SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.
FORM U5S
ANNUAL REPORT
For the Year ended December 31, 1997
Filed pursuant to the Public Utility Holding Company Act of 1935 by
Eastern Utilities Associates, P.O. Box 2333, Boston, Massachusetts 02107
04-1271872
(I.R.S. Employer Identification No.)
FORM U5S-ANNUAL REPORT
For the Calendar Year 1997
ITEMS
<TABLE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF DECEMBER 31, 1997
<CAPTION>
% of
Name of Company Number of Common Voting Issuer Owner's
(add abbreviation used herein) Shares Owned Power Book Value Book Value
<S> <C> <C> <C> <C>
Eastern Utilities Associates Publicly Owned (5) $373,510,671 $
(EUA or the Association)
EUA Service Corporation 100 100% (6) 2,895,346 2,895,346
(EUA Service)
Blackstone Valley Electric 184,062 100% (6) 38,091,740 38,091,740
Company (Blackstone)
Newport Electric Corporation 1,000,000 100% (6) 22,372,489 22,372,489
(Newport)
Eastern Edison Company 2,891,357 100% (6) 218,468,366 218,468,366
(Eastern Edison)
Montaup Electric Company 586,000 100% (7) 160,512,035 160,512,035
(Montaup)
Preferred Stock (7) 1,500,000 1,500,000
Debenture Bonds (Unsecured) (7) 135,575,000 135,575,000
Pollution Control
Bonds (Unsecured) - Net (7) 37,135,965 37,135,965
EUA Cogenex Corporation 1,000 100% (6) 47,602,678 47,602,678
(EUA Cogenex)
EUA Citizens Conservation
Services, Inc. 10,000 100% (9) 223,553 223,553
Northeast Energy Management, Inc. 10,000 100% (9) 10,782,717 10,782,717
(NEM)
EUA Cogenex West 10,000 100% (9) 5,170,109 5,170,109
(formerly EUA Highland Corporation)
APS Cogenex L.L.C. 50% (12) (73,197) (73,197)
EUA Cogenex-Canada Inc. 100 100% (9) 860,865 860,865
(Cogenex Canada)
EUA Cogenex-Canada Energy Services Inc.(1) 100 100% (13)
EUA WestCoast L.P. 50% (11) 1,452,417 1,452,417
EUA Energy Capital and
Services I 50% (10) 12,631,787 12,631,787
Promissory Note 25,995 25,995
EUA Energy Capital and
Services II 50% (10) 16,330,113 16,330,113
EUA FRC II Energy Associates 50% (10) 1,022,061 1,022,061
Micro Utility Partners of America 50% (11) 19,955 19,955
EUA Energy Services 100 100%(6) (50,495) (50,495)
Duke/Louis Dreyfus Energy Services (2)
L.L.C. 30%(12)
EUA Energy Investment Corporation 100 100% (6) (16,781,735) (16,781,735)
(EUA Energy)
Eastern Unicord Corporation 1,000 100% (8) (1,840,592) (1,840,592)
(Unicord)
EUA TransCapacity, Inc. 1,000 100% (8) (6,233,748) (6,233,748)
TransCapacity, L.P. 80% (11) (11,162,820) (11,162,820)
EUA Bioten, Inc. 100 100% (8) (880,085) (880,085)
EUA Compression Services, Inc. (3) 10 100% (8) (60,631) (60,631)
EUA Telecommunications
Corporation (4) 10 100% (6) (24,714) (24,714)
EUA Ocean State Corporation 1 100% (6) 15,629,804 15,629,804
(EUA Ocean State)
Ocean State Power I 29.9% 29.9% (10) 29,119,122 29,119,122
Ocean State Power II 29.9% 29.9% (10) 22,739,494 22,739,494
*Eastern Edison Electric Company 100% (6) 1,000 1,000
_________
(1) Formed under Canada Business Corporations Act on December 16, 1997 to engage in providing energy conservation services to
industrial sector customers in Canada.
(2) Joint venture activities were terminated on September 19, 1997. Wind-down and dissolution currently in process.
(3) Organized under the Laws of the Commonwealth of Massachusetts on May 23, 1997 to engage in the development of services
to upgrade national gas pipeline compression infrastructure. Common shares were issued to EUA Energy Investment
Corporation in May 1997, although consideration was not paid until April 1998 for these shares.
(4) Organized under the Laws of the Commonwealth of Massachusetts on May 19, 1997 to engage in telecommunications and
information services.
(5) Cumulative Voting.
(6) Wholly-owned by EUA.
(7) Wholly-owned by Eastern Edison.
(8) Wholly-owned by EUA Energy.
(9) Wholly-owned by EUA Cogenex.
(10) General Partnership.
(11) Limited Partnership.
(12) Limited Liability Corporation.
(13) Wholly-owned by EUA Cogenex-Canada Inc.
*Inactive
</TABLE>
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS
Brief Description
Name of Company of Transaction Consideration Exemptions
(1) (2) (3) (4)
Blackstone Valley Electric Sale of Land $34,000 44 (b)
Shawnut, Aetna, Phoenix Sts.
Central Falls, RI
Blackstone Valley Electric Sale of Land $20,000 44 (b)
Vose & Valley Sts.
Woonsocket, RI
Blackstone Valley Electric Sale of Land $52,000 44 (b)
Liberty & Dexter Sts.
Central Falls, RI
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS
Brief Description
Name of Company of Transaction Consideration Exemptions
(1) (2) (3) (4)
Montaup Electric Company Sale of Land $70,000 44 (b)
Riverside Ave
Somerset, MA
Montaup Electric Company Sale of Land $50,000 44 (b)
Riverside & Wilbur Ave
Somerset, MA
Newport Electric Company Sale of Land $36,000 44 (b)
Schoolhouse Lane
Portsmouth, RI
<TABLE>
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES
<CAPTION>
Date and
Type of Form of
Name of Issuer Security Transaction Consideration Exemption
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
EUA Compression common May 27, 1997 $100 (1) Rule 58
Services, Inc. shares original issue
EUA common May 19, 1997 $100 34 (d)
Telecommunications shares original issue
Corporation
(1) Paid for in 1998.
</TABLE>
The following refers to short-term borrowing by EUA system
companies during 1997:
Highest Effective
Balance at Balance Date of Average
Year-end During Year Highest Interest Rate
(000) (000) Balance For Year
$61,484 $74,444 12/15/97 5.6%
EUA Cogenex is required under certain contracts with various government
entities and utility companies to maintain either a letter of credit or
performance bond to collateralize performance under the contract. These
contingent liabilities will only be drawn by the customer if EUA Cogenex fails
to perform under the construction contract. For the letters of credit, the
highest amount outstanding during 1997 and the year end balance was
approximately $4.6 million and $3.2 million, respectively. For the performance
bonds, the highest amount outstanding during 1997 and the year end balance was
$12.6 million and $9.4 million, respectively.
<TABLE>
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES
<CAPTION>
Name of Company
Acquiring,
Name of Issuer Redeeming Number of Shares or
and or Retiring Principal Amount
Title of Issue Securities Acquired, Redeemed, Consideration Authorization
(1) (2) or Retired (3) (4) (5)
<S> <C> <C> <C> <C>
Blackstone: Blackstone
First Mortgage Bonds:
9 1/2% due 2004 $1,500,000 $1,500,000 (a)
Newport: Newport
First Mortgage Bonds:
8.95% due 2001 650,000 650,000 (a)
Small Business
Administration Loan:
6.5% due 2005 90,303 90,303 (a)
EUA Cogenex: EUA Cogenex
Unsecured Notes:
7.22% due 1997 15,000,000 15,000,000 (a)
9.6% due 2001 3,200,000 3,200,000 (a)
10.56% due 2005 3,500,000 3,500,000 (a)
EUA Service: EUA Service
Secured Notes:
10.20% due 2008 2,200,000 2,200,000 (a)
EUA Ocean State: EUA Ocean State
Unsecured Notes:
9.59% due 2011 2,476,660 2,476,660 (a)
(a) Rule 42
</TABLE>
<TABLE>
ITEM 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES
<CAPTION>
% of Number of Shares
Voting or Principal Book
Name of Owner Name of Issuer Security Owned Power Amount Owned Value
(1) (2) (3) (4) (5) (6)
<S> <C> <C> <C> <C> <C>
Eastern Edison Massachusetts Capital Stock less than 1,040 shares $ 10,400
Business one
Development Corp.*
Montaup Yankee Atomic Capital Stock 4.5 6,903 shares 1,055,441
Electric Co. **
" " Conn. Yankee Capital Stock 4.5 15,750 shares 4,979,529
Atomic Power Co.**
" " Vermont Yankee Capital Stock 2.5 9,801 shares 1,358,923
Nuclear
Power Corp. **
" " Maine Yankee Capital Stock 4.0 20,000 shares 3,169,567
Atomic
Power Co. **
" " NE Hydro Trans. Capital Stock 3.3 121,001 shares 1,791,957
Electric Co. ***
" " NE Hydro Capital Stock 3.3 600 shares 1,078,644
Trans. Corp. ***
___________
* Development company.
**Regional nuclear generating company.
***Owner of Transmission Facilities.
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1997. Names of System Companies with which Connected
<CAPTION>
Blackstone
Eastern EUA Valley Newport Eastern Montaup
Utilities Service Electric Electric Edison Electric
Associates Corporation Company Corporation Company Company
<S> <C> <C> <C> <C> <C> <C>
Russell A. Boss One Albion Road TR
Lincoln, RI 02865
Richard Bower 37 Linden Terrace
Ottawa, Ontario,
Canada K1S1Z1
J. Thomas Brett 275 Slater St.,Ste 1700
Ottawa, Canada K1P 5H9
John D. Carney P.O. Box 543 EVP D,EVP D,P D,P D,P D,EVP
W. Bridgewater, MA 02379
Paul J. Choquette, Jr. 7 Jackson Walkway TR
Providence, RI 02940
Peter S. Damon 500 West Main Rd. TR
Middletown, RI 02842
James L. Day 7931 Rae Boulevard
Victor, NY 14564
Janice P. DeBarros Boott Mills South
100 Foot of John Street
Lowell, MA 01852
Peter B. Freeman 100 Alumni Drive TR
Providence, RI 02906
Barbara A. Hassan P.O. Box 543 D,VP VP VP VP
W. Bridgewater, MA 02379
Clifford J. Hebert, Jr. One Liberty Square T,S D,VP,T,S,C D,T,S D,T,S D,T,C T,C
Boston, MA 02109
Darcy L. Immerman 100 Foot of John Street
Lowell, MA 01852
Michael J. Hirsh P.O. Box 543 VP VP VP VP
W. Bridgewater, MA 02379
Kevin A. Kirby P.O Box 543 D,VP VP VP VP D,VP
W. Bridgewater, MA 02379
Larry A. Liebenow 1082 Davol Street, 5th Fl. TR
Fall River, MA 02720
Edward T. Liston Boott Mills South D, VP
100 Foot of John Street
Lowell, MA 01852
Marc F. Mahoney P.O. Box 543 VP VP VP VP
W. Bridgewater, MA 02379
Jacek Makowski One Center Plaza Ste 270 TR
Boston, MA 02108
Wesley W. Marple, Jr. 413 Hayden Hall TR
Northeastern University
Boston, MA 02115
Stephen Morgan Boott Mills South
100 Foot of John Street
Lowell, MA 01852
Donald G. Pardus One Liberty Square TR,CH,CEO D,CH D,CH D,CH D,CH D,CH
Boston, MA 02109
Robert G. Powderly P.O. Box 543 EVP D,EVP D,EVP D,EVP D,EVP D,EVP
W. Bridgewater, MA 02379
Dennis St. Pierre P.O. Box 543
W. Bridgewater, MA 02379 VP
William A. Sifflard 20 Thurber Blvd
Smithfield, RI 02917
Margaret M. Stapleton P.O. Box 111 TR
Boston, MA 02117
John R. Stevens One Liberty Square TR,COO,P D,P D,VCH D,VCH D,VCH D,P
Boston, MA 02109
W. Nicholas Thorndike 150 Dudley Street TR
Brookline, MA 02146
Mark S. White Boott Mills South
100 Foot of John Street
Lowell, MA 01852
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued
Part I. As of December 31, 1997. Names of System Companies with which Connected
<CAPTION>
EUA EUA Energy EUA EUA EUA
Cogenex Investment Ocean State Energy Telecommunications
Corporation Corporation Corporation Services, Inc. Corporation
<S> <C> <C> <C> <C> <C>
Russell A. Boss One Albion Road
Lincoln, RI 02865
Richard Bower 37 Linden Terrace
Ottawa, Ontario,
Canada K1S1Z1
J. Thomas Brett 275 Slater St., Ste 1700
Ottawa, Canada K1P 5H9
John D. Carney P.O. Box 543 D,EVP D,EVP EVP D
W. Bridgewater, MA 02379
Paul J. Choquette, Jr. 7 Jackson Walkway
Providence, RI 02940
Peter S. Damon 500 West Main Road
Middletown, RI 02842
James L. Day 7931 Rae Boulevard VP
Victor, NY 14564
Janice P. DeBarros Boott Mills South
100 Foot of John Street
Lowell, MA 01852
Peter B. Freeman 100 Alumni Drive
Providence, RI 02960
Barbara A. Hassan P.O. Box 543
W. Bridgewater, MA 02379
Clifford J. Hebert, Jr. One Liberty Square D,T,C D,T,C T,S T,C T,C
Boston, MA 02109
Michael J. Hirsh P.O. Box 543 VP
W. Bridgewater, MA 02379
Darcy L. Immerman Boott Mills South VP
100 Foot of John Street
Lowell, MA 01852
Kevin A. Kirby P.O Box 543 D,VP D,VP
W. Bridgewater, MA 02379
Larry A. Liebenow 1082 Davol Street, 5th Fl.
Fall River, MA 02720
Edward T. Liston Boott Mills South D,P
100 Foot of John Street
Lowell, MA 01852
Marc F. Mahoney P.O. Box 543
W. Bridgewater, MA 02379
Jacek Makowski One Center Plaza, Ste 270
Boston, MA 02108
Wesley W. Marple, Jr. 413 Hayden Hall
Northeastern University
Boston, MA 02115
Stephen Morgan Boott Mills South
100 Foot of John Street
Lowell, MA 01852
Donald G. Pardus One Liberty Square D,CH D,CH D,CH D,CH D,CH
Boston, MA 02109
Robert G. Powderly P.O. Box 543 D,EVP D,EVP D,EVP D D
W. Bridgewater, MA 02379
Dennis St. Pierre P.O. Box 543
W. Bridgewater, MA 02379
William A. Sifflard 20 Thurber Blvd VP
Smithfield, RI 02917
Margaret M. Stapleton P.O. Box 111
Boston, MA 02117
John R. Stevens One Liberty Square D,VCH D,P D,P D,P D,P
Boston, MA 02109
W. Nicholas Thorndike 150 Dudley Street
Brookline, MA 02146
Mark S. White Boott Mills South EVP,ACM,AC
100 Foot of John Street
Lowell, MA 01852
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued
Part I. As of December 31, 1997. Names of System Companies with which Connected
<CAPTION>
EUA
EUA Trans- Northeast EUA Citizens EUA EUA EUA
Cogenex- Capacity Energy Conserv Cogenex Bioten Compression
Canada Inc. Inc. Mgt. Inc. Srvs. Corp. West Corp. Inc. Srvcs, Inc.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Russell A. Boss One Albion Road
Lincoln, RI 02865
Richard Bower 37 Linden Terrace D
Ottawa, Ontario,
Canada K1S1Z1
J. Thomas Brett 275 Slater St. Ste 1700 D
Ottawa, Canada K1P5H9
John D. Carney P.O. Box 543 EVP D, EVP D,EVP
W. Bridgewater, MA 02379
Paul J. Choquette, Jr. 7 Jackson Walkway
Providence, RI 02940
Peter S. Damon 500 West Main Rd.
Middletown, RI 02842
James L. Day 7931 Rae Boulevard
Victor, NY 14564
Janice P. DeBarros Boott Mills South VP
100 Foot of John Street
Lowell, MA 01852
Peter B. Freeman 100 Alumni Drive
Providence, RI 02906
Barbara A. Hassan P.O. Box 543
W. Bridgewater, MA 02379
Clifford J. Hebert, Jr. One Liberty Square T,S D,T,C T,C T,C T,C D,T,C D,T,C
Boston, MA 02109
Michael J. Hirsh P.O. Box 543
W. Bridgewater, MA 02379
Darcy L. Immerman Boott Mills South VP VP
100 Foot of John Street
Lowell, MA 01852
Kevin A. Kirby P.O Box 543
W. Bridgewater, MA 02379
Larry A. Liebenow 1082 Davol Street, 5th Fl.
Fall River, MA 02720
Edward T. Liston Boott Mills South D,P D,P D,P D,P
100 Foot of John Street
Lowell, MA 01852
Marc F. Mahoney P.O. Box 543
W. Bridgewater, MA 02379
Jacek Makowski One Center Plaza, Ste 270
Boston, MA 02108
Wesley W. Marple, Jr. 413 Hayden Hall
Northeastern University
Boston, MA 02115
Stephen Morgan Boott Mills South P
100 Foot of John Street
Lowell, MA 01852
Donald G. Pardus One Liberty Square CH D,CH D,CH D D D,CH D,CH
Boston, MA 02109
Robert G. Powderly P.O. Box 543 D,EVP D,EVP D,EVP
W. Bridgewater, MA 02379
Dennis St. Pierre P.O. Box 543
W. Bridgewater, MA 02379
William A. Sifflard 20 Thurber Blvd
Smithfield, RI 02917
Margaret M. Stapleton P.O. Box 111
Boston, MA 02117
John R. Stevens One Liberty Square VCH D,P D,VCH D D D,P D,P
Boston, MA 02109
W. Nicholas Thorndike 150 Dudley Street
Brookline, MA 02146
Mark S. White Boott Mills South EVP, EVP EVP, EVP,
100 Foot of John Street AT,ACM ACM,AC ACM, AC
Lowell, MA 01852
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued
Part I. As of December 31, 1997.
<CAPTION>
KEY:
<S> <C> <C>
CH -Chairman of the Board T - Treasurer C - Clerk
VCH -Vice Chairman of the Board TR - Trustee AC - Assistant Clerk
P - President CM - Comptroller D - Director
VP - Executive Vice President AT - Assistant Treasurer CEO - Chief Executive Officer
SVP - Senior Vice President S - Secretary COO - Chief Operating Officer
VP - Vice President AS - Assistant Secretary ACM - Assistant Comptroller
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS (continued)
Part II. As of December 31, 1997.
<CAPTION>
Position Held
Name of Name and Location of in Financial Applicable
Officer or Director Financial Institution Institution Exemption Rule
(1) (2) (3) (4)
<S> <C> <C> <C>
Russell A. Boss Fleet National Bank Director Rule 70(a)
Providence, RI
Fleet Bank of MA Director Rule 70(a)
Boston, MA
Fleet Bank, N.A. Director Rule 70(a)
Hartford, CT
Paul J. Choquette, Jr. Fleet Financial Group Director Rule 70(a)
Providence, RI
Peter S. Damon Bank of Newport Trustee, Rule 70(a)
President
and CEO
_____________________
(Note: In the answer to this Part II of Item 6, the phrase "financial
connection within the provisions of Section 17(C) of the Act" is regarded as
being limited by the definitions in Paragraph (h) of Rule 70 under the Act as
in effect at December 31, 1997).
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS (continued)
Part III.
(a) Information is set out below as to cash compensation paid by the
Association and its subsidiaries for the years 1997, 1996
and 1995 to each of the five highest paid executive officers of each
Company whose annual salary and bonus for the yea r exceeded
$100,000.
<CAPTION>
Long-Term All
Compensation Other
Name and Annual Compensation Restricted Compen-
Principal Fiscal Incentive Stock sation
Position Year Salary Bonus Other(1) Awards(2) (3)
<S> <C> <C> <C> <C> <C> <C>
EUA Service Corporation
Donald G. Pardus 1997 $428,525 $167,112 $12,747 $232,617 $13,775
Chairman 1996 412,025 - 12,383 - 12,976
1995 400,025 85,000 13,696 319,401 13,519
John R. Stevens 1997 $334,325 $133,665 $11,763 $232,617 $10,726
President 1996 321,425 - 8,636 - 10,104
1995 312,025 68,000 7,300 202,561 10,513
Robert G. Powderly 1997 $184,025 $50,663 $10,240 $116,322 $5,560
Executive Vice 1996 176,025 - 10,210 - 5,321
President 1995 168,025 32,787 9,790 71,024 4,960
John D. Carney 1997 $179,525 $50,663 $10,502 $87,235 $5,624
Executive Vice 1996 169,525 - 10,018 - 5,108
President 1995 155,775 32,787 4,025 72,749 4,233
Clifford J. Hebert, Jr. 1997 $136,025 $28,071 - $116,322 $4,078
Treasurer and 1996 129,525 - - - 3,846
Secretary 1995 121,025 17,402 - 37,835 3,557
</TABLE>
Blackstone, Eastern Edison and Newport Electric
The Chief Executive Officer and the four other most highly compensated
executive officers of Blackstone, Newport and Eastern Edison hold the same or
similar positions with EUA Service and are not paid directly by any of
Blackstone, Newport or Eastern Edison. The information required by this item
is the same as shown above under EUA Service Corporation.
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS (continued)
<CAPTION>
Long-Term All
Compensation Other
Name and Annual Compensation Restricted Compen-
Principal Fiscal Incentive Stock sation
Position Year Salary Bonus Other(1) Awards(2) (3)
EUA Cogenex Corporation
<S> <C> <C> <C> <C> <C> <C>
Edward T. Liston 1997 $168,525 - $11,146 $82,195 $8,966
President 1996 157,025 - 6,381 - 4,676
1995 153,640 - 1,890 52,900 4,276
Mark S. White 1997 $115,950 - $9,437 $44,514 $5,998
Vice President 1996 101,875 - 5,466 - 2,860
William A. Sifflard 1997 $105,525 - $8,122 $25,128 $5,423
Vice President 1996 101,025 - 2,942 - 2,726
Darcy L. Immerman 1997 $100,025 $40,629 $316 $37,681 $5,048
___________________
(1) Represents amounts reimbursed for tax liability accruing as a result of
personal use of company-owned automobiles.
(2) Aggregate amount and value (including the value reflected in the table
under "Restricted Stock Awards") of shares held under the Association's
Restricted Stock Plan to the officers listed above are as follows:
Mr. Pardus, 22,876 shares, including 8,989 shares granted in 1997
and 13,887 shares granted in 1995, $600,495; Mr. Stevens, 17,796 shares,
including 8,989 shares granted in 1997 and 8,807 shares granted in 1995,
$467,145; Mr. Powderly, 7,583 shares, including 4,495 shares granted in
1997 and 3,088 shares granted in 1995, $199,054; Mr. Carney, 6,534 shares,
including 3,371 shares granted in 1997 and 3,163 shares granted in 1995,
$171,518; and Mr. Hebert, 6,140 shares, including 4,495 shares granted in
1997 and 1,645 shares granted in 1995, $161,175. Dividends are paid on
these shares.
(3) Contributions made under the Association's Employees' Savings Plan.
(4) Aggregate amount and value (including the value reflected in the table
under "Restricted Stock Awards") of shares held under Cogenex's
Restricted Stock Plan to the officers listed above are as follows: Mr.
Liston, 3,693 shares granted in 1997, $96,941; Mr. White, 2,000 shares
granted in 1997, $52,500; Mr. Sifflard, 1,129 shares granted in 1997,
$29,636; Ms. Immerman, 1,693 shares granted in 1997, $44,441. All of
the shares granted in 1997 remain held. The shares granted in 1995
are fully vested. With the exception of Mr. Sifflard's 1997 Restricted
Stock award, which vest 1/2 annually in each of the two years following
1997, Cogenex stock awards vests 1/3 annually in each of the three
years subsequent to year of the award. Dividends are paid on these
shares.
</TABLE>
<TABLE>
(b) Securities Interest
Common Shares of the Association
Beneficially Owned at January 2, 1998(1)
<CAPTION>
Executive
Employees Stock
Jointly Savings Grant
Individual Owned(2) Plan Plan Total
<S> <C> <C> <C> <C> <C>
Russell A. Boss 1,000 - - - 1,000(3)
John D. Carney 2,475 - 1,725 6,534 10,734
Paul J. Choquette 2,137 - - - 2,137(4)
Peter S. Damon 200 990 - - 1,190
Peter B. Freeman 2,500 - - - 2,500
Clifford J. Hebert, Jr. 3,042 417 2,280 6,140 11,879
Darcy L. Immerman 600 - 516 1,693 2,809
Larry A. Liebenow - 1,000 - - 1,000
Edward T. Liston 3,904 - 1,835 4,460 10,199
Jacek Makowski - 200 - - 200
Wesley W. Marple 1,885 - - - 1,885(5)
Donald G. Pardus 498 20,530 5,821 22,876 49,725
Robert G. Powderly 4,721 250 2,236 7,583 14,790
William A. Sifflard 25 - 636 1,129 1,790
Margaret M. Stapleton 1,577 - - - 1,577
John R. Stevens 3,424 4,501 2,347 17,796 28,068
W. Nicholas Thorndike 2,146 - - - 2,146
Mark S. White 896 2 1,335 2,000 4,233
Trustees and Executive
Officers as a Group 41,850 46,970 32,646 99,505 220,971(6)
(1) Unless otherwise indicated, beneficial ownership is based on sole
investment and voting power. Each individual's ownership represents
less than three-tenths of one percent of the outstanding common shares
of the Association.
(2) Jointly owned with spouse.
(3) In addition, Mr. Boss owns 5 shares of Blackstone's 4.25% Preferred
Stock.
(4) In addition, Mr. Choquette's spouse owns 150 EUA common shares. Mr.
Choquette disclaims any beneficial interest in such shares.
(5) In addition, Mr. Marple's spouse owns 263 EUA common shares. Mr.
Marple disclaims any beneficial interest in such shares.
(6) Represents approximately one percent of the outstanding common shares
of the Association.
</TABLE>
(c) Contracts and Transactions with System Companies
See Section (e) below regarding severance agreements.
(d) Indebtedness to System Companies
None
(e) Participation in Bonus and Profit Sharing Arrangements.
The Employees' Retirement Plan of Eastern Utilities Associates and its
Affiliated Companies (the "Pension Plan") is a tax-qualified defined benefit
plan available to employees who have completed one year of service and have
attained the age of twenty -one. All of the officers referred to in the
preceding Summary Compensation Tables participate in the Pension Plan.
Trustees who are not also employees of the EUA System are not covered by the
Pension Plan. The benefits of participants become full y vested after five
years of service. Annual lifetime benefits are determined under formulas
applicable to all employees, regardless of position, and the amounts depend on
length of credited service and salaries prior to retirement. Benefits are
equal to one and six-tenths percent of salaries (averaged over the four years
preceding retirement) for each year of credited service up to thirty-five,
reduced for each year by one and two-tenths percent of the participants'
estimated age sixty-five Social Security benefit, plus seventy-five hundredths
percent of salaries for each year of credited service in excess of thirty-five
years up to the Pension Plan maximum of forty years.
Any contributions to provide benefits under the Pension Plan are made by the
EUA System in amounts determined by the Pension Plan's actuaries to meet the
funding standards established by the Employee Retirement Income Security Act of
1974. Any contributions are actuarially determined and cannot appropriately
be allocated to individual participants. The annual benefits shown in the
table below are straight life annuity amounts, without reduction for primary
Social Security benefits as described above. Federal law limits the annual
benefits payable from qualified pension plans in the form of a life annuity,
after reduction for Social Security benefits, to $120,000 for 1997 and $130,000
for 1998 plus adjustments for increases in the cost of living. The number of
years of service credited at present under the Pension Plan to Messrs. Pardus,
Stevens, Carney, Powderly and Hebert are thirty-five, thirty-two, thirty-one,
eighteen and twenty-one, respectively.
Average Years of Service
Annual Salary 15 20 25 30 35 40
$100,000 $ 24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000 $ 59,750
200,000 48,000 64,000 80,000 96,000 112,000 119,500
300,000 72,000 96,000 120,000 144,000 168,000 179,250
400,000 96,000 128,000 160,000 192,000 224,000 239,000
500,000 120,000 160,000 200,000 240,000 280,000 298,750
600,000 144,000 192,000 240,000 288,000 336,000 358,500
The Association has a Key Executive Plan for certain officers of the
Association and its subsidiaries. This plan provides for the annual payment of
supplemental retirement benefits equal to 25% of the officer's base salary when
he retires, for a period of fifteen (15) years following the date of
retirement. In addition, in the event of the death of the participant prior to
retirement an amount equal to 200% of the officer's base salary at that time
will be paid to his beneficiary. A grantor t rust has been established by the
Association to help ensure the performance of its payment obligations under the
Key Executive Plan. Any amounts not covered by trust payments or otherwise
will be paid from funds available to the EUA System.
The Association maintains non-qualified, unfunded retirement plans ("The
Restoration Plans") to restore benefits under the qualified plans' formulas
which are not covered under the qualified plan trusts due to federal
limitations on either earnings, contributions or benefits. Payments or
contributions which exceed the applicable federal limitations are made outside
the qualified plans in the same manner and under the same conditions as are
applicable to benefits payable from, or contributions payable to, the
qualified plans. A grantor trust has been established by the Association to
help ensure the performance of its payment obligations under these plans. Any
amounts not covered by trust payments or otherwise will be paid from funds
avail able to the EUA System.
Severance agreements with executive officers of the Association and certain of
its affiliates provide that an officer's rate of compensation, benefits,
position, responsibilities and other conditions of employment will not be
reduced during the term of the agreement, which is thirty-six months commencing
upon the date on which a Change in Control, as defined in the agreements, of
the Association occurs. If within thirty-six months after a Change in Control
the officer's employment is terminated for any reason other than Cause, as
defined in the agreements, the Association will, (i) pay the officer within
five business days a lump-sum cash amount generally equal to the present value
of the additional wages and retirement benefits that the executive would have
received in return for completing an additional three years of service, (ii)
continue or vest certain fringe benefits and common share grants, (iii)
reimburse legal fees and expenses incurred as a result of the termination or to
enforce the provisions of the severance agreement and (iv) reimburse a portion
of the taxes on certain of the foregoing payments, including any amount
contributing a "parachute payment" under the Internal Revenue Code. If the
officer leaves the employ of the Association or a subsidiary following a
reduction in his position, compensation, responsibilities, authority or other
benefits existing prior to the Change in Control, or suffers a relocation of
regular employment of more than fifty miles, such departure will be deemed to
be a termination for reason other than Cause.
(f) Rights to Indemnity
Article 32 of EUA's Declaration of Trust, as set forth in Exhibit B-1(a) to
Form U5S of EUA for the year ended December 31, 1986, is incorporated herein by
reference.
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS
Accounts Charged
if any, Per Books
Name of Recipient of Disbursing
Name of Company or Beneficiary Purpose Company Amount
(1) (2) (3) (4) (5)
Blackstone Tillinghast, Collins Lobbying 426.4 $17,160
& Graham Expenditures
Blackstone David Correira, Esq. Lobbying 426.4 21,000
Expenditures
Blackstone United Way Donations 426.1 20,000
Blackstone David Gulvin Lobbying 426.1 13,832
Blackstone Miscellaneous Donations 426.1 40,599
Donations less
than $10,000
Blackstone Edison Electric Lobbying 426.4 16,104
Institute Expenditures
Blackstone Miscellaneous Lobbying 426.4 239
Donations less Expenditures
than $10,000
Eastern Edison United Way Donations 426.1 22,500
Eastern Edison Stonehill College Donations 426.1 13,250
Eastern Edison Fall River Donations 426.1 40,000
Development Council
Eastern Edison Miscellaneous Donations 426.1 16,290
Donations less
than $10,000
Eastern Edison Edison Electric Lobbying 426.4 32,862
Institute Expenditures
Eastern Edison Miscellaneous Donations 426.4 2,720
Donations less
than $10,000
Newport United Way Donations 426.1 10,000
Newport Miscellaneous Donations 426.1 20,062
Donations less
than $10,000
Newport Newport Historical Donations 426.1 25,000
Society
Newport Edison Electric Lobbying 426.4 6,680
Institute Expenditures
Newport Tillinghast, Collins Lobbying 426.4 7,860
& Graham Expenditures
Newport David Correira, Esq. Lobbying 426.4 9,000
Expenditures
Newport David Gulvin Lobbying 426.4 6,120
Expenditures
Montaup Miscellaneous Donations 426.1 12,083
Donations Less than
$10,000
Montaup Seabrook #1 Lobbying 426.4 1,161
Expenditures
Montaup Millstone #3 Lobbying 426.4 1,862
Expenditures
Montaup Edison Electric Lobbying 426.4 924
Institute Expenditures
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I.
None
Part II.
No
Part III.
No
ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES
None
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS (*Filed herewith)
The following financial statements and supplemental schedules are filed as a
part of this Annual Report.
FINANCIAL STATEMENTS
1 - Consolidating Balance Sheets - December 31, 1997 of Eastern Utilities
Associates and Subsidiary Companies, Eastern Edison Company and
Subsidiary, EUA Cogenex Corporation and Subsidiaries, and EUA Energy
Investment Corporation and Subsidiaries.
2 - Consolidating Statements of Capitalization - December 31, 1997 of
Eastern Utilities Associates and Subsidiary Companies, Eastern Edison
Company and Subsidiary, EUA Cogenex Corporation and Subsidiaries, and
EUA Energy Investment Corporation a nd Subsidiaries.
3 - Consolidating Income Statements for the year ended December 31, 1997
of Eastern Utilities Associates and Subsidiary Companies, Eastern
Edison Company and Subsidiary, EUA Cogenex Corporation and
Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries.
4 - Consolidating Statements of Cash Flows for the year ended December 31,
1997 of Eastern Utilities Associates and Subsidiary Companies, Eastern
Edison Company and Subsidiary, EUA Cogenex Corporation and
Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries.
5 - Consolidating Statements of Retained Earnings and Other Paid-In Capital
for the year ended December 31, 1997 of Eastern Utilities Associates
and Subsidiary Companies, Eastern Edison Company and Subsidiary, EUA
Cogenex Corporation and Subsidiaries, and EUA Energy Investment
Corporation and Subsidiaries.
6 - Notes to Consolidated Financial Statements (page 55).
Exhibits
Exhibit A - (incorporated herein by reference)
A-1 Form 10-K of EUA, Blackstone and Eastern Edison for 1997 (including
Annual Reports to Shareholders and Proxy Statement, portions of which
are incorporated therein by reference; File Nos. 1-5366, 0-8480, and
0-2602).
Exhibit B -
B-1 Declaration of Trust of EUA, dated April 2, 1928, as amended (Exhibit
A-3, File No. 70-3188; Exhibit 1 to EUA's 8-K reports for April in
each of the years 1957, 1962, 1966, 1968, 1972, and 1973, File No. 1-
5366; Exhibit A-1 (a), Amendment N o. 2 to Form U-1, File No. 70-5997,
Exhibit 4-3, Registration No. 2-72589; Exhibit 1 to Certificate of
Notification, File No. 70-6713; Exhibit 1 to Certificate of
Notification, File No. 70-7084; Exhibit 3-2, Form 10-K of EUA for 1987,
File No. 1-5366 ).
B-2 Charter of Blackstone (formerly Blackstone Valley Gas and Electric
Company), as amended (Exhibit (a)(1) and (a)(2), Form 1-A filed
March, 1957, File No. 24B-970; Exhibit A-2, Form U5S of EUA for the
year 1958, File No. 1-5366; Exhibit (1), Form 8-K for March, 1965 File
No. 0-2602; Exhibit A-2, Form U5S of EUA for the year 1966, File No.
1-5366 and Exhibit (1), Form 8-K for June 1976, File No. 0-2602;
Exhibit (1), Form 10-Q for quarter ended June 30, 1988, File No. 0-
2602); Exhibit 3-3, Form 10-K of Blackstone for 1989, File No. 0-
2602).
B-3 By-laws of Blackstone, (Exhibit A-2, Form U-1 filed October 16, 1990,
File No. 70-7769).
B-4 Restated and Amended Articles of Organization of Eastern Edison,
(Exhibit B-4 to Form U5S of EUA for 1993).
B-5 By-laws of Eastern Edison, as amended (Exhibit 3-2, Form 10-K of
Eastern Edison for 1980, File No. 0-8480).
B-6 Charter of Montaup Electric Company ("Montaup"), as amended (Exhibits
A-6(a), A-6(b) and A-6(c) to Post Effective Amendment No. 18 to Form U-
1, File No. 70-5388; Exhibit 3, Form 10-K of EUA for 1977, File No. 1-
5366; and Exhibit 6 to Form U5S of EUA for 1979).
B-7 By-laws of Montaup, as amended (Exhibit 4, Form 10-K of EUA for 1977,
File No. 1-5366).
B-8 Charter of EUA Service Corporation (Exhibit A-1, File No. 37-67).
B-9 By-laws of EUA Service Corporation, as amended (Exhibit 2, Form 10-K of
EUA for 1977, File No. 1-5366).
B-10 Charter of EUA Cogenex Corporation, as amended (Exhibit A-1, File No.
70-7287, Exhibit B-15 to Form U5S of EUA for 1986).
B-11 By-Laws of EUA Cogenex Corporation, as amended (Exhibit A-2, File No.
70-7287, to Form U5S of EUA for 1986).
B-12 Agreement of Limited Partnership among Onsite Energy and EUA Cogenex
Corporation dated as of November 30, 1988 (Exhibit A-4 to Post-
Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October
21, 1991).
B-13 EUA/FRCII Energy Associates Agreement of Limited Partnership dated as
of September 19, 1989 (Exhibit A-5 to Post-Effective Amendment No. 3 of
Form U-1, File No. 70-7825, dated October 21, 1991).
B-14 Micro Utility Partners of America, L.P., Agreement of Limited
Partnership dated as of December 20, 1988 (Exhibit A-6 to Post-
Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October
21, 1991).
B-15 Energy Capital and Services I, LP, Agreement of Limited Partnership
dated as of April 10, 1990 (Exhibit A-7 to Post-Effective Amendment
No. 3 of Form U-1, File No. 70-7825, dated October 21, 1991).
B-16 EUA/SYCOM General Partnership Agreement dated as of September 20, 1989
(Exhibit A-9 to Post-Effective Amendment No. 3 of Form U-1, File No.
70-7825, dated October 21, 1991).
B-17 Articles of Organization of EUA Energy Investment Corporation (Exhibit
B-14 to Form U5S of EUA for 1987).
B-18 By-Laws of EUA Energy Investment Corporation (Exhibit B-15 to Form U5S
of EUA for 1987).
B-19 Articles of Organization of EUA Ocean State Corporation (Exhibit B-16
to Form U5S of EUA for 1988).
B-20 By-Laws of EUA Ocean State Corporation (Exhibit B-17 to Form U5S of EUA
for 1988).
B-21 Charter of Newport, as amended (Exhibit B-18 to Form U5S of EUA for
1990).
B-22 By-Laws of Newport (Exhibit B-19 to Form U5S of EUA for 1990).
B-23 Ocean State Power Amended and Restated General Partnership Agreement
among EUA Ocean State, Ocean State Power Company, TCPL Power Ltd.,
Narragansett Energy Resources Company and NECO Power, Inc.
(collectively, the "OSP Partners") dated as o f December 2, 1988, as
amended March 27, 1989 (Exhibit 10-107, Form 10-K of EUA for 1989, File
No. 1-5366, Exhibits 10-3.12, 10-4.12 and 10-5.12, Form 10K of EUA for
1994, File No. 1-5366).
B-24 Ocean State Power II Amended and Restated General Partnership Agreement
among EUA Ocean State, JMC Ocean State Corporation, Makowski Power,
Inc., TCPL Power Ltd., Narragansett Energy Resources Company and
Newport Electric Power Corporation (collectively, the "OSP II
Partners") dated as of September 29, 1989 (Exhibit 10-110, Form 10-K of
EUA for 1989, File No. 1-5366).
B-25 Articles of Organization of EUA Transcapacity, Inc. (Exhibit A-1 File
No. 70-8283).
B-26 By-Laws of EUA Transcapacity, Inc. (Exhibit A-2 File No. 70-8283).
B-27 Amended and Restated Agreement of Limited Partnership of TransCapacity
Limited Partnership (Exhibit A-2 File No. 70-8283).
B-28 Articles of Incorporation of Cogenex Canada (Exhibit A-1 File No. 70-
8441).
B-29 By-Law No.1 of Cogenex Canada (Exhibit A-2 File No. 70-8441).
B-30 Articles of Organization of NEM (Exhibit A-2 File No. 70-8255).
B-31 By-Laws of NEM (Exhibit A-3 File No. 70-8255).
B-32 Articles of Organization of EUA Highland (Exhibit A-2 File No. 70-
8523).
B-33 By-Laws of EUA Highland (Exhibit A-3 File No. 70-8523).
B-34 Articles of Organization of EUA Citizens Conservation Service, Inc.
(Exhibit A-1 File No. 70-8473).
B-35 By-Laws of EUA Citizens Conservation Services, Inc. (Exhibit A-2 File
No. 70-8473).
B-36 Articles of Organization of EUA Bioten, Inc. (Exhibit A-1 File No. 70-
8617).
B-37 By-laws of EUA Bioten, Inc. (Exhibit A-2 File No. 70-8617).
B-38 Certificate of Formation of APS Cogenex L.L.C. (Exhibit A-1 File No.
70-8663).
B-39 Limited liability company operating agreement for APS Cogenex L.L.C.
(Exhibit B-2 File No. 70-8663).
B-40 1995 Agreement of General Partnership of BIOTEN General Partnership
(Exhibit A-3 File No. 70-8617).
B-41 Articles of Organization of Energy Services (Exhibit A-1 File No. 70-
8769).
B-42 By-Laws of EUA Energy Services, Inc. (Exhibit A-2 File No. 70-8769).
B-43 Operating Agreement of Duke/Louis Dreyfus Energy Services (New England)
L.L.C. (Exhibit B-1 File No. 70-8769 filed under confidential treatment
request).
*B-44 Articles of Organization of EUA Compression Services, Inc.
*B-45 Articles of Organization of EUA Telecommunications Corporation.
Exhibit C -
(a)
C-1 Form of 8% Debenture Bonds due 2000 of Montaup (Exhibit 4-10,
Registration File No. 2-41488).
C-2 Form of 8-1/4% Debenture Bonds due 2003 of Montaup (Exhibit B-3,
Form U5S of EUA for year 1973).
C-3 Form of 14% Debenture Bonds due 2005 of Montaup (Exhibit 4-11,
Registration No. 2-55990).
C-4 Form of 10% Debenture Bonds due 2008 of Montaup (Exhibit 5-3,
Registration No. 2-65785).
C-5 Form of 16-1/2% Debenture Bonds due 2010 of Montaup (Exhibit 4-11,
Form 10-K of EUA for 1980, File No. 1-5366).
C-6 Form of 12-3/8% Debenture Bonds due 2013 of Montaup (Exhibit 4-13,
Form 10-K of EUA for 1983, File No. 1-5366).
C-7 Form of 9% Debenture Bonds due 2020 of Montaup (Exhibit 4-10, Form
10-K of Eastern Edison for 1990, File No. 0-8480).
C-8 Form of 9-3/8% Debenture Bonds due 2020 of Montaup (Exhibit 4-11,
Form 10-K of Eastern Edison for 1990, File No. 0-8480).
C-9 Indenture of First Mortgage and Deed of Trust dated as of September 1,
1948 of Eastern Edison (Exhibit 4-1, Registration No. 2-77468), and
twenty-seven supplements thereto (Exhibit A, File No. 70-3015; Exhibit
A-3, File No. 70-3371; Exhibit C to Certificate of Notification, File
No. 70-3371; Exhibit D to Certificate of Notification, File No. 3619;
Exhibit D to Certificate of Notification, File No. 70-3798; Exhibit F
to Certificate of Notification, File No. 70-4164; Exhibit D to
Certificate of Notification, File No. 70-4748; Exhibit C to Certificate
of Notification, File No. 70-5195; Exhibit F to Certificate of
Notification, File No. 70-5379; Exhibit C to Certificate of
Notification, File No. 70-5719; Exhibit 5-24 Registration No. 2-65785;
Exhibit F to Certificate of Notification, File No. 70-6463; Exhibit C
to Certificate of Notification, File No. 70-6608; Exhibit C to
Certificate of Notification, File No. 70-6737; Exhibit F to Certificate
of Notification, File No. 70-6851 ; Exhibit 4-31, Form 10-K of EUA for
1984, File No. 1-5366; Exhibit F to Certificate of Notification, File
No. 70-7254; Exhibit C to Certificate of Notification, File No. 70-
7373; Exhibit C to Certificate of Notification, File No. 70-7373;
Exhibit C to Certificate of Notification, File No. 70-7373; Exhibit F
to Certificate of Notification, File No. 20-7511; Exhibit 4-34, Form
10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 4-24, Form
10-K of Eastern Edison for 1992, File No. 0-8480; Exhibit 4-35, Form
10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 4-36, Form
10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit C-33 to Form
U5S of EUA for 1993; Exhibit C-34 to Form U5S of EUA for 1993; Exhibit
4-29.08, Form 10-K of Eastern Edison for 1994, File No. 0-8480; Exhibit
4-1.09, Form 10K of EUA for 1997, File 1-5366).
C-10 Form of Eastern Edison Medium Term Note (Exhibit 4-36, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
C-11 First Mortgage Indenture and Deed of Trust dated as of December 1, 1980
of Blackstone (Exhibit A, Form 8-K of EUA dated January 14, 1981, File
No. 1-5366).
C-12 First Supplemental Indenture dated as of August 1, 1989 of Blackstone
(Exhibit 4-33, Form 10-K of EUA for 1989, File 1-5366).
C-13 Second Supplemental Indenture dated as of November 26, 1990 of
Blackstone (Exhibit 4-3, Form 10-K of BVE for 1990, File No. 0-2602).
C-14 Loan Agreement between Rhode Island Industrial Facilities Corporation
and Blackstone dated as of December 1, 1984 (Exhibit 10-72, Form 10-K
of EUA for 1984, File No. 1-5366).
C-15 Note Purchase Agreement dated as of January 13, 1988 of Service
(Exhibit 4-38, Form 10-K of EUA for 1987, File No. 1-5366).
C-16 Note Agreement dated as of June 28, 1990 of EUA Cogenex with the
Prudential Insurance Company of America (Exhibit 4-46, Form 10-K
of EUA for 1990, File No. 1-5366).
C-17 Note Agreement dated as of October 29, 1991 between EUA Cogenex and
Prudential Insurance Company of America (Exhibit 4-55, Form 10-K of
EUA for 1991, File No. 1-5366).
C-18 Indenture dated September 1, 1993 between EUA Cogenex and the Bank of
New York as Trustee (Exhibit 4-4.10, Form 10-K of EUA for 1993, File
No. 1-5366).
C-19 Guaranty, dated June 28, 1990, made by Eastern Utilities Associates in
favor of The Prudential Insurance Company of America (Exhibit B-2 to
Form U-1, File No. 70-7655, dated June 14, 1990).
C-20 Indenture of First Mortgage dated as of June 1, 1954 of Newport, as
supplemented on August 1, 1959, April 1, 1962, October 1, 1964, April
1, 1967, September 1, 1969, September 1, 1970, June 1, 1978, October 1,
1978, May 1, 1986, December 1, 1987 and November 1, 1989 (Exhibit 4-49,
Form 10-K of EUA for 1990, File No. 1-5366).
C-21 United States Government Small Business Administration Loan to Newport
entitled, "Base Closing Economic Injury Loan", signed May 30, 1975 and
amended on October 6, 1983 (Exhibit 4-50, Form 10-K of EUA for 1990,
File No. 1-5366).
C-22 Indenture of Second Mortgage dated as of September 1, 1982 of Newport,
as supplemented on December 1, 1988 (Exhibit 4-51, Form 10-K of EUA for
1990, File No. 1-5366).
C-23 Note Purchase Agreement dated as of January 16, 1992 between EUA Ocean
State Corporation and John Hancock Mutual Life Insurance Company
(Exhibit 4-56, Form 10-K of EUA for 1991, File No. 1-5366).
C-24 Guaranty, dated January 16, 1992 made by EUA in favor of John Hancock
Mutual Life Insurance Company (Exhibit 10-125, Form 10-K of EUA for
1991, File No. 1-5366).
C-25 Trust Agreement dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Shawmut Bank, N.A. (filed as Exhibit 10-
1.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480).
C-26 Loan Agreement dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Eastern Edison (filed as Exhibit 10-2.08
to Eastern Edison's Form 10-K for 1993, File No. 0-8480).
C-27 Power Purchase Agreement entered into as of September 20, 1993 by and
between Meridian Middleboro Limited Partnership and Eastern Edison
Company (filed as Exhibit 10-3.08 to Eastern Edison's Form 10-K for
1993, File No. 0-8480).
C-28 Inducement Letter dated July 14, 1993 from Eastern Edison to the
Massachusetts Industrial Finance Agency and Goldman, Sachs & Company
and Citicorp Securities Markets, Inc. (filed as Exhibit 10-4.08 to
Eastern Edison's Form 10-K for 1993, File No. 0-8480).
C-29 Indenture dated September 1, 1993 between EUA Cogenex and the Bank of
New York as Trustee (filed as Exhibit 4-4.10 to EUA's Form 10-K for
1993, File No. 1-5366).
C-30 Loan Agreement between the Rhode Island Port Authority and Economic
Development Corporation and Newport Electric Corporation dated as of
January 6, 1994 (filed as Exhibit 4-14.14 to EUA's Form 10-K for 1993,
File No. 1-5366).
C-31 Trust Indenture between the Rhode Island Authority and Economic
Development Corporation and Newport Electric Corporation dated as of
January 1, 1994 (filed as Exhibit 4-5.14 to EUA's Form 10-K for 1993,
File No. 1-5366).
C-32 Letter of Credit and Reimbursement Agreement among Newport and the
Canadian Imperial Bank of Commerce dated January 6, 1994 (filed as
Exhibit 4-6.14 to EUA's Form 10-K for 1993, File No. 1-5366).
C-33 Memorandum of understanding by and between Canal Electric Company and
Montaup Electric Company dated September 23, 1993 (Exhibit 10-39.05,
Eastern Edison 10-K for 1993, File No. 0-8480).
C-34 Ancillary Agreement by and between Algonquin Gas Transmission Company,
Canal Electric Company and Montaup Electric Company dated October 8,
1993 (Exhibit 10-40.05 of Eastern Edison 10-K for 1993, File No.
0-8480).
(b) None
*Exhibit D - Tax allocation agreement for 1998 pursuant to Rule 45(c).
Exhibit E - Other documents. None.
Exhibit F - Report of Independent Accountants (Exhibit 13-1.03 of EUA 10-K
for 1997, File No. 1-5366).
*Exhibit G - Financial Data Schedules. Filed electronically via EDGAR.
Exhibit H - None.
Exhibit I - None.
SIGNATURE
The undersigned system company has duly caused this annual report to be signed
on its behalf by the undersigned thereunto duly authorized, pursuant to the
requirements of the Public Utility Holding Company Act of 1935.
EASTERN UTILITIES ASSOCIATES
and Subsidiaries
By /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Treasurer
May 1, 1998
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
<CAPTION>
ASSETS
Blackstone
Eastern EUA Valley Newport Eastern
EUA Utilities Service Electric Electric Edison
Consolidated Eliminations Associates Corporation Company Corporation Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Utility plant and other inv.:
Utility plant in service $1,079,360,769 $ $ $33,360,786 $140,571,852 $82,437,658 $822,990,473
Less accumulated provision for
depreciation and amortization 376,722,420 13,975,450 55,850,853 27,184,936 279,711,181
Net utility plant in service 702,638,349 19,385,336 84,720,999 55,252,722 543,279,292
Construction work in progress 5,538,071 1,987,924 1,036,645 265,393 2,248,109
Net utility plant 708,176,420 21,373,260 85,757,644 55,518,115 545,527,401
Non-utility property 113,974,402 70,206 2,715,349
Less accumulated provision for
depreciation 42,458,533 25,420 9,697
Net non-utility property 71,515,869 44,786 2,705,652
Investments in subsidiaries (at
equity) 69,748,775 328,092,368 328,092,368 13,523,752
Excess of carrying values of
investments in subsidiaries 17,489 17,489
Other 62,817,223 1,000 54,789
Total Utility Plant and Other
Investments 912,275,776 328,092,368 328,110,857 21,373,260 85,802,430 55,518,115 561,811,594
Current Assets:
Cash and temporary cash invest. 7,251,973 169,264 1,108,519 408,061 169,991 461,326
Notes receivable 27,692,570 38,298,097 38,298,097
Accounts receivable - Net:
Customers 64,214,339 11,393,936 4,977,226 27,801,108
Accrued unbilled revenue 14,103,520 1,583,759 782,723 8,490,397
Others 14,328,721 2,760,739 1,185,091 357,557 1,631,362 1,862,582 4,486,379
Accounts receivable - assoc. comp. 26,057,563 394,778 10,818,691 512,379 188,797 14,142,818
Materials and Supplies (at avg. cost):
Fuel 4,304,568 56,723 4,247,845
Plant materials and operat. supp. 6,897,092 59,230 759,282 696,974 3,734,480
Other current assets 7,176,875 502,793 529,355 389,376 395,303 355,252 3,686,335
Total Current Assets 145,969,658 67,619,192 40,576,585 12,733,373 16,684,082 9,090,268 67,050,688
Deferred Debits:
Unamortized debt expense 3,953,785 60,013 587,400 412,718 2,091,649
Unrecovered regulatory plant
costs (Note A) 68,345,432 68,345,432
Other deferred debits 140,207,570 23,473,268 650,238 27,758,590 5,647,239 77,824,885
Total Deferred Debits 212,506,787 23,473,268 710,251 28,345,990 6,059,957 148,261,966
Total Assets $1,270,752,221 $395,711,560 $392,160,710 $34,816,884 $130,832,502 $70,668,340 $777,124,248
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS (Continued)
DECEMBER 31, 1997
ASSETS
<CAPTION>
EUA EUA
EUA Energy EUA EUA Telecomm-
Cogenex Investment Energy Svcs Ocean State unications
Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C>
Utility plant and other investment
Utility plant in service $ $ $ $ $
Less accumulated provision for
depreciation and amortization
Net utility plant in service
Construction work in progress
Net utility plant
Non-utility property 109,249,126 1,939,721
Less accumulated provision for deprec. 41,206,977 1,216,439
Net non-utility property 68,042,149 723,282
Investments in subsidiaries (at equity) (438,983) 4,805,390 51,858,616
Excess of carrying values of invest.
in subsidiaries
Other 62,477,829 161,843 109,078 12,684
Total Utility Plant and Other Invest. 130,080,995 5,690,515 109,078 51,858,616 12,684
Current Assets:
Cash and temporary cash invest. 4,472,365 422,789 14,342 23,982 1,334
Notes receivable 17,805,119 9,887,451
Accounts receivable - Net:
Customers 20,042,069
Accrued unbilled revenue 3,246,641
Others 5,631,977 1,725,177 195,518 13,817
Accounts receivable - assoc. comp. 100
Materials and Supplies (at average cost)
Fuel
Plant materials and operat. supp. 1,647,126
Other current assets 963,032 1,347,684 13,331
Total Current Assets 53,808,329 13,383,101 209,860 37,313 15,251
Deferred Debits:
Unamortized debt expense 410,352 391,653
Unrecovered regulatory plant costs
(Note A)
Other deferred debits 4,051,671 798,215 3,464
Total Deferred Debits 4,462,023 798,215 391,653 3,464
Total Assets $188,351,347 $19,871,831 $318,938 $52,287,582 $31,399
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
LIABILITIES
<CAPTION>
Blackstone
Eastern EUA Valley
EUA Utilities Service Electric
Consolidated Eliminations Associates Corporation Company
<S> <C> <C> <C> <C> <C>
Capitalization:
Common equity $373,466,760 $328,092,368 $373,510,672 $2,895,346 $38,091,740
Non-redeemable preferred stock of sub. 6,900,625 6,129,500
Redeemable preferred stock of
subsidiaries - net 29,664,502
Preferred stock redemption cost (2,052,691)
Long-term debt - net 332,802,298 6,800,000 33,500,000
Total Capitalization 740,781,494 328,092,368 373,510,672 9,695,346 77,721,240
Current Liabilities:
Long-term debt due within one year 72,518,424 1,100,000 1,500,000
Notes payable 61,483,595 38,298,097 9,800,000 1,400,000
Accounts payable 35,036,589 1,939,651 971,635 960,005
Accounts payable - associated cos. 26,057,563 36,955 140,448 8,331,692
Customer deposits 3,210,310 1,048,994
Taxes accrued 3,063,208 2,760,739 13,088 2,064,975
Interest accrued 8,623,882 502,793 508,318 402,900 841,541
Dividends accrued 79,396 72,188
Other current liabilities 30,036,751 1,199,630 1,380,564 8,017,466
Total Current Liabilities 214,052,155 67,619,192 13,484,554 4,008,635 24,236,861
Other Liabilities:
Unamortized investment credit 19,471,904 2,380,345
Other deferred credits and other liab. 133,053,535 2,557,407 19,701,263 14,597,027
Total Other Liabilities 152,525,439 2,557,407 19,701,263 16,977,372
Accumulated deferred taxes 163,393,133 2,608,077 1,411,640 11,897,029
Commitments and contingencies (Note J)
Total Liabilities and Capitalization $1,270,752,221 $395,711,560 $392,160,710 $34,816,884 $130,832,502
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET (Continued)
DECEMBER 31, 1997
LIABILITIES
<CAPTION>
EUA EUA
Newport Eastern EUA Energy EUA EUA Telecomm-
Electric Edison Cogenex Investment Energy Svcs Ocean State unications
Corporation Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C>
Capitalization:
Common equity $22,372,489 $218,468,366 $47,602,678 ($16,781,735) ($205,518) $15,629,804 ($24,714)
Non-redeemable preferred stock
of subs. 771,050 75
Redeemable preferred stock of
subsidiaries - net 29,664,502
Preferred stock redemption cost (2,052,691)
Long-term debt - net 19,797,845 162,490,897 84,100,000 26,113,556
Total Capitalization 42,941,384 408,571,074 131,702,753 (16,781,735) (205,518) 41,743,360 (24,714)
Current Liabilities:
Long-term debt due within 1 yr. 741,764 60,000,000 6,700,000 2,476,660
Notes payable 1,000,000 4,675,000 40,693,521 37,846,824 506,347 3,860,000
Accounts payable 413,425 27,113,175 3,619,619 18,563 461 55
Accounts payable - assoc. comp. 9,530,116 7,316,572 521,506 68,988 8,400 47,828 55,058
Customer deposits 672,691 1,258,540 230,085
Taxes accrued 531,351 2,324,591 301,884 588,058
Interest accrued 450,171 4,923,146 1,266,881 497,879 4,913 230,926
Dividends accrued 7,208
Other current liabilities 1,307,636 13,753,169 4,206,376 171,929 (19)
Total Current Liabilities 14,654,362 121,364,193 57,539,872 38,604,183 519,660 7,203,914 55,113
Other Liabilities:
Unamortized investment credit 1,124,274 15,967,285
Other deferred credits and other lia. 2,653,478 91,746,727 2,943,302 (1,156,669) 10,000 1,000
Total Other Liabilities 3,777,752 107,714,012 2,943,302 (1,156,669) 10,000 1,000
Accumulated deferred taxes 9,294,842 139,474,969 (3,834,580) (793,948) (5,204) 3,340,308
Commitments and contingencies
(Note J)
Total Liabilities and Capital. $1,270,668,340 $777,124,248 $188,351,347 $19,871,831 $318,938 $52,287,582 $31,399
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1997
(1 of 2)
<CAPTION>
Blackstone
Eastern EUA Valley Newport Eastern
EUA Utilities Service Electric Electric Edison
Consolidated Eliminations Associates Corporation Company Corporation Consol.
<S> <C> <C> <C> <C> <C> <C> <C>
Common Equity:
Common shares, $5 par value
of Registrant (1) $102,179,985 $92,856,908 $102,179,985 $1,000 $9,203,100 $11,368,779 $72,283,925
Other paid-in capital 219,156,027 133,393,267 219,156,027 2,300,000 17,907,931 9,000,000 47,249,633
Common share expense (3,930,679) (742,214) (3,886,767) (742,214) (43,912)
Retained earnings 56,061,427 102,584,407 56,061,427 594,346 10,980,709 2,745,924 98,978,720
Total Common Equity 373,466,760 328,092,368 373,510,672 2,895,346 38,091,740 22,372,489 218,468,366
Non-Redeemable Preferred:
4.25%, $100 par value, 35,000
share (2) 3,500,000 3,500,000
5.60%, $100 par value, 25,000
share (2) 2,500,000 2,500,000
3.75%, $100 par value, 7,689
share (2) 768,900 768,900
$.01 par value, 7,500 share (3) 75
Premium, net of expense 131,650 129,500 2,150
Total Non-Redeemable 6,900,625 6,129,500 771,050
Redeemable Preferred:
6.625%, $100 par value,
300,000 share (4) 30,000,000 30,000,000
Expense, net of premium (335,498) (335,498)
Preferred stock redemption cost (2,052,691) (2,052,691)
Total Redeemable 27,611,811 27,611,811
Long-Term Debt:
Secured Notes:
10.2% due 2008 7,900,000 7,900,000
Unsecured Notes:
9.59% due 2011 28,590,216
7% due 2000 50,000,000
9.6% due 2001 12,800,000
10.56% due 2005 28,000,000
Variable Rate Bonds:
Demand due 2014 (5) 6,500,000 6,500,000
Revenue Refunding due 2011 (5) 7,925,000 7,925,000
First Mortgage and Coll. Trust Bonds:
5.875% due 1998 20,000,000 20,000,000
6.875% due 2003 40,000,000 40,000,000
8% due 2023 40,000,000 40,000,000
6.35% due 2003 8,000,000 8,000,000
7.78% Secured medium-term
note due 2002 35,000,000 35,000,000
5.75% due 1998 40,000,000 40,000,000
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (Continued)
DECEMBER 31, 1997
(1 of 2)
<CAPTION>
EUA
EUA EUA EUA EUA Telecomm-
Cogenex Energy Inv. Energy Svcs. Ocean State unications
Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C>
Common Equity:
Common shares, $5 par value
of Registrant (1) $100 $1 $1 $1 $1
Other paid-in capital 47,125,407 999 999 9,808,199 99
Common share expense
Retained earnings 477,171 (16,782,735) (206,518) 5,821,604 (24,814)
Total Common Equity 47,602,678 (16,781,735) (205,518) 15,629,804 (24,714)
Non-Redeemable Preferred:
4.25%, $100 par value, 35,000
share (2)
5.60%, $100 par value, 25,000
share (2)
3.75%, $100 par value, 7,689
share (2)
$.01 par value, 7,500 share(3) 75
Premium, net of expense
Total Non-Redeemable 75
Redeemable Preferred:
6.625%, $100 par value, 300,000 share (4)
Expense, net of premium
Preferred stock redemption cost
Total Redeemable
Long-Term Debt:
Secured Notes:
10.2% due 2008
Unsecured Notes:
9.59% due 2011 28,590,216
7% due 2000 50,000,000
9.6% due 2001 12,800,000
10.56% due 2005 28,000,000
Variable Rate Bonds:
Demand due 2014 (5)
Revenue Refunding due 2011(5)
First Mortgage and Collateral
Trust Bonds
5.875% due 1998
6.875% due 2003
8% due 2023
6.35% due 2003
7.78% Secured medium-term
notes due 2002
5.75% due 1998
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1997
(2 0F 2)
<CAPTION>
Eastern EUA Valley Newport Eastern
EUA Utilities Service Electric Electric Edison
Consolidated Eliminations Associates Corporation Company Corporation Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt (continued):
Pollution Control Revenue Bonds:
5.875% due 2008 40,000,000 40,000,000
First Mortgage Bonds:
9.5% due 2004 (Series B) 10,500,000 10,500,000
10.35% due 2010 (Series 18,000,000 18,000,000
9% due 1999 1,386,000 1,386,000
9.8% due 1999 8,000,000 8,000,000
8.95% due 2001 2,600,000 2,600,000
Second Mortgage Bonds:
6.5% SBA Loan due 2005 628,609 628,609
Unamortized (Discount) - Net (509,103) (509,103)
405,320,722 7,900,000 35,000,000 20,539,609 222,490,897
Less portion due within 1 yr. 72,518,424 1,100,000 1,500,000 741,764 60,000,000
Total Long-Term Debt 332,802,298 6,800,000 33,500,000 19,797,845 162,490,897
Total Capitalization $740,781,494 $328,092,368 $373,510,672 $9,695,346 $77,721,240 $42,941,384 $408,571,074
(1) Authorized 36,000,000 shares, outstanding 20,435,997
(2) Authorized and Outstanding.
(3) The Preferred Stock shall be entitled to an annual dividend per share at a rate equal
to 33% of the modified net income of Citizens Conservation Services divided by 7,500.
(4) Authorized 400,000 shares, outstanding 300,000.
(5) Weighted average interest rate was 3.7 % for 1997.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (Continued)
DECEMBER 31, 1997
(2 0F 2)
<CAPTION>
EUA
EUA EUA EUA EUA Telecomm-
Cogenex Energy Inv. Energy Svcs. Ocean State unications
Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C>
Long-Term Debt (continued):
Pollution Control Revenue B
5.875% due 2008
First Mortgage Bonds:
9.5% due 2004 (Series B)
10.35% due 2010 (Series
9% due 1999
9.8% due 1999
8.95% due 2001
Second Mortgage Bonds:
6.5% SBA Loan due 2005
Unamortized (Discount) - Net
90,800,000 28,590,216
Less portion due within 1 yr. 6,700,000 2,476,660
Total Long-Term Debt 84,100,000 26,113,556
Total Capitalization $131,702,753 ($16,781,735) ($205,518) $41,743,360 ($24,714)
(1) Authorized 36,000,000 shares, outstanding 20,435,997
(2) Authorized and Outstanding.
(3) The Preferred Stock shall be entitled to an annual dividend per share at a rate equal
to 33% of the modified net income of Citizens Conservation Services divided by 7,500.
(4) Authorized 400,000 shares, outstanding 300,000.
(5) Weighted average interest rate was 3.7 % for 1997.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Blackstone
Eastern EUA Valley Newport Eastern
EUA Utilities Service Electric Electric Edison
Consolidated Eliminations Associates Corporation Company Corporation Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $568,512,733 $132,079,754 $ $ $140,258,371 $63,503,535 $435,013,647
Operating Expenses:
Operation 392,673,289 180,349,451 1,079,977 49,089,884 109,767,411 47,535,499 312,446,228
Maintenance 30,431,946 1,227,426 2,230 1,228,201 3,183,973 2,387,377 24,055,267
Early Retirement Offer 1,416,104 11,872 363,269 177,617 737,337
Depreciation and amortization 46,941,306 1,259,949 2,547 1,271,846 5,725,458 2,854,873 27,488,862
Taxes Other than income 24,021,267 2,675,367 8,893 2,717,706 8,339,696 4,073,809 10,843,864
Income Taxes - Current (credit) 19,750,460 272,113 134 402,119 5,024,629 1,594,449 18,997,073
- Deferred (credit) (5,528,719) (178,195) (235,705) (90,438) (1,698,243) 118,802 (4,750,350)
Total Operating Expenses 509,705,653 185,606,111 869,948 54,619,318 130,706,193 58,742,426 389,818,281
Operating Income 58,807,080 (53,526,357) (869,948) (54,619,318) 9,552,178 4,761,109 45,195,366
Other Income and Deductions:
Interest and dividend income 10,548,020 3,338,477 1,996,992 1,119,921 312,409 36,158 1,566,830
Equity in earnings of jointly-
owned companies 9,465,602 35,511,032 35,511,032 1,599,320
All. for other funds used during
construction 161,515 161,515
Other (deductions) income - net 438,308 53,213,434 2,514,639 54,609,473 (117,896) 203,483 (901,365)
Total Other Income 20,613,445 92,062,943 40,022,663 55,729,394 194,513 239,641 2,426,300
Income Before Interest Charges 79,420,525 38,536,586 39,152,715 1,110,076 9,746,691 5,000,750 47,621,666
Interest Charges:
Interest on long-term debt 32,197,499 805,800 3,185,888 1,496,113 15,006,000
Amortization of debt expense
and premium 2,548,367 24,383 82,024 124,029 2,141,906
Other interest expense (principally
short-term notes) 5,244,644 3,025,554 1,192,591 5,382 914,530 614,484 1,650,977
All. for borrowed funds used during
construction - (credit) (835,193) (81,338) (35,243) (223,476)
Total Interest Charges 39,155,317 3,025,554 1,192,591 835,565 4,101,104 2,199,383 18,575,407
Net Income 40,265,208 35,511,032 37,960,124 274,511 5,645,587 2,801,367 29,046,259
Preferred Dividends Requirement 2,305,084 288,750 28,834 1,987,500
Earnings available for common
shareholders $37,960,124 $35,511,032 $37,960,124 $274,511 $5,356,837 $2,772,533 $27,058,759
Earnings per EUA Common Share 20,435,997
weighted average shares outstanding $1.86
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
EUA
EUA EUA EUA EUA Telecomm-
Cogenex Energy Inv. Energy Svcs. Ocean State unications
Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C>
Operating Revenues $61,320,922 $496,012 $ $ $
Operating Expenses:
Operation 48,761,373 3,825,116 289,060 192,966 35,226
Maintenance 792,413 5,413 1,670 2,828
Early Retirement Offer 81,102 25,573 8,997 10,337
Depreciation and amortization 10,310,118 498,155 44,659 3,600 1,137
Taxes Other than income 678,203 13,130 10,830 8,691 1,812
Income Taxes - Current (credit) (3,517,966) (1,322,019) 73 (1,142,558) (13,361)
- Deferred (credit) 867,190 107,851 (6,862) (19,159)
Total Operating Expenses 57,972,433 3,153,219 348,427 (943,295) 24,814
Operating Income 3,348,489 (2,657,207) (348,427) 943,295 (24,814)
Other Income and Deductions:
Interest and dividend income 7,367,919 1,480,124 37 6,107
Equity in earnings of jointly-
owned companies (110,631) (1,250,838) (198,276) 9,426,027
Allowance for other funds used during
construction
Other (deductions) income - net (274,021) 710,012 216,623 (3,309,206)
Total Other Income 6,983,267 939,298 18,384 6,122,928
Income Before Interest Charges 10,331,756 (1,717,909) (330,043) 7,066,223 (24,814)
Interest Charges:
Interest on long-term debt 8,803,555 2,900,143
Amortization of debt expense
and premium 148,050 27,975
Other interest expense (principally
short-term notes) 1,673,264 2,023,496 24,256 171,218
All. for borrowed funds used during
construction - (credit) (495,136)
Total Interest Charges 10,129,733 2,023,496 24,256 3,099,336
Net Income 202,023 (3,741,405) (354,299) 3,966,887 (24,814)
Preferred Dividends Requirement
Earnings available for
common shareholders $202,023 ($3,741,405) ($354,299) $3,966,887 ($24,814)
Earnings per EUA Common Share 20,435,997
weighted average shares oustanding $1.86
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Blackstone
Eastern EUA Valley Newport Eastern
EUA Utilities Service Electric Electric Edison
Consolidated Eliminations Associates Corporation Company Corporation Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $40,265,208 $35,511,032 $37,960,124 $274,511 $5,645,587 $2,801,367 $29,046,259
Adjustments to Reconcile Net Income
to Net Cash Provided by Op. Act.:
Depreciation and amortization 51,615,174 754,171 1,296,229 6,183,515 2,960,209 28,862,285
Amortization of nuclear fuel 1,066,663 1,066,663
Deferred taxes (6,317,073) (241,116) (90,438) (1,666,743) 134,087 (4,872,440)
Non-cash (Gains)/Exp on Sales of Inv.
in Energy Savings Projects 15,992,687
Investment tax credit, net (1,201,431) (180,712) (85,320) (935,399)
Allowance for other funds used
during construction (161,515) (161,515)
Collections and sales of project
notes and leases receivable 19,148,454
Other - net (5,726,420) 22,412,804 14,130,240 5,298,491 (1,768,479) 554,630 (4,485,502)
Changes in Op. Assets and Liabilities:
Accounts receivable (2,494,353) 5,668,790 2,668,232 (5,738,105) 237,982 (1,031,083) 10,038,235
Materials and supplies 2,929,328 (6,729) 113,406 90,336 2,666,435
Notes receivable (5,170,000) (9,653,103) (9,653,103)
Accounts payable 1,225,420 (5,080,225) 1,919,307 (300,941) (7,977,064) 74,680 3,089,185
Accrued taxes 58,786 (148,072) 7,402 650,429 (59,035) (652,800)
Other - net 4,506,053 (440,493) 281,295 1,387,206 6,761,778 (338,307) (2,282,272)
Net Cash Provided from (Used in)
Operating Activities 115,736,981 48,270,733 47,819,150 2,127,626 7,999,699 5,101,564 61,379,134
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (76,118,357) (2,306,627) (3,768,716) (2,439,274) (15,662,254)
Collections on Notes and Lease
Receivable of EUA Cogenex 10,075,583
Increase/Decrease in other invest. 312,892 218,855
Investments in subsidiaries 198,900 198,900
Net Cash Used in Investing Act. (65,729,882) 198,900 198,900 (2,306,627) (3,768,716) (2,439,274) (15,443,399)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Common shares/capital contribution 1,100
Redemptions:
Long-term debt (28,616,963) (2,200,000) (1,500,000) (740,303)
Preferred stock
EUA common share dividends paid (33,923,777) (57,923,836) (33,923,777) (400,000) (3,497,180) (2,120,000) (48,226,656)
Subsidiary preferred dividends paid (2,305,084) (288,750) (28,834) (1,987,500)
Capital contribution/(return of cap.) (200,000) (200,000)
Net increase (decrease) in short-term
debt 9,635,836 9,653,103 (14,037,000) 665,000 105,000 2,635,000
Net Cash (Used in) Provided from
Financing Activities (55,209,988) (48,469,633) (47,960,777) (2,800,000) (4,620,930) (2,784,137) (47,579,156)
NET INCREASE (DECREASE) IN CASH (5,202,889) 57,273 (2,979,001) (389,947) (121,847) (1,643,421)
Cash and temporary cash investments at
beginning of year 12,454,862 111,991 4,087,520 798,008 291,838 2,104,747
Cash and temporary cash investments at
end of year $7,251,973 $169,264 $1,108,519 $408,061 $169,991 $461,326
Cash paid during the year for:
Interest (net of amount capitalized) $40,172,276 $691,060 $925,717 $3,436,041 $1,674,246 $13,992,662
Income Taxes (Refund) $28,920,686 ($807,761) $260,973 $4,906,110 $1,706,471 $21,290,949
Conversion of investments in energy
savings projects
to notes and leases receivable $5,403,860
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
EUA EUA
EUA Energy EUA EUA Telecomm-
Cogenex Investment Energy Svcs Ocean State unications
Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $202,023 ($3,741,405) ($354,299) $3,966,887 ($24,814)
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Act
Depreciation and amortization 11,007,249 484,221 37,400 28,758 1,137
Amortization of nuclear fuel
Deferred taxes 1,118,863 18,979 (5,204) (713,061)
Non-cash (Gains)/Expenses on Sales
Invest. in Energy Savings Projects 15,992,687
Investment tax credit, net
Allowance for other funds used during
construction
Collections and sales of project
notes and leases receivable 19,148,454
Other - net 1,081,556 929,664 208,275 739,973 (2,464)
Changes in Operating Assets and Liabilities
Accounts receivable (2,699,592) (119,443) (167,872) (13,917)
Materials and supplies 65,880
Notes receivable (5,170,000)
Accounts payable (762,889) 18,041 6,499 23,264 55,113
Accrued taxes (148,685) 113,403
Other - net (509,726) (1,211,370) 4,880 (27,924)
Net Cash Provided from (Used in)
Operating Activities 44,495,820 (8,791,313) (270,321) 4,131,300 15,055
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (51,659,875) (267,790) (13,821)
Collections on Notes and Lease
Receivables of EUA Cogenex 10,075,583
Increase/Decrease in other invest. 369,774 (275,737)
Investments in subsidiaries
Net Cash Used in Investing Activities (41,214,518) (543,527) (13,821)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Common shares/capital contribution 1,000 100
Redemptions:
Long-term debt (21,700,000) (2,476,660)
Preferred stock
EUA common share dividends paid (3,680,000)
Subsidiary preferred dividends paid
Capital contribution/(return of capital)
Net increase (decrease) in short-term debt 18,228,836 9,370,000 283,103 2,039,000
Net Cash (Used in) Provided from Fin. Act. (3,471,164) 9,370,000 284,103 (4,117,660) 100
NET INCREASE (DECREASE) IN CASH (189,862) 35,160 13,782 13,640 1,334
Cash and temporary cash investments at
beginning of year 4,662,227 387,629 560 10,342
Cash and temporary cash investments at
end of year $4,472,365 $422,789 $14,342 $23,982 $1,334
Cash paid during the year for:
Interest (net of amount capitalized) $14,470,654 $1,904,522 $ $3,077,374 $
Income Taxes (Refund) $769,518 ($1,899,457) ($48,525) $2,741,952 $456
Conversion of investments in energy savings
projects to notes and leases receivable $5,403,860
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1997
<CAPTION>
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corporation Company Corporation
<S> <C> <C> <C> <C> <C> <C>
Balance of retained earnings at
beginning of year $52,403,844 $125,375,975 $52,403,844 $719,835 $9,121,052 $2,093,391
Additions:
Net Income (Loss) 40,265,208 35,511,032 37,960,124 274,511 5,645,587 2,801,367
Total 92,669,052 160,887,007 90,363,968 994,346 14,766,639 4,894,758
Deductions:
Dividends:
Preferred - subsidiaries 2,305,084 288,750 28,834
Common - subsidiaries 57,923,836 400,000 3,497,180 2,120,000
Common - registrant - $1.66 per sh. 33,923,777 33,923,777
Total Dividends 36,228,861 57,923,836 33,923,777 400,000 3,785,930 2,148,834
Other 378,764 378,764 378,764
Total Deductions 36,607,625 58,302,600 34,302,541 400,000 3,785,930 2,148,834
Balance of retained earnings at end of
period $56,061,427 $102,584,407 $56,061,427 $594,346 $10,980,709 $2,745,924
Other Paid-In Capital at Beginning
of year $221,159,783 $221,159,783
Additions:
Amortization restricted stock costs 548,215 548,215
Deductions:
Restricted Stock Issue and Grant Provision 2,403,914 2,403,914
Currency Conversion 148,057 148,057
Other Paid-In Capital at End of year $219,156,027 $219,156,027
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1997 (Continued)
<CAPTION>
EUA EUA
EUA Energy EUA EUA Telecomm-
Cogenex Investment Energy Svcs. Ocean State unications
Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C>
Balance of retained earnings at
beginning of year $275,148 ($13,041,330 ($50,495) $5,534,717 $
Additions:
Net Income (Loss) 202,023 (3,741,405) (354,299) 3,966,887 (24,814)
Total 477,171 (16,782,735) (404,794) 9,501,604 (24,814)
Deductions:
Dividends:
Preferred - subsidiaries
Common - subsidiaries 3,680,000
Common - registrant - $1.660 per share
Total Dividends 3,680,000
Other (198,276)
Total Deductions (198,276) 3,680,000
Balance of retained earnings at end of period $477,171 ($16,782,735 ($206,518) $5,821,604 ($24,814)
Other Paid-In Capital at Beginning of year
Additions:
Amortization restricted stock costs
Deductions:
Restricted Stock Issue and Grant Provision
Currency Conversion
Other Paid-In Capital at End of Year
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
<CAPTION>
ASSETS
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Utility plant and other investments:
Utility plant in service $822,990,473 $ $241,611,699 $581,378,774
Less accumulated provision for
depreciation and amortization 279,711,181 91,597,815 188,113,366
Net Utility plant in service 543,279,292 150,013,884 393,265,408
Construction work in progress 2,248,109 1,337,647 910,462
Net utility plant 545,527,401 151,351,531 394,175,870
Non-utility property 2,715,349 105,735 2,609,614
Less accumulated provision for deprec. 9,697 9,697
Net non-utility property 2,705,652 96,038 2,609,614
Investments in subsidiaries (at equity) 13,523,752 334,723,001 334,723,001 13,523,752
Other 54,789 10,405 44,384
Total Utility Plant and Other Invest. 561,811,594 334,723,001 486,180,975 410,353,620
Current Assets:
Cash and temporary cash investments 461,326 287,511 173,815
Accounts receivable - Net:
Customers 27,801,108 26,133,092 1,668,016
Accrued unbilled revenue 8,490,397 8,490,397
Others 4,486,379 3,740,763 745,616
Accounts receivable - associated comp. 14,142,818 39,514,440 5,410,416 48,246,842
Materials and supplies (at average cost):
Fuel 4,247,845 4,247,845
Plant materials and operating supplies 3,734,480 1,726,330 2,008,150
Other current assets 3,686,335 612,889 3,073,446
Total Current Assets 67,050,688 39,514,440 46,401,398 60,163,730
Deferred Debits:
Unamortized debt expense 2,091,649 2,067,687 23,962
Unrecovered Regulatory Plant Costs (Note A) 68,345,432 68,345,432
Other deferred debits 77,824,885 29,299,562 48,525,323
Total Deferred Debits 148,261,966 31,367,249 116,894,717
Total assets $777,124,248 $374,237,441 $563,949,622 $587,412,067
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
<CAPTION>
LIABILITIES
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Capitalization:
Common equity $218,468,366 $160,512,035 $218,468,366 $160,512,035
Redeemable preferred stock - net 29,664,502 29,664,502
Redeemable preferred stock of subsidiaries - net 1,500,000 1,500,000
Preferred Stock Redemption Cost (2,052,691) (2,052,691)
Long-term debt - net 162,490,897 172,710,965 162,490,897 172,710,965
Total Capitalization 408,571,074 334,723,000 408,571,074 334,723,000
Current Liabilities:
Long-term debt due within one year 60,000,000 60,000,000
Notes payable 4,675,000 4,675,000
Accounts payable 27,113,175 1,391,142 25,722,033
Accounts payable - associated companies 7,316,572 34,382,940 38,509,007 3,190,505
Customer deposits 1,258,540 1,258,540
Taxes accrued 2,324,591 1,269,666 1,054,925
Interest accrued 4,923,146 5,131,500 4,923,091 5,131,555
Other current liabilities 13,753,169 12,994,618 758,551
Total Current Liabilities 121,364,193 39,514,440 125,021,064 35,857,569
Other Liabilities:
Unamortized investment credit 15,967,285 3,613,508 12,353,777
Other deferred credits and other liabilities 91,746,727 10,864,160 80,882,567
Total Other Liabilities 107,714,012 14,477,668 93,236,344
Accumulated deferred taxes 139,474,969 15,879,815 123,595,154
Commitments and contingencies (Note J)
Total liabilities and capitalization $777,124,248 $374,237,440 $563,949,621 $587,412,067
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1997
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Common Equity:
Common shares $72,283,925 $58,600,000 $72,283,925 $58,600,000
Other paid-in capital 47,249,633 29,528,000 47,249,633 29,528,000
Common share expense (43,912) (43,912)
Retained earnings 98,978,720 72,384,035 98,978,720 72,384,035
Total Common Equity 218,468,366 160,512,035 218,468,366 160,512,035
Redeemable Preferred:
6.625%, $100 par value, 300,000 shares 30,000,000 30,000,000
Redeemable preferred stock of
subsidiaries 1,500,000 1,500,000
Expense, net of premium (335,498) (335,498)
Preferred stock redemption cost (2,052,691) (2,052,691)
Total Redeemable 27,611,811 1,500,000 27,611,811 1,500,000
Long-Term Debt:
First Mort. and Coll. Trust Bonds:
5.875% due 1998 20,000,000 20,000,000
6.875% due 2003 40,000,000 40,000,000
8% due 2023 40,000,000 40,000,000
6.35% due 2003 8,000,000 8,000,000
7.78% Secured medium-term notes 35,000,000 35,000,000
5.75% due 1998 40,000,000 40,000,000
Pollution Control Revenue Bonds:
5.875% due 2008 40,000,000 40,000,000
Debenture Bonds:
8% due 2000 8,500,000 8,500,000
8.25% due 2003 12,800,000 12,800,000
14% due 2005 26,000,000 26,000,000
10% due 2008 9,275,000 9,275,000
16.5% due 2010 19,000,000 19,000,000
12.375% due 2013 30,000,000 30,000,000
10.125% due 2008 37,135,965 37,135,965
9% due 2020 5,000,000 5,000,000
9.375% due 2020 25,000,000 25,000,000
Unamortized (Discount) - Net (509,103) (509,103)
222,490,897 172,710,965 222,490,897 172,710,965
Less portion due within one year 60,000,000 60,000,000
Total Long-Term Debt 162,490,897 172,710,965 162,490,897 172,710,965
Total Capitalization $408,571,074 $334,723,000 $408,571,074 $334,723,000
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Operating Revenues $435,013,647 $190,017,798 $277,322,558 $347,708,887
Operating Expenses:
Operation 312,446,228 190,017,798 227,879,908 274,584,118
Maintenance 24,055,267 6,714,665 17,340,602
Voluntary Retirement Incentive 737,337 737,337
Depreciation and amortization 27,488,862 10,360,999 17,127,863
Taxes Other than income 10,843,864 4,848,496 5,995,368
Income Taxes - Current 18,997,073 15,524,232 3,472,841
- Deferred (4,750,350) (5,350,959) 600,609
Total Operating Expenses 389,818,281 190,017,798 260,714,678 319,121,401
Operating Income 45,195,366 16,607,880 28,587,486
Other Income and Deductions:
Interest and dividend income 1,566,830 21,097,275 20,961,041 1,703,064
Equity in earnings of jointly-owned companies 1,599,320 11,097,335 11,097,335 1,599,320
All. for other funds used during construction 161,515 161,515
Other (deductions) income - net (901,365) (328,229) (573,136)
Total Other Income 2,426,300 32,194,610 31,730,147 2,890,763
Income Before Interest Charges 47,621,666 32,194,610 48,338,027 31,478,249
Interest Charges:
Interest on long-term debt 15,006,000 19,994,750 15,006,000 19,994,750
Amortization of debt expense and premium 2,141,906 1,869,100 272,806
Other interest expense (principally
short-term notes) 1,650,977 1,102,525 2,557,597 195,905
Allowance for borrowed funds used during
construction - (credit) (223,476) (140,929) (82,547)
Total Interest Charges 18,575,407 21,097,275 19,291,768 20,380,914
Net Income 29,046,259 11,097,335 29,046,259 11,097,335
Preferred Dividends Requirement 1,987,500 1,987,500
Earnings Available for Common Shareholders $27,058,759 $11,097,335 $27,058,759 $11,097,335
Weighted average shares outstanding 2,891,357
Earnings per share $9.36
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $29,046,259 $11,097,335 $29,046,259 $11,097,335
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 28,862,285 12,398,596 16,463,689
Amortization of nuclear fuel 1,066,663 1,066,663
Deferred taxes (4,872,440) (5,287,375) 414,935
Investment tax credit, net (935,399) (307,247) (628,152)
Allowance for other funds used during costr. (161,515) (161,515)
Other - Net (4,485,502) 23,043,185 21,928,096 (3,370,413)
Changes in Operating Assets and Liabilities:
Accounts receivable 10,038,235 8,587,820 (984,994) 19,611,049
Materials and supplies 2,666,435 17,474 2,648,961
Accounts payable 3,089,185 (8,587,820) (6,905,440) 1,406,805
Accrued taxes (652,800) (855,919) 203,119
Other - net (2,282,272) 8,443,485 (10,725,757)
Net Cash Provided from Operating Activities 61,379,134 34,140,520 57,492,935 38,026,719
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (15,662,254) (10,552,798) (5,109,456)
Decrease in Other Investments 218,855 218,855
Net Cash Used in Investing Activities (15,443,399) (10,552,798) (4,890,601)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemptions:
Eastern Edison common share dividends paid (48,226,656) (33,712,720) (48,226,656) (33,712,720)
Preferred dividends paid (1,987,500) (427,800) (1,987,500) (427,800)
Net Decrease in short-term debt 2,635,000 2,635,000
Net Cash (Used In) Financing Activities (47,579,156) (34,140,520) (47,579,156) (34,140,520)
NET INCREASE IN CASH (1,643,421) (639,019) (1,004,402)
Cash and temporary cash investments
at beginning of year 2,104,747 926,530 1,178,217
Cash and temporary cash investments
at end of year $461,326 $287,511 $173,815
Cash paid during the year for:
Interest (Net of Amounts Capitalized) $13,992,662 $19,994,750 $14,053,072 $19,934,340
Income Taxes $21,290,949 $17,028,922 $4,262,027
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF RETAINED
EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1997
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Balance of retained earnings at beginning
of year $120,723,657 $95,427,220 $120,723,657 $95,427,220
Additions:
Net Income 29,046,259 11,097,335 29,046,259 11,097,335
Total 149,769,916 106,524,555 149,769,916 106,524,555
Deductions:
Dividends:
Preferred 1,987,500 427,800 1,987,500 427,800
Common 48,226,656 33,712,720 48,226,656 33,712,720
Total Dividends 50,214,156 34,140,520 50,214,156 34,140,520
Other 577,040 577,040
Total Deductions 50,791,196 34,140,520 50,791,196 34,140,520
Balance of retained earnings at end of period $98,978,720 $72,384,035 $98,978,720 $72,384,035
( ) Denotes Contra
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
ASSETS
<CAPTION>
EUA EUA EUA EUA EUA EUA
Cogenex Cogenex Nova Day Day I & II NEM
Consolidated Eliminations (Division) (Division) (Division) (Division) Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Utility Plant and Other Investments:
Utility plant in service $ $ $ $ $ $ $
Less accumulated provision for
depreciation and amortization
Net utility plant in service
Construction work in progress
Net utility plant
Non-utility property 109,249,126 57,436,211 1,489,216 1,976,332 1,150,027 8,493,365
Less accumulated provision for
depreciation 41,206,977 22,566,234 743,886 876,857 443,911 3,527,192
Net non-utility property 68,042,149 34,869,977 745,330 1,099,475 706,116 4,966,173
Investments in subsidiaries
(at equity) (438,983) 48,885,358 48,446,375
Notes receivable 30,730,229 24,350,304
Leases receivable 15,462,205 9,775,514
Other 16,285,395 10,738,262 (186,000) 108,349
Total Utility Plant and Other
Investments 130,080,995 48,885,358 128,180,432 559,330 1,099,475 706,116 5,074,522
Current Assets:
Cash and temporary cash invest. 4,472,365 718,131 (41,790) 149,729 384,367
Notes receivable 15,494,756 18,952,328 31,703,508 72,958 1,287,015
Leases receivable 2,310,363 1,087,592
Accounts receivable - Net:
Customers 20,042,069 6,428,901 1,265,951 1,226,504 885,317
Accrued unbilled revenue 3,246,641 3,246,641
Others 5,631,977 52,326 5,185,704 1,443 21,863 (140,054)
Accounts receivable - assoc. comp. 6,104,878 5,324,809 242,721 395,764
Materials and supplies (at
average cost):
Plant materials and operating
supplies 1,647,126 63,569 819,446 225,540 411,194
Other current assets 963,032 2,261,051 3,103,194 34,656 30,487
Total Current Assets 53,808,329 27,370,583 56,862,049 2,395,385 3,336,902 411,194 1,129,630
Deferred Debits:
Unamortized debt expense 410,352 410,352
Other deferred debits 4,051,671 2,610,293 (17) 9,987 1,166,384
Total Deferred Debits 4,462,023 3,020,645 (17) 9,987 1,166,384
Total Assets $188,351,347 $76,255,941 $188,063,126 $2,954,698 $4,446,364 $1,117,310 $7,370,536
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS (Continued)
DECEMBER 31, 1997
ASSETS
<CAPTION>
EUA EUA EUA EUA EUA EUA EUA EUA
Cogenex Citizens Cogenex MUPA WestCoast FRC II EC&S I EC&S II
Canada Corporation West (Part.) (Part.) (Part.) (Part.) (Part.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Utility Plant and Other Investment
Utility plant in service $ $ $ $ $ $ $ $
Less accumulated provision for
depreciation and amortization
Net utility plant in service
Construction work in progress
Net utility plant
Non-utility property 4,138,916 782,308 2,596,864 77,490 12,047,138 19,061,259
Less accumulated provision for
depreciation 524,010 577,174 1,977,541 77,490 2,413,642 7,479,040
Net non-utility property 3,614,906 205,134 619,323 9,633,496 11,582,219
Investments in subsidiaries
(at equity)
Notes receivable 4,322,974 2,056,951
Leases receivable 1,747,323 1,311,855 2,627,513
Other 126,721 5,298,820 57,043 61,944 80,256
Total Utility Plant and
Other Investments 4,322,974 3,741,627 9,308,228 676,366 11,007,295 14,289,988
Current Assets:
Cash and temporary cash invest. 782,852 (420,831) 239,405 184 660,956 350,975 644,701 1,003,686
Notes receivable 916,892 288,090 178,621
Leases receivable 530,705 175,952 516,114
Accounts receivable - Net:
Customers 736,132 3,277,672 3,052,697 23,749 69,061 588,761 1,039,519 1,447,805
Accrued unbilled revenue
Others 549,990 (114,448) 16,861 84,000 78,944
Accounts receivable - assoc. comp. 55,164 86,420
Materials and supplies
(at average cost)
Plant materials and operating supp. 127,377
Other current assets 13,479 1,754 40,513
Total Current Assets 2,999,345 2,799,311 4,382,068 23,933 992,638 939,736 1,860,172 3,046,549
Deferred Debits:
Unamortized debt expense
Other deferred debits 134,242 71,083 59,699
Total Deferred Debits 134,242 71,083 59,699
Total Assets $7,456,561 $6,612,021 $13,749,995 $23,933 $1,669,004 $939,736 $12,867,467 $17,336,537
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
LIABILITIES
<CAPTION>
EUA EUA EUA EUA EUA EUA
Cogenex Cogenex Nova Day Day I & II NEM
Consolidated Eliminations Corporation (Division) (Division) (Division) Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Capitalization:
Common equity 47,602,678 $17,037,244 $48,687,684 ($1,499,286) $1,389,715 ($886,734) $10,694,016
Non-redeemable preferred stock
of subsidiaries
Redeemable preferred stock of
subsidiaries - net 75
Preferred stock redemption cost
Partnerships' capital 31,185,245
Long-term debt - net 84,100,000 84,100,000
Total Capitalization 131,702,753 48,222,489 132,787,684 (1,499,286) 1,389,715 (886,734) 10,694,016
Current Liabilities:
Preferred stock sinking fund requir.
Long-term debt due within one year 6,700,000 6,700,000
Notes payable 40,693,521 18,969,427 37,550,000 1,752,150 1,672,073 1,961,412 348,222
Accounts payable 3,619,619 61,222 1,416,498 169,090 295,784
Accounts payable - associated comp. 521,506 6,104,878 1,193,768 835,660 298,386 15,000
(46,045)
Customer deposits 230,085 2,099
Taxes accrued 301,884 44,949 59,902 26,535
Interest accrued 1,266,881 2,261,052 1,266,883 1,413,187 380,947 27,632
Other current liabilities 4,206,376 3,355,953 3,867 1,488
Total Current Liabilities 57,539,872 27,396,579 51,528,051 4,235,955 2,675,213 2,004,044 302,177
Deferred Credits:
Unamortized investment credit
Other deferred credits 2,943,302 636,873 2,790,706 218,029 381,436 124,583
Total Deferred Credits 2,943,302 636,873 2,790,706 218,029 381,436 124,583
Accumulated deferred taxes (3,834,580) 956,685
(3,750,240)
Commitments and contingencies
Total Liabilities and Capitalization 188,351,347 $76,255,941 $188,063,126 $2,954,698 $4,446,364 $1,117,310 $7,370,536
() Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS (Continued)
DECEMBER 31, 1997
LIABILITIES
<CAPTION>
EUA EUA EUA EUA EUA EUA EUA EUA
Cogenex Citizens Cogenex MUPA WestCoast FRC II EC&S I EC&S II
Canada Corporation West (Part.) (Part.) (Part.) (Part.) (Part.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capitalization:
Common equity $860,865 $223,553 $5,170,109 $ $ $ $ $
Non-redeemable preferred stock
subsidiaries
Redeemable preferred stock of
subsidiaries - net 75
Preferred stock redemption cost
Partnerships' capital 23,933 1,249,677 939,736 12,636,787 16,335,112
Long-term debt - net
Total Capitalization 860,865 223,628 5,170,109 23,933 1,249,677 939,736 12,636,787 16,335,112
Current Liabilities:
Preferred stock sinking fund requir.
Long-term debt due within one year
Notes payable 3,146,175 5,428,000 7,787,817 17,099
Accounts payable 648,593 222,159 319,186 1,917 89,400 518,214
Accounts payable - associated comp. 2,591,231 425,542 1,312,842
Customer deposits 63,276 164,710
Taxes accrued 148,168 59 22,271
Interest accrued 175,974 263,310
Other current liabilities 36,844 1,408 417,410 65,905 323,501
Total Current Liabilities 6,534,167 6,288,578 9,706,834 419,327 235,680 1,006,425
Deferred Credits:
Unamortized investment credit
Other deferred credits 61,529 33,370 (19,478) (5,000)
(5,000)
Total Deferred Credits 61,529 33,370 (19,478) (5,000)
(5,000)
Accumulated deferred taxes 66,445 (1,107,470)
Commitments and contingencies
Total Liabilities and Capitalization $7,456,561 $6,612,021 $13,749,995 $23,933 $1,669,004 $939,736 $12,867,467 $17,336,537
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1997
<CAPTION>
EUA EUA EUA EUA EUA EUA
Cogenex Cogenex Nova Day Day I & II NEM
Consolidated Eliminations Corporation (Division) (Division) (Division) Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Common Equity:
Common Shares, $.01 par value $100 $1,400 $100 $1,100
Other Paid-In Capital 47,125,407 16,024,016 46,027,875 1,097,532 10,502,050
Retained Earnings 477,171 32,197,073 2,659,709 (1,499,286) 292,183 (886,734) 190,866
Total Common Equity 47,602,678 48,222,489 48,687,684 (1,499,286) 1,389,715 (886,734) 10,694,016
Non-Redeemable Preferred:
$.01 par value, 7,500 shares (1) 75
Total Non-Redeemable 75
Long-Term Debt:
Unsecured Notes:
7.00% due 2000 50,000,000 50,000,000
9.6% due 2001 12,800,000 12,800,000
10.56% due 2005 28,000,000 28,000,000
90,800,000 90,800,000
Less portion due within one year 6,700,000 6,700,000
Total Long-Term Debt 84,100,000 84,100,000
Total Capitalization $131,702,753 $48,222,489 $132,787,684 ($1,499,286) $1,389,715 ($886,734) $10,694,016
(1 The Preferred Stock shall be entitled to an annual dividend per share at a rate equal
to 33% of the net income of Citizens Conservation Services divided by 7,500.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (Continued)
DECEMBER 31, 1997
<CAPTION>
EUA EUA EUA EUA EUA EUA EUA EUA
Cogenex Citizens Cogenex MUPA West Coast FRC II EC&S I EC &S II
Canada Corpor. West (Part.) (Part.) (Part.) (Part.) (Part.)
<S> <C> <C> <C> <C> <C> <C> <C>
Common Equity:
Common Shares, $.01 par value $100 $100 $100
Other Paid-In Capital 5,521,966
Retained Earnings 860,765 223,453 (351,957) 23,933 1,249,677 939,736 12,636,787
16,335,112
Total Common Equity 860,865 223,553 5,170,109 23,933 1,249,677 939,736 12,636,787
16,335,112
Non-Redeemable Preferred:
$.01 par value, 7,500 shares (1) 75
Total Non-Redeemable 75
Long-Term Debt:
Unsecured Notes:
7.00% due 2000
9.6% due 2001
10.56% due 2005
Less portion due within one year
Total Long-Term Debt
Total Capitalization $860,865 $223,628 $5,170,109 $23,933 $1,249,677 $939,736 $12,636,787
$16,335,112
(1 The Preferred Stock shall be entitled to an annual dividend per share at a rate equal
to 33% of the net income of Citizens Conservation Services divided by 7,500.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<CAPTION>
EUA EUA EUA EUA EUA EUA
Cogenex Cogenex Nova Day Day I & II NEM
Consolidated Eliminations Corporation (Division) (Division) (Division) Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $61,320,922 $1,924,494 $22,974,941 $5,289,037 $6,056,082 $118,358 $3,633,976
Operating Expenses:
Operation 48,761,373 2,104,494 19,767,304 6,749,323 5,360,934 744,189 43,794
Maintenance 792,413 106,818 14,543 21,677
Voluntary Retirement Offer 81,102 81,102
Depreciation and amortization 10,310,118 5,078,569 117,375 61,571 194,940 717,075
Taxes - Other than income 678,203 206,552 169,318 195,263 34,173 407
- Income (credit) (3,517,966) (4,484,744) 683,818
- Deferred 867,190 544,854 287,640
Total Operating Expenses 57,972,433 2,104,494 21,300,455 7,050,559 5,617,768 973,302 1,754,411
Operating Income 3,348,489 (180,000) 1,674,486 (1,761,522) 438,314 (854,944) 1,879,565
Other Income and Deductions:
Interest and dividend income 7,367,919 1,258,666 7,333,846 6,298
Equity in earnings of jointly-
owned companies (110,631) 3,870,053 3,759,422
Other (deductions) income - net (274,021) 180,000 (125,295) 208,927 75 (9,268)
Total Other Income 6,983,267 5,308,719 10,967,973 215,225 75 (9,268)
Income (Loss) Before
Interest charges 10,331,756 5,128,719 12,642,459 (1,546,297) 438,389 (854,944) 1,870,297
Interest Charges:
Interest on long-term debt 8,803,555 116,657 8,803,555
Amortization of debt expense
and premium 148,050 148,050
Other interest expense
(principally short-term notes) 1,673,264 931,013 1,470,945 61,879 95,610 31,790
Allowance for borrowed funds
used during
construction - (credit) (495,136) 210,996 (134,241)
Total Interest Charges 10,129,733 1,258,666 10,288,309 61,879 95,610 31,790
Net Income (Loss) before
preferred return 202,023 3,870,053 2,354,150 (1,608,176) 342,779 (886,734) 1,870,297
Preferred Return Requirement
Net (Loss) Income $202,023 $3,870,053 $2,354,150 ($1,608,176) $342,779 ($886,734) $1,870,297
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (Continued)
<CAPTION>
EUA EUA EUA EUA EUA EUA EUA EUA
Cogenex Citizens Cogenex MUPA WestCoast FRC II EC&S I EC&S II
Canada Corporation West (Part.) (Part.) (Part.) (Part.) (Partnership)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $3,168,361 $5,852,648 $6,377,835 $ $474,739 $7,400 $3,662,546 $5,629,493
Operating Expenses:
Operation 2,884,966 4,911,579 6,556,371 848,592 70,033 6,019 1,181,155 1,741,608
Maintenance (41) (649) 82 33,277 2,384 106,844 507,478
Voluntary Retirement Offer
Depreciation and amortization (29) 396,965 619,514 350,608 728,493 2,045,037
Taxes - Other than income 10,321 62,169
- Income (credit) 447,855 84,163 (249,059)
- Deferred 50,788 (16,092)
Total Operating Expenses 3,332,792 5,453,775 6,972,255 848,674 453,918 8,403 2,016,492 4,294,123
Operating Income (164,431) 398,873 (594,420) (848,674) 20,821 (1,003) 1,646,054 1,335,370
Other Income and Deductions:
Interest and dividend income 977,018 4,555 300,091 (345) 5,122
Equity in earnings of jointly-
owned companies
Other (deductions) income - net (61,718) (54) (4,034) (100,202) (1,226) (1,226)
Total Other Income 915,300 4,501 296,057 (100,547) (1,226) 3,896
Income (Loss) Before Interest
Charges 750,869 403,374 (298,363) (848,674) (79,726) (1,003) 1,644,828 1,339,266
Interest Charges:
Interest on long-term debt 12,035 6,476 23,880 74,266
Amortization of debt expense
and premium
Other interest expense
(principally
short-term notes) 163,240 296,676 484,137
Allowance for borrowed funds
used during
construction - (credit) (89,506) (60,393)
Total Interest Charges 163,240 207,170 423,744 12,035 6,476 23,880 74,266
Net Income (Loss) before
preferred return 587,629 196,204 (722,107) (860,709) (86,202) (1,003) 1,620,948 1,265,000
Preferred Return Requirement
Net (Loss) Income $587,629 $196,204 ($722,107) ($860,709) ($86,202) ($1,003) $1,620,948 $1,265,000
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<CAPTION>
EUA EUA EUA EUA EUA EUA
Cogenex Cogenex Nova Day Day I & II NEM
Consolidated Eliminations Corporation (Division) (Division) (Division) Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) $202,023 $3,870,053 $2,354,150 ($1,608,176) $342,779 ($886,734) $1,870,297
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by
Operating Activities:
Depreciation and amortization 11,007,249 (18,701) 5,354,110 132,953 75,146 443,911 779,571
Deferred taxes 1,118,863 (19,960) 776,567 287,640
Gains on sales of investments
in energy savings
projects paid for with
notes and leases receivable (1,982,534) (461,279) (1,084,245)
Non - cash costs of energy
savings project sales 17,975,221 (2,472,596) 9,056,593
Pension liability (266,943) (190,463) (76,480)
Amortization of deferred revenues (156,254) 70,333 (242,317)
Collections and sales of project
notes and leases receivable 19,148,454 17,653,024
Undistributed Equity earnings
of subsidiaries 3,089,010 3,089,010
Other - net 1,504,753 (4,056,780) (5,042,764) (136,367) 430,490 (881,534)
Net Changes to Working Capital:
Accounts receivable (2,699,592) 2,078,679 (1,767,610) 357,208 21,868 (341,627)
Materials and supplies 65,880 312,766 520,195 357,232 (411,194)
Accounts payable (762,889) (1,805,091) (1,227,647) 52,491 (138,047) 15,000 (54,407)
Accrued taxes (148,685) (37,736) 30,739 4,587 16,761
Accrued interest (1,215,641) 628,249 (1,215,640) 61,564 99,768 27,632
Other - net 705,915 (2,536,078) (1,672,704) (34,892) 535
Net Cash Provided from (Used
in) Operating Activities 44,495,820 (1,429,464) 26,183,453 (726,917) 1,206,532 (811,385) 1,417,623
CASH FLOW FROM INVESTING ACTIVITIES
Expenditures for investments
in energy savings project (51,290,101) 1,856,307 (33,341,455) (452,501) (1,271,428) (1,150,027) (106)
Collections on notes and
leases receivable 10,075,583 (33,776) 8,405,922 16,084
Net Cash Provided from (Used
in) Investing Activities (41,214,518) 1,822,531 (24,935,533) (452,501) (1,255,344) (1,150,027) (106)
CASH FLOW FROM FINANCING ACTIVITIES
Redemption:
Long-term debt (21,700,000) (21,700,000)
Dividends declared (1,610,000) (1,610,000)
Partner's contribution
(withdrawal) (1,655,488)
Net increase (decrease) in
short-term debt 18,228,836 2,872,421 19,627,000 996,500 (95,000) 1,961,412 8,222
Net Cash Provided from
(Used in) Financing Activ. (3,471,164) (393,067) (2,073,000) 996,500 (95,000) 1,961,412 (1,601,778)
NET (DECREASE) INCREASE IN CASH (189,862) (825,080) (182,918) (143,812) (184,261)
Cash and temporary cash investment
at beginning of year 4,662,227 1,543,211 141,129 293,539 568,629
Cash and temporary cash investment
at end of year $4,472,365 $ $718,131 ($41,789) $149,727 $ $384,368
Cash paid during the year for:
Interest (net of amounts capit.) $14,470,654 $14,470,654 $
Income Taxes $769,518 ($137,266) $735,678
Conversion of investments in
energy savings projects
to notes and leases receiv. $5,403,860 $2,592,497
( ) Denotes contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (Continued)
<CAPTION>
EUA EUA EUA EUA EU EUA EUA EUA
Cogenex Citizens Cogenex MUPA WestCoast FRC II EC&S I EC&S II
Canada Corporation West (Part.) (Partnership (Part.) (Part.) (Part.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (Loss) $587,629 $196,204 ($722,107) ($860,709) ($86,202) ($1,003) $1,620,948 $1,265,000
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by
Operating Activities
Depreciation and amortization 396,658 619,514 391,573 733,592 2,061,520
Deferred taxes 50,788 (16,092)
Gains on sales of investments in
energy savings
projects paid for with
notes and leases receivable (369,910) (963,059) (26,599)
Non - cash costs of energy
savings project sales 1,578,359 3,276,877 1,590,796
Pension liability
Amortization of deferred
revenues (14,769) 30,499
Collections and sales of project
notes and leases receivable 812,460 40,637 138,837 503,496
Undistributed Equity earnings
of subsidiaries
Other - net 311,987 (111,023) 838,401 894,638 1,108,102 36,043
Net Changes to Working Capital:
Accounts receivable (1,264,182) (2,209,426) 2,652,658 286,034 214,960 242,738 (125,194) 1,311,660
Materials and supplies (87,587)
Accounts payable 540,926 189,038 (100,105) (1,086,194) (67,815) (748,961) (48,770) 106,511
Accrued taxes (188,192) (3,291) (9,289) (37,736)
Accrued interest 175,974 263,310
Other - net (1,847) (28,739) (61,388) (7,321) (2,830) (103,600) 74,128 8,495
Net Cash Provided from (Used
In) Operating Activities (28,448) 265,041 7,096,742 (773,552) 1,560,689 (610,826) 1,466,525 6,820,879
CASH FLOW FROM INVESTING ACTIVITIES
Expenditures for investments
in energy savings projects (327,849) (2,815,318) (7,661,403) (1,418) (930,164) (1,482,125)
Collections on notes and
leases receivable 1,591,032 28,769
Net Cash Provided from (Used
in) Investing Activities 1,263,183 (2,815,318) (7,661,403) 27,351 (930,164) (1,482,125)
CASH FLOW FROM FINANCING ACTIVITIES
Redemption:
Long-term debt
Dividends declared
Partner's contr. (withdrawal) 773,249 (2,041,957) 842,868 241,145 (1,470,793)
Net increase (decrease) in
short-term debt (502,125) 1,966,718 634,608 (218,401) (3,277,677)
Net Cash Provided from (Used
in) Financing Activities (502,125) 1,966,718 634,608 773,249 (2,041,957) 842,868 22,744 (4,748,470)
NET (DECREASE) INCREASE IN CASH 732,610 (583,559) 69,947 (303) (453,917) 232,042 559,105 590,284
Cash and temporary cash investments
at beginning of year 50,242 162,730 169,458 487 1,114,874 118,932 85,595 413,401
Cash and temporary cash investments
at end of year $782,852 ($420,829) $239,405 $184 $660,957 $350,974 $644,700 $1,003,685
Cash paid during the year for:
Interest (net of amounts capitalized)
Income Taxes ($7,921) $179,027
Conversion of investments in energy
savings projects
to notes and leases rec. $185,959 $1,688,944 $963,059 ($26,599)
( ) Denotes contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1997
<CAPTION>
EUA EUA EUA EUA EUA EUA
Cogenex Cogenex Nova Day Day I & II NEM
Consolidated Eliminations Corporation (Division) (Division) (Division) Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Balance of retained earnings at
beginning of year $275,148 $16,100,956 $305,556 $108,889 ($50,598) $ ($229,430)
Additions:
Net Income (Loss) 202,023 3,870,053 2,354,151 (1,608,175) 342,780 (886,734) 1,870,296
Partners Capital contribution 16,023,294
Total 477,171 35,994,303 2,659,707 (1,499,286) 292,182 (886,734) 1,640,866
Deductions:
Dividends:
Common - subsidiaries 1,450,000 1,450,000
Partners withdrawals 2,135,042
Other deductions 212,190
Total 3,797,232 1,450,000
Balance of retained earnings at
end of period 477,171 32,197,071 2,659,707 (1,499,286) 292,182 (886,734) 190,866
Other Paid-In Capital at beginning
of year 47,273,465 15,866,802 46,175,933 1,097,532 11,502,050
Additions:
Other 1,157,214
Total 47,273,465 17,024,016 46,175,933 1,097,532 11,502,050
Deductions:
Foreign currency translation
adjustments 148,058 148,058
Return of Capital 1,000,000 1,000,000
Total 148,058 1,000,000 148,058 1,000,000
Other Paid-In Capital at end of
period $47,125,407 $16,024,016 $46,027,875 $1,097,532 $10,502,050
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL (Continued)
DECEMBER 31, 1997
<CAPTION>
EUA EUA EUA EUA EUA EUA EUA EUA
Cogenex Citizens Cogenex MUPA West Coast FRC II EC&S I EC &S II
Canada Corporation West (Part.) (Part.) (Part.) (Par.) (Part.)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance of retained earnings at
beginning of year $485,327 $27,251 $370,150 ($691,932) $2,454,600 $97,870 $5,594,898 $7,903,523
Additions:
Net Income (Loss) 587,628 196,202 (722,107) (860,709) (86,203) (1,002) 1,620,949 1,265,000
Partners Capital contribution 1,576,574 16,322 842,869 5,420,940 8,166,589
Total 1,072,955 223,453 (351,957) 23,933 2,384,719 939,737 12,636,787 17,335,112
Deductions:
Dividends:
Common - subsidiaries
Partners withdrawals 1,135,042 1,000,000
Other deductions 212,190
Total 212,190 1,135,042 1,000,000
Balance of retained earnings at
end of period 860,765 223,453 (351,957) 23,933 1,249,677 939,737 12,636,787 16,335,112
Other Paid-In Capital at beginning
of year 4,364,752
Additions:
Other 1,157,214
Total 5,521,966
Deductions:
Foreign currency translation adjust.
Return of Capital
Total
Other Paid-In Capital at end of period $5,521,966
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
<CAPTION>
EUA EUA
Energy Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
ASSETS Consolidated Eliminations Corporation Transcapacity Corporation Bioten Services
<S> <C> <C> <C> <C> <C> <C> <C>
Utility plant and other investments:
Non-utility property $1,939,721 $ $ $1,939,721 $ $ $
Less accumulated provision for
depreciation 1,216,439 1,216,439
Net non-utility property 723,282 723,282
Investments in subs. (at equity) 4,805,390 (9,015,056) (5,438,282) 317,539 706,630 204,447
Other investments & notes receiv. 161,843 50,917 3,274 89,453 18,199
Total Utility Plant and Other Invest. 5,690,515 (9,015,056) (5,387,365) 726,556 317,539 796,083 222,646
Current Assets:
Cash and temporary cash investments 422,789 1,905 420,884
Notes receivable 9,887,451 21,549,565 23,974,565 7,462,451
Accounts receivable - Net 1,725,177 (150,847) 1,229,171 456 613,294 33,103
Accounts receivable - associated
companies 47,774 46,588 1,186
Other current assets 1,347,684 883,524 1,000,347 49,971 1,180,890
Total Current Assets 13,383,101 22,480,863 24,872,558 1,700,026 1,642 9,256,635 33,103
Deferred Debits:
Other deferred debits 798,215 787,460 10,755
Total Deferred Debits 798,215 787,460 10,755
Total assets $19,871,831 $13,465,807 $20,272,653 $2,437,337 $319,181 $10,052,718 $255,749
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1997
<CAPTION>
EUA EUA
Energy Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
LIABILITIES Consolidated Eliminations Corporation Transcapacity Corporation Bioten Services
<S> <C> <C> <C> <C> <C> <C> <C>
Capitalization:
Common equity ($16,781,735 ($9,015,056) ($16,781,735 ($6,233,748) ($1,840,592) ($880,085) ($60,631)
Total Capitalization (16,781,735) (9,015,056) (16,781,735) (6,233,748) (1,840,592) (880,085) (60,631)
Current Liabilities:
Notes Payable 37,846,824 21,549,565 37,791,752 9,585,262 2,245,095 9,498,543 275,737
Accounts payable 18,563 594 17,969
Accounts payable - assoc. comp. 68,988 47,774 26,409 18,527 2,120 37,575 32,131
Interest accrued 497,879 883,524 497,879 94,975 20,691 759,346 8,512
Other current liabilities 171,929 171,929
Total Current Liabilities 38,604,183 22,480,863 38,316,634 9,888,662 2,267,906 10,295,464 316,380
Deferred Credits:
Minority Interest (Loss) (1,156,669) (1,156,669)
Total Deferred Credits (1,156,669) (1,156,669)
Accumulated deferred taxes (793,948) (1,262,246) (60,908) (108,133) 637,339
Commitments and conting. (Note J)
Total liabilities and capital. $19,871,831 $13,465,807 $20,272,653 $2,437,337 $319,181 $10,052,718 $255,749
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1997
<CAPTION>
EUA EUA
Energy Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
Consolidated Eliminations Corporation Transcapacity Corporation Bioten Services
<S> <C> <C> <C> <C> <C> <C> <C>
Common Equity:
Common shares $1 21 $1 $10 $10 $1
Other paid-in capital 999 1,001,089 999 1,000,090 990 9
Accumulated Deficit (16,782,735) (10,016,166) (16,782,735) (7,233,848) (1,841,592) (880,095) (60,631)
Total Common Equity (16,781,735) (9,015,056) (16,781,735) (6,233,748) (1,840,592) (880,085) (60,631)
Total Capitalization ($16,781,735 ($9,015,056) ($16,781,735 ($6,233,748) ($1,840,592) ($880,085) ($60,631)
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
EUA EUA
Energy Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
Consolidated Eliminations Corporation Transcapacity Corporation Bioten Services
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues $496,012 $ $ $496,012 $ $ $
Operating Expenses:
Operation 3,825,116 503,905 3,248,291 61,104 11,816
Maintenance 5,413 5,413
Voluntary Retirement Incentive 25,573 25,573
Depreciation and amortization 498,155 19,570 441,161 35,781 1,643
Taxes - Other than income 13,130 10,112 1,220 1,782 16
Income Taxes - Current (credit) (1,322,019) (642,994) (679,025)
- Deferred (credit) 107,851 67,683 (373,143) 413,311
Total Operating Expenses 3,153,219 (10,738) 2,638,504 511,978 13,475
Operating Income (Loss) (2,657,207) 10,738 (2,142,492) (511,978) (13,475)
Other Income and Deductions:
Interest and dividend income 1,480,124 632,121 926,247 5,107 1,180,891
Equity in earnings of jointly-
owned companies (1,250,838) (2,526,998) (2,815,045) (891,501) (71,290)
Other income (deductions) - net 710,012 101,113 576,252 32,647
Total Other Income 939,298 (1,894,877) (1,787,685) 5,107 865,642 (38,643)
(Loss) Before Interest Charge (1,717,909) (1,894,877) (1,776,947) (2,137,385) 353,664 (52,118)
Interest Charges:
Other interest expense (princ.
short-term notes) 2,023,496 632,121 1,964,458 (76,726) 759,372 8,513
Allowance for borrowed funds
used during construction
Total Interest Charges 2,023,496 632,121 1,964,458 (76,726) 759,372 8,513
Net (Loss) (3,741,405) (2,526,998) (3,741,405) (2,060,659) (405,708) (60,631)
(Loss) Available for Common
Shareholders ($3,741,405) ($2,526,998) ($3,741,405) ($2,060,659) $ ($405,708) ($60,631)
EUA Energy Common Shares outstanding 100
Loss per share ($37,414.05)
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
EUA EUA
Energy Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
Consolidated Eliminations Corporation Transcapacity Corporation Bioten Services
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) ($3,741,405) ($2,526,998) ($3,741,405) ($2,060,659) $ ($405,708) ($60,631)
Adjustments to Reconcile Net
Income (Loss)
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 484,221 14,903 431,894 35,781 1,643
Deferred Taxes 18,979 (25,299) (373,143) 417,421
Other - Net 929,664 2,526,998 2,494,260 (390) 891,502 71,290
Changes in Op. Assets and Liabilities:
Accounts receivable (119,443) 43,398 (9,868) 364,507 (397,581) (33,103)
Notes receivable (5,170,000) (5,783,894) (7,208,894) (3,745,000)
Accounts payable 18,041 44,418 (2,960) 5,593 27,695 32,131
Accrued taxes
Other - net (1,211,370) (87,817) (904,362) 18,207 (421,544) 8,512
Net Cash (Used In) Provided from
Operating Activities (8,791,313) (5,783,895) (9,383,625) (1,613,991) (3,597,434) 19,842
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (267,790) (247,947) (19,843)
Increase in Other Investments (275,737) (275,737)
Net Cash (Used in) Investing Act. (543,527) (247,947) (295,580)
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase in short-term debt 9,370,000 5,783,894 9,370,000 1,910,723 3,597,434 275,737
Net Cash Provided From
Financing Activities 9,370,000 5,783,894 9,370,000 1,910,723 3,597,434 275,737
NET (DECREASE) INCREASE IN CASH 35,160 (13,625) 48,785
Cash and temporary cash investments
at beginning of year 387,629 15,530 372,099
Cash and temporary cash investments
at end of year $422,789 $1,905 $420,884
Cash paid during the year for:
Interest (Net of amounts Capit.) $1,904,522 $441,176 $1,904,522 $441,176 $ $
Incomes Taxes (Refund) ($1,899,457) ($590,439) ($1,127,266) $619 ($182,827) $456
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF RETAINED
EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1997
<CAPTION>
EUA EUA
Energy Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
Consolidated Eliminations Corporation Transcapacity Corporation Bioten Services
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated deficit at beginning
of year ($13,041,330 ($7,489,168) ($13,041,330 ($5,173,189) ($1,841,592) ($474,387) $
Additions:
Net Income (Loss) (3,741,405) ($2,526,998) (3,741,405) (2,060,659) (405,708) (60,631)
Accumulated deficit at end of period ($16,782,735 ($10,016,166 ($16,782,735 ($7,233,848) ($1,841,592) ($880,095) ($60,631)
( ) Denotes Contra
</TABLE>
Notes to Consolidated Financial Statements
December 31, 1997
(A) Nature of Operations and Summary of Significant Accounting Policies:
General: Eastern Utilities Associates (EUA) is a diversified energy services
holding company. Its subsidiaries are principally engaged in the generation,
transmission, distribution and sale of electricity; energy related services
such as energy management; and promoting the conservation and efficient use of
energy.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Basis of Consolidation: The consolidated financial statements include the
accounts of EUA and all subsidiaries. All material intercompany transactions
between the consolidated subsidiaries have been eliminated.
System of Accounts: The accounts of EUA and its consolidated subsidiaries are
maintained in accordance with the uniform system of accounts prescribed by the
regulatory bodies having jurisdiction.
Jointly Owned Companies: Montaup Electric Company (Montaup) follows the
equity method of accounting for its stock ownership investments in jointly
owned companies including four regional nuclear generating companies.
Montaup's investments in these nuclear generating companies range from 2.5% to
4.5%. Three of the four facilities have been permanently shut down and are in
the process of decommissioning. Montaup is entitled to electricity produced
from the remaining facility based on its ownership interest and is billed for
its entitlement pursuant to a contractual agreement which is approved by the
Federal Energy Regulatory Commission (FERC).
In December 1996, the Board of Directors of Connecticut Yankee voted to retire
the generating station. Connecticut Yankee certified to the Nuclear
Regulatory Commission (NRC) that it had permanently closed power generation
operations and removed fuel from the reactor. Montaup has a 4.5% equity
ownership in Connecticut Yankee. Montaup's share of the total estimated costs
for the permanent shutdown, decommissioning, and recovery of the investment in
Connecticut Yankee is approximately $27.4 million and is included with Other
Liabilities on the Consolidated Balance Sheet as of December 31, 1997. Also,
due to recoverability, a regulatory asset has been recorded for the same
amount and is included with Other Assets. The recovery of this estimated
amount, elements of which have been disputed by certain intervening parties,
is subject to approval of FERC. Montaup cannot predict the ultimate outcome
of FERC's review.
In August 1997, as the result of an economic evaluation, the Maine Yankee
Board of Directors voted to permanently close that nuclear plant. Montaup has
a 4.0% equity ownership in Maine Yankee. Montaup's share of the total
estimated costs for the permanent shutdown, decommissioning, and recovery of
the remaining investment in Maine Yankee is approximately $35.4 million and is
included with Other Liabilities on the Consolidated Balance Sheet as of
December 31, 1997. Also, due to recoverability, a regulatory asset has been
recorded for the same amount and is included with Other Assets. The recovery
of this estimated amount, elements of which have been disputed by certain
intervening parties, is subject to approval of FERC. Montaup cannot predict
the ultimate outcome of FERC's review.
Montaup also has a stock ownership investment of 3.27% in each of two companies
which own and operate certain transmission facilities between the
Hydro Quebec electric system and New England.
EUA Ocean State Corporation (EUA Ocean State) follows the equity method of
accounting for its 29.9% partnership interest in the Ocean State Power Project
(OSP). Also, EUA Energy Investment follows the equity method of accounting
for its 40% partnership interest in BIOTEN, G.P. and for its 20% stock
ownership in Separation Technologies, Inc. These ownership interests and
Montaup's stock ownership investments are included in "Investments in Jointly
Owned Companies" on the Consolidated Balance Sheet.
Plant and Depreciation: Utility plant is stated at original cost. The cost
of additions to utility plant includes contracted work, direct labor and
material, allocable overhead, allowance for funds used during construction and
indirect charges for engineering and supervision. For financial statement
purposes, depreciation is computed on the straight-line method based on
estimated useful lives of the various classes of property. On a consolidated
basis, provisions for depreciation on utility plant was equivalent to a
composite rate of approximately 3.6% in 1997 based on the average depreciable
property balances at the beginning and end of each year. Beginning in 1998,
coincident with billing a contract termination charge (CTC) to its retail
affiliates, Montaup will commence depreciating its investment in generation
related assets recoverable through the CTC over a twelve-year period.
Non-utility property and equipment of EUA Cogenex Corporation (EUA Cogenex) is
stated at original cost. For financial statement purposes, depreciation on
office furniture and equipment, computer equipment and real property is
computed on the straight-line method based on estimated useful lives ranging
from five to forty years. Project equipment is depreciated over the term of
the applicable contracts or based on the estimated useful lives, whichever is
shorter, ranging from five to fifteen years.
Other Assets: The components of Other Assets at December 31, 1997 are
detailed as follows:
($ in thousands) 1997
Regulatory Assets:
Unamortized losses on reacquired debt $ 12,299
Unrecovered plant and
decommissioning costs 68,345
Deferred FAS 109 costs (Note B) 57,732
Deferred FAS 106 costs 3,310
Mendon Road judgment (Note J) 6,154
Other regulatory assets 15,524
Total regulatory assets 163,364
Other deferred charges and assets:
Split dollar life insurance premiums 15,502
Unamortized debt expenses 3,954
Goodwill 6,642
Other 23,045
Total Other Assets $212,507
Regulatory Accounting: Blackstone Valley Electric Company (Blackstone),
Eastern Edison Company (Eastern Edison), Newport Electric Corporation
(Newport) and Montaup, together referred to as EUA's Core Electric companies,
are subject to certain accounting rules that are not applicable to other
industries. These accounting rules allow regulated companies, in appropriate
circumstances, to establish regulatory assets and liabilities which defer the
current financial impact of certain costs that are expected to be recovered in
future rates. In light of approved restructuring settlement agreements and
restructuring legislation in both Massachusetts and Rhode Island, EUA has
determined that Montaup no longer will apply the provisions of Financial
Accounting Standards Board's (FASB) Statement of Financial Accounting
Standards No. 71 (FAS71), "Accounting for the Effects of Certain Types of
Regulation" for the generation portion of its business. Due to the
recoverability of regulatory assets granted in the approved restructuring
plans, EUA believes that the discontinuation of FAS71 for the generation
portion of Montaup's business will not have a material impact on EUA's results
of operation or financial condition. EUA believes its transmission and retail
distribution businesses continue to meet the criteria for continued
application of FAS71.
Allowance for Funds Used During Construction (AFUDC) and Capitalized
Interest: AFUDC represents the estimated cost of borrowed and equity funds
used to finance the EUA System's construction program. In accordance with
regulatory accounting, AFUDC is capitalized as a cost of utility plant in the
same manner as certain general and administrative costs. AFUDC is not an item
of current cash income but is recovered over the service life of utility plant
in the form of increased revenues collected as a result of higher depreciation
expense. The combined rate used in calculating AFUDC was 8.0% in 1997. The
caption "Allowance for Borrowed Funds Used During Construction" also includes
interest capitalized for non-regulated entities in accordance with FASB
Statement No. 34.
Operating Revenues: Utility revenues are based on billing rates authorized by
applicable federal and state regulatory commissions. Eastern Edison,
Blackstone and Newport (collectively, the Retail Subsidiaries) accrue the
estimated amount of unbilled revenues at the end of each month to match costs
and revenues more closely. Montaup recognizes revenues when billed. In 1998,
Montaup and the Retail Subsidiaries also began accruing revenues consistent
with provisions of approved settlement agreements and enabling state
legislation.
EUA Cogenex's revenues are recognized based on financial arrangements
established by each individual contract. Under paid-from-savings contracts,
revenues are recognized as energy savings are realized by customers. Revenue
from the sale of energy savings projects and sales-type leases are recognized
when the sales are complete. Interest on the financing portion of the
contracts is recognized as earned at rates established at the outset of the
financing arrangement. All construction and installation costs are recognized
as contract expenses when the contract revenues are recorded. In
circumstances in which material uncertainties exist as to contract
profitability, cost recovery accounting is followed and revenues received
under such contracts are first accounted for as recovery of costs to the
extent incurred.
Federal Income Taxes: EUA and its subsidiaries generally reflect in income
the estimated amount of taxes currently payable, and provide for deferred
taxes on certain items subject to temporary timing differences to the extent
permitted by the various regulatory agencies. EUA's rate-regulated
subsidiaries amortize previously deferred investment tax credits (ITC) over
the productive lives of the related assets. Beginning in 1998, Montaup will
amortize previously deferred ITC related to generation investments recoverable
through the CTC over a twelve-year period.
Cash and Temporary Cash Investments: EUA considers all highly liquid
investments and temporary cash investments with a maturity of three months or
less when acquired to be cash equivalents.
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES:
Components of income and deferred tax expense for Eastern Utilities Associates and Subsidiary Companies for 1997 are as follows:
<CAPTION>
Blackstone
Eastern EUA Valley Newport Eastern
EUA Utilities Service Electric Electric Edison
Consolidated Elimin. Associates Corporation Company Company Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Federal:
Current $17,248,806 $258,569 $2 $368,832 $5,201,761 $1,596,060 $16,427,444
Deferred ($4,900,411) (178,195) (235,705) (201,098) (1,580,119) 114,475 (4,031,415)
Investment Tax Credit, Net ($1,120,071) (180,711) (3,960) (935,400)
11,228,324 80,374 (235,703) 167,734 3,440,931 1,706,575 11,460,629
State:
Current 3,621,725 13,542 132 33,287 3,579 2,350 3,505,029
Deferred (628,306) 110,660 (118,124) 4,327 (718,934)
2,993,419 13,542 132 143,947 (114,545) 6,677 2,786,095
Charged to Operations (Federal & State) 14,221,743 93,916 (235,571) 311,681 3,326,386 1,713,252 14,246,724
Charged to Other Income:
Current 9,142,840 1,669,536 142,939 (1,230) 1,175,866
Deferred (788,355) (7,061) (219,303)
Investment Tax Credit, Net (81,360) (81,360)
Total $22,494,868 $93,916 $1,426,904 $311,681 $3,469,325 $1,630,662 $15,203,287
Federal income tax expense was different than the amounts computed by applying the statutory rates to book income
subject to tax for the following reasons:
Tax Computed at Statutory Rates $21,966,022 $32,871 $1,356,598 $205,167 $3,190,218 $1,551,209 $15,487,340
(Decrease) Increase In Tax From:
Equity Component of AFUDC ($56,531) (56,531)
Depreciation of Equity AFUDC ($12,350) (273) 255,603 80,578 (348,258)
Amortization and Utilization of ITC ($1,201,431) (180,711) (85,320) (935,400)
State Tax, Net of Federal Income
Tax Benefit $2,092,330 86 84,763 (74,454) 4,340 1,918,929
Other ($293,172) 61,045 70,220 22,024 278,669 79,855 (862,793)
Total $22,494,868 $93,916 $1,426,904 $311,681 $3,469,325 $1,630,662 $15,203,287
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES:
Components of income and deferred tax expense for Eastern Utilities Associates and Subsidiary Companies for 1997 are as follows:
<CAPTION>
EUA EUA EUA
EUA Energy Energy EUA Telecomm-
Cogenex Investment Services Ocean unications
Consolidated Consolidated Corporation Corpor. Corporation
<S> <C> <C> <C> <C> <C>
Federal:
Current ($3,605,606) ($1,324,916) $ ($1,142,841) ($13,361)
Deferred 773,425 107,851 (6,862) (19,158)
Investment Tax Credit, Net
(2,832,181) (1,217,065) (6,862) (1,161,999) (13,361)
State:
Current 87,639 2,896 72 283
Deferred 93,765
181,404 2,896 72 283
Charged to Operations (Federal & State) (2,650,777) (1,214,169) (6,790) (1,161,716) (13,361)
Charged to Other Income:
Current 2,985,638 (613,054) (216,397) 3,999,542
Deferred 231,713 (96,709) (696,995)
Investment Tax Credit, Net
Total $566,574 ($1,923,932) ($223,187) $2,140,831 ($13,361)
Federal income tax expense was different than the amounts computed by applying the statutory
rates to book income subject to tax for the following reasons:
Tax Computed at Statutory Rates $269,009 ($1,982,868) ($202,122) $2,137,703 ($13,361)
(Decrease) Increase In Tax From:
Equity Component of AFUDC
Depreciation of Equity AFUDC
Amortization and Utilization of ITC
State Tax, Net of Federal Income
Tax Benefit 154,204 2,483 344 1,635
Other 143,361 56,453 (21,409) 1,493
Total $566,574 ($1,923,932) ($223,187) $2,140,831 ($13,361)
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES:
Components of income and deferred tax expense for Eastern Edison Company and Subsidiary
for 1997 are as follows:
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consol. Company Company
<S> <C> <C> <C>
Federal:
Current $16,427,444 $13,217,961 $3,209,483
Deferred (4,031,415) (4,533,827 502,412
Investment Tax Credit, Net (935,400) (307,248) (628,152)
11,460,629 8,376,886 3,083,743
State:
Current 3,505,029 2,613,519 891,510
Deferred (718,934) (817,132) 98,198
2,786,095 1,796,387 989,708
Charged to Operations (Federal & State) 14,246,724 10,173,273 4,073,451
Charged to Other Income:
Current 1,175,866 453,143 722,723
Deferred (219,303) (219,303)
Total $15,203,287 $10,626,416 $4,576,871
Federal income tax expense was different than the amounts computed by applying the statutory
rates to book income subject to tax for the following reasons:
Tax Computed at Statutory Rates $15,487,340 $10,001,368 $5,485,972
(Decrease) Increase In Tax From:
Equity Component of AFUDC (56,531) (56,531)
Depreciation of Equity AFUDC (348,258) 72,961 (421,219)
Amortization and Utilization of ITC (935,400) (307,248) (628,152)
State Tax, Net of Federal Income
Tax Benefit 1,918,929 1,216,464 702,465
Other (862,793) (357,129) (505,664)
Total $15,203,287 $10,626,416 $4,576,871
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES:
Components of income and deferred tax expense for EUA Cogenex Corporation
and Subsidiary Companies for 1997 are as follows:
<CAPTION>
EUA EUA
Cogenex EUA Northeast Citizens EUA EUA
Corporation Cogenex Energy Conserv. Cogenex Cogenex
Consolidated Corporation Mgmt., Inc Service West Canada
<S> <C> <C> <C> <C> <C> <C>
Federal:
Current ($3,605,606) ($4,543,004) $683,600 $56,533 ($250,590) $447,855
Deferred 773,425 459,237 279,492 50,788 (16,092)
(2,832,181) (4,083,767) 963,092 107,321 (266,682) 447,855
State:
Current 87,639 58,260 218 27,630 1,531
Deferred 93,765 85,617 8,148
181,404 143,877 8,366 27,630 1,531
Charged to Operations (Federal & State) (2,650,777) (3,939,890) 971,458 134,951 (265,151) 447,855
Charged to Other Income:
Current 2,985,638 2,985,638
Deferred 231,713 231,713
Total $566,574 ($722,539) $971,458 $134,951 ($265,151) $447,855
Federal income tax expense was different than the amounts computed by applying the statutory rates to book income
subject to tax for the following reasons:
Tax Computed at Statutory Rates $269,009 ($858,386) $994,613 $115,904 ($345,541) $362,419
(Decrease) Increase In Tax From:
State Tax, Net of Federal Income
Tax Benefit 154,204 129,811 5,438 17,960 995
Other 143,361 6,036 (28,593) 1,088 79,395 85,436
Total $566,574 ($722,539) $971,458 $134,951 ($265,151) $447,855
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES:
Components of income and deferred tax expense for EUA Energy Investment Corporation
and Subsidiary Companies for 1997 are as follows:
<CAPTION>
EUA Energy EUA EUA EUA
Investment Energy EUA Unicord EUA Compression
Consol. Corporation Transcap. Corpor. Bioten Services, Inc.
<S> <C> <C> <C> <C> <C> <C>
Federal:
Current ($1,324,916) ($644,475) ($680,441) $ $ $
Deferred 107,851 67,683 (373,143) 413,311
(1,217,065) (576,792) (1,053,584) 413,311
State:
Current 2,896 1,480 1,416
2,896 1,480 1,416
Charged to Operations (Federal & State) (1,214,169) (575,312) (1,052,168) 413,311
Charged to Other Income:
Current (613,054) (580,407) (32,647)
Deferred (96,709) (100,819) 4,110
Total ($1,923,932) ($676,131) ($1,052,168) $ ($162,986) ($32,647)
Federal income tax expense was different than the amounts computed by applying the statutory rates to book
income subject to tax for the following reasons:
Tax Computed at Statutory Rates ($1,982,868) ($661,685) ($1,089,489) $ ($199,047) ($32,647)
(Decrease) Increase In Tax From:
State Tax, Net of Federal Income
Tax Benefit 2,483 962 920 601
Other 56,453 (15,408) 36,401 35,460
Total ($1,923,932) ($676,131) ($1,052,168) $ ($162,986) ($32,647)
</TABLE>
(B) Income Taxes:
EUA adopted FASB Statement No. 109, "Accounting for Income Taxes" (FAS109),
which requires recognition of deferred income taxes for temporary differences
that are reported in different years for financial reporting and tax purposes
using the liability method. Under the liability method, deferred tax
liabilities or assets are computed using the tax rates that will be in effect
when temporary differences reverse. Generally, for regulated companies, the
change in tax rates may not be immediately recognized in operating results
because of ratemaking treatment and provisions in the Tax Reform Act of 1986.
Total deferred tax assets and liabilities for 1997 are comprised as follows
($ in thousands):
Deferred Tax Deferred Tax
Assets ($ in thousands) Liabilities
Plant Related Plant Related
Differences $18,947 Differences $191,274
NOL Carryforward 2,294 Refinancing Costs 1,406
Pensions 4,868 Pensions 1,500
Acquisitions 3,650 Other 13,236
Other 14,264 Total $207,416
Total $44,023
As of December 31, 1997, EUA has recorded on its Consolidated Balance Sheet a
regulatory liability to ratepayers of approximately $18.8 million. These
amounts primarily represent excess deferred income taxes resulting from the
reduction in the federal income tax rate and also include deferred taxes
provided on investment tax credits. Also at December 31, 1997, a regulatory
asset of approximately $57.7 million, has been recorded, representing the
cumulative amount of federal income taxes on temporary depreciation
differences which were previously flowed through to ratepayers.
(C) Capital Stock:
There was no change in the number of common shares outstanding during 1997.
In October 1995, FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" (FAS123). This Statement establishes a fair-value based method
of accounting for stock compensation plans. As permitted, the Company
accounts for its stock-based compensation, as discussed below, using the
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB25).
The Company established a Restricted Stock Plan in 1989. Under the Restricted
Stock Plan, executives and certain key employees may be granted restricted
common shares of the Company. In 1997, approximately 95,000 shares of
restricted common shares valued at approximately $2.4 million, were granted.
The shares issued are restricted for a period ranging from two to five years
and all shares are subject to forfeiture if specified employment services are
not met. There are no exercise prices related to these share grants. During
the applicable restriction period, the recipient has all the voting, dividend,
and other rights of a record holder except that the shares are
nontransferable. The annual compensation expense related to these grant
awards was immaterial for 1997. There are no material differences in the
Company recording its annual compensation expense under APB25 from the
requirements under FAS123.
The preferred stock provisions of the Retail Subsidiaries place certain
restrictions upon the payment of dividends on common stock by each company.
At December 31, 1997, each company was in excess of the minimum requirements
which would make these restrictions effective.
In the event of involuntary liquidation, the holders of non-redeemable
preferred stock of the Retail Subsidiaries are entitled to $100 per share plus
accrued dividends. In the event of voluntary liquidation, or if redeemed at
the option of these companies, each share of the non-redeemable preferred
stock is entitled to accrued dividends plus the following:
Company Issue Amount
Blackstone: 4.25% issue $104.40
5.60% issue 103.82
Newport: 3.75% issue 103.50
(D) Redeemable Preferred Stock:
Eastern Edison's 6 5/8% Preferred Stock issue is entitled to an annual
mandatory sinking fund sufficient to redeem 15,000 shares commencing September
1, 2003. The redemption price is $100 per share plus accrued dividends. All
outstanding shares of the 6 5/8% issue are subject to mandatory redemption on
September 1, 2008, at a price of $100 per share plus accrued dividends. In
the event of liquidation, the holders of Eastern Edison's 6 5/8% Preferred
Stock are entitled to $100 per share plus accrued dividends.
(E) Long-Term Debt:
The various mortgage bond issues of Blackstone, Eastern Edison, and Newport
are collateralized by substantially all of their utility plant. In addition,
Eastern Edison's bonds are collateralized by securities of Montaup, which are
wholly-owned by Eastern Edison, in the principal amount of approximately $236
million.
Blackstone's Variable Rate Demand Bonds are collateralized by an irrevocable
Letter of Credit which expires on January 21, 1999. The letter of credit
permits an extension of one year upon mutual agreement of the bank and
Blackstone.
Newport's Variable Rate Electric Energy Facilities Revenue Refunding Bonds are
collateralized by an irrevocable Letter of Credit which expires on January 6,
1999, and permits an extension of one year upon mutual agreement of the bank
and Newport. EUA Service Corporation's (EUA Service) 10.2% Secured Notes due
2008 are collateralized by certain real estate and property of the company.
In September, EUA Cogenex used short-term borrowings to redeem $15 million of
7.22% Unsecured Notes at maturity.
The EUA System's aggregate amount of current cash sinking fund requirements
and maturities of long-term debt, (excluding amounts that may be satisfied by
available property additions) for each of the five years following 1997 are:
$72.5 million in 1998, $21.9 million in 1999, $62.5 million in 2000, $14.3
million in 2001 and $45.5 million in 2002.
EUA Cogenex was not in compliance with the interest coverage covenant
contained in certain of its unsecured note agreements at December 31, 1997.
EUA Cogenex has reached agreement with lenders to modify the interest coverage
covenant contained in these note agreements through January 1, 1999, and to
waive the default. EUA Cogenex expects to be in compliance during 1998.
(F) Fair Value Of Financial Instruments:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate:
Cash and Temporary Cash Investments: The carrying amount approximates fair
value because of the short-term maturity of these instruments.
Long Term Notes Receivable and Net Investment in Sales-Type Leases: The fair
value of these assets are based on market rates of similar securities.
Preferred Stock and Long-Term Debt of Subsidiaries: The fair value of the
System's redeemable preferred stock and long-term debt were based on quoted
market prices for such securities at December 31, 1997.
Carrying Amount Fair Value
($ in thousands) 1997 1997
EUA
Cash and Temporary Cash Investments $169 $169
Redeemable Preferred Stock - -
Long-Term Debt - -
EUA Service
Cash and Temporary Cash Investments 1,109 1,109
Redeemable Preferred Stock - -
Long-Term Debt 7,900 8,298
Blackstone
Cash and Temporary Cash Investments 408 408
Redeemable Preferred Stock - -
Long-Term Debt 35,000 36,363
Newport
Cash and Temporary Cash Investments 170 170
Redeemable Preferred Stock - -
Long-Term Debt 20,540 21,188
Eastern Edison - Consolidated
Cash and Temporary Cash Investments 461 461
Redeemable Preferred Stock 30,000 31,613
Long-Term Debt 223,000 235,190
EUA Cogenex - Consolidated
Cash and Temporary Cash Investments 4,472 4,472
Redeemable Preferred Stock - -
Long-Term Notes Receivable and
Net Investment in Sales-Type Leases 46,192 47,200
Long-Term Debt 90,800 95,845
EUA Energy - Consolidated
Cash and Temporary Cash Investments 423 423
Redeemable Preferred Stock - -
Long-Term Debt - -
EUA Ocean State
Cash and Temporary Cash Investments 24 24
Redeemable Preferred Stock - -
Long-Term Debt 28,590 32,150
EUA Energy Services
Cash and Temporary Cash Investments 14 14
Redeemable Preferred Stock - -
Long-Term Debt - -
EUA Telecommunications
Cash and Temporary Cash Investments 1 1
Redeemable Preferred Stock - -
Long-Term Debt - -
(G) Lines Of Credit:
In July 1997, several EUA System companies entered into a three-year revolving
credit agreement allowing for borrowings in aggregate of up to $120 million.
As of December 31, 1997, various financial institutions have committed up to
$75 million under the revolving credit facility. At December 31, 1997 under
the revolving credit agreement the EUA System had short-term borrowings
available of approximately $13.5 million. During 1997, the weighted average
interest rate for short-term borrowings was 5.6%.
(H) Jointly Owned Facilities:
At December 31, 1997, in addition to the stock ownership interests discussed
in Note A, Nature of Operations and Summary of Significant Accounting Policies
- - Jointly Owned Companies, Montaup and Newport had direct ownership interests
in the following electric generating facilities:
Accumulated
Provision For Net Construc-
Utility Depreciation Utility tion
Percent Plant in and Plant in Work in
($ in thousands) Owned Service Amortization Service Progress
Montaup:
Canal Unit 2 50.00% $ 85,750 $ 44,498 $ 41,252 $ 227
Wyman Unit 4 1.96% 4,054 2,253 1,801
Seabrook Unit 1 2.90% 194,679 34,400 160,279 325
Millstone Unit 3 4.01% 178,918 54,844 124,074 285
Newport:
Wyman Unit 4 0.67% 1,315 768 547
The foregoing amounts represent Montaup's and Newport's interest in each
facility, including nuclear fuel where appropriate, and are included on the
like-captioned lines on the Consolidated Balance Sheet. At December 31, 1997,
Montaup's total net investment in nuclear fuel of the Seabrook and Millstone
Units amounted to $2.2 million and $1.8 million, respectively.
Montaup's and Newport's shares of related operating and maintenance expenses
with respect to units reflected in the preceding table are included in the
corresponding operating expenses.
(i) Financial Information By Business Segments:
The Core Electric Business includes results of the electric utility operations
of Blackstone, Eastern Edison, Newport and Montaup.
Energy Related Business includes results of our diversified energy-related
subsidiaries, EUA Cogenex, EUA Ocean State, EUA Energy Investment Corporation
(EUA Energy), EUA Energy Services and EUA Telecommunications.
Corporate Business results include the operations of EUA Service and EUA
Parent.
<TABLE>
<CAPTION>
Pre-Tax Depreciation Cash Equity in
Operating Operating Income and Construction Subsidiary
($ in thousands) Revenues Income Taxes Amortization Expenditures Earnings
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1997
Core Electric $506,696 $78,795 $20,303 $36,069 $21,870 $1,599
Energy Related 61,817 (3,785) 547 10,858 51,941 7,867
Corporate (1,980) 1,645 14 2,307
Total $568,513 $73,030 $22,495 $46,941 $76,118 $9,466
</TABLE>
($ in thousands) December 31, 1997
Total Plant and Other Investments
Core Electric $ 703,132
Energy Related 187,752
Corporate 21,392
Total Plant and Other Investments 912,276
Other Assets
Core Electric 257,888
Energy Related 73,109
Corporate 27,479
Total Other Assets 358,476
Total Assets $1,270,752
(J) Commitments And Contingencies:
Nuclear Fuel Disposal and Nuclear Plant Decommissioning Costs: The owners (or
lead participants) of the nuclear units in which Montaup has an interest have
made, or expect to make, various arrangements for the acquisition of uranium
concentrate, the conversion, enrichment, fabrication and utilization of
nuclear fuel and the disposition of that fuel after use. The owners (or lead
participants) of United States nuclear units have entered into contracts with
the Department of Energy (DOE) for disposal of spent nuclear fuel in
accordance with the Nuclear Waste Policy Act of 1982 (NWPA). The NWPA
requires (subject to various contingencies) that the federal government
design, license, construct and operate a permanent repository for high level
radioactive wastes and spent nuclear fuel and establish a prescribed fee for
the disposal of such wastes and nuclear fuel. The NWPA specifies that the DOE
provide for the disposal of such waste and spent nuclear fuel starting in
1998. Objections on environmental and other grounds have been asserted
against proposals for storage as well as disposal of spent nuclear fuel. The
DOE now estimates that a permanent disposal site for spent fuel will not be
ready to accept fuel for storage or disposal until as late as the year 2010.
In early 1998 a number of utilities filed suit in federal appeals court
seeking, among other things, an order requiring the DOE to immediately
establish a program for the disposal of spent nuclear fuel. Montaup owns a
4.01% interest in Millstone 3 and a 2.9% interest in Seabrook I. Northeast
Utilities, the operator of the units, indicates that Millstone 3 has
sufficient on-site storage facilities which, with rack additions, can
accommodate its spent fuel for the projected life of the unit. At the
Seabrook Project, there is on-site storage capacity which, with rack
additions, will be sufficient to at least the year 2011.
The Energy Policy Act of 1992 requires that a fund be created for the
decommissioning and decontamination of the DOE uranium enrichment facilities.
The fund will be financed in part by special assessments on nuclear power
plants in which Montaup has an interest. These assessments are calculated
based on the utilities' prior use of the government facilities and have been
levied by the DOE, starting in September 1993, and will continue over 15
years. This cost is passed on to the joint owners or power buyers as an
additional fuel charge on a monthly basis and is currently being recovered by
Montaup through rates.
Also, Montaup is recovering through rates its share of estimated
decommissioning costs for Millstone 3 and Seabrook I. Montaup's share of the
current estimate of total costs to decommission Millstone 3 is $21.9 million
in 1997 dollars, and Seabrook I is $13.7 million in 1997 dollars. These
figures are based on studies performed for the lead owners of the units.
Montaup also pays into decommissioning reserves pursuant to contractual
arrangements with other nuclear generating facilities in which it has an
equity ownership interest or life of the unit entitlement. Such expenses are
currently recoverable through rates.
Pensions: EUA maintains a noncontributory defined benefit pension plan
covering most of the employees of the EUA System (Retirement Plan).
Retirement Plan benefits are based on years of service and average
compensation over the four years prior to retirement. It is the EUA System's
policy to fund the Retirement Plan on a current basis in amounts determined to
meet the funding standards established by the Employee Retirement Income
Security Act of 1974.
Total pension (income) expense for the Retirement Plan, including amounts
related to the 1997 voluntary retirement incentive offer, for 1997 included
the following components:
($ in thousands) 1997
Service cost-benefits earned
during the period $ 2,816
Interest cost on projected
benefit obligations 10,116
Actual (return) on assets (29,898)
Net amortization and deferrals 16,347
Net periodic pension (income) expense (619)
Subsidiary curtailment (131)
Total periodic pension (income) expense $(750)
Assumptions used to determine pension costs:
Discount Rate 7.50%
Compensation Increase Rate 4.25%
Long-Term Return on Assets 9.50%
The following table sets forth the actuarial present value of benefit
obligations and funded status at December 31, 1997:
($ in thousands) 1997
Accumulated benefit obligations
Vested $ (126,302)
Non-vested (266)
Total $ (126,568)
Projected benefit obligations $ (144,915)
Plan assets at fair value,
primarily stocks and bonds 182,795
Unrecognized net (gain) (41,399)
Unamortized net assets at January 1 3,832
Net pension assets $ 313
The discount rate used to determine pension obligations, effective January 1,
1998 was changed to 7.25% and was used to calculate the plan's funded status
at December 31, 1997.
The voluntary retirement incentives also resulted in $1.3 million of
non-qualified pension benefits which were expensed in 1997. At December 31,
1997, approximately $2.6 million was included in other liabilities for these
unfunded benefits.
EUA also maintains non-qualified supplemental retirement plans for certain
officers and trustees of the EUA System (Supplemental Plans). Benefits
provided under the Supplemental Plans are based primarily on compensation at
retirement date. EUA maintains life insurance on certain participants of the
Supplemental Plans to fund in whole, or in part, its future liabilities under
the Supplemental Plans. As of December 31, 1997, approximately $5.7 million
was included in accrued expenses and other liabilities for these plans.
Expenses related to the Supplemental Plans were $1.9 million in 1997. EUA also
provides a defined contribution 401(k) savings plan for substantially all
employees. EUA's matching percentage of employees' voluntary contributions to
the plan, amounted to $1.5 million in 1997.
Post-Retirement Benefits: Retired employees are entitled to participate in
health care and life insurance benefit plans. Health care benefits are
subject to deductibles and other limitations. Health care and life insurance
benefits are partially funded by EUA System companies for all qualified
employees.
The EUA System adopted Statement of Financial Accounting Standard No. 106,
"Accounting for Post-Retirement Benefits Other Than Pensions," (FAS106) as of
January 1, 1993. This standard establishes accounting and reporting standards
for such post-retirement benefits as health care and life insurance. Under
FAS106 the present value of future benefits is recorded as a periodic expense
over employee service periods through the date they become fully eligible for
benefits. With respect to periods prior to adopting FAS106, EUA elected to
recognize accrued costs (the Transition Obligation) over a period of 20 years,
as permitted by FAS106. The resultant annual expense, including amortization
of the Transition Obligation and net of capitalized and deferred amounts, was
approximately $6.1 million in 1997.
The total cost of post-retirement benefits other than pensions, including
amounts related to the 1997 voluntary retirement incentive offer, for 1997
includes the following components:
($ in thousands) 1997
Service cost $ 949
Interest cost 4,434
Actual (return) on plan assets (1,433)
Amortization of transition obligation 3,289
Other amortizations & deferrals - net (663)
Net periodic post-retirement benefit cost 6,576
Voluntary Retirement Incentives 172
Subsidiary curtailment (548)
Total periodic post-retirement
benefit costs $ 6,200
Assumptions used to determine post-retirement benefit costs
Discount rate 7.50%
Health care cost trend rate
- near-term 7.00%
- long-term 5.00%
Compensation increase rate 4.25%
Long-term return on assets
- union 8.75%
- non-union 7.75%
Reconciliation of funded status:
($ in thousands) 1997
Accumulated post-retirement benefit obligation (APBO):
Retirees $(38,701)
Active employees fully
eligible for benefits (6,753)
Other active employees (19,372)
Total $(64,826)
Plan assets at fair value, primarily
notes and bonds 23,729
Unrecognized transition obligation 49,335
Unrecognized net loss (gain) (16,233)
(Accrued)/prepaid post-retirement benefit cost $ (7,995)
The discount rate used to determine post-retirement benefit obligations
effective January 1, 1998 was changed to 7.25% and was used to calculate the
funded status of post-retirement benefits at December 31, 1997.
Increasing the assumed health care cost trend rate by 1% each year would
increase the total post-retirement benefit cost for 1997 by $800,000 and
increase the total accumulated post-retirement benefit obligation by $7.2
million.
The EUA System has also established separate irrevocable external Voluntary
Employees' Beneficiary Association Trust Funds for union and non-union
retirees. Contributions to the funds commenced in March 1993 and totaled
approximately $7.1 million in 1997.
Long-Term Purchased Power Contracts: The EUA System is committed under
long-term purchased power contracts, expiring on various dates through
September 2021, to pay demand charges whether or not energy is received.
Under terms in effect at December 31, 1997, the aggregate annual minimum
commitments for such contracts are approximately $114 million in 1998, $110
million in 1999, $107 million in 2000, $108 million in 2001, $108 million in
2002, and will aggregate $1.0 billion for the ensuing years. In addition, the
EUA System is required to pay additional amounts depending on the actual
amount of energy received under such contracts. The demand costs associated
with these contracts are reflected as Purchased Power-Demand on the
Consolidated Statement of Income. Such costs are currently recoverable
through rates.
Environmental Matters: There is an extensive body of federal and state
statutes governing environmental matters, which permit, among other things,
federal and state authorities to initiate legal action providing for
liability, compensation, cleanup, and emergency response to the release or
threatened release of hazardous substances into the environment and for the
cleanup of inactive hazardous waste disposal sites which constitute
substantial hazards. Because of the nature of the EUA System's business,
various by-products and substances are produced or handled which are
classified as hazardous under the rules and regulations promulgated by the
United States Environmental Protection Agency (EPA) as well as state and local
authorities. The EUA System generally provides for the disposal of such
substances through licensed contractors, but these statutory provisions
generally impose potential joint and several responsibility on the generators
of the wastes for cleanup costs. Subsidiaries of EUA have been notified with
respect to a number of sites where they may be responsible for such costs,
including sites where they may have joint and several liability with other
responsible parties. It is the policy of the EUA System companies to notify
liability insurers and to initiate claims. EUA is unable to predict whether
liability, if any, will be assumed by, or can be enforced against, the
insurance carriers in these matters.
On December 13, 1994, the United States District Court for the District of
Massachusetts (District Court) issued a judgment against Blackstone, finding
Blackstone liable to the Commonwealth of Massachusetts (Commonwealth) for the
full amount of response costs incurred by the Commonwealth in the cleanup of a
by-product of manufactured gas at a site at Mendon Road in Attleboro,
Massachusetts. The judgment also found Blackstone liable for interest and
litigation expenses calculated to the date of judgment. The total liability
is approximately $5.9 million, including approximately $3.6 million in
interest which has accumulated since 1985. Due to the uncertainty of the
ultimate outcome of this proceeding and anticipated recoverability, Blackstone
recorded the $5.9 million District Court judgment as a deferred debit. This
amount is included with Other Assets on the Consolidated Balance Sheet at
December 31, 1997.
Blackstone filed a Notice of Appeal of the District Court's judgment and filed
its brief with the United States Court of Appeals for the First Circuit (First
Circuit) on February 24, 1995. On October 6, 1995, the First Circuit vacated
the District Court's judgment and ordered the District Court to refer the
matter to the EPA to determine whether the chemical substance, ferric
ferrocyanide (FFC), contained within the by-product is a hazardous substance.
On January 20, 1995, Blackstone entered into an escrow agreement with the
Commonwealth whereby Blackstone deposited $5.9 million with an escrow agent
who transferred the funds into an interest bearing money market account. The
distribution of the proceeds of the escrow account will be determined upon the
final resolution of the judgment. No additional interest expense will accrue
on the judgment amount.
On January 28, 1994, Blackstone filed a complaint in the District Court,
seeking, among other relief, contribution and reimbursement from Stone &
Webster Inc., of New York City and several of its affiliated companies (Stone
& Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley) for
any damages incurred by Blackstone regarding the Mendon Road site. On
November 7, 1994, the Court denied motions to dismiss the complaint which were
filed by Stone & Webster and Valley. This proceeding was stayed in December
1995 pending final EPA determination as to whether FFC is a hazardous
substance.
In addition, Blackstone has notified certain liability insurers and has filed
claims with respect to the Mendon Road site, as well as other sites.
Blackstone reached settlement with one carrier for reimbursement of legal
costs related to the Mendon Road case. In January 1996, Blackstone received
the proceeds of the settlement.
As of December 31, 1997, the EUA System had incurred costs of approximately
$6.7 million (excluding the $5.9 million Mendon Road judgment) in connection
with the investigation and clean-up of these sites, substantially all of which
relate to Blackstone. These amounts have been financed primarily by
internally generated cash. Blackstone is currently amortizing all of its
incurred costs over a five-year period consistent with prior regulatory
recovery periods and is recovering certain of those costs in rates.
EUA estimates that additional costs of up to $1.3 million (excluding the $5.9
million Mendon Road judgment) may be incurred at these sites through 1998,
substantially all of which relates to sites at which Blackstone is a
potentially responsible party. Estimates beyond 1998 cannot be made since
site studies, which are the basis of these estimates, have not been
completed. As a result of the recoverability of cleanup costs in rates and
the uncertainty regarding both its estimated liability, as well as its
potential contributions from insurance carriers and other responsible parties,
EUA does not believe that the ultimate impact of the environmental costs will
be material to the financial position of the EUA System or to any individual
subsidiary and thus no loss provision is required at this time.
The Clean Air Act Amendments (Amendments) created new regulatory programs and
generally updated and strengthened air pollution control laws. These
amendments expanded the regulatory role of the EPA regarding emissions from
electric generating facilities and a host of other sources. EUA System
generating facilities were first affected in 1995, when EPA regulations took
effect for facilities owned by the EUA System. Montaup's coal-fired Somerset
Unit 6 is utilizing lower sulfur content coal to meet the 1995 air standards.
EUA does not anticipate the impact from the Amendments to be material to the
financial position of the EUA System.
In July 1997, the EPA issued a new and more stringent rule covering ozone
particulate matter which is to be followed by promulgation of more stringent
ozone and particulate matter standards. The effect that such standards will
have on the EUA System cannot be determined by management at this time.
Eastern Edison, Montaup, the Massachusetts Attorney General and Division
of Energy Resources entered into a settlement regarding electric utility
industry restructuring in Massachusetts. The settlement includes a plan for
emissions reductions related to Montaup's Somerset Station Units 5 and 6, and
to Montaup's 50% ownership share of Canal Electric's Unit 2. The basis for SO2
and NOx emission reductions in the proposed settlement is an allowance cap
calculation. Montaup may meet its allowance caps by any combination of
control technologies, fuel switching, operational changes, and/or the use of
purchased or surplus allowances. The settlement was approved by FERC on
December 19, 1997.
In April 1992, the Northeast States for Coordinated Air Use Management
(NESCAUM), an environmental advisory group for eight northeast states
including Massachusetts and Rhode Island, issued recommendations for NOx
controls for existing utility boilers required to meet the ozone non-attainment
requirements of the Clean Air Act. The NESCAUM recommendations are more
restrictive than the Clean Air Act requirements. The Massachusetts Department
of Environmental Management has amended its regulations to require that
Reasonably Available Control Technology (RACT) be implemented at all stationary
sources potentially emitting 50 tons or more per year of NOx. Similar
regulations have been issued in Rhode Island. Montaup has initiated
compliance, through, among other things, selective noncatalytic reduction
processes.
A number of scientific studies in the past several years have examined the
possibility of health effects from EMF that are found wherever there is
electricity. While some of the studies have indicated some association
between exposure to EMF and health effects, many others have indicated no
direct association. On October 31, 1996, the National Academy of Sciences
issued a literature review of all research to date, Possible Health Effects of
Exposure to Residential Electric and Magnetic Fields. Its most widely
reported conclusion stated, "No clear, convincing evidence exists to show
that residential exposures to EMF are a threat to human health." Additional
studies, which are intended to provide a better understanding of EMF, are
continuing.
Some states have enacted regulations to limit the strength of magnetic fields
at the edge of transmission line rights-of-way. Rhode Island has enacted a
statute which authorizes and directs the Energy Facility Siting Board to
establish rules and regulations governing construction of high voltage
transmission lines of 69 kv or more. Management cannot predict the ultimate
outcome of the EMF issue.
Guarantee of Financial Obligations: EUA has guaranteed or entered into equity
maintenance agreements in connection with certain obligations of its
subsidiaries. EUA has guaranteed the repayment of EUA Cogenex's $28.0 million,
10.56% unsecured long-term notes due 2005 and EUA Ocean State's $28.6 million,
9.59% unsecured long-term notes due 2011. In addition, EUA has entered into
equity maintenance agreements in connection with the issuance of EUA Service's
10.2% Secured Notes and EUA Cogenex's 9.6% Unsecured Notes. Under the
December 1992 settlement agreement with EUA Power, EUA reaffirmed its
guarantee of up to $10 million of EUA Power's share of the decommissioning
costs of Seabrook I and any costs of cancellation of Seabrook I or Seabrook
II. EUA guaranteed this obligation in 1990 in order to secure the release to
EUA Power of a $10 million fund established by EUA Power at the time EUA Power
acquired its Seabrook interest. EUA has not provided a reserve for this
guarantee because management believes it unlikely that EUA will ever be
required to honor the guarantee.
Montaup is a 3.27% equity participant in two companies which own and operate
transmission facilities interconnecting New England and the Hydro Quebec
system in Canada. Montaup has guaranteed approximately $4.5 million of the
outstanding debt of these two companies. In addition, Montaup and Newport
have minimum rental commitments which total approximately $12 million and $1.5
million, respectively under a noncancelable transmission facilities support
agreement for years subsequent to 1997.
Other: In the fourth quarter of 1996 EUA Cogenex was notified by
Ridgewood/Mass. Corporation that it intended to seek damages related to
certain claims and alleged misrepresentations by EUA Cogenex regarding the
sale of its cogeneration portfolio. As part of the "Agreement for Assignment
for Beneficial Interests," Ridgewood exercised these rights under the
mandatory arbitration clause contained within said agreement. A date has not
been determined for the arbitration proceedings at this time. EUA Cogenex has
filed a counter-claim against Ridgewood for its failure to pay for certain
transitional expenses as stipulated in the "Assignment Agreement." In 1997,
the American Arbitration Association set a preliminary hearing date of June
14, 1998. Management cannot determine at this time the ultimate outcome of
these proceedings.
On January 10, 1997, the Internal Revenue Service (IRS) issued a report in
connection with its examination of the consolidated income tax returns of EUA
for 1992 and 1993. The report includes an adjustment to disallow EUA's
inclusion of its investment in EUA Power's Preferred Stock as a deduction in
determining Excess Loss Account (ELA) taxable income relating to the
redemption of EUA Power's Common and Preferred Stock in 1993. The IRS has
taken the position that the redemption of the Preferred Stock resulted in a
capital loss transaction and not a deduction in determining ELA. The Company
disagrees with the IRS's position and filed a protest in March 1997. On
February 24, 1998, EUA met with an IRS appeals officer to discuss resolution
of this matter and awaits a decision. EUA believes that it will ultimately
prevail in this matter. However, if the ultimate resolution of this matter is
a favorable decision for the IRS and EUA has not generated sufficient capital
gain transactions to offset the capital loss then EUA would be required to
record a charge that could have a material impact on financial results in the
year of the charge but would not materially impact the financial position of
the company.
In early 1997, ten plaintiffs brought suit against numerous defendants,
including EUA, for injuries and illness allegedly caused by exposure to
asbestos over approximately a thirty-year period, at premises, including some
owned by EUA companies. The total damages claimed in all of these complaints
was $25 million in compensatory and punitive damages, plus exemplary damages
and interest and costs. Each complaint names between fifteen and
twenty-eight defendants, including EUA. These complaints have been referred
to the applicable insurance companies. Counsel has been retained by the
insurers and is actively defending all cases. Three cases have been dismissed
as against the EUA Companies, with prejudice. EUA cannot predict the ultimate
outcome of this matter at this time.
The Office of the Attorney General has certified a referendum petition to
repeal the Massachusetts Electric Industry Restructuring Act as a matter
appropriate for a referendum initiative. A petition was filed with the
Election Division of the Office of the Secretary of State in February 1998.
A question on repealing the Act will be presented to voters on the November
1998 ballot. EUA and the electric industry in Massachusetts will actively
oppose repeal. Management cannot predict the outcome of the November
ballot question.
FORM OF ARTICLES OF ORGANIZATION
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
ARTICLE I
The name of the corporation is:
EUA COMPRESSION SERVICES, INC.
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
To serve as a Member of a limited liability company to be organized
under Delaware law which will engage in the provision of services to up-grade
natural gas pipeline compression infrastructure through the application of
electric compression systems and other technologies.
To engage in and carry on any other business or activity which may
lawfully be engaged in or carried on by a corporation which is organized under
Chapter 156B of the General Laws of the Commonwealth of Massachusetts as
presently in effect or as amended from time to time, or any successor
provisions adopted in lieu thereof.
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
WITHOUT PAR VALUE
WITH PAR VALUE TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE Common:
Common: 200,000 $.01 Preferred: Preferred:
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
Not applicable.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None.
ARTICLE VI
*Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholder s, or of any class of stockholders:
See Continuation Sheets 1A and 1B.
*If there are no provisions state "None".
Note: The preceding six (6) articles are considered to be permanent and may
ONLY be changed by filing appropriate Articles of Amendment.
Continuation Sheet 1A
ONE: The Board of Directors may make, amend or repeal the By Laws of
the corporation in whole or in part, except with respect to any provision
thereof which by law or the By Laws requires action by the stockholders. Any
by-law adopted by the Board of Directors may be amended or repealed by the
stockholders.
TWO: Meetings of the stockholders may be held anywhere in the United
States.
THREE: The corporation may be a partner, either general or limited, or a
member of a limited liability company, in any business enterprise it would have
the power to conduct by itself.
FOUR: No current or former director of the corporation shall be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director notwithstanding any provision of law
imposing such liability; provided, however, that this provision shall not
eliminate the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 61 or 62 or successor provisions of the
Massachusetts Business Corporation Law or (iv) for any transaction from which
the director derived an improper personal benefit. This provision shall not
eliminate the liability of a director for any act or omission occurring prior
to the date upon which this provision becomes effective. No amendment to or
repeal of this provision shall apply to or have any effect on the liability or
alleged liability of any director for or with respect to any acts or omissions
of such director occurring prior to such amendment or repeal.
FIVE: No contract or transaction between the corporation and one or
more of its directors or officers, or between the corporation and any other
organization of which one or more of its directors or officers are directors,
trustees or officers, or in which any of them has any financial or other
interest, shall be void or voidable, or in any way affected, solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the board of directors or committee thereof which authorizes,
approves or ratifies the contract or transaction, or solely because his/her or
their votes are counted for such purposes, if:
Continuation Sheet 1B
(i) The material facts as to his/her relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee which authorizes, approves or ratifies the contract
or transaction, and the board or committee in good faith authorizes, approves
or ratifies the contract or transaction by the affirmative vote of a majority
of the disinterested directors, even though the disinterested directors be less
than a quorum; or
(ii) The material facts as to his/her relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically authorized, approved or ratified in good faith by vote of the
stockholders; or
(iii) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the Board of
Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee thereof which
authorizes, approves or ratifies the contract or transaction. No director or
officer of the corporation shall be liable or accountable to the corporation or
to any of its stockholders or creditors or to any other person, either for any
loss to the corporation or to any other person or for any gains or profits
realized by such director or officer, by reason of any contract or transaction
as to which clauses (i), (ii) or (iii) above are applicable.
ARTICLE VII
The effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a later EFFECTIVE
DATE is desired, specify such date which shall not be more than thirty days
after the date of filing.
Not applicable.
ARTICLE VIII
The information contained in ARTICLE VIII is NOT a PERMANENT part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation IN MASSACHUSETTS is:
c/o EUA Energy Investment Corporation
One Liberty Square, Floor 13
Boston, MA 02109
Attention: President
b. The name, residential address and post office address of the directors and
officers of the corporation is as follows:
See Continuation Sheet VIIIB.
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of: December
d. The name and BUSINESS address of the RESIDENT AGENT, if any, of the
corporation is:
CONTINUATION SHEET VIIIB
NAME RESIDENCE P.O. ADDRESS
President: John R. Stevens 41 Old Village Road
Acton, MA 01720 Same
Treasurer: Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
Clerk: Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
Directors: Donald G. Pardus 238 Glezen Lane
Wayland, MA 01778 Same
Robert G. Powderly 42 Wayside Lane
Ashland, MA 01721 Same
John R. Stevens 41 Old Village Road
Acton, MA 01720 Same
Richard M. Burns 57 Hodge Road
Arlington, MA 02174 Same
John D. Carney 30 Round Tree Lane
Scituate, MA 02066 Same
ARTICLE IX
By-Laws of the corporation have been duly adopted and the president, treasurer,
clerk and directors whose names are set forth above, have been duly elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I/we whose
signature(s) appear below as incorporator(s) and whose name(s) and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 23rd day of May, 1997.
/s/ William O. Fabbri, Esq.
William O. Fabbri, Esq.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
Note: If an existing corporation is acting as incorporator, type in the exact
name of the corporation, the state or other jurisdiction where it was
incorporated, the name of the person signing on behalf of said corporation and
the title he/she holds or other authority by which such action is taken.
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
____________________________________________
I hereby certify that, upon examination of these Articles of
Organization, duly submitted to me, it appears that the provisions of the
General Laws relative to the organization of corporations have been complied
with, and I hereby approve said articles; and the filing fee in the amount of
$200.00 having been paid, said articles are deemed to have been filed with me
this 23rd day of May, 1997.
Effective date:____________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
FILING FEE: One tenth of one percent of the total authorized capital stock, but
not less than $200.00. For the purpose of filing, shares of stock with a par
value less than one dollar, or no par stock, shall be deemed to have a par
value of one dollar per share.
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
William O. Fabbri, Esq.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
Telephone: (617) 345-5090
WRITTEN CONSENT OF
THE SOLE INCORPORATOR OF
EUA COMPRESSION SERVICES, INC.
The undersigned, being the sole incorporator of EUA Compression
Services, Inc., a Massachusetts corporation (the "Corporation"), acting
pursuant to Section 12 of the Business Corporation Law of the Commonwealth of
Massachusetts, does hereby consent to, approve and adopt the following votes:
VOTED: That the by-laws in the form attached hereto as Exhibit A be and hereby
are adopted as the By-Laws of the Corporation.
VOTED: That the number of directors of the Corporation is hereby fixed at five
(5); and that the following named persons be, and they hereby are, elected
directors of the Corporation to serve in that capacity until the first meeting
of the stockholders or unanimous written consent in lieu thereof and until
their successors are duly elected and qualified:
Donald G. Pardus
Robert G. Powderly
John R. Stevens
Clifford J. Hebert, Jr.
John D. Carney
VOTED: That the Articles of Organization of the Corporation attached hereto as
Exhibit B be and hereby are approved, and that the Incorporator be and hereby
is instructed to cause the same to be filed with the Secretary of State of the
Commonwealth of Massachusetts.
Dated: May 23, 1997
/s/ William O. Fabbri
William O. Fabbri
FEDERAL IDENTIFICATION
NO. _____________________
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
CERTIFICATE OF CORRECTION
(General Laws, Chapter 156B, Section 6A)
Exact name of corporation: EUA Compression Services, Inc.
Document to be corrected: Articles of Organization
The above mentioned document was filed with the Secretary of the Commonwealth
on May 23, 1997.
Please state the inaccuracy or defect in said document:
See attached Continuation Sheet IV.
Please state corrected version of the document:
See attached Continuation Sheet V.
Note: This correction should be signed by the person(s) required by law to
sign the original document.
SIGNED UNDER THE PENALTIES OF PERJURY, this 16th day of July, 1997.
/s/ William O. Fabbri
Incorporator
*Delete the inapplicable words.
Note: If the inaccuracy or defect to be corrected is not apparent on the face
of the document, minutes of the meeting substantiating the error must be filed
with the certificate. Additional information may be provided on separate 8 x
11 sheets of white paper with a left margin of at least 1 inch.
CONTINUATION SHEET IV
CONTINUATION SHEET VIIIB
NAME RESIDENCE P.O. ADDRESS
President: John R. Stevens 41 Old Village Road
Acton, MA 01720 Same
Treasurer: Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
Clerk: Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
Directors: Donald G. Pardus 238 Glezen Lane
Wayland, MA 01778 Same
Robert G. Powderly 42 Wayside Lane
Ashland, MA 01721 Same
John R. Stevens 41 Old Village Road
Acton, MA 01720 Same
Richard M. Burns 57 Hodge Road
Arlington, MA 02174 Same
John D. Carney 30 Round Tree Lane
Scituate, MA 02066 Same
CONTINUATION SHEET V
CONTINUATION SHEET VIIIB
NAME RESIDENCE P.O. ADDRESS
President: John R. Stevens 41 Old Village Road
Acton, MA 01720 Same
Treasurer: Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
Clerk: Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
Directors: Donald G. Pardus 238 Glezen Lane
Wayland, MA 01778 Same
Robert G. Powderly 42 Wayside Lane
Ashland, MA 01721 Same
John R. Stevens 41 Old Village Road
Acton, MA 01720 Same
Clifford J. Hebert, Jr. 3 Hammond Place
Woburn, MA 01801 Same
John D. Carney 30 Round Tree Lane
Scituate, MA 02066 Same
FORM OF ARTICLES OF ORGANIZATION
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
ARTICLE I
The name of the corporation is:
EUA TELECOMMUNICATIONS CORPORATION
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
To engage in and carry on businesses, as an exempt telecommunications
company with the meaning of Section 34(a)(1) of the Public Utility Holding
Company Act of 1935, providing telecommunications and information services and
other services or products subject to the jurisdiction of the Federal
Communications Commission.
To engage in and carry on any other business or activity which may
lawfully be engaged in or carried on by a corporation which is organized under
Chapter 156B of the General Laws of the Commonwealth of Massachusetts as
presently in effect or as amended from time to time, or any successor
provisions adopted in lieu thereof.
EUA TELECOMMUNICATIONS CORPORATION
Articles of Organization
Continuation Sheet VIA
(a) The Board of Directors may make, amend or repeal the By-Laws of the
corporation in whole or in part, except with respect to any provision thereof
which by law or the By-Laws requires action by the stockholders. Any by-law
adopted by the Board of Directors may be amended or repealed by the
stockholders.
(b) Meetings of the stockholders may be held anywhere in the United States.
(c) The corporation may be a partner, either general or limited, in any
business enterprise it would have the power to conduct by itself.
(d) No current or former director of the corporation shall be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director notwithstanding any provision of law imposing
such liability; provided, however, that this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 61 or 62 or successor provisions of the Massachusetts
Business Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit. This provision shall not eliminate the
liability of a director for any act or omission occurring prior to the date
upon which this provision becomes effective. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or allege d
liability of any director for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
(e) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other
organization of which one or more of its directors or officers are directors,
trustees or officers, or i n which any of them has any financial or other
interest, shall be void or voidable, or in any way affected, solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the board of directors or committee thereof which authorizes,
approves or ratifies the contract or transaction, or solely because his/her or
their votes are counted for such purposes, if:
EUA TELECOMMUNICATIONS CORPORATION
Articles of Organization
Continuation Sheet VIB
(i) The material facts as to his/her relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee which authorizes, approves or ratifies the contract
or transaction, and the board or committee in good faith authorizes, approves
or ratifies the contract or transaction by the affirmative vote of a majority
of the disinterested directors, even though the disinterested directors be less
than a quorum; or
(ii) The material facts as to his/her relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically authorized, approved or ratified in good faith by vote of the
stockholders; or
(iii) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the Board of
Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee thereof which
authorizes, approves or ratifies the contract or transaction. No director or
officer of the corporation shall be liable or accountable to the corporation or
to any of its stockholders or creditors or to any other person, either for any
loss to the corporation or to any other person or for any gains or profits
realized by such director or officer, by reason of any contract or transaction
as to which clauses (i), (ii) or (iii) above are applicable.
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
WITHOUT PAR VALUE
WITH PAR VALUE TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE Common:
Common: 200,000 $.01 Preferred: Preferred:
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
N/A
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
N/A
ARTICLE VI
*Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheet VIA-B attached.
*If there are no provisions state "None".
Note: The preceding six (6) articles are considered to be permanent and may
ONLY be changed by filing appropriate Articles of Amendment.
ARTICLE VII
The effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a later EFFECTIVE
DATE is desired, specify such date which shall not be more than thirty days
after the date of filing.
Not applicable.
ARTICLE VIII
The information contained in ARTICLE VIII is NOT a PERMANENT part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation IN MASSACHUSETTS is:
c/o Eastern Utilities Associates
One Liberty Square
Boston, MA 02109
Attention: President
b. The name, residential address and post office address of the directors and
officers of the corporation is as follows:
See Continuation Sheet VIIIB attached.
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of: December
d. The name and BUSINESS address of the RESIDENT AGENT, if any, of the
corporation is: Not applicable.
CONTINUATION SHEET VIIIB
DIRECTORS
Post Office
Name Residence Address
Donald G. Pardus 238 Glezen Lane Same
Wayland, MA 01778
Robert G. Powderly 42 Wayside Lane Same
Ashland, MA 01721
John R. Stevens 41 Old Village Road Same
Acton, MA 01720
OFFICERS
Post
Office
Title Name Residence Address
President John R. Stevens 41 Old Village Road Same
Acton, MA 01720
Vice
President Michael J. Hirsh 3 S. Stone Mill Drive, #223 Same
Dedham, MA 02026
Clerk Clifford J. 3 Hammond Place Same
Hebert, Jr. Woburn, MA 01801
Treasurer Clifford J. 3 Hammond Place Same
Hebert, Jr. Woburn, MA 01801
ARTICLE IX
By-Laws of the corporation have been duly adopted and the president, treasurer,
clerk and directors whose names are set forth above, have been duly elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I/we whose
signature(s) appear below as incorporator(s) and whose name(s) and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 25th day of April, 1997.
William O. Fabbri
17 Long Avenue, #2
Boston, MA 02134
/s/ William O. Fabbri
Note: If an existing corporation is acting as incorporator, type in the exact
name of the corporation, the state or other jurisdiction where it was
incorporated, the name of the person signing on behalf of said corporation and
the title he/she holds or other authority by which such action is taken.
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
____________________________________________
I hereby certify that, upon examination of these Articles of
Organization, duly submitted to me, it appears that the provisions of the
General Laws relative to the organization of corporations have been complied
with, and I hereby approve said articles; and the filing fee in the amount of $
200.00 having been paid, said articles are deemed to have been filed with me
this 19 day of May, 1997.
Effective date:
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
FILING FEE: One tenth of one percent of the total authorized capital stock, but
not less than $200.00. For the purpose of filing, shares of stock with a par
value less than one dollar, or no par stock, shall be deemed to have a par
value of one dollar per share.
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
William O. Fabbri, Esq.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
Telephone: (617) 345-5090
Exhibit D
EASTERN UTILITIES ASSOCIATES AND
AFFILIATED CORPORATIONS
Federal Income Tax Allocation Agreement
Pursuant to Rule 45(c). Public Utility Holding
Company Act of 1935 and I.R.C. Regulation Section
1.1552-1(a) (1) and Section 1.1502-33(d)(3)
This agreement made as of April 6, 1998, among Eastern Utilities
Associates (the designation of the trustees for the time being under a
Declaration of Trust dated April 2, 1928, as amended) (EUA); Eastern Edison
Company, a Massachusetts corporation (Eastern); Blackstone Valley Electric
Company, a Rhode Island corporation (Blackstone); Newport Electric Corporation,
a Rhode Island corporation (Newport); Montaup Electric Company, a Massachusetts
corporation (Montaup); EUA Service Corporation, a Massachusetts corporation
(EUA Service); EUA Cogenex Corporation, a Massachusetts corporation (Cogenex);
EUA Energy Investment Corporation, a Massachusetts corporation (EUA Energy);
EUA Ocean State Corporation, a Rhode Island corporation (Ocean State); Eastern
Unicord Corporation, a Massachusetts corporation (Unicord); Northeast Energy
Management, Inc., a Massachusetts corporation (NEM); EUA TransCapacity, Inc., a
Massachusetts corporation (TransCapacity); EUA Cogenex-Canada, Inc., a Canadian
corporation (Cogenex-Canada); EUA Bioten, Inc., a Massachusetts corporation
(Bioten); EUA Cogenex-West Corporation, a Massachusetts corporation (Cogenex-
West); EUA Citizens Conservation Services, Inc., a Massachusetts Corporation
(CCS); EUA Energy Services, Inc. a Massachusetts corporation (EUA ESI); EUA
Compression Services, Inc., a Massachusetts corporation (Compression); and EUA
Telecommunications, Inc, a Massachusetts corporation (Telecommunications).
W I T N E S S E T H T H A T:
WHEREAS, the term "AFFILIATES" as used herein shall be deemed to refer to
Eastern, Blackstone, Newport, Montaup, EUA Service, Cogenex, EUA Energy, Ocean
State, Unicord, NEM, TransCapacity, EUA Cogenex-Canada, Bioten, Cogenex-West,
CCS, EUA ESI, Compression and Telecommunications, the AFFILIATES together with
EUA, and the CONSOLIDATED AFFILIATES as a collective taxpaying unit is
sometimes referred to as the "GROUP" and
WHEREAS, EUA owns directly or indirectly at least 80 percent of the issued
and outstanding shares of each class of voting common stock of each of the
AFFILIATES; each of the CONSOLIDATED AFFILIATES is a member of an affiliated
group within the meaning of Section 1504 of the Internal Revenue Code of 1954,
as amended (the "Code"), of which EUA is the common parent; and the GROUP
presently participates in the filing of a consolidated income tax return.
Definitions
A. Corporate Tax Benefit - The amount by which the consolidated tax is
reduced by including a net corporate tax loss or other net tax benefit
in the consolidated return. The value of the benefit of the operating
loss shall be determined by applying the then current corporate income
tax rate to the amount of the loss. The value of a credit is the
actual tax savings (100%). The value of capital losses used to offset
capital gains shall be computed at the then current tax rate applicable
to capital gains for corporations. The value of any corporate tax
benefit to be reimbursed to a member shall be reduced by the amount of
any alternate minimum tax attributable to such member.
B. Separate Return Tax - The tax on the corporate taxable income of an
affiliate company computed as though such company were not a member of
the consolidated group.
C. Excess Tax Credits - The investment tax credit, alternate minimum tax
credit, research and development credit, energy tax credit or other
similar credit that would be allowable in the consolidation (were it
not for a limitation provided by law) in excess of the amount of such
credits which could be utilized on a separate return basis with regard
to such limitations.
EUA and the AFFILIATES agree as follows:
Allocation Procedures in Accordance with I.R.C. Regulation
Sections 1.1552-1(a)(1) and 1.1502-33(d)(3)
A. General Rule
Step 1 - The consolidated tax liability shall be apportioned among the
companies in the ratio that each member's separate taxable income bears to the
sum of the separate taxable incomes of all members having taxable income.
Step 2 - An additional amount will be allocated to the members at 100% of
the excess of the member's separate tax liability over the consolidated tax
liability allocated to the member under Step 1. Under no circumstances shall
the tax allocated to a member exceed its separate tax liability.
Step 3 - The total of the amounts allocated under Step 2 is credited to
those members who had "corporate tax benefits" as follows:
(a) Those members having a negative allocation under Step 2;
(b) If the total of the "corporate tax benefits" is greater than the total
reduction in the consolidated tax, then the benefits arising from the
inclusion of negative taxable incomes in the consolidated return shall
be recognized and paid prior to the benefits arising from excess tax
credits.
(c) If the total benefits attributable to the negative taxable incomes of
the members are not absorbed in the consolidated return, the benefit
allocated to each company shall be in proportion to their respective
negative taxable incomes.
(d) If the total benefits attributable to the excess tax credits are not
applied in the consolidated return, the benefit allocated to each
company shall be in proportion to their respective excess tax credits.
Step 4 - If the total consolidated tax liability shall result in an
"Alternative Minimum Tax" liability position then an additional amount will be
added to Steps 1 and 2. This additional amount will be allocated to the
members based upon their proportionate amounts of alternate minimum taxable
income.
Step 5 - Reimbursement - Benefiting members will reimburse the others no
later than 90 days after the filing of the consolidated tax return.
B. Unused Corporate Tax Benefits
A member that is entitled to payment for a tax benefit, but does not
receive such payment because of the rules in Step 3 shall retain such right for
the future to the extent that such benefit can be applied against the
consolidated tax liability. Uncompensated corporate tax benefits arising from
negative taxable income shall have priority over the benefits attributable to
excess tax credits.
C. Tax Adjustments
In the event of any adjustments to the tax returns of any of the
CONSOLIDATED AFFILIATES filed (by reason of an amended return, a claim for
refund or an audit by the Internal Revenue Service), the liability, if any, of
each of the AFFILIATES under Section A shall be redetermined to give effect to
any such adjustment as if it had been made as part of the original computation
of tax liability, and payments between EUA and the appropriate AFFILIATES shall
be made within 120 days after any such payments are made or refunds are
received, or, in the case of contested proceedings, within 120 days after a
final determination of the contest. Interest and penalties, if any,
attributable to such an adjustment shall be paid by each AFFILIATE to
EUA in proportion to the increase in such AFFILIATE'S separate return tax
liability computed under Section A of this Agreement that is required to be
paid to EUA. In any situation in which the Group's tax liability is adjusted
by a revenue agent's report or a court settlement and an item-by-item
modification is not made, the Group shall consult its accountants for
assistance in determining a fair allocation of the adjusted liability.
D. Subsidiaries of Affiliates
If at any time, any of the AFFILIATES acquires or creates one or more
subsidiary corporations that are includible corporations of the Group, they
shall be subject to this Agreement and all references to the AFFILIATES herein
shall be interpreted to include such subsidiaries as a group.
E. Successors
This Agreement shall be binding on and insure to the benefit of any
successor, by merger, acquisition of assets or otherwise, to any of the parties
hereto (including but not limited to any successor of EUA or any of the
AFFILIATES succeeding to the tax attributes of such corporation under Section
381 of the Code) to the same extent as if such successor had been an original
party to this agreement.
F. Special Rule
In making the tax allocations provided for in this agreement,
notwithstanding any of the foregoing, no corporate tax benefits shall be
allocated to EUA. Although the separate corporate taxable income or taxable
loss of EUA and any tax credits attributable to EUA will be included
in the consolidated return, only the tax savings attributable to such items
shall be allocated to the other AFFILIATES as if EUA were not a member of the
Group. In making this allocation, the tax savings of EUA shall be allocated
only to members of the Group having taxable income.
Also, in making the tax allocations, only those tax consequences
attributable to non-affiliated transactions shall remain with EUA Service
Corporation in accordance with Section A of this Agreement. All others will be
allocated to the other AFFILIATES.
G. Termination Clause
This Agreement shall apply to the taxable year ending December 31, 1998,
unless all of the members of the Group agree in writing to terminate the
Agreement prior to the end of the taxable year. The Agreement shall be
renewable on a year to year basis for subsequent taxable years, provided all of
the members of the Group agree in writing, prior to the end of the immediately
preceding taxable year, to extend the Agreement one additional year.
Notwithstanding any termination, this Agreement shall continue in effect with
respect to any payment or refunds due for all taxable periods prior to
termination.
IN WITNESS WHEREOF, the duly authorized representatives of the parties
have set their hands this 6th day of April, 1998.
EASTERN UTILITIES ASSOCIATES
By Donald G. Pardus
Title: Chairman of the Board
EUA SERVICE CORPORATION EUA COGENEX-CANADA
By Robert G Powderly By Edward T. Liston
Title: Executive Vice President Title: President
BLACKSTONE VALLEY ELECTRIC COMPANY EUA ENERGY INVESTMENT CORPORATION
By John D. Carney By John R. Stevens
Title: President Title: President
EASTERN EDISON COMPANY EASTERN UNICORD CORPORATION
By Michael J. Hirsh By John R. Stevens
Title: President Title: President
MONTAUP ELECTRIC COMPANY EUA TRANSCAPACITY, INC.
By Kevin A. Kirby By John R. Stevens
Title: Vice President Title: President
EUA COGENEX CORPORATION EUA BIOTEN, INC.
By Edward T. Liston By John R. Stevens
Title: President Title: President
NORTHEAST ENERGY MANAGEMENT, INC. EUA OCEAN STATE CORPORATION
By Edward T. Liston By Clifford J. Hebert, Jr.
Title: President Title: Treasurer
EUA HIGHLAND CORPORATION NEWPORT ELECTRIC CORPORATION
By Edward T. Liston By Barbara A. Hasson
Title: Executive Vice President Title: President
EUA CITIZENS CONSERVATION SERVICES, INC. EUA ENERGY SERVICES, INC.
By Edward T. Liston By Kevin A. Kirby
Title: Executive President Title: Vice President
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