File No. 70 -
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
APPLICATION-DECLARATION WITH RESPECT TO
THE ACQUISITION OF A SUBSIDIARY IN CONNECTION
WITH THE UNBUNDLING OF GENERATION BUSINESS
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
________________________________
EASTERN UTILITIES ASSOCIATES ("EUA")
One Liberty Square, P.O. Box 2333, Boston, Massachusetts 02107
EASTERN EDISON COMPANY ("EASTERN")
750 West Center Street, West Bridgewater, Massachusetts 02379
MONTAUP ELECTRIC COMPANY
750 West Center Street, West Bridgewater, Massachusetts 02379
(Names of companies filing this statement and addresses of their principal
executive offices)
EASTERN UTILITIES ASSOCIATES
(Name of top registered holding company parent of each applicant or declarant)
_________________________________
Clifford J. Hebert, Jr.
Treasurer
Eastern Utilities Associates
One Liberty Square
P.O. Box 2333
Boston, MA 02107
(Name and address of agent for service)
The Commission is requested to mail signed copies of
all orders, notices and communications to:
Arthur I. Anderson, P.C.
McDermott, Will & Emery
28 State Street
Boston, MA 02109-1775
Item 1. Description of Proposed Transaction.
I. Introduction.
A. Description of the Parties to the Transaction
This Application-Declaration (the "Declaration") is being filed with the United
States Securities and Exchange Commission (the "Commission") by Eastern
Utilities Associates ("EUA"), a Massachusetts voluntary association and a
registered public utility holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), Eastern Edison Company ("Eastern
Edison"), a Massachusetts corporation that is a registered retail electric
utility company and a wholly-owned subsidiary of EUA, and Montaup Electric
Company ("Montaup"), a Massachusetts corporation that is a wholesale generation
and transmission company and the wholly-owned subsidiary of Eastern Edison
(collectively, the "Declarants").
B. General Request and Overview of Transaction.
The Declarants hereby file this Declaration for the purpose of obtaining
Commission authorization for Eastern Edison to transfer to EUA, and for EUA to
acquire from Eastern Edison, all of Eastern Edison's investment in Montaup's
capitalization including its outstanding: (i) preferred stock of Montaup (ii)
common stock of Montaup; and (iii) debenture bonds of Montaup (the securities
described in clauses (i) through (iii), collectively, the "Montaup
Securities"), thereby causing Montaup to become a wholly-owned, first-tier
subsidiary of EUA (such transfer and acquisition of Montaup Securities, and the
transactions relating thereto, hereafter collectively referred to as the "Spin-
Off"). The transfer of the Montaup Securities to EUA by Eastern Edison will
take the form of a special dividend payment comprising all remaining
capitalization of Montaup, which will be paid out of Eastern Edison's retained
earnings to the maximum extent possible and, thereafter, subject to receipt of
Commission authorization, out of paid-in capital, unearned surplus and/or a
redemption of Eastern Edison common stock, such redemption to be funded with
Montaup Securities.
The Declarants expect that the Spin-Off will produce significant benefits to
the EUA holding company system's investors and consumers and will meet all
applicable standards of the Act. The corporate separation of Montaup from
Eastern Edison through the Spin-Off will complete the functional unbundling of
Montaup's generation business from Eastern Edison's distribution business,
consistent with the requirements of Section 1A(b) of the Massachusetts
Restructuring Act of 1997, and thereby isolating Eastern Edison's capital
structure so that it will apply only to distribution ratemaking. The Spin-Off
also will eliminate any risk that Eastern may have incurred through its
association with Montaup as a result of Montaup's ownership interest in a
nuclear facility and other contingent liabilities. In addition, the Spin-Off
will further simplify EUA's corporate structure.
C. Amendment of Montaup Charter
Prior to consummating the Spin-Off, and subject to obtaining (i) Commission
authorization therefor, which Montaup hereby requests, and (ii) the consent of
Eastern Edison, its sole shareholder, Montaup will amend its charter to
eliminate its status as a Section 9A company under Chapter 164 of the
Massachusetts General Laws so that its ability to transmit and sell
electricity will not be tied to its sole shareholder.
II. Dividend Distribution by Eastern Edison to EUA and Payment Out of Paid
In Capital.
Eastern Edison hereby proposes and requests authorization to distribute all of
the then remaining Montaup Securities to EUA in the form of a dividend which
shall, in part, exceed Eastern Edison's retained earnings and be paid out of
paid-in capital, unearned surplus and/or as the redemption price for the
redemption of Eastern Edison common stock (as described in paragraph I.B
above). EUA proposes and requests authorization to acquire and/or receive in
the form of a dividend from Eastern Edison such Montaup Securities. All of the
Montaup Securities are issued in the name of, and beneficially owned by,
Eastern Edison. Eastern Edison hereby further requests authorization, upon
consummation of the Spin-Off, to pay future dividends to EUA out of other than
retained earnings.
III. EWGs and FUCOs.
None of the Declarants has acquired an ownership interest in any EWG or FUCO,
or now is or as a consequence of the transactions proposed herein will become
a party to or has or will as a consequence of the transactions proposed herein
any right under a service, sales or construction contract with an EWG or FUCO,
except in accordance with the provisions of the Act. The Declarants will not
acquire any such interest or right without first obtaining any necessary
Commission authorization. All applicable conditions contained in Rule 53(a)
are, and assuming the consummation of the proposed transactions will be,
satisfied, and none of the conditions contained in Rule 53 (b) exist or will
exist as a result of the proposed transactions making Rule 53(c) inapplicable.
Item 2. Fees, Commissions and Expenses.
The estimate of the approximate amount of fees and expenses payable in
connection with the proposed transactions is as follows:
(To be filed by Amendment)
Counsel fees
Financial fees
Miscellaneous
TOTAL
Item 3. Applicable Statutory Provisions.
The sections of the Act and rules or exemptions thereunder that the Declarants
consider applicable to the transactions, or the basis for exemption therefrom,
are set forth below:
Transaction Applicable Statutory Provisions
Acquisition of Montaup Securities Sections 9(a), 10 and 12(c); by EUA
from Eastern Edison Rule 43
Payment of dividends out of paid-in Section 12(c); Rule 46(a)
capital and unearned surplus by
Eastern Edison
Redemption of Eastern Edison Sections 9(a), 10, 12(c); Rule 43
common stock
Amendment of Montaup Charter Sections 6(a) and 7
to eliminate Section 9A status
Item 4. Regulatory Approval.
The following Federal and state regulatory authorities have jurisdiction over
the proposed transactions: the Nuclear Regulatory Commission ("NRC"), the
Federal Energy Regulatory Commission ("FERC"), and the Connecticut Department
of Public Utility Control ("CDPUC"). Additionally, the Applicants intend to
request from the Massachusetts Department of Telecommunications and Energy
("DTE") confirmation that the proposed transactions do not fall within the
jurisdiction of the DTE or, in the alternative, approval of such transactions.
Item 5. Procedure.
(a) In order to enable Eastern Edison to spin-off Montaup to EUA and to
undertake the other related transactions contemplated in Item 1, the Declarants
request that the Commission issue and publish not later than August 9, 1999 a
notice with respect to the filing of this Declaration and, concurrently
therewith, that the Commission enter an appropriate order granting and
permitting this Declaration to become effective at the earliest convenient
date.
(b) No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The
Division of Investment Management of the Commission may assist in the
preparation of the Commission's decision in this matter. There should be no
thirty-day waiting period between the issuance and the effective date of any
order issued by the Commission in this matter, and it is respectfully requested
that any such order be made effective immediately upon the entry thereof.
Item 6. Exhibits and Financial Statements.
(a) Exhibits.
* To be filed by Amendment
*Exhibit A-1 Amended and Restated Articles of Organization
of Montaup
*Exhibit D-1 Regulatory filings with/orders of the FERC
*Exhibit D-2 Regulatory filings with/orders of the NRC
*Exhibit D-3 Regulatory filings with/orders of the CDPUC
*Exhibit D-4 Regulatory filings with/orders of the DTE
*Exhibit F Opinion of Counsel
*Exhibit G Proposed form of Notice
(b) Financial Statements
* To be filed by Amendment
Item 7. Environmental Effects.
The proposed transactions do not involve major Federal action having a
significant effect on the human environment. No Federal agency has prepared
or is preparing an environmental impact statement with respect to the proposed
transactions.
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding Company Act of 1935,
as amended, each of the undersigned companies has duly caused this statement to
be duly signed on its behalf by the undersigned thereunto duly authorized.
Date: July 14, 1999
EASTERN UTILITIES ASSOCIATES,
EASTERN EDISON COMPANY, and
MONTAUP ELECTRIC COMPANY,
By /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Treasurer
