UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _________________ to ___________________
Commission File Number 1-5366
EASTERN UTILITIES ASSOCIATES
(Exact name of registrant as specified in its charter)
Massachusetts 04-1271872
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Liberty Square, Boston, Massachusetts
(Address of principal executive offices)
02109
(Zip Code)
(617)357-9590
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes...X.......No..........
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Class Outstanding at July 31, 1995
Common Shares, $5 par value 20,309,714 shares
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
June 30, December 31,
ASSETS 1995 1994
<S> <C> <C>
Utility Plant and Other Investments:
Utility Plant in Service $ 1,025,258 $ 1,020,859
Less: Accumulated Provision for Depreciation
and Amortization 321,096 304,034
Net Utility Plant in Service 704,162 716,825
Construction Work in Progress 20,756 8,389
Net Utility Plant 724,918 725,214
Investments in Jointly Owned Companies 69,621 70,675
Non-Utility Plant - Net 109,106 107,803
Total Plant and Other Investments 903,645 903,692
Current Assets:
Cash and Temporary Cash Investments 11,441 20,109
Accounts Receivable, Net 87,631 89,348
Notes Receivable 19,494 13,906
Materials and Supplies 13,438 15,168
Other Current Assets 12,069 8,517
Total Current Assets 144,073 147,048
Deferred Debits and Other Non-Current Assets 182,716 183,309
Total Assets $ 1,230,434 $ 1,234,049
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Shares, $5 Par Value $ 101,513 $ 99,685
Other Paid-In Capital 218,256 212,990
Common Share Expense (3,899) (3,849)
Retained Earnings 59,493 56,617
Total Common Equity 375,363 365,443
Non-Redeemable Preferred Stock - Net 6,900 6,900
Redeemable Preferred Stock - Net 25,870 25,390
Long-Term Debt - Net 449,728 455,412
Total Capitalization 857,861 853,145
Current Liabilities:
Long-Term Debt Due Within One Year 43,203 41,601
Notes Payable 43,075 31,678
Preferred Stock Sinking Fund 50 50
Accounts Payable 30,587 33,442
Taxes Accrued 4,688 6,465
Interest Accrued 9,080 10,889
Other Current Liabilities 10,285 29,566
Total Current Liabilities 140,968 153,691
Deferred Credits and Other Non-Current Liabilities 89,586 89,313
Accumulated Deferred Taxes 142,019 137,900
Total Liabilities and Capitalization $ 1,230,434 $ 1,234,049
See accompanying notes to consolidated condensed financial statements.
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<TABLE>
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands Except Number of Shares and Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Operating Revenues $ 146,119 $ 137,269 $ 284,086 $ 287,466
Operating Expenses:
Fuel 23,643 23,246 45,927 46,429
Purchased Power 31,481 29,907 63,455 64,809
Other Operation and Maintenance 53,445 44,392 94,745 88,705
Voluntary Retirement Incentive 4,505 0 4,505 0
Depreciation and Amortization 11,724 12,076 23,480 23,471
Taxes - Other Than Income 4,497 6,113 11,054 12,962
- Current Income 1,297 2,558 5,248 8,380
- Deferred Income 1,056 730 3,117 2,893
Total 131,648 119,022 251,531 247,649
Operating Income 14,471 18,247 32,555 39,817
Other Income (Deductions) - Net 4,234 4,470 8,387 9,780
Income Before Interest Charges 18,705 22,717 40,942 49,597
Interest Charges:
Interest on Long-Term Debt 9,658 9,746 19,318 19,519
Other Interest Expense 1,480 2,405 2,728 3,684
Allowance for Borrowed Funds Used
During Construction (Credit) (838) (204) (1,396) (549)
Net Interest Charges 10,300 11,947 20,650 22,654
Net Income 8,405 10,770 20,292 26,943
Preferred Dividends of Subsidiaries 580 584 1,161 1,167
Consolidated Net Earnings $ 7,825 $ 10,186 $ 19,131 $ 25,776
Weighted Average Number of
Common Shares Outstanding 20,210,861 19,652,160 20,105,183 19,521,353
Consolidated Earnings Per
Average Common Share $ 0.38 $ 0.52 $ 0.95 $ 1.32
Dividends Paid $ 0.40 $ 0.385 $ 0.785 $ 0.745
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
Six Months Ended
June 30,
<S> <C> <C>
1995 1994
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 20,292 $ 26,943
Adjustments to Reconcile Net Income
to Net Cash Provided from Operating Activities:
Depreciation and Amortization 29,307 27,498
Deferred Taxes 3,410 3,505
Non-cash (Gains)/Expenses on Sales of Investments
in Energy Savings Projects (3,946) 823
Investment Tax Credit, Net (606) (590)
Allowance for Funds Used During Construction (299) (129)
Collections and sales of project notes and leases rec. 10,064 3,895
Other - Net 5,245 1,207
Change in Operating Assets and Liabilities (22,837) (9,744)
Net Cash Provided From Operating Activities 40,630 53,408
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (43,572) (22,823
Collections on Notes and Lease Receivables of EUA Cogenex 939 621
Acquisition of Northeast Energy Management, Inc. (8,567)
Increase in Other Investments (327)
Net Cash (Used in) Investment Activities (42,633) (31,096
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Common Stock 3,050 4,584
Long-Term Debt 7,927
Redemptions:
Long-Term Debt (4,125) (10,954
Premium on Reacquisition and Financing Expenses (50) (607)
EUA Common Share Dividends Paid (15,775) (14,572
Subsidiary Preferred Dividends Paid (1,162) (1,167)
Net Increase (Decrease) in Short-Term Debt 11,397 (1,637)
Net Cash (Used in) Financing Activities (6,665) (16,426
Net (Decrease) Increase in Cash and Temp. Cash Investments (8,668) 5,886
Cash and Temporary Cash Investments at Beginning of Period 20,109 4,180
Cash and Temporary Cash Investments at End of Period $ 11,441 $ 10,066
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (Net of Capitalized Interest) $ 20,794 $ 20,356
Income Taxes $ 4,622 $ 5,159
Supplemental schedule of non-cash investing activities:
Conversion of Investments in Energy Savings
Projects to Notes and Leases Receivable $ 9,248 $ 3,536
See accompanying notes to consolidated condensed financial statements.
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EASTERN_UTILITIES_ASSOCIATES
NOTES_TO_CONSOLIDATED_CONDENSED_FINANCIAL_STATEMENTS
The accompanying Notes should be read in conjunction with the Notes to
Consolidated Financial Statements incorporated in the Eastern Utilities
Associates (EUA or the Company) 1994 Annual Report on Form 10-K and the
Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995.
Note A - In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly its
financial position as of June 30, 1995 and December 31, 1994, and the
results of operations for the three and six months ended June 30, 1995
and 1994 and cash flows for the six months ended June 30, 1995 and
1994. Certain reclassifications have been made to prior period
financial statements to conform to current period classifications.
Note B - Results shown above for the respective interim periods are not neces-
sarily indicative of results to be expected for the fiscal years due
to seasonal factors which are inherent in electric utilities in New
England. A greater proportionate amount of revenues is earned in the
first and fourth quarters (winter season) of most years because more
electricity is sold due to weather conditions, fewer day-light hours,
etc.
Note C - Commitments and Contingencies:
Rate Activity
On March 21, 1994, Montaup Electric Company (Montaup), the wholesale
electric generating and transmission subsidiary of EUA, filed an
application with the Federal Energy Regulatory Commission (FERC) for
authorization to reduce its wholesale rates by $10.1 million, or three
percent. Montaup supplies electricity at wholesale to EUA's retail
electric utilities - Eastern Edison Company (Eastern Edison),
Blackstone Valley Electric Company (Blackstone) and Newport Electric
Corporation (Newport) - and to two non-affiliated municipal
utilities. This application was designed to match more closely
Montaup's revenues with its decreasing cost of doing business
resulting from, among other things, a reduced rate base, lower
interest costs and successful cost control efforts.
On May 21, 1994, Montaup began billing the reduced rates and on April
14, 1995 FERC approved a settlement agreement between Montaup and the
intervenors in the case calling for an annual reduction of
approximately $13.9 million (inclusive of the filed $10.1 million
reduction).
Montaup refunded to its customers the difference collected between the
$10.1 million filed reduction and the $13.9 million settled reduction
in April 1995. Montaup had previously reserved for this refund.
Note C - Commitments and Contingencies (Cont'd):
Maine Yankee
During the refueling-and-maintenance shutdown of the Maine Yankee
Nuclear Generating plant that started in early February of 1995, Maine
Yankee Atomic Power Company (Maine Yankee), the owner of the plant,
detected an increased rate of degradation of the plant's steam
generator tubes in excess of the number expected and started
evaluating several courses of action.
On April 7, 1995, Maine Yankee announced its intention to further
explore sleeving all 17,000 steam generator tubes and on May 22, 1995
the Maine Yankee Board of Directors authorized a sleeving project to
go forward. Although testing of all tubes revealed that approximately
40% of the tubes were free of defects, Maine Yankee is in the process
of sleeving all of the tubes as a preventative safety measure.
Sleeving involves the inserting of a tube of slightly smaller diameter
into the defective tube; the sleeve is welded in place and acts as a
new tube. Sleeving is a proven technology and must meet rigorous
federal standards of safety and licensing. This sleeving project is
expected to be completed in December 1995.
Montaup owns 4% of the Common Stock of Maine Yankee. Montaup's share
of the current estimated cost of the sleeving project is approximately
$1.6 million and is recoverable through rates.
Other
In December 1992, Montaup commenced a declaratory judgment action in
which it sought to have the Massachusetts Superior Court determine its
rights under the Power Purchase Agreement between it and Aquidneck
Power Limited Partnership (Aquidneck). Montaup sought a declaration
that the Power Purchase Agreement was binding on the parties according
to its terms. Aquidneck asserted that Montaup had either an expressed
or implied obligation to negotiate new terms and conditions to the
Power Purchase Agreement.
In April 1995 Montaup filed a motion for summary judgement and in June
1995 the court granted Montaup's motion. In July, Aquidneck filed for
appeal of the court's decision.
Montaup, EUA and EUA Service intend to vigorously contest the appeal
and continue to believe that Aquidneck's claims have no basis in law.
EUA Cogenex, through its EUA WestCoast L.P., has had under development a
cogeneration facility of approximately 1.5 MW. As of June 30, 1995,
WestCoast's investment in the project was approximately $5.8 million. The
cogeneration facility has experienced numerous start-up delays and cost
overruns. The host of the facility has taken the position that the energy
services agreement between WestCoast and itself is terminated due to, among
other things, failure to complete the project. WestCoast disagrees with the
host's right to terminate, but has decided not to contest the host's purported
termination.
In June 1993, WestCoast filed a lawsuit against the contractors
responsible for the design and construction of the facility, as well as the
surety on the contractor's performance bond. Certain defendants in that action
have filed cross-complaints against WestCoast and EUA Cogenex, seeking, among
other things, approximately $300,000 for payments withheld by WestCoast due to
the contractor's deficient performance. A contractor has also filed a
cross-complaint against the host. Additionally, the host has also stated that
it intends to file a cross-complaint against Cogenex and the other parties in
the litigation, seeking at least $7 million in damages arising from lost
economic advantage.
EUA Cogenex intends to vigorously prosecute its claims against the
contractors and surety and defend itself against any cross-complaints. EUA
Cogenex cannot predict the ultimate resolution of this matter; it is possible
that EUA Cogenex's investment may not be fully recovered.
Item_2. Management's_Discussion_and_Analysis_of_Financial_Condition_and_Results
of_Operations
The following is Management's discussion and analysis of certain
significant factors affecting the Company's earnings and financial condition
for the interim periods presented in this Form 10-Q.
Voluntary Retirement Incentive Offer
On March 15, 1995, EUA announced a corporate reorganization which, among
other things, consolidated management of Eastern Edison, Blackstone and
Newport. As part of the reorganization, a voluntary retirement incentive was
offered to sixty-six EUA System employees. Forty-nine of those eligible for
the program accepted the incentive and retired effective June 1, 1995. The
cost of this incentive program amounted to a one-time $4.5 million pre-tax
($2.7 million after-tax) charge to second quarter 1995 earnings. The estimated
payback period is approximately 18 months.
Overview
Consolidated Net Earnings for the quarter ended June 30, 1995 were $7.8
million compared to $10.2 million in the second quarter of 1994. The second
quarter 1995 earnings include a one-time charge of $2.7 million, on an
after-tax basis, related to the voluntary retirement incentive offer. Net
Earnings contributions by Business Unit for the second quarter of 1995 and 1994
were as follows (000's):
Three Months Ended June 30,
Increase
1995 1994 (Decrease)
Core Electric Business $ 6,456 $ 7,415 $ (959)
Energy Related Business 1,337 3,476 (2,139)
Corporate 32 (705) 737
Consolidated $ 7,825 $10,186 $(2,361)
======= ======= ========
Net Earnings of the Core Electric Business for the second quarter of 1995
decreased by $1.0 million due primarily to the one-time charge related to the
voluntary retirement incentive offer and the impact of Montaup's wholesale rate
reduction implemented on May 21, 1994. Offsetting these impacts somewhat were
reductions in litigation expenses resulting from recently received favorable
court decisions, a decrease in taxes other than income and a slight increase in
the second quarter kWh sales.
Net Earnings of the Energy Related Business Unit decreased by
approximately $2.1 million in the second quarter of 1995 as compared to the
same period of a year ago due primarily to increased operating and development
expenses of new business ventures of EUA Energy Investment Corporation (EUA
Energy) aggregating $900,000. Also second quarter 1994 results included $1.3
million of investment tax credits recorded by EUA Ocean State.
The Corporate Business Unit Net Earnings for the second quarter of 1995
compared to the same period in 1994 increased by approximately $0.7 million due
primarily to decreased interest and legal expenses.
Consolidated Net Earnings for the six months ended June 30, 1995 were
$19.1 million compared to $25.8 million for the same period of 1994. Net
Earnings contributions by Business Unit for the first six months of 1995 and
1994 were as follows (000's):
Six Months Ended June 30,
Increase
1995 1994 (Decrease)
Core Electric Business $17,092 $20,642 $(3,550)
Energy Related Business 1,845 5,725 (3,880)
Corporate 194 (591) 785
Consolidated $19,131 $25,776 $(6,645)
======= ======= =======
Net Earnings of the Core Electric Business for the first half of 1995
decreased by $3.6 million. The voluntary retirement incentive offer and
Montaup's 1994 rate reduction were the principal reasons for the decrease in
year-to-date earnings contributions of the Core Electric Business. Also, a
1.8% decrease in kWh sales in the period had a negative impact on this business
unit's earnings. Offsetting these impacts somewhat were reductions in
litigation expenses and taxes other than income.
Net Earnings of the Energy Related Business Unit decreased by
approximately $3.9 million in the first six months of 1995 as compared to the
same period of a year ago. The principal reasons for this decrease were
additional operating and development expenses of new business ventures of EUA
Energy aggregating $2.7 million. Also, 1994 results included $1.3 million of
investment tax credits recorded by EUA Ocean State in the second quarter of
1994. EUA Cogenex's year-to-date earnings contribution decreased by
approximately $500,000 due primarily to increased costs related to new product
development of its EUA Day division and lower earnings from its cogeneration
portfolio (see below).
The Corporate Business Unit Net Earnings for the first six months of 1995
compared to the same period in 1994 increased by approximately $0.8 million due
primarily to decreased interest and legal expenses.
EUA Cogenex's Cogeneration Portfolio
EUA Cogenex, through its EUA WestCoast L.P., has had under development a
cogeneration facility of approximately 1.5 MW. As of June 30, 1995,
WestCoast's investment in the project was approximately $5.8 million. The
cogeneration facility has experienced numerous start-up delays and cost
overruns. The host of the facility has taken the position that the energy
services agreement between WestCoast and itself is terminated due to, among
other things, failure to complete the project. WestCoast disagrees with the
host's right to terminate, but has decided not to contest the host's purported
termination.
In June 1993, WestCoast filed a lawsuit against the contractors
responsible for the design and construction of the facility, as well as the
surety on the contractor's performance bond. Certain defendants in that action
have filed cross-complaints against WestCoast and EUA Cogenex, seeking, among
other things, approximately $300,000 for payments withheld by WestCoast due to
the contractor's deficient performance. A contractor has also filed a
cross-complaint against the host. Additionally, the host has also stated that
it intends to file a cross-complaint against Cogenex and the other parties in
the litigation, seeking at least $7 million in damages arising from lost
economic advantage.
EUA Cogenex intends to vigorously prosecute its claims against the
contractors and surety and defend itself against any cross-complaints. EUA
Cogenex cannot predict the ultimate resolution of this matter; it is possible
that EUA Cogenex's investment may not be fully recovered.
In addition to the above mentioned cogeneration project, EUA Cogenex also
has approximately 23MW of installed cogeneration capacity, with an aggregate
investment of approximately $23 million as of June 30, 1995. The cogeneration
portfolio's financial performance has been below expectation, and as a result,
EUA Cogenex has ceased investing in new projects. Further, EUA Cogenex is now
re-evaluating its continued presence in this line of business, in light of: (i)
continued poor financial performance; (ii) increasing environmental regulation;
and (iii) competition resulting from electric utility deregulation. As a
result, EUA Cogenex is soliciting offers to purchase the cogeneration portfolio
and any sale of all or a portion of the portfolio may result in a loss.
Operating_Revenues
Operating Revenues for the second quarter of 1995 increased by $8.8
million or 6.5% when compared to the same period of 1994. Revenues by Business
Unit operations were as follows (000's):
Three Months Ended June 30,
Increase
1995 1994 (Decrease)
Core Electric Business $119,217 $119,255 $ (38)
Energy Related Business 26,902 18,014 8,888
Corporate 0 0 0
Consolidated $146,119 $137,269 $8,850
======== ======== =======
Core Electric Business revenues include the negative impact of Montaup's
$13.9 million annual wholesale rate reduction implemented on May 21, 1994
essentially offset by recoveries of increased fuel and purchased power expenses
(see Operations Expense below).
EUA Cogenex revenues, which account for all of the Energy Related Business
Unit revenues, increased by $8.9 million due primarily to increases in
partnership project sales and Nova division revenues. (See offsetting impacts
in operating expenses below).
Operating Revenues for the first six months of 1995 decreased by $3.4
million or 1.2% when compared to the same period of 1994. Operating Revenues
by Business Unit for the first six months of 1995 and 1994 were as follows
(000's):
Six Months Ended June 30,
Increase
1995 1994 (Decrease)
Core Electric Business $241,955 $251,703 $(9,748)
Energy Related Business 42,131 35,763 6,368
Corporate 0 0 0
Consolidated $284,086 $287,466 (3,380)
======== ======== =======
Core Electric Business revenues decreased by $9.7 million due primarily to
Montaup's 1994 wholesale rate reduction and recoveries of lower fuel and
purchased power expenses. A year-to-date decrease in primary kilowatthour
sales of 1.8% also contributed to the decrease in revenues.
EUA Cogenex revenues increased by $6.4 million due primarily to increases
in partnership project sales and Nova division revenues.
KWH Sales
Primary kWh sales of electricity by EUA's Core Electric Business Unit
increased slightly in the second quarter of 1995 compared to the same period
last year only partially offsetting dismal first quarter sales results.
Year-to-date June 30, 1995 sales of electricity decreased by 1.8% compared to
the same period of 1994 as a result of the unusually mild weather in the first
quarter of this year. A 1.8% improvement in year-to-date industrial sales,
however, is an indication of slowly improving economic conditions in EUA's
service territory. Total energy sales for the three and six months ended June
30, 1995 decreased 23.2% and 20.3% respectively, due mainly to decreased energy
sales to the New England Power Pool and decreased short-term unit contract
energy sales. Power purchase contracts of Montaup totaling 41mw which expired
in October 1994 resulted in lower kilowatthours available to Montaup for
interchange and short-term energy sales. These interchange and short-term
energy sales essentially recover fuel costs only and have little or no earnings
impact.
Operations_Expense
Fuel expense of the Core Electric Business for the second quarter of 1995
increased from that of the same period in 1994 by approximately $400,000 or
1.7% while for the year-to-date period fuel expense decreased approximately
$500,000 or 1.1%. Decreases in total energy generated and purchased of 23.2%
and 20.3% for the three and six months ended June 30, 1995, respectively,
lowered fuel expense for both periods of 1995. More than offsetting this
impact on fuel expense in the second quarter and partially offsetting the year
to date impact were increases in the average cost of fuel of 30.5% and 19.6%
for the three and six month periods, respectively, and purchased power-energy
previously recorded as purchased power expense by Newport now recorded as fuel
expense by Montaup as a result of Newport becoming an all-requirements customer
of Montaup effective May 21, 1994. This classification adjustment increased
fuel expense and decreased purchased power expense by $600,000 and $1.8 million
in the second quarter and year-to-date periods of 1995, respectively.
Purchased Power demand expense for the second quarter of 1995 increased
$1.6 million or 5.3% and decreased $1.4 million or 2.1% for the six months
ended June 30, 1995. These changes are due primarily to the net impact of
increased billings from the Ocean State Power project and the Yankee nuclear
units aggregating $3.9 million and $5.1 million for the second quarter and
year-to-date periods, respectively, decreases of $2.1 million and $4.2 million
for the respective periods related to 41 mw of power purchase contracts which
expired in October 1994 and the classification adjustments discussed above.
Other Operation and Maintenance expenses for the quarter and six months
ended June 30, 1995 increased approximately $9.1 million or 20.4% and $6.0
million or 6.8%, respectively, from the same periods in 1994. EUA Cogenex
expenses increased $10.3 million and $7.6 million for the respective periods
and are directly related to increased revenues (see above) and increased
personnel and benefits costs. Operating and development expenses of new
business ventures of EUA Energy increased $900,000 and $2.7 million in the
respective periods. Direct controllable expenses decreased $1.4 million and
$3.3 million for the respective periods and indirect expenses decreased
$500,000 and $700,000 in the second quarter and year-to-date periods,
respectively, due mainly to lower conservation and load management expenses.
Taxes Other Than Income
Taxes other than income decreased $1.6 million and $1.9 million in the
three and six month periods ended June 30, 1995 compared to the same periods of
1994. The June 1995 reversal of previously over-accrued property taxes and
lower Rhode Island gross receipts taxes, directly related to lower revenues and
a decrease in the gross receipts tax rate, account for most of these changes.
Effective Income Tax Rate
The EUA System's composite federal and state effective tax rate was
approximately 29.6% and 33.7%, respectively, for the quarter and six months
ended June 30, 1995 compared to approximately 26.2% and 32.7%, respectively,
for the same periods in 1994. The increases are primarily due to $1.3 million
of tax credits recorded in the second quarter of 1994 by EUA Ocean State
related to its partnership investment in the Ocean State Power Project.
Other_Income_(Deductions) -_Net
Other Income and (Deductions)-Net decreased $1.4 million or 14.2% in the
current year-to-date period as compared to the corresponding period in the
prior year due primarily to the absence of $1.3 million of investment tax
credits recorded in June 1994 by EUA Ocean State.
Interest_Charges
Net interest charges for the quarter and six months ended June 30, 1995
decreased approximately $1.6 million and $2.0 million respectively, as compared
to the same periods of 1994. These decreases were due primarily to increases
in capitalized interest of EUA Cogenex of $600,000 and $800,000 for the
respective periods related to increased construction activity in 1995 and
decreased other interest expense of Eastern Edison and Montaup due to interest
expense provisions recorded in June 1994 aggregating approximately $1.0
million related to Internal Revenue Service audits.
Electric Utility Industry Restructuring
On May 12, 1995, Blackstone and Newport along with other members of the
Rhode Island Electric Industry Restructuring Collaborative (the Rhode Island
Collaborative), submitted to the Rhode Island Public Utilities Commission a
Report and Set of Interdependent Principles addressing industry restructuring.
On July 17, 1995, Eastern Edison Company, along with other members of the
Electric Industry Restructuring Roundtable (the Massachusetts Roundtable) in
Massachusetts filed a similar set of principles with the Massachusetts
Department of Public Utilities.
The Rhode Island Collaborative and the Massachusetts Roundtable consist of
a number of different utilities, industrial users, environmental groups and
consumer advocates. These filings are intended to be statements of the
consensus position by the signatories of the interdependent principles that
should underlie any electric industry restructuring proposal and include but
are not limited to principles addressing stranded cost recovery, unbundling of
services and demand side management programs. Each filing was submitted on the
condition they be approved in full by the respective Commissions. The
Commissions of each state are assessing the principles and are expected to make
recommendations to implement a competitive environment in the industry.
Liquidity_and_Sources_of_Capital
The EUA system's need for permanent capital is primarily related to
investments in facilities required to meet the needs of its existing and future
customers.
Traditionally, cash construction requirements not met with internally
generated funds are financed through short-term borrowings which are ultimately
funded with permanent capital. At June 30, 1995, EUA System companies
maintained short-term lines of credit with various banks aggregating
approximately $150 million. Outstanding short-term debt at June 30, 1995 and
December 31, 1994 by Business Unit was as follows (000's):
June 30, 1995 December 31, 1994
Core Electric Business $ 6,087 $ 0
Energy Related Business 25,610 23,476
Corporate 11,378 8,202
Consolidated $43,075 $31,678
======= =======
For the six months ended June 30, 1995 internally generated funds
available after the payment of dividends amounted to approximately $42.3
million while the EUA System's cash construction requirements amounted to
approximately $43.6 million for the same period. Various laws, regulations and
contract provisions limit the use of EUA's internally generated funds such that
the funds generated by one subsidiary are not generally available to fund the
operations of another subsidiary.
On April 17, 1995, the Trustees of EUA voted to increase the quarterly
dividend 1.5 cents per share from 38.5 cents per share to 40 cents per share.
The first quarterly dividend at the new rate was payable May 15, 1995 to
shareholders of record on May 1, 1995.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Notes to Consolidated Condensed Financial Statements, Note C -
Commitments and Contingencies under Other for a discussion of legal proceedings
involving Montaup and EUA Cogenex.
Item 5. Other Information
On May 1, 1995 EUA Cogenex completed the acquisition of Highland Energy
Group, Inc. (Highland) of Boulder, Colorado in exchange for $4.2 million of EUA
Common Shares (176,258 shares) plus a possible deferred payment of up to $3.8
million in EUA Common Shares contingent upon post-acquisition performance.
Highland is an energy services and demand side management company operating as
a wholly-owned subsidiary of EUA Cogenex.
Item 6. Exhibits_and_Reports_on_Form_8-K
(a) Exhibits - None
(b) Reports on Form 8-K
- none filed in the quarter ended June 30, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Eastern_Utilities_Associates______
(Registrant)
Date: August_11,_1995 /s/ Richard M. Burns
Richard M. Burns, Comptroller
(on behalf of the Registrant and
as Chief Accounting Officer)
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