File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION WITH RESPECT
TO A DECLARATION AND PAYMENT OF DIVIDENDS
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, Boston, Massachusetts 02107
EUA SERVICE CORPORATION
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name of companies filing this statement
and address of principal executive office)
EASTERN UTILITIES ASSOCIATES
(Name of top registered holding company parent of
applicant or declarant)
CLIFFORD J. HEBERT, JR., TREASURER
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name and address of agent for service)
The Commission is requested to mail signed copies
of all orders, notices and communications to:
ARTHUR I. ANDERSON, ESQ.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
ITEM 1. DESCRIPTION OF THE PROPOSED TRANSACTION.
A. By an order (the "1986 Order") dated February 18, 1986
(HCAR 35-24020), the Commission authorized Eastern Utilities
Associates ("EUA") to make capital contributions to EUA Service
Corporation ("EUA Service") and/or purchase shares of EUA
Service's common stock in an aggregate amount not to exceed $5
million, primarily in order to provide interim financing for
constructing EUA Service's office complex (the "Service Center").
EUA made a $5 million equity capital contribution during 1987.
The 1986 Order also authorized EUA Service to amend its service
contracts with the other companies in the EUA system of companies
(the "System Companies") in order to provide a return on EUA
Service's equity capital. As the administrative arm of the EUA
holding company system (the "EUA System"), EUA Service charges a
fee at cost to the System Companies for the services it renders
to them. The authorization under the 1986 Order permitted EUA
Service to begin billing its allocated equity return among the
System Companies at the end of the first month in which EUA made
its capital contribution.
By an order (the "1987 Order") dated December 28, 1987 (HCAR
35-24543), the Commission authorized EUA Service to issue and
sell up to $20 million aggregate principal amount of notes (the
"Notes") by means of a negotiated private placement with the
Massachusetts Mutual Life Insurance Company and the Franklin Life
Insurance Company. The net proceeds from the sale of the Notes
were applied to pay or reduce short-term borrowings from banks
obtained by EUA Service primarily for construction of the Service
Center. The Notes mature in 2008, and are currently being repaid
pursuant to a sinking fund repayment schedule.
B. In reviewing its cost of capital, EUA Service has
determined that it will be desirable to reduce the $5 million of
paid-in-capital as it pays down the principal amount of the
Notes. Therefore, EUA Service seeks authorization to reduce its
paid-in-capital account over the next fifteen years to zero
through payment from that account of cash dividends to its sole
stockholder, EUA. The dividends will be paid as follows:
Year Dividend
1994 $ 500,000
1995 1,000,000
1996 1,000,000
1997 200,000
1998 200,000
1999 200,000
2000 200,000
2001 200,000
2002 200,000
2003 200,000
2004 200,000
2005 200,000
2006 200,000
2007 200,000
2008 300,000
The dividend payment schedule is calculated to reduce EUA
Service's capital to a level proportionate to the principal
amount remaining on the Notes by 1997 through dividend payments
of $2.5 million, in the aggregate. Thereafter, the dividend
payments will be made in the same proportions as the sinking fund
payments on the Notes. That is, the dividend payment in any
given year will be the same percentage of EUA Service's paid-in-
capital as the sinking fund payment is to the remaining principal
owed on the Notes. The dividends will be paid out of EUA
Service's internally generated cash. By paying down its paid-in-
capital account over time, as opposed to in a lump sum, EUA
Service will not have to incur additional debt in an effort to
reduce its capital.
By reducing its equity capital, EUA Service will be reducing
its fees to the System Companies. A reduction of fees will
reduce the overall cost of doing business for the EUA System.
Ultimately, such cost savings redounds to the benefit of the
System's ratepayers. Therefore, EUA Service hereby requests
authorization to declare and pay dividends to EUA out of paid-in-
capital as set forth in this Declaration.
ITEM 2. FEES, COMMISSIONS, AND EXPENSES.
The estimated fees, commissions and expenses of the
Declarants expected to be paid or incurred, directly or
indirectly, in connection with the transaction described herein
are as follows:
Securities and Exchange Commission Fee $ 2,000*
EUA Service Corporation Expenses 2,500
Fees and Expenses of Company Counsel 5,000
TOTAL 9,500
=======
(*actual)
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The sections of the Act and rules or exemptions thereunder
that the Declarants believe are or may be applicable to the
transactions proposed are set forth below:
Payment of dividends to EUA Section 12(c) and Rule 46(a)
ITEM 4. REGULATORY APPROVALS.
No state commission and no Federal commission, other than
the Commission, has jurisdiction over the proposed transaction.
ITEM 5. PROCEDURE.
(a) In order to be in a position to carry out the proposed
transaction at the most advantageous time, the Declarants request
that the Commission issue its order hereon on the earliest
practical date.
(b) It is not considered necessary that there be a
recommended decision by a hearing officer or by any other
responsible officer of the Commission. The Office of Public
Utility Regulation may assist in the preparation of the decision
of the Commission, and it is believed that a thirty (30) day
waiting period between the issuance of the order of the
Commission and the day on which the order is to become effective
would not be appropriate.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS (* Filed herewith).
(a) Exhibits.
*Exhibit F Opinion of counsel.
*Exhibit G Proposed Form of Notice.
(b) Financial Statements.
*b-1 EUA Service Corporations Statement of
Cash Flows and Compensation use of
Capital for the years ended December 31,
1994, 1995 and 1996.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
The transactions described in Item 1 do not involve major
federal actions significantly affecting the quality of the human
environment. No Federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed
transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned Declarants have duly caused
this statement to be signed on their behalf by the undersigned
duly authorized individuals.
EASTERN UTILITIES ASSOCIATES
By: /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Treasurer
EUA SERVICE CORPORATION
By: /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Treasurer
Dated: March 14, 1994
March 14, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
Re: File No. 70-
Eastern Utilities Associates; EUA Service
Corporation-Declaration with Respect to a Declaration
and Payment of Dividends
Ladies and Gentlemen:
As counsel for Eastern Utilities Associates ("EUA") and EUA
Service Corporation ("EUA Service"), we are furnishing this
opinion to be used in connection with the declaration on
Form U-1 under the Public Utility Holding Company Act of 1935
(the "Act") filed by EUA and EUA Service with the Securities and
Exchange Commission (the "Commission") on March ___, 1994, File
No. 70- , (the "Declaration"). In the Declaration, EUA Service
requests Commission authorization to declare and pay dividends in
an aggregate amount of $5 million to EUA, as EUA Service's sole
stockholder, over a fifteen-year period according to a payment
schedule set forth in the Declaration. The dividend payments
will be made from EUA Service's paid-in-capital account and will
reduce the balance of such account to zero, and they will mirror
the sinking fund payments for EUA Service's $20 million aggregate
principal amount of outstanding notes.
It is our opinion, subject to the assumptions hereinafter
stated, that in the event the transactions for which EUA Service
has requested authorization as described above (the "Proposed
Transactions") are consummated in accordance with the
Declaration:
(a) All State laws applicable to the Proposed Transactions
will have been complied with by EUA Service; and
(b) The consummation of the Proposed Transactions will not
violate the legal rights of the holders of any of the securities
issued by EUA or EUA Service or any of their associate companies,
Eastern Edison Company ("Eastern Edison"), Blackstone Valley
Electric Company ("Blackstone"), Newport Electric Corporation
("Newport"), EUA Cogenex Corporation ("EUA Cogenex"), Montaup
Electric Company ("Montaup"), EUA Energy Investment Corporation
("EUA Energy Investment"), EUA Ocean State Corporation ("EUA
Ocean State"), Ocean State Power ("OSP I"), Ocean State Power II
("OSP II"), OSP Finance Company ("OSP Finance") and Northeast
Energy Management, Inc. ("NEM").
This opinion, in addition to being subject to the
consummation of the Proposed Transactions in accordance with the
Declaration, is also subject to the following additional
assumptions:
(1) compliance with such orders as the Commission may issue
from time to time upon the Declaration;
(2) the accuracy of information furnished to us (a) as to
the outstanding securities of EUA and EUA Service and their
associate companies, Eastern Edison, Blackstone, Newport, EUA
Cogenex, Montaup, EUA Energy Investment, EUA Ocean State, OSP I,
OSP II, OSP Finance and NEM and (b) that there is no provision or
condition in any note or other document in connection with
outstanding short-term notes of any of those companies limiting
the Proposed Transactions;
(3) that the Proposed Transactions may be subject to and
affected by applicable bankruptcy, receivership, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws
affecting the enforcement of the rights and remedies of creditors
generally (including, without limitation, such as may deny giving
effect to waivers of rights to debtors or guarantors); and such
duties and standards as are or may be imposed on creditors,
including, without limitation, good faith, reasonableness and
fair dealing under any applicable statute, rule, regulation or
judicial decision; and
(4) that the Proposed Transactions may be subject to and
affected by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law) and the exercise of equitable powers by a court of competent
jurisdiction (and no opinion is given herein as to specific
performance or as to the availability of other equitable remedies
or equitable relief of any kind).
This opinion relates only to Federal law and the laws of The
Commonwealth of Massachusetts. To the extent that certain
matters addressed may involve the laws of other States, we have
assumed that such laws are not materially different from the laws
of The Commonwealth of Massachusetts.
We consent to the use of this opinion in connection with the
Declaration filed with the Commission.
Very truly yours,
McDermott, Will & Emery
Exhibit G
(PROPOSED FORM OF NOTICE)
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35 - , 70 - )
Eastern Utilities Associates ("EUA"), a registered holding
company and EUA Service Corporation ("EUA Service"), a wholly-
owned subsidiary of EUA, have filed a declaration with this
Commission pursuant to Section 12(c) of the Public Utility
Holding Company Act of 1935 (the "Act") and Rule 46(a)
promulgated thereunder.
EUA Service seeks authorization to declare and pay dividends
to EUA out of EUA Service's paid-in-capital account in an
aggregate amount of $5 million according to a fifteen-year
payment schedule set forth in the declaration. The payment
schedule mirrors the sinking fund payments for EUA Service's $20
million aggregate principal amount of outstanding notes.
NOTICE IS FURTHER GIVEN that any interested person may, not
later than _________, 1994, request in writing that a hearing be
held on such matter, stating the nature of his interest, the
reasons for such request, and the issues of fact or law raised by
said declaration which he desires to controvert; or he may
request that he be notified if the Commission should order a
hearing thereon. Any such request should be addressed:
Secretary, Securities and Exchange Commission, 450 5th Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. A copy of such
request should be served personally or by mail upon the declarant
at the above-stated address and proof of service (by affidavit
or, in case of an attorney at law, by certificate) should be
filed with the request. At any time after said date the
declaration, as filed or as it may be amended, may be granted and
permitted to become effective as provided in Rule 23 of the
General Rules and Regulations promulgated under the Act, or the
Commission may grant exemption from such rules as provided in
Rules 20(a) and 100 thereof or take such other action as it may
deem appropriate. Persons who request a hearing or advice as to
whether a hearing is ordered will receive any notices and orders
issued in this matter, including the date of the hearing (if
ordered) and any postponements thereof.
For the Commission, by the Division of Corporate Regulation,
pursuant to delegated authority.
Secretary
EUA SERVICE CORPORATION
ESTIMATED STATEMENT OF CASH FLOWS
For The Years Ended December 31,
<TABLE>
<S> <C> <C> <C>
1994 1995 1996
Cash flow from operating activities:
Net income:
Compensation Use of Capital (see attachment) 581,616 523,466 407,166
Addback non-cash items funded
by operating companies:
SFAS 106 - EUA Service Corp accrual
in excess of tax deductible amount 507,000 507,000 507,000
SFAS 87 - Key Executive Insurance
accrued by EUA Service 258,000 258,000 258,000
Depreciation and Amortization 1,160,000 1,160,000 1,160,000
------------ ------------ ------------
SUB-TOTAL 2,506,616 2,448,466 2,332,166
Cash used in investing activities:
Cash construction expenditures (373,000) (465,000) (482,000)
Cash provided from (used in) financing activities:
Proceeds from short-term borrowings
Redemption of long-term debt (1,100,000) (1,100,000) (1,100,000)
------------ ------------ ------------
Estimated net available cash 1,033,616 883,466 750,166
Cash balance brought forward 0 533,616 417,082
Proposed Return of Capital Dividend 500,000 1,000,000 1,000,000
------------ ------------ ------------
Etimated available cash after R.O.C. dividend 533,616 417,082 167,248
============ ============ ============
</TABLE>
EUA SERVICE CORPORATION
COMPENSATION USE OF CAPITAL
For The Years Ended December 31,
<TABLE>
<S> <C> <C> <C>
1994 1995 1996
COMMON STOCK AT BEGINNING OF YEAR 1,000 1,000 1,000
MISCELLANEOUS PAID IN CAPITAL 5,000,000 4,500,000 3,500,000
------------ ------------ ------------
TOTAL BASE AMOUNT 5,001,000 4,501,000 3,501,000
WEIGHTED COST OF COMMON EQUITY AT 12/31/93 11.63% 11.63% 11.63%
------------ ------------ ------------
ANNUAL RETURN ON INVESTMENT 581,616 523,466 407,166
============ ============ ============
</TABLE>
