UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 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 1-8369
CONNECTICUT ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Connecticut 06-0869582
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
855 Main Street
Bridgeport, Connecticut 06604
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(203) 579-1732
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock ($1 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing price of such stock as of November 22, 1996:
$192,735,190
Class Outstanding at November 22, 1996
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Common Stock, $1 par value 9,016,851
An index of exhibits to this Annual Report on Form 10-K begins on page 15
hereof.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. Portions of Connecticut Energy Corporation's 1996 Annual Report to
Shareholders are incorporated into Part II.
2. Portions of Connecticut Energy Corporation's Definitive Proxy Statement
dated December 13, 1996 are incorporated into Part III.
PART I
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CONNECTICUT ENERGY CORPORATION
------------------------------
Item 1. Business
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General
Connecticut Energy Corporation ("Company") is a public utility holding
company primarily engaged in the retail distribution of natural gas for
residential, commercial and industrial uses through its principal subsidiary,
The Southern Connecticut Gas Company ("Southern"), a Connecticut public service
company. Southern's predecessor companies, New Haven Gas Company and The
Bridgeport Gas Company, were originally incorporated in Connecticut in 1847 and
1849, respectively. The Company is exempt from registration under the Public
Utility Holding Company Act of 1935.
Southern serves approximately 156,000 customers in Connecticut, primarily
in twenty-two towns along the southern Connecticut coast from Westport to Old
Saybrook, which include the urban communities of Bridgeport and New Haven.
Southern is also authorized to lay mains and sell gas in an additional ten towns
in its service area, but does not currently provide any service to these towns.
The percentage of Southern's revenues contributed by each class of
customers for the last three fiscal years was as follows:
Years ended September 30, 1996 1995 1994
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Residential 58.0% 58.2% 60.6%
Commercial firm 21.4 20.5 21.1
Industrial firm 6.5 7.8 8.9
Interruptible and other 14.1 13.5 9.4
----- ----- -----
100.0% 100.0% 100.0%
Southern is the sole distributor of natural gas, other than bottled gas,
in its service area. Oil and electricity compete with gas in most industrial
and commercial markets and for residential space and water heating. In general,
Southern's firm rates are currently lower than electric rates for heating and,
on average, are generally competitive with fuel oil. Southern's gas sales are
affected by seasonal factors, and it experiences higher revenues during the
winter months.
In fiscal 1995, the Company formed two nonutility subsidiaries, CNE Energy
Services Group, Inc. ("CNE Energy") and CNE Development Corporation ("CNE
Development"). CNE Energy engages in activities relating to the selling,
planning, purchasing and management of various energy services to commercial and
industrial end users. CNE Development is an equity holder in an entity formed
to purchase and market natural gas and may potentially participate in other
nonregulated activities.
In October 1996, the Company formed a new nonutility subsidiary, CNE
Venture-Tech, Inc. ("CNE Venture-Tech"). CNE Venture-Tech is expected to
participate or invest in information technology ventures including, but not
limited to, providing related services. It is anticipated that CNE Venture-Tech
will enter into strategic alliances with other vendors in the information
technology business to provide services to utilities and other businesses.
As of September 30, 1996, the Company, through its subsidiaries, had 509
full-time employees, the majority of whom were employees of Southern.
Customers
General From 1992 through 1996, the average number of on-system customers
served by Southern grew from approximately 152,100 to 156,100. Southern
provides three types of gas service to its on-system customers--firm sales, firm
transportation and interruptible. Firm service is provided to residential,
commercial and industrial customers who require a continuous gas supply
throughout the year. Southern serves approximately 175,000 firm residential
units. Interruptible service is available to those commercial and industrial
customers and multi-family residential dwellings that have dual fuel
capabilities which allow them to alternate between natural gas and another fuel
source. Firm service for residential use includes service to multi-family
units. Firm transportation is available to commercial and industrial customers
who have secured their own gas supply and require that Southern transport this
supply on its distribution system. Southern also provides transportation
service to certain commercial and industrial customers on an interruptible
basis, where the gas transported is owned by those customers.
Additionally, Southern has the approval of the Connecticut Department of
Public Utility Control ("DPUC") to participate in the off-system sales market.
If gas supplies are available after meeting on-system loads, Southern sells to
customers within Connecticut or in out-of-state markets. The customers to whom
these sales are made are not permanent customers of Southern.
Firm Sales and Transportation In 1996, firm services represented
approximately 86% of operating revenues and approximately 55% of total gas
throughput. Firm sales to industrial customers are likely to constitute a
smaller percentage of Southern's future total sales due to the changing
character of the local economy and continuing regulatory developments
affecting the natural gas industry. See "Rates and Regulation" for further
detail.
Southern concentrates on customer additions that are the most cost-
effective to achieve. During the mid-1980s, when many residential family
developments were being constructed, Southern extended mains to those
developments, thereby adding groups of customers for heating as well as
appliance loads at a relatively low capital cost per customer. Over the past
several years, Southern has focused on adding load along its existing mains,
which generally requires a lower capital outlay. Approximately 50% of the
residences along Southern's mains heat with natural gas. The conversion of
these homes from an alternate fuel to natural gas heat has been a major factor
in increased load growth.
Interruptible Sales, Transportation and Special Contract Services
Interruptible sales and transportation services are priced flexibly and
competitively compared to the price paid for alternate fuels by larger
commercial and industrial customers. Southern's interruptible sales
fluctuate primarily due to the relative price differentials between alternate
fuels and natural gas as well as the availability of gas not needed to serve
firm customers.
In addition to interruptible sales, Southern transports gas, on an
interruptible basis, for delivery to certain large commercial and industrial
consumers. Because of recent regulatory developments, end users can contract
more easily than in the past for transportation service on interstate pipelines
to transport natural gas supplies purchased from producers/suppliers, rather
than purchase gas solely from the local gas distribution company ("LDC"). In
Southern's service area, gas is transported to customers using interstate
pipeline transportation and Southern's distribution system.
Interruptible transportation revenues are considerably less than revenues
from gas sales because customers pay only a fee for the transportation service.
Gas sales revenues include the cost of gas sold.
Southern provides service to The Connecticut Light and Power Company's
Devon generating station in accordance with rates specified in a Special
Contract for the Transportation of Gas ("Special Contract").
In 1996, interruptible sales, transportation and Special Contract services
represented approximately 13% of operating revenues and approximately 42% of
total gas throughput.
Southern's average margins on interruptible transportation service are
less than its average margins on firm sales and are usually less than
its average margins on interruptible sales. To the extent Southern
negotiates its monthly prices for interruptible services below its monthly
standard offering price, lower margins may result.
The Company does not believe that the loss of any single customer or a few
customers would have a long-term, material, adverse effect upon Southern's
business.
Marketing
General Southern focuses its marketing efforts on three objectives: (1) to
increase the number of households using natural gas for heating and hot water,
(2) to improve system load factor by promoting additional interruptible sales
and (3) to add new sales and retain existing sales to commercial and industrial
customers through the use of both traditional and interruptible applications for
natural gas.
Marketing programs emphasize growth from within the existing distribution
system and the addition of high load factor usage of natural gas such as water
heating, air conditioning and electric power generation.
Residential Market In the residential heating market, 1,866 customers were
added in 1996 compared to 2,366 customers in 1995 and 2,504 in 1994.
Residential conversions accounted for 52% of these additions in 1996 as compared
to 68% in 1995 and 61% in 1994. Southern's residential marketing programs
include (1) a conversion burner program, (2) a high-efficiency heating program,
(3) a trade ally program and (4) service contracts for natural gas heating
equipment. Southern also uses employee incentives to promote heating
conversions.
Commercial and Industrial Markets In the commercial and industrial markets,
emphasis is on adding new firm and interruptible sales while retaining existing
load. Marketing programs for commercial and industrial customers include (1) a
program to promote the use of high efficiency equipment, (2) a program offering
customers the option of financing new equipment through Southern, (3) a
conversion burner leasing program which provides customers with a low cost
opportunity to switch to natural gas and (4) a major customer retention
program.
Effective April 1, 1996, firm transportation service became available to
commercial and industrial customers. Thus far, some customers have opted for
the service, choosing to purchase their natural gas directly from marketers.
In these cases, Southern offers customers the opportunity to purchase additional
services such as balancing or stand-by services.
Sales to cooling and cogeneration markets represent the potential for
increasing natural gas usage. Advances in natural gas cooling technology, along
with environmental and operational advantages, continue to increase the
competitiveness of natural gas cooling in commercial buildings and for
industrial process applications. During 1996, Southern added 510 tons of
natural gas cooling. This represents almost 8,400 Mcf of new interruptible
load. Since 1991, Southern has added 9,912 tons of natural gas cooling.
Natural Gas Vehicles
Natural gas vehicles ("NGV") represent a significant opportunity to
increase the base load usage of natural gas. Southern has been actively
developing projects in this market, primarily to serve centrally-fueled fleets
with on-site fueling. Thus far, almost one hundred natural gas vehicles are in
use by customers in Southern's service area. These customers include the U.S.
Postal Service, The Southern New England Telephone Company, R. R. Donnelley and
Sons, South Central Regional Water Authority, Bridgeport Hydraulic Company and
the town of Westport, Connecticut.
During fiscal 1996, Southern's NGV marketing emphasis shifted to
developing NGV projects that serve multiple customers from a single site. This
approach improves the attractiveness of NGV projects for fleet customers and
potential station developers. Fleet owners can avoid constructing an on-site
NGV fueling station by purchasing fuel at an off-site facility. Station
developers can take advantage of economies of scale to improve profitability by
pooling volumes to serve multiple customers. Also, these stations can serve
customers phasing-in NGVs and small fleets.
CNE Development is in the preliminary stages of forming a joint venture
with Trillium-U.S.A., a unit of Westcoast Energy, to develop NGV service
oriented projects within and outside Southern's service area. The venture's
first proposed project is to construct an NGV fueling station on a site in
Stratford, Connecticut to initially serve Prime Time Shuttle ("Prime Time"), a
major airport shuttle service. A Memorandum of Understanding between CNE
Development, Trillium-U.S.A. and Prime Time establishes that Prime Time has
agreed to have up to 120 Dodge maxi-vans converted to use only compressed
natural gas as fuel and to purchase a minimum of 500,000 gasoline gallon
equivalents, or almost 61,000 Mcf of natural gas fuel, from the station during
its first five years of operation to fuel these vehicles. During years two
through five, minimum fuel usage is expected to rise to accomodate additional
stations near Danbury, Connecticut, and Bradley Airport as may be required as
Prime Time's operations expand. The initial station will also provide natural
gas fueling for other Stratford area fleets and for vehicles traveling through
the area on I-95.
Gas Supply
General Southern's long-term supply sources include (1) Canadian supplies
purchased from Alberta Northeast Gas Limited ("Alberta Northeast") with
transportation on Iroquois Gas Transmission System, L.P. ("Iroquois"), (2)
transportation and storage services from Tennessee Gas Pipeline Company
("Tennessee") with direct purchase of supply from producers and marketers, (3)
transportation and storage services from Texas Eastern Transmission Corporation
("Texas Eastern") with direct purchase of supply from producers and marketers,
(4) transportation services from Algonquin Gas Transmission Company
("Algonquin"), (5) transportation and storage services from CNG Transmission
Corporation ("CNG Transmission"), (6) transportation service from
Transcontinental Gas Pipeline Corporation ("Transco"), (7) transportation
service from National Fuel Gas Supply Corporation ("National Fuel") and
(8) liquid and vapor supplies from Distrigas of Massachusetts Corporation
("Distrigas"). These arrangements result in gas deliveries into Southern's
service territory through interconnections with three interstate pipelines:
Algonquin, Iroquois and Tennessee.
In addition to Southern's long-term firm supply arrangements, Southern
purchases spot supplies and utilizes interruptible transportation services from
interstate pipeline companies.
Southern's supply, transportation and storage agreements require Southern
to pay a fixed demand charge regardless of the amount of gas transported or
stored. The Federal Energy Regulatory Commission ("FERC") regulates interstate
pipeline companies in connection with the rates charged to Southern for
transportation and storage of natural gas.
Domestic Supply Southern's domestic supply arrangements consist mainly of
purchasing storage and transportation services from interstate pipelines.
Producers and marketers provide the gas supply to support these services.
Southern has firm transportation and firm storage contracts with
Tennessee. Under the transportation contract, Southern has 13,336,000 Mcf of
pipeline capacity available on an annual basis. Southern's storage contract
with Tennessee provides 1,195,000 Mcf of storage capacity. These contracts
expire in the year 2000. Two other transportation contracts with Tennessee
provide 516,000 Mcf of firm transportation service annually and expire in the
year 2000.
A transportation contract with Texas Eastern provides 5,972,000 Mcf of
capacity on an annual basis. Additional contracts with Texas Eastern provide
1,383,000 Mcf of storage service and 12,108,000 Mcf of transportation service on
an annual basis. Contracts with Texas Eastern expire in the year 2012.
Southern has storage service contracts with CNG Transmission. One
contract provides one hundred days of storage service with 648,000 Mcf of annual
delivery. The remaining term of this contract is sixteen years. Under other
contracts which have remaining terms of seven to eleven years, CNG Transmission
provides 773,000 Mcf of annual firm storage service and 1,028,000 Mcf of annual
transportation service. The gas is stored by CNG Transmission and delivered to
Southern under transportation contracts with Texas Eastern and Algonquin.
Algonquin furnishes only transportation services to Southern. The
deliveries which Algonquin makes to Southern are gas supplies transported by
other interstate pipelines interconnected to Algonquin.
Southern has multiple, diverse purchase agreements with producers and
marketers for firm supply behind its storage and transportation agreements.
These agreements vary in terms of delivery obligations and the contract terms
range from one month to five years. Southern pays a monthly reservation charge,
but has no monthly purchase obligation under these agreements. Commodity prices
are based on price indexes by supply area or are negotiated.
Canadian Supply Southern receives Canadian supply under its long-term
contracts with Alberta Northeast with firm transportation provided by Iroquois.
These supply contracts with Alberta Northeast provide Southern with 12,775,000
Mcf of firm Canadian supply annually. Supply agreements with Alberta Northeast
have remaining terms of six to ten years, and the transportation agreement with
Iroquois has a remaining term of fifteen years.
Supplemental Supply Southern has an agreement with Distrigas to purchase
328,000 Mcf annually on a firm basis. This contract continues for six years and
includes a provision for either vapor or liquid delivery, with an option to
increase maximum daily delivery over the term of the contract. Additionally,
Southern has interruptible purchase contracts with Distrigas.
Supplemental gas supplies from on-site liquefied natural gas ("LNG") and
liquefied propane air storage facilities are available to meet peak and winter
demand requirements. Southern is in the process of obtaining necessary
approvals to sublease its LNG facility. Under new agreements, Southern would be
able to purchase peaking supply without supporting the entire cost of the LNG
facility, positioning Southern to lower the cost of peaking supply. See section
entitled "Connecticut Regulation" for the Decision in Docket No. 96-04-30.
FERC Order No. 636
In FERC Order No. 636, the FERC took the latest step in its decade-long
restructuring of the natural gas industry, gradually withdrawing from direct
regulation of certain industry sectors in favor of a policy of "light-handed
regulation" when market forces make that possible.
Effective November 1, 1993, FERC Order No 636 mandated the unbundling of
interstate pipeline services, thereby fostering a competitive natural gas market
through equal and open access to pipeline transportation capacity by all
suppliers and users. Through the issuance of Order No. 636, FERC removed the
pipelines' competitive advantage of bundling sales of gas supplies with all
related transportation and storage services and required pipelines to sell
transportation and storage services separately.
FERC Order No. 636 resulted in costs being incurred by Southern's
interstate pipeline suppliers as they unbundled their services. FERC has
allowed transition costs to be recovered by pipelines from their customers.
Southern has recovered transition costs through the various recovery mechanisms
authorized by the DPUC in Docket No. 94-01-12. Included in the recovery are
Tennessee transition costs, which are still being litigated, subject to refund
of any overbilling at the time of a FERC decision or settlement.
Straight-fixed-variable ("SFV") rates are in effect on the pipelines
serving Southern as a result of FERC Order No. 636. Pipeline demand charges
increased under SFV rate design, while pipeline usage charges decreased. The
change in gas costs due to SFV rates were incorporated in Southern's base cost
of gas approved by the DPUC.
Although the initial implementation of FERC Order No. 636 increased gas
costs, the resultant market competition, increased throughput, capacity release
and recovery of transition costs have continued to decrease average gas costs.
On July 16, 1996, the U.S. Court of Appeals for the District of Columbia
("Court"), Circuit in UNITED DISTRIBUTION COMPANIES V. FERC, 88 F.3d 1105 (D.C.
Cir. 1996), upheld FERC Order No. 636, "in its broad contours and in most of its
specifics." The Court remanded a number of issues to FERC for further
explanation. No portion of FERC Order No. 636 was vacated as the Court awaits
FERC's response. Until the FERC takes final action on remand, FERC Order No.
636 will be left in place as currently formulated.
Post-FERC Order No. 636 Opportunities
Southern's off-system sales program maximizes the use of its gas supply
contracts, improves the usage of Southern's capacity on pipeline systems and
lowers gas costs to firm customers through established margin sharing
mechanisms. Pursuant to the DPUC Decision regarding FERC Order No. 636,
Southern is allowed to enter into off-system sales for periods of less than one
year without prior approval of the DPUC.
Capacity release programs are available on all interstate pipelines
serving Southern, and Southern actively participates in these programs. Demand
charges recovered from a replacement shipper flow back as a reduction on the
pipeline's monthly invoice. These demand reductions are used to lower gas costs
to firm customers through established margin sharing mechanisms approved by the
DPUC.
CNE Development has joined six other eastern U.S. natural gas
distribution companies or their affiliates to form the East Coast Natural Gas
Cooperative, L.L.C. to access competitively priced gas supplies. Southern has
experienced reduced gas costs as a result of the activities of this cooperative.
Rates and Regulation
Connecticut Regulation Southern is subject to the jurisdiction of the DPUC
as to accounting, rates, charges, operating matters and the issuance of
securities, both equity and debt, other than borrowings maturing in twelve
months or less. Southern's firm sales rates change monthly pursuant to a DPUC-
approved Purchased Gas Adjustment clause ("PGA"), under which purchased gas
costs above or below a specified base cost are charged or credited to customers.
In setting authorized rates for Southern, the DPUC allows prospective
adjustments to a historical test year. Forward-looking adjustments to the mid-
point of the rate year (the first year that rates will be in effect) for rate
base, revenues, expenses and capital structure are allowed. The DPUC has found
that these refinements provide for better synchronization of the ratemaking
components. Costs used by the DPUC in determining Southern's rates may not be
the same as actual costs incurred by Southern during the period rates are in
effect. The sales used in establishing rates are based on "normal" weather
patterns. Actual rates of return realized may not necessarily equal the
authorized rates of return.
On April 23, 1993, Southern filed an application with the DPUC for an
increase in rates designed to produce additional revenues of approximately
$27,900,000, or 13.67%, over test year revenues. Southern's base rates had not
been increased since April 1990.
On December 1, 1993, the DPUC issued a final Decision on Southern's latest
rate request. The Decision incorporated the Partial Settlement of Certain
Issues ("Partial Settlement") which was previously approved by the DPUC in
September 1993 and resolved most of the significant financial aspects of
Southern's original rate request, including an increase in base rates of
$13,400,000 based upon Southern's sales forecast as originally filed, an allowed
return on equity of 11.45% and the implementation of a Weather Normalization
Adjustment. In addition, Southern was permitted to recover previously deferred
costs over amortization periods from three to five years associated with
shortfalls in energy assistance, the certified hardship arrearage forgiveness
program, environmental remediation expenditures, economic development programs
and undepreciated gas holder costs.
The Partial Settlement also provided for current recovery of
postretirement health care expenses accrued under Statement of Financial
Accounting Standards No. 106 and the establishment of a target margin, net of
gross earnings tax, for on-system sales and transportation to Southern's
interruptible customers with excess margins shared between firm customers and
shareholders on an 80%/20% split.
As part of the Partial Settlement, Southern agreed that, except for
certain adverse events, it would not file a general application to increase
rates which would become effective on or before November 30, 1995.
In January 1996, Southern requested a reopening of the 1993 rate
proceeding to propose a plan to redirect excess on-system margins to be returned
to ratepayers for calendar years 1996, 1997 and 1998 to fund certain economic
development initiatives in Bridgeport ("BEDI") and to provide grants to
customers to reduce Southern's current hardship assistance balances ("HAB").
Southern estimated that margins to be earned over the proposed three-year period
would be approximately $14,000,000, which would be divided equally between BEDI
and HAB.
Southern's proposal related to the BEDI included job training and
services, certain loan subsidies and health promotion outreach services.
Redirection of ratepayer margins for HAB would benefit Southern's hardship
customers by reducing their accounts receivable arrearages and would benefit
Southern by reducing its provision for uncollectibles for such accounts.
On April 26, 1996, the DPUC issued a final Decision regarding Southern's
proposal. The DPUC effectively approved Southern's proposal with certain
modifications in the direction of BEDI funding initiatives, the imposition of a
cap of $6,000,000 per year of ratepayer margins to be split between BEDI and HAB
and certain implementation and status reporting requirements.
On August 2, 1995, the DPUC issued a final Decision in Docket No.
94-11-12, DPUC REVIEW OF CONNECTICUT LOCAL DISTRIBUTION COMPANIES' COST OF
SERVICE STUDY METHODOLOGIES. In this docket, the DPUC investigated the issues
surrounding the development of firm transportation rates at the state level in
response to FERC Order No. 636. Effective April 1, 1996, commercial and
industrial gas customers in Connecticut can contract for their gas supplies from
sources other than the LDCs and pay the LDCs only for the transportation of that
gas through their distribution systems at DPUC approved rates. The new firm
transportation rates are designed to provide Southern with the same margins
provided by bundled services.
On August 21, 1996, the DPUC issued a final Decision in Docket No.
96-04-30, APPLICATION OF THE SOUTHERN CONNECTICUT GAS COMPANY TO DISPOSE OF A
PORTION OF ITS PLANT AND EQUIPMENT. The DPUC approved certain proposals made by
Southern regarding the operation of its LNG tank and related facilities, which
include the sublease of the LNG tank and related facilities from Southern to its
nonregulated affiliate, CNE Energy, which would, in turn, sublease the LNG
facility to Total Peaking Services, L.L.C. ("TPS"). The members of TPS are CNE
Energy and PanEnergy Plus Milford Ventures Company, a wholly-owned subsidiary of
EnergyPlus Ventures Company which, in turn, is a wholly-owned subsidiary of
PanEnergy Corp.
Under an agreement with TPS, Southern will purchase peaking service at a
pre-established price structure for five years. After that, Southern will have
the right, but not the obligation, to continue purchasing peaking service from
TPS at the then prevailing market prices. This arrangement will give Southern
the benefit of available peaking service without the burden of supporting the
entire cost of the LNG facilities. TPS will assume responsibility for paying
the rent due under the LNG tank lease. Accordingly, Southern will benefit from
revenues received from TPS and from reductions to be realized in carrying costs,
depreciation expense, operations expense and gross earnings taxes.
Due to differences between the ratemaking recognition of such savings
compared to the additional demand charges from the peaking services agreement,
Southern provided a mitigation plan to delay including the demand charges in the
PGA mechanism to better match the rate treatment of the costs and benefits of
Southern's application.
While this transaction has been approved by the DPUC, it will also require
approval by the FERC. The transaction will not be effective unless all
necessary regulatory approvals are received on terms and conditions acceptable
to the parties.
Federal Regulation Southern is affected by various federal regulations,
including regulations which (1) provide for emergency authority and curtailment
allocations under the Natural Gas Policy Act of 1978 when pipeline supplies are
limited and (2) establish certain retail policies for natural gas utilities
under the Public Utility Regulatory Policies Act of 1978. Southern is also
subject to the Natural Gas Pipeline Safety Act of 1968 with respect to the
construction, operation and maintenance of its mains, services and LNG
facilities as well as other federal regulations pertaining to safety standards
concerning such facilities. Currently, these federal regulations have a minimal
impact on Southern's day-to-day operations. Southern must comply with various
federal, state and local regulation with respect to environmental matters
(including hazardous waste regulation), local zoning and other regulations. To
date, such regulations have not materially impacted Southern's capital
expenditures, earnings or operations.
Regulations promulgated under the Clean Air Act Amendments of 1990 and the
Energy Policy Act of 1992, which require reduced pollution levels and certain
energy efficiency standards, have begun to affect Southern. Among other things,
the Clean Air Act Amendments (1) impose stringent vehicle emissions standards
beginning in 1994, (2) mandate the gradual phase-in of alternative fuel vehicles
for fleets of more than ten vehicles beginning in 1998 and (3) require power
plants to phase-in significant emission reductions of sulfur dioxide and
nitrogen oxide by the year 2000. Similarly, the Energy Policy Act of 1992
(1) requires that federal agencies begin phasing-in the use of alternative fuels
in vehicles in 1993, (2) offers tax incentives to private parties who use or
facilitate the use of alternative fuel vehicles and (3) requires a lessening
reliance on foreign fuels. Over time, these regulations will likely lead to an
increasing demand for natural gas. Southern already has begun to participate in
the expanded markets for natural gas emerging due to these regulatory mandates.
Since 1986, FERC has effected major changes in the regulations governing
the natural gas industry, especially FERC Order No. 636. Although the Company
is not subject to FERC jurisdiction, FERC's actions increase competition in the
natural gas industry by requiring interstate pipeline companies to provide gas
transportation to others on a nondiscriminatory basis. This increased
competition may assist Southern, at least in the short-term, by replacing some
higher cost gas supplies with less costly supplies. Refer to the section
entitled "FERC Order No. 636" for further detail.
Environmental Matters
Southern has identified coal tar residue at three sites in Connecticut
resulting from coal gasification operations conducted at those sites by
Southern's predecessors from the late 1800s through the first part of this
century. Many gas distribution companies throughout the country carried on such
gas manufacturing operations during the same period. The coal tar residue is
not designated a hazardous material by any federal or Connecticut agency, but
some of its constituents are classified as hazardous.
On April 27, 1992, Southern notified the Connecticut Department of
Environmental Protection ("DEP") and the United States Environmental Protection
Agency of the presence of coal tar residue at the sites. On November 9, 1994,
the DEP informed Southern that it had performed a preliminary review of the
information provided to it by Southern and had determined that, based on current
priorities and limited staff resources, a comprehensive review of site
conditions and subsequent participation by the DEP "are not possible at this
time." Until the DEP conducts a comprehensive review, no discussions with it
addressing the extent, timing and type of remedial action, if any, can occur.
Given the DEP's response, management cannot at this time predict the costs
of any future site analysis and remediation, if any, nor can it estimate when
any such costs, if any, would be incurred. While such future analytical and
cleanup costs could possibly be significant, management believes, based upon the
provisions of the Partial Settlement in Southern's latest rate order, that
Southern will be able to recover these costs through its customer rates.
Although the method, timing and extent of any recovery remain uncertain,
management currently does not expect that the incurrence of such costs will
materially adversely impact the Company's financial condition or results of
operations.
Item 2. Properties
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The Company's physical plant and properties consist primarily of
Southern's gas distribution facilities. Southern had 2,099 miles of main and
121,679 service units as of September 30, 1996. It leases office space in
Bridgeport, New Haven, Orange and Madison, owns properties in Bridgeport and
New Haven that were formerly manufacturing sites and owns a propane air facility
in Trumbull.
In 1995, the LNG plant lease agreement was renewed for two consecutive
terms of twelve years. The lease contains an option to purchase the plant for
a purchase price based on the then fair market sales value of the unit as
defined therein.
Substantially all of Southern's utility properties and plant are subject
to the lien of the indenture and supplemental indentures securing its first
mortgage bonds. It is management's opinion that the physical plant and
properties as described herein are suitable and adequate for the purpose of
delivering gas for customer use.
Item 3. Legal Proceedings
- --------------------------
In a class action styled CONNECTICUT HEATING & COOLING CONTRACTORS
ASSOCIATION, INC. V. CONNECTICUT NATURAL GAS CORP., CONNECTICUT SUPERIOR COURT -
MIDDLESEX, two trade associations and two plumbing and heating contractors in
November 1995 sued Southern as well as the other Connecticut LDCs for violations
of the Connecticut Unfair Trade Practices Act and tortious interference with
business expectancies in connection with the LDCs provision of service and
maintenance to heating, cooling and ventilating systems and appliances. An
Amended Complaint was filed in response to motions filed by the defendants in
which one of the two contractor plaintiffs was removed from the case. The
plaintiffs seek declaratory and injunctive relief. The plaintiffs seek treble
damages in excess of $15,000, punitive damages and attorneys' fees. Southern
and one of the other defendants have filed a Motion to Strike the Complaint on
the grounds of misjoinder of causes of action. These motions are expected to be
argued and decided before the end of the year. Southern intends to vigorously
defend itself in this suit, which management believes is without merit. In the
opinion of management, resolution of this lawsuit is not expected to have a
material adverse impact on the Company's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
PART II
-------
Item 5. Market for Common Stock and Related Stockholder Matters
- ----------------------------------------------------------------
Common Stock Data
The Company's common stock is listed for trading on the New York Stock
Exchange. The Company's common stock symbol is CNE.
The following table shows the quarterly high and low price ranges of the
Company's common stock and quarterly dividends paid during the years ended
September 30, 1996 and 1995.
Market Price and Dividend Data
1996 Quarter ended High Low Dividend
- ------------------ ---- --- --------
December 31, 1995 $22 1/2 $19 $0.325
March 31, 1996 $22 1/4 $18 5/8 $0.325
June 30, 1996 $20 7/8 $18 7/8 $0.33
September 30, 1996 $20 3/8 $19 $0.33
1995 Quarter ended High Low Dividend
- ------------------ ---- --- --------
December 31, 1994 $22 $18 5/8 $0.325
March 31, 1995 $20 1/4 $18 1/2 $0.325
June 30, 1995 $20 5/8 $18 5/8 $0.325
September 30, 1995 $20 1/2 $18 7/8 $0.325
As of September 1996, the Company and its predecessors have paid 347
consecutive quarterly cash dividends. Cash dividends have been paid since 1850,
and the Company currently expects that dividends will continue to be paid in the
future.
The major source of funds for payment of the Company's dividends are the
dividends received on the shares of Southern's common stock owned by the
Company. Southern's indentures relating to long-term debt contain restrictions
as to the declaration or payment of cash dividends on, or the reacquisition of,
capital stock. Under the most restrictive of such provisions, $25,492,000 of
retained earnings at September 30, 1996 was available for such purposes.
The approximate number of shareholders of record of the Company's common
stock as of November 22, 1996 was 11,162.
Item 6. Selected Financial Data
- --------------------------------
The presentation under the "Eleven Year Financial Summary" for the five-
year period ended September 30, 1996 on pages 34 and 35 of the Company's 1996
Annual Report to Shareholders is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
- -------------------------
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 11 to 17 of the Company's 1996 Annual Report to
Shareholders is incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Consolidated Statements of Income, Consolidated Balance Sheets,
Consolidated Statements of Changes in Common Shareholders' Equity, Consolidated
Statements of Cash Flows and Notes to Consolidated Financial Statements on pages
18 to 31 and the Report of Independent Accountants on page 33 of the Company's
1996 Annual Report to Shareholders are incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information required in this item regarding directors is contained in the
Company's definitive Proxy Statement at pages 2 to 4, which will be mailed to
shareholders on or about December 13, 1996, and is incorporated by reference
herein. A list of executive officers of the registrant and Southern follows:
Executive Officers of Connecticut Energy Corporation
----------------------------------------------------
and
---
The Southern Connecticut Gas Company
------------------------------------
Position and
Business Experience for the
Name and Age Past 5 Years
- ------------ -----------------------------------------------
J. R. Crespo, 54 Chairman, President and Chief Executive Officer
of the Company and Southern (1990).
Thomas A. Trotta, 59 Senior Vice President of the Company and
Executive Vice President and Chief Operating
Officer of Southern (1996), Executive Vice
President and Chief Operating Officer of Southern
(1995), Senior Vice President and Chief Operating
Officer of Southern (1992), Senior Vice
President, Operations of Southern (1991).
Vincent L. Ammann, Jr., 37 Vice President and Chief Accounting Officer of
the Company (1996), Vice President and Chief
Accounting Officer of the Company and Group Vice
President of Southern (1994), Vice President and
Chief Accounting Officer of the Company and
Southern (1991).
Carol A. Forest, 48 Vice President, Finance, Chief Financial Officer
and Treasurer of the Company and Southern (1991).
Michael H. Pinto, 69 Vice President, Government Affairs of the Company
(1991), Director, Governmental Relations of
Southern (1990).
J. Richard Tiano, 52 Vice President, General Counsel and Secretary of
the Company and Southern (1988).
Salvatore A. Ardigliano, 47 Vice President, Marketing and Gas Supply Services
of Southern (1995), Vice President, Gas Supply
Services of Southern (1995), Group Director, Gas
Supply Services of Southern (1993), Director, Gas
Control of Southern (1992), Director, Marketing
and Energy Services of Southern (1991).
Frank L. Esposito, 64* Vice President, Human Resources of Southern
(1995), Vice President, Human Resources and
Corporate Services of Southern (1992), Vice
President, Human Resources of Southern (1991).
James P. Healy, 54 Vice President, Energy Services Planning of
Southern (1995), Vice President, Information
Technology of Southern (1992), Senior Vice
President, Corporate Development of Southern
(1986).
Ernest W. Karkut, 54 Vice President, Purchasing and Plant Services of
Southern (1994), Vice President, Customer
Relations (1993), Vice President, Customer
Support Services of Southern (1992), Assistant
Vice President, Customer Support Services of
Southern (1991), Assistant Vice President,
Financial Planning and Treasurer of Southern
(1991).
Peter D. Loomis, 48 Group Vice President, Customer and Operating
Services of Southern (1995), Vice President,
Distribution and Customer Service of Southern
(1992), Group Director, Customer Services (1991).
Phyllis A. O'Brien, 51 Group Vice President, Accounting, Regulatory and
Customer Relations of Southern (1996), Vice
President, Accounting and Regulatory Services of
Southern (1994), Vice President, Corporate and
Regulatory Planning of Southern (1993), Group
Director, Corporate Regulatory and Supply
Planning of Southern (1991), Group Director,
Planning, Rates and Regulatory Affairs of
Southern (1991).
Patricia A. Younger, 54 Vice President, Customer Relations of Southern
(1995), Group Director, Customer Relations of
Southern (1994), Director, Customer Information
and Collections of Southern (1994), Director,
Credit and Collections of Southern (1993),
Manager, Credit and Collections of Southern
(1986).
*Retired effective November 1, 1996.
Item 11. Executive Compensation
- --------------------------------
Information required in this Item is contained in the Company's definitive
Proxy Statement on pages 9 to 10, which will be mailed to shareholders on or
about December 13, 1996, and is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information required in this Item is contained in the Company's definitive
Proxy Statement on pages 4 to 5, which will be mailed to shareholders on or
about December 13, 1996, and is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information required in this Item is contained in the Company's definitive
Proxy Statement on page 11, which will be mailed to shareholders on or about
December 13, 1996, and is incorporated by reference herein.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) List of documents filed as part of this Report:
1. Financial Statements
--------------------
Among the responses to this Item 14(a) are the following financial
statements which are incorporated by reference herein in Item 8 above:
(i) Consolidated Statements of Income for the years ended September 30,
1996, 1995 and 1994.
(ii) Consolidated Balance Sheets for the years ended September 30, 1996
and 1995.
(iii) Consolidated Statements of Changes in Common Shareholders' Equity
for the years ended September 30, 1996, 1995 and 1994.
(iv) Consolidated Statements of Cash Flows for the years ended September
30, 1996, 1995 and 1994.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Accountants.
2. Financial Statements and Supplementary Data Required by Item 8
--------------------------------------------------------------
(A) Schedule Description Page
-------- ----------- ----
Report of Independent Accountants on
Financial Statement Schedules 20
II Valuation and Qualifying Accounts 21
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial statements
or notes thereto.
3. Exhibits Required by Item 601 of Securities and Exchange Commission
-------------------------------------------------------------------
Regulation S-K
--------------
(A) The following such exhibits are filed as a separate section of this
report.
Exhibits
--------
(3) Certificate of Incorporation and By-Laws
----------------------------------------
The Amended and Restated Certificate of Incorporation of Connecticut
Energy Corporation is incorporated herein by reference to Item 6 of the
Company's Form 10-Q filed for the quarter ended March 31, 1991 at pages 14
through 22. The Amended and Restated By-Laws of Connecticut Energy Corporation
are incorporated herein by reference to Item 6 of the Company's Form 10-Q filed
for the quarter ended March 31, 1995 at pages 20 through 31.
The Amended and Restated Certificate of Incorporation of The Southern
Connecticut Gas Company is incorporated herein by reference to Item 6 of Form
10-Q filed for the quarter ended June 30, 1990 at pages 40 through 51. The
Amended and Restated By-Laws of The Southern Connecticut Gas Company are
incorporated herein by reference to Item 6 of the Company's Form 10-Q filed for
the quarter ended March 31, 1995 at pages 32 through 41.
(4) Instruments Defining Rights of Security Holders, Including Indentures
---------------------------------------------------------------------
(i) Indenture between The Bridgeport Gas Light Company and The
Bridgeport City Trust Company, as Trustee, dated as of March 1, 1948.
Incorporated herein by reference in Exhibit 4(b) (1) to Registration Statement
2-10566.
(ii) In addition to the Indenture referred to in 4 (i) hereof,
there have been twenty-seven indentures supplemental thereto, copies of all of
which the Company agrees to furnish to the Commission upon request.
(10) Material Contracts
------------------
(i) Gas Transportation Contract between Tennessee Gas Pipeline
Company and The Southern Connecticut Gas Company, Contract No. 10783, dated June
1, 1995, is filed herewith at pages 24 to 32.
(ii) Interruptible Gas Transportation Contract and Amendment No.
1, thereto, among Tenngasco Corporation, The Southern Connecticut Gas Company
and The United Illuminating Company, dated May 14, 1987 and August 1, 1989,
respectively, incorporated by reference to Form 10-K for the fiscal year ended
December 31, 1989 at pages 238 to 258.
(iii) Amendment No. 2 to Interruptible Gas Transportation Contract
and Amendment No. 1, thereto, among Tenngasco Corporation, The Southern
Connecticut Gas Company and The United Illuminating Company, dated November 1,
1990, incorporated by reference to Form 10-K for the transition period from
January 1, 1990 to September 30, 1990 at pages 90 to 91.
(iv) Gas Transportation Contract between Iroquois Gas Transmission
System, L.P. and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.32 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(v) Gas Sales Agreement No. 1 by and between Alberta Northeast
Gas Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.33 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(vi) Gas Sales Agreement No. 2 by and between Alberta Northeast
Gas Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.34 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(vii) Gas Sales Agreement by and between Alberta Northeast Gas
Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.35 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(viii) Gas Sales Agreement by and between Alberta Northeast Gas
Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.36 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(ix) Gas Sales Agreement by and between Alberta Northeast Gas
Limited and The Southern Connecticut Gas Company, dated February 7, 1991,
incorporated by reference to Exhibit 10.37 to Connecticut Energy Corporation's
Registration Statement No. 33-40232.
(x) Storage Service Transportation Contract between Tennessee Gas
Pipeline Company and The Southern Connecticut Gas Company, Contract No. 542,
dated September 1, 1993, is filed herewith at pages 33 to 42.
(xi) Storage Service Agreement (GSS) between CNG Transmission
Corporation and The Southern Connecticut Gas Company, dated October 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 130 to 137.
(xii) Storage Service Agreement (GSS-TE) between CNG Transmission
Corporation and The Southern Connecticut Gas Company, dated October 1, 1993, is
filed herewith at pages 43 to 50.
(xiii) Storage Service Agreement (GSS-II) between CNG Transmission
Corporation and The Southern Connecticut Gas Company, dated September 1,
1993, is filed herewith at pages 51 to 56.
(xiv) Gas Storage Contract and Amendment No. 1, thereto, between
Tennessee Gas Pipeline Company and The Southern Connecticut Gas Company, dated
December 1, 1994, and July 1, 1995, respectively, are filed herewith at pages 57
to 63.
(xv) Gas Transportation Agreement between Tennessee Gas Pipeline
Company and The Southern Connecticut Gas Company, dated August 19, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 143 to 151.
(xvi) Gas Transportation Agreement between Tennessee Gas Pipeline
Company and The Southern Connecticut Gas Company, dated August 19, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 152 to 159.
(xvii) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 160 to 170.
(xviii) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 171 to 180.
(xix) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 181 to 192.
(xx) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 193 to 204.
(xxi) Service Agreement between Texas Eastern Transmission
Corporation and The Southern Connecticut Gas Company, dated June 1, 1993,
incorporated by reference to Form 10-K for the fiscal year ended September 30,
1993 at pages 214 to 220.
(xxii) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 221
to 227.
(xxiii) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 228
to 235.
(xxiv) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 236
to 243.
(xxv) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 244
to 251.
(xxvi) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated June 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 252
to 257.
(xxvii) Service Agreement between Algonquin Gas Transmission Company
and The Southern Connecticut Gas Company, dated October 1, 1993, incorporated by
reference to Form 10-K for the fiscal year ended September 30, 1993 at pages 258
to 277.
Executive Compensation Plans and Arrangements
---------------------------------------------
(xxviii) Employment Agreement between The Southern Connecticut Gas
Company and J. R. Crespo, dated March 24, 1992, incorporated by reference to
Form 10-K for the fiscal year ended September 30, 1992 at pages 213 to 229.
(xxix) Amended and Restated Deferred Compensation Agreement between
The Southern Connecticut Gas Company and Connecticut Energy Corporation and
J. R. Crespo, dated November 8, 1996, is filed herewith at pages 64 to 73.
(xxx) The Southern Connecticut Gas Company Board of Directors
Retirement Plan, dated October 1, 1992, is incorporated by reference to Form
10-K for the fiscal year ended September 30, 1994 at pages 27 to 30.
(xxxi) The Southern Connecticut Gas Company, Management Compensation
Plan, dated October 1, 1992, incorporated by reference to Form 10-K for the
fiscal year ended September 30, 1992 at pages 251 to 253.
(xxxii) Agreements between The Southern Connecticut Gas Company and
Philip R. Marsilius and Henry Chauncey, Jr. related to deferred compensation as
directors, dated December 27, 1988 and December 31, 1988, incorporated by
reference to Form 10-K for the fiscal year ended December 31, 1988 at pages 58
to 62 and pages 63 to 67.
(xxxiii) Supplemental Retirement Benefits Plan dated October 1, 1993,
incorporated by reference to Form 10-Q for the quarter ended December 31, 1993
at pages 25 to 28.
(xxxiv) Agreement between The Southern Connecticut Gas Company and
Helen B. Wasserman related to deferred compensation as a director, dated
December 31, 1994, incorporated by reference to Form 10-K for the fiscal year
ended September 30, 1995 at pages 25 to 29.
(xxxv) Agreement between The Southern Connecticut Gas Company and
Connecticut Energy Corporation and Carol A. Forest related to change in control,
dated October 1, 1996, is filed herewith at pages 74 to 83.
(xxxvi) Agreement between The Southern Connecticut Gas Company and
Connecticut Energy Corporation and J. Richard Tiano related to change in
control, dated October 1, 1996, is filed herewith at pages 84 to 93.
(xxxvii) Agreement between The Southern Connecticut Gas Company and
Connecticut Energy Corporation and Thomas A. Trotta related to change in
control, dated October 1, 1996, is filed herewith at pages 94 to 104.
(13) Annual Report to Security Holders
---------------------------------
The Company's 1996 Annual Report to Shareholders is filed herewith at
pages 105 to 150.
(21) Subsidiaries of the Registrant
------------------------------
A list of the Company's subsidiaries is filed herewith at page 151.
(27) Financial Data Schedule
-----------------------
Financial Data Schedule UT is submitted only in electronic format to the
Securities and Exchange Commission.
(B) No reports on Form 8-K were filed during the last quarter of 1996.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
of Connecticut Energy Corporation:
Our report on the consolidated financial statements of Connecticut Energy
Corporation has been incorporated by reference in this Form 10-K from page 33 of
the 1996 Annual Report to Shareholders of Connecticut Energy Corporation. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in Item 14(a)2 of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
New York, New York
October 31, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting part
of the Registration Statements on Form S-3 (No. 33-47684-3) and Form S-8 (No.
33-39245 and 33-51763) of Connecticut Energy Corporation of our report dated
October 31, 1996, on our audits of the consolidated financial statements and
financial statement schedule of Connecticut Energy Corporation as of
September 30, 1996 and 1995, and for the years ended September 30, 1996, 1995
and 1994, appearing on page 33 of the 1996 Annual Report to Shareholders of
Connecticut Energy Corporation which is incorporated by reference in this Annual
Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
New York, New York
December 6, 1996
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CONNECTICUT ENERGY CORPORATION
Years Ended September 30, 1996, 1995 and 1994
(in thousands)
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ----------------------- ------ ------
Additions
---------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
- ----------- ---------- ---------- ---------- ---------- ------
Allowance for
Doubtful Accounts
1996 (1) $3,553 $6,549 $1,826 (2) $9,186 (3) $2,742
1995 (1) $3,747 $6,548 $2,235 (2) $8,977 (3) $3,553
1994 (1) $4,251 $6,962 $1,482 (2) $8,948 (3) $3,747
Notes:
- -----
(1) Reserve deducted in the Consolidated Balance Sheet from the asset to which
it applies
(2) Recoveries on accounts previously charged off
(3) Accounts charged off as uncollectible
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) CONNECTICUT ENERGY CORPORATION
------------------------------
/s/ J. R. Crespo
- ----------------
by: J. R. Crespo, Chairman,
President and Chief Executive Officer
Dated: November 26, 1996
- -------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Henry Chauncey, Jr. /s/ Samuel M. Sugden
- ----------------------- --------------------
by: Henry Chauncey, Jr., Director by: Samuel M. Sugden, Director
Dated: November 26, 1996 Dated: November 26, 1996
/s/ James P. Comer /s/ Christopher D. Turner
- ------------------ -------------------------
by: James P. Comer, M.D., Director by: Christopher D. Turner, Director
Dated: November 26, 1996 Dated: November 22, 1996
/s/ J. R. Crespo /s/ Helen B. Wasserman
- ---------------- ----------------------
by: J. R. Crespo, Chairman, by: Helen B. Wasserman, Director
President and Chief Executive Officer Dated: November 26, 1996
Dated: November 26, 1996
/s/ Richard F. Freeman /s/ Vincent L. Ammann, Jr.
- ---------------------- --------------------------
by: Richard F. Freeman, Director by: Vincent L. Ammann, Jr.
Dated: November 26, 1996 Vice President and
Chief Accounting Officer,
(Principal Accounting Officer)
Dated: November 26, 1996
/s/ Richard M. Hoyt /s/ Carol A. Forest
- ------------------- -------------------
by: Richard M. Hoyt, Director by: Carol A. Forest, Vice President,
Dated: November 26, 1996 Finance, Chief Financial Officer and
Treasurer, (Principal Financial
Officer)
Dated: November 26, 1996
/s/ Paul H. Johnson /s/ J. Richard Tiano
- ------------------- --------------------
by: Paul H. Johnson, Director by: J. Richard Tiano, Vice President,
Dated: November 26, 1996 General Counsel and Secretary
Dated: November 26, 1996
/s/ Newman M. Marsilius, III
- ----------------------------
by: Newman M. Marsilius, III, Director
Dated: November 26, 1996
THIS AGREEMENT is made and entered into as of the 1st day of June,
1995, by and between TENNESSEE GAS PIPELINE COMPANY, a Delaware
Corporation, hereinafter referred to as "Transporter" and SOUTHERN
CONNECTICUT GAS CO THE, a CONNECTICUT Corporation, hereinafter
referred to as "Shipper." Transporter and Shipper shall
collectively be referred to herein as the "Parties."
ARTICLE I
DEFINITIONS
1.1 TRANSPORTATION QUANTITY (TQ) - shall mean the maximum daily
quantity of gas which Transporter agrees to receive and
transport on a firm basis, subject to Article II herein, for
the account of Shipper hereunder on each day during each
year during the term hereof, which shall be 1,025
dekatherms. Any limitations of the quantities to be
received from each Point of Receipt and/or delivered to each
Point of Delivery shall be as specified on Exhibit "A"
attached hereto.
1.2 EQUIVALENT QUANTITY - shall be as defined in Article I of
the General Terms and Conditions of Transporter's FERC Gas
Tariff.
ARTICLE II
TRANSPORTATION
Transportation Service - Transporter agrees to accept and receive
daily on a firm basis, at the Point(s) of Receipt from Shipper or
for Shipper's account such quantity of gas as Shipper makes
available up to the Transportation Quantity, and to deliver to or
for the account of Shipper to the Point(s) of Delivery an
Equivalent Quantity of gas.
ARTICLE III
POINT(S) OF RECEIPT AND DELIVERY
The Primary Point(s) of Receipt and Delivery shall be those points
specified on Exhibit "A" attached hereto.
ARTICLE IV
All facilities are in place to render the service provided for in
this Agreement.
ARTICLE V
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENT
For all gas received, transported and delivered hereunder the
Parties agree to the Quality Specifications and Standards for
Measurement as specified in the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1. To the extent that no
new measurement facilities are installed to provide service
hereunder, measurement operations will continue in the manner in
which they have previously been handled. In the event that such
facilities are not operated by Transporter or a downstream
pipeline, then responsibility for operations shall be deemed to be
Shipper's.
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 TRANSPORTATION RATES - Commencing upon the effective date
hereof, the rates, charges, and surcharges to be paid by
Shipper to Transporter for the transportation service
provided herein shall be in accordance with Transporter's
Rate Schedule FT-A and the General Terms and Conditions of
Transporter's FERC Gas Tariff.
6.2 INCIDENTAL CHARGES - Shipper agrees to reimburse Transporter
for any filing or similar fees, which have not been
previously paid for by Shipper, which Transporter incurs in
rendering service hereunder.
6.3 CHANGES IN RATES AND CHARGES - Shipper agrees that
Transporter shall have the unilateral right to file with the
appropriate regulatory authority and make effective changes
in (a) the rates and charges applicable to service pursuant
to Transporter's Rate Schedule FT-A, (b) the rate
schedule(s) pursuant to which service hereunder is rendered,
or (c) any provision of the General Terms and Conditions
applicable to those rate schedules. Transporter agrees that
Shipper may protest or contest the aforementioned filings,
or may seek authorization from duly constituted regulatory
authorities for such adjustment of Transporter's existing
FERC Gas Tariff as may be found necessary to assure
Transporter just and reasonable rates.
ARTICLE VII
BILLINGS AND PAYMENTS
Transporter shall bill and Shipper shall pay all rates and charges
in accordance with Articles V and VI, respectively, of the General
Terms and Conditions of Transporter's FERC Gas Tariff.
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
This Agreement shall be subject to the effective provisions of
Transporter's Rate Schedule FT-A and to the General Terms and
Conditions incorporated therein, as the same may be changed or
superseded from time to time in accordance with the rules and
regulations of the FERC.
ARTICLE IX
REGULATION
9.1 This Agreement shall be subject to all applicable and lawful
governmental statutes, orders, rules and regulations and is
contingent upon the receipt and continuation of all
necessary regulatory approvals or authorizations upon terms
acceptable to Transporter. This Agreement shall be void and
of no force and effect if any necessary regulatory approval
is not so obtained or continued. All Parties hereto shall
cooperate to obtain or continue all necessary approvals or
authorizations, but no Party shall be liable to any other
Party for failure to obtain or continue such approvals or
authorizations.
9.2 The transportation service described herein shall be
provided subject to Subpart G, Part 284, of the FERC
Regulations.
ARTICLE X
RESPONSIBILITY DURING TRANSPORTATION
Except as herein specified, the responsibility for gas during
transportation shall be as stated in the General Terms and
Conditions of Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE XI
WARRANTIES
11.1 In addition to the warranties set forth in Article IX of the
General Terms and Conditions of Transporter's FERC Gas
Tariff, Shipper warrants the following:
(a) Shipper warrants that all upstream and downstream
transportation arrangements are in place, or will be in
place as of the requested effective date of service, and
that it has advised the upstream and downstream
transporters of the receipt and delivery points under
this Agreement and any quantity limitations for each
point as specified on Exhibit "A" attached hereto.
Shipper agrees to indemnify and hold Transporter
harmless for refusal to transport gas hereunder in the
event any upstream or downstream transporter fails to
receive or deliver gas as contemplated by this
Agreement.
(b) Shipper agrees to indemnify and hold Transporter
harmless from all suits, actions, debts, accounts,
damages, costs, losses and expenses (including
reasonable attorneys fees) arising from or out of breach
of any warranty by Shipper herein.
11.2 Transporter shall not be obligated to provide or continue
service hereunder in the event of any breach of warranty.
ARTICLE XII
TERM
12.1 This Agreement shall be effective as of the 1st day of June,
1995, and shall remain in force and effect until the 31st
day of May, 2000,("Primary Term") and on a month to month
basis thereafter unless terminated by either Party upon at
least thirty (30) days prior written notice to the other
Party; provided, however, that if the Primary Term is one
year or more, then unless Shipper elects upon one year's
prior written notice to Transporter to request a lesser
extension term, the Agreement shall automatically extend
upon the expiration of the Primary Term for a term of five
years and shall automatically extend for successive five
year terms thereafter unless Shipper provides notice
described above in advance of the expiration of a succeeding
term; provided further, if the FERC or other governmental
body having jurisdiction over the service rendered pursuant
to this Agreement authorizes abandonment of such service,
this Agreement shall terminate on the abandonment date
permitted by the FERC or such other governmental body.
12.2 Any portions of this Agreement necessary to resolve or cash-
out imbalances under this Agreement as required by the
General Terms and Conditions of Transporter's FERC Gas
Tariff Volume No. 1, shall survive the other parts of this
Agreement until such time as such balancing has been
accomplished; provided, however, that Transporter notifies
Shipper of such imbalance no later than twelve months after
the termination of this Agreement.
12.3 This Agreement will terminate automatically upon written
notice from Transporter in the event Shipper fails to pay
all of the amount of any bill for service rendered by
Transporter hereunder in accord with the terms and
conditions of Article VI of the General Terms and Conditions
of Transporter's FERC Tariff.
ARTICLE XIII
NOTICE
Except as otherwise provided in the General Terms and Conditions
applicable to this Agreement, any notice under this Agreement shall
be in writing and mailed to the post office address of the Party
intended to receive the same, as follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Marketing
SHIPPER:
NOTICES: SOUTHERN CONNECTICUT GAS CO THE
855 MAIN STREET
BRIDGEPORT, CT 06604-4918
Attention: PAT ZYCHEK
BILLING: SOUTHERN CONNECTICUT GAS CO THE
855 MAIN STREET
BRIDGEPORT, CT 06604-4918
Attention: PAT ZYCHEK
or to such other address as either Party shall designate by formal
written notice to the other.
ARTICLE XIV
ASSIGNMENTS
14.1 Either Party may assign or pledge this Agreement and all
rights and obligations hereunder under the provisions of any
mortgage, deed of trust, indenture, or other instrument
which it has executed or may execute hereafter as security
for indebtedness. Either Party may, without relieving
itself of its obligation under this Agreement, assign any of
its rights hereunder to a company with which it is
affiliated. Otherwise, Shipper shall not assign this
Agreement or any of its rights hereunder, except in accord
with Article III, Section 11 of the General Terms and
Conditions of Transporter's FERC Gas Tariff.
14.2 Any person which shall succeed by purchase, merger, or
consolidation to the properties, substantially as an
entirety, of either Party hereto shall be entitled to the
rights and shall be subject to the obligations of its
predecessor in interest under this Agreement.
ARTICLE XV
MISCELLANEOUS
15.1 The interpretation and performance of this Agreement shall
be in accordance with and controlled by the laws of the
state of texas, without regard to the doctrines governing
choice of law.
15.2 If any provisions of this Agreement is declared null and
void, or voidable, by a court of competent jurisdiction,
then that provision will be considered severable at either
Party's option; and if the severability option is exercised,
the remaining provisions of the Agreement shall remain in
full force and effect.
15.3 Unless otherwise expressly provided in this Agreement or
Transporter's Gas Tariff, no modification of or supplement
to the terms and provisions stated in this agreement shall
be or become effective until Shipper has submitted a request
for change through the TENN-SPEED 2 System and Shipper has
been notified through TENN-SPEED 2 of Transporter's
agreement to such change.
15.4 Exhibit "A" attached hereto is incorporated herein by
reference and made a part hereof for all purposes.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be duly executed as of the date first hereinabove written.
TENNESSEE GAS PIPELINE COMPANY
BY:____________________________
Agent and Attorney-in-Fact
SOUTHERN CONNECTICUT GAS CO THE
BY:____________________________
TITLE: ________________________
DATE: _________________________
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
EXHIBIT "A"
AMENDMENT #0 TO GAS TRANSPORTATION AGREEMENT
DATED June 1, 1995
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
SOUTHERN CONNECTICUT GAS CO THE
SOUTHERN CONNECTICUT GAS CO THE
EFFECTIVE DATE OF AMENDMENT: June 1, 1995
RATE SCHEDULE: FT-A
SERVICE PACKAGE: 10783
SERVICE PACKAGE TQ: 1,025 Dth
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Meter Meter Name Interconnect Party Name County ST Zone R/D LEG Meter-TQ Billable-TQ
- ----- ---------- ----------------------- ------ -- ---- --- --- -------- -----------
020578 Penn-NFG-Andrews National Fuel Gas Supply Potter PA 04 R 300 1,025 1,025
Settlement SA Corp.
Total Receipt TQ: 1,025 1,025
020313 Southern-Trumbull, Conn. Southern Connecticut Gas Fairfield CT 06 D 300 1,025 1,025
Co.
NUMBER OF RECEIPT POINTS AFFECTED: 1
NUMBER OF DELIVERY POINTS AFFECTED: 1
Note: Exhibit "A" is a reflection of the contract and all amendments as of the amendment effective date.
</TABLE>
THIS AGREEMENT is made and entered into as of the 1st day of
September, 1993, by and between TENNESSEE GAS PIPELINE COMPANY, a
Delaware Corporation, hereinafter referred to as "Transporter" and
SOUTHERN CONNECTICUT GAS CO THE, a CONNECTICUT Corporation,
hereinafter referred to as "Shipper." Transporter and Shipper
shall collectively be referred to herein as the "Parties."
ARTICLE I
DEFINITIONS
1.1 TRANSPORTATION QUANTITY (TQ) - shall mean the maximum daily
quantity of gas which Transporter agrees to receive and
transport on a firm basis, subject to Article II herein, for
the account of Shipper hereunder on each day during each
year during the term hereof, which shall be 9,408 dekatherms
(Dth). Any limitations of the quantities to be received
from each Point of Receipt and/or delivered to each Point of
Delivery shall be as specified on Exhibit "A" attached
hereto.
1.2 EQUIVALENT QUANTITY - shall be as defined in Article I of
the General Terms and Conditions of Transporter's FERC Gas
Tariff.
ARTICLE II
TRANSPORTATION
Transportation Service - Transporter agrees to accept and receive
daily on a firm basis, at the Point(s) of Receipt from Shipper or
for Shipper's account such quantity of gas as Shipper makes
available up to the Transportation Quantity, and to deliver to or
for the account of Shipper to the Point(s) of Delivery an
Equivalent Quantity of gas.
ARTICLE III
POINT(S) OF RECEIPT AND DELIVERY
The Primary Point(s) of Receipt and Delivery shall be those points
specified on Exhibit "A" attached hereto.
ARTICLE IV
All facilities are in place to render the service provided for in
this Agreement.
ARTICLE V
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENT
For all gas received, transported and delivered hereunder the
Parties agree to the Quality Specifications and Standards for
Measurement as specified in the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1. To the extent that no
new measurement facilities are installed to provide service
hereunder, measurement operations will continue in the manner in
which they have previously been handled. In the event that such
facilities are not operated by Transporter then responsibility for
operations shall be deemed to be Shipper's.
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 TRANSPORTATION RATES - Commencing upon the date of
execution, the rates, charges, and surcharges to be paid by
Shipper to Transporter for the transportation service
provided herein shall be in accordance with Transporter's
Rate Schedule FT-A and the General Terms and Conditions of
Transporter's FERC Gas Tariff.
6.2 INCIDENTAL CHARGES - Shipper agrees to reimburse Transporter
for any filing or similar fees, which have not been
previously paid for by Shipper, which Transporter incurs in
rendering service hereunder.
6.3 CHANGES IN RATES AND CHARGES - Shipper agrees that
Transporter shall have the unilateral right to file with the
appropriate regulatory authority and make effective changes
in (a) the rates and charges applicable to service pursuant
to Transporter's Rate Schedule FT-A, (b) the rate
schedule(s) pursuant to which service hereunder is rendered,
or (c) any provision of the General Terms and Conditions
applicable to those rate schedules. Transporter agrees that
Shipper may protest or contest the aforementioned filings,
or may seek authorization from duly constituted regulatory
authorities for such adjustment of Transporter's existing
FERC Gas Tariff as may be found necessary to assure
Transporter just and reasonable rates.
ARTICLE VII
BILLINGS AND PAYMENTS
Transporter shall bill and Shipper shall pay all rates and charges
in accordance with Articles V and VI, respectively, of the General
Terms and Conditions of Transporter's FERC Gas Tariff.
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
This Agreement shall be subject to the effective provisions of
Transporter's Rate Schedule FT-A and to the General Terms and
Conditions incorporated therein, as the same may be changed or
superseded from time to time in accordance with the rules and
regulations of the FERC.
ARTICLE IX
REGULATION
9.1 This Agreement shall be subject to all applicable and lawful
governmental statutes, orders, rules and regulations and is
contingent upon the receipt and continuation of all
necessary regulatory approvals or authorizations upon terms
acceptable to Transporter. This Agreement shall be void and
of no force and effect if any necessary regulatory approval
is not so obtained or continued. All Parties hereto shall
cooperate to obtain or continue all necessary approvals or
authorizations, but no Party shall be liable to any other
Party for failure to obtain or continue such approvals or
authorizations.
9.2 The transportation service described herein shall be
provided subject to Part 284, Subpart G of the FERC
Regulations.
ARTICLE X
RESPONSIBILITY DURING TRANSPORTATION
Except as herein specified, the responsibility for gas during
transportation shall be as stated in the General Terms and
Conditions of Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE XI
WARRANTIES
11.1 In addition to the warranties set forth in Article IX of the
General Terms and Conditions of Transporter's FERC Gas
Tariff, Shipper warrants the following:
(a) Shipper warrants that all upstream and downstream
transportation arrangements are in place, or will be in
place as of the requested effective date of service, and
that it has advised the upstream and downstream
transporters of the receipt and delivery points under
this Agreement and any quantity limitations for each
point as specified on Exhibit "A" attached hereto.
Shipper agrees to indemnify and hold Transporter
harmless for refusal to transport gas hereunder in the
event any upstream or downstream transporter fails to
receive or deliver gas as contemplated by this
Agreement.
(b) Shipper agrees to indemnify and hold Transporter
harmless from all suits, actions, debts, accounts,
damages, costs, losses and expenses (including
reasonable attorneys fees) arising from or out of breach
of any warranty by Shipper herein.
11.2 Transporter shall not be obligated to provide or continue
service hereunder in the event of any breach of warranty.
ARTICLE XII
TERM
12.1 This Contract shall be effective as of the 1st day of
September, 1993, and shall remain in force and effect until
the 1st day of November, 2000, ("Primary Term") and on a
month to month basis thereafter unless terminated by either
Party upon at least thirty (30) days prior written notice to
the other Party; provided, however, that if the Primary Term
is one year or more, then unless Shipper elects upon one
year's prior written notice to Transporter to request a
lesser extension term, the Agreement shall automatically
extend upon the expiration of the Primary Term for a term of
five years and shall automatically extend for successive
five year terms thereafter unless Shipper provides notice
described above in advance of the expiration of a succeeding
term; provided further, if the FERC or other governmental
body having jurisdiction over the service rendered pursuant
to this Agreement authorizes abandonment of such service,
this Agreement shall terminate on the abandonment date
permitted by the FERC or such other governmental body.
12.2 Any portions of this Agreement necessary to resolve or cash-
out imbalances under this Agreement as required by the
General Terms and Conditions of Transporter's FERC Gas
Tariff Volume No. 1, shall survive the other parts of this
Agreement until such time as such balancing has been
accomplished.
12.3 This Agreement will terminate upon notice from Transporter
in the event Shipper fails to pay all of the amount of any
bill for service rendered by Transporter hereunder in accord
with the terms and conditions of Article VI of the General
Terms and Conditions of Transporter's FERC Tariff.
ARTICLE XIII
NOTICE
Except as otherwise provided in the General Terms and Conditions
applicable to this Agreement, any notice under this Agreement shall
be in writing and mailed to the post office address of the Party
intended to receive the same, as follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Marketing
SHIPPER:
NOTICES: SOUTHERN CONNECTICUT GAS COMPANY
855 Main Street
P.O. Box 1540
Bridgeport, CT 06601
Attention: Paul Rossi, Director of Gas Suppply
BILLING: SOUTHERN CONNECTICUT GAS COMPANY
855 Main Street
P.O. Box 1540
Bridgeport, CT 06601
Attention: Pat Zychek, Manager Gas Supply Planning
or to such other address as either Party shall designate by formal
written notice to the other.
ARTICLE XIV
ASSIGNMENTS
14.1 Either Party may assign or pledge this Agreement and all
rights and obligations hereunder under the provisions of any
mortgage, deed of trust, indenture, or other instrument
which it has executed or may execute hereafter as security
for indebtedness. Either Party may, without relieving
itself of its obligation under this Agreement, assign any of
its rights hereunder to a company with which it is
affiliated. Otherwise, Shipper shall not assign this
Agreement or any of its rights hereunder, except in accord
with Article III, Section 11 of the General Terms and
Conditions of Transporter's FERC Gas Tariff.
14.2 Any person which shall succeed by purchase, merger, or
consolidation to the properties, substantially as an
entirety, of either Party hereto shall be entitled to the
rights and shall be subject to the obligations of its
predecessor in interest under this Agreement.
ARTICLE XV
MISCELLANEOUS
15.1 The interpretation and performance of this contract shall be
in accordance with and controlled by the laws of the state
of Texas, without regard to the doctrines governing choice
of law.
15.2 If any provisions of this Agreement is declared null and
void, or voidable, by a court of competent jurisdiction,
then that provision will be considered severable at either
Party's option; and if the severability option is exercised,
the remaining provisions of the Agreement shall remain in
full force and effect.
15.3 Unless otherwise expressly provided in this Agreement or
Transporter's Gas Tariff, no modification of or supplement
to the terms and provisions stated in this agreement shall
be or become effective, except by the execution of by both
Parties of a written amendment.
15.4 Exhibit "A" attached hereto is incorporated herein by
reference and made a part hereof for all purposes.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be duly executed in several counterparts as of the date first
hereinabove written.
TENNESSEE GAS PIPELINE COMPANY
BY:____________________________
Agent and Attorney-in-Fact
SOUTHERN CONNECTICUT GAS COMPANY
BY:____________________________
TITLE: ________________________
DATE: _________________________
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
EXHIBIT "A"
TO GAS TRANSPORTATION AGREEMENT
DATED September 1, 1993
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
SOUTHERN CONNECTICUT GAS CO THE
SERVICE PACKAGE: 542
SERVICE PACKAGE TQ: 9,408 Dth
AMENDMENT EFFECTIVE DATE: September 1, 1993
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interconnect Min.
Meter AMD Meter Name Party Name County ST Zone R/D LEG Meter-TQ Press. Notes
- ----- --- ---------- ------------ ------ -- ---- --- --- -------- ------ -----
070018 0 TGP - ISS-Northern Storage Potter PA 04 R 300 9,408 2/
Withdra
020126 0 Southern-Bridgeport, Conn. Connecticut Natural Gas Fairfield CT 06 D 300 9,408 100 lbs. 1/
Corp.
020313 0 Southern-Trumbull, Conn. Southern Conn. Gas Co. Fairfield CT 06 D 300 9,408 100 lbs. 1/
020425 0 Southern Conn.-Milford Southern Conn. Gas Co. New Haven CT 06 D 300 7,800 100 lbs. 1/
Conn. Alg.
020490 0 Southern-Westport, Conn. Southern Conn. Gas Co. Fairfield CT 06 D 300 9,408 100 lbs. 1/
1/ THE SUM OF TRANSPORTER'S DELIVERIES TO SHIPPER FOR ALL TRANSPORTATION CONTRACTS CONVERTED FROM FIRM SALES CANNOT
EXCEED THE FOLLOWING QUANTITIES:
Meter Dth/Day
- ----- -------
020490 15,390
020126 30,780
020313 20,000
020425 7,800
060018 8,060
020578 781
2/ METER 070018 IS FOR NOMINATION PURPOSES ONLY AND DOES NOT DENOTE CAPACITY AT THIS SPECIFIC POINT.
NUMBER OF RECEIPT POINTS: 1
NUMBER OF DELIVERY POINTS: 4
</TABLE>
SERVICE AGREEMENT
APPLICABLE TO THE STORAGE OF NATURAL GAS
UNDER RATE SCHEDULE GSS
(SECTION 7 (c))
AGREEMENT made as of this first day of October 1993, by and
between CNG TRANSMISSION CORPORATION, a Delaware corporation,
hereinafter called "Pipeline," and SOUTHERN CONNECTICUT GAS COMPANY,
a Connecticut corporation, hereinafter called "Customer."
WITNESSETH: That in consideration of the mutual covenants
herein contained, the parties hereto agree that Pipeline will store
natural gas for Customer during the term, at the rates and on the
terms and conditions hereinafter provided and, with respect to gas
delivered by each of the parties to the other, under and subject to
Pipeline's Rate Schedule GSS and all of the General Terms and
Conditions contained in Pipeline's FERC Gas Tariff and any
revisions thereof that may be made effective hereafter:
ARTICLE I
Quantities
Beginning as of October 1, 1993 and thereafter for the
remaining term of this agreement, Customer agrees to deliver to
Pipeline and Pipeline agrees to receive for storage in Pipeline's
underground storage properties, and Pipeline agrees to inject or
cause to be injected into storage for Customer's account, store,
withdraw from storage, and deliver to Customer and Customer agrees
to receive, quantities of natural gas as set forth on Exhibit A,
attached hereto.
ARTICLE II
Rate
A. For storage service rendered by Pipeline to Customer
hereunder, Customer shall pay Pipeline in accordance with Rate
Schedule GSS contained in Pipeline's effective FERC Gas Tariff or
any effective superseding rate schedule. Said rate schedule or
superseding rate schedule and any revisions thereof which shall be
filed and made effective shall apply to and be part of this
Agreement. Pipeline shall have the right to propose to and file
with the Federal Energy Regulatory Commission or other body having
jurisdiction, changes and revisions of any effective rate schedule,
or to propose and file superseding rate schedules, for the purpose
of changing the rate, charges, and other provisions thereof
effective as to Customer; provided, however, that any request by
Pipeline to amend the terms and conditions of Rate Schedule GSS
must be consistent with the terms and conditions of Article VII,
Part 2, Paragraph (F) of the stipulation filed on March 31, 1993 by
Pipeline in Docket No. RS92-14 and conform to the requirements of
Section 7 (b) of the Natural Gas Act, if applicable, and provided
further that Pipeline and Customer agree that they will not seek to
place in effect a change in any aspect of the terms and conditions
under Section 8 of Rate Schedule GSS for a period of two years from
the date of such request. The filing of requests, changes and
revisions of Rate Schedule GSS shall be without prejudice to the
right of Customer to contest or oppose such requests, filings or
revisions and their effectiveness.
B. The Storage Demand Charge and the Storage Capacity charge
provided in the aforesaid rate schedule shall commence on October
1, 1993.
ARTICLE III
Term of Agreement
Subject to all the terms and conditions herein, this Agreement
shall be effective as of October 1, 1993, and shall continue in
effect for a primary term through and including March 31, 2006, and
for subsequent annual terms of April 1 through March 31 thereafter,
until either party terminates this Agreement by giving written
notice to the other at least twenty-four months prior to the start
of an annual term.
ARTICLE IV
Points of Receipt and Delivery
The Points of Receipt for Customer's tender of storage
injection quantities, and the Point(s) of Delivery for withdrawals
from storage shall be specified on Exhibit A, attached hereto.
ARTICLE V
Special Operating Conditions
For the sole purpose of calculating Customer's Storage Gas
Balance to determine the initial decline in Customer's Daily
Entitlement, Pipeline shall multiply Customer's actual Storage Gas
Balance by a factor of 1.176. For purposes other than calculating
the initial decline in Customer's Daily Entitlement, Customer's
Storage Gas Balance shall remain equal to Customer's actual
inventory in storage.
ARTICLE VI
Miscellaneous
A. No change, modification or alteration of this Agreement
shall be or become effective until executed in writing by the
parties hereto; provided, however, that the parties do not intend
that this Article VI.A. requires a further written agreement either
prior to the making of any requests of filing permitted under
Article II hereof or prior to the effectiveness of such request or
filing after Commission approval, provided further, however, that
nothing in this Agreement shall be deemed to prejudice any position
the parties may take as to whether the request, filing or revision
permitted under Article II must be made under Section 7 or section
4 of Natural Gas Act.
B. Any notice, request or demand provided for in this
Agreement, or any notice which either party may desire to give the
other, shall be in writing and sent to the following addresses:
Pipeline: CNG Transmission Corporation
445 West Main Street
Clarksburg, West Virginia 26301
Attention: Vice President, Marketing
and Customer Services
Customer: Southern Connecticut Gas Company
P.O. Box 1540
855 Main Street
Bridgeport, CT 06604
Attention: Rod Cranford
or at such other address as either party shall designate by formal
written notice.
C. No presumption shall operate in favor of or against either
party hereto as a result of any responsibility either party may
have had for drafting this Agreement.
D. The subject headings of the provisions of this Agreement
are inserted for the purpose of convenient reference, and are not
intended to become a part of or to be considered in any
interpretations of such provisions.
ARTICLE VII
Prior Contracts
This Service Agreement shall supersede and cancel, as of the
effective date, the Service Agreements for storage service between
Customer and Pipeline dated June 1, 1993.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officials as of the
day and year first above written.
CNG TRANSMISSION CORPORATION
(Pipeline)
By:______________________________
Its: Vice President
SOUTHERN CONNECTICUT GAS COMPANY
By:_____________________________
Its:____________________________
(Title)
EXHIBIT A
To The GSS (Section 7 (c))
Storage Service Agreement
Dated October 1, 1993
Between CNG Transmission Corporation and
Southern Connecticut Gas Company
A. Quantities
The quantities of natural gas storage service which Customer
may utilize under this Service Agreement, as well as Customer's
applicable Billing Determinants, are as follows:
1. Storage Capacity of 650,588 Dekatherms (Dt), and
2. Storage Demand of 6,090 Dt per day.
B. Points of Receipt and Delivery
1. The Points of Receipt for Customer's tender of storage
injection quantities, and the maximum quantities and character of
service for each point shall be as set forth below. Pipeline will
use due care and diligence to assure and Customer will use due care
and diligence to cause its transporter to assure, that uniform
pressures will be maintained at the Receipt Points as responsibly
may be required to render service hereunder, but Pipeline will not
be required to accept gas at less than the minimum pressures
specified herein.
a. Up to 3,614 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Eastern Transmission Corporation
("Texas Eastern") or Transcontinental Gas Pipe Line Corporation
("Transco") or other pipeline (s) in Clinton County, Pennsylvania,
known as the Leidy Interconnection, at a pressure of not less than
one thousand d(1,000) pounds per square inch gauge ("psig").
b. Up to 3,614 Dt per Day at the "Texas Eastern Market Zone
2 Point" which shall consist of any combination of the
following points:
1. The interconnection of the facilities of Pipeline
and Texas Eastern or other pipeline(s) in
Westmoreland County, Pennsylvania, known as the
Oakford Interconnection, at a pressure of not less
than five hundred seventy-five (575) psig.
2. An existing point of interconnection between
Pipeline and Texas Eastern Transmission Corporation
("Texas Eastern") located in Noble County, Ohio, at
Texas Eastern Measuring Station 450, at the
operating pressure existing at the point of
delivery.
3. An existing point of interconnection between
Pipeline and Texas Eastern located in Monroe
County, Ohio, at Texas Eastern Measuring Station
471, at a pressure of not less than two hundred
(200) psig.
4. An existing point of interconnection between
Pipeline and Texas Eastern located in Monroe
County, Ohio, at Texas Eastern Measuring Station
983, at a pressure of not less than three hundred
(300) psig.
5. An existing point of interconnection between
Pipeline and Texas Eastern located in Monroe
County, Ohio, at Texas Eastern Measuring Station
004, at the pressure provided for in the General
Terms and Conditions of Texas Eastern's FERC Gas
Tariff.
6. An existing point of interconnection between
Pipeline and Texas Eastern located in Marshall
County, West Virginia at Texas Eastern Measuring
Station 372, at the operating pressure existing at
the point of delivery.
7. An existing point of interconnection between
Pipeline and Texas Eastern located in Green County,
Pennsylvania at Texas Eastern Measuring Station
037, at the pressure provided for in the General
Terms and Conditions of Texas Eastern's FERC Gas
Tariff.
8. An existing point of interconnection between
Pipeline and Texas Eastern located in Somerset
County, Pennsylvania at Texas Eastern Measuring
Station 051, at the pressure provided for in the
General Terms and Conditions of Texas Eastern's
FERC Gas Tariff.
2. The quantity of gas which Customer shall be entitled to tender
to Pipeline for injection into storage at the Leidy
Interconnection on a firm basis on any Day during the Storage
Year shall be one-one hundred eightieth (1/180th) of
Customer's Storage Capacity whenever Customer's Storage Gas
Balance is less than or equal to one half of Customer's
Storage Capacity, and one-two hundred fourteenth (1/214th) of
Customer's Storage Capacity whenever Customer's Storage Gas
Balance is greater than one half of Customer's Storage
Capacity.
3. The Points of Delivery for withdrawals from storage, and the
maximum quantities and character of service for each point,
shall be as set forth below. Pipeline will use due care and
diligence to assure, and Customer will use due care and
diligence to cause its transporter to assure, that uniform
pressures will be maintained at the Delivery Points as
reasonably may be required to render service hereunder, and
Pipeline will use due care and diligence to deliver gas (or
cause gas to be delivered) within the pressure limitations
specified herein.
a. Up to 6,090 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Eastern or other
Pipeline(s) in Westmoreland County, Pennsylvania, known
as the Oakford Interconnection, at a pressure of not less
than eight hundred fifty (850) psig.
b. Up to 6,090 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and
Texas Eastern, in Franklin County, Pennsylvania, known at
the Chambersburg Interconnection, on an interruptible
basis if operating conditions permit, at a pressure of
not more than seven hundred (700) psig.
c. Up to 6,090 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and
Texas Eastern, in Greene County, Pennsylvania, known as
the Crayne Interconnection, on an interruptible basis if
operating conditions permit, at a pressure of not more
than eight hundred sixty-five (865) psig.
d. Up to 6,090 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and
Texas Eastern, in Cambria County, Pennsylvania, known as
the Rager Mountain Interconnection, on an interruptible
basis if mutually agreed between Pipeline and Customer,
at the operating pressure existing at the point of
delivery.
e. Up to 6,090 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Eastern or Transco or
other pipeline(s) in Clinton County, Pennsylvania, known
as the Leidy Interconnection, at a pressure of not less
than one-thousand, two-hundred (1,200) psig, if, in
Pipeline's sole opinion, its operating or other
circumstances permit.
SERVICE AGREEMENT
APPLICABLE TO THE STORAGE OF NATURAL GAS
UNDER RATE SCHEDULE GSS-II
AGREEMENT made as of this first day of September 1993, by and
between CNG TRANSMISSION CORPORATION, a Delaware corporation,
hereinafter called "Pipeline," and SOUTHERN CONNECTICUT GAS COMPANY,
a Connecticut corporation, hereinafter called "Customer."
WITNESSETH: That in consideration of the mutual covenants
herein contained, the parties hereto agree that Pipeline will store
natural gas for Customer during the term, at the rates and on the
terms and conditions hereinafter provided and, with respect to gas
delivered by each of the parties to the other, under and subject to
Pipeline's Rate Schedule GSS-II and all of the General Terms and
Conditions contained in Pipeline's FERC Gas Tariff and any
revisions thereof that may be made effective hereafter:
ARTICLE I
Quantities
Beginning as of October 1, 1993 and thereafter for the
remaining term of this agreement, Customer agrees to deliver to
Pipeline and Pipeline agrees to receive for storage in Pipeline's
underground storage properties, and Pipeline agrees to inject or
cause to be injected into storage for Customer's account, store,
withdraw from storage, and deliver to Customer and Customer agrees
to receive, quantities of natural gas as set forth on Exhibit A,
attached hereto.
ARTICLE II
Rate
A. For storage service rendered by Pipeline to Customer
hereunder, Customer shall pay Pipeline in accordance with Rate
Schedule GSS-II contained in Pipeline's effective FERC Gas Tariff
or any effective superseding rate schedule. Said rate schedule or
superseding rate schedule and any revisions thereof which shall be
filed and made effective shall apply to and be part of this
Agreement. Pipeline shall have the right to propose to and file
with the Federal Energy Regulatory Commission or other body having
jurisdiction, changes and revisions of any effective rate schedule,
or to propose and file superseding rate schedules, for the purpose
of changing the rate, charges, and other provisions thereof
effective as to Customer; provided, however, that any request by
Pipeline to amend the terms and conditions of Rate Schedule GSS-II
must be consistent with the terms and conditions of Article VII,
Part 2, Paragraph (F) of the stipulation filed on March 31, 1993 by
Pipeline in Docket No. RS92-14 and conform to the requirements of
Section 7 (b) of the Natural Gas Act, if applicable, and provided
further that Pipeline and Customer agree that they will not seek to
place in effect a change in any aspect of the terms and conditions
under Section 8 of Rate Schedule GSS-II for a period of two years
from the date of such request. The filing of requests, changes and
revisions of Rate Schedule GSS-II shall be without prejudice to the
right of Customer to contest or oppose such requests, filings or
revisions and their effectiveness.
B. The Storage Demand Charge and the Storage Capacity charge
provided in the aforesaid rate schedule shall commence on October
1, 1993.
ARTICLE III
Term of Agreement
Subject to all the terms and conditions herein, this Agreement
shall be effective as of October 1, 1993, and shall continue in
effect for a primary term through and including March 31, 2012, and
for subsequent annual terms of April 1 through March 31 thereafter,
until either party terminates this Agreement by giving written
notice to the other at least twenty-four months prior to the start
of an annual term.
ARTICLE IV
Points of Receipt and Delivery
The Points of Receipt for Customer's tender of storage
injection quantities, and the Point(s) of Delivery for withdrawals
from storage shall be specified on Exhibit A, attached hereto.
ARTICLE V
Special Operating Conditions
For the sole purpose of calculating Customer's Storage Gas
Balance to determine the initial decline in Customer's Daily
Entitlement, Pipeline shall multiply Customer's actual Storage Gas
Balance by a factor of 1.176. For purposes other than calculating
the initial decline in Customer's Daily Entitlement, Customer's
Storage Gas Balance shall remain equal to Customer's actual
inventory in storage.
ARTICLE VI
Miscellaneous
A. No change, modification or alteration of this Agreement
shall be or become effective until executed in writing by the
parties hereto; provided, however, that the parties do not intend
that this Article V.A. requires a further written agreement either
prior to the making of any requests of filing permitted under
Article II hereof or prior to the effectiveness of such request or
filing after Commission approval, provided further, however, that
nothing in this Agreement shall be deemed to prejudice any position
the parties may take as to whether the request, filing or revision
permitted under Article II must be made under Section 7 or section
4 of Natural Gas Act.
B. Any notice, request or demand provided for in this
Agreement, or any notice which either party may desire to give the
other, shall be in writing and sent to the following addresses:
Pipeline: CNG Transmission Corporation
445 West Main Street
Clarksburg, West Virginia 26301
Attention: Vice President, Marketing
and Customer Services
Customer: Southern Connecticut Gas Company
P.O. Box 1540
855 Main Street
Bridgeport, CT 06604
Attention: Rod Cranford
or at such other address as either party shall designate by formal
written notice.
C. No presumption shall operate in favor of or against either
party hereto as a result of any responsibility either party may
have had for drafting this Agreement.
D. The subject headings of the provisions of this Agreement
are inserted for the purpose of convenient reference, and are not
intended to become a part of or to be considered in any
interpretations of such provisions.
ARTICLE VII
Prior Contracts
This Service Agreement shall supersede and cancel, as of the
effective date, the Service Agreements for storage service between
Customer and Pipeline dated May 25, 1992.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officials as of the
day and year first above written.
CNG TRANSMISSION CORPORATION
(Pipeline)
By:______________________________
Its: Vice President
SOUTHERN CONNECTICUT GAS COMPANY
By:______________________________
Its:_____________________________
(Title)
EXHIBIT A
To The Storage Service Agreement
Dated September 1993
Between CNG Transmission Corporation and
Southern Connecticut Gas Company
A. Quantities
The quantities of natural gas storage service which Customer
may utilize under this Service Agreement, as well as Customer's
applicable Billing Determinants, are as follows:
1. Storage Capacity of 666,667 Dekatherms (Dt), and
2. Storage Demand of 6,667 Dt per day.
B. Points of Receipt and Delivery
1. The Points of Receipt for Customer's tender of storage
injection quantities, and the maximum quantities and character
of service for such point shall be as set forth below. Each
of the parties will use due care and diligence to assure that
uniform pressures will be maintained at the Receipt Point as
reasonably may be required to render service hereunder, but
Pipeline will not be required to accept gas at less than the
minimum pressure specified herein.
Up to 3,704 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and
Texas Eastern Transmission Corporation ("Texas Eastern"),
in Fayette County, Pennsylvania, known as the North
Summit Interconnection, at a pressure of not less than
seven hundred (700) pounds per square inch ("psig").
2. The points of Delivery for withdrawals from storage, and the
maximum quantities and character of service for each point,
shall be as set forth below. Each of the parties will use due
care and diligence to assure that Points as reasonably may be
required to render service hereunder, but Pipeline will not be
required to deliver gas at greater than the maximum pressures
specified herein.
a. Up to 6,667 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and
Texas Eastern, in Fayette County, Pennsylvania, known as
the North Summit Interconnection, at a pressure of not
more than one thousand (1,000) psig.
b. Up to 6,667 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and
Texas Eastern, in Greene County, Pennsylvania, known as
the Crayne Interconnection, on an interruptible basis if
operating conditions permit, at a pressure of not more
than eight hundred sixty-five (865) psig.
c. Up to 6,667 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Eastern or other
pipeline(s) in Westmoreland County, Pennsylvania, known
as the Oakford Interconnection, on an interruptible basis
if operating conditions permit, at a pressure of not less
than eight hundred fifty (850) psig.
3. Pipeline shall deliver on a firm basis up to Customer's
Storage Demand, as adjusted pursuant to Section 8 of Rate
Schedule GSS-II and Article V of this Service Agreement.
This Contract is made as of the 1st day of December, 1994, by and between
TENNESSEE GAS PIPELINE COMPANY, a Delaware corporation herein called
"Transporter," and THE SOUTHERN CONNECTICUT GAS CO, a CONNECTICUT Corporation,
herein called "Shipper." Transporter and Shipper collectively shall be referred
to herein as the "Parties."
ARTICLE I - SCOPE OF AGREEMENT
Following the commencement of service hereunder, in accordance with the terms of
Transporter's Rate Schedule FS, and of this Agreement, Transporter shall receive
for injection for Shipper's account a daily quantity of gas up to Shipper's
Maximum Injection Quantity of 8,208 dekatherms (Dth) and Maximum Storage
Quantity (MSQ) of 1,231,189 (Dth) (on a cumulative basis) and on demand shall
withdraw from Shipper's storage account and deliver to Shipper a daily quantity
of gas up to Shipper's Maximum Daily Withdrawal Quantity (MDWQ) of 13,679 Dth;
provided however, that when Shipper's storage balance is equal to or less than
30% of the MSQ but greater than 20% of the MSQ, the Maximum Daily Withdrawal
Quantity shall be 11,797 Dth; and provided further, that when Shipper's storage
balance is less than or equal to 20% of the MSQ, the Maximum Daily Withdrawal
Quantity shall be 9,408 Dth. For demand charge purposes, the MDWQ for
balances greater than 30% of the MSQ shall be used.
ARTICLE II - SERVICE POINT
The point or points at which the gas is to be tendered for delivery by
Transporter to Shipper under this Agreement shall be at the storage service
point at Transporter's Compressor Station 313.
ARTICLE III - PRICE
1. Shipper agrees to pay Transporter for all natural gas storage service
furnished to Shipper hereunder, including compensation for system fuel and
losses, at Transporter's legally effective rate or at any effective
superseding rate applicable to the type of service specified herein.
Transporter's present legally effective rate for said service is contained
in Transporter's Tariff as filed with the Federal Energy Regulatory
Commission.
2. Shipper agrees to reimburse Transporter for any filing or similar fees,
which have not been previously paid by Shipper, which Transporter incurs
in rendering service hereunder.
3. Shipper agrees that Transporter shall have the unilateral right to file
with the appropriate regulatory authority and make changes effective in
(a) the rates and charges applicable to service pursuant to Transporter's
Rate Schedule FS, (b) the rate schedule(s) pursuant to which service
hereunder is rendered, or (c) any provision of the General Terms and
Conditions applicable to those rate schedules. Transporter agrees that
Shipper may protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for such
adjustment of Transporter's existing FERC Gas Tariff as may be found
necessary to assure Transporter just and reasonable rates.
ARTICLE IV - INCORPORATION OF RATE SCHEDULE AND TARIFF PROVISIONS
This agreement shall be subject to the terms of Transporter's Rate Schedule FS,
as filed with the Federal Energy Regulatory Commission, together with the
General Terms and Conditions applicable thereto (including any changes in
said Rate Schedule or General Terms and Conditions as may from time to time
be filed and made effective by Transporter).
ARTICLE V - TERM OF AGREEMENT
This Agreement shall be effective as of the December 1, 1994, and shall remain
in force and effect until November 1, 2000, ("Primary Term") and on a month-to-
month basis thereafter unless terminated by either Party upon at least thirty
(30) days prior written notice to the other Party; provided, however, that if
the Primary Term is one year or more, then unless Shipper elects upon one
year's prior written notice to Transporter to request a lesser extension
term, the Agreement shall automatically extend upon the expiration of the
Primary Term for a term of five years; and shall automatically extend for
successive five year terms thereafter unless Shipper provides notice described
above in advance of the expiration of a succeeding term; provided further, if
the FERC or other governmental body having jurisdiction over the service
rendered pursuant to this Agreement authorizes abandonment of such service,
this Agreement shall terminate on the abandonment date permitted by the FERC or
such other governmental body.
This Agreement will terminate upon notice from Transporter in the event Shipper
fails to pay all of the amount of any bill for service rendered by Transporter
hereunder in accordance with the terms and conditions of Article VI of the
General Terms and Conditions of Transporter's Tariff.
ARTICLE VI - NOTICES
Except as otherwise provided in the General Terms and Conditions applicable to
this Agreement, any notice under this Agreement shall be in writing and mailed
to the post office address of the Party intended to receive the same, as
follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P. O. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Services
SHIPPER:
NOTICES: THE SOUTHERN CONNECTICUT GAS CO
855 MAIN STREET
P.O. BOX 1540
BRIDGEPORT, CT 06601
Attention: Daniel F. Commella
BILLING: THE SOUTHERN CONNECTICUT GAS CO
855 MAIN STREET
P.O. BOX 1540
BRIDGEPORT, CT 06601
Attention: Daniel F. Commella
or to such other address as either Party shall designate by formal written
notice to the other.
ARTICLE VII - ASSIGNMENT
Any company which shall succeed by purchase, merger or consolidation to the
properties, substantially as an entirety, of Transporter or of Shipper, as the
case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Agreement. Otherwise no
assignment of the Agreement or any of the rights or obligations thereunder
shall be made by Shipper, except pursuant to the General Terms and Conditions
of Transporter's FERC Gas Tariff.
It is agreed, however, that the restrictions on assignment contained in this
Article shall not in any way prevent either Party to the Agreement from pledging
or mortgaging its rights thereunder as security for its indebtedness.
ARTICLE VIII - MISCELLANEOUS
8.1 The interpretation and performance of this Agreement shall be in
accordance with and controlled by the laws of the State of Texas, without
regard to doctrines governing choice of law.
8.2 If any provision of this Agreement is declared null and void, or voidable,
by a court of competent jurisdiction, then that provision will be
considered severable at either Party's option; and if the severability
option is exercised, the remaining provisions of the Agreement shall
remain in full force and effect.
8.3 Unless otherwise expressly provided in this Agreement or Transporter's
Tariff, no modification of or supplement to the terms and provisions
stated in this Agreement shall be or become effective until Shipper has
submitted a request for change through the TENN-SPEED 2 System and Shipper
has been notified through TENN-SPEED 2 of Transporter's agreement to such
change.
8.4 Transporter and Shipper agree that this Agreement, as of the date hereof,
shall supersede and cancel the Gas Storage Contract Number 636, dated
September 1, 1993 between the Parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their authorized agents.
TENNESSEE GAS PIPELINE COMPANY
BY:______________________________
Agent and Attorney-in-Fact
THE SOUTHERN CONNECTICUT GAS CO
BY ___________________________
TITLE ___________________________
DATE ___________________________
GAS STORAGE SERVICE AGREEMENT
EXHIBIT "A"
TO FIRM GAS STORAGE SERVICE AGREEMENT
DATED DECEMBER 1, 1994
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
THE SOUTHERN CONNECTICUT GAS CO
SERVICE PACKAGE MSQ: 1,231,189
MAXIMUM DAILY INJECTION QUANTITY: 8,208 Dth
MAXIMUM DAILY WITHDRAWAL QUANTITY (MDWQ):
Storage Balance Storage Balance Maximum Daily Withdrawal
From Dth To Dth Quantity Dth
- --------------- --------------- ------------------------
369,358 1,231,189 13,679 Ratchet 0
246,239 369,357 11,797 Ratchet 1
0 246,238 9,408 Ratchet 2
SERVICE POINT: Compressor Station 313
INJECTION METER: 060018 TGP-NORTHERN STORAGE INJECTION
WITHDRAWAL METER: 070018 TGP-NORTHERN STORAGE WITHDRAWAL
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Storage Storage
Balance Balance MDIQ
Meter Meter Name County ST Zone I/W LEG From To MDWQ
- ----- ---------- ------ -- ---- --- --- ------- ------- ----
060018 TGP - Northern Storage Injection Potter PA 04 I 300 8,208
070018 TGP - Northern Storage Withdrawal Potter PA 04 W 300 369,358 1,231,189 13,679 Ratchet 0
246,239 369,357 11,797 Ratchet 1
0 246,238 9,408 Ratchet 2
</TABLE>
AMENDED AND RESTATED DEFERRED
COMPENSATION AGREEMENT
THIS AGREEMENT is made as of the 8th day of November, 1996
and amends and restates effective as of the date of execution
hereof, the Deferred Compensation Agreement dated as of the 17th
day of January, 1989 and amended as of the 24th day of March, 1992,
and the 21st day of October, 1993 by and between THE SOUTHERN
CONNECTICUT GAS COMPANY, a Connecticut corporation with a
principal place of business at 855 Main Street, Bridgeport, Connecticut
06604 ("Southern"), and CONNECTICUT ENERGY CORPORATION, a Connecticut
corporation with a principal place of business at 885 Main Street,
Bridgeport, Connecticut 06604 (the "Corporation") and J.R. CRESPO,
of 560 Hulls Highway, Southport, Connecticut 06490 (the "Executive").
WHEREAS, the Corporation has employed the Executive as the
President and Chief Executive Officer of its wholly owned
subsidiary, Southern, since January 17, 1989, as President and
Chief Executive Officer of the Corporation since April 18, 1989,
and as Chairman of the Board of Directors of Southern and the
Corporation since April 24, 1990; and
WHEREAS, to induce the Executive to remain in its employment,
the Corporation deems it appropriate to give certain further
assurances with respect to compensation to be deferred and become
payable upon the termination of the Executive's employment with the
Corporation;
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions.
The following terms when used herein with initial capital
letters shall, unless the context clearly requires to the contrary,
have the meanings assigned to them below:
(a) "Annual Compensation" means annual base pay in effect at
the time in question plus incentive compensation in the amount most
recently previously received by the Executive.
(b) "Cause", for purposes of the Employment Agreement dated
March 24, 1992 among the Executive, the Corporation and Southern,
Means the Executive's gross negligence, willful misconduct or
conviction of a felony, which negligence, misconduct or conviction
has a demonstrable and material adverse affect upon the Corporation
or Southern, provided that the Corporation or Southern shall have
given the Executive written notice of the alleged negligence or
misconduct and the Executive shall have failed to cure such
negligence or misconduct within 30 days after his receipt of such
notice. The Executive shall be deemed to have been terminated for
Cause effective upon the effective date stated in a written notice
of such termination delivered by the Corporation or Southern to the
Executive and accompanied by the resolution duly adopted by the
affirmative vote of not less than 2/3 of the entire membership of
the Board of Directors of the Corporation or Southern at a meeting
of said Board (after reasonable notice to the Executive and an
opportunity for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith opinion of
the Board of Directors of the Corporation or Southern, the
Executive was guilty of conduct constituting Cause hereunder and
setting forth in reasonable detail the facts and circumstances
claimed to provide the basis for the Executive's termination,
provided that the effective date shall not be less than 30 days
from the date such notice is given.
(c) "Change in Control" of the Corporation shall be deemed to
have occurred if:
(i) Any Person is or becomes an Acquiring Person;
(ii) Less than 2/3 of the total membership of the Board
of Directors of the Corporation shall be Continuing Directors; or
(iii) The shareholders of the Corporation shall approve a merger or
consolidation of the Corporation or a plan of complete
liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
In connection with the preceding definition of "Change in Control", the
capitalized terms therein are defined as follows:
(iv) "Acquiring Person" means any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding
voting securities, unless such person has filed Schedule 13G and
all Required amendments thereto with respect to its holdings and
continues to hold such securities for investment in a manner
qualifying such Person to utilize Schedule 13G for reporting of
ownership.
(v) "Affiliate" and "Associate" shall have the respective meaning
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect as of the date
hereof.
(vi) "Continuing Directors" means any member of the Board of
Directors of the Corporation who was a member of said Board
prior to the date hereof and any successor of a Continuing
Director while such successor is a member of the Board of
Directors of the Corporation who is not an Acquiring Person or
an Affiliate or Associate of an Acquiring Person and who is
recommended or elected to succeed the Continuing Director by
a majority of the Continuing Directors.
(vii) "Person" shall have the meaning assigned to it in Section 13(d)
and 14(d) of the Exchange Act.
(d) "Disability" means the Executive's permanent disability as evidenced
by the Executive's inability by reason or physical or mental
impairment or illness to fulfill his obligation hereunder for the
reasonably foreseeable future, as determined by the Board of Directors
of Southern and the Company after considering all relevant medical
evidence.
(e) "Final Average Annual Pay" means the total base pay plus incentive
compensation paid to the Executive in those 60 consecutive months out
of the 120 months (or such shorter period as shall have elapsed since
the Executive's date of hire) immediately preceding a Termination of
Employment in which the Executive's pay and compensation was the
highest, divided by five (or the lesser number of years, to the nearest
1/12th, since the Executive's date of hire).
(f) "Good Reason", for purposes of the Employment Agreement dated
March 24, 1992 among the Executive, the Corporation and Southern,
means:
(i) An adverse change in the Executive's status, duties
or responsibilities as an Executive of the Corporation or
Southern;
(ii) Failure of the Corporation or Southern to pay or provide the
Executive in a timely fashion the salary or benefits to which
he is entitled under any Employment Agreement between the
Corporation or Southern and the Executive then in effect or
under any benefit plans or policies in which the Executive was
then participating (including, without limitation, any
incentive, bonus, stock option, restricted stock, health,
accident, disability, life insurance, thrift, vacation pay,
deferred compensation and retirement plans or policies);
(iii) The reduction of the Executive's salary (except in connection
with a uniform and general reduction of salaried employee's
compensation effected by the Corporation or Southern);
(iv) The taking of any action by the Corporation or Southern
(including the elimination of a plan without providing
substitutes therefore, the reduction of the Executive's
awards thereunder or failure to continue the Executive's
participation therein) that would substantially diminish
the aggregate projected value of the Executive's awards or
benefits under the Corporation's or Southern's benefit plans
or policies described in Section 1(f)(ii) in which the
Executive was then participating; provided, however, that
the Board of Directors may determine at any time to
discontinue Southern's Management Incentive Compensation
Plan for years beginning January 1, 1990 and thereafter. The
Executive further acknowledges that awards under such Plan
may vary from year to year and that, under the terms of such
Plan, no awards or reduced awards may be made in any
particular year.
(v) A failure by the Corporation or Southern to obtain from any
successors the assent to this Agreement contemplated by
Section 12 hereof; or
(vi) The relocation of the principal office at which the
Executive is to perform his services on behalf of the
Corporation or Southern to a location outside the State of
Connecticut or a substantial increase in the Executive's
business travel obligations.
Any circumstances described in this Section 1(f) shall constitute
Good Reason even if such circumstances would not constitute a
breach by the Corporation or Southern of the terms of the
Employment Agreement among the Corporation, Southern and the
Executive then in effect. The Executive shall be deemed to have
terminated his employment for Good Reason effective upon the
effective date stated in a written notice of such termination given
by him to the Corporation and Southern setting forth in reasonable
detail the facts and circumstances claimed to provide the basis for
termination, provided that the effective date may not precede, nor
be more than 60 days from, the date such notice is given. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder.
(g) "Qualifying Surviving Spouse" means the Executive's widow to
whom he has been married for more than one year at the
time of benefit payment commencement pursuant to this
Agreement.
(h) "SCG Pension Plan Benefit" means the benefit payable
to the Executive pursuant to the provisions of the SCG Pension
Plan.
"SCG Pension Plan" collectively means The Southern Connecticut Gas
Company Pension Plan for Salaried Employees, as amended from time to
time, and The Southern Connecticut Gas Company Benefit Equalization
Plan, as amended from time to time.
2. Term of Agreement.
The term of this Agreement shall be coterminous with the term of the
Executive's Employment Agreement with the Corporation and Southern
entered into March 24, 1992 and, unless this Amended and Restated
Agreement is expressly amended or rescinded, upon any extension or renewal
of the Executive's employment by the Corporation and Southern, the term
hereof shall continue during the Executive's continued employment by the
Corporation and Southern.
3. Compensation upon Termination of Employment.
The Executive shall be entitled to receive compensation ("Deferred
Compensation") following the termination of his employment with the
Corporation and Southern unless such termination shall be by reason of the
Executive's death. (The phrase "Termination of Employment" is hereinafter
used to describe a termination of employment other than death.) The annual
Deferred Compensation payable in equal monthly installments of 1/12 of the
annual amount for the Executive's life, commencing on the first day of the
month following the Termination of Employment, shall be the percentage of
the Executive's Final Average Annual Pay specified below for the Executive's
Age at Termination (augmented, if appropriate, by 5 years, as provided in
subparagraph (b) below)(subject to the Executive's right to elect an actuarial
equivalent form of benefit as provided in subparagraph (a) (ii) below) reduced
by the SCG Pension Plan Benefit the Executive is entitled to receive at the
earliest permissible commencement date of such benefits. The Executive is
not required to elect commencement of his SCG Pension Benefits prior to his
attainment of age 65, even though Deferred Compensation becomes payable
pursuant to this Agreement at an earlier age, but the Deferred Compensation
payable pursuant hereto shall be reduced without regard to the Executive's
actual receipt of such benefits. Prior to the earliest permissible
commencement date of SCG Pension Plan Benefits, the Deferred
Compensation payable hereunder shall not be reduced.
(a) In the event of a Termination of Employment for reasons
other than the Executive's disability or Change in Control:
(i) the following amount is payable:
Annual Deferred Compensation Amount
Age at Payable as a Percentage of
Termination Final Average Annual Pay
----------- ------------------------
62 or later 65%
61 63%
60 60%
59 58%
58 56%
57 55%
56 53%
55 50%
54 44%
53 38%
The percentages will be interpolated for termination at other than
the Executive's birthday.
(ii) In lieu of the applicable payments for the life of
the Executive specified in the preceding paragraph (i), the
Executive may elect to have the Deferred Compensation paid as an
actuarial equivalent payment to the Executive with a percentage
(not less than 50% nor more than 100%) of such amount payable to
the Executive's Qualifying Surviving Spouse for her life;
provided, however, that the Executive may so elect without
Southern's prior written consent only if the Executive's SCG
Retirement Benefit is also payable in the form of a joint and
survivor annuity providing payment of a similar percentage of
the Executive's benefit to his Qualifying Surviving Spouse.
Actuarial equivalence shall be determined on the same basis as
the SCG Pension Plan.
(b) In the event of a Change of Control, the Executive shall be entitled to
the Deferred Compensation described in paragraph (a) but the amount
shall be determined based upon his actual age at termination plus five
(5) years.
(c) If the Executive's employment is terminated by reason of the
Executive's Disability, the Executive shall be entitled to
receive a benefit from the date of such Disability to the Executive's
65th birthday in an amount equal to 60% of the Executive's Annual
Compensation at the time of his termination by reason of Disability,
which disability benefit shall be reduced by SCG Pension Plan and
social security benefits (if any) paid to the Executive by reason of
the Executive's Disability. Upon attainment of age 65, the Executive
shall be entitled to annual Deferred Compensation as provided in
paragraph 3(a)(i) for termination after age 62, commencing on the
first day of the month following his 65th birthday, based on his
Final Average Annual Pay at the time of this Termination of Employment
by reason of Disability.
4. Life Insurance and Death Benefits.
If the Executive is insurable at standard rates at the time such coverage
is sought, and provided that the premium cost is deductible by Southern and
payment thereof does not jeopardize either the deductibility of premiums paid
by Southern for life insurance on other employees or the exclusion of the cost
thereof from the taxable income of such other employees, Southern will obtain
and pay the premiums on guaranteed renewable term life insurance on the
Executive during his continued employment by Southern in an amount equal to
the difference between coverage provided under Southern's group life
insurance for salaried employees and 2 1/2 times the Executive's Annual
Compensation from time to time in effect. Southern shall not, however, be
obligated hereunder to increase the Executive's coverage more frequently than
once in any 12 consecutive month period. The Executive may designate the
beneficiary of such insurance in his discretion. If the Executive is not
insurable at standard rates upon commencement of employment, no coverage need
be provided under this Section 4. If the Executive becomes uninsurable at
standards rates after coverage is effected under this Section 4, only coverage
obtained prior to the Executive's uninsurability (including renewal, extension
or coverage increase privileges included in such coverage) need be provided by
Southern. Southern may require the Executive to bear the cost of any such
renewal, extension, or coverage increase privilege in excess of standard rates.
The Executive shall be responsible for the payment of personal income taxes
imposed upon him by reason of his receipt of the coverage provided pursuant
to this Section 4.
5. Vesting.
The interest of the Executive in any benefit accrued hereunder
shall be fully vested and nonforfeitable at all times.
6. Funding and Trust Accounts.
(a) Neither the Corporation nor Southern shall be required to fund or
otherwise segregate assets for the payment of Deferred
Compensation under this Agreement. Notwithstanding the foregoing,
however, as soon as practicable after October 21, 1993,
Southern shall establish a trust fund (or amend an existing trust
fund) (the "Trust"). Southern shall calculate the amount of
Deferred Compensation expected to be payable under this
agreement. Each year thereafter, Southern shall contribute an
amount that it determines to be sufficient to actuarially fund
the Deferred Compensation expected to be paid under this
Agreement. Southern shall update its calculation of the
expected Deferred Compensation and review such funding levels
once a year as of January 1 and, if needed to maintain the
funding on a sound actuarial basis, increase or decrease the
level of such funding.
(b) The Trust shall be a "rabbi trust" and shall be embodied in a
trust agreement with an institutional trustee (the "Trustee").
Deferred Compensation shall be paid from the funds in the
"rabbi trust" by the Trustee to the extent not paid by Southern.
The Trustee shall establish an account (an "Account") for this
Agreement which shall be credited annually with the contributions
to be made pursuant to preceding paragraph and with earnings
attributable thereto, including realized and unrealized
investment gains and losses. The establishment of the Account is
solely for accounting and funding purposes and shall not
otherwise restrict the use of the funds in the Trust.
7. Notices.
Any notices required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been given when delivered, or when
mailed, if mailed by registered or certified mail, return receipt requested, to
the respective addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in writing
pursuant to the terms of this Section 7.
8. Severability.
The provisions of this Agreement are severable, and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of any other provision.
9. Governing Law.
This Amended and Restated Agreement shall be governed by and
interpreted in accordance with the substantive of laws of the State of
Connecticut.
10. Supersedure.
This Amended and Restated Agreement shall cancel and supersede all prior
agreements relating to the payment of deferred compensation between the
Executive and the Corporation and Southern, except the Employment
Agreement executed as of the 24th day of March, 1992.
11. Waiver of Breach.
The waiver by a party of a breach of any provision of this Amended and
Restated Agreement shall not operate or be construed as a waiver of any prior
or subsequent breach by any of the parties hereto.
12. Binding Agreement.
This Amended and Restated Agreement shall inure to the benefit of and be
enforceable by the Executive, his heirs, executors, administrators, successors
and assigns. This Amended and Restated Agreement shall be binding upon the
Corporation, Southern and their successors and assigns. The Corporation and
Southern shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation and Southern expressly to assume
and agree to perform this Amended and Restated Agreement in accordance
with its terms. The Corporation and Southern shall obtain such assumption and
agreement prior to the effectiveness of any succession.
13. Arbitration.
If the Executive so elects, any dispute or controversy arising under or
in connection with this Amended and Restated Agreement shall be settled
exclusively by arbitration in the city nearest to the Executive's principal
residence which has an office of the American Arbitration Association, by one
arbitrator in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The Corporation and Southern hereby waive their right to
contest the personal jurisdiction or venue of any court, federal or state, in an
action brought to enforce this Agreement or any award of an arbitrator
hereunder which action is brought in the jurisdiction in which such
arbitration could have been conducted pursuant to this provision.
14. Executive's Expenses.
The Corporation and Southern, or the successor of either of such
companies, shall pay or reimburse the Executive (or, if appropriate, his
Qualified Surviving Spouse) for all costs, including reasonable attorney's fees
and expenses of litigation and arbitration, incurred by the Executive (or his
Qualified Surviving Spouse) in successfully contesting or disputing any action
taken by the Corporation and Southern, or the successor of either of such
companies, purportedly pursuant to this Amended and Restated Agreement or
in successfully seeking to obtain or enforce any right or benefit provided by
this Amended and Restated Agreement.
15. Counterparts.
This Amended and Restated Agreement may be executed in one or more
counterparts; each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Agreement to be executed as of the day and year first above
written.
CONNECTICUT ENERGY CORPORATION
By______________________________________
Henry Chauncey, Jr., duly authorized
Chairman, Nominating and Salary
Committee
THE SOUTHERN CONNECTICUT GAS COMPANY
By______________________________________
Henry Chauncey, Jr., duly authorized
Chairman, Nominating and Salary
Committee
EXECUTIVE
By______________________________________
J. R. Crespo
AGREEMENT
THIS AGREEMENT, made as of the 1st day of October, 1996, by and
among The Southern Connecticut Gas Company, a company incorporated in
the State of Connecticut with executive offices at 855 Main Street, Bridgeport,
Connecticut ("Southern"), and Connecticut Energy Corporation, a company
incorporated in the State of Connecticut with executive offices at 855 Main
Street, Bridgeport, Connecticut ("the Company"), and Carol A. Forest, an
individual residing at 157 Old Dyke Road, Trumbull, Connecticut 06611 (the
"Executive").
WHEREAS, Executive serves as Vice President, Finance, Chief Financial
Officer and Treasurer of the Company and Southern; and
WHEREAS, Southern and the Company seek to retain Executive in these
positions; and
WHEREAS, Executive desires to continue his/her employment with
Southern and the Company in accordance with the terms set forth below;
NOW, THEREFORE, in consideration of the remuneration and other
benefits to be provided by Southern and the Company and the services to be
provided by Executive, and in consideration of other mutual promises herein
contained, the parties hereby agree as follows:
1. DEFINITIONS.
The following terms when used herein with initial capital letters shall,
unless the context clearly requires to the contrary, have the meanings assigned
to them below:
(a) "Cause" means the Executive's gross negligence, willful misconduct or
conviction of a felony, which negligence, misconduct or conviction has
a demonstrable and material adverse affect upon the Company or
Southern, provided that the Company or Southern shall have given the
Executive written notice of the alleged negligence or misconduct and
the Executive shall have failed to cure such negligence or misconduct
within 30 days after his/her receipt of such notice. The Executive
shall be deemed to have been terminated for Cause effective upon the
effective date stated in a written notice of such termination
delivered by the Company or Southern to the Executive and
accompanied by the resolution duly adopted by the affirmative vote
of not less than 2/3 of the entire membership of the Board of
Directors of the Company or Southern at a meeting of said Board
(after reasonable notice to the Executive and an opportunity for the
Executive, with his/her counsel present, to be heard before the
Board) finding that, in the good faith opinion of the Board of
Directors of the Company or Southern, the Executive was guilty of
conduct constituting Cause hereunder and setting forth in reasonable
detail the facts and circumstances claimed to provide the basis for
the Executive's termination, provided that the effective date shall
not be less than 30 days from the date such notice is given.
(b) "Change in Control" of the Company shall be deemed to have occurred
if:
(i) Any Person is or becomes an Acquiring Person;
(ii) Less than 2/3 of the total membership of the Board of
Directors of the Company shall be Continuing Directors; or
(iii) The shareholders of the Company shall approve a merger or
consolidation of the Company or a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
In connection with the preceding definition of "Change in Control",
the capitalized terms therein are defined as follows:
(iv) "Acquiring Person" means any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
voting securities, unless such person has filed Shedule 13G and
all required amendments thereto with respect to its holdings and
continues to hold such securities for investment in a manner
qualifying such Person to utilize Schedule 13G for reporting of
ownership.
(v) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect as of the date
hereof.
(vi) "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of said Board prior
to the date hereof and any successor of a Continuing Director
while such successor is a member of the Board of Directors of
the Company who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person and who is recommended or
elected to succeed the Continuing Director by a majority of the
Continuing Directors.
(vii) "Person" shall have the meaning assigned to it in Section 13(d)
and 14(d) of the Exchange Act.
(c) "Good Reason" means:
(i) An adverse change in the Executive's status, duties or
responsibilities as an Executive of the Company or Southern;
(ii) Failure of the Company or Southern to pay or provide the
Executive in a timely fashion the salary or benefits to which
he is entitled under any Employment Agreement between the Company
or Southern and the Executive then in effect or under any benefit
plans or policies in which the Executive was then participating
(including, without limitation, any incentive, bonus, stock
option, restricted stock, health, accident, disability, life
insurance, thrift, vacation pay, deferred compensation and
retirement plans or policies);
(iii) The reduction of the Executive's salary (except in connection
with a uniform and general reduction of salaried employees'
compensation effected by the Company or Southern);
(iv) The taking of any action by the Company or Southern (including
the elimination of a plan without providing substitutes therefore,
the reduction of the Executive's awards thereunder or failure to
continue the Executive's participation therein) that would
substantially diminish the aggregate projected value of the
Executive's awards or benefits under the Company's or Southern's
benefit plans or policies described in Section 1(c)(ii) in which
the Executive was then participating; provided, however, that the
Board of Directors may determine at any time to discontinue
Southern's Management Incentive Compensation Plan. The
Executive further acknowledges that awards under such Plan may
vary from year to year and that, under the terms of such Plan, no
awards or reduced awards may be made in any particular year.
(v) A failure by the Company or Southern to obtain from any
successors the assent to this Agreement contemplated by Section 12
hereof; or
(vi) The relocation of the principal office at which the Executive is
to perform his/her services on behalf of the Company or Southern
to a location outside the State of Connecticut or a substantial
increase in the Executive's business travel obligations.
The Executive shall be deemed to have terminated his/her employment for
Good Reason effective upon the effective date stated in a written
notice of such termination given by him/her to the Company and
Southern setting forth in reasonable detail the facts and circumstances
claimed to provide the basis for termination, provided that the
effective date may not precede, nor be more than 60 days from, the date
such notice is given. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(d) "Qualifying Surviving Spouse" means the Executive's widow to whom
he has been married for more than one year at the time of benefit
payment commencement pursuant to this Agreement.
2. EMPLOYMENT: Southern and the Company shall employ Executive
and Executive hereby accepts such employment upon the terms and conditions
hereinafter set forth.
3. TERM OF EMPLOYMENT: The term of this Agreement shall begin
on October 1, 1996, and shall continue thereafter until terminated by either
party by written notice given to the other party at least thirty (30) days
prior to the effective date of any such termination. The effective date of the
termination shall be the date stated in such notice, provided that if the
Company or Southern specifies an effective date that is more than thirty (30)
days following the date of such notice, the Executive may, upon thirty (30)
days' written notice to the Company or Southern, accelerate the effective date
of such termination.
4. COMPENSATION: For all services rendered by Executive under this
Agreement, Southern shall pay Executive an annual base salary, payable at
such times as is customary for Southern to pay its officers, in such amount as
Southern's Board of Directors shall establish from time to time. Executive's
base salary is subject to upward or downward revision by the Board of
Directors at such time as the Board generally increases or reduces the salary
rates of other officers of Southern. Executive shall also participate in
Southern's Management Incentive Compensation Plan (the "Plan") for such
years as the Board of Directors determines the Plan shall be in effect.
Executive shall be entitled to any other benefits available to officers and
employees of Southern generally.
5. CHANGE IN CONTROL: If a Change in Control of the Company
shall have occurred, and Executive's employment by the Company or Southern
is terminated effective as of a date within three (3) years after the date of
such Change in Control for any reason other than (1) his/her death, (2) his/her
Disability, (3) his/her retirement on his/her Normal Retirement Date, (4) by
the Company for Cause, or (5) by Executive without Good Reason, Executive
shall be under no further obligation to perform services for the Company or
Southern and shall be entitled to receive the following payments:
(a) The Company or Southern shall pay to Executive his/her full base
salary through the effective date of the termination within five (5)
business days thereafter and all benefits and awards (including both
the cash and stock components) to which Executive is entitled under any
benefit plans or policies in which he was a participant prior to the
Change in Control, at the time such payments are due pursuant to the
terms of such benefit plans or policies as in effect immediately prior
to the Change in Control.
(b) In addition to the entitlements set forth in Section 3(a), the Company
or Southern shall pay to Executive, in a lump sum not later than ten
(10) business days following the effective date of the termination:
(i) an amount equal to three (3) times Executive's annual base salary
on the effective date of the termination or, if higher,
immediately prior to the Change in Control;
(ii) an amount equal to three (3) times the greater of (A) the highest
amount of the actual bonus awarded to Executive in the five (5)
fiscal years immediately preceding the year in which the Change
in Control occurred or (B) an amount equal to the amount
Executive would have been awarded under the Company's bonus
plan in effect immediately prior to the Change in Control for the
fiscal year in which the Change of Control occurred had he
continued to render services to the Company at the same level of
performance, at the same level of salary, and in the same
position as immediately prior to the Change in Control;
(iii) an amount equal to three (3) times the greater of (A) the largest
annual contribution made by Southern (or the Company, or by
both) to The Southern Connecticut Gas Company TARGET Plan
for Salaried and Certain Other Executives on Executive's behalf
during the five (5) fiscal years immediately preceding the year
in which the Change of Control occurred or (B) an amount equal to
the contribution the Company would have made to said Plan on
his/her behalf for the fiscal year in which the Change of Control
occurred had he participated in said Plan for the entire
fiscal year, received a base salary equal to the salary he was
receiving immediately prior to the Change in Control and had
he elected to contribute to the Plan the same percentage of
his/her base salary as he was contributing on said date; and
(iv) an amount equal to thirty five percent (35%) of Executive's
annual base salary on the effective date of the termination or,
if higher, immediately prior to the Change in Control (as
compensation for medical, life insurance and other benefits
lost as a result of termination of his/her employment).
(v) If a payment may be increased by reference to an alternate
calculation which cannot be made by the time the payment is due,
payment of the lesser known amount shall be made when due, and
if any additional amount becomes due, such additional amount
shall be paid within ten (10) days after the information upon
which calculation of such payment is dependent first becomes
available.
The amount of all payments due to Executive pursuant to this Section
5(b) shall be reduced by four percent (4%) for each full calendar
month by which the date which is two (2) years from the effective date
of the Executive's termination extends beyond his/her Normal
Retirement Date (as that term is defined in The Southern Connecticut
Gas Company Pension Plan for Salaried Employees).
Upon entering into this Agreement and for a period of fourteen (14)
days following each anniversary of the date hereof (the "Election
Period"), the Executive may, in writing, direct the Company or
Southern to pay any amounts to which he is entitled under this
Section 5(b) in five (5) equal annual installments, with the first
such installment payable within ten (10) business days of the
effective date of the termination and each successive installment
payable on the anniversary of the effective date of the termination
or the next following business day if such date is not a business
day (the "Deferred Payment Election"). A Deferred Payment Election,
once made, cannot be revoked except during an Election Period;
provided, however, no Deferred Payment Election can be made or
revoked by Executive during an Election Period that occurs after a
Change in Control or at a time when, in the judgment of the Company,
a Change in Control may occur within sixty (60) days of such
Election Period.
(c) The Company or Southern shall pay or provide to Executive, or his/her
widow or children as the case may be, such amounts and benefits as
may be required so that the pension and other post-retirement benefits
paid or made available to him/her, his/her widow and his/her children
are equal to those, if any, which would have been paid under
The Southern Connecticut Gas Company Pension Plan for Salaried
Executives as in effect immediately prior to the Change in Control,
assuming Executive continued in the employ of the Company or
Southern at the same salary until the third anniversary of the
effective date of the termination of his/her employment or until
his/her Normal Retirement Date, whichever is earlier.
(d) Executive shall not be required to mitigate the amount of any payment
provided in this Section 5, nor shall any payment or benefit provided
for in this Section 5 be offset by any compensation earned by him/her
as the result of employment by another employer, by retirement
benefits, or by offset against any amount claimed to be owed by the
Executive to the Company or Southern, or otherwise.
(e) If any payment to Executive required by this Section 5 is not made
within the time for such payment specified herein, the Company or
Southern shall pay to him/her interest on such payment at the legal
rate payable from time to time upon judgments in the State of
Connecticut from the date such payment is payable under the terms
hereof until paid.
(f) If any payment or benefit to Executive provided for in this Agreement
is subject to the excise tax imposed pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended, (which tax, together with
any similar tax hereafter imposed is referred to in this Agreement as
the "Excise Tax") the Company or Southern shall pay to him/her an
additional amount such that the total amount of the payments to or for
the benefit of Executive under this Agreement (including payments
made pursuant to this Section 5(f)), net of the Excise Tax and all
other applicable federal, state and local taxes shall equal the total
amount of the payments and benefits to which Executive would have
been entitled under this Agreement but for this Section 5(f), net of
all applicable federal, state and local taxes except the Excise Tax.
The amount of the payment to Executive under this Section 5(f) shall
be estimated by the Company's independent auditors based upon the
following assumptions:
(i) All payments to Executive under this Agreement and all other
payments and benefits to him/her in connection with a Change in
Control of the Company shall be deemed to be "parachute
payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" shall be deemed to be subject
to the Excise Tax unless, in the written opinion of tax counsel
selected by the Company's independent auditors, (a signed copy of
which opinion shall be delivered to Executive) such payment or
benefits are not subject to the Excise Tax;
(ii) Except to the extent that the total of the payments and benefits
to Executive under this Agreement exceeds the total of the
"excess parachute payments" made to him/her, no such payments or
benefits shall be deemed to be part of the "base amount" within
the meaning of Section 280G(b)(3) of the Code; and
(iii) Executive shall be deemed to pay federal, state and local taxes
at the highest marginal rate of taxation for the applicable
calendar year.
The estimated amount of the payment due to Executive pursuant to this
Section 5(f) shall be paid to him/her in a lump sum not later than
thirty (30) business days following the effective date of termination.
In the event that the amount of the estimated payment is less than the
amount actually due to him/her under this Section 5(f), the amount of
any such shortfall shall be paid to him/her within ten (10) days
after the existence of the shortfall is discovered.
6. DUTIES: Executive shall serve as in such capacities and with such
titles as may be assigned to him/her by the Board of Directors of Southern and
the Company, and shall assume such duties as the Board of Directors of
Southern and the Company shall assign to him/her.
7. TERMINATION: Subject to the applicable provisions of Section 5 of
this Agreement, Executive's employment pursuant to this Agreement may be
terminated by Southern or the Company on thirty (30) days written notice at
any time, with or without Cause. Executive's term of employment shall also
terminate upon his/her death or permanent disability. Such terminations shall
not constitute a termination of employment without Cause for purposes of
Section 5 of this Agreement. Permanent disability shall mean Executive's
inability by reason of physical or mental impairment or illness to fulfill
his/her obligation hereunder for the reasonably foreseeable future, as
determined by the Board of Directors of Southern and the Company after
considering all relevant medical evidence.
8. AMENDMENT: Amendment of the terms of this Agreement shall not
be valid unless made in writing and signed by duly authorized representatives
of Southern and the Company and by Executive.
9. EXECUTIVE'S EXPENSES: The Company and Southern, or the
successor of either of such companies, shall pay or reimburse Executive (or, if
appropriate, his/her Qualified Surviving Spouse) for all costs, including
reasonable attorney's fees and expenses of litigation and arbitration, incurred
by Executive (or his/her Qualified Surviving Spouse) in successfully
contesting or disputing any action taken by the Company and Southern, or the
successor of either of such companies, purportedly pursuant to Section 5 of
this Employment Agreement or in successfully seeking to obtain or enforce
any right or benefit provided by Section 5 of this Employment Agreement.
10. NOTICES: Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered or sent by
registered or certified mail postage prepaid, properly addressed (if to
Executive, at his/her residence address as then reflected in the Company's
personnel records; if to Southern and the Company, at 855 Main Street,
Bridgeport, Connecticut 06604, Attention: Vice President, Human Resources
or at such other address as the executive offices of the Company may be
located), return receipt requested, and shall be deemed given as of the date of
delivery or personally delivered or of mailing if properly mailed.
11. WAIVER OF BREACH: The waiver by Southern or the Company of
a breach of any provision of this Agreement by Executive shall not operate or
be construed as a waiver of any prior or subsequent breach by Executive.
12. INTEGRATION: This Agreement shall be the sole and exclusive
Agreement among Southern, the Company, and Executive, and any other
agreements or arrangements among them are hereby superseded, canceled, and
made void and of no effect.
13. BINDING AGREEMENT: This Agreement shall inure to the benefit
of and be enforceable by Executive, his/her heirs, executors, administrators,
successors, and assigns. This Agreement shall be binding upon the Company,
Southern and their successors and assigns. The Company and Southern shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company and Southern expressly to assume and agree to perform
this Agreement in accordance with its terms. The Company and Southern
shall obtain such assumption and agreement prior to the effectiveness of any
succession. The obligations of this Agreement may not be assigned by
Executive.
14. COUNTERPARTS: This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
15. CHOICE OF LAW: This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut (except that,
if application of Connecticut's choice of law rules would result in this
Agreement being governed, construed or interpreted in accordance with the
substantive law of a jurisdiction other than Connecticut, Connecticut's
choice of law rules shall not supersede or vary the choice of law made by this
Section 15).
16. SEVERABILITY: The provisions of this Agreement are severable,
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of any other provision.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
THE SOUTHERN CONNECTICUT GAS COMPANY
By______________________________________________
Henry Chauncey, Jr., duly authorized Chairman,
Nominating and Salary Committee
CONNECTICUT ENERGY CORPORATION
By______________________________________________
Henry Chauncey, Jr., duly authorized Chairman,
Nominating Salary Committee
______________________________________________
Carol A. Forest
AGREEMENT
THIS AGREEMENT, made as of the 1st day of October, 1996, by and
among The Southern Connecticut Gas Company, a company incorporated in
the State of Connecticut with executive offices at 855 Main Street, Bridgeport,
Connecticut ("Southern"), and Connecticut Energy Corporation, a company
incorporated in the State of Connecticut with executive offices at 855 Main
Street, Bridgeport, Connecticut ("the Company"), and J. Richard Tiano, an
individual residing at 38 Penny Lane, Woodbridge, Connecticut 06525
(the "Executive").
WHEREAS, Executive serves as Vice President, General Counsel and
Secretary of the Company and Southern; and
WHEREAS, Southern and the Company seek to retain Executive in these
positions; and
WHEREAS, Executive desires to continue his/her employment with
Southern and the Company in accordance with the terms set forth below;
NOW, THEREFORE, in consideration of the remuneration and other
benefits to be provided by Southern and the Company and the services to be
provided by Executive, and in consideration of other mutual promises herein
contained, the parties hereby agree as follows:
1. DEFINITIONS.
The following terms when used herein with initial capital letters shall,
unless the context clearly requires to the contrary, have the meanings assigned
to them below:
(a) "Cause" means the Executive's gross negligence, willful misconduct or
conviction of a felony, which negligence, misconduct or conviction
has a demonstrable and material adverse affect upon the Company or
Southern, provided that the Company or Southern shall have given the
Executive written notice of the alleged negligence or misconduct and
the Executive shall have failed to cure such negligence or
misconduct within 30 days after his/her receipt of such notice. The
Executive shall be deemed to have been terminated for Cause
effective upon the effective date stated in a written notice of such
termination delivered by the Company or Southern to the Executive and
accompanied by the resolution duly adopted by the affirmative vote of
not less than 2/3 of the entire membership of the Board of Directors
of the Company or Southern at a meeting of said Board (after reasonable
notice to the Executive and an opportunity for the Executive, with
his/her counsel present, to be heard before the Board) finding that,
in the good faith opinion of the Board of Directors of the Company
or Southern, the Executive was guilty of conduct constituting Cause
hereunder and setting forth in reasonable detail the facts and
circumstances claimed to provide the basis for the Executive's
termination, provided that the effective date shall not be less than
30 days from the date such notice is given.
(b) "Change in Control" of the Company shall be deemed to have occurred
if:
(i) Any Person is or becomes an Acquiring Person;
(ii) Less than 2/3 of the total membership of the Board of Directors
of the Company shall be Continuing Directors; or
(iii) The shareholders of the Company shall approve a merger or
consolidation of the Company or a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
In connection with the preceding definition of "Change in Control", the
capitalized terms therein are defined as follows:
(iv) "Acquiring Person" means any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding voting
securities, unless such person has filed Schedule 13G and all
required amendments thereto with respect to its holdings and
continues to hold such securities for investment in a
manner qualifying such Person to utilize Schedule 13G for
reporting of ownership.
(v) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect as of the date
hereof.
(vi) "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of said Board prior to
the date hereof and any successor of a Continuing Director while
such successor is a member of the Board of Directors of the
Company who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person and who is recommended or
elected to succeed the Continuing Director by a majority of
the Continuing Directors.
(vii) "Person" shall have the meaning assigned to it in Section 13(d)
and 14(d) of the Exchange Act.
(c) "Good Reason" means:
(i) An adverse change in the Executive's status, duties or
responsibilities as an Executive of the Company or Southern;
(ii) Failure of the Company or Southern to pay or provide the
Executive in a timely fashion the salary or benefits to which
he is entitled under any Employment Agreement between the Company
or Southern and the Executive then in effect or under any benefit
plans or policies in which the Executive was then participating
(including, without limitation, any incentive, bonus, stock
option, restricted stock, health, accident, disability, life
insurance, thrift, vacation pay, deferred compensation and
retirement plans or policies);
(iii) The reduction of the Executive's salary (except in connection
with a uniform and general reduction of salaried employees'
compensation effected by the Company or Southern);
(iv) The taking of any action by the Company or Southern (including
the elimination of a plan without providing substitutes
therefore, the reduction of the Executive's awards thereunder or
failure to continue the Executive's participation therein) that
would substantially diminish the aggregate projected value of the
Executive's awards or benefits under the Company's or Southern's
benefit plans or policies described in Section 1(c)(ii) in which
the Executive was then participating; provided, however, that the
Board of Directors may determine at any time to discontinue
Southern's Management Incentive Compensation Plan. The
Executive further acknowledges that awards under such Plan
may vary from year to year and that, under the terms of such
Plan, no awards or reduced awards may be made in any particular
year.
(v) A failure by the Company or Southern to obtain from any
successors the assent to this Agreement contemplated by Section 12
hereof; or
(vi) The relocation of the principal office at which the Executive is
to perform his/her services on behalf of the Company or Southern
to a location outside the State of Connecticut or a substantial
increase in the Executive's business travel obligations.
The Executive shall be deemed to have terminated his/her employment for
Good Reason effective upon the effective date stated in a written
notice of such termination given by him/her to the Company and Southern
setting forth in reasonable detail the facts and circumstances claimed
to provide the basis for termination, provided that the effective date
may not precede, nor be more than 60 days from, the date such notice is
given. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder.
(d) "Qualifying Surviving Spouse" means the Executive's widow to whom
he has been married for more than one year at the time of benefit
payment commencement pursuant to this Agreement.
2. EMPLOYMENT: Southern and the Company shall employ Executive
and Executive hereby accepts such employment upon the terms and conditions
hereinafter set forth.
3. TERM OF EMPLOYMENT: The term of this Agreement shall begin
on October 1, 1996, and shall continue thereafter until terminated by either
party by written notice given to the other party at least thirty (30) days
prior to the effective date of any such termination. The effective date of the
termination shall be the date stated in such notice, provided that if the
Company or Southern specifies an effective date that is more than thirty
(30) days following the date of such notice, the Executive may, upon thirty
(30) days' written notice to the Company or Southern, accelerate the effective
date of such termination.
4. COMPENSATION: For all services rendered by Executive under this
Agreement, Southern shall pay Executive an annual base salary, payable at
such times as is customary for Southern to pay its officers, in such amount as
Southern's Board of Directors shall establish from time to time. Executive's
base salary is subject to upward or downward revision by the Board of
Directors at such time as the Board generally increases or reduces the salary
rates of other officers of Southern. Executive shall also participate in
Southern's Management Incentive Compensation Plan (the "Plan") for such
years as the Board of Directors determines the Plan shall be in effect.
Executive shall be entitled to any other benefits available to officers and
employees of Southern generally.
5. CHANGE IN CONTROL: If a Change in Control of the Company
shall have occurred, and Executive's employment by the Company or Southern
is terminated effective as of a date within three (3) years after the date of
such Change in Control for any reason other than (1) his/her death, (2) his/her
Disability, (3) his/her retirement on his/her Normal Retirement Date, (4) by
the Company for Cause, or (5) by Executive without Good Reason, Executive
shall be under no further obligation to perform services for the Company
or Southern and shall be entitled to receive the following payments:
(a) The Company or Southern shall pay to Executive his/her full base
salary through the effective date of the termination within five (5)
business days thereafter and all benefits and awards (including both
the cash and stock components) to which Executive is entitled under any
benefit plans or policies in which he was a participant prior to the
Change in Control, at the time such payments are due pursuant to the
terms of such benefit plans or policies as in effect immediately prior
to the Change in Control.
(b) In addition to the entitlements set forth in Section 3(a), the Company
or Southern shall pay to Executive, in a lump sum not later than ten
(10) business days following the effective date of the termination:
(i) an amount equal to three (3) times Executive's annual base salary
on the effective date of the termination or, if higher,
immediately prior to the Change in Control;
(ii) an amount equal to three (3) times the greater of (A) the highest
amount of the actual bonus awarded to Executive in the five (5)
fiscal years immediately preceding the year in which the
Change in Control occurred or (B) an amount equal to the amount
Executive would have been awarded under the Company's bonus plan
in effect immediately prior to the Change in Control for the
fiscal year in which the Change of Control occurred had he
continued to render services to the Company at the same level of
performance, at the same level of salary, and in the same
position as immediately prior to the Change in Control;
(iii) an amount equal to three (3) times the greater of (A) the largest
annual contribution made by Southern (or the Company, or by
both) to The Southern Connecticut Gas Company TARGET Plan
for Salaried and Certain Other Executives on Executive's behalf
during the five (5) fiscal years immediately preceding the
year in which the Change of Control occurred or (B) an amount
equal to the contribution the Company would have made to said
Plan on his/her behalf for the fiscal year in which the Change of
Control occurred had he participated in said Plan for the entire
fiscal year, received a base salary equal to the salary he was
receiving immediately prior to the Change in Control and had he
elected to contribute to the Plan the same percentage of his/her
base salary as he was contributing on said date; and
(iv) an amount equal to thirty five percent (35%) of Executive's
annual base salary on the effective date of the termination or,
if higher, immediately prior to the Change in Control (as
compensation for medical, life insurance and other benefits lost
as a result of termination of his/her employment).
(v) If a payment may be increased by reference to an alternate
calculation which cannot be made by the time the payment is due,
payment of the Lesser known amount shall be made when due,
and if any additional amount becomes due, such additional amount
shall be paid within ten (10) days after the information upon
which calculation of such payment is dependent first becomes
available.
The amount of all payments due to Executive pursuant to this Section
5(b) shall be reduced by four percent (4%) for each full calendar month
by which the date which is two (2) years from the effective date of the
Executive's termination extends beyond his/her Normal Retirement Date
(as that term is defined in The Southern Connecticut Gas Company
Pension Plan for Salaried Employees).
Upon entering into this Agreement and for a period of fourteen (14)
days following each anniversary of the date hereof (the "Election
Period"), the Executive may, in writing, direct the Company or Southern
to pay any amounts to which he is entitled under this Section 5(b) in
five (5) equal annual installments, with the first such installment
payable within ten (10) business days of the effective date of the
termination and each successive installment payable on the anniversary
of the effective date of the termination or the next following business
day if such date is not a business day (the "Deferred Payment
Election"). A Deferred Payment Election, once made, cannot be
revoked except during an Election Period; provided, however, no
Deferred Payment Election can be made or revoked by Executive during an
Election Period that occurs after a Change in Control or at a time
when, in the judgment of the Company, a Change in Control may occur
within sixty (60) days of such Election Period.
(c) The Company or Southern shall pay or provide to Executive, or his/her
widow or children as the case may be, such amounts and benefits as
may be required so that the pension and other post-retirement benefits
paid or made available to him/her, his/her widow and his/her children
are equal to those, if any, which would have been paid under The
Southern Connecticut Gas Company Pension Plan for Salaried
Executives as in effect immediately prior to the Change in
Control, assuming Executive continued in the employ of the Company
or Southern at the same salary until the third anniversary of the
effective date of the termination of his/her employment or until
his/her Normal Retirement Date, whichever is earlier.
(d) Executive shall not be required to mitigate the amount of any payment
provided in this Section 5, nor shall any payment or benefit provided
for in this Section 5 be offset by any compensation earned by him/her
as the result of employment by another employer, by retirement
benefits, or by offset against any amount claimed to be owed by the
Executive to the Company or Southern, or otherwise.
(e) If any payment to Executive required by this Section 5 is not made
within the time for such payment specified herein, the Company or
Southern shall pay to him/her interest on such payment at the legal
rate payable from time to time upon judgments in the State of
Connecticut from the date such payment is payable under the terms
hereof until paid.
(f) If any payment or benefit to Executive provided for in this Agreement
is subject to the excise tax imposed pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended, (which tax, together with
any similar tax hereafter imposed is referred to in this Agreement as
the "Excise Tax") the Company or Southern shall pay to him/her an
additional amount such that the total amount of the payments to or for
the benefit of Executive under this Agreement (including payments
made pursuant to this Section 5(f)), net of the Excise Tax and all
other applicable federal, state and local taxes shall equal the total
amount of the payments and benefits to which Executive would have been
entitled under this Agreement but for this Section 5(f), net of all
applicable federal, state and local taxes except the Excise Tax.
The amount of the payment to Executive under this Section 5(f) shall
be estimated by the Company's independent auditors based upon the
following assumptions:
(i) All payments to Executive under this Agreement and all other
payments and benefits to him/her in connection with a Change in
Control of the Company shall be deemed to be "parachute
payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" shall be deemed to be subject
to the Excise Tax unless, in the written opinion of tax counsel
selected by the Company's independent auditors, (a signed copy of
which opinion shall be delivered to Executive) such payment or
benefits are not subject to the Excise Tax;
(ii) Except to the extent that the total of the payments and benefits
to Executive under this Agreement exceeds the total of the
"excess parachute payments" made to him/her, no such payments or
benefits shall be deemed to be part of the "base amount" within
the meaning of Section 280G(b)(3) of the Code; and
(iii) Executive shall be deemed to pay federal, state and local taxes
at the highest marginal rate of taxation for the applicable
calendar year. The estimated amount of the payment due to
Executive pursuant to this Section 5(f) shall be paid to him/her
in a lump sum not later than thirty (30) business days following
the effective date of termination. In the event that the amount
of the estimated payment is less than the amount actually due to
him/her under this Section 5(f), the amount of any such shortfall
shall be paid to him/her within ten (10) days after the existence
of the shortfall is discovered.
6. DUTIES: Executive shall serve as in such capacities and with such
titles as may be assigned to him/her by the Board of Directors of Southern and
the Company, and shall assume such duties as the Board of Directors of
Southern and the Company shall assign to him/her.
7. TERMINATION: Subject to the applicable provisions of Section 5 of
this Agreement, Executive's employment pursuant to this Agreement may be
terminated by Southern or the Company on thirty (30) days written notice at
any time, with or without Cause. Executive's term of employment shall also
terminate upon his/her death or permanent disability. Such terminations shall
not constitute a termination of employment without Cause for purposes of
Section 5 of this Agreement. Permanent disability shall mean Executive's
inability by reason of physical or mental impairment or illness to fulfill
his/her obligation hereunder for the reasonably foreseeable future, as
determined by the Board of Directors of Southern and the Company after
considering all relevant medical evidence.
8. AMENDMENT: Amendment of the terms of this Agreement shall not
be valid unless made in writing and signed by duly authorized representatives
of Southern and the Company and by Executive.
9. EXECUTIVE'S EXPENSES: The Company and Southern, or the
successor of either of such companies, shall pay or reimburse Executive (or, if
appropriate, his/her Qualified Surviving Spouse) for all costs, including
reasonable attorney's fees and expenses of litigation and arbitration, incurred
by Executive (or his/her Qualified Surviving Spouse) in successfully contesting
or disputing any action taken by the Company and Southern, or the successor
of either of such companies, purportedly pursuant to Section 5 of this
Employment Agreement or in successfully seeking to obtain or enforce any
right or benefit provided by Section 5 of this Employment Agreement.
10. NOTICES: Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered or sent by
registered or certified mail postage prepaid, properly addressed (if to
Executive, at his/her residence address as then reflected in the Company's
personnel records; if to Southern and the Company, at 855 Main Street,
Bridgeport, Connecticut 06604, Attention: Vice President, Human Resources
or at such other address as the executive offices of the Company may be
located), return receipt requested, and shall be deemed given as of the date of
delivery or personally delivered or of mailing if properly mailed.
11. WAIVER OF BREACH: The waiver by Southern or the Company of
a breach of any provision of this Agreement by Executive shall not operate or
be construed as a waiver of any prior or subsequent breach by Executive.
12. INTEGRATION: This Agreement shall be the sole and exclusive
Agreement among Southern, the Company, and Executive, and any other
agreements or arrangements among them are hereby superseded, canceled, and
made void and of no effect.
13. BINDING AGREEMENT: This Agreement shall inure to the benefit
of and be enforceable by Executive, his/her heirs, executors, administrators,
successors, and assigns. This Agreement shall be binding upon the Company,
Southern and their successors and assigns. The Company and Southern shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company and Southern expressly to assume and agree to perform
this Agreement in accordance with its terms. The Company and Southern
shall obtain such assumption and agreement prior to the effectiveness of any
succession. The obligations of this Agreement may not be assigned by
Executive.
14. COUNTERPARTS: This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
15. CHOICE OF LAW: This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut (except that,
if application of Connecticut's choice of law rules would result in this
Agreement being governed, construed or interpreted in accordance with the
substantive law of a jurisdiction other than Connecticut, Connecticut's choice
of law rules shall not supersede or vary the choice of law made by this
Section 15).
16. SEVERABILITY: The provisions of this Agreement are severable,
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of any other provision.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
THE SOUTHERN CONNECTICUT GAS COMPANY
By______________________________________________
Henry Chauncey, Jr., duly authorized Chairman,
Nominating and Salary Committee
CONNECTICUT ENERGY CORPORATION
By______________________________________________
Henry Chauncey, Jr., duly authorized Chairman,
Nominating Salary Committee
______________________________________________
J. Richard Tiano
AGREEMENT
THIS AGREEMENT, made as of the 1st day of October, 1996, by and
among The Southern Connecticut Gas Company, a company incorporated in
the State of Connecticut with executive offices at 855 Main Street,
Bridgeport, Connecticut ("Southern"), and Connecticut Energy Corporation,
a company incorporated in the State of Connecticut with executive offices
at 855 Main Street, Bridgeport, Connecticut ("the Company"), and Thomas A.
Trotta, an individual residing at 8 Zephyr Road, Trumbull, Connecticut
06611 (the "Executive").
WHEREAS, Executive serves as Executive Vice President and Chief
Operating Officer of Southern and Senior Vice President of the Company;
and
WHEREAS, Southern and the Company seek to retain Executive in these
positions; and
WHEREAS, Executive desires to continue his/her employment with
Southern and the Company in accordance with the terms set forth below;
NOW, THEREFORE, in consideration of the remuneration and other
benefits to be provided by Southern and the Company and the services to be
provided by Executive, and in consideration of other mutual promises herein
contained, the parties hereby agree as follows:
1. DEFINITIONS.
The following terms when used herein with initial capital letters shall,
unless the context clearly requires to the contrary, have the meanings assigned
to them below:
(a) "Cause" means the Executive's gross negligence, willful misconduct or
conviction of a felony, which negligence, misconduct or conviction has
a demonstrable and material adverse affect upon the Company or
Southern, provided that the Company or Southern shall have given the
Executive written notice of the alleged negligence or misconduct and
the Executive shall have failed to cure such negligence or misconduct
within 30 days after his/her receipt of such notice. The Executive
shall be deemed to have been terminated for Cause effective upon the
effective date stated in a written notice of such termination delivered
by the Company or Southern to the Executive and accompanied by the
resolution duly adopted by the affirmative vote of not less than 2/3 of
the entire membership of the Board of Directors of the Company or
Southern at a meeting of said Board (after reasonable notice to the
Executive and an opportunity for the Executive, with his/her counsel
present, to be heard before the Board) finding that, in the good faith
opinion of the Board of Directors of the Company or Southern, the
Executive was guilty of conduct constituting Cause hereunder and
setting forth in reasonable detail the facts and circumstances claimed
to provide the basis for the Executive's termination, provided that the
effective date shall not be less than 30 days from the date such notice
is given.
(b) "Change in Control" of the Company shall be deemed to have occurred
if:
(i) Any Person is or becomes an Acquiring Person;
(ii) Less than 2/3 of the total membership of the Board of Directors
of the Company shall be Continuing Directors; or
(iii) The shareholders of the Company shall approve a merger or
consolidation of the Company or a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
In connection with the preceding definition of "Change in Control", the
capitalized terms therein are defined as follows:
(iv) "Acquiring Person" means any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding voting
securities, unless such person has filed Schedule 13G and all
required amendments thereto with respect to its holdings and
continues to hold such securities for investment in a manner
qualifying such Person to utilize Schedule 13G for reporting of
ownership.
(v) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect as of the date
hereof.
(vi) "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of said Board prior
to the date hereof and any successor of a Continuing Director
while such successor is a member of the Board of Directors of the
Company who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person and who is recommended or
elected to succeed the Continuing Director by a majority of the
Continuing Directors.
(vii) "Person" shall have the meaning assigned to it in Section 13(d)
and 14(d) of the Exchange Act.
(c) "Good Reason" means:
(i) An adverse change in the Executive's status, duties or
responsibilities as an Executive of the Company or Southern;
(ii) Failure of the Company or Southern to pay or provide the
Executive in a timely fashion the salary or benefits to which he
is entitled under any Employment Agreement between the Company
or Southern and the Executive then in effect or under any benefit
plans or policies in which the Executive was then participating
(including, without limitation, any incentive, bonus, stock
option, restricted stock, health, accident, disability, life
insurance, thrift, vacation pay, deferred compensation and
retirement plans or policies);
(iii) The reduction of the Executive's salary (except in connection
with a uniform and general reduction of salaried employees'
compensation effected by the Company or Southern);
(iv) The taking of any action by the Company or Southern (including
the elimination of a plan without providing substitutes
therefore, the reduction of the Executive's awards thereunder or
failure to continue the Executive's participation therein) that
would substantially diminish the aggregate projected value of
the Executive's awards or benefits under the Company's or
Southern's benefit plans or policies described in Section
1(c)(ii) in which the Executive was then participating;
provided, however, that the Board of Directors may determine
at any time to discontinue Southern's Management Incentive
Compensation Plan. The Executive further acknowledges that
awards under such Plan may vary from year to year and that,
under the terms of such Plan, no awards or reduced awards may
be made in any particular year.
(v) A failure by the Company or Southern to obtain from any
successors the assent to this Agreement contemplated by Section
12 hereof; or
(vi) The relocation of the principal office at which the Executive is
to perform his/her services on behalf of the Company or Southern
to a location outside the State of Connecticut or a substantial
increase in the Executive's business travel obligations.
The Executive shall be deemed to have terminated his/her employment for
Good Reason effective upon the effective date stated in a written notice of such
termination given by him/her to the Company and Southern setting forth in
reasonable detail the facts and circumstances claimed to provide the basis for
termination, provided that the effective date may not precede, nor be more
than 60 days from, the date such notice is given. The Executive's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(d) "Qualifying Surviving Spouse" means the Executive's widow to whom
he has been married for more than one year at the time of benefit
payment commencement pursuant to this Agreement.
2. EMPLOYMENT: Southern and the Company shall employ Executive
and Executive hereby accepts such employment upon the terms and conditions
hereinafter set forth.
3. TERM OF EMPLOYMENT: The term of this Agreement shall begin
on October 1, 1996, and shall continue thereafter until terminated by either
party by written notice given to the other party at least thirty (30) days prior
to the effective date of any such termination. The effective date of the
termination shall be the date stated in such notice, provided that if the
Company or Southern specifies an effective date that is more than thirty
(30) days following the date of such notice, the Executive may, upon thirty
(30) days' written notice to the Company or Southern, accelerate the effective
date of such termination.
4. COMPENSATION: For all services rendered by Executive under this
Agreement, Southern shall pay Executive an annual base salary, payable at
such times as is customary for Southern to pay its officers, in such amount as
Southern's Board of Directors shall establish from time to time. Executive's
base salary is subject to upward or downward revision by the Board of
Directors at such time as the Board generally increases or reduces the salary
rates of other officers of Southern. Executive shall also participate in
Southern's Management Incentive Compensation Plan (the "Plan") for such
years as the Board of Directors determines the Plan shall be in effect.
Executive shall be entitled to any other benefits available to officers and
employees of Southern generally.
5. CHANGE IN CONTROL: If a Change in Control of the Company
shall have occurred, and Executive's employment by the Company or Southern
is terminated effective as of a date within three (3) years after the date of
such Change in Control for any reason other than (1) his/her death, (2) his/her
Disability, (3) his/her retirement on his/her Normal Retirement Date, (4) by
the Company for Cause, or (5) by Executive without Good Reason, Executive
shall be under no further obligation to perform services for the Company
or Southern and shall be entitled to receive the following payments:
(a) The Company or Southern shall pay to Executive his/her full base
salary through the effective date of the termination within five (5)
business days thereafter and all benefits and awards (including both
the cash and stock components) to which Executive is entitled under any
benefit plans or policies in which he was a participant prior to the
Change in Control, at the time such payments are due pursuant to the
terms of such benefit plans or policies as in effect immediately prior
to the Change in Control.
(b) In addition to the entitlements set forth in Section 3(a), the Company
or Southern shall pay to Executive, in a lump sum not later than ten
(10) business days following the effective date of the termination:
(i) an amount equal to three (3) times Executive's annual base salary
on the effective date of the termination or, if higher,
immediately prior to the Change in Control;
(ii) an amount equal to three (3) times the greater of (A) the
highest amount of the actual bonus awarded to Executive in the
five (5) fiscal years immediately preceding the year in which the
Change in Control occurred or (B) an amount equal to the amount
Executive would have been awarded under the Company's bonus
plan in effect immediately prior to the Change in Control for the
fiscal year in which the Change of Control occurred had he
continued to render services to the Company at the same level of
performance, at the same level of salary, and in the same
position as immediately prior to the Change in Control;
(iii) an amount equal to three (3) times the greater of (A) the
largest annual contribution made by Southern (or the Company, or
by both) to The Southern Connecticut Gas Company TARGET Plan
for Salaried and Certain Other Executives on Executive's behalf
during the five (5) fiscal years immediately preceding the year
in which the Change of Control occurred or (B) an amount equal to
the contribution the Company would have made to said Plan on
his/her behalf for the fiscal year in which the Change of Control
occurred had he participated in said Plan for the entire fiscal
year, received a base salary equal to the salary he was receiving
immediately prior to the Change in Control and had he elected to
contribute to the Plan the same percentage of his/her base salary
as he was contributing on said date; and
(iv) an amount equal to thirty five percent (35%) of Executive's
annual base salary on the effective date of the termination or,
if higher, immediately prior to the Change in Control (as
compensation for medical, life insurance and other benefits lost
as a result of termination of his/her employment).
(v) If a payment may be increased by reference to an alternate
calculation which cannot be made by the time the payment is due,
payment of the lesser known amount shall be made when due, and
if any additional amount becomes due, such additional amount
shall be paid within ten (10) days after the information upon
which calculation of such payment is dependent first becomes
available.
The amount of all payments due to Executive pursuant to this Section
5(b) shall be reduced by four percent (4%) for each full calendar
month by which the date which is two (2) years from the effective
date of the Executive's Termination extends beyond his/her Normal
Retirement Date (as that term is defined in The Southern Connecticut
Gas Company Pension Plan for Salaried Employees).
Upon entering into this Agreement and for a period of fourteen
(14) days Following each anniversary of the date hereof (the
"Election Period"), the Executive may, in writing, direct the
Company or Southern to pay any amounts to which he is entitled
under this Section 5(b) in five (5) equal annual installments, with the
first such installment payable within ten (10) business days of the
effective date of the termination and each successive installment
payable on the anniversary of the effective date of the termination or
the next following business day if such date is not a business day (the
"Deferred Payment Election"). A Deferred Payment Election, once
made, cannot be revoked except during an Election Period; provided,
however, no Deferred Payment Election can be made or revoked by
Executive during an Election Period that occurs after a Change in
Control or at a time when, in the judgment of the Company, a
Change in Control may occur within sixty (60) days of such Election
Period.
(c) The Company or Southern shall pay or provide to Executive, or his/her
widow or children as the case may be, such amounts and benefits as
may be required so that the pension and other post-retirement benefits
paid or made available to him/her, his/her widow and his/her children
are equal to those, if any, which would have been paid under The
Southern Connecticut Gas Company Pension Plan for Salaried
Executives as in effect immediately prior to the Change in
Control, assuming Executive continued in the employ of the Company
or Southern at the same salary until the third anniversary of the
effective date of the termination of his/her employment or until
his/her Normal Retirement Date, whichever is earlier.
(d) Executive shall not be required to mitigate the amount of any payment
provided in this Section 5, nor shall any payment or benefit provided
for in this Section 5 be offset by any compensation earned by him/her
as the result of employment by another employer, by retirement
benefits, or by offset against any amount claimed to be owed by the
Executive to the Company or Southern, or otherwise.
(e) If any payment to Executive required by this Section 5 is not made
within the time for such payment specified herein, the Company or
Southern shall pay to him/her interest on such payment at the legal
rate payable from time to time upon judgments in the State of
Connecticut from the date such payment is payable under the terms
hereof until paid.
(f) If any payment or benefit to Executive provided for in this Agreement
is subject to the excise tax imposed pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended, (which tax, together with
any similar tax hereafter imposed is referred to in this Agreement as
the "Excise Tax") the Company or Southern shall pay to him/her an
additional amount such that the total amount of the payments to or for
the benefit of Executive under this Agreement (including payments
made pursuant to this Section 5(f)), net of the Excise Tax and all
other applicable federal, state and local taxes shall equal the total
amount of the payments and benefits to which Executive would have been
entitled under this Agreement but for this Section 5(f), net of all
applicable federal, state and local taxes except the Excise Tax.
The amount of the payment to Executive under this Section 5(f) shall
be estimated by the Company's independent auditors based upon the
following assumptions:
(i) All payments to Executive under this Agreement and all other
payments and benefits to him/her in connection with a Change in
Control of the Company shall be deemed to be "parachute
payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess parachute payments" shall be deemed to be subject
to the Excise Tax unless, in the written opinion of tax counsel
selected by the Company's independent auditors, (a signed copy of
which opinion shall be delivered to Executive) such payment or
benefits are not subject to the Excise Tax;
(ii) Except to the extent that the total of the payments and benefits
to Executive under this Agreement exceeds the total of the
"excess parachute payments" made to him/her, no such payments or
benefits shall be deemed to be part of the "base amount" within
the meaning of Section 280G(b)(3) of the Code; and
(iii) Executive shall be deemed to pay federal, state and local taxes
at the highest marginal rate of taxation for the applicable
calendar year.
The estimated amount of the payment due to Executive pursuant to this
Section 5(f) shall be paid to him/her in a lump sum not later than
thirty (30) business days following the effective date of termination.
In the event that the amount of the estimated payment is less than the
amount actually due to him/her under this Section 5(f), the amount of
any such shortfall shall be paid to him/her within ten (10) days after
the existence of the shortfall is discovered.
6. DUTIES: Executive shall serve as in such capacities and with such
titles as may be assigned to him/her by the Board of Directors of Southern and
the Company, and shall assume such duties as the Board of Directors of
Southern and the Company shall assign to him/her.
7. TERMINATION: Subject to the applicable provisions of Section 5 of
this Agreement, Executive's employment pursuant to this Agreement may be
terminated by Southern or the Company on thirty (30) days written notice at
any time, with or without Cause. Executive's term of employment shall also
terminate upon his/her death or permanent disability. Such terminations shall
not constitute a termination of employment without Cause for purposes of
Section 5 of this Agreement. Permanent disability shall mean Executive's
inability by reason of physical or mental impairment or illness to fulfill
his/her obligation hereunder for the reasonably foreseeable future, as
determined by the Board of Directors of Southern and the Company after
considering all relevant medical evidence.
8. AMENDMENT: Amendment of the terms of this Agreement shall not
be valid unless made in writing and signed by duly authorized representatives
of Southern and the Company and by Executive.
9. EXECUTIVE'S EXPENSES: The Company and Southern, or the
successor of either of such companies, shall pay or reimburse Executive (or, if
appropriate, his/her Qualified Surviving Spouse) for all costs, including
reasonable attorney's fees and expenses of litigation and arbitration, incurred
by Executive (or his/her Qualified Surviving Spouse) in successfully contesting
or disputing any action taken by the Company and Southern, or the successor
of either of such companies, purportedly pursuant to Section 5 of this
Employment Agreement or in successfully seeking to obtain or enforce any
right or benefit provided by Section 5 of this Employment Agreement.
10. NOTICES: Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered or sent by
registered or certified mail postage prepaid, properly addressed (if to
Executive, at his/her residence address as then reflected in the Company's
personnel records; if to Southern and the Company, at 855 Main Street,
Bridgeport, Connecticut 06604, Attention: Vice President, Human Resources
or at such other address as the executive offices of the Company may be
located), return receipt requested, and shall be deemed given as of the date of
delivery or personally delivered or of mailing if properly mailed.
11. WAIVER OF BREACH: The waiver by Southern or the Company of
a breach of any provision of this Agreement by Executive shall not operate or
be construed as a waiver of any prior or subsequent breach by Executive.
12. INTEGRATION: This Agreement shall be the sole and exclusive
Agreement among Southern, the Company, and Executive, and any other
agreements or arrangements among them are hereby superseded, canceled, and
made void and of no effect.
13. BINDING AGREEMENT: This Agreement shall inure to the benefit
of and be enforceable by Executive, his/her heirs, executors, administrators,
successors, and assigns. This Agreement shall be binding upon the Company,
Southern and their successors and assigns. The Company and Southern shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company and Southern expressly to assume and agree to perform
this Agreement in accordance with its terms. The Company and Southern
shall obtain such assumption and agreement prior to the effectiveness of any
succession. The obligations of this Agreement may not be assigned by
Executive.
14. COUNTERPARTS: This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
15. CHOICE OF LAW: This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut (except that,
if application of Connecticut's choice of law rules would result in this
Agreement being governed, construed or interpreted in accordance with the
substantive law of a jurisdiction other than Connecticut, Connecticut's choice
of law rules shall not supersede or vary the choice of law made by this Section
15).
16. SEVERABILITY: The provisions of this Agreement are severable,
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of any other provision.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
THE SOUTHERN CONNECTICUT GAS COMPANY
By______________________________________________
Henry Chauncey, Jr., duly authorized Chairman,
Nominating and Salary Committee
CONNECTICUT ENERGY CORPORATION
By______________________________________________
Henry Chauncey, Jr., duly authorized Chairman,
Nominating Salary Committee
_____________________________________________
Thomas A. Trotta
<PAGE>
- -------------------------------------------------------------------------------
Connecticut Energy
Corporation
1996 Annual Report
Southern Connecticut Gas
Service First!
CNE Energy Services Group, Inc.
CNE Development Corporation
CNE Venture-Tech, Inc.
...into the next millennium
<PAGE>
Business Profile
Connecticut Energy Corporation is a holding company primarily engaged
in the retail distribution of natural gas through its wholly-owned subsidiary,
The Southern Connecticut Gas Company, which delivers
natural gas in 22 Connecticut communities to over 156,000
customers. The Company also has three nonutility subsidiaries:
CNE Energy Services Group, Inc. provides an array of energy commodities and
services to commercial and industrial customers throughout New England;
CNE Development Corporation participates in a natural gas
purchasing cooperative; and CNE Venture-Tech, Inc. participates in ventures
providing information technology to utility companies.
Corporate Structure
- -------------------------------------------------------------------------------
Connecticut
Energy
Corporation
-
-
- -------------------------------------------------------------------------------
- - - -
- - - -
CNE The Southern CNE CNE
Energy Serives Connecticut Gas Venture-Tech, Development
Group, Inc. Company Inc. Corporation
- -
---------------------- -
- -
-------------------------------------------- -
- - - -
- - - -
Total/Louis Operating & East Coast
Dreyfus Maintenance Total Peaking Natural Gas
Energy Services, Services Services, L.L.C. Cooperative,
L.L.C. L.L.C.
- -------------------------------------------------------------------------------
<PAGE>
Highlights
Years ended September 30, 1996 1995 % Change
- -------------------------------------------------------------------------------
FINANCIAL (dollars in thousands, except per share)
- -------------------------------------------------------------------------------
Operating revenues $261,093 $232,093 12.5
Gross margin 119,465 116,510 2.5
Net income 15,165 14,060 7.9
Net income per share 1.70 1.60 6.2
Dividends paid per share 1.31 1.30 0.8
Total assets 399,228 370,088 7.9
Common shareholders' equity 137,961 131,561 4.9
Long-term debt 138,727 119,322 16.3
Return on average common equity (%) 10.87 10.52 3.3
- -------------------------------------------------------------------------------
OTHER
- -------------------------------------------------------------------------------
Weighted average common shares outstanding 8,924,299 8,773,878 1.7
Shares outstanding at year end 9,012,267 8,865,210 1.7
Shareholders of record 11,274 11,688 (3.5)
Shareholders in dividend reinvestment plan 6,110 6,683 (8.6)
Institutional ownership (shares) 1,821,000 1,860,000 (2.1)
Average number of customers 156,085 154,216 1.2
- -------------------------------------------------------------------------------
Dividends
Connecticut Energy, through its predecessor companies, has paid cash
dividends on its common stock since 1850, the longest consecutive dividend pay
ment record of any nonfinancial company listed on the New York Stock
Exchange. In September 1996, the Company paid its 347th consecutive quarterly
dividend. The dividend has increased in nineteen of the last twenty years.
Stock Listing Information
Connecticut Energy's common stock is listed on the New York Stock Exchange
under the ticker symbol "CNE." Quotes may be obtained in daily newspapers
where it is listed under "ConnEn" in the New York Stock Exchange composite
table. Investment and Shareholder Information is on pages 39, 40 and 41.
Net
Income
(dollars in millions)
'91 '92 '93 '94 '95 '96
9.0 10.2 11.1 12.8 14.1 15.2
Earnings
(dollars per share)
'91 '92 '93 '94 '95 '96
1.38 1.43 1.50 1.58 1.60 1.70
1
<PAGE>
[photo of chairman]
To Our
Shareholders:
Fiscal 1996 was truly a watershed year for Connecticut Energy
Corporation. At this time last year, I provided you with a preview of the
numerous new opportunities available to us in an increasingly deregulated
environment, and I outlined our plans to capitalize on them. It is my privilege
now to report on our success in executing these plans and to share the
impressive results we achieved for you in 1996. I am pleased to describe the
many exciting changes we have made and the strategic joint ventures we have
formed, all of which have been built upon our successful planning efforts in
this and prior years.
CONTINUED EARNINGS GROWTH
Our first responsibility to you rests with our commitment to
continued long-term earnings growth. I am pleased to report that, once again,
we have achieved record earnings. Earnings for fiscal 1996 grew to $1.70 per
share from $1.60 per share last year, an increase of six percent. Fiscal 1996
marks the seventh consecutive year in which we have succeeded in achieving
growth in annual earnings per share. This is an extraordinary record, and one
which is unmatched by any other natural gas distribution company in the United
States. Net income reached a record level of $15,165,000, an increase of
nearly eight percent over the $14,060,000 earned last year. As a
demonstration of our confidence in continuing to meet our earnings growth
objectives in the future, we have also increased your annual indicated
dividend to $1.32 per share while continuing to reduce our dividend payout
ratio to 77 percent in fiscal 1996. Our current payout ratio is over seventeen
percent lower than it was seven years ago, making our target payout ratio of
75 percent now clearly within reach.
CORE UTILITY BUSINESS
Margins from our utility business, The Southern Connecticut Gas
Company (Southern), have been and will remain the anchor of our earnings for
the near future. Southern continues to add customers in its core firm markets
by concentrating efforts along its existing distribution system, as well as in
non-core markets, which are beginning to play a more important role in its
revenue mix. Southern's on-system gas deliveries reached an all time high of
31.5 billion cubic feet (Bcf), including record firm deliveries of 22.8 Bcf.
Gross margins grew to a new high of $119,465,000, and operations and
maintenance expenses decreased by over two percent from the prior year.
Southern has succeeded in lowering its operations and maintenance expense as a
percentage of margins to 43 percent, an achievement which sets us apart from
the rest of the industry. This was accomplished while continuing to improve
customer service. Additionally, the Connecticut Department of Public Utility
Control (DPUC) has recognized Southern for having the best customer service
record of the state's three natural gas distribution companies for the third
consecutive year.
COMPETITIVE ENERGY
MARKETPLACE
Our plans are securely in place as the regulated utility environment
transforms itself into a competitive energy marketplace where traditional
boundaries are evaporating. In response to these
2
<PAGE>
changes, we have expanded the two unregulated subsidiaries we added to our
business structure last year, and we have developed a third unregulated
subsidiary. These unregulated initiatives are directly related to our core
business, and they leverage our years of solid experience with the unique
expertise of the nationally renowned partners we have chosen for joint
ventures. Our unregulated subsidiaries, through which we will be able to
capture new markets within and outside of Southern's service area, will be our
engines for growth as we approach the 21st century.
CNE Development Corporation, our first unregulated subsidiary,
was initially formed as an equity partner in the East Coast Natural Gas
Cooperative (Co-op) to purchase large volume supplies and thus, lower gas
costs for our customers. The Co-op expanded this venture by forming an
agreement with Tejas Power to offer storage utilization service and unbundled
sales.
CNE Energy Services Group, Inc. (CNE Energy) has established
strategic alliances and joint ventures with nationally recognized leaders in
the energy market. A joint venture with Louis Dreyfus Energy, an international
energy commodities trader and price risk manager, has quickly developed an
impressive commercial and industrial customer base throughout New England.
This partnership has also established strategic marketing alliances with
distribution companies in New Hampshire, Rhode Island and Massachusetts to
provide an entry into those commercial and industrial markets. Our approach of
forming strategic alliances has given Connecticut Energy an early start in
establishing a strong market presence in New England as unbundling evolves.
Another critical joint venture involving CNE Energy will
transform our liquefied natural gas (LNG)facility into an interstate peaking
"hub." This venture, called Total Peaking Services (TPS), has been formed with
PanEnergy Corporation, one of the country's largest natural gas producers,
transporters and marketers. Once again, we have drawn on our reputation and
our knowledge of the New England markets and combined these with PanEnergy's
expertise in storage and marketing. Once final regulatory approvals are
complete, we expect that this joint venture will begin contributing to
earnings in fiscal 1997.
Our third unregulated subsidiary, CNE Venture-Tech, Inc., will
involve partnerships with companies which have developed information
technology systems that are used to help utilities operate in a more efficient
way. Although over the near term, the growth in Connecticut Energy's
unregulated ventures will come from CNE Energy's joint ventures, over the
longer term, information systems and other technology ventures could produce
even greater growth opportunities than energy marketing. Information
technology business alliances will become an important vehicle to
differentiate Connecticut Energy from its competitors.
A STRONG FOUNDATION; A BRIGHT FUTURE
We can attribute our success to the strong foundation of industry
experience we have built over the years and to a dedicated Board of Directors
and workforce. Our Board of Directors has provided their guidance and
expertise, and I want to express my appreciation for their ongoing support for
our initiatives.
I would also like to compliment all of our employees for their
high level of commitment and teamwork, which have allowed us to work more
efficiently than we did just a few years ago. Contributing to those efforts,
our labor union negotiated a new five year contract in March which included
changes in work practices that allow more operational flexibility. I would like
to take this opportunity to also thank Frank L. Esposito, Vice President, Human
Resources, who recently retired after 46 years of dedicated service. His
experience in labor relations and valued counsel have played a key role in our
success.
In order to succeed in the new energy world, we must move forward
with a clear sense of vision, focusing on those efforts that will enable us to
expand our business and add value to our shareholders and customers. Our
dynamic new marketplace offers us a unique opportunity to embrace competition
and prosper in areas which were previously beyond our reach. We made
enlightened decisions and took aggressive actions in 1996 to respond to these
changes, establishing strategic new ventures related to energy products and
services and information technology applications. We have firmly put the
building blocks in place to guide Connecticut Energy into the next millennium.
Our achievements last year are yet another milepost along the continuous road
to success. Our search for excellence and success will always be an endless
journey!
/s/ J. R. Crespo
- ----------------
J. R. Crespo
Chairman, President and
Chief Executive Officer
3
<PAGE>
Southern
Connecticut
Gas
Service First!
We have continued to expand our customer base by concentrating on heating
conversions, especially along our existing distribution system in the
residential market. We are also working with our trade allies, vendors and
architects to expand our commercial and industrial business to increase the
efficiency of the system we currently have in place.
4
<PAGE>
CHANGES LEADING TO 1997
Although the deregulation of the natural gas industry began on a
federal level in the 1980s, it was only in this past year that a landmark
regulatory Decision on unbundling initiated gas deregulation at the state
level. The Connecticut DPUC accepted Southern's recommendation that unbundled
service be made available to all commercial and industrial customers, both
firm and interruptible. As of April 1, 1996, those customers have had the
option to buy gas from Southern or any other supplier. A critical component of
this proceeding was DPUC approval of firm transportation rates that are margin
neutral; that is, Southern receives the same margins from firm transportation
service as it does from firm sales, so earnings will not be negatively
impacted if customers switch to firm transportation and buy their gas from
other suppliers.
IMPLICATIONS OF
DEREGULATION
FOR OUR CUSTOMERS
In Connecticut, firm transportation is currently available for
commercial and industrial customers only. However, we are preparing for the
time when all customers will have the ability to choose their gas suppliers.
We will be ready to meet their needs as a merchant or a distributor.
In an environment where customer choice is available, providing
excellent customer service will remain one of Southern's main priorities. We
are proud of the fact that for three years in a row the "scorecard" released
by the DPUC has rated Southern's overall quality of service the best among
Connecticut's three gas distribution companies.
IMPLICATIONS OF
DEREGULATION FOR
GAS SUPPLY PLANNING
Just a few years ago, Southern restructured its supply contracts with
pipelines during the first wave of federal deregulation. With non-core
customers now playing a larger role in our revenue mix and with firm customers
purchasing supplies from other sources, our role as a gas merchant may begin
to diminish. Our supply contracts going forward will become more flexible and
reflect lower contracted volumes, and our risks and obligations during peak
demand periods will also be reduced.
This period of "decontracting" has allowed Southern to craft an
agreement to sublease its LNG facility to our unregulated subsidiary which
will develop it as a storage hub. This not only allows revenue producing
utilization of and profit from this facility, it also reduces operating costs
for Southern and its customers.
IMPLICATIONS OF
DEREGULATION FOR THE COMMUNITIES WE SERVE
Our distribution system operates in a 22 town service area. Although
our newer subsidiaries are dealing with customers in many other states,
Southern's focus will remain on its service territory.
During the second half of 1996, the DPUC approved an innovative
proposal we submitted to help Bridgeport's economic and community development
initiatives and to assist Southern's hardship customers to pay their bills.
Over a three year period, the DPUC is allowing Southern to redirect
interruptible margins which are normally shared with firm customers. This
innovative public/ private partnership, which the DPUC applauded, will help our
community, our customers and our shareholders.
Customers Served Per Employee
267 290 307
'94 '95 '96
5
<PAGE>
CNE Energy Services Group, Inc.
"Deregulation of energy markets brings about new opportunities to meet the
needs of new customers. The CNE Energy Services Group of companies are well
positioned to give us a significant competitive advantage in the New England
energy marketplace."
/s/ Larry S. McGaughy
- ---------------------
Larry S. McGaughy
President
6
<PAGE>
As our core business changes, Connecticut Energy's other businesses
are expected to grow rapidly with the opportunity to market energy supplies
and related services beyond our traditional service area. CNE Energy Services
Group, Inc. expects to become a major regional marketer of gas supplies, oil,
and eventually electricity, through marketing alliances with nationally
recognized energy companies.
STRATEGIC ALLIANCES
CNE Energy has formed two significant strategic alliances. The first
is a joint venture with Louis Dreyfus Energy which combines Connecticut
Energy's unique knowledge of regional energy markets with our partner's
strength in energy commodity procurement, delivery and price risk management.
In May, the joint venture established marketing alliances with gas
distribution companies located in New Hampshire and Rhode Island, which
provide access to additional customers extending into Massachusetts and Maine.
These alliances allow an introduction for CNE Energy to the commercial and
industrial customer base of these distribution companies, which do not have
unregulated marketing subsidiaries.
A TOTAL PACKAGE
Other strategic alliances with engineering and mechanical contracting
firms have enabled us to provide maintenance services in addition to energy
supply contracts. Being able to go beyond energy commodities to offer total
energy related services will be an important aspect in growing and retaining
customers in an unregulated energy marketplace.
CNE Energy has made outstanding progress in its first full year of
operation, especially considering that gas deregulation only began in
Connecticut on April 1, 1996. Our joint venture has contracted with over 300
metered commercial and industrial accounts, including the municipal accounts of
the city of New Haven and 61 Stop & Shop stores located throughout our state.
In the future, the potential electric loads for regional chain customers like
Stop & Shop are huge as we move forward into electric deregulation.
TOTAL PEAKING SERVICES
The second joint venture formed by CNE Energy was with PanEnergy
Corporation, one of the leading energy companies in the country. The venture,
Total Peaking Services, L.L.C. (TPS), will create an interstate winter peaking
services "marketing hub" using our LNG facility and our distribution system's
interconnections with three major interstate pipelines. Formation of this
venture requires both federal and state approval.
A major hurdle was passed this August when we secured Connecticut
regulatory approvals to move the LNG facility out of the regulated utility and
into the unregulated joint venture. The successful outcome of this docket was a
critical step in making the TPS joint venture a reality.
Securing federal regulatory approval is the last requirement before
the venture can commence operation. As we await final Federal Energy
Regulatory Commission (FERC) approval, we are actively pursuing the market for
peaking service sales for the upcoming winter. Bids have been submitted to the
East Coast Natural Gas Cooperative as a group, and the members have been
contacted individually for peaking sales this winter.
We hope to have FERC approval in the first quarter of fiscal 1997,
and it is our goal to have TPS operational by January 1. In addition to
producing new revenue, this joint venture will continue to provide peaking
services to our utility customers and produce savings for Southern, since
Southern will be reimbursed for operating the plant.
CNE Energy now has the ability to offer equipment replacement, parts,
materials and contracted maintenance services in addition to energy
commodities.
- -----------------------------------------------------------------------------
* Total Peaking Services will create an interstate winter peaking services
"marketing hub" using our LNG facility.
7
<PAGE>
CNE
Development
Corporation
"In this deregulated environment, our company can provide a total,
competitively-priced package of energy services tailored to each client's
needs, and to the extent that this lowers the cost of doing business here, we
will contribute to a stronger economy in the region."
/s/ Thomas A. Trotta
- --------------------
Thomas A. Trotta
President
Since its formation last year, CNE Development Corporation has been
a partner in the East Coast Natural Gas Cooperative, L.L.C., a group of seven
natural gas distribution companies that collectively serves over three million
customers and purchases large volume supplies at a discount. The Co-op entered
into an agreement with Tejas Power in April of this year to offer storage
utilization service and unbundled sales to further profit from its pooled
resources. By optimizing the members' assets in combination with Tejas'
storage, members of the Co-op will realize significantly lower delivered gas
costs.
We are in the preliminary stages of a joint venture which represents
an exciting opportunity in the natural gas vehicle market. We recently signed
a memorandum of understanding to convert 120 vehicles which will be used as
transportation from Connecticut cities to airports in Connecticut, New York
City and New Jersey. The agreement calls for the natural gas equivalent of
500,000 gallons of gasoline to be used in the first year increasing to the
equivalent of 800,000 gallons in years two, three, four and five. We are
currently in the process of negotiating and preparing final agreements and,
barring unforseen circumstances, we should have an operational facility by
mid-1997. This will be the first airport transportation service in the
Northeast to convert its fleet to natural gas.
As a member of the East Coast Natural Gas Cooperative, CNE Development
Corporation has the purchasing power of over three million customers behind
it.
- -----------------------------------------------------------------------------
8
<PAGE>
CNE Venture-Tech, Inc.
Although over the near term the growth in Connecticut Energy's
unregulated ventures will come from CNE Energy's joint ventures, over the
longer term, information systems and other technology ventures could produce
even greater growth opportunities than energy marketing. We expect utilities
will continue the recent trend of relying on technology to improve operational
efficiencies, enhance customer service and address the demands of a changing
environment. The level of special skills required to develop and implement
these solutions has fueled the growth of technology companies focused on
utility applications. Consequently, prospects from technology alliances will
become an important vehicle to differentiate Connecticut Energy from other
energy companies.
During 1996, we completed our first Connecticut Energy five year
Strategic Plan at the holding company level which included a significant role
for a technology business in our vision for the future. We took our first
steps in that direction by creating a new unregulated subsidiary, CNE
Venture-Tech, Inc., to invest in technology opportunities related to the
utility industry.
CNE Venture-Tech will focus on making investments in successful technology
companies and participating in new ventures with technology partners serving
the utility industry. We believe we can capitalize on our knowledge of the
industry, our physical location, our contacts on the East Coast and our
business development skills to build a successful network of technology
companies that will add value to Connecticut Energy shareholders.
"CNE Venture-Tech will partner with those companies that share our vision of
technology for utilities -- to unlock the power of data delivered where and
when it has the greatest value."
/s/ Vincent L. Ammann, Jr.
- --------------------------
Vincent L. Ammann, Jr.
Senior Vice President
The trend in utilities is to continue relying on technology to improve
operational efficiencies, enhance customer service and address the demands of
a changing environment.
- ------------------------------------------------------------------------------
9
<PAGE>
Financial Table of Contents
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . 11
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . 18
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . 19
Consolidated Statements of Changes in
Common Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . 21
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 22
Management Responsibility for Financial Statements . . . . . . . . . . . 32
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . 33
Eleven Year Financial Summary . . . . . . . . . . . . . . . . . . . . . . 34
Operating Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Investment Information . . . . . . . . . . . . . . . . . . . . . . . . . 39
Obtaining Shareholder Account Information . . . . . . . . . . . . . . . . 40
Obtaining Company Information . . . . . . . . . . . . . . . . . . . . . . 41
Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10
<PAGE>
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Results of Operations
NET INCOME
Connecticut Energy Corporation's ("Connecticut Energy" or "Company")
consolidated net income for the fiscal years ended September 30 is detailed
below:
(in thousands, except per share) 1996 1995 1994
- ------------------------------------------------------------------------------
Net Income $15,165 $14,060 $12,843
- ------------------------------------------------------------------------------
Net income per share $1.70 $1.60 $1.58
- ------------------------------------------------------------------------------
Weighted average shares outstanding 8,924 8,774 8,134
- ------------------------------------------------------------------------------
Net income for 1996 was a record for the Company and increased approximately
8% compared to 1995. Factors affecting the improved results for 1996 were
increased firm margins earned by the Company's principal subsidiary, The
Southern Connecticut Gas Company ("Southern"), due to higher usage per
customer, customer growth and conversions of nonheating customers to heating
customers as well as lower operations expense. Partially offsetting the
benefits of increased margins and lower operations expense were higher costs
for depreciation, taxes and interest.
Net income for 1995 increased approximately 9% compared to 1994. Factors
affecting the improved results for 1995 were additional interruptible and
off-system margins earned and retained by Southern, a 6.6% rate increase
implemented by Southern in December 1993, the continued conversion of
residential nonheating customers to heating customers and lower operations
and maintenance expenses.
TOTAL SALES AND TRANSPORTATION VOLUMES
Southern's total volumes of gas sold and transported were 40,055 MMcf in
1996, which was a 19% decrease from 1995. The 1996 level was lower
principally because of reductions in interruptible and off-system sales and
transportation volumes due to the colder weather as well as the competitive
price of certain alternate fuels. Partially offsetting these decreases were
increases in firm sales and transportation volumes.
Throughput in 1995 was 50% higher than in 1994 principally due to increases
in interruptible sales, transportation volumes in accordance with a special
contract for The Connecticut Light and Power Company's ("CL&P") Devon
generating station which began in July 1994 and off-system sales.
FIRM SALES AND TRANSPORTATION VOLUMES
Firm sales and transportation volumes for 1996 were a record and were
approximately 14% higher compared to 1995. This increase was principally due
to weather that was approximately 17% colder than 1995, which contributed to
higher usage per firm customer. Growth in Southern's firm customer base and
the conversion of nonheating customers to heating customers also contributed
to the increase in firm sales volumes. Additionally, service under Southern's
firm transportation tariffs commenced during the third quarter of fiscal
1996. See section entitled "Rate Matters" for additional information
regarding Southern's firm transportation tariffs.
Firm sales volumes were approximately 12% lower in 1995 compared to 1994.
This decrease was primarily attributable to weather that was approximately
14% warmer than 1994 and, to a lesser extent, customer switching between firm
and interruptible rate classes and slightly lower usage per customer. This
decrease was partially offset by new customer additions and the continued
conversion of nonheating customers to heating customers.
Connecticut Energy Corporation 11
<PAGE>
INTERRUPTIBLE SALES AND TRANSPORTATION VOLUMES
Margins earned on volumes delivered to interruptible customers vary depending
upon the relationship of the market price for alternate fuels to the cost of
natural gas and related transportation. Additionally, margins earned, net of
gross earnings tax, from interruptible services in excess of an annual target
were allocated through a margin sharing mechanism between firm customers and
Southern.
Beginning June 1, 1996, excess on-system margins earned that would have been
returned to firm customers have been redirected, with Connecticut Department
of Public Utility Control ("DPUC") approval, to fund certain economic
development and hardship assistance programs. See section entitled "Rate
Matters" for additional information regarding this DPUC Decision.
The chart below depicts volumes of gas sold to and transported for
interruptible customers, off-system sales volumes and off-system
transportation volumes under the special contract with CL&P as well as gross
margins earned and retained due to the margin sharing mechanism on these
services for the fiscal years ended September 30:
(in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------
Gross margin earned $12,674 $13,702 $7,421
- ------------------------------------------------------------------------------
Gross margin retained $ 7,643 $ 7,390 $5,346
- ------------------------------------------------------------------------------
Volumes sold and transported (MMcf) 17,211 29,680 10,509
- ------------------------------------------------------------------------------
Margins retained by Southern were higher for 1996 compared to 1995
principally due to the absence of allocating margins earned to recover
previously deferred transition costs.
Margins earned and retained by Southern were higher for 1995 compared to
1994. The increase in margins retained for 1995 was principally attributable
to higher levels of interruptible sales due to warmer winter weather and
competitive gas prices as well as Southern's ability to share margins earned
from selling and transporting gas off-system pursuant to the DPUC's Decision
regarding the implementation of Federal Energy Regulatory Commission's
("FERC") Order No. 636.
GROSS MARGIN
The Company's gross margin increased by approximately 3% for 1996 compared to
1995. This increase was principally attributed to higher margins earned from
firm sales and services and higher margins retained from interruptible sales
and services.
Southern's firm rates include a Weather Normalization Adjustment clause
("WNA") which allows Southern to charge or credit the non-gas portion of its
firm rates to reflect deviations from normal weather. Because weather during
1996 was approximately 4% colder than normal, the operation of the WNA
returned approximately $2,771,000 to firm customers.
Gross margin increased by approximately 2% for 1995 compared to 1994. This
increase was principally attributed to higher margins earned and retained
from interruptible services. Additionally, gross margin for 1995 was affected
by the collection of approximately $6,853,000 from firm customers through the
operation of the WNA. The WNA collections helped offset the effects of lower
firm sales volumes resulting from weather that was approximately 10% warmer
than normal during 1995.
Southern's firm rates also include a Purchased Gas Adjustment clause ("PGA")
which allows Southern to flow through to its customers, through periodic
adjustments to amounts billed, increased or decreased costs incurred for
purchased gas compared to base rate levels without affecting gross margin.
Adjustments related to Southern's PGA increased revenues and gas costs for
1996 and 1994 by approximately $6,717,000 and $6,885,000, respectively, and
decreased revenues and gas costs for 1995 by approximately $3,756,000.
12 Connecticut Energy Corporation
<PAGE>
OPERATIONS EXPENSE
Operations expense was approximately 3% lower in 1996 compared to 1995. This
decrease was principally due to lower costs for labor, increased rates for
service on customer premises and lower pension and postretirement health care
costs. Partially offsetting these positive effects on operations expense was
an increase in regulatory commission expense.
Operations expense was approximately 2% lower in 1995 compared to 1994. This
decrease was principally due to lower costs for labor, conservation programs,
pensions, employee health insurance and other general and administrative
expenses. This decrease was partially offset by a higher expense for
uncollectible accounts.
In December 1992, the DPUC allowed Southern to defer certain shortfalls in
energy assistance funding from various state and federal agencies related to
the 1991/92 and 1992/93 heating seasons. The DPUC's action positively
impacted Southern's provision for uncollectible accounts for 1993. Southern
has been allowed to recover these costs as well as deferred costs associated
with Southern's certified hardship forgiveness program beginning January 1994
in accordance with the DPUC's 1993 rate Decision. Accordingly, included in
operations expense for 1996, 1995 and 1994 were approximately $2,987,000,
$2,987,000 and $1,726,000 related to these amortizations.
DEPRECIATION EXPENSE
Depreciation expense for Southern has increased in each of the last three
years because of additions to plant in service.
FEDERAL AND STATE INCOME TAXES
The total provision for federal and state income taxes increased in 1996 by
approximately 2% compared to 1995 primarily due to higher pre-tax income.
Although pre-tax income was higher in fiscal 1996, the benefits related to
the current deductibility of conservation program expenses, uncollectible
accounts and various employee benefit plan contributions caused the effective
tax rate to be slightly lower than in fiscal 1995.
The total provision for federal and state income taxes increased in 1995 by
approximately 38% compared to 1994. This increase was primarily due to higher
pre-tax income, coupled with a higher effective tax rate for 1995. Results
for 1995 were also impacted by the flow-through tax effect of the
amortization of previously deferred costs. Partially offsetting these
increases in the tax provision for 1995 were benefits related to the current
deductibility of conservation program expenses and certain postretirement
health care and pension costs.
MUNICIPAL, GROSS EARNINGS AND OTHER TAXES
Municipal, gross earnings and other taxes increased approximately 10% in 1996
compared to 1995. This increase was principally due to a higher provision for
property taxes, higher gross earnings taxes due to higher revenues and higher
sales and use taxes.
Municipal, gross earnings and other taxes decreased approximately 6% in 1995
compared to 1994. This decrease was principally due to lower gross earnings
taxes due to lower revenues, lower sales and use taxes and lower property tax
expense primarily due to the successful litigation against the city of
Bridgeport concerning taxes imposed on Southern's personal property.
INTEREST EXPENSE
Total interest expense increased approximately 5% in 1996 compared to 1995.
Higher long-term debt costs for 1996 were associated with the issuance of
$20,000,000 in secured Medium-Term Notes ("MTN") in August 1996.
Additionally, interest costs associated with higher average short-term
borrowings, deferred gas costs and the operation of the margin sharing
mechanism contributed to this increase.
Connecticut Energy Corporation 13
<PAGE>
Total interest expense increased approximately 6% in 1995 compared to 1994.
The increase was primarily due to higher weighted average short-term interest
rates during 1995 and a higher interest expense related to average deferred
gas costs and average margin sharing balances. Partially offsetting the
increased short-term debt costs was a lower expense related to refunds owed
to customers from interstate pipeline suppliers.
The Company strives to borrow short-term funds at the most competitive rates
by utilizing commercial paper and bank borrowings at money market rates.
Short-term interest rates averaged 5.81% in 1996 compared to 5.99% in 1995
and 3.74% in 1994.
INFLATION
Inflation as measured by the Consumer Price Index for all urban consumers was
approximately 2.8%, 2.8% and 3.0% for 1996, 1995 and 1994, respectively.
Operations and maintenance expenses increase as a result of inflation, as
does depreciation expense due to higher replacement costs of plant and
equipment. As a regulated utility, Southern's increases in expenses are
generally recoverable from customers through rates approved by the DPUC. In
management's opinion, inflation has not had a material impact on net income
and the results of operations over the last three years.
RATE MATTERS
On August 21, 1996, the DPUC issued a final Decision in Docket No. 96-04-30,
APPLICATION OF THE SOUTHERN CONNECTICUT GAS COMPANY TO DISPOSE OF A PORTION OF
ITS PLANT AND EQUIPMENT. The DPUC approved certain proposals made by Southern
regarding the operation of its liquefied natural gas ("LNG") tank and related
facilities, which include the sublease of the LNG tank and related facilities
from Southern to its nonregulated affiliate, CNE Energy Services Group, Inc.
("CNE Energy"), which would, in turn, sublease the LNG facility to Total
Peaking Services, L.L.C. ("TPS"). The members of TPS are CNE Energy and
PanEnergy Plus Milford Ventures Company, a wholly-owned subsidiary of
EnergyPlus Ventures Company which, in turn, is a wholly-owned subsidiary of
PanEnergy Corp.
Under an agreement with TPS, Southern will purchase peaking service at a
pre-established price structure for five years. After that, Southern will
have the right, but not the obligation, to continue purchasing peaking
service from TPS at the then prevailing market prices. This arrangement will
give Southern the benefit of available peaking service without the burden of
supporting the entire cost of the LNG facilities. TPS will assume
responsibility for paying the rent due under the LNG tank lease. Accordingly,
Southern will benefit from revenues received from TPS and from reductions to
be realized in carrying costs, depreciation expense, operations expense and
gross earnings taxes.
Due to differences between the ratemaking recognition of such savings
compared to the additional demand charges from the peaking services
agreement, Southern provided a mitigation plan to delay including the demand
charges in the PGA mechanism to better match the rate treatment of the costs
and benefits of Southern's application.
While this transaction has been approved by the DPUC, it will also require
approval by the FERC. The transaction will not be effective unless all
necessary regulatory approvals are received on terms and conditions acceptable
to the parties.
Pursuant to Southern's 1993 rate order, which incorporated the provisions of
the previously approved PARTIAL SETTLEMENT OF CERTAIN ISSUES ("Partial
Settlement"), a target margin, net of gross earnings tax, was established for
on-system sales and transportation to Southern's interruptible customers.
Margins earned in excess of this target were shared between customers and
Southern on an 80%/20% split.
14 Connecticut Energy Corporation
<PAGE>
In January 1996, Southern requested a reopening of the 1993 rate proceeding
to propose a plan to redirect excess on-system margins to be returned to
ratepayers for calendar years 1996, 1997 and 1998 to fund certain economic
development initiatives in Bridgeport ("BEDI") and provide grants to
customers to reduce Southern's current hardship assistance balances ("HAB").
Southern estimated that margins to be earned over the proposed three-year
period would be approximately $14,000,000, which would be divided equally
between BEDI and HAB.
Southern's proposal related to the BEDI included job training and services,
certain loan subsidies and health promotion outreach services. Redirection of
ratepayer margins for HAB would benefit Southern's hardship customers by
reducing their accounts receivable arrearages and would benefit Southern by
reducing its provision for uncollectibles for such accounts.
On April 26, 1996, the DPUC issued a final Decision regarding Southern's
proposal. The DPUC effectively approved Southern's proposal with certain
modifications in the direction of BEDI funding initiatives, the imposition of
a cap of $6,000,000 per year of ratepayer margins to be split between BEDI
and HAB and certain implementation and status reporting requirements.
On August 2, 1995, the DPUC issued a final Decision in Docket No. 94-11-12,
DPUC REVIEW OF CONNECTICUT LOCAL DISTRIBUTION COMPANIES' COST OF SERVICE STUDY
METHODOLOGIES. In this docket, the DPUC investigated the issues surrounding
the development of firm transportation rates at the state level in response
to FERC Order No. 636. Effective April 1, 1996, commercial and industrial gas
customers in Connecticut can contract for their gas supplies from sources
other than the local gas distribution companies ("LDC") and pay the LDCs only
for the transportation of that gas through their distribution systems at DPUC
approved rates. The new firm transportation rates are designed to provide Sout
hern with the same margins provided by bundled services.
RECENT ACCOUNTING DEVELOPMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which will be effective for the Company's fiscal year ending September 30, 1997.
This statement imposes stricter criteria for regulatory assets by
requiring that such assets be probable of future recovery at each balance
sheet date. The adoption of SFAS 121 is required by October 1, 1996, and the
Company intends to adopt this statement prospectively. The impact of this new
standard is not expected to have a material effect on the Company's financial
condition or results of operations.
Liquidity and Capital Resources
OPERATING ACTIVITIES
The seasonal nature of Southern's business creates large short-term cash
demands primarily to finance gas purchases, customer accounts receivable and
certain tax payments. To provide these funds, as well as funds for its
capital expenditure program and other corporate purposes, Connecticut Energy
and Southern have committed lines of credit with a number of banks totaling
$5,000,000 and $32,000,000, respectively. Additionally, uncommitted lines of
credit exist with two banks totaling $18,000,000; and Southern has a revolving
credit line agreement for up to $20,000,000 with one bank. This latter
agreement has a revolving
Connecticut Energy Corporation 15
<PAGE>
credit feature through December 21, 1996, followed by a term loan period
through December 21, 2000. At September 30, 1996, the Company had unused
lines of credit of $55,800,000. Because of the availability of short-term
credit and the ability to issue long-term debt and additional equity,
management believes it has adequate financial flexibility to meet its
anticipated cash needs.
Operating cash flows for 1996 compared to 1995 were negatively impacted by
higher accounts receivable, inventory, prepaid pension, postretirement health
care and deferred certified hardship customer arrearage balances as well as
lower balances related to Southern's interruptible margin sharing mechanism.
These items were partially offset by higher net income and higher accounts
payable, accrued tax and refundable purchased gas cost balances.
Operating cash flows for 1995 were positively affected by higher net income,
the receipt of approximately $8,689,000 in interstate pipeline refunds used
to offset previously deferred transition costs, higher balances related to
Southern's interruptible margin sharing mechanism and lower accounts
receivable balances.
INVESTING ACTIVITIES
Capital expenditures approximated $25,200,000 in 1996, $27,600,000 in 1995
and $26,600,000 in 1994. Southern relies upon cash flows provided by
operating activities to fund a portion of these expenditures, with the
remainder funded by short-term borrowings and, at some later date, long-term
debt and capital stock financings. Capital expenditures in 1997 will
approximate $27,600,000. Approximately $23,600,000 of budgeted capital
expenditures has been allocated to Southern, of which approximately 24% is
earmarked for new business. The majority of Southern's remaining planned
capital expenditures are to improve, protect and maintain its existing gas
distribution system. Over the 1997-2001 period, it is estimated that total exp
enditures for new plant and equipment will range between $110,000,000 and
$130,000,000.
The Company, through its nonutility subsidiary, CNE Energy, funded a joint
venture with Louis Dreyfus Energy Corp. in December 1995. The venture
provides, among other things, natural gas, fuel oil and other energy products
to customers located in New England as well as a full range of energy-related
financial, operational and maintenance services to commercial, industrial and
municipal customers located in the region.
In October 1996, the Company formed a new nonutility subsidiary, CNE
Venture-Tech, Inc. ("CNE Venture-Tech"). CNE Venture-Tech is expected to
participate or invest in information technology ventures including, but not
limited to, providing related services. It is anticipated that CNE
Venture-Tech will enter into strategic alliances with other vendors in the
information technology business to provide services to utilities and other
businesses.
FINANCING ACTIVITIES
Southern initiated an MTN program in fiscal 1996, which was approved by the
DPUC. The program permits the issuance, from time to time, of up to
$75,000,000 of secured MTNs over a four-year period in varying amounts and
with varying terms. Proceeds from the sale of the MTNs will be used to reduce
short-term borrowings incurred primarily in connection with Southern's
capital expenditure program and for other general corporate purposes. On
August 1, 1996, Southern made its first issuance and sale under the program
of $20,000,000 in MTNs at a weighted average rate of 7.84%.
As of June 1996, the quarterly dividend paid per share on the Company's
common stock was increased to $0.33 per share, or an annual indicated
dividend rate of $1.32 per share.
16 Connecticut Energy Corporation
<PAGE>
As of June 1994, the quarterly dividend paid per share on the Company's
common stock was increased to $0.325 per share, or an annual indicated
dividend rate of $1.30 per share.
In March 1994, the Company completed a public sale of 1,000,000 shares of
common stock at a price of $20 1/8 per share and received net proceeds of
$19,375,000. The proceeds were used for the repayment of short-term debt and
for other general corporate purposes.
In December 1993, Southern redeemed all outstanding shares of its $100 par
value 4 3/4% cumulative preferred stock. The redemption price was 100% of par
value plus accrued dividends through December 30, 1993.
Financing plans for 1997 include a proposed sale to the public of
approximately 1,000,000 shares of common stock during the latter part of
fiscal 1997. The proceeds of this sale will be used for the repayment of
short-term debt and for other general corporate purposes. The method, timing
and amounts of any future financings by the Company or its subsidiaries will
depend on a variety of factors, including capitalization ratios, coverage
ratios, interest costs, the state of the capital markets and general economic
conditions.
In response to the competitive forces and regulatory changes being faced by
the Company, the Company has from time to time considered, and expects to
continue to consider, various strategies designed to enhance its competitive
position. These strategies may include business combinations with other compan
ies as well as acquisitions of related or unrelated businesses. The Company
may, from time to time, be engaged in preliminary discussions regarding one
or more of these potential strategies. No assurances can be given as to
whether any potential transaction of the type described may actually occur,
or as to the ultimate effect thereof on the financial condition or
competitive position of the Company.
ENVIRONMENTAL MATTERS
Southern has identified coal tar residue at three sites in Connecticut
resulting from coal gasification operations conducted at those sites by
Southern's predecessors from the late 1800s through the first part of this
century. Many gas distribution companies throughout the country carried on such
gas manufacturing operations during the same period. The coal tar residue is
not designated a hazardous material by any federal or Connecticut agency, but
some of its constituents are classified as hazardous.
On April 27, 1992, Southern notified the Connecticut Department of
Environmental Protection ("DEP") and the United States Environmental
Protection Agency of the presence of coal tar residue at the sites. On November
9, 1994, the DEP informed Southern that it had performed a preliminary
review of the information provided to it by Southern and had determined that,
based on current priorities and limited staff resources, a comprehensive
review of site conditions and subsequent participation by the DEP "are not
possible at this time." Until the DEP conducts a comprehensive review, no
discussions with it addressing the extent, timing and type of remedial
action, if any, can occur.
Given the DEP's response, management cannot at this time predict the costs of
any future site analysis and remediation, if any, nor can it estimate when
any such costs, if any, would be incurred. While such future analytical and
cleanup costs could possibly be significant, management believes, based upon
the provisions of the Partial Settlement in Southern's latest rate order,
that Southern will be able to recover these costs through its customer rates.
Although the method, timing and extent of any recovery remain uncertain,
management currently does not expect that the incurrence of such costs will
materially adversely impact the Company's financial condition or results of
operations.
Connecticut Energy Corporation 17
<PAGE>
Consolidated Statements of Income
(dollars in thousands, except per share)
Years Ended September 30, 1996 1995 1994
- -----------------------------------------------------------------------------
OPERATING REVENUES $261,093 $232,093 $240,873
Purchased gas 141,628 115,583 126,870
- -----------------------------------------------------------------------------
Gross margin 119,465 116,510 114,003
- -----------------------------------------------------------------------------
OPERATING EXPENSES:
Operations 47,821 49,113 50,209
Maintenance 3,784 3,743 4,035
Depreciation 14,752 14,050 13,031
Federal and state income taxes 7,606 7,436 5,402
Municipal, gross earnings and
other taxes 16,838 15,282 16,314
- -----------------------------------------------------------------------------
Total operating expenses 90,801 89,624 88,991
- -----------------------------------------------------------------------------
Operating income 28,664 26,886 25,012
- -----------------------------------------------------------------------------
Other deductions, net 546 519 586
- -----------------------------------------------------------------------------
INTEREST EXPENSE AND PREFERRED
STOCK DIVIDENDS:
Interest on long-term debt and
amortization of debt
issue costs 11,065 10,859 10,920
Other interest, net and
preferred stock dividends 1,888 1,448 663
- -----------------------------------------------------------------------------
Total interest expense and
preferred stock dividends 12,953 12,307 11,583
- -----------------------------------------------------------------------------
NET INCOME $ 15,165 $ 14,060 $ 12,843
- -----------------------------------------------------------------------------
Net income per share $ 1.70 $ 1.60 $ 1.58
- -----------------------------------------------------------------------------
Dividends paid per share $ 1.31 $ 1.30 $ 1.29
- -----------------------------------------------------------------------------
Weighted average common
shares outstanding 8,924,299 8,773,878 8,134,021
- -----------------------------------------------------------------------------
See notes to consolidated financial statements.
18 Connecticut Energy Corporation
<PAGE>
Consolidated Balance Sheets
(dollars in thousands, except per share)
<TABLE>
<CAPTION>
As of September 30, 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Utility Plant:
Plant in service, at cost $372,776 $350,715
Construction work in progress 3,333 4,132
- -------------------------------------------------------------------------------------------------------------------------------
Gross utility plant 376,109 354,847
Less: accumulated depreciation 118,348 107,244
- -------------------------------------------------------------------------------------------------------------------------------
Net utility plant 257,761 247,603
Nonutility property, net 2,804 2,541
- -------------------------------------------------------------------------------------------------------------------------------
Net utility plant and other property 260,565 250,144
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents 5,121 4,635
Accounts and notes receivable (less allowance for doubtful
accounts of $2,742 in 1996 and $3,553 in 1995) 30,873 23,456
Accrued utility revenue, net 2,608 2,675
Unrecovered purchased gas costs -- 2,972
Inventories 15,331 13,115
Prepaid expenses 1,841 2,247
- -------------------------------------------------------------------------------------------------------------------------------
Total current assets 55,774 49,100
- -------------------------------------------------------------------------------------------------------------------------------
DEFERRED CHARGES AND OTHER ASSETS:
Unamortized debt expenses 6,238 6,090
Unrecovered deferred income taxes 41,435 37,717
Other 35,216 27,037
- -------------------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 82,889 70,844
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $399,228 $370,088
- -------------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
COMMON SHAREHOLDERS' EQUITY:
Common stock -- par value $1 per share:
authorized -- 20,000,000 shares;
issued and outstanding -- 9,012,267 in 1996; 8,865,210 in 1995 $ 9,012 $ 8,865
Capital in excess of par value 91,079 88,295
Retained earnings 37,870 34,401
- -------------------------------------------------------------------------------------------------------------------------------
Total common shareholders' equity 137,961 131,561
- -------------------------------------------------------------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK -- --
LONG-TERM DEBT 138,727 119,322
- -------------------------------------------------------------------------------------------------------------------------------
Total capitalization 276,688 250,883
- -------------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Short-term borrowings 19,200 24,200
Current maturities of long-term debt 595 594
Accounts payable 14,250 9,586
Federal, state and deferred income taxes 2,424 2,525
Property and other accrued taxes 5,555 4,877
Interest payable 3,569 3,311
Customers' deposits 1,826 1,843
Refundable purchased gas costs 520 --
Other 3,747 4,281
- -------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 51,686 51,217
- -------------------------------------------------------------------------------------------------------------------------------
DEFERRED CREDITS:
Deferred income taxes 62,112 56,359
Deferred investment tax credits 3,269 3,561
Other 5,473 8,068
- -------------------------------------------------------------------------------------------------------------------------------
Total deferred credits 70,854 67,988
- -------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $399,228 $370,088
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
Connecticut Energy Corporation 19
<PAGE>
Consolidated Statements of Changes in Common Shareholders' Equity
(dollars in thousands, except per share)
<TABLE>
<CAPTION>
Adjustment
Common Stock Capital for Total
----------------------- in Minimum Common
Number Par Excess of Retained Pension Shareholders'
of Shares Value Par Value Earnings Liability Equity
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 1993 7,488,467 $7,488 $62,808 $ 29,665 $(108) $ 99,853
Public offering 1,000,000 1,000 18,375 -- -- 19,375
Issuance through dividend
reinvestment plan 211,799 212 4,082 -- -- 4,294
Net income -- -- -- 12,843 -- 12,843
Dividends paid on common stock
($1.29 per share) -- -- -- (10,754) -- (10,754)
Adjustment for minimum pension
liability (net of income taxes) -- -- -- -- 108 108
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1994 8,700,266 $8,700 $85,265 $ 31,754 -- $125,719
Issuance through dividend
reinvestment plan 164,944 165 3,030 -- -- 3,195
Net income -- -- -- 14,060 -- 14,060
Dividends paid on common stock
($1.30 per share) -- -- -- (11,413) -- (11,413)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 8,865,210 $8,865 $88,295 $ 34,401 -- $131,561
Issuance through dividend
reinvestment plan 147,057 147 2,784 -- -- 2,931
Net income -- -- -- 15,165 -- 15,165
Dividends paid on common stock
($1.31 per share) -- -- -- (11,696) -- (11,696)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996 9,012,267 $9,012 $91,079 $ 37,870 -- $137,961
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
20 Connecticut Energy Corporation
<PAGE>
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended September 30, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,165 $ 14,060 $ 12,843
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH:
Depreciation and amortization 15,747 14,985 13,844
Provision for losses on accounts receivable 6,549 6,548 6,962
(INCREASE) DECREASE IN ASSETS:
Accounts and notes receivable (13,966) (6,306) (12,248)
Accrued utility revenue, net 67 (45) (323)
Unrecovered purchased gas costs 2,972 1,551 1,452
Inventories (2,216) 1,563 1,634
Prepaid expenses 140 (400) (282)
Unamortized debt expense (383) (7) (87)
Deferred charges and other assets (6,229) (1,860) (4,852)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable 4,664 (1,300) (1,661)
Accrued taxes 577 (1,452) 47
Refundable purchased gas costs 520 -- --
Other current liabilities (293) 82 597
Deferred income taxes and investment tax credits 1,743 2,627 1,706
Deferred credits and other liabilities (2,635) 4,323 177
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,422 34,369 19,809
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,251) (27,641) (26,669)
Contributions in aid of construction 71 32 51
Payments for retirement of utility plant (487) (390) (779)
Energy ventures (1,910) -- --
Other -- 40 28
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (27,577) (27,959) (27,369)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on common stock (11,696) (11,413) (10,754)
Issuance of common stock 2,931 3,195 23,669
Issuance of long-term debt 20,000 -- --
Repayments of long-term debt (594) (594) (594)
Redemption of preferred stock -- -- (638)
(Decrease) increase in short-term borrowings (5,000) 5,400 (4,700)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 5,641 (3,412) 6,983
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 486 2,998 (577)
Cash and cash equivalents at beginning of year 4,635 1,637 2,214
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 5,121 $ 4,635 $ 1,637
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest $ 12,228 $ 11,701 $ 11,332
Income taxes $ 6,625 $ 6,636 $ 4,252
</TABLE>
See notes to consolidated financial statements.
Connecticut Energy Corporation 21
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
Note 1 -- Summary of Significant Accounting Policies
GENERAL
Connecticut Energy Corporation's ("Connecticut Energy" or "Company")
consolidated financial statements include the accounts of all subsidiary
companies, and all significant intercompany transactions and accounts have
been eliminated.
The Company's principal subsidiary, The Southern Connecticut Gas Company
("Southern"), is subject to regulation by the Connecticut Department of
Public Utility Control ("DPUC") with respect to rates charged for service and
the maintenance of accounting records, among other things. Southern's
accounting policies conform to generally accepted accounting principles
("GAAP") as applied to regulated public utilities and are in accordance with
the accounting requirements and ratemaking practices of the DPUC.
In preparing the financial statements in conformity with GAAP, the Company
uses estimates. Estimates are disclosed when there is a reasonable
possibility for change in the near term. For this purpose, near term is define
d as a period of time not to exceed one year from the date of the financial
statements. The Company's financial statements have been prepared based on
management's estimates of the impact of regulatory, legislative and judicial
developments on the Company or significant groups of its customers. The
recorded amounts of certain accruals, reserves, deferred charges and assets
could be materially impacted if circumstances change which affect these
estimates.
LINE OF BUSINESS
Connecticut Energy is a public utility holding company primarily engaged in
the retail distribution of natural gas for residential, commercial and
industrial uses through its utility subsidiary, Southern.
In December 1994, the Company formed a nonutility subsidiary, CNE Development
Corporation ("CNE Development"). CNE Development is an equity holder in an
entity formed to purchase and market natural gas and may potentially
participate in other nonregulated activities. In August 1995, the Company
formed another nonutility subsidiary, CNE Energy Services Group, Inc. ("CNE
Energy"). CNE Energy engages in activities relating to the selling, planning,
purchasing and management of various energy services to commercial and
industrial end users.
In October 1996, the Company formed a new nonutility subsidiary, CNE
Venture-Tech, Inc. ("CNE Venture-Tech"). CNE Venture-Tech is expected to
participate or invest in information technology ventures including, but not
limited to, providing related services. It is anticipated that CNE
Venture-Tech will enter into strategic alliances with other vendors in the
information technology business to provide services to utilities and other
businesses.
ACCOUNTING FOR THE EFFECTS OF REGULATION
Southern prepares its financial statements in accordance with the provisions
of Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" ("SFAS 71"), which requires a
cost-based, rate-regulated enterprise such as Southern to reflect the impact
of regulatory decisions in its financial statements. The DPUC's actions
through the ratemaking process can create regulatory assets in which costs
are allowed for ratemaking purposes in a period other than the period in
which the costs would be charged to expense if the reporting entity were
unregulated.
In the application of SFAS 71, Southern follows accounting policies that
reflect the impact of the rate treatment of certain events or transactions
that are permitted to differ from GAAP. The most significant of these policies
include the recording of deferred gas costs, deferred environmental
evaluation costs and an unfunded deferred income tax liability, with a
corresponding unrecovered asset, to account for temporary differences
previously flowed through to ratepayers.
Southern had net regulatory assets as of September 30, 1996 and 1995 of
$59,281 and $51,708, respectively. These amounts are included in deferred
charges and deferred credits in the consolidated balance sheets and are
solely due to the application of the provisions of SFAS 71.
22 Connecticut Energy Corporation
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
During fiscal 1996, the DPUC approved regulations designed to increase
competition in the natural gas industry in Connecticut by giving commercial
and industrial gas customers the ability to purchase gas from independent
brokers and marketers and by allowing local gas distribution companies
("LDC") to charge firm transportation rates for use of their distribution
systems. The firm transportation rates are designed to provide Southern with
the same margins provided by the bundled services.
While the DPUC's actions encourage a competitive environment by deregulating
certain activities, the Company believes that it continues to meet the
requirements of SFAS 71.
UTILITY REVENUES
The primary source of the Company's revenue is derived from Southern's retail
distribution of natural gas. Southern's service area spans twenty-two
Connecticut towns from Westport to Old Saybrook, including the urban
communities of Bridgeport and New Haven. Southern bills its customers on a
cycle basis throughout each month and accrues revenues related to volumes of
gas consumed by customers, but not billed at month end. The accrual of
unbilled revenues is recorded net of related gas costs and accrued expenses.
PURCHASED GAS COSTS
Southern's firm rates include a Purchased Gas Adjustment clause ("PGA") under
which purchased gas costs above or below base rate levels are charged or
credited to customers. As prescribed by the DPUC, most differences between
Southern's actual purchased gas costs and the current cost recovery are
deferred for future recovery or refund through the PGA.
CONSERVATION ADJUSTMENT MECHANISM
In a Decision dated August 23, 1995, the DPUC provided the Connecticut LDCs
with guidelines by which conservation-related expenditures not included in
current rates charged would be evaluated by the DPUC for recovery through a
Conservation Adjustment Mechanism ("CAM"). Based upon a DPUC review of
Southern's monthly PGA filing in January 1996, Southern is allowed to include
as part of its monthly PGA a separate CAM factor to recover these deferred
charges.
WEATHER NORMALIZATION ADJUSTMENT
Southern's firm rates include a Weather Normalization Adjustment ("WNA")
under which the non-gas portion of these rates is charged or credited monthly
to reflect deviations from normal temperatures. The WNA was implementated in
January 1994 and operates for ten months of the year (September through
June).
FEDERAL INCOME TAXES
In accordance with the requirements of the DPUC, the Economic Recovery Tax
Act of 1981 and subsequent amendments to the Internal Revenue Code ("IRC"),
income tax reductions to Southern resulting from such items as liberalized
depreciation on 1981 to 1996 plant additions and investment tax credits on
1981 to 1986 plant additions are deferred and amortized to income over the
useful lives of the related assets. Prior to 1981, Southern had treated the
differences between tax and book depreciation on plant and equipment as
adjustments to tax provisions ("flow-through method") and utilized the
flow-through method on depreciation of pre-1981 assets. With specific
permission from the DPUC, Southern also provides deferred federal income
taxes for certain items, such as unrecovered purchased gas costs, that are
reported in different time periods for tax purposes and financial reporting
purposes.
In February 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 establishes financial accounting and reporting
standards for deferred income taxes using an asset and liability approach.
SFAS 109 requires, among other things, the recognition of the effect on
deferred taxes of enacted tax rate and law changes in the year in which they
occur.
The Company adopted SFAS 109 on October 1, 1993 and has adjusted deferred tax
balances to reflect the differences between the tax and financial statement
basis of all assets and liabilities, regardless of whether deferred taxes had
been previously provided. Deferred tax liabilities have been reduced to the
extent they had been previously provided at federal statutory rates in excess
of the rates in effect on the effective date of adoption. In accordance with
SFAS 71, as of September 30, 1996, the Company has a deferred tax liability
and a corresponding regulatory asset of approximately $41,435 due to the
adoption of SFAS 109. The effect of the adoption of SFAS 109 on net income is
not material since this adjustment will be recognized in income in future
periods as the temporary differences reverse.
Connecticut Energy Corporation 23
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
NET INCOME PER SHARE
Net income per share is computed based upon the weighted average number of
common shares outstanding during each year.
UTILITY PLANT
Utility plant is stated at original cost. The costs of additions and of major
replacements of retired units are capitalized. Costs include labor, direct
material and certain indirect charges such as engineering and supervision.
Replacement of minor items of property and the cost of maintenance and
repairs are included in maintenance expense. For normal retirements, the
original cost of property, together with removal cost, less salvage value, is
charged to accumulated depreciation when the property is retired and removed
from service.
DEPRECIATION
For financial accounting purposes, depreciation of utility plant is computed
using the composite straightline rates prescribed by the DPUC. The annual
composite rate allowed for book depreciation for Southern is 4.15%.
Depreciation of transportation and power-operated equipment is computed
separately and based on their estimated useful lives. For federal income tax
purposes, the Company computes depreciation using accelerated methods.
INVENTORIES
Inventories are stated at the lower of cost or market, cost generally being
determined on the basis of the average cost method. Inventories consist
primarily of fuel stock and smaller amounts of materials, supplies and
appliances.
DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets include amounts related to the following:
As of September 30, 1996 1995
- ------------------------------------------------------------------------------
Hardship heating customer accounts
receivable arrearages $11,753 $10,223
Energy assistance funding shortfall 1,502 2,122
Prepaid pension and postretirement medical
contributions 11,395 7,969
Conservation costs 3,954 1,840
Environmental evaluation costs 915 1,111
Nonqualified benefit plans 1,160 1,051
Gas holder costs 554 800
Investment in energy ventures 1,960 50
Other 2,023 1,871
- ------------------------------------------------------------------------------
$35,216 $27,037
- ------------------------------------------------------------------------------
Southern has been allowed to recover various deferred charges in rates over
periods ranging from three to five years in accordance with the DPUC's
Decision in Southern's latest rate case.
DEFERRED CREDITS
Deferred credits include amounts related to the following:
As of September 30, 1996 1995
- ------------------------------------------------------------------------------
Interruptible margin sharing $ 556 $4,851
Nonqualified benefit plans 2,574 2,190
Insurance reserve 722 853
Other 1,621 174
- ------------------------------------------------------------------------------
$5,473 $8,068
- ------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, short-term investments having
maturities of three months or less are considered to be cash equivalents.
24 Connecticut Energy Corporation
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
RECENT ACCOUNTING DEVELOPMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which will be effective for the Company's fiscal year ending September 30,
1997. This statement imposes stricter criteria for regulatory assets by
requiring that such assets be probable of future recovery at each balance
sheet date. The adoption of SFAS 121 is required by October 1, 1996, and the
Company intends to adopt this statement prospectively. The impact of this new
standard is not expected to have a material effect on the Company's financial
condition or results of operations.
Note 2 -- Provision for Income Taxes
Effective October 1, 1993, the Company adopted SFAS 109 and recorded a
regulatory asset of $33,943 related to the cumulative amount of income taxes
to account for temporary differences previously flowed through to ratepayers.
In addition, the Company has a deferred tax liability of $3,269 related to
future tax benefits to be flowed back to ratepayers associated with
unamortized investment tax credits and decreases in both federal and state
statutory tax rates. Both the regulatory asset and liability are recognized
over the regulatory lives of the related taxable bases concurrent with the
realization in rates.
The provision for income taxes includes the following:
Years ended September 30, 1996 1995 1994
- ------------------------------------------------------------------------------
Taxes currently payable -- federal $5,463 $3,817 $2,958
Taxes currently payable -- state 1,669 1,535 1,464
- ------------------------------------------------------------------------------
$7,132 $5,352 $4,422
- ------------------------------------------------------------------------------
Deferred taxes -- federal 474 2,084 980
- ------------------------------------------------------------------------------
Total income tax provision $7,606 $7,436 $5,402
- ------------------------------------------------------------------------------
Sources and tax effects of items which gave rise to deferred taxes are as
follows:
Years ended September 30, 1996 1995 1994
- ------------------------------------------------------------------------------
Amortization of deferred investment
tax credits $ (292) $ (292) $ (292)
Unrecovered purchased gas costs (1,288) (542) (508)
Depreciation 1,817 1,956 1,779
Minimum tax credits 439 1,024 452
Other (202) (62) (451)
- ------------------------------------------------------------------------------
$ 474 $2,084 $ 980
- ------------------------------------------------------------------------------
The following table reconciles the income tax provision calculated using the
federal statutory tax rate to the book provision for federal and state income
taxes:
Years ended September 30, 1996 1995 1994
- ------------------------------------------------------------------------------
U.S. statutory federal tax rate 35% 35% 35%
Depreciation differences 4% 3% 4%
Allowance for doubtful accounts,
including amounts forgiven and deferred (3%) 1% (7%)
Investment tax credits (1%) (1%) (2%)
Cost to retire assets, net of salvage (1%) (1%) (2%)
State taxes, net of federal tax benefit 5% 5% 5%
Pension contribution (3%) (2%) (2%)
Conservation expenses (4%) (3%) --
Reduction due to graduated tax rates -- -- (.6%)
Other, net 1% (2%) (.4%)
- ------------------------------------------------------------------------------
Effective tax rate 33% 35% 30%
- ------------------------------------------------------------------------------
Connecticut Energy Corporation 25
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
Deferred income tax liabilities (assets) are composed of the following:
As of September 30, 1996 1995
- -----------------------------------------------------------------------------
TAX EFFECT OF TEMPORARY DIFFERENCES FOR:
Depreciation $22,281 $20,464
Items previously flowed through 41,435 37,717
Alternative minimum tax -- (440)
Contributions in aid of construction (715) (689)
Nonqualified benefit plans (793) (658)
Other (96) (35)
- -----------------------------------------------------------------------------
Net deferred income tax liability -- long-term $62,112 $56,359
- -----------------------------------------------------------------------------
As of September 30, 1996 and 1995, the balance sheet caption "Federal, state
and deferred income taxes" included approximately $247 and $1,023,
respectively, of current deferred federal and state income taxes and
approximately $0 and $440, respectively, of minimum tax credits available to
reduce federal income taxes to be paid in future periods.
Note 3 -- Long-Term Debt
Long-term debt outstanding consists of the following:
As of September 30, 1996 1995
- -----------------------------------------------------------------------------
FIRST MORTGAGE BONDS:
Series L, 8%, due March 1, 1998 $ 4,340 $ 4,480
Series T, 10.02%, due September 1, 2003 3,182 3,636
Series U, 9.70%, due July 31, 2019 9,800 9,800
Series V, 9.85%, due July 31, 2020 15,000 15,000
Series W, 8.93% - 9.13%, due November 17, 2031 60,000 60,000
Series X, 7.67%, due December 15, 2012 15,000 15,000
Series Y, 7.08%, due October 1, 2013 12,000 12,000
- -----------------------------------------------------------------------------
$119,322 $119,916
- -----------------------------------------------------------------------------
MEDIUM-TERM NOTES:
Series MTN, 7.50% - 7.95%, due August 3, 2026 20,000 --
Less: amounts due within one year 595 594
- -----------------------------------------------------------------------------
$138,727 $119,322
- -----------------------------------------------------------------------------
Under the provisions of Southern's mortgage bond indenture dated March 1, 1948,
as supplemented from time to time, sinking fund payments are required at
various dates for Series L and Series T First Mortgage Bonds. Series W First
Mortgage Bonds are due in bullet payments in the years 2021 and 2031,
respectively. Series U, V, X and Y are due in single payments in the years
2019, 2020, 2012 and 2013, respectively. Substantially all of the utility
plant of Southern is subject to the lien of its mortgage bond indentures. See
Note 6, "Common Shareholders' Equity," for dividend restrictions.
In August 1996, Southern issued and sold $20,000 in secured medium-term
notes. These notes have a weighted average rate of 7.84% and a weighted
average life of 25 years. They will be redeemed through payments of $5,000
and $15,000 in the years 2006 and 2026, respectively. Proceeds from the sale
were principally used to reduce short-term borrowings incurred primarily in
connection with Southern's construction program.
The aggregate annual sinking fund contributions and principal maturities for
the five fiscal years subsequent to September 30, 1996 are as follows: 1997 --
$595; 1998 -- $4,654; 1999 -- $455; 2000 -- $454;
2001 -- $455; total -- $6,613.
Expenses incurred in connection with long-term borrowings are normally
amortized on a straightline method over the respective lives of the issues
giving rise thereto.
26 Connecticut Energy Corporation
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
Note 4 -- Short-Term Borrowings
The Company follows the practice of borrowing on a short-term basis from
banks and through the sale of commercial paper. The following information
relates to these borrowings:
As of September 30, 1996 1995 1994
- -----------------------------------------------------------------------------
BANK LOANS:
Outstanding $19,200 $19,200 $12,800
Weighted average interest rate 6.10% 6.79% 5.41%
COMMERCIAL PAPER:
Outstanding -- $ 5,000 $ 6,000
Weighted average interest rate -- 5.97% 4.95%
- -----------------------------------------------------------------------------
As of September 30, 1996, Connecticut Energy and Southern have committed
short-term bank credit lines totaling $5,000 and $32,000, respectively, a
portion of which supports the issuance of commercial paper. Additionally,
uncommitted lines of credit exist with two banks totaling $18,000. Southern
also has a revolving credit/term loan agreement with one bank. This latter
agreement provides an additional credit line of up to $20,000. The revolving
credit feature is in effect through December 21, 1996 and is followed by a
term loan period through December 21, 2000. As of September 30, 1996,
Southern had no outstanding borrowings under this agreement. The fee for this
facility is 1/8 of 1% per annum. As of September 30, 1996, the Company had
unused lines of credit of $55,800. In lieu of compensating balances, Southern
pays fees for its lines of credit which are approximately 1/4 of 1% of the
amount of the line of credit. The aggregate annual commitment fees on these
lines were $110, $96 and $124 for the years ended September 30, 1996, 1995
and 1994, respectively.
Note 5 -- Redeemable Preferred Stock
The following table summarizes the shares of preferred stock authorized,
issued and outstanding:
As of September 30, 1996 1995
- -----------------------------------------------------------------------------
THE SOUTHERN CONNECTICUT GAS COMPANY:
Cumulative preferred stock, $100 par value
Authorized 200,000 200,000
4.75% issued and outstanding -- --
- -----------------------------------------------------------------------------
Preferred stock, $1 par value
Authorized 600,000 600,000
Issued and outstanding -- --
- -----------------------------------------------------------------------------
Preference stock, $1 par value
Authorized 1,000,000 1,000,000
Issued and outstanding -- --
- -----------------------------------------------------------------------------
Connecticut Energy Corporation:
Preference stock, $1 par value
Authorized 1,000,000 1,000,000
Issued and outstanding -- --
- -----------------------------------------------------------------------------
Southern's $1 par value preferred stock ranks on a parity as to dividends and
payments in liquidation with Southern's $100 par value preferred stock. While
the preference stock is preferred as to dividends and payments in liquidation
over Southern's common stock, it is subordinate to the other classes of
preferred stock.
Note 6 -- Common Shareholders' Equity
Southern's indentures relating to long-term debt contain restrictions as to
the declaration or payment of cash dividends on capital stock and the
reacquisition of capital stock. Under the most restrictive of such provisions,
$25,492 of Southern's retained earnings as of September 30, 1996 was
available for such purposes.
Connecticut Energy Corporation 27
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
The Company currently issues common stock through the Dividend Reinvestment
and Stock Purchase Plan ("DRP") and an employee savings plan ("Target Plan").
The DRP permits shareholders to automatically reinvest their cash dividends
or invest optional limited amounts of cash payments in newly issued shares or
open market purchases of the Company's common stock. As of September 30,
1996, there were 1,260,838 shares reserved for issuance under the DRP and Targ
et Plan.
Note 7 -- Employee Benefits
RETIREMENT PLANS
Southern maintains two noncontributory pension plans covering substantially
all of its employees and employees of certain affiliates. The plan covering
salaried employees provides pension benefits based on compensation during the
five years before retirement and on years of service. The union plan provides
negotiated benefits of stated amounts for each year of service. It is the
Company's policy to fund annually the periodic pension cost of its retirement
plans subject to the minimum and maximum contribution limitations of the IRC.
A regulatory adjustment has been made to the net periodic pension cost to
reflect the amount of pension cost that is realized through the ratemaking
process.
The Company recorded an additional minimum liability of $63 and $23 at
September 30, 1996 and 1995, respectively, representing the excess of the
accumulated benefit obligation over the fair value of plan assets and accrued
pension costs. This liability is offset by an intangible asset of $63 and $23
at September 30, 1996 and 1995, respectively, which represents unrecognized
prior service costs.
The net periodic pension cost includes the following components:
Years ended September 30, 1996 1995 1994
- -----------------------------------------------------------------------------
Service cost benefit earned during the period $ 2,179 $ 1,868 $ 2,117
Interest cost on projected benefit obligation 4,846 4,686 4,263
Actual return on plan assets (9,372) (12,603) (1,986)
Net amortization and deferral 3,959 8,135 (1,829)
- -----------------------------------------------------------------------------
Net periodic pension cost $ 1,612 $ 2,086 $ 2,565
Regulatory adjustment 233 233 22
- -----------------------------------------------------------------------------
Net pension cost $ 1,845 $ 2,319 $ 2,587
- -----------------------------------------------------------------------------
Portion capitalized to utility plant $ 351 $ 441 $ 439
- -----------------------------------------------------------------------------
The following table sets forth the funded status of Southern's pension plans:
<TABLE>
<CAPTION>
As of September 30, 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
PLANS WHERE: Plans Where:
ASSETS ACCUMULATED Assets Accumulated
EXCEED BENEFITS Exceed Benefits
ACCUMULATED EXCEED Accumulated Exceed
BENEFITS ASSETS Benefits Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $(50,819) $ (747) $(50,481) $ (457)
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $(55,986) $ (914) $(54,827) $ (637)
- --------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of projected
benefit obligation $(65,618) $(1,560) $(64,718) $(1,591)
Plan assets at fair value 79,526 -- 70,177 --
- --------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation less than
(in excess of) plan assets $ 13,908 $(1,560) $ 5,459 $(1,591)
Transition obligation 658 -- 827 --
Prior service cost 4,102 273 3,178 295
Unrecognized (gain) loss (8,818) 368 (2,601) 635
Adjustment required to recognize
minimum liability -- (63) -- (23)
- --------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (liability), net $ 9,850 $ (982) $ 6,863 $ (684)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28 Connecticut Energy Corporation
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
Key assumptions used in the determination of the projected benefit
obligations and the fair value of plan assets were:
1996 1995 1994
- -----------------------------------------------------------------------------
Discount rate 8% 7 1/4% 8 1/2%
Salary increase rate 5 3/4% 5 1/4% 5 1/2%
Expected rate of return on assets 9 1/4% 9 1/2% 9%
- -----------------------------------------------------------------------------
The majority of the assets of the pension plans is invested in common stock,
fixed income securities and balanced mutual funds, with the balance in cash
and short-term investments.
Effective October 1, 1993, Southern established nonqualified pension programs
to provide benefits on compensation in excess of the limitations imposed by
the IRC and to provide additional retirement income to designated officers.
Southern maintains a savings plan covering substantially all of its employees
and employees of certain affiliates who meet minimum service and age
requirements. Employees may elect to contribute to the plan through payroll
deductions on either a taxable or a tax-deferred basis as permitted by
Section 401(k) of the IRC. Participants receive a matching contribution of
50% of the first 6% of annual compensation and become vested in the matching
contribution over a five year period. Benefits are payable upon retirement,
death, disability or termination of employment. Amounts expensed under the
plan were $808, $816 and $795 for years ended September 30, 1996, 1995 and
1994, respectively.
POSTRETIREMENT HEALTH CARE BENEFITS
In addition to providing pension benefits, Southern provides certain health
care benefits for retired employees. Substantially all of the Company's
employees may become eligible for those benefits if they have reached age 55
while working for the Company and have completed at least five years of
service. Prior to October 1, 1993, Southern recognized the cost of providing
these benefits by expensing $350 annually in excess of paid medical claims in
accordance with funding provided by a rate decision in 1990.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" ("SFAS 106"), which requires accrual accounting
for postretirement benefits during an employee's years of service with
Southern. Southern has elected to amortize the transition obligation over
twenty years. In the DPUC's Decision on Southern's latest rate request,
Southern was allowed current recovery of SFAS 106 costs through customer base
rates which became effective December 9, 1993. The expense of implementing
SFAS 106 prior to full recovery in rates, which totaled $367, was deferred
and is being recovered over a three year period.
The postretirement benefit costs include the following components:
Years ended September 30, 1996 1995 1994
- -----------------------------------------------------------------------------
Service cost benefit attributed to
service during the period $ 405 $ 340 $ 598
Interest cost on accumulated postretirement
benefit obligation 1,198 1,401 1,282
Actual return on plan assets (837) (594) (113)
Net amortization and deferral 1,037 1,071 880
- -----------------------------------------------------------------------------
Net periodic postretirement benefit cost $1,803 $2,218 $2,647
Regulatory adjustment 122 122 (275)
- -----------------------------------------------------------------------------
Net postretirement benefit cost $1,925 $2,340 $2,372
- -----------------------------------------------------------------------------
In 1990, Southern amended the Pension Plan for Salaried and Certain Other
Employees to establish an account within the pension plan trust, as permitted
under Section 401(h) of the IRC, to fund a portion of Southern's anticipated
future postretirement health care benefits liability with amounts allowed
through the ratemaking process. Through the use of the existing trust and the
establishment in 1994 of a Voluntary Employees' Beneficiary Association
("VEBA") trust as permitted under Section 501(c)(9) of the IRC, Southern
plans to fund its full postretirement benefit expense under SFAS 106.
The majority of the assets of the VEBA trust is invested in a diversified
fund consisting of common stock and fixed income securities, with the balance
in cash and short-term investments.
Connecticut Energy Corporation 29
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
The following table reconciles the funded status of the plan with the amounts
recognized in the consolidated balance sheets:
As of September 30, 1996 1995
- -----------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ (8,796) $ (8,866)
Fully eligible active plan participants (2,174) (2,692)
Other active plan participants (4,865) (5,493)
- -----------------------------------------------------------------------------
Total accumulated postretirement benefit obligation $(15,835) $(17,051)
Plan assets at fair value 5,372 3,757
- -----------------------------------------------------------------------------
Accumulated postretirement benefit obligation
(in excess of) less than plan assets $(10,463) $(13,294)
Unamortized transition obligation 13,053 13,820
Unrecognized (gain) loss (3,811) (2,131)
- -----------------------------------------------------------------------------
(Accrued) postretirement benefit obligation $ (1,221) $ (1,605)
- -----------------------------------------------------------------------------
The expected long-term rate of return on plan assets is 9 1/4%. The assumed
initial health care cost trend rates used to measure the expected cost of
benefits are 9% for pre-age 65 claims and 8% for post-age 65 claims. The
rates decline to 5% by the years 2004 and 2002, respectively. The weighted
average discount rate used to measure the accumulated postretirement benefit
obligation is 8%. A one percentage point change in the assumed health care
cost trend rate would change the service cost and interest cost components of
the net periodic postretirement benefit cost by approximately $6 and $45,
respectively, and would change the accumulated postretirement health care
benefit obligation by approximately $573.
Note 8 -- Leases
Total rental expense was $3,035, $3,074 and $2,864 for the years ended
September 30, 1996, 1995 and 1994, respectively. Southern's approximate
aggregate minimum rental commitments (exclusive of taxes, maintenance, etc.)
under noncancelable operating leases for each of the five fiscal years
subsequent to September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Years ended September 30, 1997 1998 1999 2000 2001 Thereafter
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office space $2,037 $2,111 $2,111 $2,087 $2,087 $27,222
LNG plant 608 609 608 609 608 11,869
Other 75 72 54 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total Commitment $2,720 $2,792 $2,773 $2,696 $2,695 $39,091
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In 1995, the liquefied natural gas ("LNG") plant lease agreement was renewed
for two consecutive terms of twelve years. The lease contains an option to
purchase the plant at a price based on the then fair market sales value of
the unit as defined therein.
Note 9 -- Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Dec. 31, March 31, June 30, Sept. 30,
1996 Quarters ended 1995 1996 1996 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $69,775 $120,189 $43,954 $27,175
Gross margin 32,282 53,423 21,127 12,633
Operating income (loss) 8,248 18,107 2,737 (428)
Net income (loss) 5,029 14,635 (684) (3,815)
Net income (loss) per share* 0.57 1.64 (0.08) (0.42)
- --------------------------------------------------------------------------------------------------------------------------------
Dec. 31, March 31, June 30, Sept. 30,
1995 Quarters ended 1994 1995 1995 1995
- --------------------------------------------------------------------------------------------------------------------------------
Operating revenues $65,523 $103,284 $39,755 $23,531
Gross margin 32,246 53,286 19,063 11,915
Operating income (loss) 8,072 18,988 1,203 (1,377)
Net income (loss) 4,941 15,715 (1,985) (4,611)
Net income (loss) per share 0.57 1.79 (0.23) (0.52)
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
*Calculated on the basis of weighted average shares outstanding during the
applicable quarter.
</TABLE>
30 Connecticut Energy Corporation
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share)
Note 10 -- Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value because of the short-term
maturity of those instruments.
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on quoted
market prices for the same or similar issues or on current rates offered to
the Company for debt of the same remaining maturities.
The estimated fair value of the Company's financial instruments is as
follows:
<TABLE>
<CAPTION>
As of September 30, 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt (including current maturities) $(139,322) $(150,808) $(119,916) $(138,171)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 11 -- Commitments and Contingencies
ENVIRONMENTAL MATTERS
Southern has identified coal tar residue at three sites in Connecticut
resulting from coal gasification operations conducted at those sites by
Southern's predecessors from the late 1800s through the first part of this
century. Many gas distribution companies throughout the country carried on
such gas manufacturing operations during the same period. The coal tar
residue is not designated a hazardous material by any federal or Connecticut
agency, but some of its constituents are classified as hazardous.
On April 27, 1992, Southern notified the Connecticut Department of
Environmental Protection ("DEP") and the United States Environmental
Protection Agency of the presence of coal tar residue at the sites. On
November 9, 1994, the DEP informed Southern that it had performed a preliminary
review of the information provided to it by Southern and had determined that,
based on current priorities and limited staff resources, a comprehensive
review of site conditions and subsequent participation by the DEP "are not
possible at this time." Until the DEP conducts a comprehensive review, no
discussions with it addressing the extent, timing and type of remedial
action, if any, can occur.
Given the DEP's response, management cannot at this time predict the costs of
any future site analysis and remediation, if any, nor can it estimate when
any such costs, if any, would be incurred. While such future analytical and
cleanup costs could possibly be significant, management believes, based upon
the provisions of the Partial Settlement in Southern's latest rate order,
that Southern will be able to recover these costs through its customer rates.
Although the method, timing and extent of any recovery remain uncertain,
management currently does not expect that the incurrence of such costs will
materially adversely impact the Company's financial condition or results of
operations.
Connecticut Energy Corporation 31
<PAGE>
Management Responsibility for
Financial Statements
The management of Connecticut Energy Corporation is responsible for the
preparation and integrity of the consolidated financial statements and all
other financial information included in this annual report. The financial
statements were prepared in conformity with generally accepted accounting
principles consistently applied and they necessarily include amounts which
are based on estimates and judgments made with due consideration to
materiality.
Management maintains a system of internal accounting controls which it
believes provides reasonable assurance that Company policies and procedures
are complied with, assets are safeguarded and transactions are executed in
accordance with appropriate corporate authorization and recorded in a manner
which permits management to meet its responsibility for the preparation of
financial statements. The Company's system of controls includes the
communication and enforcement of written policies and procedures.
The Audit Committee of the Board of Directors, comprised of non-employee
directors, meets periodically and as necessary with management, the internal
auditors and Coopers & Lybrand L.L.P. to review audit plans and results and
the Company's accounting, financial reporting and internal control practices,
procedures and results. Both Coopers & Lybrand L.L.P. and the Company's
internal audit department have full and free access to all levels of
management.
/s/ Carol A. Forest /s/ Vincent L. Ammann, Jr.
- ------------------- --------------------------
Carol A. Forest Vincent L. Ammann, Jr.
Vice President, Finance, Vice President and
Chief Financial Officer and Treasurer Chief Accounting Officer
32 Connecticut Energy Corporation
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Connecticut Energy Corporation
We have audited the accompanying consolidated balance sheets of Connecticut
Energy Corporation and its subsidiaries (the Company) as of September 30,
1996 and 1995 and the related consolidated statements of income, changes in
common shareholders' equity and cash flows for each of the three years in the
period ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Connecticut
Energy Corporation and its subsidiaries as of September 30, 1996 and 1995,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended September 30, 1996 in conformity
with generally accepted accounting principles.
As discussed in Notes 2 and 7 to the consolidated financial statements, in
fiscal 1994 the Company changed its methods of accounting for income taxes
and postretirement benefits other than pensions.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
New York, New York
October 31, 1996
Connecticut Energy Corporation 33
<PAGE>
Eleven Year Financial Summary
Financial information presented for 1996 through 1990 is for the twelve month
period ended September 30; all information for prior years is for the twelve
month period ended December 31.
(dollars in thousands, except per share)
<TABLE>
<CAPTION>
1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Operating revenues $261,093 $232,093 $240,873 $212,762
Purchased gas 141,628 115,583 126,870 113,045
Gross margin 119,465 116,510 114,003 99,717
Operations and maintenance expenses 51,605 52,856 54,244 45,023
Depreciation and depletion 14,752 14,050 13,031 12,051
Federal income taxes 5,937 5,901 3,938 3,474
Other taxes 18,507 16,817 17,778 16,044
Other deductions (income), net 546 519 586 510
Interest expense 12,953 12,307 11,575 11,530
Subsidiary preferred stock dividends -- -- 8 32
Income before cumulative effect of accounting change $ 15,165 $ 14,060 $ 12,843 $ 11,053
Cumulative effect of accounting change -- -- -- --
Net income $ 15,165 $ 14,060 $ 12,843 $ 11,053
Net income per share before cumulative
effect of accounting change (e) $ 1.70 $ 1.60 $ 1.58 $ 1.50
Net income per share (e) $ 1.70 $ 1.60 $ 1.58 $ 1.50
Annual dividend paid per common share (e) $ 1.31 $ 1.30 $ 1.29 $ 1.28
- --------------------------------------------------------------------------------------------------------------------------------
*CAPITALIZATION
Common shareholders' equity $137,961 $131,561 $125,719 $ 99,853
Redeemable preferred stock -- -- -- 638
Long-term debt 138,727 119,322 119,917 120,511
- --------------------------------------------------------------------------------------------------------------------------------
Total capitalization $276,688 $250,883 $245,636 $221,002
- --------------------------------------------------------------------------------------------------------------------------------
*CAPITALIZATION (% OF TOTAL)
Common shareholders' equity 49.9 52.4 51.2 45.2
Redeemable preferred stock -- -- -- 0.3
Long-term debt 50.1 47.6 48.8 54.5
- --------------------------------------------------------------------------------------------------------------------------------
Total capitalization 100.0% 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------------------------------------------------
*COMMON STOCK (E)
Shares outstanding at end of period 9,012,267 8,865,210 8,700,266 7,488,467
Book value per share at end of period $ 15.31 $ 14.84 $ 14.45 $ 13.33
Market value per share at end of period $ 20.00 $ 19.38 $ 21.63 $ 24.88
Average daily trading volume 9,000 5,000 5,500 9,000
Shareholders of record at year end 11,274 11,688 12,094 11,094
Percent of institutional ownership 20 21 21 18
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
Gross utility plant $376,109 $354,847 $331,953 $313,951
Net utility plant $257,761 $247,603 $234,495 $221,800
Capital expenditures $ 25,180 $ 27,609 $ 26,618 $ 26,070
Oil and gas properties, net -- -- -- --
Total assets $399,228 $370,088 $352,920 $299,795
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS (% OF TOTAL)
Operations and maintenance
expense as a % of gross margin 43.2 45.4 47.6 45.2
Dividend payout as a % of earnings 77.1 81.3 81.6 85.3
Effective federal tax rate 28.0 30.0 23.0 24.0
*Return on ending common equity 11.0 10.7 10.2 11.1
Price to earnings 11.8 12.1 13.7 16.6
Dividend yield 6.6 6.7 6.0 5.1
Market price as a % of book value 130.6 130.6 149.7 186.6
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
* Information used in the National Association of Investors Corporation (NAIC)
stock selection format.
(a) The results for the years ended September 30, 1990 and December 31, 1989
include the results for the three months ended December 31, 1989, which
included the effects of the unusually cold weather experienced in the
month of December and a writedown of the value of oil and gas properties.
(b) Includes the cumulative effect of accounting change for municipal
property taxes which increased earnings by $0.21 per share.
(c) The writedown of the value of oil and gas properties reduced earnings by
$0.10 per share in 1990 and 1989, $0.05 per share in 1987 and $0.03 per share
in 1986.
</TABLE>
34 Connecticut Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------------
(a)(b)(c) (a)(c) (c) (c)(d)
<S> <C> <C> <C> <C> <C> <C> <C>
$203,011 $179,172 $174,059 $171,218 $156,978 $157,867 $156,028
104,163 86,778 84,154 81,794 71,787 75,337 79,333
98,848 92,394 89,905 89,424 85,191 82,530 76,695
46,881 42,475 44,085 42,636 38,869 38,218 36,011
11,327 10,540 10,664 10,297 8,533 8,427 7,487
2,287 4,324 3,819 4,740 5,839 6,325 5,270
16,025 15,238 14,431 14,560 14,146 13,617 13,487
531 349 (228) 356 713 276 261
11,536 10,428 10,156 8,598 7,653 7,484 6,848
34 36 39 403 751 849 1,244
$ 10,227 $ 9,004 $ 6,939 $ 7,834 $ 8,687 $ 7,334 $ 6,087
-- -- 1,280 -- -- -- 1,911
$ 10,227 $ 9,004 $ 8,219 $ 7,834 $ 8,687 $ 7,334 $ 7,998
$ 1.43 $ 1.38 $ 1.12 $ 1.28 $ 1.49 $ 1.38 $ 1.16
$ 1.43 $ 1.38 $ 1.33 $ 1.28 $ 1.49 $ 1.38 $ 1.53
$ 1.265 $ 1.24 $ 1.23 $ 1.20 $ 1.17 $ 1.12 $ 1.12
$ 92,605 $ 88,622 $ 74,413 $ 75,001 $ 73,311 $ 61,187 $ 58,731
687 736 786 835 6,429 7,270 8,112
94,106 87,378 91,506 79,686 69,137 64,461 58,714
$187,398 $176,736 $166,705 $155,522 $148,877 $132,918 $125,557
49.4 50.1 44.6 48.2 49.2 46.0 46.8
0.4 0.4 0.5 0.6 4.3 5.5 6.4
50.2 49.5 54.9 51.2 46.5 48.5 46.8
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
7,234,921 7,096,634 6,250,161 6,176,665 6,088,017 5,346,879 5,277,276
$ 12.80 $ 12.49 $ 11.91 $ 12.14 $ 12.04 $ 11.45 $ 11.13
$ 22.25 $ 19.00 $ 16.63 $ 17.63 $ 14.50 $ 13.67 $ 16.00
4,500 5,000 2,950 4,200 2,850 2,550 4,500
9,153 9,163 7,382 7,493 7,662 7,577 7,960
18 14 15 16 16 13 N/A
$293,687 $273,862 $255,446 $241,624 $ 222,236 $204,947 $191,589
$210,054 $198,695 $189,108 $181,358 $ 166,970 $155,289 $144,509
$ 22,634 $ 20,331 $ 23,102 $ 23,184 $ 19,471 $ 17,790 $ 20,543
$ 496 $ 542 $ 605 $ 698 $ 1,760 $ 1,889 $ 2,564
$269,504 $247,969 $229,600 $239,327 $ 214,458 $193,842 $186,449
47.4 46.0 49.0 47.7 45.6 46.3 47.0
88.5 89.9 92.5 93.8 78.5 81.2 73.2
18.0 32.0 35.0 37.0 38.0 44.0 42.0
11.0 10.2 11.0 10.4 11.8 12.0 13.6
15.6 13.8 12.5 13.8 9.7 9.9 10.5
5.7 6.5 7.4 6.8 8.1 8.2 7.0
173.8 152.1 139.6 145.2 120.4 119.4 143.8
<FN>
(d) Includes the cumulative effect of accounting change for unbilled revenues
which increased earnings by $0.37 per share.
(e) Adjusted to reflect the Company's 3-for-2 stock split in October 1989.
</TABLE>
Connecticut Energy Corporation 35
<PAGE>
Operating Data
<TABLE>
<CAPTION>
Years ended September 30, 1996 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Table 1
Analysis by Utility Customer Class Averaged Over Twelve Months (a)
- ------------------------------------------------------------------------------------------------------------------------------
Residential nonheating
- ------------------------------------------------------------------------------------------------------------------------------
Mcf* consumption per customer 23 22 23 24 24 24
Annual revenue per customer $ 319 $ 317 $ 317 $ 299 $ 300 $ 289
Rate per Mcf $ 14.05 $ 14.11 $ 13.74 $ 12.62 $ 12.35 $ 12.04
Margin per Mcf $ 8.77 $ 8.96 $ 8.36 $ 7.63 $ 7.52 $ 7.61
Annual number of customers 33,977 34,419 35,170 36,184 37,444 39,186
- ------------------------------------------------------------------------------------------------------------------------------
Residential heating
- ------------------------------------------------------------------------------------------------------------------------------
Mcf consumption per customer 112 98 115 110 108 97
Annual revenue per customer $ 1,180 $ 1,078 $ 1,187 $ 1,074 $ 1,045 $ 904
Rate per Mcf $ 10.51 $ 11.03 $ 10.35 $ 9.73 $ 9.70 $ 9.36
Margin per Mcf $ 5.28 $ 6.01 $ 5.03 $ 4.81 $ 4.81 $ 4.95
Annual number of customers 105,888 104,067 102,043 100,872 99,706 97,406
- ------------------------------------------------------------------------------------------------------------------------------
Residential apartments
- ------------------------------------------------------------------------------------------------------------------------------
Mcf consumption per customer 1,505 1,585 2,132 2,132 2,149 2,006
Annual revenue per customer $ 12,109 $ 12,919 $ 16,611 $ 15,294 $ 15,217 $ 13,401
Rate per Mcf $ 8.05 $ 8.15 $ 7.79 $ 7.18 $ 7.08 $ 6.68
Margin per Mcf $ 2.93 $ 3.23 $ 2.59 $ 2.35 $ 2.33 $ 2.38
Annual number of customers 922 843 751 751 739 725
- ------------------------------------------------------------------------------------------------------------------------------
Commercial firm
- ------------------------------------------------------------------------------------------------------------------------------
Mcf consumption per customer 460 403 452 444 435 387
Annual revenue per customer $ 3,927 $ 3,522 $ 3,826 $ 3,527 $ 3,440 $ 2,917
Rate per Mcf $ 8.53 $ 8.75 $ 8.47 $ 7.95 $ 7.90 $ 7.53
Margin per Mcf $ 3.32 $ 3.73 $ 3.15 $ 3.03 $ 3.02 $ 3.13
Annual number of customers 13,823 13,412 13,142 12,965 12,831 12,758
Annual number of heating customers 8,292 8,005 7,813 7,630 7,541 7,498
- ------------------------------------------------------------------------------------------------------------------------------
Industrial firm
- ------------------------------------------------------------------------------------------------------------------------------
Mcf consumption per customer 1,757 1,856 2,199 2,085 1,925 1,754
Annual revenue per customer $ 13,956 $ 14,362 $ 16,568 $ 14,935 $ 13,691 $ 11,812
Rate per Mcf $ 7.74 $ 7.74 $ 7.53 $ 7.16 $ 7.11 $ 6.73
Margin per Mcf $ 2.63 $ 2.82 $ 2.30 $ 2.30 $ 2.32 $ 2.40
Annual number of customers 1,224 1,258 1,274 1,283 1,287 1,305
Annual number of heating customers 709 722 731 728 716 716
- ------------------------------------------------------------------------------------------------------------------------------
Firm transportation
- ------------------------------------------------------------------------------------------------------------------------------
Mcf consumption per customer 10,590 -- -- -- -- --
Annual revenue per customer $ 22,273 -- -- -- -- --
Rate per Mcf $ 2.10 -- -- -- -- --
Margin per Mcf $ 2.08 -- -- -- -- --
Annual number of customers 31 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Interruptible
- ------------------------------------------------------------------------------------------------------------------------------
Mcf consumption per customer 35,566 42,212 37,870 30,545 23,035 21,933
Annual revenue per customer $135,899 $128,705 $121,940 $105,892 $ 86,215 $104,186
Rate per Mcf $ 3.83 $ 3.05 $ 3.22 $ 3.47 $ 3.74 $ 4.75
Margin per Mcf $ 1.17 $ 1.14 $ 0.87 $ 0.88 $ 0.99 $ 1.39
Annual number of customers 220 217 184 152 136 127
- ------------------------------------------------------------------------------------------------------------------------------
Number of total customers 156,085 154,216 152,564 152,207 152,143 151,507
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
*Mcf -- one thousand cubic feet; MMcf -- one million cubic feet
</TABLE>
36 Connecticut Energy Corporation
<PAGE>
Operating Data
<TABLE>
<CAPTION>
Years ended September 30, 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Table 2
Percentage of Operating Revenues
- ----------------------------------------------------------------------------------------------------------------------------
Purchased gas 54.2 49.8 52.7 53.1 51.3 48.4
Operations 18.3 21.2 20.8 19.4 21.3 21.7
Maintenance 1.4 1.6 1.7 1.7 1.8 2.0
Depreciation and depletion 5.7 6.0 5.4 5.7 5.6 5.9
Taxes 9.4 9.8 9.0 9.2 9.0 10.9
- ----------------------------------------------------------------------------------------------------------------------------
Purchased gas and operating expenses 89.0 88.4 89.6 89.1 89.0 88.9
- ----------------------------------------------------------------------------------------------------------------------------
Interest expense and
other deductions, net 5.2 5.5 5.1 5.7 6.0 6.1
Earnings applicable to common stock 5.8 6.1 5.3 5.2 5.0 5.0
- ----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0 100.0
- ----------------------------------------------------------------------------------------------------------------------------
Table 3
Revenue by Customer Class
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Residential $151,560 $135,061 $145,975 $131,632 $ 127,224 $110,062
Commercial firm 55,846 47,558 50,838 46,022 44,316 37,538
Industrial firm 16,929 18,190 21,339 19,180 17,696 15,557
Firm transportation 690 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total firm revenue $225,025 $200,809 $218,152 $196,834 $ 189,236 $163,157
- ----------------------------------------------------------------------------------------------------------------------------
Interruptible, transportation and
special contract $ 33,790 $ 29,576 $ 21,127 $ 14,697 $ 12,478 $ 14,814
Other 2,278 1,708 1,594 1,231 1,297 1,201
- ----------------------------------------------------------------------------------------------------------------------------
Total operating revenues $261,093 $232,093 $240,873 $212,762 $203,011 $179,172
- ----------------------------------------------------------------------------------------------------------------------------
Margin by Customer Class (a)
- ----------------------------------------------------------------------------------------------------------------------------
Residential $ 73,734 $ 72,480 $ 71,643 $ 63,391 $ 62,449 $ 57,153
Commercial firm 20,522 20,005 19,315 17,265 16,946 15,446
Industrial firm 5,293 6,507 6,688 6,111 5,794 5,491
Firm transportation 683 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total firm margin $100,232 $ 98,992 $ 97,646 $ 86,767 $ 85,189 $ 78,090
- ----------------------------------------------------------------------------------------------------------------------------
Interruptible, transportation and
special contract $ 6,188 $ 5,755 $ 4,258 $ 2,427 $ 3,666 $ 5,302
- ----------------------------------------------------------------------------------------------------------------------------
Total margins $106,420 $104,747 $101,904 $ 89,194 $ 88,855 $ 83,392
- ----------------------------------------------------------------------------------------------------------------------------
Table 4
Gas Throughput in MMcf* (b)
- ----------------------------------------------------------------------------------------------------------------------------
Residential 14,036 12,280 14,038 13,635 13,233 11,790
Commercial firm 6,365 5,402 5,902 5,786 5,583 4,935
Industrial firm 2,115 2,336 2,787 2,673 2,476 2,287
Firm transportation (c) 328 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total firm throughput 22,844 20,018 22,727 22,094 21,292 19,012
- ----------------------------------------------------------------------------------------------------------------------------
Interruptible, transportation and
special contract (c)(d) 17,211 29,680 10,509 6,296 7,992 8,784
Other uses (e) 1,272 1,030 1,066 712 517 521
- ----------------------------------------------------------------------------------------------------------------------------
Total requirements 41,327 50,728 34,302 29,102 29,801 28,317
- ----------------------------------------------------------------------------------------------------------------------------
Peak day delivery in MMcf 217 254 227 204 183 189
- ----------------------------------------------------------------------------------------------------------------------------
Degree days -- actual 5,798 4,970 5,750 5,467 5,354 4,654
Degree days as percentage of "normal" 104% 90% 104% 99% 97% 85%
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Margin in this table is calculated as revenue minus purchased gas costs
and gross earnings tax.
(b) Sales volumes from the residential, commercial firm and industrial firm
classes of customers reflect volumes delivered but not yet billed at year
end.
(c) Transportation volumes represent customer-owned gas transported directly
to end users, which includes volumes under a special contract for
transportation to Connecticut Light and Power Company's (CL&P) Devon
generating station.
(d) Interruptible service balances daily available supply and demand sales.
Southern or the customer can terminate interruptible service at any time.
(e) Includes gas used by Southern and unaccounted for gas.
</TABLE>
Connecticut Energy Corporation 37
<PAGE>
Glossary
Firm (Core) Customers -- Customers with priority of supply using natural gas
under contracts which anticipate no interruptions.
Gross Margin -- For gas distribution business, operating revenues minus the
cost of purchased gas equals the gross profit margin. The cost of gas is
passed directly on to customers.
Heating Degree Days -- The mean temperature for a single day subtracted from
65 degrees Fahrenheit, the temperature at which the average household
begins using heat.
Interruptible Customers -- Large industrial or commercial customers that have
dual fuel capabilities whose service can be interrupted if capacity is
needed to serve firm customers.
Liquefied Natural Gas (LNG) -- Natural gas liquefied by reducing its
temperature to minus 260 degrees Fahrenheit.
Mcf -- One thousand cubic feet: a standard measurement of natural gas. MMcf:
million cubic feet.
Bcf: billion cubic feet.
NGV -- Natural gas-powered vehicle.
Off-System -- Interruptible gas service provided to parties outside of a
utility's own distribution system.
Purchased Gas Adjustment clause (PGA) -- A mechanism by which firm customers
are charged or credited for purchased gas costs above or below base rate
levels, as prescribed by the DPUC.
Throughput -- The amount of gas carried within or outside of a distribution
system, including gas sold to and transported for end users.
Transportation Volumes -- Customer-owned gas purchased from a supply source
and conveyed through a pipeline or distribution system.
Unbundling -- Separating the sale of the natural gas commodity from the
service of transporting natural gas to the local distribution company or
the end user.
Weather Normalization Adjustment (WNA) -- Formula which adjusts customers'
monthly bills to reflect normal weather patterns (based on the 30-year
average temperature for each billing period), lowering bills during periods
of colder than normal weather and raising them during warmer than normal
periods.
38 Connecticut Energy Corporation
<PAGE>
Investment Information
NAIC STOCK SELECTION DATA
The National Association of Investors Corporation (NAIC) is an organization
with over 350,000 members which provides investment education for the
long-term, value-oriented investor in common stock. As a corporate member of
NAIC, the following data is presented in NAIC's stock selection format.
Historical balance sheet data can be found in the Eleven Year Financial
Summary on pages 34 and 35.
Connecticut Energy is also a participant in NAIC's "LOW COST INVESTMENT PLAN"
which encourages members to make regular contributions to dividend
reinvestment and stock purchase plans such as ours.
<TABLE>
<CAPTION>
Income-Revenue Data Common Share Data
- ------------------------------------------------------------------------------------------------------------------------------
Federal
Gross margin Pretax (fed.) net income Net % Yield Price range P-E ratio
$ $ per $ % of tax income Earned Dividend Pay- on avg. $ $
Year mil. share mil. g.m. $ mil. $ mil. $ $ out price high low high low
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 92.4 14.11 13.3 14.4 4.3 9.0 1.38 1.24 90 7.4 19 3/8 14 1/4 14.0 10.3
- ------------------------------------------------------------------------------------------------------------------------------
1992 98.8 13.85 12.5 12.7 2.3 10.2 1.43 1.265 88 5.8 24 3/4 18 5/8 17.3 13.0
- ------------------------------------------------------------------------------------------------------------------------------
1993 99.7 13.52 14.6 14.6 3.5 11.1 1.50 1.28 85 5.5 26 1/2 20 1/8 17.7 13.4
- ------------------------------------------------------------------------------------------------------------------------------
1994 114.0 14.02 16.8 14.7 4.0 12.8 1.58 1.29 82 5.6 26 20 16.5 12.7
- ------------------------------------------------------------------------------------------------------------------------------
1995 116.5 13.28 20.0 17.1 5.9 14.1 1.60 1.30 81 6.4 22 18 1/2 13.8 11.6
- ------------------------------------------------------------------------------------------------------------------------------
1996 119.5 13.39 21.1 17.7 5.9 15.2 1.70 1.31 77 6.4 22 1/2 18 5/8 13.2 11.0
- ------------------------------------------------------------------------------------------------------------------------------
5 Yr.
avg. 109.7 13.61 17.0 15.4 4.3 12.7 1.56 1.29 83 5.9 24 3/8 19 1/4 15.7 12.3
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarterly Financial Information
- ------------------------------------------------------------------------------------------------------------------------------
Quarter Gross margin $ mil. Pretax (fed.) net income $ mil. Earned per share $ Dividends paid per share $
ended 1996 1995 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31 32.3 32.2 30.1 7.5 7.2 7.2 .57 .57 .67 .325 .325 .320
- ------------------------------------------------------------------------------------------------------------------------------
3/31 53.4 53.3 50.5 22.0 22.7 20.0 1.64 1.79 1.77 .325 .325 .320
- ------------------------------------------------------------------------------------------------------------------------------
6/30(a) 21.1 19.1 20.1 (1.4) (2.7) (2.7) (.08) (.23) (.16) .330 .325 .325
- ------------------------------------------------------------------------------------------------------------------------------
9/30(a) 12.7 11.9 13.3 (7.0) (7.2) (7.7) (.42) (.52) (.53) .330 .325 .325
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Market price $ Trading volume
Quarter 1996 1995 1994 in thousands
ended high low close high low close high low close 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31 22 1/2 19 22 1/4 22 18 5/8 19 1/2 26 23 24 7/8 435.5 330.0 266.3
- ------------------------------------------------------------------------------------------------------------------------------
3/31 22 1/4 18 5/8 19 1/8 20 1/4 18 1/2 19 1/8 25 20 21 1/4 482.0 264.3 508.7
- ------------------------------------------------------------------------------------------------------------------------------
6/30 20 7/8 18 7/8 19 20 5/8 18 5/8 19 5/8 22 1/2 20 1/4 20 1/4 406.1 336.2 336.3
- ------------------------------------------------------------------------------------------------------------------------------
9/30 20 3/8 19 20 20 1/2 18 7/8 19 3/8 22 1/4 20 1/4 21 5/8 405.0 229.5 262.2
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) It is not unusual for a company primarily engaged in the distribution of natural gas to incur a loss in quarters ending in
June and September.
</TABLE>
Connecticut Energy Corporation 39
<PAGE>
Obtaining Shareholder
Account Information
TRANSFER AGENT
Boston EquiServe, formerly Bank of Boston, is the Transfer Agent and
Registrar for Connecticut Energy Corporation (CNE-NYSE) common stock. NO
STOCK TRANSFER OR SHAREHOLDER ACCOUNT ACTIVITY TAKES PLACE AT THE CONNECTICUT
ENERGY CORPORATION OFFICES.
There are four ways to obtain information about your shareholder account:
BOSTON EQUISERVE INVESTOR RELATIONS REPRESENTATIVES are available Monday
through Friday from 9:00 a.m. to 6:00 p.m. E.S.T. by dialing (800) 736-3001,
then pressing "0" to speak with a representative. Please have your social
security number available. For hearing impaired shareholders TTY/TDD service
is available at (800) 952-9245. Please speak with a representative if you
need to:
* Change your account mailing address
* Report a lost or stolen dividend check or stock certificate
24 HOUR INTERACTIVE PHONE SERVICE is available to obtain the following:
* Share balance
* Dividend reinvestment and stock purchase plan enrollment form
* Dividend reinvestment plan account statement
* Direct deposit of dividends enrollment form
* Duplicate 1099 form
* Stock transfer instructions package
Call (800) 736-3001 and follow the interactive prompts. Please have your
social security number available.
BOSTON EQUISERVE'S INTERNET PAGE [HTTP://WWW.EQUISERVE.COM] allows
shareholders to expedite mail requests to investor relations representatives
for information such as:
* Direct deposit enrollment forms
* Dividend reinvestment and stock purchase plan enrollment forms
In addition, shareholders may also DOWNLOAD
* Stock transfer forms and instructions
* W-9 certification forms
MAIL REQUESTS can be sent to Boston EquiServe Investor Relations, Mail Stop
45-02-09, P.O. Box 644, Boston, MA 02102-0644.
GIFT CERTIFICATES
If you are transferring shares of stock from your dividend reinvestment and
stock purchase plan (plan) account as a gift, we would be happy to supply you
with a gift certificate. This allows the actual shares to remain in
safekeeping in a plan account for the recipient. For further information call
Connecticut Energy Corporation at (800) 760-7776. Allow at least two weeks
for the transfer to occur.
40 Connecticut Energy Corporation
<PAGE>
Obtaining Company Information
ANNUAL MEETING
The Annual Meeting of Shareholders will take place Tuesday, January 28, 1997
at 10 a.m. in the Trumbull Marriott Hotel, 180 Hawley Lane, Trumbull,
Connecticut.
QUARTERLY EARNINGS RELEASES
Press releases are issued when the Company announces quarterly financial
results. For the 1997 quarters, results should appear in the Wall Street
Journal Digest of Earnings on or about January 29, April 24, July 24 and
November 6.
CHAIRMAN'S UPDATE LETTERS
If your Connecticut Energy account is held in a brokerage account instead of
your own name, we would like to send you a copy of the Chairman's Update
which is enclosed with the dividend checks or dividend reinvestment
statements of registered shareholders. Please call us at (800) 760-7776 and
ask to be put on our mailing list for the Chairman's quarterly updates, or
fax your request to Judith Falango at (203) 382-8672.
FORM 10-K
To obtain a copy of Form 10-K or to request further financial information
contact Judith Falango, Manager Investor and Shareholder Relations, at (800)
760-7776, or fax your request at (203) 382-8672.
INTERNET HOME PAGE
Connecticut Energy Corporation has established a home page on the World Wide
Web of the Internet. The following information, in addition to this annual
report, is available through our home page:
* Most recent stock quotes (updated throughout the trading day)
* Forms 10-K and 10-Q
* Earnings news releases
* Chairman's update letters
* Dividend Reinvestment and Stock Purchase Plan Prospectus
* List of investment firms that follow Connecticut Energy
You may access our home page at the address [HTTP://WWW.CONNENERGY.COM].
AUDIO CASSETTE
For visually impaired shareholders or prospective investors, our annual
report is available on audio cassettes. The tapes are made by the Connecticut
unit of Recordings for the Blind and Dyslexic. Please call (800) 760-7776 to
request a copy.
Connecticut Energy Corporation 41
<PAGE>
Corporate Directory
BOARD OF DIRECTORS
- ----------------------------------------------
Connecticut Energy Corporation
and The Southern Connecticut
Gas Company
Henry Chauncey, Jr.
Lecturer and Head of Management Program,
Department of Epidemiology and
Public Health, Yale School of Medicine
James P. Comer, M.D.
Maurice Falk Professor of Child
Psychiatry, Yale Child Study Center and
Associate Dean, Yale School of Medicine
J.R. Crespo
Chairman, President and Chief Executive
Officer, Connecticut Energy Corporation and
The Southern Connecticut Gas Company
Richard F. Freeman
President and Chief Executive Officer,
Greater Bridgeport Area Foundation
Richard M. Hoyt
President and Chief Executive Officer,
Chapin & Bangs Company
Paul H. Johnson
President and Chief Executive Officer,
Gaylord Hospital
Newman M. Marsilius III
President and Chief Executive Officer,
Producto-Moore Companies
Samuel M. Sugden
Chairman,
LeBoeuf, Lamb, Greene & MacRae L.L.P.
Christopher D. Turner
Project Manager, Energy Sector
Bechtel International Consulting Group
Helen B. Wasserman
Member, Board of Governors for Higher
Education, State of Connecticut
OFFICERS
- ----------------------------------------------
CONNECTICUT ENERGY CORPORATION
J.R. Crespo
Chairman and Chief Executive Officer of
Connecticut Energy and its Subsidiaries;
President of Connecticut Energy and
The Southern Connecticut Gas Company
Thomas A. Trotta
Senior Vice President of Connecticut
Energy; Executive Vice President and
Chief Operating Officer of The Southern
Connecticut Gas Company
Vincent L. Ammann, Jr.
Vice President and Chief Accounting Officer
Carol A. Forest
Vice President, Finance,
Chief Financial Officer and Treasurer of
Connecticut Energy and The Southern
Connecticut Gas Company; Vice President
and Treasurer of Subsidiaries
Michael H. Pinto
Vice President, Government Affairs
J. Richard Tiano
Vice President, General Counsel and
Secretary of Connecticut Energy and
its Subsidiaries
THE SOUTHERN CONNECTICUT
GAS COMPANY
Peter D. Loomis
Group Vice President, Customer and
Operating Services
Phyllis A. O'Brien
Group Vice President, Accounting,
Regulatory and Customer Relations
Salvatore A. Ardigliano
Vice President, Marketing and
Gas Supply Services
James P. Healy
Vice President, Energy Services Planning
Ernest W. Karkut
Vice President, Purchasing and Plant Services
Patricia A. Younger
Vice President, Customer Relations
CNE ENERGY SERVICES GROUP, INC.
Larry S. McGaughy
President
Joseph F. Feeley
Vice President and Chief Financial Officer
Robert A. Cables
Vice President, Marketing and
Energy Services
CNE DEVELOPMENT CORPORATION
Thomas A. Trotta
President
Salvatore A. Ardigliano
Vice President
Joseph F. Feeley
Vice President and Chief Financial Officer
CNE VENTURE-TECH, INC.
Thomas A. Trotta
President
Vincent L. Ammann, Jr.
Senior Vice President
Joseph F. Feeley
Vice President and Chief Financial Officer
INDEPENDENT ACCOUNTANTS
- ----------------------------------------------
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, NY 10019-6013
LABOR UNION LEADERSHIP
- ----------------------------------------------
UNITED STEEL WORKERS OF AMERICA
LOCAL 12000
Gabriel Gambardella
President
Francis J. O'Connor
Vice President
[recycle logo]
Continuing our commitment and concern for the environment as
an integral part of our business
responsibility, this entire document was printed on
recycled paper containing 50% recovered fiber.
42 Connecticut Energy Corporation
<PAGE>
[logo] Connecticut Energy Corporation
855 Main Street
Bridgeport
Connecticut 06604
EXHIBIT 21
SUBSIDIARIES OF
CONNECTICUT ENERGY CORPORATION
Name State of Incorporation
---- ----------------------
The Southern Connecticut Gas Company Connecticut
CNE Development Corporation Connecticut
CNE Energy Services Group, Inc. Connecticut
CNE Venture-Tech, Inc. Connecticut
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 257,761
<OTHER-PROPERTY-AND-INVEST> 2,804
<TOTAL-CURRENT-ASSETS> 55,774
<TOTAL-DEFERRED-CHARGES> 82,889
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 399,228
<COMMON> 9,012
<CAPITAL-SURPLUS-PAID-IN> 91,079
<RETAINED-EARNINGS> 37,870
<TOTAL-COMMON-STOCKHOLDERS-EQ> 137,961
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<LONG-TERM-DEBT-NET> 138,727
<SHORT-TERM-NOTES> 19,200
<LONG-TERM-NOTES-PAYABLE> 0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 102,745
<TOT-CAPITALIZATION-AND-LIAB> 399,228
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<INCOME-TAX-EXPENSE> 7,606
<OTHER-OPERATING-EXPENSES> 224,823
<TOTAL-OPERATING-EXPENSES> 232,429
<OPERATING-INCOME-LOSS> 28,664
<OTHER-INCOME-NET> (546)
<INCOME-BEFORE-INTEREST-EXPEN> 28,118
<TOTAL-INTEREST-EXPENSE> 12,953
<NET-INCOME> 15,165
0
<EARNINGS-AVAILABLE-FOR-COMM> 15,165
<COMMON-STOCK-DIVIDENDS> 11,696
<TOTAL-INTEREST-ON-BONDS> 11,065
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