UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
---------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number 1-7727
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CONNECTICUT NATURAL GAS CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0383860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Boulevard, Hartford, Connecticut 06103
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(Address of principal executive offices) (Zip Code)
(203) 727-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on April 23, 1996: 9,930,480.
<PAGE>
FINANCIAL STATEMENTS
CONNECTICUT NATURAL GAS CORPORATION
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K. In the opinion
of the Company, all adjustments necessary to present fairly the consolidated
financial position of the Connecticut Natural Gas Corporation as of March
31, 1996 and 1995 and the results of its operations and its cash flows for
the three months, six months and twelve months ended March 31, 1996 and 1995
have been included. The results of operations for such interim periods are
not necessarily indicative of the results for the full year.
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<S> <C> <C> <C>
March 31, Sept. 30, March 31,
ASSETS 1996 1995 1995
------ --------- --------- ---------
Plant and Equipment:
Regulated energy $ 393,400 $ 387,906 $ 374,310
Nonregulated energy 64,000 63,937 63,205
Construction work in progress 3,615 3,564 2,854
--------- --------- ---------
461,015 455,407 440,369
Less-Allowance for depreciation 140,087 133,314 126,654
--------- --------- ---------
320,928 322,093 313,715
--------- --------- ---------
Investments, at equity 5,549 5,743 5,463
--------- --------- ---------
Current Assets:
Cash and cash equivalents 21,167 3,042 13,477
Accounts and notes receivable 63,796 31,504 50,352
Allowance for doubtful accounts (5,699) (4,590) (4,834)
Accrued utility revenue 16,187 5,093 11,504
Inventories 2,687 14,511 8,671
Prepaid expenses 3,069 6,095 3,450
--------- --------- ---------
101,207 55,655 82,620
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 48,641 51,634 49,997
Recoverable transition costs 3,899 4,636 5,634
Other assets 20,177 25,278 27,755
--------- --------- ---------
72,717 81,548 83,386
--------- --------- ---------
$ 500,401 $ 465,039 $ 485,184
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS (Concluded)
(Thousands of Dollars)
<S> <C> <C> <C>
March 31, Sept. 30, March 31,
CAPITALIZATION AND LIABILITIES 1996 1995 1995
------------------------------ --------- --------- ---------
Capitalization:
Common Stock $ 31,045 $ 31,045 $ 31,045
Capital in excess of par value 74,018 74,018 74,018
Retained Earnings 60,204 45,522 54,891
--------- --------- ---------
165,267 150,585 159,954
Unearned compensation -
Restricted stock awards (286) (371) (400)
Treasury stock (129) (103) (103)
--------- --------- ---------
Common stock equity 164,852 150,111 159,451
Preferred stock, not subject to
mandatory redemption 902 904 906
Long-term debt 149,372 150,390 153,283
--------- --------- ---------
315,126 301,405 313,640
--------- --------- ---------
Notes Payable Under Revolving Credit
Agreements - - 1,000
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,923 3,921 3,885
Notes payable and commercial paper - 4,200 -
Accounts payable and accrued expenses 39,791 46,341 40,663
Refundable purchased gas costs 22,937 2,300 12,369
Accrued liabilities 11,898 6,539 8,291
--------- --------- ---------
78,549 63,301 65,208
--------- --------- ---------
Deferred Credits:
Deferred income taxes 47,048 37,985 44,099
Unfunded deferred income taxes 48,641 51,634 49,997
Investment tax credits 3,313 3,423 3,533
Refundable taxes 3,501 3,365 3,367
Accrued transition costs - - 634
Other 4,223 3,926 3,706
--------- --------- ---------
106,726 100,333 105,336
--------- --------- ---------
$ 500,401 $ 465,039 $ 485,184
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Three Months Ended
March 31,
<S> <C> <C>
-----------------------------
1996 1995
---------- ----------
Operating Revenues $ 130,606 $ 105,540
Less: Cost of Energy 73,314 56,573
State Gross Receipts Tax 4,854 4,215
---------- ----------
Operating Margin 52,438 44,752
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 15,814 13,986
Depreciation 4,416 4,287
Income taxes 13,031 7,902
Other taxes 1,944 1,919
---------- ----------
35,205 28,094
---------- ----------
Operating Income 17,233 16,658
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 38 33
Equity in partnership earnings 282 159
Other income (deductions) (127) (255)
Income Taxes (86) (115)
---------- ----------
107 (178)
---------- ----------
Interest and Debt Expense 3,452 3,556
---------- ----------
Net Income 13,888 12,924
Less-Dividends on Preferred Stock 15 16
---------- ----------
Net Income Applicable to Common Stock $ 13,873 $ 12,908
========== ==========
Income Per Average Share of
Common Stock $ 1.40 $ 1.30
========== ==========
Dividends Per Share of Common Stock $ 0.37 $ 0.37
========== ==========
Average Common Shares Outstanding
During the Period 9,931,120 9,931,279
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Six Months Ended
March 31,
-----------------------------
<S> <C> <C>
1996 1995
---------- ----------
Operating Revenues $ 221,068 $ 182,071
Less: Cost of Energy 122,386 98,456
State Gross Receipts Tax 8,644 7,440
---------- ----------
Operating Margin 90,038 76,175
---------- ----------
Operating Expenses:
Operations & maintenance expenses 29,312 25,849
Depreciation 8,799 8,501
Income taxes 19,461 12,082
Other taxes 3,866 3,708
---------- ----------
61,438 50,140
---------- ----------
Operating Income 28,600 26,035
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 83 63
Equity in partnership earnings 684 534
Other deductions (236) (508)
Income Taxes (238) (133)
---------- ----------
293 (44)
---------- ----------
Interest and Debt Expense 6,831 6,983
---------- ----------
Net Income 22,062 19,008
Less-Dividends on Preferred Stock 31 31
---------- ----------
Net Income Applicable to Common Stock $ 22,031 $ 18,977
========== ==========
Income Per Average Share of
Common Stock $ 2.22 $ 1.91
========== ==========
Dividends Per Share of Common Stock $ 0.74 $ 0.74
========== ==========
Average Common Shares Outstanding
During the Period 9,931,199 9,922,658
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Twelve Months Ended
March 31,
-----------------------------
<S> <C> <C>
1996 1995
---------- ----------
Operating Revenues $ 314,182 $ 270,028
Less: Cost of Energy 171,693 143,906
State Gross Receipts Tax 12,500 10,828
---------- ----------
Operating Margin 129,989 115,294
---------- ----------
Operating Expenses:
Operations & maintenance expenses 56,692 53,486
Depreciation 17,275 16,643
Income taxes 16,809 9,100
Other taxes 7,489 7,294
---------- ----------
98,265 86,523
---------- ----------
Operating Income 31,724 28,771
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 126 53
Equity in partnership earnings 1,182 950
Other deductions (602) (611)
Nonrecurring items 3,624 -
Income Taxes (1,942) (434)
---------- ----------
2,388 (42)
---------- ----------
Interest and Debt Expense 14,039 13,734
---------- ----------
Net Income 20,073 14,995
Less-Dividends on Preferred Stock 62 64
---------- ----------
Net Income Applicable to Common Stock $ 20,011 $ 14,931
========== ==========
Income Per Average Share of
Common Stock $ 2.01 $ 1.53
========== ==========
Dividends Per Share of Common Stock $ 1.48 $ 1.48
========== ==========
Average Common Shares Outstanding
During the Period 9,931,239 9,730,343
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
March 31,
----------------------
<S> <C> <C>
1996 1995
---- ----
Cash Flows from Operations $ 41,130 $ 39,539
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (3,895) (5,771)
Other investing activities 999 (535)
-------- --------
Net cash used in investing activities (2,896) (6,306)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (3,689) (3,690)
Other stock activity, net - 109
Principal retired on long-term debt (152) (320)
Short-term debt (14,100) (17,000)
-------- --------
Net cash used by
financing activities (17,941) (20,901)
-------- --------
Increase in Cash and
Cash Equivalents 20,293 12,332
Cash and Cash Equivalents at
Beginning of Period 874 1,145
-------- --------
Cash and Cash Equivalents at
End of Period $ 21,167 $ 13,477
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Three Months Ended
March 31,
----------------------
<S> <C> <C>
1996 1995
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 13,888 $ 12,924
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 4,561 4,126
Deferred income taxes, net 8,810 6,643
Equity in partnership earnings (282) (159)
Change in assets and liabilities:
Accounts receivable (20,383) (12,124)
Accrued utility revenue 5,476 5,634
Inventories 8,646 9,162
Purchased gas costs 17,488 12,279
Prepaid expenses (899) (813)
Accounts payable and accrued expenses 7,007 2,514
Other assets/liabilities (3,182) (647)
-------- --------
Total adjustments 27,242 26,615
-------- --------
Cash flows from operations $ 41,130 $ 39,539
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 2,135 $ 2,210
======== ========
Income taxes $ 2,313 $ 1,318
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Six Months Ended
March 31,
----------------------
<S> <C> <C>
1996 1995
---- ----
Cash Flows from Operations $ 37,839 $ 40,429
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (7,899) (9,927)
Other investing activities 783 (1,038)
-------- --------
Net cash used in investing activities (7,116) (10,965)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (7,380) (7,380)
Issuance of common stock - 8,474
Other stock activity, net (2) 109
Principal retired on long-term debt (1,016) (816)
Short-term debt (4,200) (17,500)
-------- --------
Net cash used by
financing activities (12,598) (17,113)
-------- --------
Increase in Cash and
Cash Equivalents 18,125 12,351
Cash and Cash Equivalents at
Beginning of Period 3,042 1,126
-------- --------
Cash and Cash Equivalents at
End of Period $ 21,167 $ 13,477
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Six Months Ended
March 31,
----------------------
<S> <C> <C>
1996 1995
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 22,062 $ 19,008
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 9,062 8,478
Deferred income taxes, net 9,089 7,164
Equity in partnership earnings (684) (534)
Cash distributions received from
investments 360 168
Change in assets and liabilities:
Accounts receivable (31,001) (21,142)
Accrued utility revenue (11,094) (7,790)
Inventories 11,824 9,655
Purchased gas costs 20,637 16,138
Prepaid expenses 3,026 6,657
Accounts payable and accrued expenses 3,436 3,269
Other assets/liabilities 1,122 (642)
-------- --------
Total adjustments 15,777 21,421
-------- --------
Cash flows from operations $ 37,839 $ 40,429
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 6,232 $ 6,312
======== ========
Income taxes $ 6,920 $ 2,246
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Twelve Months Ended
March 31,
----------------------
<S> <C> <C>
1996 1995
---- ----
Cash Flows from Operations $ 51,247 $ 47,603
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (24,811) (28,893)
Other investing activities 892 (1,238)
-------- --------
Net cash used in investing activities (23,919) (30,131)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (14,761) (14,472)
Issuance of common stock - 8,474
Other stock activity, net (4) 51
Issuance of long-term debt - 20,000
Principal retired on long-term debt (3,873) (3,847)
Short-term debt (1,000) (15,600)
-------- --------
Net cash used by
financing activities (19,638) (5,394)
-------- --------
Increase in Cash and
Cash Equivalents 7,690 12,078
Cash and Cash Equivalents at
Beginning of Period 13,477 1,399
-------- --------
Cash and Cash Equivalents at
End of Period $ 21,167 $ 13,477
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Twelve Months Ended
March 31,
----------------------
<S> <C> <C>
1996 1995
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 20,073 $ 14,995
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 17,800 17,132
Deferred income taxes, net 2,822 3,553
Equity in partnership earnings (1,182) (950)
Cash distributions received from
investments 528 408
Change in assets and liabilities:
Accounts receivable (10,544) 11,163
Accrued utility revenue (4,683) 1,072
Inventories 5,984 (1,341)
Purchased gas costs 10,568 (3,490)
Prepaid expenses 381 (962)
Accounts payable and accrued expenses 7,726 2,713
Other assets/liabilities 1,774 3,310
-------- --------
Total adjustments 31,174 32,608
-------- --------
Cash flows from operations $ 51,247 $ 47,603
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 12,366 $ 12,184
======== ========
Income taxes $ 13,641 $ 9,513
======== ========
</TABLE>
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Thousands of Dollars)
(1) Rate Matters
In January, 1996 the Connecticut Department of Public Utility Control
(the "DPUC") approved final natural gas rates related to a rate
increase of $8,900 or 3.64% allowed by the DPUC in October, 1995.
These final rates became effective on February 9, 1996. As part of
this decision, the DPUC also approved the Company's Firm Transportation
rates for Commercial and Industrial customers, effective April 1, 1996.
(See "Management's Discussion and Analysis," "Competitive Environment")
(2) Short-term Debt
The Company maintains a number of credit lines with financial
institutions. One of the lines of credit with a bank for $9,000 was
due to expire on February 18, 1996. It was extended for one year at
that time.
The Company's $20,000 revolving credit agreement with a large regional
bank was due to expire on March 30, 1996. The Company exercised its
option to extend this agreement for one year at that time.
(3) Subsequent Event - Increased Investment in Iroquois
On April 30, 1996 the Company acquired an additional 2.47% ownership
interest in the Iroquois Gas Transmission System Partnership
("Iroquois") for an investment of approximately $5,200 with funds from
working capital. The Company's total share of Iroquois, which is held
by the Company's wholly-owned subsidiary ENI Transmission Company, is
now 4.87%. As a result of this increase in ownership interest, the
Company's guarantee of a letter of credit for Iroquois is also 4.87%,
equivalent to approximately $1,658 at April 30, 1996.
Iroquois is in the process of negotiating a final settlement with State
and Federal authorities regarding certain environmental allegations
asserted by them. The Company expects that a potential settlement will
be reached within the current year. The Company has provided for its
anticipated share of the potential settlement in its financial records.
If the settlement is finalized, the Company expects that any additional
costs associated with the allegations will not be material.
(4) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 1996
(Thousands of Dollars Except Per Share Amounts)
RESULTS OF OPERATIONS
A significantly colder winter and the increase in natural gas rates granted
to the Company by the Connecticut Department of Public Utility Control (the
"DPUC"), effective in October, 1995, are the primary reasons for the higher
earnings recorded in the three, six and twelve months ended March 31, 1996
when compared to the same periods of fiscal, 1995. Second quarter, 1996
earnings per share were $1.40, compared to $1.30 recorded for the same
quarter of fiscal, 1995. Six and twelve months ended March, 1996 earnings
per share were $2.22 and $2.01, respectively as compared to $1.91 and $1.53,
respectively, for fiscal, 1995. Earnings recorded for the twelve months
ended March 31, 1996 include two nonrecurring items: a gain of $.24 per
share from a negotiated settlement for the termination of a steam supply
contract; and a charge of $(.05) per share in connection with legal matters
related to the Company's interest in the Iroquois Gas Transmission System
partnership ("Iroquois"). Without the effect of these two items, earnings
per share for this period would be $1.82.
Operating Margin
The following table presents the changes in revenues, gas operating margin
and gas throughput for all periods presented in the statements of income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
Gas Revenues $124,661 $100,212 $209,856 $172,038 $291,824 $248,045
======== ======== ======== ======== ======== ========
Gas Operating Margin $ 48,457 $ 41,218 $ 82,387 $ 69,567 $115,729 $101,394
======== ======== ======== ======== ======== ========
Gas Throughput (mmcf)
Firm Sales 11,261 9,811 18,577 16,200 23,739 21,160
Interruptible Sales 2,353 2,759 4,854 5,285 8,123 8,604
Off-System Sales 1,511 2,195 5,189 4,925 16,528 11,351
Transportation
Services 1,093 2,011 2,147 3,964 5,878 7,548
------ ------ ------ ------ ------ ------
Total System
Throughput 16,218 16,776 30,767 30,374 54,268 48,663
====== ====== ====== ====== ====== ======
</TABLE>
Gas operating margin is equal to gas revenues less the cost of gas and
Connecticut gross revenues tax. In all reported periods ending March 31,
1996, gas operating margin is higher as compared to the same periods of
fiscal, 1995. The two principal factors behind this increase in gas
operating margin are new, higher gas rates allowed by the DPUC beginning in
the first quarter of fiscal, 1996, and the significantly colder winter
<PAGE>
heating season weather experienced in the Company's service area in fiscal,
1996. The higher volumes of gas sold to firm customers during this time
multiplied the effect of the higher gas rates. These benefits were somewhat
offset by fewer sales to interruptible customers and somewhat lower
interruptible margins because of higher gas costs associated with these
sales.
Operations and Maintenance Expenses
The October, 1995, rate decision issued by the DPUC allowed the Company to
begin to amortize expenses that had been previously deferred pending the
outcome of the rate proceedings. Because of these additional amortizations
and a increases in a few other specific items, higher operations and
maintenance expenses have been recorded in fiscal, 1996. Increases have
been in the categories of wages and salaries, pension costs, insurance-
related costs, employee benefits, regulatory commission and rate proceedings
expenses and outside purchased services. The colder fiscal, 1996 winter has
also resulted in increased bad debt accruals related to hardship customers.
Collectively, these have generated an overall increase in operations and
maintenance expenses when comparing the three, six and twelve months ended
March, 1996 to 1995.
Income Taxes
Income taxes are higher in all periods of fiscal, 1996, primarily because of
higher taxable income and the absence of the flow through of cost of removal
benefits recognized during fiscal 1995. The higher effective tax rate is
caused primarily by the turn around in recent years of flow-through book tax
depreciation differences of older plant. These higher taxes were included
in the determinatin of the Company's rates from the last rate decision.
Because of these differences, and the lack of other offsetting tax benefits,
the Company's effective tax rate is higher in 1996 than the previous
periods. Because of this higher effective tax rate, the Company will tend
to record higher tax expenses in the winter quarters and receive a greater
tax benefit in the summer months, thus reducing net income during the
heating season and reducing the net losses normally experienced during the
summer season.
Other Income (Deductions)
Other income (deductions) in all reported periods ended March, 1996 have
benefited the reconfiguration of certain life insurance plans. The impact
of this benefit has been partially offset by the costs of terminating the
Company's Gas Roots regulated propane service program, as directed by the
DPUC late in fiscal, 1995.
Two nonrecurring items were recorded in the twelve months ended March, 1996:
a one-time pretax benefit of $4,124 from the negotiated settlement of a
contract termination agreement with the nonregulated operations' principal
steam supplier and a charge of $500 for the Company's share of expenses in
connection with legal matters related to its ownership interest in Iroquois.
(See "Material Changes in Financial Condition," "Investing Activities").
Reduced promotional expenses also provided a benefit to the twelve months
ended March, 1996.
<PAGE>
Interest and Debt Expense
Interest expense between the comparable quarter and six months ended periods
is relatively unchanged. During the earlier part of this fiscal year, more
short-term borrowings were required to pay for higher volumes of gas needed
to supply customers during the colder winter weather. The interest incurred
for these borrowings was offset by lower short-term borrowing rates. In
addition, during the second quarter of fiscal, 1996, available cash from
operations, a result of the colder winter and commensurate higher sales,
reduced the need to borrow for working capital. In the first six months of
fiscal, 1996, the Company also recorded higher interest expense related to
merchandise receivables and transition costs.
Higher fiscal, 1996 interest expense for the twelve months ended period is
attributed to interest related to pipeline refunds and deferred gas costs.
Earnings from Nonregulated Operations
Earnings contributed by nonregulated operations were $.08, $.15 and $.47 per
share, respectively, for the quarter, six and twelve months ended March 31,
1996, compared to $.09, $.18 and $.39 per share for the same periods ended
March 31, 1995. Twelve months ended March, 1996 earnings include $.24 per
share from the settlement related to the termination agreement negotiated
with a supplier of steam in the fourth quarter of fiscal, 1995, and a charge
of $(.05) in connection with legal matters related to the Company's
ownership interest in Iroquois. (See "Material Changes in Financial
Condition," "Investing Activities").
Lower fiscal, 1996 nonregulated contributions to earnings from operations
were the result of higher fixed costs of produced steam, attributed to labor
and equipment maintenance expenses, reduced chilled water sales for cooling,
because of lower building occupancy levels, and initial operating losses
related to new nonregulated subsidiaries, ENServe Corporation and ENI Gas
Services, Inc. The benefit of higher sales for steam and hot water heating,
generated because of the colder winter weather, partially offset these
negative impacts to nonregulated earnings.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash flows from operations funded both net investing and net financing
activities during the three, six and twelve months ended March, 1996, as
they did in the same periods of fiscal, 1995. The level of cash and cash
equivalents on hand at March 31, 1996 is also significantly greater than
levels on hand in 1995. The higher levels of cash from operations are
attributed to higher operating margins, primarily because of higher gas
rates, compounded by the impact of greater volumes sold because of the
colder winter weather. The six and twelve months ended March, 1996 also
reflect the receipt of the balance of the settlement amount due from the
termination of the steam supply contract with the nonregulated operations'
principal steam supplier. The six and twelve months ended March, 1995 cash
flows from operations were supplemented by debt and equity issues which were
used to permanently finance outstanding short-term borrowings and for
working capital.
<PAGE>
Investing Activities
On April 30, 1996 the Company acquired an additional 2.47% ownership
interest in Iroquois for an investment of approximately $5,200 with funds
from working capital. The Company's total share of Iroquois, which is held
by the Company's wholly-owned subsidiary ENI Transmission Company, is now
4.87%. As a result of this increase in ownership interest, the Company's
guarantee of a letter of credit for Iroquois has also increased to 4.87%,
equivalent to approximately $1,658 at April 30, 1996.
Iroquois is in the process of negotiating a final settlement with State and
Federal authorities regarding certain environmental allegations asserted by
them. The Company expects that a potential settlement will be reached
within the current year. The Company has provided for its anticipated share
of the potential settlement in its financial records. If the settlement is
finalized, the Company expects that any additional costs associated with the
allegations will not be material.
Financing Activities
The Company maintains a number of credit lines with financial institutions.
One of the lines of credit with a bank for $9,000 was due to expire on
February 18, 1996. It was extended for one year at that time.
The Company's $20,000 revolving credit agreement with a large regional bank
was due to expire on March 30, 1996. The Company exercised its option to
extend this agreement for one year at that time.
Rate Matters
In January, 1996 the DPUC approved final natural gas rates related to a rate
increase of $8,900 or 3.64% allowed by the DPUC in October, 1995. These
final rates became effective on February 9, 1996. As part of this decision,
the DPUC also approved the Company's Firm Transportation ("FTS") rates for
Commercial and Industrial customers, effective April 1, 1996.
Similar FTS rates have also been approved for Connecticut's other local
natural gas distribution companies ("LDC"). These rates allow commercial
and industrial customers to purchase their gas from independent brokers and
to pay their LDC only for the transportation of that gas through its gas
lines. In addition, each LDC offers a similar package of ancillary services
from which an FTS customer can choose to ensure that its business will have
an adequate supply of gas in the event that its broker does not meet its
commitment or if the customer's gas use requirements exceed its contractual
purchase.
Competitive Environment
In recent years, the natural gas industry has undergone structural changes
in response to Federal regulatory policy intended to increase competition.
In 1992, the Federal Energy Regulatory Commission (the "FERC") issued Order
636, which required all interstate gas pipelines to provide "unbundled," or
separate, gas transportation and storage services and to discontinue their
bundled merchant sales operations, which included the gas acquisition
function. The impact of the FERC Order 636 and the resulting deregulation
of the gas industry has continued to heighten competition and has changed
the nature of the Company's business.
<PAGE>
In the past, the three segments of the natural gas industry had defined
roles and relationships. Producers explored, drilled for and processed
natural gas. The pipelines purchased natural gas from the producers and
transported it to LDCs. The LDCs purchased the gas and transportation
services from the pipeline companies. To bring natural gas into a
competitive open market, the FERC demanded that the pipelines separate or,
"unbundle" the natural gas purchases, the transportation and the balancing
services which they had sold as a package to LDCs.
In the late 1980's, in anticipation of this restructured environment, the
Company put in place arrangements for the direct purchase of gas from
producers and marketers as well as for the transportation of such gas to its
service territory. In response to the FERC Order 636, in August, 1995, the
DPUC issued a decision ordering Connecticut LDCs to unbundle their gas
services. New, firm transportation service rates were approved by the DPUC
and went into effect for the LDCs on April 1, 1996. With the implementation
of these new rates, the Company's commercial and industrial natural gas
customers have an expanded opportunity to purchase natural gas directly from
producers or marketers. The Company, and the other Connecticut LDCs, thus
have become natural gas transporters and compete with each other and with
other gas marketers and providers for the sale of natural gas to such
customers.
The Company has been preparing for this local impact of the FERC Order 636
environment since 1988. Since that time the Company's large commercial and
industrial interruptible customers have had the opportunity to contract for
the purchase of their own supply of gas directly from a third-party
supplier. Any such customer must also arrange for transportation services
from the Company to deliver this gas to its premises.
While unbundling has provided the opportunity for the Company to service and
supply large commercial and industrial customers outside of its franchise
area, it has also allowed other gas service companies to have access to the
Company's customers within its service territory by allowing these customers
the opportunity to purchase their gas supplies from any source. However,
when such customers purchase their gas from other suppliers, the Company's
distribution system is required to deliver their supplies, for which the
Company receives a transportation margin.
Since 1993, the Company has also offered off-system sales of short-term gas
supplies and transportation services by contract. For these sales, the
Company competes with other sellers and suppliers of natural gas services.
As the natural gas distribution business becomes more competitive,
management believes the principal factor for determining success is likely
to be price, followed closely by customer loyalty and satisfaction.
The Company has posted the lowest weighted average cost of gas of all
Connecticut LDCs for seven consecutive years. For its fifth consecutive
year the Company has posted the lowest firm unit cost of natural gas for all
Connecticut LDC's.
The Company's nonregulated operations have been subject to the slow economic
conditions in the Hartford, Connecticut area. The district heating and
cooling operations have had to produce more costly steam as a result of the
1995 termination of a steam supply contract. These factors may adversely
affect the Company's district heating and cooling operations' ability to
maintain steam, hot and chilled water rates at current levels.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
3 (ii) Bylaws of the Company, as amended
10 (lxxxvii) Irrevocable Standby Letter of Credit by and between
Energy Networks, Inc. and The Bank of Nova Scotia, dated
March 20, 1996
27 Financial Data Schedule
99 (i) Exhibit Index
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONNECTICUT NATURAL GAS CORPORATION
Date 04/30/96 By: S/ Andrew H. Johnson
-------------------- -----------------------------------
(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)
<PAGE>
Exhibit 99(i)
CONNECTICUT NATURAL GAS CORPORATION
Quarterly Report on Form 10-Q
Exhibit Index
Quarter Ended March 31, 1996
Document
Item Description Description
------------ ----------- ------------
99(i) Exhibit Index Ex-99.1
3(ii) Bylaws of the Company, as amended Ex-3.2
10(lxxxvii)Irrevocable Standby Letter of Ex-10.87
Credit by and between Energy
Networks, Inc. and the Bank of Nova
Scotia
27 Financial Data Schedule Ex-27
<PAGE>
BY-LAWS OF CONNECTICUT NATURAL GAS CORPORATION
Adopted August 31, 1968 and amended
October 28, 1968 and
November 29, 1973 and
June 26, 1978 and
November 29, 1988 and
October 22, 1991 and
January 28, 1992 and
April 27, 1993 and
September 27, 1994 and
February 27, 1996
ARTICLE I
---------
DIRECTORS
Sec. 1. The Board of Directors shall consist of not less
than ten and not more than sixteen persons who shall be
stockholders of the Company and who shall, except as provided in
section 5 of this Article 1, be elected by the stockholders by
ballot in the manner prescribed by law and according to the
provisions of the Charter of the Company pertaining to
classification of the Board of Directors.
Sec. 2. The directors of the Company shall be divided into
three classes: Class I, Class II, and Class III. Such classes
shall be as nearly equal in number as possible. At each annual
election held after the initial election of directors according
to classes, the directors chosen to succeed those whose terms<PAGE>
then expire shall be identified as being of the same class as the
directors they succeed and shall be elected for a term expiring
at the third succeeding annual meeting of stockholders or in each
case thereafter when their respective successors are elected and
have qualified or upon their earlier death, resignation or
removal. If the number of directorships is changed, any increase
or decrease in directors shall be apportioned among the classes
so as to maintain all classes as nearly equal in number as
possible. No decrease in the number of directorships shall
shorten the term of any director. Any director elected to fill a
vacancy not resulting from an increase in the number of
directorships shall have the same remaining term as that of his
predecessor. No qualification for the office of director shall
apply to any director in office at the time such qualification
was adopted or to any successor director elected by the directors
to fill the unexpired term of a director.
Sec. 3. A regular meeting of the Board of Directors shall
be held without notice other than this By-law, immediately after,
and at the same place as, each annual meeting of stockholders.
Additional regular meetings of the Board of Directors may be held
without notice at such time and such place as shall from time to
time be determined by the Board of Directors, provided, however,
that the Board of Directors shall meet at least quarterly.
Special meetings of the Board may be called at any time by the
-2-<PAGE>
Chairman or by the President, and also shall be called on the
written request of a majority of the Board addressed to the
Chairman or the President.
Notice of any special meeting shall be given to each
director at his business or residence in writing or by
telegram or by telephone communication. If mailed, such no-
tice shall be deemed adequately delivered when deposited in
the United States mails so addressed, with postage thereon
prepaid, at least five days before such meeting. If by tele-
gram, such notice shall be deemed adequately delivered when
the telegram is delivered to the telegraph company at least
twenty-four hours before such meeting. If by facsimile tran-
smission, such notice shall be transmitted at least twenty-
four hours before such meeting. If by telephone, the notice
shall be given at least twelve hours prior to the time set for
the meeting. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice of such meeting,
except for amendments to these By-laws as provided under
Section 1 of Article XI hereof. A meeting may be held at any
time without notice if all the directors are present or if
those not present waive notice of the meeting in writing,
either before or after such meeting.
-3-<PAGE>
Sec. 4. At any meeting of the Board of Directors, a
majority shall be a quorum for the transaction of business,
but any meeting may be adjourned from time to time by the vote
of the directors present.
Sec. 5. A vacancy in the Board of Directors caused by a
director's death, resignation, removal from office, or order
of a court, or caused by an increase in the number of
directorships within the range established by the Charter of
the Company may be filled for the applicable term by action of
the sole remaining director in office or at a meeting of the
Board of Directors by the concurring vote of a majority of the
remaining directors in office, though such remaining directors
are less than a quorum, though the number of directors at the
meeting is less than a quorum and though such majority is less
than a quorum.
Sec. 6. No director shall be removed except by the
affirmative vote of seventy-five percent (75%) or more of the
outstanding shares of capital stock of the Company entitled to
vote generally in the election of directors, considered as one
class for the purpose of the Charter article entitled
Classification of Board of Directors.
-4-<PAGE>
ARTICLE II
----------
INDEMNITY
Sec. 1. The Company shall indemnify each director of the
Company to the full extent allowed by the laws of the State of
Connecticut, as they may change from time to time.
ARTICLE III
-----------
OFFICERS
Sec. 1. The officers of the Company shall be a
President, a Secretary, a Treasurer and, at the discretion of
the Board of Directors, a Chairman and one or more Executive
Vice Presidents, Senior Vice Presidents, Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries, Assistant
Treasurers and such other officers as the Board of Directors
may deem advisable. The chief executive officer shall be a
director. One person may hold any two offices except that one
person shall not hold more than one of the following offices:
President, Secretary. All officers shall be elected or
appointed annually by the Board of Directors.
Sec. 2. The Board of Directors by a two-thirds vote of
their number shall have power to and may at any time remove
from office any of the officers elected or appointed by them.
-5-<PAGE>
Sec. 3. In case of death, removal or resignation of any
of the officers of the Company, the directors may supply the
vacancy thus created until the next election.
ARTICLE IV
----------
DUTIES OF THE CHAIRMAN AND PRESIDENT
Sec. 1. The Chairman, if such office shall be filled by
the Board of Directors, shall, when present, preside at all
meetings of the Board and of the stockholders. He shall be an
executive officer of the Company, shall be the representative
of the Board of Directors and, if the Board so determines,
shall be the chief executive officer of the Company, and,
while chief executive officer, his title shall be Chairman and
Chief Executive Officer. He shall perform such additional
duties as may be assigned to him from time to time by the
Board.
Sec. 2. The President shall be an executive officer of
the Company and, if the Board of Directors so determines or
does not fill the office of Chairman, shall be the chief
executive officer of the Company. If the President be not the
chief executive officer of the Company, he shall perform such
duties as shall be assigned to him by the Chairman or by the
Board of Directors.
-6-<PAGE>
Sec. 3. The chief executive officer of the Company shall
have direct and active supervision and control of the business
and affairs of the Company.
ARTICLE V
---------
DUTIES OF THE VICE PRESIDENT
Sec. 1. The Executive Vice President, Senior Vice
Presidents, Vice Presidents, and Assistant Vice Presidents
shall perform such duties as may be assigned by the chief
executive officer of the Board of Directors.
ARTICLE VI
----------
DUTIES OF THE SECRETARY AND ASSISTANT SECRETARY
Sec. 1. The Secretary shall record all the votes of the
Company and the minutes of its transactions in a book to be
kept for that purpose. He shall under the direction of the
chief executive officer be present at all meetings of the
Board and keep a record of proceedings in a minute book. He
shall notify the stockholders of the annual and any special
meetings, and shall notify the members of the Board of
Directors of all regular and special meetings of the Board.
He shall have charge of the transfer of stock and the registry
-7-<PAGE>
of any bonds of the Company and shall keep records thereof in
such manner as the Board of Directors shall from time to time
direct. He shall perform all the duties that are customary
and incident to the office of Secretary in like companies.
Sec. 2. The Assistant Secretary shall perform the duties
of the Secretary in case of the absence or disability of the
Secretary, and shall at all times render such assistance as
the Secretary may require.
ARTICLE VII
-----------
DUTIES OF THE TREASURER AND ASSISTANT TREASURERS
Sec. 1. The Treasurer shall keep full and accurate
accounts of receipts and disbursements and shall deposit the
Company's funds in the name and to the credit of the Company
in such depositories as may be determined by the Board of
Directors. He shall disburse the funds of the Company as may
be ordered by the Board, taking proper vouchers for such
disbursements. He shall have charge of the money, notes,
bills and checks of the Company, and may accept and endorse
the same. He shall make such reports of the receipts and
disbursements in such form and detail and at such time as the
Board may direct.
Sec. 2. The Assistant Treasurer shall perform the duties
of the Treasurer in case of the absence or disability of the
-8-<PAGE>
Treasurer, and shall at all times render such assistance as
the Treasurer may require.
Sec. 3. Checks on funds of the Company, except in
payment of dividends, shall be signed by any one of the
following: the Chairman, the President, a Vice President
whose duties relate primarily to responsibility for the
financial aspects of the business of the Company, the
Treasurer, an Assistant Treasurer, the Controller and such
other person or persons as the Board of Directors may
determine from time to time.
ARTICLE VIII
------------
COMMITTEES
Sec. 1. There shall be an Executive Committee consisting
of such directors as may be chosen by the Board of Directors.
The Executive Committee shall have charge of all matters which
may be referred to it by the Board of Directors and generally
have oversight and authority with regard to all business of
the Company when the Board of Directors is not in session.
Sec. 2. There shall be an Audit Committee consisting of
such directors as may be chosen by the Board of Directors.
The Audit Committee shall recommend to the Board of Directors
a firm of independent public accountants to audit the books
-9-<PAGE>
and accounts of the Company. The Committee also shall review
the reports prepared by the independent public accountants and
recommend to the directors any actions deemed appropriate in
connection with the reports. The Committee shall have such
other powers and duties as the Board may designate.
Sec. 3. There shall be a Compensation Committee
consisting of such directors as may be chosen by the Board of
Directors. The Compensation Committee shall establish
salaries and benefits for all officers, subject to approval by
the directors. The Committee shall approve all organizational
matters pertaining to officers and employees and review all
Company compensation and benefit programs, subject also to
approval. The Committee shall have such other powers and
duties as the Board may designate.
Sec. 4. There shall be a Committee on Directors
consisting of such directors as may be chosen by the Board of
Directors. The Committee on Directors shall consider
candidates for vacancies among directors, including written
stockholder recommendations, and recommend nominees when the
need arises. The Committee also shall recommend assignments
of directors to the various committees of the Board of
Directors. The Committee shall have such other powers and
duties as the Board may designate.
-10-<PAGE>
Sec. 5. There shall be a Pension Committee consisting of
such directors as may be chosen by the Board of Directors.
The Pension Committee shall oversee the financial management
of all qualified and non-qualified plans of deferred
compensation, trusts relating to such plans, and similar
arrangements sponsored by the Company. The Committee shall
recommend contributions and amendments to such plans, and
shall have the authority to select, remove, review the
performance of, and allocate assets among managers, trustees,
insurance companies and other financial advisors as necessary
to fully discharge its duties. The Committee shall have such
other powers and duties as the Board may designate.
Sec. 6. The Board of Directors may from time to time
appoint such other committees with such powers as the Board
may determine.
Sec. 7. All committees shall report their actions and
recommendations to the Board of Directors at the next ensuing
meeting of the Board. A majority of each committee shall
constitute a quorum for the transaction of business. The
Board of Directors shall fix the remuneration of directors and
for membership on committees.
-11-<PAGE>
ARTICLE IX
---------
MEETING OF STOCKHOLDERS
Sec. 1. The annual meeting of the stockholders of the
Company for the election of directors and the transaction of
such other business as may properly come before the meeting
shall be held on such day and at such hour as shall be
determined by resolution of the Board of Directors.
A special meeting of the stockholders shall be called at
any time by the Chairman of the Board, by the Secretary in
conformity with the vote of the Board of Directors, on the
written request of a majority of the directors addressed to
the chief executive officer of the Company or by the president
on the written request of stockholders holding at least
thirty-five percent of the voting power of all shares entitled
to vote at the meeting.
Sec. 2. Written or printed notice, stating the place,
day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be prepared and delivered
by the Company not less than ten days nor more than fifty days
before the date of the meeting, either personally, or by mail,
to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail with
-12-<PAGE>
postage thereon prepaid, addressed to the stockholder at his
address as it appears on the stock transfer books of the
Company. Such further notice shall be given as may be re-
quired by law. Meetings may be held without notice if all
stockholders entitled to vote are present, or if notice is
waived by those not present. Any previously scheduled meeting
of the stockholders may be postponed by resolution of the
Board of Directors upon public notice given prior to the time
previously scheduled for such meeting of stockholders.
Sec. 3. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the
voting power of the outstanding shares of the Company entitled
to vote generally in the election of directors (the "Voting
Stock"), represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series
voting as a class, the holders of a majority of the shares of
such class or series shall constitute a quorum for the
transaction of such business. The chairman of the meeting or
the holders of a majority of the voting power of the shares of
Voting Stock so represented may adjourn the meeting from time
to time, whether or not there is such a quorum (or in the case
of specified business to be voted on by a class or series, the
chairman or, the holders of a majority of the shares of such
class or series so represented may adjourn the meeting with
-13-<PAGE>
respect to such specified business). No notice of the time and
place of adjourned meetings need be given except as required
by law. The stockholders present at a duly organized meeting
may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Sec. 4. Stockholders may vote at any meeting either in
person or by proxy, but all proxies shall be in writing.
Partnerships may sign the firm name and the signature of any
general partner thereof shall be sufficient. Corporations may
execute their proxies by the signature of the President,
attested by that of the Secretary and the corporate seal of
the corporation.
Sec. 5. (A) Annual Meetings of Stockholders. (1)
Nominations of persons for election to the Board of Directors
of the Company and the proposal of business to be considered
by the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the Company's notice of meeting
delivered pursuant to Section 2 of Article IX of these
By-laws, (b) by or at the direction of the Chairman or the
Board of Directors or (c) by any stockholder of the Company
who is entitled to vote at the meeting, who complied with the
notice procedures set forth in clauses (2) and (3) of this
paragraph (A) and this By-law and who was a stockholder of
-14-<PAGE>
record at the time such notice is delivered to the Secretary
of the Company.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(l) of this By-law, the stockholder
must have given timely notice thereof in writing to the
Secretary of the Company. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal
executive offices of the Company not less than seventy days
nor more than ninety days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that
in the event that the date of the annual meeting is advanced
by more than twenty days, or delayed by more than seventy
days, from such anniversary date, notice by the stockholder to
be timely must be so delivered not earlier than the ninetieth
day prior to such annual meeting and not later than the close
of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election
or reelection as a director all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities
-15-<PAGE>
Exchange Act of 1934, as amended (the "Exchange Act"),
including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if
elected; (b) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of
the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder,
as they appear on the Company's books, and of such beneficial
owner and (ii) the class and number of shares of the Company
which are owned beneficially and of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence
of paragraph (A)(2) of this By-law to the contrary, in the
event that the number of directors to be elected to the Board
of Directors of the Company is increased and there is no
public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made
by the Company at least seventy days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-law shall also be
-16-<PAGE>
considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be deliv-
ered to the Secretary at the principal executive offices of
the Company not later than the close of business on the tenth
day following the day on which such public announcement is
first made by the Company.
(B) Special Meetings of Stockholders. Only such
business shall be conducted at a special meeting of stock-
holders as shall have been brought before the meeting pursuant
to the Company's notice of meeting pursuant to Section 2 of
Article IX of these By-laws (including any such notice upon
the request of the holders of thirty-five percent of the
voting power of the shares entitled to vote at the meeting).
Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the notice of meeting
(a) by or at the direction of the Board of Directors or (b) by
any stockholder of the Company who is entitled to vote at the
meeting, who complies with the notice procedures set forth in
this By-law and who is a stockholder of record at the time
such notice is delivered to the Secretary of the Company.
Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by
paragraph (A)(2) of this By-law shall be delivered to the
-17-<PAGE>
Secretary at the principal executive offices of the Company
not earlier than the ninetieth day prior to such special
meeting and not later than the close of business on the later
of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is
first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at
such meeting.
(C) General. (1) Only persons who are nominated in
accordance with the procedures set forth in this By-law shall
be eligible to serve as directors and only such business shall
be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures
set forth in this By-law. Except as otherwise provided by
law, the Certificate of Incorporation or these By-laws, the
chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the
procedures set forth in this By-law and, if any proposed
nomination or business is not in compliance with this By-law,
to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this By-law, "public announce-
ment" shall mean disclosure in a press release reported by the
-18-<PAGE>
Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the
Company with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
By-law, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this
By-law. Nothing in this By-law shall be deemed to affect any
rights of stockholders to request inclusion of proposals in
the Company's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Sec. 6. The Chairman of the meeting shall fix and
announce at the meeting the date and time of the opening and
the closing of the polls for each matter upon which the
stockholders will vote at a meeting.
ARTICLE X
---------
CERTIFICATES OF STOCK
---------------------
Sec. 1. Certificates of stock shall be issued to the
stockholders and transfer of them made by the Secretary when
-19-<PAGE>
required. The certificates shall be signed by the Chairman,
the President or Vice President and by the Secretary or
Assistant Secretary, the signatures of whom may be facsimiles,
countersigned by the transfer agent, and sealed with the
common seal of the Company or a facsimile thereof. A transfer
agent and a registrar of the stock may be appointed by the
Board of Directors. Transfers of stock shall be made upon the
books of the Company by the stockholder in person or by
attorney duly authorized upon surrender of the certificates.
Sec. 2. The Board of Directors may close the transfer
books in its discretion for a period not exceeding ten days
preceding any meeting of the stockholders or preceding the day
appointed for the payment of a dividend and the Board may in
its discretion fix a record date for the determination of
stockholders entitled to a vote at any meeting or to receive
the payment of a dividend.
ARTICLE XI
-----------
AMENDMENTS TO THE BY-LAWS
Sec. 1. Amendments to the By-laws may be made at any
special or stated meeting of the Board of Directors by vote or
consent of at least two-thirds of the entire number of
directors, provided that no amendment shall be made unless the
-20-<PAGE>
notice of the meeting shall specify the amendment as the
purpose or one of the purposes of the meeting.
Sec. 2. Amendments to the By-laws may be made at any
annual or special meeting of the stockholders by vote of the
holders of at least two-thirds of the voting power of shares
entitled to vote thereon, provided that no amendment shall be
made unless the notice of the meeting shall specify the
amendment as the purpose or one of the purposes of the
meeting.
-21-<PAGE>
March 20, 1996
IRREVOCABLE STANDBY LETTER OF CREDIT NO. S002/82875/96
-------------------------------------------------------
State Street Bank and Trust Company,
as Trustee
Two International Place, 4th Floor
Boston, MA 02110
Attn: Corporate Trust Department
Dear Sirs:
At the request and on the instructions of our customer Energy Networks,
Inc. (the Company ), we hereby establish this Irrevocable Standby Letter
of Credit (this Letter of Credit ) in your favor, as Trustee under the
Indenture of Trust, dated as of December 1, 1986, as amended and
supplemented by the First Supplemental Indenture, dated as March 1, 1988 (as
so amended and supplemented, the Indenture ), between the Connecticut
Development Authority (the Authority ) and you, pursuant to which Sixteen
Million Three Hundred Thousand Dollars ($16,300,000) in aggregate principal
amount of the Authority s Industrial Revenue Variable Rate Demand Bonds
(Capitol District Energy Center Project - 1986 Series) and the Authority s
Industrial Revenue Variable Rate Demand Bonds (Capitol District Energy
Center Project - 1988 Series) (collectively, the Bonds ) have been issued.
Upon the terms and conditions hereinafter set forth, this Letter of Credit
authorizes you to draw on us an amount not exceeding Twelve Million Four-
hundred Thirty-one Thousand Five-hundred and Seven Dollars ($12,431,507)
(hereinafter, as reduced or reinstated from time to time in accordance with
the provisions hereof, the Stated Amount ), of which an amount not
exceeding Twelve Million One Hundred Thousand Dollars ($12,100,000) (as
reduced or reinstated from time to time in accordance with the terms hereof,
the Principal Component ) may be drawn with respect to payment of the
unpaid principal amount of, or the portion of the Purchase Price
corresponding to principal of, the Bonds, and of which an amount not
exceeding Three Hundred Thirty-One Thousand Five Hundred and Seven Dollars
($331,507) (as reduced or reinstated from time to time in accordance with
the terms hereof, the Interest Component ) may be drawn with respect to
payment of interest accrued on, or the portion of the Purchase Price
corresponding to interest accrued on, the Bonds on or prior to their stated
maturity date. This Letter of Credit shall be effective immediately and<PAGE>
-2-
shall expire (unless otherwise terminated or extended in accordance with the
provisions hereof) on the earlier to occur of (i) the making by you of the
final drawing available to be made hereunder, (ii) our receipt of a
certificate signed by an Authorized Officer stating that: (a) the
conditions precedent to the acceptance of an Alternative Credit Facility
have been satisfied, (b) the Trustee has accepted an Alternative Credit
Facility and (c) on the effective date of such Alternative Credit Facility,
and after receipt by The Bank of Nova Scotia of this certificate,
Irrevocable Standby Letter of Credit No. S0021/82875/96 shall terminate ;
(iii) our receipt of a certificate signed by an Authorized Officer stating
that no Bonds remain Outstanding; (iv) fifteen (15) days after the
Conversion Date; or (v) October 16, 1996, (the Expiry Date ); provided,
that on the Business Day immediately preceding the Expiry Date, such Expiry
Date shall be automatically extended to the next anniversary of such Expiry
Date (or, in the event such anniversary date is not a Business Day, the
Business Day immediately preceding such anniversary date) unless the Bank
notifies the Trustee in writing not less than one hundred eighty (180) days
prior to such Expiry Date of the Bank s intention not to extend such Expiry
Date.
Subject to the terms and conditions hereof, funds will be made
available to you under this Letter of Credit against receipt by us of the
following items by the time required below: (i) your sight draft or drafts
drawn on The Bank of Nova Scotia, Boston, Massachusetts; and (ii)(a) if the
drawing is being made with respect to payment of the portion of the Purchase
Price corresponding to principal of the Bonds (an A Drawing ), receipt by
us of your written certificate in the form of Exhibit A attached hereto
appropriately completed and signed by an Authorized Officer, (b) if the
drawing is being made with respect to principal of the Bonds other than as a
portion of the Purchase Price of the Bonds (a B Drawing ), receipt by us of
your written certificate in the form of Exhibit B attached hereto
appropriately completed and signed by an Authorized Officer, and (c) if the
drawing is being made with respect to the payment of interest, or the
portion of Purchase Price corresponding to interest, on the Bonds (a C
Drawing ), receipt by us of your written certificate in the form of Exhibit
C attached hereto appropriately completed and signed by an Authorized
Officer. Presentation of such draft(s) and such certificate(s) shall be
made in person or by tested telex at our office located at 101 Federal
Street, Boston, Massachusetts.
If a drawing is made by you hereunder (i) after 11:00 a.m., Boston
time, but at or prior to 1:00 p.m., Boston time, on a Business Day, payment
out of our own funds shall be made to you or your designee of the amount
specified, in immediately available funds, not later than 10:00 a.m., Boston
time, on the next Business Day or (ii) after 1:00 p.m. Boston time, on a
Business Day but at or prior to 11:00 a.m. Boston time, on the next Business
Day, payment out of our own funds shall be made to you of the amount
specified, in immediately available funds, not later than 3:00 p.m., Boston
time, on such next Business Day; provided, however, that payment shall not
be made to you or your designee unless the drawing and the documents and
other items presented in connection therewith conform to the terms and
conditions hereof. If a demand for payment made by you hereunder does not,<PAGE>
-3-
in any instance, conform to the terms and conditions of this Letter of
Credit, we shall give you prompt notice that the demand for payment was not
effected in accordance with the terms and conditions of this Letter of
Credit, stating the reasons therefor and that we will upon your instructions
hold any documents at your disposal or return the same to you. Upon being
notified that the demand for payment was not effected in conformity with
this Letter of Credit, you may attempt to correct any such non-conforming
demand for payment to the extent that you are entitled to do so.
Demands for payment hereunder honored by us shall not, in the
aggregate, exceed the Stated Amount, as the Stated Amount may be reduced or
reinstated in accordance with the terms hereof. Demands for payment
hereunder honored by us with respect to A Drawings and B Drawings shall not,
in the aggregate, exceed the Principal Component, as the principal component
may be reduced or reinstated in accordance with the terms hereof. Demands
for payment hereunder honored by us with respect to C Drawings shall not, in
the aggregate, exceed the Interest Component, as the Interest Component may
be reduced or reinstated in accordance with the terms hereof.
Each A Drawing and each B Drawing honored by us hereunder shall reduce
the Principal Component by an amount equal to the amount of such drawing.
Each C Drawing honored by us hereunder shall reduce the Interest Component
by an amount equal to the amount of such drawing. Without duplication for
any reductions made pursuant to the immediately preceding two sentences,
upon the payment or redemption (or deemed payment or redemption) of any
Bonds, the Principal Component shall be reduced by the principal amount of
the Bonds so paid or redeemed (or deemed paid or redeemed) and the Interest
Component shall be reduced by an amount equal to interest on the principal
amount of the Bonds so paid or redeemed (or deemed paid or redeemed) for
fifty (50) days (computed at the rate of twenty percent (20%) per annum and
on the basis of a three hundred sixty-five (365) day or three hundred sixty-
six (366) day year, as applicable). Any reduction in the Principal
Component or the Interest Component pursuant to the immediately preceding
three sentences shall result in a corresponding reduction in the Stated
Amount.
Upon delivery by us to the Tender Agent, and release by us our security
interest in, any Pledged Bonds in accordance with the terms of the Pledge
Agreement, the Principal Component shall be reinstated automatically by an
amount equal to the principal amount of such Pledged Bonds. In addition,
(i) if you shall not have received within ten (10) Business Days after our
honoring of any C Drawing (other than a C Drawing in respect of interest due
on the principal amount of any payment or redemption of the Bonds), notice
from us that an Event of Default has occurred and is continuing under the
Letter of Credit and Reimbursement Agreement, dated as of October 14, 1994
(as amended or supplemented from time to time, the Letter of Credit
Agreement ), between the Company and us, the Interest Component shall be
reinstated automatically, as of the close of business on such tenth Business
Day (unless the Interest Component previously has been reinstated with
respect to such C Drawing), by the amount of such C Drawing and (ii) upon
the release by us of any Pledged Bonds, the Interest Component shall be
reinstated automatically by the amount of the C Drawing made to pay the<PAGE>
-4-
portion of the Purchase Price corresponding to interest on such Pledged
Bonds (unless the Interest Component previously has been reinstated with
respect to such C Drawing); provided, however, that in no event shall the
Interest Component be reinstated to an amount in excess of fifty (50) days
interest (computed at the rate of twenty percent (20%) per annum and on the
basis of a three hundred sixty-five (365) day or three hundred sixty-six
(366) day year, as applicable, notwithstanding the actual rate borne from
time to time by the Bonds) on the aggregate principal amount of the Bonds
Outstanding at the time of any such reinstatement.
Only you or your successor as Trustee may make a drawing under this
Letter of Credit. Upon the payment to you or to your account of the amount
demanded hereunder, we shall be fully discharged of our obligation under
this Letter of Credit with respect to such demand for payment and we shall
not thereafter be obligated to make any further payments under this Letter
of Credit in respect of such demand for payment to you or any other person
who may have made to you or makes to you a demand for payment of the
principal of, the Purchase Price of, or the interest on, any Bond. By
paying to you an amount demanded in accordance herewith, we make no
representation as to the correctness of the amount demanded.
No drawing will be honored hereunder with respect to any interest that
may accrue on the Bonds, or any principal or premium which may be payable
with respect to the Bonds, after the date of termination or expiration of
this Letter of Credit.
Communications with respect to this Letter of Credit shall be in
writing, be addressed to us at 101 Federal Street, Boston, Massachusetts,
02208, Attention: Mr. Stephen M. Johnson, and shall specifically refer to
this Letter of Credit by number.
This Letter of Credit may not be transferred or assigned, either in
whole or in part except to a successor trustee properly appointed and
qualified pursuant to the Indenture. We agree to issue a substitute letter
of credit to any such successor trustee (and to successively replace any
such substitute letter of credit) upon the return to us for cancellation of
the original of this Letter of Credit accompanied by a request which (i)
shall be in the form of Exhibit D attached hereto with the blanks
appropriately completed, (ii) shall be signed by an Authorized Officer,
(iii) shall refer to this Letter of Credit and (iv) shall state the name and
address of the successor trustee. Each substitute letter of credit will be
in substantially the form of this Letter of Credit except for the date and
letter of credit number.
As used herein the term "Authorized-Officer" shall mean any officer in
your Corporate Trust Department at 2 International Place, Boston,
Massachusetts. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed thereto in the Indenture.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited
by reference to any document, instrument or agreement referred to herein<PAGE>
-5-
(including without limitation, the Bonds), except only the certificate(s)
referred to herein, and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement except
for such certificate(s).
This Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits, 1993 Revision, ICC Publication No. 500 (the
"Uniform Customs"). This Letter of Credit shall be deemed to be a contract
made under the laws of The Commonwealth of Massachusetts and shall, as to
matters not governed by the Uniform Customs, be governed by and construed in
accordance with the internal laws of said Commonwealth.
Very truly yours,
THE BANK OF NOVA SCOTIA
By: _____________________________
T.M. Pitcher
Title: Vice President
-----------------------------
By: _____________________________
G.A. Yong
Title: Sr. Assistant Manager
----------------------------
<PAGE>
EXHIBIT A
---------
CERTIFICATE FOR A DRAWING
[Date]
The Bank of Nova Scotia
101 Federal Street
Boston, MA 02208
Attention: [ ]
Re: Irrevocable Letter of Credit No.[ ]
--------------------------------------------
Gentlemen:
The undersigned, a duly Authorized Officer of State Street Bank and
Trust Company (The "Trustee"), hereby certifies to The Bank of Nova Scotia
(the "Bank") that:
(1) The Trustee is the Trustee under the Indenture for the
holders of the Bonds.
(2) The principal amount of the Bonds Outstanding (as defined in
the Indenture) on the date of this Certificate (before giving
effect to the payments contemplated hereby) is $___________.
(3) The Trustee is making a drawing under the above-referenced
Letter of Credit in the amount of $__________ with respect to
the payment of the portion of the Purchase Price of the Bonds
corresponding to the principal amount thereof, which Bonds
are required to be [or were required to be] purchased [by the
Tender Agent] [by the Paying Agent] pursuant to the
Indenture.
(4) The amount demanded hereby does not exceed the amount
available on the date hereof to be drawn (after giving effect
to any contemporaneous drawings) under the above-referenced
Letter of Credit in respect of the Principal Component or the
Stated Amount. The amount demanded hereby was computed in
accordance with the terms and conditions of the Bonds.
(5) The amount demanded hereby does not include any amount in
respect of the purchase of any Pledged Bonds or any Bonds
held by Energy Networks, Inc.
(6) Upon receipt by the undersigned of the amount demanded
hereby, (i) the undersigned will apply the same directly to<PAGE>
-3-
the payment when due of the principal amount owing on account
of the purchase of Bonds pursuant to the Indenture [or
reimbursement of the Tender Agent for amounts advanced by it
with respect to such payment, which amounts the Tender Agent
has certified it has not been reimbursed for], (ii) no
portion of said amount shall be applied by the undersigned
for any other purpose and (iii) no portion of said amount
shall be commingled with other funds held by the undersigned.
(7) The Letter of Credit has not been terminated prior to the
time of delivery of this Certificate. The drawing demanded
hereby is authorized by the Indenture and the Bonds, and all
conditions to the drawing demanded hereby under the Indenture
and the Bonds have been satisfied.
As used herein the terms "Authorized Officer", "Bonds", "Indenture",
"Pledged Bonds", "Principal Component", "Purchase Price" and "Stated Amount"
shall have the respective meanings assigned to such terms in the above-
referenced Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ___ day of ___, 19_.
_____________________________,
as Trustee
By___________________________
Title:
<PAGE>
EXHIBIT B
---------
CERTIFICATE FOR B DRAWING
March 15, 1996
The Bank of Nova Scotia
101 Federal Street
Boston, MA 02208
Attention:
Re: Irrevocable Letter of Credit No.
---------------------------------------------
Gentlemen:
The undersigned, a duly Authorized Officer of State Street Bank and
Trust Company (The "Trustee"), hereby certifies to The Bank of Nova Scotia
(the "Bank") that:
(1) The Trustee is the Trustee under the Indenture for the
holders of the Bonds.
(2) The principal amount of the Bonds Outstanding (as defined in
the Indenture) on the date of this Certificate (before giving
effect to the payments contemplated hereby) is $___________.
(3) The Trustee is making a drawing under the above-referenced
Letter of Credit in the amount of $__________ with respect to
the payment of principal of the Bonds, which amount has, or
will, within five (5) business days, become due and payable
pursuant to the Indenture, upon stated maturity or as a
result of acceleration or redemption of the Bonds.
(4) The amount demanded hereby does not include any amount in
respect of the principal amount of any Pledged Bonds or any
Bonds held by Energy Networks, Inc.
(5) The amount demanded hereby does not exceed the amount
available on the date hereof to be drawn (after giving effect
to any contemporaneous drawings) under the above-referenced
Letter of Credit in respect of the Principal Component or the
Stated Amount. The amount demanded hereby was computed in
accordance with the terms and conditions of the Bonds.
<PAGE>
-3-
(6) Upon receipt by the undersigned of the amount demanded hereby
(i) the undersigned will apply the same directly to the
payment when due of the principal amount owing on account of
the Bonds pursuant to the Indenture, (ii) no portion of said
amount shall be applied by the undersigned for any other
purpose and (iii) no portion of said amount shall be
commingled with other funds held by the undersigned.
(7) The Letter of Credit has not been terminated prior to the
time of delivery of this Certificate. The drawing demanded
hereby is authorized by the Indenture and the Bonds, and all
conditions to the drawing demanded hereby under the Indenture
and the Bonds have been satisfied.
As used herein, the terms "Authorized Officer", "Bonds", "Indenture",
"Business Day", "Pledged Bonds", "Principal Component", and "Stated Amount"
shall have the respective meanings assigned to such terms in the above-
referenced Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ___ day of ___, 19_.
_____________________________,
as Trustee
By___________________________
Title:
<PAGE>
EXHIBIT C
---------
CERTIFICATE FOR C DRAWING
March 15, 1996
The Bank of Nova Scotia
101 Federal Street
Boston, MA 02208
Attention:
Re: Irrevocable Letter of Credit No.
-------------------------------------------
Gentlemen:
The undersigned, a duly Authorized Officer of State Street Bank and
Trust Company (The "Trustee"), hereby certifies to The Bank of Nova Scotia
(the "Bank") that:
(1) The Trustee is the Trustee under the Indenture for the
holders of the Bonds.
(2) The principal amount of the Bonds Outstanding(as defined in
the Indenture) on the date of this Certificate is
$________________.
(3) The Trustee is making a drawing under the above-referenced
Letter of Credit in the amount of $___________ with respect
to the payment of [the portion of the Purchase Price of
$__________ in principal amount of the Bonds corresponding to
the accrued interest thereon, which Bonds are required to be
[or were required to be] purchased [by the Tender Agent] [by
the Paying Agent] pursuant to the Indenture] [accrued
interest on the Bonds which amount has, or will, within five
(5) Business Days, become due and payable pursuant to the
Indenture].
(4) The amount demanded hereby does not exceed the amount
available on the date hereof to be drawn (after giving effect
to any contemporaneous drawing) under the above-referenced
Letter of Credit in respect of the Interest Component or the
Stated Amount. The amount demanded hereby was computed in
accordance with the terms and conditions of the Bonds.
(5) The amount demanded hereby does not include any amount in
respect of the interest on any Pledged Bonds or any Bonds
held by Energy Networks, Inc.<PAGE>
-3-
(6) Upon receipt by the undersigned of the amount demanded
hereby, (i) the undersigned will apply the same directly to
the payment when due of the [portion of the Purchase Price of
Bonds corresponding to accrued interest thereon pursuant to
the Indenture] [interest owing on account of the Bonds
pursuant to the Indenture], (ii) no portion of said amount
shall be applied by the undersigned for any other purpose and
(iii) no portion of said amount shall be commingled with
other funds held by the undersigned.
(7) The Letter of Credit has not been terminated prior to the
time of delivery of this Certificate. The drawing demanded
hereby is authorized by the Indenture and the Bonds, and all
conditions to the drawing demanded hereby under the Indenture
and the Bonds have been satisfied.
As used herein, the terms "Authorized Officer", "Bonds", "Business
Day", "Indenture", Interest Component", "Pledged Bonds", "Purchase Price",
and "Stated Amount" shall have the respective meanings assigned to such
terms in the above-referenced Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ___ day of ___, 19_.
_____________________________,
as Trustee
By___________________________
Title:
<PAGE>
EXHIBIT D
---------
INSTRUCTION TO ISSUE SUBSTITUTE LETTER OF CREDIT
------------------------------------------------
March 15, 1996
The Bank of Nova Scotia
101 Federal Street
Boston, MA 02208
Attention:
Re: Irrevocable Letter of Credit No.
--------------------------------------------
Gentlemen:
Reference is made to (i) the above-referenced letter of credit (the
"Old Letter of Credit" and (ii) the Indenture of Trust, dated as of December
1, 1986, as amended and supplemented by the First Supplemental Indenture,
dated as of March 1, 1988 (as so amended and supplemented, the "Indenture"),
from the Connecticut Development Authority to us.
[Name and address of successor trustee] (the "Successor Trustee") has
been appointed successor trustee under the Indenture. You are hereby
requested to issue in accordance with the terms of the Old Letter of Credit,
a new letter of credit to the Successor Trustee having the same terms and
providing for the same Stated Amount (as defined in the Old Letter of
Credit) as the Old Letter of Credit.
We submit herewith for cancellation the original of the Old Letter of
Credit.
The individual signing below on our behalf hereby represents that he or
she is duly authorized to so sign on our behalf.
_____________________________,
as Trustee
By___________________________
Title:_______________________
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE
SHEETS, STATEMENTS OF
INCOME, STATEMENTS OF
CASHFLOWS AND STATEMENTS OF
CAPITALIZATION AND IS
QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 275,528
<OTHER-PROPERTY-AND-INVEST> 50,949
<TOTAL-CURRENT-ASSETS> 101,207
<TOTAL-DEFERRED-CHARGES> 72,717
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 500,401
<COMMON> 30,630
<CAPITAL-SURPLUS-PAID-IN> 74,018
<RETAINED-EARNINGS> 60,204
<TOTAL-COMMON-STOCKHOLDERS-EQ> 164,852
0
902
<LONG-TERM-DEBT-NET> 149,372
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,923
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 181,352
<TOT-CAPITALIZATION-AND-LIAB> 500,401
<GROSS-OPERATING-REVENUE> 221,068
<INCOME-TAX-EXPENSE> 19,699
<OTHER-OPERATING-EXPENSES> 172,769
<TOTAL-OPERATING-EXPENSES> 192,468
<OPERATING-INCOME-LOSS> 28,600
<OTHER-INCOME-NET> 293
<INCOME-BEFORE-INTEREST-EXPEN> 28,893
<TOTAL-INTEREST-EXPENSE> 6,831
<NET-INCOME> 22,062
31
<EARNINGS-AVAILABLE-FOR-COMM> 22,031
<COMMON-STOCK-DIVIDENDS> 7,349
<TOTAL-INTEREST-ON-BONDS> 1,597
<CASH-FLOW-OPERATIONS> 37,839
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
<PAGE>
</TABLE>
