petitioner complies with Rule 52 under the 1935 Act,
which includes a requirement that the Department approve (i) the issuance of
the 1999 WMECO Collateral Bonds and (ii) the extension of the term of the
1998 WMECO Collateral Bonds, no SEC approval relating to the 1998 WMECO
Collateral Bonds or the 1999 WMECO Collateral Bonds is required under the
1935 Act. The Department's attention is respectfully directed to the 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
approving the Modification of the Lease.
32. A copy of WMECO's annual report to the SEC on Form 10-K for the twelve
months ended December 31, 1998 is filed as Exhibit 8. As the 1999 WMECO
Collateral Bonds are not being sold publicly or privately, but are being
issued solely as security for repayment of borrowings, no registration
statement or private placement memorandum will be distributed in connection
with the issuance of such bonds.
33. The Petitioner has also requested that the State of Connecticut
Department of Public Utility Control reopen its Docket No. 91-06-04, in
order to approve the proposed modifications to the nuclear fuel financing
arrangements outlined herein.
I. TESTIMONY, EXHIBITS AND FINANCIAL STATEMENTS
34. The Petitioner is filing, in support of this Petition, the exhibits,
including the prepared testimony of Randy A. Shoop, Assistant Treasurer-
Finance of WMECO, listed in Appendix I hereto.
WHEREFORE, pursuant to Section 14 of Chapter 164 of the General Laws of
Massachusetts, the Petitioner respectfully requests the Department to
determine:
A. That the proposed Modification to the Lease, the amendment to the
Security Agreement, the issuance of the 1999 WMECO Collateral Bonds and the
extension of maturity date of the 1998 WMECO Collateral Bonds are reasonably
necessary to enable the Petitioner to further secure, and remain in
compliance with, its obligations. The Department's attention is respectfully
directed to the fact that the Trustee must give notice to Noteholders no
later than April 1, 1999, confirming that everything necessary for an
extension of the maturity date of the 1998 WMECO Collateral Bonds has been or
will be satisfied by June 1, 1999. The Companies have directed the Trustee
to give such notice and are therefore committed to extend the maturity date
of the 1998 WMECO Collateral Bonds as of June 1, 1999. The inability to
extend the term of maturity may result in the Noteholders exercising their
right to have the Trustee repurchase their Notes in full. Under these
conditions, time is of the essence and the WMECO respectfully requests that
the Department grant the requested approvals at the earliest date it is able
to do so, not later than May 3, 1999; and
B. That the Department grant such other and further orders, approvals and
consents as it shall deem proper.
Dated this 30th day of March , 1999.
Respectfully submitted,
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By/s/
Stephen Klionsky, Esq.
Senior Counsel
Northeast Utilities Service Company
Its Attorney
APPENDIX I
The following testimony and exhibits are being filed as part of the Petition
of Western Massachusetts Electric Company ("WMECO") for the Department of
Telecommunications and Energy's approval of the modifications to the nuclear
fuel financing arrangements.
1. Testimony of Mr. Randy A. Shoop, Assistant Treasurer-Finance of WMECO.
2. Form of 1999 WMECO Collateral Bonds.
3. Draft of Supplemental Mortgage Indenture.
4. Proposed Modification and Amendment of Nuclear Fuel Lease.
5. Form of Second Supplement and Amendment to the Security Agreement.
6. Form of Resolutions of Board of Directors of Western Massachusetts
Electric Company approving the proposed modification of its financing
arrangements relating to the Niantic Bay Fuel Trust.
7. Financial Statements.
a. Balance Sheet of Western Massachusetts Electric Company, per books
and pro forma, as of December 31, 1998.
b. Statement of Income and Statement of Retained Earnings of Western
Massachusetts Electric Company, per books and pro forma, 12
months ended as of December 31, 1998.
8. The Annual Report on Form 10-K for 1998 for Northeast Utilities, Western
Massachusetts Electric Company, The Connecticut Light and Power Company,
Public Service Company of New Hampshire, and North Atlantic Energy
Corporation.
9. Copy of Letter to the Connecticut Department of Public Utility Control,
requesting the reopening of its Docket No. 91-06-04 and seeking approval of
certain modifications to the nuclear fuel financing arrangements.
10. Calculation of Net Plant Test
11. Schedule of Fees and Expenses
EXHIBIT D.7
March 12, 1999
Ms. Louise Rickard
Acting Executive Secretary
Department of Public Utility Control
10 Franklin Square
New Britain, CT 06051
Re: Docket No. 91-06-04: Application of Western Massachusetts Electric
Company for Waiver of Approval of Certain Modifications to Nuclear Fuel
Financing Arrangements--Request for Reopening
Dear Ms. Rickard:
Western Massachusetts Electric Company ("WMECO"), a foreign electric company
within the meaning of Section 16-246a of the Connecticut General Statutes
("Conn. Gen. Stat."), hereby requests that the Department of Public Utility
Control (the "Department") reopen the above-referenced docket for the limited
purpose of granting a waiver of approval of certain proposed modifications to
the terms of its nuclear fuel financing arrangements.
Specifically, WMECO is seeking, pursuant to Conn. Gen. Stat. Section 16-
246c(c), the Department's waiver of the requirements of Conn. Gen. Stat.
Section 16-43 with respect to:
(i) the modification of and amendment to the Nuclear Fuel Lease Agreement
(the "Lease"), which modification will alter the partial termination
provision of the Lease to effect the release of nuclear fuel used or intended
to be used at Millstone Unit 1 (the "Unit 1 Nuclear Fuel") upon the issuance
by WMECO and The Connecticut Light and Power Company (collectively, the
"Companies") of $80 million aggregate principal amount of collateral first
mortgage bonds, rather than effecting the release of the Unit 1 Nuclear Fuel
upon a payment by the Companies of an amount equal to the stipulated loss
value of such fuel, currently approximately $80 million;
(ii) the amendment of the definition of "Collateral First Mortgage Bond" in
the Security Agreement and Assignment of Contracts (the "Security
Agreement"), dated as of January 4, 1982, as amended and restated by the
Amendment to and Restatement of Security Agreement and Assignment of
Contracts dated February 11, 1992 and as further supplemented by the First
Supplement and Amendment dated as of May 1, 1998 between Bankers Trust
Company and The First National Bank of Chicago, as Collateral Agent to
reflect a new definition as will be specified in the Second Supplement and
Amendment to the Security Agreement. The new definition will include as
collateral the proposed issuance of a new series of collateral bonds (the
"1999 WMECO Collateral Bonds") and any such other collateral mortgage bonds
as may be issued by WMECO from time to time;
(iii) the issuance by WMECO of up to $15.2 million in aggregate principal
amount of the 1999 WMECO Collateral Bonds; and
(iv) an extension of the June 1, 1999 maturity date of collateral bonds
previously issued by WMECO in the aggregate principal amount of $17.3 million
(the "1998 WMECO Collateral Bonds").
Both bond series are or will be issued as collateral security under certain
financing arrangements of the Niantic Bay Fuel Trust (the "Trust"), through
which WMECO finances its share of the nuclear fuel required for the Millstone
nuclear generating units.
Although WMECO believes that the proposed modifications to the nuclear fuel
financing arrangements, as described above, may require Department approval
under Conn. Gen. Stat. Section 16-43, Conn. Gen. Stat. Section 16-246c(c)
provides that the Department may waive the requirements of Conn. Gen. Stat.
Section 16-43 upon a determination that the authority over such issuance has
been exercised by the Commonwealth of Massachusetts, the domicile of WMECO.
In accordance with the requirements of Massachusetts law, WMECO is applying
for the approval of the Massachusetts Department of Telecommunications and
Energy (the "Massachusetts DTE") to modify the Lease, to amend the Security
Agreement, to issue the 1999 WMECO Collateral Bonds and to extend the term of
the 1998 WMECO Collateral Bonds. A copy of the Massachusetts DTE order
relating to these applications will be forwarded to the Department as soon as
it is received. This is the same procedure as was followed in connection
with the issuance by WMECO of the 1998 WMECO Collateral Bonds earlier in this
docket.
The following information is supplied as part of this application:
1. The exact legal name of the applicant and its principal place of
business is:
Western Massachusetts Electric Company
174 Brush Hill Avenue
West Springfield, MA 01090-0010
WMECO is a corporation organized and existing under the laws of the
Commonwealth of Massachusetts. WMECO is a foreign electric company within
the meaning of Connecticut General Statutes Section 16-246c.
2. The name, title, address and telephone number of the attorneys and other
persons to whom correspondence or communication in regard to this application
are to be addressed:
A. Jane P. Seidl, Esq.
Senior Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Telephone: (860) 665-5051
B. Randy A. Shoop
Assistant Treasurer - Finance
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Telephone: (860) 665-3258
C. Kenneth M. Burke
Senior Regulatory Planning Analyst
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Telephone: (860) 665-5558
3. The Company believes that its request for waiver of approval from the
Department as discussed above is reasonable, consistent with the way that the
Department has acted on past applications by WMECO, and in the public
interest in that (i) the waiver requested is subject to the condition that
WMECO shall have obtained all necessary approvals from the Massachusetts DTE
and as such the interests of the Department are protected; and (ii) approving
the waiver will help alleviate the administrative burdens imposed on the
Department.
WMECO therefore respectfully requests that the Department reopen the above-
referenced docket and issue an order not later than May 1, 1999, pursuant to
Conn. Gen. Stat. Section 16-246c(c), waiving the requirements of Connecticut
General Statutes Section 16-43 with respect to the proposed modifications to
the nuclear fuel financing arrangements, as described herein, subject to
compliance by WMECO with any orders issued by the Massachusetts DTE.
Enclosed herewith are one (1) original and ten (10) copies of this
application.
Very truly yours,
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By: /s/
Randy A. Shoop
Assistant Treasurer-Finance
cc: Service List
EXHIBIT G.4
SCHEDULE OF FEES, COMMISIONS AND EXPENSES
Legal 75,000
Accommodation Fee* 80,000
Northeast Utilities Service Company Expenses 50,000
Distribution Expenses 10,000
Trustees Fees 5,000
Miscellaneous Fees 5,000
Filing Fees 2,910
Total Fees, Commissions and Expenses (est.) 227,910
*0.10% of approximately $80 million stipulated loss value of Unit 1 Nuclear
Fuel to be offered as an accommodation fee to Series G Noteholders for
consideration of the Modifications of the Nuclear Fuel Financing Arrangements
Exhibit H.2
PROPOSED FORM OF NOTICE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. 35- / , 1999
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
Notice is hereby given that the following filing(s) has/have been made
with the Commission pursuant to provisions of the Act and rules promulgated
thereunder. All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s)
summarized below. The application(s) and/or declaration(s) and any
amendment(s) thereto is/are available for public inspection through the
Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
, 1999 to the Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the relevant applicant(s) and/or declarant(s) at
the address(es) specified below. Proof of service (by affidavit or, in case
of an attorney at law, by certificate) should be filed with the request. Any
request for hearing shall identify specifically the issues of fact or law
that are disputed. A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued in the
matter. After said date, the application(s) and/or declaration(s), as filed,
or as amended, may be granted and/or permitted to become effective.
Northeast Utilities, et al.
(70-7875)
The Connecticut Light & Power Company ("CL&P"), 107 Selden Street,
Berlin, Connecticut, 06037 and Western Massachusetts Electric Company
("WMECO"), 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 an amendment to
their application/declaration in File No. 70-7875 (the "Application") with
this Commission pursuant to Sections 6(a), 7 and 12(d) of the Public Utility
Holding Company Act of 1935 (the "Act") and Rule 52 promulgated thereunder,
in order to seek the Commission's approval for certain proposed modifications
to existing nuclear fuel financing arrangements (the "Lease").
The Applicants have joint ownership interests in three nuclear electric
generating units located at Millstone Point in Waterford, Connecticut and are
responsible for the fuel costs for these units. In order to provide a single
comprehensive and efficient framework for the financing of nuclear fuel for
the units, the Applicants entered into arrangements in July of 1982 with
Bankers Trust Company, as trustee of the Niantic Bay Fuel Trust (the "Trust")
which was specially created for the purpose of such financing. Upon making a
payment with respect to nuclear fuel, the Trust acquires title to such
nuclear fuel and the related nuclear fuel contract rights. Pursuant to the
Lease, the Trust then leases the nuclear fuel to the Applicants and utilizes
the Applicants' lease payments to service the credit financing.
By its orders dated December 30, 1981 (HCA Release No. 35-22342) and May
19, 1982 (HCA Release No. 35-22501), in File No. 70-6639, and January 23,
1992 in this File (HCA Release No. 35-25458), the Commission approved (i) the
formation of the Trust for the purpose of financing the purchase of nuclear
fuel under a trust agreement, (ii) the assignment of certain nuclear fuel and
related contracts and (iii) financing for the acquisition of nuclear fuel.
As a result of the Applicants' decision to permanently cease operations
at one of the nuclear generating units ("Unit 1"), all nuclear fuel has been
permanently removed from Unit 1's reactor vessel. Consequently, the
Applicants are no longer authorized to operate Unit 1 or retain nuclear fuel
in its reactor. The Applicants have proposed a modification of and amendment
to the Lease, and an amendment to the related security agreement, which will
effect partial termination of the Lease with respect to Unit 1 and a release
of the Unit 1 nuclear fuel upon the issuance by the Applicants to the Trustee
of an aggregate principal amount of $80.2 million of collateral first
mortgage bonds, rather than effecting a release of the Unit 1 nuclear fuel
upon a payment by the Applicants of an amount equal to the stipulated loss
value of such fuel, as is currently required by the Lease.
The Applicants, through the amendment to their Application, are seeking
Commission approval for the amendment to the Lease.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> DEC-31-1998 DEC-31-1998
<PERIOD-TYPE> YEAR YEAR
<BOOK-VALUE> PER-BOOK PRO-FORMA
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<OTHER-PROPERTY-AND-INVEST> 603,618 603,618
<TOTAL-CURRENT-ASSETS> 411,168 410,986
<TOTAL-DEFERRED-CHARGES> 1,448,209 1,448,209
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 6,050,198 6,050,089
<COMMON> 122,229 122,229
<CAPITAL-SURPLUS-PAID-IN> 664,156 664,156
<RETAINED-EARNINGS> 210,108 210,044
<TOTAL-COMMON-STOCKHOLDERS-EQ> 996,871 996,807
99,539 99,539
116,200 116,200
<LONG-TERM-DEBT-NET> 1,793,952 1,793,952
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<LONG-TERM-DEBT-CURRENT-PORT> 214,005 214,005
19,750 19,750
<CAPITAL-LEASE-OBLIGATIONS> 68,444 68,444
<LEASES-CURRENT> 94,440 94,440
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,640,504 1,640,459
<TOT-CAPITALIZATION-AND-LIAB> 6,050,198 6,050,089
<GROSS-OPERATING-REVENUE> 2,386,864 2,386,864
<INCOME-TAX-EXPENSE> (170,347) (170,347)
<OTHER-OPERATING-EXPENSES> 142,093 142,157
<TOTAL-OPERATING-EXPENSES> 2,358,610 2,358,674
<OPERATING-INCOME-LOSS> 28,254 28,190
<OTHER-INCOME-NET> (85,246) (85,246)
<INCOME-BEFORE-INTEREST-EXPEN> (56,992) (57,056)
<TOTAL-INTEREST-EXPENSE> 138,733 138,733
<NET-INCOME> (195,725) (195,789)
14,139 14,139
<EARNINGS-AVAILABLE-FOR-COMM> (209,864) (209,864)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 133,192 133,192
<CASH-FLOW-OPERATIONS> 388,662 388,662
<EPS-PRIMARY> 0.00 0
<EPS-DILUTED> 0.00 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> DEC-31-1998 DEC-31-1998
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<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 738,645 738,663
<OTHER-PROPERTY-AND-INVEST> 148,360 148,360
<TOTAL-CURRENT-ASSETS> 72,249 72,203
<TOTAL-DEFERRED-CHARGES> 328,428 328,428
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 1,287,682 1,287,654
<COMMON> 26,812 26,812
<CAPITAL-SURPLUS-PAID-IN> 151,431 151,431
<RETAINED-EARNINGS> 46,003 45,986
<TOTAL-COMMON-STOCKHOLDERS-EQ> 224,396 224,379
18,000 18,000
20,000 20,000
<LONG-TERM-DEBT-NET> 349,314 349,314
<SHORT-TERM-NOTES> 50,900 50,900
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
41,500 41,500
<CAPITAL-LEASE-OBLIGATIONS> 12,129 12,129
<LEASES-CURRENT> 21,964 21,964
<OTHER-ITEMS-CAPITAL-AND-LIAB> 549,479 549,468
<TOT-CAPITALIZATION-AND-LIAB> 1,287,682 1,287,654
<GROSS-OPERATING-REVENUE> 393,322 393,322
<INCOME-TAX-EXPENSE> 2,109 2,109
<OTHER-OPERATING-EXPENSES> 371,359 371,376
<TOTAL-OPERATING-EXPENSES> 373,468 373,485
<OPERATING-INCOME-LOSS> 19,854 19,837
<OTHER-INCOME-NET> 1,992 1,992
<INCOME-BEFORE-INTEREST-EXPEN> 21,846 21,829
<TOTAL-INTEREST-EXPENSE> 31,425 31,425
<NET-INCOME> (9,579) (9,596)
3,026 3,026
<EARNINGS-AVAILABLE-FOR-COMM> (12,605) (12,605)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 28,027 28,027
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1000
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998
<PERIOD-TYPE> YEAR YEAR
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,170,881 6,170,972
<OTHER-PROPERTY-AND-INVEST> 859,438 859,438
<TOTAL-CURRENT-ASSETS> 932,907 932,679
<TOTAL-DEFERRED-CHARGES> 2,424,155 2,424,155
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 10,387,381 10,387,244
<COMMON> 685,156 685,156
<CAPITAL-SURPLUS-PAID-IN> 940,661 940,661
<RETAINED-EARNINGS> 560,769 560,680
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,047,372 2,047,283
167,539 167,539
136,200 136,200
<LONG-TERM-DEBT-NET> 3,282,138 3,282,138
<SHORT-TERM-NOTES> 30,000 30,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 350,903 350,903
46,250 46,250
<CAPITAL-LEASE-OBLIGATIONS> 88,423 88,423
<LEASES-CURRENT> 120,856 120,856
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,117,700 4,117,652
<TOT-CAPITALIZATION-AND-LIAB> 10,387,381 10,387,244
<GROSS-OPERATING-REVENUE> 3,767,714 3,767,714
<INCOME-TAX-EXPENSE> 251,932 251,932
<OTHER-OPERATING-EXPENSES> 3,291,055 3,291,144
<TOTAL-OPERATING-EXPENSES> 3,542,987 3,543,076
<OPERATING-INCOME-LOSS> 224,727 224,638
<OTHER-INCOME-NET> (75,951) (75,951)
<INCOME-BEFORE-INTEREST-EXPEN> 148,776 148,687
<TOTAL-INTEREST-EXPENSE> 269,089 269,089
<NET-INCOME> (120,313) (120,402)
26,440 26,440
<EARNINGS-AVAILABLE-FOR-COMM> (146,753) (146,753)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 133,192 133,192
<CASH-FLOW-OPERATIONS> 388,662 388,662
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE>
FINANCIAL STATEMENTS
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
1.1a BALANCE SHEET
AS OF DECEMBER 31, 1998
<CAPTION>
PRO FORMA
GIVING EFFECT
(THOUSANDS OF DOLLARS) PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
<S> <C> <C> <C>
ASSETS
UTILITY PLANT, AT COST:
ELECTRIC 6,173,871 6,173,871
LESS: ACC. DEPREC. 2,758,012 2,758,012
------------ ------------ ------------
3,415,859 0 3,415,859
CONSTRUCTION WORK IN PROGRESS 83,477 83,477
NUCLEAR FUEL, NET 87,867 73 (a) 87,940
------------ ------------ ------------
TOTAL NET UTILITY PLANT 3,587,203 73 3,587,276
------------ ------------ ------------
OTHER PROP. AND INVEST.:
NUC. DECOM. TRST, AT MARKET. 452,755 452,755
INV. REG. NUC. GEN. COS (EQTY) 56,999 56,999
OTHER, AT COST 93,864 93,864
------------ ------------ ------------
TOTAL OTHER PROP. & INVEST 603,618 603,618
------------ ------------ ------------
CURRENT ASSETS:
CASH & CASH EQUIVALENTS 434 (182)(a) 252
NOTES REC., AFFIL. COMPANIES 6,600 6,600
SECURITIZABLE ASSETS 160,253 160,253
RECEIVABLES, NET 22,186 22,186
A/R AFFIL. COMPANIES 1,721 1,721
TAXES RECEIVABLE 26,478 26,478
ACCRUED UTILITY REVS
FUEL, MATS & SUPP (AVG COST) 71,982 71,982
RECOV. ENRG. COST, NET -- CURR 0 0
PREPAYMENTS AND OTHER 121,514 121,514
------------ ------------ ------------
TOTAL CURRENT ASSETS 411,168 (182) 410,986
------------ ------------ ------------
DEFERRED CHARGES:
REGULATORY ASSETS 1,415,838 1,415,838
UNAMORTIZED DEBT EXPENSE 19,603 19,603
OTHER 12,768 12,768
------------ ------------ ------------
TOTAL DEF. CHARGES 1,448,209 0 1,448,209
------------ ------------ ------------
TOTAL ASSETS 6,050,198 (109) 6,050,089
========================= =============
CAPITALIZATION:
COMMON SHARES 122,229 122,229
CAPITAL SURPLUS, PAID IN 664,156 664,156
RETAINED EARNINGS 210,108 (64) 210,044
ACCUM OTHER COMP INCOME 378 378
------------ ------------ ------------
TOTAL COMMON EQUITY 996,871 (64) 996,807
PREF. STK NOT SUBJ MAND REDEM 116,200 116,200
PREF. STOCK SUBJ TO MAND REDEM 99,539 99,539
LONG-TERM DEBT 1,793,952 1,793,952
------------ ------------ ------------
TOTAL CAPITALIZATION 3,006,562 (64) 3,006,498
------------ ------------ ------------
MINOR. INT. IN CONS. SUBS 100,000 0 100,000
------------ ------------ ------------
OBLIG. UNDER CAP. LEASES 68,444 0 68,444
------------ ------------ ------------
CURRENT LIABILITIES:
NOTES PAYABLE TO BANK 10,000 10,000
NOTES PAYABLE TO AFFIL. CO. 0
L-T DEBT AND PREF. STOCK, CUR 233,755 233,755
OBLIG. UNDER CAP. LEASES, CUR 94,440 94,440
ACCOUNTS PAYABLE 121,040 121,040
ACCOUNTS PAYABLE TO AFFIL. COS. 32,758 32,758
ACCRUED TAXES PAYABLE 19,396 (45)(b) 19,351
ACCRUED INTEREST 31,409 31,409
OTHER 34,872 34,872
------------ ------------ ------------
TOT. CURRENT LIABILITIES 577,670 (45) 577,625
------------ ------------ ------------
DEFERRED CREDITS:
ACCUM. DEF. INCOME TAXES 1,194,722 1,194,722
ACC. DEF.INVEST.TAX CRDT. 114,457 114,457
DECOMMISIONING--UNIT 1 560,500
DEF. CONTRACT. OBLIG. 277,826 277,826
OTHER 150,017 150,017
------------ ------------ ------------
TOTAL DEFERRED CREDITS 2,297,522 0 2,297,522
------------ ------------ ------------
TOTAL CAPITALIZATION AND LIAB 6,050,198 (109) 6,050,089
========================= =============
</TABLE>
* See attached Pro Forma Adjustments
FINANCIAL STATEMENTS
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS)
Debit Credit
a)Nuclear Fuel, net 73
Operating Expenses: Fuel Costs 109
Cash $182
b)Accrued Income Taxes Payable 45
Federal and State Income Tax Expense 45
a)To record CL&P's pro rata expenses (approx. 81%) associated with the
Modifications of the Nuclear Fuel Financing Arrangements. Approximately
40.0% of these costs will be capitalized.
b)To record the reduction in income taxes associated with the Modifications
($109 X 41.11% = $45)
<TABLE>
FINANCIAL STATEMENTS
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
1.2a INCOME STATEMENT AND SURPLUS
12 MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
INCOME STATEMENT PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
<S> <C> <C> <C>
OPERATING REVENUE 2,386,864 0 2,386,864
---------- ---------- ----------
OPERATING EXPENSES:
OPERATION--
FUEL, PURCH.& NET INTER PWR 887,224 109 (a) 887,333
OTHER 703,971 703,971
MAINTENANCE 271,317 271,317
DEPRECIATION 216,509 216,509
AMORT OF REG ASSETS, NET 120,884 120,884
FED/ STATE INCOME TAXES (11,642) (45)(b) (11,687)
OTHER TAXES 170,347 170,347
---------- ---------- ----------
TOTAL OPERATING EXPENSES 2,358,610 64 2,358,674
---------- ---------- ----------
OPERATING LOSS 28,254 (64) 28,190
---------- ---------- ----------
OTHER INCOME (LOSS):
ERNGS OF REGNL NUCL & TRANS COS 6,241 6,241
MILLSTONE 1--UNRECOVERABLE COSTS (143,239) (143,239)
OTHER, NET (6,075) (6,075)
MIN. INT. IN INCOME OF SUB (9,300) (9,300)
INCOME TAXES 67,127 67,127
---------- ---------- ----------
OTHER INCOME, NET (85,246) 0 (85,246)
---------- ---------- ----------
LOSS BEF. INT. CHARGES (56,992) (64) (57,056)
---------- ---------- ----------
INTEREST CHARGES:
INTEREST ON L-T DEBT 133,192 133,192
OTHER INTEREST 5,541 5,541
---------- ---------- ----------
INTEREST CHARGES, NET 138,733 0 138,733
---------- ---------- ----------
NET LOSS (195,725) (64) (195,789)
=========== =========== ===========
RETAINED EARNINGS PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
BAL. AT BEGINNING OF PERIOD 419,972 419,972
NET GAIN (LOSS) (195,725) (64) (195,789)
CASH DIVIDENDS ON PREF. STOCK (14,139) (14,139)
CASH DIVIDEND ON COMMON STOCK 0 0
---------- ---------- ----------
BALANCE AT END OF PERIOD 210,108 (64) 210,044
=========== =========== ===========
* See attached Pro Forma Adjustments
FINANCIAL STATEMENTS
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
1.2a INCOME STATEMENT AND SURPLUS
12 MONTHS ENDED DECEMBER 31, 1998
CAPITAL STRUCTURE PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK % ADJUSTMENTS TRANSACTION %
LONG TERM DEBT 1,793,952 59.7 1,793,952 59.7
PREFERRED STOCK SUBJECT TO
MANATORY REDEMPTION 99,539 3.3 99,539 3.3
PREFERRRED STOCK NOT
SUBJ TO MAND REDEMPTION 116,200 3.9 116,200 3.9
COMMON STOCK EQUITY 996,871 33.2 (64) 996,807 33.2
----------- ------------ ------------
3,006,562 (64) 3,006,498
=========== ============ ============
</TABLE>
<TABLE>
FINANCIAL STATEMENTS
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARIES
2.1a BALANCE SHEET
AS OF DECEMBER 31, 1998
<CAPTION> PRO FORMA
GIVING EFFECT
(THOUSANDS OF DOLLARS) PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
<S> <C> <C> <C>
ASSETS
UTILITY PLANT, AT COST:
ELECTRIC 1,221,257 1,221,257
LESS: ACC. DEPREC. 517,401 517,401
------------ ------------ ------------
703,856 0 703,856
CONSTRUCTION WORK IN PROGRESS 14,858 14,858
NUCLEAR FUEL, NET 19,931 18 (a) 19,949
------------ ------------ ------------
TOTAL NET UTILITY PLANT 738,645 18 738,663
------------ ------------ ------------
OTHER PROP. AND INVEST.:
NUC. DECOM. TRST, AT MARKET. 125,598 125,598
INV. REG. NUC. GEN. COS (EQTY) 15,440 15,440
OTHER, AT COST 7,322 7,322
------------ ------------ ------------
TOTAL OTHER PROP. & INVEST 148,360 148,360
------------ ------------ ------------
CURRENT ASSETS:
CASH & CASH EQUIVALENTS 106 (46)(a) 60
SECURITIZABLE ASSETS 21,865 21,865
RECEIVABLES, NET 862 862
A/R AFFIL. COMPANIES 4,188 4,188
TAXES RECEIVABLE 14,255 14,255
FUEL, MAT & SUP (AVG COST) 5,053 5,053
RECOV. ENRG. COST, NET -- CUR 1,924 1,924
PREPAYMENTS AND OTHER 23,996 23,996
------------ ------------ ------------
TOTAL CURRENT ASSETS 72,249 (46) 72,203
------------ ------------ ------------
DEFERRED CHARGES:
REGULATORY ASSETS 322,435 322,435
UNAMORTIZED DEBT EXPENSE 2,298 2,298
OTHER 3,695 3,695
------------ ------------ ------------
TOTAL DEF. CHARGES 328,428 0 328,428
------------ ------------ ------------
TOTAL ASSETS 1,287,682 (28) 1,287,654
============= ============= =============
CAPITALIZATION:
COMMON SHARES 26,812 26,812
CAPITAL SURPLUS, PAID IN 151,431 151,431
RETAINED EARNINGS 46,003 (17) 45,986
ACCUM OTHER COMP INCOME 150 150
------------ ------------ ------------
TOTAL COMMON EQUITY 224,396 (17) 224,379
PREF NOT SUBJ TO MAND REDEM 20,000 20,000
PREF SUBJECT TO MAND REDEM 18,000 18,000
LONG-TERM DEBT 349,314 349,314
------------ ------------ ------------
TOTAL CAPITALIZATION 611,710 (17) 611,693
------------ ------------ ------------
OBLIG. UNDER CAP. LEASES 12,129 0 12,129
------------ ------------ ------------
CURRENT LIABILITIES:
NOTES PAYABLE TO BANK 20,000 20,000
NOTES PAYABLE TO AFFIL. CO. 30,900 30,900
L-T DEBT AND PREF. STOCK, CUR 41,500 41,500
OBLIG. UNDER CAP. LEASES, CUR 21,964 21,964
ACCOUNTS PAYABLE 17,952 17,952
ACCOUNTS PAYABLE TO AFFIL. COS. 12,866 12,866
ACCRUED TAXES PAYABLE 1,264 (11)(b) 1,253
ACCRUED INTEREST 8,030 8,030
OTHER 6,831 6,831
------------ ------------ ------------
TOT. CURRENT LIABILITIES 161,307 (11) 161,296
------------ ------------ ------------
DEFERRED CREDITS:
ACCUM. DEF. INCOME TAXES 248,985 248,985
ACC. DEF.INVEST.TAX CRDT. 21,895 21,895
DECOMMISIONING--UNIT 1 131,500
DEF. CONTRACT. OBLIG. 74,534 74,534
OTHER 25,622 25,622
------------ ------------ ------------
TOTAL DEFERRED CREDITS 502,536 0 502,536
------------ ------------ ------------
TOTAL CAPITALIZATION AND LIAB 1,287,682 (28) 1,287,654
============= ============= =============
* See attached Pro Forma Adjustments
</TABLE>
FINANCIAL STATEMENTS
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARIES
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS)
Debit Credit
a)Nuclear Fuel, net 18
Operating Expenses: Fuel Costs 28
Cash 46
b)Accrued Income Taxes Payable 11
Federal and State Income Tax Expense 11
a)To record WMECO's pro rata expenses (approx. 19%) associated with the
Modification of the Nuclear Fuel Financing Arrangements. Approximately
40.0% of these costs will be capitalized.
b)To record the reduction in income taxes associated with the Modifications
($28 X 39.0775% = $11)
<TABLE>
FINANCIAL STATEMENTS
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARIES
2.2a INCOME STATEMENT AND SURPLUS
12 MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
INCOME STATEMENT PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
<S> <C> <C> <C>
OPERATING REVENUE 393,322 0 393,322
---------- ---------- ----------
OPERATING EXPENSES:
OPERATION--
FUEL, PURCH. AND NET INTER 113,148 28 (a) 113,176
OTHER 134,916 134,916
MAINTENANCE 56,622 56,622
DEPRECIATION 40,901 40,901
AMORT OF REG ASSETS, NET 6,016 6,016
FED/ STATE INCOME TAXES 2,109 (11)(b) 2,098
OTHER TAXES 19,756 19,756
---------- ---------- ----------
TOTAL OPERATING EXPENSES 373,468 17 373,485
---------- ---------- ----------
OPERATING LOSS 19,854 (17) 19,837
---------- ---------- ----------
OTHER INCOME (LOSS):
ERNGS OF REGNL NUCL & TRANS COS 1,699 1,699
OTHER, NET (1,905) (1,905)
INCOME TAXES 2,198 2,198
---------- ---------- ----------
OTHER INCOME, NET 1,992 0 1,992
---------- ---------- ----------
LOSS BEF. INT. CHARGES 21,846 (17) 21,829
---------- ---------- ----------
INTEREST CHARGES:
INTEREST ON L-T DEBT 28,027 28,027
OTHER INTEREST 3,398 3,398
---------- ---------- ----------
INTEREST CHARGES, NET 31,425 0 31,425
---------- ---------- ----------
NET LOSS (9,579) (17) (9,596)
=========== =========== ===========
RETAINED EARNINGS PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
BAL. AT BEGINNING OF PERIOD 58,608 58,608
NET GAIN (LOSS) (9,579) (17) (9,596)
CASH DIVIDENDS ON PREF. STOCK (3,026) (3,026)
CASH DIVIDEND ON COMMON STOCK 0 0
---------- ---------- ----------
BALANCE AT END OF PERIOD 46,003 (17) 45,986
=========== =========== ===========
* See attached Pro Forma Adjustments
FINANCIAL STATEMENTS
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARIES
2.2a INCOME STATEMENT AND SURPLUS
12 MONTHS ENDED DECEMBER 31, 1998
CAPITAL STRUCTURE PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK % ADJUSTMENTS TRANSACTION %
LONG TERM DEBT 349,314 57.1 349,314 57.1
PREFERRED STOCK SUBJECT TO
MANATORY REDEMPTION 18,000 2.9 18,000 2.9
PREFERRRED STOCK NOT
SUB TO MANDATORY REDEMP 20,000 3.3 20,000 3.3
COMMON STOCK EQUITY 224,396 36.7 (17) 224,379 36.7
----------- ------------ ------------
611,710 (17) 611,693
=========== ============ ============
</TABLE>
<TABLE>
FINANCIAL STATEMENTS
NORTHEAST UTILITIES AND SUBSIDIARIES
3.1a BALANCE SHEET
AS OF DECEMBER 31, 1998
<CAPTION>
PRO FORMA
GIVING EFFECT
(THOUSANDS OF DOLLARS) PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
<S> <C> <C> <C>
ASSETS
UTILITY PLANT, AT COST:
ELECTRIC 9,570,547 9,570,547
OTHER 195,325 195,325
------------ ------------ ------------
9,765,872 0 9,765,872
LESS: ACC. DEPREC. 4,224,416 4,224,416
------------ ------------ ------------
5,541,456 0 5,541,456
UNAMORTIZED PSNH ACQ COSTS 352,855 352,855
CONSTRUCTION WORK IN PROGRESS 143,159 143,159
NUCLEAR FUEL, NET 133,411 91 (a) 133,502
------------ ------------ ------------
TOTAL NET UTILITY PLANT 6,170,881 91 6,170,972
------------ ------------ ------------
OTHER PROP. AND INVEST.:
NUC. DECOM. TRST, AT MARKET. 619,143 619,143
INV. REG. NUC. GEN. COS (EQTY) 85,791 85,791
INV. REG. TRANS COS (EQTY) 17,692 17,692
OTHER, AT COST 136,812 136,812
------------ ------------ ------------
TOTAL OTHER PROP. & INVEST 859,438 859,438
------------ ------------ ------------
CURRENT ASSETS:
CASH & CASH EQUIVALENTS 136,155 (228)(a) 135,927
NOTES REC., AFFIL. COMPANIES 0 0
SECURITIZABLE ASSETS 182,118 182,118
RECEIVABLES, NET 237,207 237,207
ACCRUED UTILITY REVS 42,145
FUEL, MAT & SUPP (AVG COST) 202,661 202,661
RECOV. ENRG. COST, NET -- CUR 67,181 0
PREPAYMENTS AND OTHER 65,440 65,440
------------ ------------ ------------
TOTAL CURRENT ASSETS 932,907 (228) 932,679
------------ ------------ ------------
DEFERRED CHARGES:
REGULATORY ASSETS 2,328,949 2,328,949
UNAMORTIZED DEBT EXPENSE 40,416 40,416
OTHER 54,790 54,790
------------ ------------ ------------
TOTAL DEF. CHARGES 2,424,155 0 2,424,155
------------ ------------ ------------
TOTAL ASSETS 10,387,381 (137) 10,387,244
========================== =============
CAPITALIZATION:
COMMON SHARES 685,156 685,156
CAPITAL SURPLUS, PAID IN 940,661 940,661
DEFERRED COMPENSATION--(ESOP) (140,619) (140,619)
RETAINED EARNINGS 560,769 (89) 560,680
ACCUM OTHER COMP INCOME 1,405 1,405
------------ ------------ ------------
TOTAL COMMON EQUITY 2,047,372 (89) 2,047,283
PREF. STK NOT SUBJ TO MAND REDEM 136,200 136,200
PREF. STK SUBJ TO MAND REDEM 167,539 167,539
LONG-TERM DEBT 3,282,138 3,282,138
------------ ------------ ------------
TOTAL CAPITALIZATION 5,633,249 (89) 5,633,160
------------ ------------ ------------
MINOR. INT. IN CONS. SUBS 100,000 0 100,000
------------ ------------ ------------
OBLIG. UNDER CAP. LEASES 88,423 0 88,423
------------ ------------ ------------
CURRENT LIABILITIES:
NOTES PAYABLE TO BANK 30,000 30,000
L-T DEBT AND PREF. STOCK, CUR 397,153 397,153
OBLIG. UNDER CAP. LEASES, CUR 120,856 120,856
ACCOUNTS PAYABLE 338,612 338,612
ACCRUED TAXES PAYABLE 50,755 (48)(b) 50,707
ACCRUED INTEREST 51,044 51,044
ACCRUED PENSION BENEFITS 33,034 33,034
OTHER 106,333 106,333
------------ ------------ ------------
TOT. CURRENT LIABILITIES 1,127,787 (48) 1,127,739
------------ ------------ ------------
DEFERRED CREDITS:
ACCUM. DEF. INCOME TAXES 1,848,694 1,848,694
ACC. DEF.INVEST.TAX CRDT. 143,369 143,369
DECOMMISIONING--UNIT 1 692,000
DEF. CONTRACT. OBLIG. 418,760 418,760
OTHER 335,099 335,099
------------ ------------ ------------
TOTAL DEFERRED CREDITS 3,437,922 0 3,437,922
------------ ------------ ------------
TOTAL CAPITALIZATION AND LIAB 10,387,381 (137) 10,387,244
========================== =============
* See attached Pro Forma Adjustments
</TABLE>
FINANCIAL STATEMENTS
NORTHEAST UTILITIES AND SUBSIDIARIES
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS)
Debit Credit
a)Nuclear Fuel, net 91
Operating Expenses: Fuel Costs 137
Cash 228
b)Accrued Income Taxes Payable 48
Federal and State Income Tax Expense 48
a)To record expenses associated with the Modification of the Nuclear Fuel
Financing Arrangements. Approximately 40.0% of these costs will be
capitalized.
b)To record the reduction in income taxes associated with the Modifications
($228 X 35.00% = $48)
<TABLE>
FINANCIAL STATEMENTS
NORTHEAST UTILITIES AND SUBSIDIARIES
3.2a INCOME STATEMENT AND SURPLUS
12 MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
INCOME STATEMENT PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
<S> <C> <C> <C>
OPERATING REVENUE 3,767,714 0 3,767,714
---------- ---------- ----------
OPERATING EXPENSES:
OPERATION--
FUEL, PURCH & NET INTER PWR 1,296,480 137 (a) 1,296,617
OTHER 977,139 977,139
MAINTENANCE 399,165 399,165
DEPRECIATION 332,807 332,807
AMORT OF REGUL ASSETS, NET 203,132 203,132
FED/ STATE INCOME TAXES 82,332 (48)(b) 82,284
OTHER TAXES 251,932 251,932
---------- ---------- ----------
TOTAL OPERATING EXPENSES 3,542,987 89 3,543,076
---------- ---------- ----------
OPERATING LOSS 224,727 (89) 224,638
---------- ---------- ----------
OTHER INCOME (LOSS):
ERNGS OF REGNL COS 12,420 12,420
DEF NUC PLNTS RETN-OTHER 6,896 6,896
MILLSTONE 1--UNRECOV COSTS (143,239) (143,239)
OTHER, NET (19,121) (19,121)
MIN. INT. IN INCOME OF SUB (9,300) (9,300)
INCOME TAXES 76,393 76,393
---------- ---------- ----------
OTHER INCOME, NET (75,951) 0 (75,951)
---------- ---------- ----------
LOSS BEF. INT. CHARGES 148,776 (89) 148,687
---------- ---------- ----------
INTEREST CHARGES:
INTEREST ON L-T DEBT 273,824 273,824
OTHER INTEREST 7,808 7,808
DEF NUC PLNTS RET--BORROWED FUNDS (12,543) (12,543)
INTEREST CHARGES, NET 269,089 0 269,089
---------- ---------- ----------
NET LOSS AFTER INTEREST CHARGES (120,313) (89) (120,402)
---------- ---------- ----------
PREFERRED DIVIDENDS OF SUBSIDIARIES 26,440 26,440
---------- ---------- ----------
NET LOSS (146,753) (89) (146,842)
=========== ============= ==============
RETAINED EARNINGS PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
BAL. AT BEGINNING OF PERIOD 707,522 707,522
NET GAIN (LOSS) (120,313) (89) (120,402)
CASH DIVIDENDS ON PREF. STOCK (26,440) (26,440)
CASH DIVIDEND ON COMMON STOCK 0 0
---------- ---------- ----------
BALANCE AT END OF PERIOD 560,769 (89) 560,680
=========== =========== ===========
* See attached Pro Forma Adjustments
FINANCIAL STATEMENTS
NORTHEAST UTILITIES AND SUBSIDIARIES
3.2a INCOME STATEMENT AND SURPLUS
12 MONTHS ENDED DECEMBER 31, 1998
CAPITAL STRUCTURE PRO FORMA
(THOUSANDS OF DOLLARS) GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK % ADJUSTMENTS TRANSACTION %
LONG TERM DEBT 3,282,138 58.3 3,282,138 58.3
PREFERRED STOCK SUBJECT TO
MANATORY REDEMPTION 167,539 3.0 167,539 3.0
PREFERRRED STOCK NOT SUBJ
TO MANDATORY REDEMPTION 136,200 2.4 136,200 2.4
COMMON STOCK EQUITY 2,047,372 36.3 (89) 2,047,283 36.3
----------- ------------ ------------
5,633,249 (89) 5,633,160
=========== ============ ============
</TABLE>
