SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U5S
ANNUAL REPORT
For the Year ended December 31, 1998
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 1998
ITEMS
<TABLE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF DECEMBER 31, 1998
<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 (1) $373,718,061 $
(EUA or the Association)
EUA Service Corporation 100 100% (2) 2,557,189 2,557,189
(EUA Service)
Blackstone Valley Electric 184,062 100% (2) 41,658,390 41,658,390
Company (Blackstone)
Newport Electric Corporation 1,000,000 100% (2) 23,320,795 23,320,795
(Newport)
Eastern Edison Company 2,891,357 100% (2) 225,998,388 225,998,388
(Eastern Edison)
Montaup Electric Company 586,000 100% (3) 147,017,241 147,017,241
(Montaup)
Preferred Stock (3) 1,500,000 1,500,000
Debenture Bonds (Unsecured) (3) 90,575,000 90,575,000
Pollution Control
Bonds (Unsecured) - Net (3) 27,406,583 27,406,583
EUA Cogenex Corporation 1,000 100% (2) 48,361,220 48,361,220
(EUA Cogenex)
EUA Citizens Conservation
Services, Inc. 10,000 100% (4) 445,607 445,607
Northeast Energy
Management, Inc. 10,000 100% (4) 9,134,328 9,134,328
(NEM)
EUA Cogenex West 10,000 100% (4) 4,657,067 4,657,067
(formerly EUA Highland Corporation)
APS Cogenex L.L.C. 50% (5) 516,949 516,949
EUA Cogenex-Canada Inc. 100 100% (4) $706,905 $706,905
(Cogenex Canada)
EUA Cogenex-Canada
Energy Services Inc. 100 100% (6)
EUA WestCoast L.P. 50% (7) 1,018,395 1,018,395
EUA Energy Capital and
Services I 50% (8) 11,807,219 11,807,219
EUA Energy Capital and
Services II 50% (8) 13,339,067 13,339,067
EUA FRC II Energy Associates 50% (8) 30,592 30,592
Micro Utility Partners of America 50% (7) 23,720 23,720
EUA Energy Services, Inc. 100 100% (2) (34,086) (34,086)
EUA Energy Investment Corporation 100 100% (2) (24,203,924) (24,203,924)
(EUA Energy)
Eastern Unicord Corporation 1,000 100% (9) (1,840,592) (1,840,592)
(Unicord)
EUA TransCapacity, Inc. 1,000 100% (9) (8,864,744) (8,864,744)
TransCapacity, L.P. 80% (7) (15,802,547) (15,802,547)
EUA BIOTEN, Inc. 100 100% (9) (1,512,699) (1,512,699)
BIOTEN General Partn. (10) 80% (8) 3,691,851 3,691,851
BIOTEN GPM (11) 2 100% (13)
BIOTEN Operations, Inc. (12) 1,000 100% (13) 1,020 1,020
EUA Compression Services, Inc. 10 100% (9) (255,727) (255,727)
Renova, L.L.C. (14) 100% (5) (3,311,670) (3,311,670)
EUA Telecommunications
Corporation 10 100% (2) (131,037) (131,037)
EUA Ocean State Corporation 1 100% (2) 16,545,748 16,545,748
(EUA Ocean State)
Ocean State Power I 29.9% 29.9% (8) 27,539,091 27,539,091
Ocean State Power II 29.9% 29.9% (8) 21,295,260 21,295,260
*Eastern Edison Electric Company 100% (2) 1,000 1,000
_________
( 1) Cumulative Voting.
( 2) Wholly-owned by EUA.
( 3) Wholly-owned by Eastern Edison.
( 4) Wholly-owned by EUA Cogenex.
( 5) Limited Liability Corporation.
( 6) Wholly-owned by EUA Cogenex-Canada Inc.
( 7) Limited Partnership.
( 8) General Partnership.
( 9) Wholly-owned by EUA Energy.
(10) Effective June 1, 1998, EUA BIOTEN, Inc. increased its profits and
voting interests in BIOTEN Partnership to 80%. The Partnership was
dissolved on February 25, 1999.
(11) Organized under the Laws of Mauritius as an offshore company on June
29, 1998 to invest in and manage projects in connection with the
development and commercialization of biomass-fired combustion turbine
power generation facilities and related products and services.
(12) Organized under the Laws of Tennessee on May 22, 1995 to engage in
the business of acquiring, owning, holding, developing and commercializing proprietary technology relating to biomass-
fired combustion turbine power generation.
(13) Wholly-owned by BIOTEN Partnership. EUA BIOTEN is working toward
restructuring, pursuant to which all ownership interest in BIOTEN GPM and
BIOTEN Operations would be transferred to the restructured entity.
(14) Effective May 1, 1998, Renova operations were transferred from EUA
Cogenex to EUA Energy Investment.
*Inactive.
</TABLE>
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS
Brief Description
Name of Company of Transaction Consideration Exemptions
(1) (2) (3) (4)
Blackstone Sale of Land $10,000 Rule 44 (b)
School Street
No. Smithfield, RI
Blackstone Sale of Land 3,500 Rule 44 (b)
Helmer Lane
Woonsocket, RI
Eastern Edison Sale of Mulberry Street 600,000 Rule 44 (b)
Building/Land
Brockton, MA
Eastern Edison Sale of Land 135,000 Rule 44 (b)
King Street
Cohasset, MA
Montaup Canal 2 75,878,800 Section 32 (c)
Riverside Ave
Somerset, MA
Newport Jepson/Eldred Diesel Stations 1,566,500 Rule 44 (b)
Portsmouth/Jamestown, RI
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES
Date and
Type of Form of
Name of Issuer Security Transaction Consideration Exemption
(1) (2) (3) (4) (5)
None.
The following refers to short-term borrowing by EUA system companies during
1998:
Highest Effective
Balance at Balance Date of Average
Year-end During Year Highest Interest Rate
(000's) (000's) Balance For Year
$63,547 $132,920 7/5/98 5.8%
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 1998 and the year end balance was
approximately $3.5 million and $3.4 million, respectively. For the performance
bonds, the highest amount outstanding during 1998 and the year end balance was
$10.8 million.
<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)
Eastern Edison: Eastern Edison
First Mortgage and
Collateral Trust Bonds:
5 7/8% due 1998 20,000,000 20,000,000 (a)
5 3/4% due 1998 40,000,000 40,000,000 (a)
Newport: Newport
First Mortgage Bonds:
8.95% due 2001 650,000 650,000 (a)
Small Business
Administration Loan:
6.5% due 2005 95,924 95,924 (a)
EUA Cogenex: EUA Cogenex
Unsecured Notes:
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 1,700,000 1,700,000 (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 874,808
Electric Co. **
" " Conn. Yankee Capital Stock 4.5 15,750 shares 4,705,317
Atomic Power Co.**
" " Vermont Yankee Capital Stock 2.5 9,801 shares 1,365,653
Nuclear
Power Corp. **
" " Maine Yankee Capital Stock 4.0 20,000 shares 3,340,613
Atomic
Power Co. **
" " NE Hydro Trans. Capital Stock 3.3 111,190 shares 1,647,803
Electric Co. ***
" " NE Hydro Capital Stock 3.3 540 shares 946,901
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, 1998. 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, Ontario,
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 41 Long Wharf Mall TR
Newport, RI 02840
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
Michael J. Hirsh P.O. Box 543 VP VP VP VP
W. Bridgewater, MA 02379
Darcy L. Immerman 100 Foot of John Street
Lowell, MA 01852
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
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued Names of System Companies with which Connected
Part I. As of December 31, 1998.
<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>
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 360 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
Donald T. Sena One Liberty Square AS AT,AC,AS AT,AS AT,AS AT,AS AT,AC
Boston, MA 02109
Dennis St. Pierre P.O. Box 543 VP
W. Bridgewater, MA 02379
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 10 Walnut Place TR
Brookline, MA 02445
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, 1998. 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, Ontario,
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 41 Long Wharf Mall
Newport, RI 02840
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
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued
Part I. As of December 31, 1998. 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>
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
Donald T. Sena One Liberty Square AT,AC AT,AC AT,AS
Boston, MA 02109
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 (1 of 2)
Part I. As of December 31, 1998. Names of System Companies with which Connected
<CAPTION>
EUA EUA Northeast
Cogenex- TransCapacity, Energy
Canada Inc. Inc. Management, Inc.
<S> <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, Ontario,
Canada K1P5H9
John D. Carney P.O. Box 543 EVP
W. Bridgewater, MA 02379
Paul J. Choquette, Jr. 7 Jackson Walkway
Providence, RI 02940
Peter S. Damon 41 Long Wharf Mall
Newport, RI 02840
Janice P. DeBarros Boott Mills South
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
Boston, MA 02109
Michael J. Hirsh P.O. Box 543
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
W. Bridgewater, MA 02379
Larry A. Liebenow 1082 Davol Street, 5th Fl.
Fall River, MA 02720
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued (2 of 2)
Part I. As of December 31, 1998. Names of System Companies with which Connected
<CAPTION>
EUA Citizens EUA EUA EUA
Conservation Cogenex BIOTEN, Compression
Services Corp. West Corp. Inc. Services, Inc.
<S> <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, Ontario,
Canada K1P5H9
John D. Carney P.O. Box 543 D,EVP D,EVP
W. Bridgewater, MA 02379
Paul J. Choquette, Jr. 7 Jackson Walkway
Providence, RI 02940
Peter S. Damon 41 Long Wharf Mall
Newport, RI 02840
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,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
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
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued
Part I. As of December 31, 1998. Names of System Companies with which Connected
<CAPTION>
EUA EUA Northeast EUA Citizens
Cogenex- TransCapacity, Energy Conservation
Canada Inc. Inc. Management,Inc. Services Corp.
<S> <C> <C> <C> <C>
Edward T. Liston Boott Mills South D,P D,P D,EVP
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
Boston, MA 02109
Robert G. Powderly P.O. Box 543 D,EVP
W. Bridgewater, MA 02379
Donald T. Sena One Liberty Square AT,AC AT,AC
Boston, MA 02109
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
Boston, MA 02109
W. Nicholas Thorndike 150 Dudley Street
Brookline, MA 02146
Mark S. White Boott Mills South EVP, EVP EVP,
100 Foot of John Street AT,ACM ACM,AC
Lowell, MA 01852
</TABLE>
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued (2of2)
Part I. As of December 31, 1998. Names of System Companies with which Connected
<CAPTION>
EUA EUA EUA
Cogenex BIOTEN, Compression
West Corp. Inc. Services, Inc.
<S> <C> <C> <C>
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 D,CH D,CH
Boston, MA 02109
Robert G. Powderly P.O. Box 543 D,EVP D,EVP
W. Bridgewater, MA 02379
Donald T. Sena One Liberty Square AT,AC AT,AC
Boston, MA 02109
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 D D,P D,P
Boston, MA 02109
W. Nicholas Thorndike 150 Dudley Street
Brookline, MA 02146
Mark S. White Boott Mills South EVP,
100 Foot of John Street ACM,AC
Lowell, MA 01852
</TABLE>
ITEM 6. OFFICERS AND DIRECTORS - Continued
Part I. As of December 31, 1998.
KEY:
CH - Chairman of the Board T - Treasurer
VCH - Vice Chairman of the Board TR - Trustee
P - President CM - Comptroller
EVP - Executive Vice President AT - Assistant Treasurer
SVP - Senior Vice President S - Secretary
VP - Vice President AS - Assistant Secretary
C - Clerk
AC - Assistant Clerk
D - Director
CEO - Chief Executive Officer
COO - Chief Operating Officer
ACM - Assistant Comptroller
ITEM 6. OFFICERS AND DIRECTORS (continued)
Part II. As of December 31, 1998.
Position Held
Name of Name and Location of in Financial Applicable
Officer or Director Financial Institution Institution Exemption Rule
(1) (2) (3) (4)
Russell A. Boss Fleet Bank Director Rule 70(a)
Providence, RI
Paul J. Choquette, Jr. Fleet Financial Group Director Rule 70(a)
Providence, RI
Peter S. Damon Bank of Newport Trustee, Rule 70(a)
Newport, RI 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, 1998).
<TABLE>
ITEM 6. OFFICERS AND DIRECTORS (continued)
<CAPTION>
Part III.
(a) Information is set out below as to cash compensation paid by the
Association and its subsidiaries for the years 1998, 1997, and 1996
to each of the five highest paid executive officers of each Company
whose annual salary and bonus for the year exceeded $100,000.
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 1998 $443,525 $351,311 $14,100 $511,106 $14,865
Chairman 1997 428,525 167,112 12,747 232,617 13,775
1996 412,025 - 12,383 - 12,976
John R. Stevens 1998 $346,025 $296,026 $16,696 $408,811 $11,462
President 1997 334,325 133,665 11,763 232,617 10,726
1996 321,425 - 8,636 - 10,104
Robert G. Powderly 1998 $191,025 $145,743 $10,726 $142,105 $5,907
Executive Vice 1997 184,025 51,249 10,240 116,322 5,560
President 1996 176,025 - 10,210 - 5,321
John D. Carney 1998 $187,525 $145,743 $11,302 $142,105 $ 6,085
Executive Vice 1997 179,525 51,249 10,502 87,235 5,624
President 1996 169,525 - 10,018 - 5,108
Clifford J. Hebert, Jr. 1998 $148,025 $138,140 - $90,056 $4,699
Treasurer and 1997 136,025 28,417 - 116,322 4,078
Secretary 1996 129,525 - - - 3,846
</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(4) (3)
<S> <C> <C> <C> <C> <C> <C>
EUA Cogenex Corporation
Edward T. Liston 1998 $180,000 - $11,146 $ - $12,586
President 1997 168,525 - 11,146 82,195 8,966
1996 157,025 - 6,381 - 4,676
Mark S. White 1998 $132,504 - $10,077 $ - $8,390
Executive 1997 115,950 - 9,437 44,514 5,998
Vice President 1996 101,875 - 5,466 - 2,860
William A. Sifflard 1998 $110,000 - $9,502 $14,125 $6,949
Vice President 1997 105,525 - 8,122 25,128 5,423
1996 101,025 - 2,942 - 2,726
Darcy L. Immerman 1998 $110,000 - $9,458 $ - $6,826
Vice President 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, 43,841 shares, including 20,965 shares granted in 1998, 8,989 shares
granted in 1997 and 13,887 shares granted in 1995, $1,238,508; Mr. Stevens,
34,565 shares, including 16,769 shares granted in 1998, 8,989 shares granted
in 1997 and 8,807 shares granted in 1995, $976,461; Mr. Powderly, 13,412
shares, including 5,829 shares granted in 1998, 4,495 shares granted in 1997
and 3,088 shares granted in 1995, $378,889; Mr. Carney, 12,363 shares,
including 5,829 shares granted in 1998, 3,371 shares granted in 1997 and 3,163 shares
granted in 1995, $349,255; and Mr. Hebert, 9,834 shares, including 3,694 shares granted
in 1998, 4,495 shares granted in 1997 and 1,645 shares granted in 1995, $277,811.
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, $104,327; Mr. White, 2,000 shares
granted in 1997, $56,500; Mr. Sifflard, 1,129 shares granted in 1997, $31,894;
Ms. Immerman, 1,693 shares granted in 1997, $47,827. All of the shares
granted in 1997 remain held. With the exception of Mr. Sifflard's 1997
Restricted Stock award, which vest half; annually in each of the two years following
1997, Cogenex stock awards vest 1/3; annually in each of the three years subsequent to
year of the award. Because of restrictions on the sales of restricted stock, Mr. Liston's,
Mr. White's and Ms. Immerman's 1997 Restricted Stock Awards will vest 2/3 in 1999. Dividends
are paid on these shares.
(b) Securities Interest
</TABLE>
<TABLE>
Common Shares of the Association
Beneficially Owned at January 1, 1999(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 - 2,004 12,363 16,842
Paul J. Choquette 2,643 - - - 2,643(4)
Peter S. Damon 400 1,058 - - 1,458
Peter B. Freeman 2,500 - - - 2,500
Clifford J. Hebert, Jr. 3,459 - 2,588 9,834 15,881
Darcy L. Immerman - - 737 1,693 2,430
Larry A. Liebenow - 1,000 - - 1,000
Edward T. Liston 5,173 - 2,183 3,693 11,049
Jacek Makowski 200 - - - 200
Wesley W. Marple 2,585 - - - 2,585(5)
Donald G. Pardus - 21,029 6,388 43,841 71,258
Robert G. Powderly 4,775 282 2,549 13,412 21,018
William A. Sifflard 10 - 944 564 1,518
Margaret M. Stapleton 1,685 - - - 1,685
John R. Stevens 93 132 2,677 34,565 37,467
W. Nicholas Thorndike 2,146 - - - 2,146
Mark S. White 96 2 1,701 2,000 3,799
Trustees and Executive
Officers as a Group 31,812 24,364 37,721 164,294 258,391(6)
(1) Unless otherwise indicated, beneficial ownership is based on sole
investment and voting power. Each individual's ownership represents
less than four-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 363 EUA common shares.
Mr. Marple disclaims any beneficial interest in such shares.
(6) Represents approximately 1.3 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 and its subsidiaries (the "EUA
System") are not covered by the Pension Plan. The benefits of participants
become fully 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 $130,000 for 1999
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-six, thirty-three, thirty-two, eighteen
and twenty-two, 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
EUA 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.
EUA 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 available 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.
<TABLE>
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS
<CAPTION>
Accounts Charged
if any, Per Books
Name of Recipient of Disbursing
Name of Company or Beneficiary Purpose Company Amount
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Blackstone Tillinghast, Collins Lobbying 426.4 $19,250
& Graham Expenditures
Blackstone David Correira, Esq. Lobbying 426.4 23,100
Expenditures
Blackstone United Way Donations 426.1 20,000
Blackstone David Gulvin Lobbying 426.4 20,748
Expenditures
Blackstone Miscellaneous Donations 426.1 37,783
Donations less
than $10,000
Blackstone Edison Electric Lobbying 426.4 13,692
Institute Expenditures
Blackstone Miscellaneous Lobbying 426.4 250
Donations less Expenditures
than $10,000
Eastern Edison United Way Donations 426.1 44,655
Eastern Edison Stonehill College Donations 426.1 13,250
Eastern Edison Good Neighbor Donations 426.1 12,286
Energy Fund
Eastern Edison Miscellaneous Donations 426.1 14,772
Donations less
than $10,000
Eastern Edison Edison Electric Lobbying 426.4 28,560
Institute Expenditures
Eastern Edison Deregulation Lobbying 426.4 759,362
Repeal Movement Expenditures
Eastern Edison Retailers Associ- Lobbying 426.4 15,600
ation of Mass. Expenditures
Eastern Edison Associated Indus- Lobbying 426.4 10,000
tries of Mass., Inc. Expenditures
Eastern Edison Miscellaneous Lobbying 426.4 5,260
Donations less Expenditures
than $10,000
Newport United Way Donations 426.1 10,000
Newport Miscellaneous Donations 426.1 17,210
Donations less
than $10,000
Newport Edison Electric Lobbying 426.4 5,797
Institute Expenditures
Newport Tillinghast, Collins Lobbying 426.4 8,250
& Graham Expenditures
Newport David Correira, Esq. Lobbying 426.4 9,900
Expenditures
Newport David Gulvin Lobbying 426.4 9,010
Expenditures
Montaup Miscellaneous Donations 426.1 13,442
Donations Less than
$10,000
Montaup Seabrook #1 Lobbying 426.4 2,195
Expenditures
Montaup Millstone #3 Lobbying 426.4 1,171
Expenditures
</TABLE>
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, 1998 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, 1998 of
Eastern Utilities Associates and Subsidiary Companies, Eastern
Edison Company and Subsidiary, EUA Cogenex Corporation and
Subsidiaries, and EUA Energy Investment Corporation and
Subsidiaries.
3 - Consolidating Income Statements for the year ended December 31,
1998 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, 1998 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, 1998 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 (as amended) of EUA, Blackstone and Eastern Edison for
1998 (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 No. 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 of 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 10-K 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 EUA Energy Services, Inc. (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 Articles of Organization of EUA Compression Services, Inc.
B-44 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 1973).
C-3 Form of 10% Debenture Bonds due 2008 of Montaup (Exhibit
5-3, Registration No. 2-65785).
C-4 Form of 10-1/8% Debenture Bonds due 2008 of Montaup (Exhibit
4-13, Form 10-K of EUA for 1983, File No. 1-5366).
C-5 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-6 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-7 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-8 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 10-K of EUA for 1997, File
1-5366).
C- 9 Form of Eastern Edison Medium Term Note (Exhibit 4-36, Form 10-K
of Eastern Edison for 1990, File No. 0-8480).
C-10 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-11 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-12 Second Supplemental Indenture dated as of November 26, 1990 of
Blackstone (Exhibit 4-3, Form 10-K of Blackstone Valley Electric
for 1990, File No. 0-2602).
C-13 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-14 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-15 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-16 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-17 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-18 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-19 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-20 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-21 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-22 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-23 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-24 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-25 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-26 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-27 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-28 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-29 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-30 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-31 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).
(b) None.
*Exhibit D - Tax allocation agreement for 1999 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 1998, 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
April 29, 1999
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
ASSETS
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corp. Company Corp.
<S> <C> <C> <C> <C> <C> <C>
Utility plant and other investments:
Utility plant in service $1,000,242,694 $ $ $33,690,659 $144,119,713 $741,902,200
Less accumulated provision for depreciation
and amortization $353,779,690 14,735,781 60,534,231 26,208,462
Net utility plant in service 646,463,004 18,954,878 83,585,482 54,321,660
Construction work in progress 5,150,746 2,065,013 394,599
Net utility plant 651,613,750 18,954,878 85,650,495 54,716,259
Non-utility property 107,342,465 222,960
Less accumulated provision for depreciation 52,068,670 26,524
Net non-utility property 55,273,795 196,436
Investments in subsidiaries (at equity) 69,467,670 334,116,595 334,116,595
Excess of carrying values of investments
in subsidiaries 17,489 17,489
Other 55,320,140 1,000
Total Utility Plant and Other Investments 831,692,844 334,116,595 334,135,084 18,954,878 85,846,931 54,716,259
Current Assets:
Cash and temporary cash investments 32,089,677 2,422,127 178,220 142,475
Notes receivable 27,078,001 52,476,120 51,968,471
Accounts receivable - Net:
Customers 55,286,076 10,227,575 6,227,126
Accrued unbilled revenue 10,655,332 2,605,739 1,333,204
Others 29,325,915 5,655,774 1,613,697 804,898 4,664,386 1,523,141
Accounts receivable - associates companies 0 35,275,727 666,248 12,427,468 168,696 233,876
Materials and Supplies (at average cost):
Fuel 6,023,941 53,352
Plant materials and operating supplies 7,410,051 55,803 857,074 780,350
Other current assets 8,448,289 2,333,407 846,151 167,459 429,254 352,986
Total Current Assets 176,317,282 95,741,028 55,094,567 15,877,755 19,130,944 10,646,510
Deferred Debits:
Unamortized debt expense 3,380,715 42,395 535,901 358,179
Unrecovered regulatory plant costs(Note A) 58,502,840
Other deferred debits 232,744,125 32,898,528 440,211 28,630,998 6,183,043
Total Deferred Debits 294,627,680 32,898,528 482,606 29,166,899 6,541,222
Total Assets $1,302,637,806 $429,857,623 $422,128,179 $35,315,239 $134,144,774 $71,903,991
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
ASSETS (Continued)
EUA EUA
Eastern EUA Energy EUA EUA Telecomm-
Edison Cogenex Investment Energy Ocean unications
Consolidated Consolidated Consolidated Corporation Corpor. Corporation
<S> <C> <C> <C> <C> <C> <C>
Utility plant and other investments
Utility plant in service $741,902,200 $ $ $ $ $
Less accumulated provision for depreciation
and amortization 252,301,216
Net utility plant in service 489,600,984
Construction work in progress 2,691,134
Net utility plant 492,292,118
Non-utility property 2,497,881 101,313,953 3,307,671
Less accumulated provision for depreciation 9,697 49,897,327 2,135,122
Net non-utility property 2,488,184 51,416,626 1,172,549 0
Investments in subsidiaries (at equity) 12,881,094 516,949 7,235,277 48,834,350
Excess of carrying values of investments
in subsidiaries
Other 56,083 52,703,408 2,478,052 71,680 9,917
Total Utility Plant and Other Investments 507,717,479 104,636,983 10,885,878 71,680 48,834,350 9,917
Current Assets:
Cash and temporary cash investments 25,952,161 2,782,421 552,017 2,234 39,807 18,215
Notes receivable 16,379,692 11,205,958
Accounts receivable - Net:
Customers 24,685,525 13,388,014 757,836
Accrued unbilled revenue 6,716,389
Others 13,155,014 10,833,207 2,307,877 33,393 46,076
Accounts receivable - associates companies 18,628,277 2,117,667 633,581 399,814 100
Materials and Supplies (at average cost):
Fuel 5,970,589
Plant materials and operating supplies 3,993,798 827,311 895,715
Other current assets 4,753,504 2,038,807 2,185,204 8,331
Total Current Assets 103,855,257 48,367,119 18,538,188 435,441 48,138 64,391
Deferred Debits:
Unamortized debt expense 1,808,956 271,606 363,678
Unrecovered regulatory plant costs (Note A) 58,502,840
Other deferred debits 159,737,739 3,912,067 941,539
Total Deferred Debits 220,049,535 4,183,673 941,539 0 363,678 0
Total Assets $831,622,271 $157,187,775 $30,365,605 $507,121 $49,246,166 $74,308
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<CAPTION>
LIABILITIES Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corporation Company Corporation
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Common equity $373,674,149 $334,116,595 $373,718,061 $2,557,189 $41,658,390 $23,320,795
Non-redeemable preferred stock of sub. 6,900,625 6,129,500 771,050
Redeemable preferred stock of
subsidiaries - net 29,664,502
Preferred stock redemption cost (1,670,209)
Long-term debt - net 310,346,379 5,100,000 32,000,000 9,659,531
Total Capitalization 718,915,446 334,116,595 373,718,061 7,657,189 79,787,890 33,751,376
Current Liabilities:
Long-term debt due within one year 21,910,813 1,100,000 1,500,000 10,134,153
Notes payable 63,573,512 52,476,120 42,000,000 2,220,000
Accounts payable 29,018,449 67,320 438,383 684,145 667,948
Accounts payable - associated companies 0 35,275,727 1,233,308 336,545 13,641,506 8,254,307
Customer deposits 2,896,521 926,409 561,833
Taxes accrued 14,208,162 5,655,774 7,254 1,492,971 686,999
Interest accrued 6,997,135 2,333,407 523,954 316,200 778,803 419,007
Dividends accrued 64,980 72,188 (7,208)
Other current liabilities 31,945,655 1,206,199 1,573,979 4,277,638 2,067,591
Total Current Liabilities 170,615,227 95,741,028 45,030,781 3,772,361 23,373,660 25,004,630
Other Liabilities:
Unamortized investment credit 16,390,753 2,202,136 1,038,954
Other deferred credits and other liab. 254,687,043 2,723,475 22,603,470 15,496,221 2,903,419
Total Other Liabilities 271,077,796 2,723,475 22,603,470 17,698,357 3,942,373
Accumulated deferred taxes 142,029,337 655,862 1,282,219 13,284,867 9,205,612
Commitments and contingencies (Note J)
Total Liabilities and Capitalization $1,302,637,806 $429,857,623 $422,128,179 $35,315,239 $134,144,774 $71,903,991
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<CAPTION>
LIABILITIES (continued)
EUA EUA
Eastern EUA Energy EUA EUA Telecomm-
Edison Cogenex Investment Energy Ocean State unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Common equity $225,998,388 $48,361,220 ($24,203,924) ($34,086) $16,545,748 ($131,037)
Non-redeemable preferred stock of subs. 75
Redeemable preferred stock of
subsidiaries - net 29,664,502
Preferred stock redemption cost (1,670,209)
Long-term debt - net 162,549,952 77,400,000 23,636,896
Total Capitalization 416,542,633 125,761,295 (24,203,924) (34,086) 40,182,644 (131,037)
Current Liabilities:
Long-term debt due within one year 6,700,000 2,476,660
Notes payable 16,108,438 51,779,436 540,195 3,190,000 211,563
Accounts payable 25,502,231 1,505,513 150,930 1,979 0
Accounts payable - associated companies 8,987,251 1,132,715 1,666,815 3,558 16,477 3,245
Customer deposits 1,408,279 0
Taxes accrued 17,360,688 62,725 3,647 249,652
Interest accrued 3,560,655 1,187,797 2,326,419 4,982 210,720 2,005
Dividends accrued
Other current liabilities 17,316,856 5,354,453 148,639 300
Total Current Liabilities 74,135,960 32,051,641 56,075,886 548,735 6,145,788 216,813
Other Liabilities:
Unamortized investment credit 13,149,663
Other deferred credits and other liabilities 208,150,839 3,706,643 (897,024)
Total Other Liabilities 221,300,502 3,706,643 (897,024) 0 0
Accumulated deferred taxes 119,643,176 (4,331,804) (609,333) (7,528) 2,917,734 (11,468)
Commitments and contingencies (Note J)
Total Liabilities and Capitalization $831,622,271 $157,187,775 $30,365,605 $507,121 $49,246,166 $74,308
( ) 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, 1998
(1 of 2)
<CAPTION>
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corporation Company Corporation
<S> <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
Other paid-in capital 218,959,339 133,114,783 218,959,339 2,100,000 17,907,931 9,000,000
Common share expense (3,930,680) (742,214) (3,886,768) (742,214)
Retained earnings 56,465,505 108,887,118 56,465,505 456,189 14,547,359 3,694,230
Total Common Equity 373,674,149 334,116,595 373,718,061 2,557,189 41,658,390 23,320,795
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, 7,600 share(2) 768,900 768,900
$.01 par value, 7,500 shares(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 shares(4) 30,000,000
Expense, net of premium (335,498)
Preferred stock redemption cost (1,670,209)
Total Redeemable 27,994,293
Long-Term Debt:
Secured Notes:
10.2% due 2008 6,200,000 6,200,000
Unsecured Notes:
9.59% due 2011 26,113,556
7% due 2000 50,000,000
9.6% due 2001 9,600,000
10.56% due 2005 24,500,000
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 Collateral Trust Bonds:
6.875% due 2003 40,000,000
8% due 2023 40,000,000
6.35% due 2003 8,000,000
7.78% Secured medium-term notes due 2002 35,000,000
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED)
DECEMBER 31, 1998
(1 of 2)
<CAPTION>
EUA
Eastern EUA EUA EUA EUA Telecomm-
Edison Cogenex Energy Inv. Energy Ocean State unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Common Equity:
Common shares, $5 par value of Registrant(1) $72,283,925 $100 $1 $1 $1 $1
Other paid-in capital 47,249,633 47,046,923 999 999 9,808,199 99
Common share expense (43,912)
Retained earnings 106,508,742 1,314,197 (24,204,924) (35,086) 6,737,548 (131,137)
Total Common Equity 225,998,388 48,361,220 (24,203,924) (34,086) 16,545,748 (131,037)
Non-Redeemable Preferred:
4.25%, $100 par value, 35,000 shares(2)
5.60%, $100 par value, 25,000 shares (2)
3.75%, $100 par value, 7,689 shares (2)
$.01 par value, 7,500 shares (3) 75
Premium, net of expense
Total Non-Redeemable 75
Redeemable Preferred:
6.625%, $100 par value, 300,000 shares(4) 30,000,000
Expense, net of premium (335,498)
Preferred stock redemption (1,670,209)
Total Redeemable 27,994,293
Long-Term Debt:
Secured Notes:
10.2% due 2008
Unsecured Notes:
9.59% due 2011 26,113,556
7% due 2000 50,000,000
9.6% due 2001 9,600,000
10.56% due 2005 24,500,000
Variable Rate Bonds:
Demand due 2014 (5)
Revenue Refunding due 20
First Mortgage and Collateral Trust Bonds:
6.875% due 2003 40,000,000
8% due 2023 40,000,000
6.35% due 2003 8,000,000
7.78% Secured medium-term notes due 2002 35,000,000
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1998
(2 0F 2)
<CAPTION>
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corporation Company Corporation
<S> <C> <C> <C> <C> <C> <C>
Long-Term Debt (continued):
Pollution Control Revenue Bonds:
5.875% due 2008 40,000,000
First Mortgage Bonds:
9.5% due 2004 (Series B) 9,000,000 9,000,000
10.35% due 2010 (Series C) 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 1,950,000 1,950,000
Second Mortgage Bonds:
6.5% SBA Loan due 2005 532,684 532,684
Unamortized (Discount) - Net (450,048)
332,257,192 6,200,000 33,500,000 19,793,684
Less portion due within one year 21,910,813 1,100,000 1,500,000 10,134,153
Total Long-Term Debt 310,346,379 5,100,000 32,000,000 9,659,531
Total Capitalization $718,915,446 $334,116,595 $373,718,061 $7,657,189 $79,787,890 $33,751,376
(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 net income of Citizens Conservation Services divided by 7,500.
(4) Authorized 400,000 shares, outstanding 300,000.
(5) Weighted average interest rate was 3.6% for 1998.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (Continued)
DECEMBER 31, 1998
(2 0F 2)
<CAPTION>
EUA
Eastern EUA EUA EUA EUA Telecomm-
Edison Cogenex Energy Inv. Energy Ocean State unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Long-Term Debt (continued):
Pollution Control Revenue Bonds:
5.875% due 2008 40,000,000
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 (450,048)
162,549,952 84,100,000 26,113,556
Less portion due within one year 6,700,000 2,476,660
Total Long-Term Debt 162,549,952 77,400,000 23,636,896
Total Capitalization $416,542,633 $125,761,295 ($24,203,924 ($34,086) $40,182,644 ($131,037)
(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 net income of Citizens Conservation Services divided by 7,500.
(4) Authorized 400,000 shares, outstanding 300,000.
(5) Weighted average interest rate was 3.6% for 1998.
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corporation Company Corporation
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $538,801,238 $117,806,833 $ $130,202,261 $59,454,977
Operating Expenses:
Operation 364,660,086 166,621,901 1,639,821 49,186,441 101,612,700 43,750,269
Maintenance 20,143,183 1,181,326 1,810 1,181,433 2,738,942 2,171,175
Depreciation and amortization 51,079,365 1,279,546 2,986 1,283,718 6,251,411 2,917,801
Taxes other than income 23,322,536 2,662,101 9,223 2,677,837 7,593,543 3,981,128
Income Taxes - Current (credit) 34,488,434 71,765 225,232 997,295 1,629,537
- Deferred (credit) (15,015,015) (44,337) (65,350) 25,564 2,248,006 87,374
Total Operating Expenses 478,678,589 171,772,302 1,588,490 54,580,225 121,441,897 54,537,284
Operating Income 60,122,649 (53,965,469) (1,588,490) (54,580,225) 8,760,364 4,917,693
Other Income and Deductions:
Interest and dividend income 7,801,220 2,886,713 2,768,443 3,220 47,422 43,380
Equity in earnings of jointly -
owned companies 9,524,297 32,570,328 32,570,328
Allowance for other funds used during
construction 172,817
Loss on Disposal of Cogenera (3,171,904)
Income Tax Impact of Loss on Disposal of
Cogeneration Operations 1,110,166
Other (deductions) income - net (1,345,161) 54,595,293 2,346,765 55,492,619 (118,696) 22,351
Total Other Income 14,091,435 90,052,334 37,685,536 55,495,839 (71,274) 65,731
Income Before Interest 74,214,084 36,086,865 36,097,046 915,614 8,689,090 4,983,424
Interest Charges:
Interest on long-term debt 28,287,600 632,400 3,029,507 1,417,243
Amortization of debt expense 1,812,612 17,618 82,023 93,639
Other interest expense (principally
short-term notes) 7,745,065 3,516,537 1,386,711 3,753 787,854 652,062
Allowance for borrowed funds used during
construction (credit) (646,612) (114,848) (36,660)
Total Interest Charges 37,198,665 3,516,537 1,386,711 653,771 3,784,536 2,126,284
Net Income 37,015,419 32,570,328 34,710,335 261,843 4,904,554 2,857,140
Preferred Dividends Requirement 2,305,084 288,750 28,834
Earnings available for common
shareholders $34,710,335 32,570,328 $34,710,335 $261,843 $4,615,804 $2,828,306
Weighted average shares outstanding 20,435,997
Basic and Diluted Earnings per shares $1.70
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
EUA
Eastern EUA EUA EUA EUA Telecomm-
Edison Cogenex Energy Inv. Energy Ocean State unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $408,229,510 $54,775,898 $3,945,425 $ $ $
Operating Expenses:
Operation 287,804,170 38,212,310 8,724,671 29,362 173,371 148,872
Maintenance 14,062,986 1,164,195 35 569 3,173 191
Depreciation and amortization 29,636,098 11,760,691 462,663 37,822 2,788 2,933
Taxes other than income 10,779,967 799,303 130,918 1,247 7,419 4,052
Income Taxes - Current (credit) 34,706,644 (1,225,268) (2,297,779) 130,671 (1,077,005) (45,620)
- Deferred (credit) (16,389,383) (891,761) (53,143) (2,324) (6,867) (11,468)
Total Operating Expenses 360,600,482 49,819,470 6,967,365 197,347 (897,121) 98,960
Operating Income 47,629,028 4,956,428 (3,021,940) (197,347) 897,121 (98,960)
Other Income and Deductions:
Interest and dividend income 616,157 6,032,720 1,176,528 15 43 5
Equity in earnings of jointly-
owned companies 1,389,623 (1,189,761) 9,324,435
Allowance for other funds used during
construction 172,817
Loss on Disposal of Cogeneration assets (3,171,904)
Income Tax Impact of Loss on
Cogeneration Operations 1,110,166
Other (deductions) income - net (2,261,435) (959,292) 462,299 353 (3,251,144) (180)
Total Other Income (82,838) 3,011,690 449,066 368 6,073,334 (175)
Income Before Interest Charges 47,546,190 7,968,118 (2,572,874) (196,979) 6,970,455 (99,135)
Interest Charges:
Interest on long-term debt 13,072,670 7,473,149 2,662,631
Amortization of debt expense and premium 1,591,357 27,975
Other interest expense (principally
short-term notes) 3,437,747 2,027,380 2,713,598 31,404 213,905 7,188
Allowance for borrowed funds used during
construction (credit) (261,384) (233,720)
Total Interest Charges 17,840,390 9,266,809 2,713,598 31,404 2,904,511 7,188
Net Income 29,705,800 (1,298,691) (5,286,472) (228,383) 4,065,944 (106,323)
Preferred Dividends Requirement 1,987,500
Earnings available for common
shareholders $27,718,300 ($1,298,691) ($5,286,472) ($228,383) $4,065,944 ($106,323)
Weighted average shares outstanding
Basic and Diluted Earnings per share
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Eliminations Associates Corporation Company Corporation
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $37,015,419 $32,570,328 $34,710,335 $261,843 $4,904,554 $2,857,140
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and amortization 56,307,683 1,768,817 1,301,336 6,904,871 2,858,807
Amortization of nuclear fuel 1,265,313
Deferred taxes (17,854,333) (1,952,215) 25,564 2,258,092 92,382
Non-cash (gains)/expenses on sales of investment
in energy savings projects 10,001,810
Investment tax credit, net (3,081,151 (178,209) (85,320)
Allowance for other funds used during constr. (172,817)
Collections and sales of project notes and
leases receivable 17,260,531
Other - net (1,513,838) (6,793,027) (17,431,594) 5,603,717 (1,752,486) (1,184,820)
Changes in Operating Assets and Liabilities:
Accounts receivable (2,620,744) (8,720,466) (700,076) (2,056,119) (2,544,960) (1,506,020)
Materials and supplies (2,232,332) 3,427 (97,793) (80,004)
Notes receivable (1,245,549) (13,670,373) (13,670,374)
Accounts payable (6,018,140) 7,276,584 (1,075,793) (337,155) 5,033,955 (1,021,287)
Accrued taxes 11,144,954 2,895,034 0 (5,835) (572,004) 155,648
Other - net (1,317,460) (1,451,153) (294,589) 328,633 (3,959,102) 605,781
Net Cash Provided from (Used in) Operating
Activities 96,939,346 12,106,927 1,354,511 5,125,411 9,996,918 2,692,307
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (51,200,853) 0 (1,511,803) (5,988,855) (2,851,565)
Collections on notes and lease receivable
of EUA Cogenex 11,558,419
Proceeds from divestiture of generation Assets 76,873,288 1,566,500
Other investments (2,070,970)
Investments in subsidiaries 0 200,000 200,000
Net Cash Used in Investing Activities 35,159,884 200,000 200,000 (1,511,803) (5,988,855) (1,285,065)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemptions of long-term debt (73,122,584) (1,700,000) (1,500,000) (745,924)
EUA common share dividends paid (33,923,775) (26,484,950) (33,923,775) (600,000) (1,049,154) (1,880,000)
Subsidiary preferred dividends paid (2,305,084 (288,750) (28,834)
Net increase (decrease) in short-term debt 2,089,917 14,178,023 32,200,000 (1,400,000) 1,220,000
Net Cash (Used in) Provided from Financing Act. (107,261,526) (12,306,927) (1,723,775) (2,300,000) (4,237,904) (1,434,758)
NET INCREASE (DECREASE) IN CASH 24,837,704 (169,264) 1,313,608 (229,841) (27,516)
Cash and temporary cash investments at
beginning of year 7,251,973 169,264 1,108,519 408,061 169,991
Cash and temporary cash investments at
end of year $32,089,677 $0 $2,422,127 $178,220 $142,475
Cash paid during the year for:
Interest (net of amount capitalized) $37,086,950 $1,385,603 $722,700 $3,243,155 $1,706,437
Income Taxes (Refund) $25,975,691 $312,494 $388,503 $1,957,466 $1,439,842
Conversion of investments in energy savings projects
to notes and leases receivable $4,528,788
( ) 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, 1998
<CAPTION>
EUA EUA
Eastern EUA Energy EUA EUA Telecomm-
Edison Cogenex Investment Energy Ocean State unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $29,705,800 ($1,298,691) ($5,286,472) ($228,383) $4,065,944 ($106,323)
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities
Depreciation and amortization 31,090,632 11,972,188 342,891 37,398 27,975 2,768
Amortization of nuclear fuel 1,265,313
Deferred taxes (17,278,806) (628,047) 65,063 (2,324) (422,574) (11,468)
Non-cash (gains)/expenses on sales of Invest.
in energy savings projects 10,001,810
Investment tax credit, net (2,817,622)
Allowance for other funds used during const. (172,817)
Collections and sales of project notes and
leases receivable 17,260,531
Other - net 2,525,221 1,646,021 (729,653) (10,000) 3,024,266 2,463
Changes in Operating Assets and Liabilities
Accounts receivable (8,264,502) 4,231,839 (631,237) 162,124 (32,259)
Materials and supplies (1,982,062) 2,787 (78,687)
Notes receivable (1,245,548)
Accounts payable 59,736 (1,767,098) 452,629 (4,841) (29,833) (51,869)
Accrued taxes 15,036,097 (192,110) (43,402) (338,406) 0
Other - net 1,283,766 (271,006) (449,285) 70 (14,887) 2,006
Net Cash Provided from (Used in)
Operating Activities 50,450,756 40,958,224 (7,603,701) (45,956) 6,312,485 (194,682)
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (14,047,091) (26,774,878) (26,661) 0
Collections on notes and lease receivables
of EUA Cogenex 11,558,419
Proceeds from divestiture of generation Assets 75,306,788
Other investments 248,678 3,853,374 (6,173,022)
Investments in subsidiaries
Net Cash Used in Investing Activities 61,508,375 (11,363,085) (6,199,683) 0 0 0
CASH FLOW FROM FINANCING ACTIVITIES:
Redemptions of long-term debt (60,000,000) (6,700,000) (2,476,660) 0
EUA common share dividends paid (19,805,796) (3,150,000) 0
Subsidiary preferred dividends paid (1,987,500)
Net increase (decrease) in short-term (4,675,000) (24,585,083) 13,932,612 33,848 (670,000) 211,563
Net Cash (Used in) Provided from Financing Act. (86,468,296) (31,285,083) 13,932,612 33,848 (6,296,660) 211,563
NET INCREASE (DECREASE) IN CASH 25,490,835 (1,689,944) 129,228 (12,108) 15,825 16,881
Cash and temporary cash investments at beginning
of year 461,326 4,472,365 422,789 14,342 23,982 1,334
Cash and temporary cash investments at end of year $25,952,161 $2,782,421 $552,017 $2,234 $39,807 $18,215
Cash paid during the year for:
Interest (net of amount capitalized) $16,188,035 $9,086,848 $2,289,084 $0 $2,465,088 $0
Income Taxes (refund) $22,445,502 ($1,171,503) ($2,281,407) ($31,454) $2,929,313 ($13,065)
Conversion of investments in energy savings projects
to notes and leases receivable $4,528,788
( ) 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, 1998
<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 $56,061,427 $102,984,222 56,061,427 594,346 10,980,709 2,745,924
Additions:
Net Income (Loss) 37,015,419 32,570,328 34,710,335 261,843 4,904,554 2,857,140
Total 93,076,846 135,554,550 90,771,762 856,189 15,885,263 5,603,064
Deductions:
Dividends:
Preferred - subsidiaries 2,305,084 288,750 28,834
Common - subsidiaries 26,284,950 400,000 1,049,154 1,880,000
Common - registrant - $1.660
per share 33,923,775 33,923,775
Total Dividends 36,228,859 26,284,950 33,923,775 400,000 1,337,904 1,908,834
Other 382,482 382,482 382,482
Total Deductions 36,611,341 26,667,432 34,306,257 400,000 1,337,904 1,908,834
Balance of retained earnings at end
of period 56,465,505 108,887,118 56,465,505 456,189 14,547,359 3,694,230
Other Paid-In Capital at Beginning of yr. $219,156,027 $219,156,027
Additions:
Amortization restricted stock costs 1,562,861 1,562,861
Other 65,301 65,301
Deductions:
Restricted Stock Issue and Grant Provision 1,746,366 1,746,366
Currency Conversion 78,484 78,484
Other Paid-In Capital at End of Year $218,959,339 $218,959,339
( ) 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 (Continued)
DECEMBER 31, 1998
<CAPTION>
EUA EUA
Eastern EUA Energy EUA EUA Telecomm-
Edison Cogenex Investment Energy Ocean State unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Balance of retained earnings at
beginning of year 98,978,720 477,171 (16,782,735) 193,297 5,821,604 (24,814)
Additions:
Net Income (Loss) 29,705,800 (1,298,691) (5,286,472) (228,383) 4,065,944 (106,323)
Total 128,684,520 (821,520) (22,069,207) (35,086) 9,887,548 (131,137)
Deductions:
Dividends:
Preferred - subsidiaries 1,987,500
Common - subsidiaries 19,805,796 0 3,150,000
Common - registrant - $1.660 per share
Total Dividends 21,793,296 0 3,150,000 0
Other 382,482 (2,135,717) 2,135,717
Total Deductions 22,175,778 (2,135,717) 2,135,717 0 3,150,000
Balance of retained earnings at end of period 106,508,742 1,314,197 (24,204,924) (35,086) 6,737,548 (131,137)
Other Paid-In Capital at Beginning of Year
Additions:
Amortization restricted stock costs
Sale of EUA Common Shares
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, 1998
ASSETS
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Utility plant and other investments:
Utility plant in service $741,902,200 $ $245,699,700 $496,202,500
Less accumulated provision for
depreciation and amortization 252,301,216 96,143,250 156,157,966
Net utility plant in service 489,600,984 149,556,450 340,044,534
Construction work in progress 2,691,134 1,384,141 1,306,993
Net utility plant 492,292,118 150,940,591 341,351,527
Non-utility property 2,497,881 105,735 2,392,146
Less accumulated provision for
depreciation 9,697 9,697
Net non-utility property 2,488,184 96,038 2,392,146
Investments in subsidiaries (at equity) 12,881,094 266,498,824 266,498,824 12,881,094
Other 56,083 10,405 45,678
Total Utility Plant and Other
Investments 507,717,479 266,498,824 417,545,858 356,670,445
Current Assets:
Cash and temporary cash investments 25,952,161 25,798,213 153,948
Accounts receivable - Net:
Customers 24,685,525 22,706,500 1,979,025
Accrued unbilled revenue 6,716,389 6,225,533 490,856
Others 13,155,014 11,699,386 1,455,628
Accounts receivable - associated
companies 18,628,277 64,892,768 16,883,047 66,637,998
Materials and supplies (at average cost):
Fuel 5,970,589 5,970,589
Plant materials and operating supplies 3,993,798 1,952,793 2,041,005
Other current assets 4,753,504 692,576 4,060,928
Total Current Assets 103,855,257 64,892,768 85,958,048 82,789,977
Deferred Debits:
Unamortized debt expense 1,808,956 1,787,183 21,773
Unrecovered regulatory plant costs
(Note A) 58,502,840 58,502,840
Other deferred debits 159,737,739 16,751,760 142,985,979
Total Deferred Debits 220,049,535 18,538,943 201,510,592
Total Assets $831,622,271 $331,391,592 $522,042,849 $640,971,014
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
LIABILITIES
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Capitalization:
Common equity $225,998,388 $147,017,241 $225,998,388 $147,017,241
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 (1,670,209) (1,670,209)
Long-term debt - net 162,549,952 117,981,583 162,549,952 117,981,583
Total Capitalization 416,542,633 266,498,824 416,542,633 266,498,824
Current Liabilities:
Accounts payable 25,502,231 1,303,109 24,199,122
Accounts payable - associated companies 8,987,251 59,782,899 55,605,640 13,164,510
Customer deposits 1,408,279 1,408,279
Taxes accrued 17,360,688 (2,230,443) 19,591,131
Interest accrued 3,560,655 5,109,869 3,560,655 5,109,869
Other current liabilities 17,316,856 9,622,282 7,694,574
Total Current Liabilities 74,135,960 64,892,768 69,269,522 69,759,206
Other Liabilities:
Unamortized investment credit 13,149,663 3,309,800 9,839,863
Other deferred credits and other liabilities 208,150,839 12,845,113 195,305,726
Total Other Liabilities 221,300,502 16,154,913 205,145,589
Accumulated deferred taxes 119,643,176 20,075,781 99,567,395
Commitments and contingencies (Note J)
Total Liabilities and Capitalization $831,622,271 $331,391,592 $522,042,849 $640,971,014
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1998
<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 106,508,742 58,889,241 106,508,742 58,889,241
Total Common Equity 225,998,388 147,017,241 225,998,388 147,017,241
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 (1,670,209) (1,670,209)
Total Redeemable 27,994,293 1,500,000 27,994,293 1,500,000
Long-Term Debt:
First Mortgage and Collateral Trust Bonds:
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 due 2002 35,000,000 35,000,000
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
10% due 2008 9,275,000 9,275,000
12.375% due 2013 30,000,000 30,000,000
10.125% due 2008 27,406,583 27,406,583
9% due 2020 5,000,000 5,000,000
9.375% due 2020 25,000,000 25,000,000
Unamortized (Discount) - Net (450,048) (450,048)
Total Long-Term Debt 162,549,952 117,981,583 162,549,952 117,981,583
Total Capitalization $416,542,633 $266,498,824 $416,542,633 $266,498,824
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Operating Revenues $408,229,510 $176,055,969 $259,617,863 $324,667,616
Operating Expenses:
Operation 287,804,170 176,055,969 216,760,369 247,099,770
Maintenance 14,062,986 4,904,932 9,158,054
Depreciation and amortization 29,636,098 10,636,025 19,000,073
Taxes other than income 10,779,967 4,604,408 6,175,559
Income Taxes - Current 34,706,644 4,728,205 29,978,439
- Deferred (16,389,383) 5,547,986 (21,937,369)
Total Operating Expenses 360,600,482 176,055,969 247,181,925 289,474,526
Operating Income 47,629,028 12,435,938 35,193,090
Other Income and Deductions:
Interest and dividend income 616,157 21,725,724 20,219,085 2,122,796
Equity in earnings of jointly-owned
companies 1,389,623 15,529,886 15,529,886 1,389,623
Allowance for other funds used during
construction 172,817 0 172,817
Other (deductions) income - net (2,261,435) (788,193) (1,473,242)
Total Other Income (82,838) 37,255,610 34,960,778 2,211,994
Income Before Interest Charges 47,546,190 37,255,610 47,396,716 37,405,084
Interest Charges:
Interest on long-term debt 13,072,670 19,973,119 13,072,670 19,973,119
Amortization of debt expense and premium 1,591,357 429,801 1,161,556
Other interest expense (principally
short-term notes) 3,437,747 1,752,605 4,349,442 840,910
Allowance for borrowed funds used during
construction - (credit) (261,384) (160,997) (100,387)
Total Interest Charges 17,840,390 21,725,724 17,690,916 21,875,198
Net Income 29,705,800 15,529,886 29,705,800 15,529,886
Preferred Dividends Requirement 1,987,500 1,987,500
Earnings Available for Common
Stockholders $27,718,300 $15,529,886 $27,718,300 $15,529,886
Weighted average shares outstanding 2,891,357
Earnings per share $9.59
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $29,705,800 $15,529,886 $29,705,800 $15,529,886
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and amortization 31,090,632 10,587,736 20,502,896
Amortization of nuclear fuel 1,265,313 1,265,313
Deferred taxes (17,278,806) 5,568,338 (22,847,144
Investment tax credit, net (2,817,622) (303,708) (2,513,914)
Allowance for other funds used during
construction (172,817) 0 (172,817)
Other - Net 2,525,221 13,224,177 26,097,709 (10,348,311
Changes in Operating Assets and Liabilities:
Accounts receivable (8,264,502) (25,378,328) (13,739,796) (19,903,034
Materials and supplies (1,982,062) (226,463) (1,755,599)
Accounts payable 59,736 25,399,958 17,008,600 8,451,094
Accrued taxes 15,036,097 (3,500,109) 18,536,206
Other - net 1,283,766 (21,631) (4,664,720) 5,926,855
Net Cash Provided from Operating
Activities 50,450,756 28,754,062 66,533,387 12,671,431
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (14,047,091) (9,554,389) (4,492,702)
Proceeds from divestiture of generation assets 75,306,788 0 75,306,788
Decrease in other investments 248,678 55,000,000 55,000,000 248,678
Net Cash Provided From Investing Activities 61,508,375 55,000,000 45,445,611 71,062,764
CASH FLOW FROM FINANCING ACTIVITIES:
Redemptions:
Long-term debt (60,000,000) (54,729,382) (60,000,000) (54,729,382
Eastern Edison common share dividends paid (19,805,796) (28,774,480) (19,805,796) (28,774,480
Preferred dividends paid (1,987,500) (250,200) (1,987,500) (250,200)
Net Decrease in short-term debt (4,675,000) (4,675,000)
Net Cash (Used In) Financing Activities (86,468,296) (83,754,062) (86,468,296) (83,754,062
NET INCREASE IN CASH 25,490,835 25,510,702 (19,867)
Cash and temporary cash investments
at beginning of year 461,326 287,511 173,815
Cash and temporary cash investments
at end of year $25,952,161 $0 $25,798,213 $153,948
Cash paid during the year for:
Interest (Net of Amounts Capitalized) $16,188,035 $19,994,750 $16,258,847 $19,923,938
Income Taxes $22,445,502 $8,541,816 $13,903,686
( ) Denotes Contra
</TABLE>
<TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1998
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Balance of retained earnings at begin. of yr. $98,978,720 $72,384,036 $98,978,720 $72,384,036
Additions:
Net Income 29,705,800 15,529,886 29,705,800 15,529,886
Total 128,684,520 87,913,922 128,684,520 87,913,922
Deductions:
Dividends:
Preferred 1,987,500 250,200 1,987,500 250,200
Common 19,805,796 28,774,480 19,805,796 28,774,480
Total Dividends 21,793,296 29,024,680 21,793,296 29,024,680
Other 382,482 382,482
Total Deductions 22,175,778 29,024,680 22,175,778 29,024,680
Balance of retained earnings at end of period $106,508,742 $58,889,242 $106,508,742 $58,889,242
( ) Denotes Contra
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
ASSETS
EUA
EUA EUA EUA EUA Day Matrix
Cogenex Cogenex Nova Day (fka Day I & II
Consolidated Eliminations (Division) (Division) (Division) (Division)
<S> <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 101,313,953 50,541,931 2,556,140 1,150,027
Less accumulated provision for depreciation 49,897,327 27,780,132 971,799 673,919
Net non-utility property 51,416,626 22,761,799 1,584,341 476,108
Investments in subsidiaries (at equity) 516,949 41,241,600 41,758,549
Excess of carrying values of investments
in subsidiaries
Notes receivable 26,395,990 23,396,887
Leases receivable 14,538,275 9,687,718
Other 11,769,143 6,167,797
Total Utility Plant and Other Invest. 104,636,983 41,241,600 103,772,750 1,584,341 476,108
Current Assets:
Cash and temporary cash investments 2,782,421 (210,746) 1,359,116
Notes receivable 14,698,118 15,724,861 27,796,512 2,324,534
Leases receivable 1,681,574 733,806
Accounts receivable - Net:
Customers 13,388,014 5,769,978 1,955,737
Accrued unbilled revenue
Others 10,833,207 8,198,902 4,136 (293)
Accounts receivable - associated companies 2,117,667 9,190,971 9,063,420 643,484
Materials and supplies (at average cost):
Plant materials and operating supplies 827,311 15,353 197,874 486,707
Other current assets 2,038,807 1,711,594 3,673,313 45,994
Total Current Assets 48,367,119 26,627,426 55,040,538 6,530,875 486,414
Deferred Debits:
Unamortized debt expense 271,606 271,606
Unrecovered regulatory plant costs
Other deferred debits 3,912,067 2,518,735 1,118
Total Deferred Debits 4,183,673 2,790,341 1,118
Total Assets $157,187,775 $67,869,026 $161,603,629 $ $8,116,334 $962,522
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
ASSETS (CONTINUED)
EUA
EUA EUA EUA Cogene EUA
NEM Cogenex Citizens West MUPA
Inc. Canada Corporation Corporation (Partnership)
<S> <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 8,493,365 5,654 4,502,114 1,629,162
Less accumulated provision for depreciation 4,024,619 326 1,017,072 683,229
Net non-utility property 4,468,746 5,328 3,485,042 945,933
Investments in subsidiaries (at equity)
Excess of carrying values of investments
in subsidiaries
Notes receivable (22,777) 2,845,721
Leases receivable 1,940,266
Other 8,353 22,305 100,259 4,869,186 (3,978)
Total Utility Plant and Other Investments 4,477,099 4,856 3,585,301 10,601,106 (3,978)
Current Assets:
Cash and temporary cash investments 18,120 317,043 27,488 157,788
Notes receivable 32,834 151,573
Leases receivable 293,406
Accounts receivable - Net:
Customers 784,345 301,740 1,374,791 1,102,218 (15,552)
Accrued unbilled revenue
Others (86,047) 95 550,316 331,582
Accounts receivable - associated companies 67,253 124,415
Materials and supplies (at average cost):
Plant materials and operating supplies 127,377
Other current assets 427 4,950 25,717
Total Current Assets 716,418 652,139 2,024,798 2,314,076 (15,552)
Deferred Debits:
Unamortized debt expense
Unrecovered regulatory plant costs
Other deferred debits 1,062,379 10,924 202,351 64,924 15,552
Total Deferred Debits 1,062,379 10,924 202,351 64,924 15,552
Total Assets $6,255,896 $667,919 $5,812,450 $12,980,106 ($3,978)
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
ASSETS (CONTINUED)
EUA EUA EUA EUA
WestCoast FRC II EC&S I EC&S II
(Partn.) (Partn.) (Partn.) (Partnership)
<S> <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 2,038,920 77,490 11,742,210 18,576,940
Less accumulated provision for depreciation 1,945,691 77,490 3,213,964 9,509,086
Net non-utility property 93,229 8,528,246 9,067,854
Investments in subsidiaries (at equity)
Excess of carrying values of investments
in subsidiaries
Notes receivable 176,159
Leases receivable 1,094,303 1,815,988
Other 238,967 82,325 220,156 63,773
Total Utility Plant and Other Investments 332,196 82,325 10,018,864 10,947,615
Current Assets:
Cash and temporary cash investments 89,182 52,909 561,381 410,140
Notes receivable 117,526
Leases receivable 145,842 508,520
Accounts receivable - Net:
Customers 13,917 (35,602) 1,100,890 1,035,552
Accrued unbilled revenue
Others 735,789 214,574 884,153
Accounts receivable - associated companies 285,607 1,124,459
Materials and supplies (at average cost):
Plant materials and operating supplies
Other current assets
Total Current Assets 956,414 17,307 2,308,294 3,962,824
Deferred Debits:
Unamortized debt expense
Unrecovered regulatory plant costs
Other deferred debits 35,603 481
Total Deferred Debits 35,603 481
Total Assets $1,288,610 $135,235 $12,327,639 $14,910,439
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
LIABILITIES EUA
EUA EUA EUA EUA Day Matrix
Cogenex Cogenex Nova Day (fka Day I&II
Consolidated Eliminations (Division) (Division) (Division) (Division)
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Common equity $22,142,227 $41,251,598 $48,911,875 $ $1,874,631 ($2,336,588)
Non-redeemable preferred stock of subsidiaries
Redeemable preferred stock of subsidiaries 75
Preferred stock redemption cost
Partnerships' capital 26,218,993
Long-term debt - net 77,400,000 77,400,000
Total Capitalization 125,761,295 41,251,598 126,311,875 1,874,631 (2,336,588)
Current Liabilities:
Preferred stock sinking fund requirements
Long-term debt due within one year 6,700,000 6,700,000
Notes payable 16,108,438 15,724,861 16,160,000 1,801,059 3,001,070
Accounts payable 1,505,513 678,503 760,189
Accounts payable - associated companies 1,132,715 9,190,972 3,343,611 2,880,581 230,003
Customer deposits
Taxes accrued 62,725 5,683 14,457
Interest accrued 1,187,797 1,711,595 1,187,797 479,302 68,037
Dividends declared
Other current liabilities 5,354,453 4,160,988 41,466
Total Current Liabilities 32,051,641 26,627,428 32,236,582 5,977,054 3,299,110
Deferred Credits:
Unamortized investment credit
Other deferred credits 3,706,643 (10,000) 3,198,323 264,649
Total Deferred Credits 3,706,643 (10,000) 3,198,323 264,649
Accumulated deferred taxes (4,331,804) (143,151)
Commitments and contingencies
Total Liabilities and Capitalization $157,187,775 $67,869,026 $161,603,629 $ $8,116,334 $962,522
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
LIABILITIES (CONTINUED) EUA
EUA EUA EUA Cogenex
NEM Cogenex Citizens West
Inc. Canada Corporation Corporation
<S> <C> <C> <C> <C>
Capitalization:
Common equity $9,134,328 $706,905 $445,607 $4,657,067
Non-redeemable preferred stock of subsidiaries
Redeemable preferred stock of subsidiaries 75
Preferred stock redemption cost
Partnerships' capital
Long-term debt - net
Total Capitalization 9,134,328 706,905 445,682 4,657,067
Current Liabilities:
Preferred stock sinking fund requirements
Long-term debt due within one year
Notes payable 150,000 (52,320) 3,718,659 7,054,831
Accounts payable 5,016 (95,985) 106,176 42,407
Accounts payable - associated companies 421,081 (174,169) 681,444 1,275,834
Customer deposits
Taxes accrued 34,173 179 8,233
Interest accrued 450,613 713,643
Dividends declared
Other current liabilities 178,886 218,223 111,697
Total Current Liabilities 576,097 (109,415) 5,175,294 9,206,645
Deferred Credits:
Unamortized investment credit
Other deferred credits (8) 70,429 41,865 135
Total Deferred Credits (8) 70,429 41,865 135
Accumulated deferred taxes (3,454,521) 149,609 (883,741)
Commitments and contingencies
Total Liabilities and Capitalization $6,255,896 $667,919 $5,812,450 $12,980,106
( ) Denotes Contra
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
LIABILITIES (CONTINUED)
EUA EUA EUA EUA EUA
MUPA WestCoast FRC II EC&S I EC&S II
(Partn.) (Partn.) (Partn.) (Partn.) (Partnership)
<S> <C> <C> <C> <C> <C>
Capitalization:
Common equity $ $ $ $ $
Non-redeemable preferred stock of subsidianies
Redeemable preferred stock of subsidianies
Preferred stock redemption cost
Partnerships' capital 23,720 1,018,395 30,592 11,807,219 13,339,067
Long-term debt - net
Total Capitalization 23,720 1,018,395 30,592 11,807,219 13,339,067
Current Liabilities:
Preferred stock sinking fund requirments
Long-term debt due within one year
Notes payable
Accounts payable 290 8,917
Accounts payable - associated companies (3,948) 246,398 82,325 199,278 1,141,249
Customer deposits
Taxes accrued
Interest accrued
Dividends declared
Other current liabilities (23,750) 23,817 22,318 236,188 384,620
Total Current Liabilities (27,698) 270,215 104,643 435,756 1,534,786
Deferred Credits:
Unamortized investment credit
Other deferred credits 84,664 36,586
Total Deferred Credits 84,664 36,586
Accumulated deferred taxes
Commitments and contingencies
Total Liabilities and Capitalization ($3,978) $1,288,610 $135,235 $12,327,639 $14,910,439
0
( ) 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, 1998
<CAPTION>
EUA
EUA EUA EUA EUA Day Matrix
Cogenex Cogenex Nova Day (fka Day I&II
Consolidated Eliminations (Division) (Division) (Division) (Division)
<S> <C> <C> <C> <C> <C> <C>
Common Equity:
Common Shares, $.01 par value $100 $1,400 $100 $ $ $
Other Paid-In Capital 47,046,923 12,574,016 45,949,391 1,097,532
Retained Earnings 1,314,197 28,676,182 2,962,384 777,099 (2,336,588)
Total Common Equity 48,361,220 41,251,598 48,911,875 1,874,631 (2,336,588)
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 9,600,000 9,600,000
10.56% due 2005 24,500,000 24,500,000
84,100,000 84,100,000
Less portion due within one year 6,700,000 6,700,000
Total Long-Term Debt 77,400,000 77,400,000
Total Capitalization $125,761,295 $41,251,598 $126,311,875 $ $1,874,631 ($2,336,588)
(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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED)
DECEMBER 31, 1998
<CAPTION>
EUA
EUA EUA EUA Cogenex
NEM Cogenex Citizens West
Inc. Canada Corporation Corporation
<S> <C> <C> <C> <C>
Common Equity:
Common Shares, $.01 par value $1,100 $100 $100 $100
Other Paid-In Capital 7,052,050 5,521,966
Retained Earnings 2,081,178 706,805 445,507 (864,999)
Total Common Equity 9,134,328 706,905 445,607 4,657,067
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 $9,134,328 $706,905 $445,682 $4,657,067
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED)
DECEMBER 31, 1998
<CAPTION>
EUA EUA EUA EUA EUA
MUPA WestCoast FRC II EC&S I EC&S II
(Partn.) (Partn.) (Partn.) (Partn.) (Partnership)
<S> <C> <C> <C> <C> <C>
Common Equity:
Common Shares, $.01 par value $ $ $ $ $
Other Paid-In Capital 0
Retained Earnings 23,720 1,018,395 30,592 11,807,219 13,339,067
Total Common Equity 23,720 1,018,395 30,592 11,807,219 13,339,067
Non-Redeemable Preferred:
$.01 par value, 7,500 shares (1)
Total Non-Redeemable
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 $23,720 $1,018,395 $30,592 $11,807,219 $13,339,067
(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, 1998
<CAPTION>
EUA
EUA EUA EUA EUA Day Matrix
Cogenex Cogenex Nova Day (fka Day I&II
Consolidated Eliminations (Division) (Division) (Division) (Division)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $54,775,898 $ $23,590,482 $1,331,498 $9,000,149 $10,798
Operating Expenses:
Operation 38,212,310 17,914,005 1,851,988 8,053,398 1,179,788
Maintenance 1,164,195 596,661
Depreciation and amortization 11,760,691 6,544,469 44,121 94,942 230,008
Taxes - Other than income 799,303 329,712 56,251 218,044 8,593
- Income (credit) (1,225,268) (1,810,078) (387)
- Deferred (891,761) (1,243,998)
Total Operating Expenses 49,819,470 22,330,771 1,951,973 8,366,384 1,418,389
Operating Income 4,956,428 1,259,711 (620,475) 633,765 (1,407,591)
Other Income and Deductions:
Interest and dividend income 6,032,720 906,785 5,743,043 (41)
Equity in earnings of jointly-owned companies (9,854) 5,835,952 5,826,098
Allowance for other funds used during construct.
Loss on Disposal of Cogeneration Operations (3,171,904) (3,171,904)
Income Tax Impact of Loss on Disposal of
Cogeneration Operations 1,110,166 1,110,166
Other (deductions) income - net (949,439) (1,221,023) 22,063 (37,386) (720)
Total Other Income (Deductions) 3,011,690 6,742,737 8,286,380 22,022 (37,386) (720)
Income (Loss) Before Interest Charges 7,968,118 6,742,737 9,546,091 (598,453) 596,379 (1,408,311)
Interest Charges:
Interest on long-term debt 7,473,149 7,473,149
Amortization of debt expense and premium
Other interest expense (principally
short-term notes) 2,027,380 906,785 1,929,065 37,978 111,462 41,543
Allowance for borrowed funds used during
construction - (credit) (233,720) (158,800)
Total Interest Charges 9,266,809 906,785 9,243,414 37,978 111,462 41,543
Net Income (Loss) before preferred return (1,298,691) 5,835,952 302,677 (636,431) 484,917 (1,449,854)
Preferred Return Requirement
Net (Loss) Income ($1,298,691) $5,835,952 $302,677 ($636,431) $484,917 ($1,449,854)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
EUA
EUA EUA EUA Cogenex
NEM Cogenex Citizens West
Inc. Canada Corporation Corporation
<S> <C> <C> <C> <C>
Operating Revenues $3,663,773 $126,352 $5,452,291 $3,543,409
Operating Expenses:
Operation 55,722 108,152 4,166,881 3,463,535
Maintenance 20,148 98,274 102,752
Depreciation and amortization 701,429 15,194 527,358 579,840
Taxes - Other than income 69 1,543 91,523 95,168
- Income (credit) 700,389 (2,452) 38,381 (151,121)
- Deferred 295,719 83,164 (26,646)
Total Operating Expenses 1,773,476 122,437 5,005,581 4,063,528
Operating Income 1,890,297 3,915 446,710 (520,119)
Other Income and Deductions:
Interest and dividend income 192,549 436,473
Equity in earnings of jointly-owned companies
Allowance for other funds used during construction
Loss on Disposal of Cogeneration Operations
Income Tax Impact of Loss on Disposal of
Cogeneration Operations
Other (deductions) income - net 15 (188,592) (128) (3,163)
Total Other Income (Deductions) 15 3,957 (128) 433,310
Income (Loss) Before Interest Charges 1,890,312 7,872 446,582 (86,809)
Interest Charges:
Interest on long-term debt
Amortization of debt expense and premuim
Other interest expense (principally
short-term notes) 83,348 274,648 451,033
Allowance for borrowed funds used during
construction - (credit) (50,120) (24,800)
Total Interest Charges 83,348 224,528 426,233
Net Income (Loss) before preferred return 1,890,312 (75,476) 222,054 (513,042)
Preferred Return Requirement
Net (Loss) Income $1,890,312 ($75,476) $222,054 ($513,042)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING INCOME STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
EUA EUA EUA EUA EUA
MUPA WestCoas FRC II EC&S I EC&S II
(Partn.) (Partn.) (Partn.) (Partn.) (Partnership)
<S> <C> <C> <C> <C> <C>
Operating Revenues $ $416,598 $392,042 $2,241,615 $5,006,891
Operating Expenses:
Operation 113 5,788 258,700 1,154,240
Maintenance 37,658 66,910 241,792
Depreciation and amortization 171,383 805,419 2,046,528
Taxes - Other than income (1,600)
- Income (credit)
- Deferred
Total Operating Expenses 113 214,829 (1,600) 1,131,029 3,442,560
Operating Income (113) 201,769 393,642 1,110,586 1,564,331
Other Income and Deductions:
Interest and dividend income 65,591 75,670 136,347 289,873
Equity in earnings of jointly-owned companies
Allowance for other funds used during construction
Loss on Disposal of cogeneration operations
Income Tax Impact of Loss on Disposal of
Cogeneration Operations
Other (deductions) income - net (100) 1,358 (100) 28,587 449,751
Total Other Income (Deductions) (100) 66,949 75,570 164,934 739,624
Income (Loss) Before Interest Charges (213) 268,718 469,212 1,275,520 2,303,955
Interest Charges:
Interest on long-term debt
Amortization of debt expense and premuim
Other interest expense (principally
short-term notes) 5,088
Allowance for borrowed funds used during
construction - (credit)
Total Interest Charges 5,088
Net Income (Loss) before preferred return (213) 268,718 469,212 1,270,432 2,303,955
Preferred Return Requirement
Net (Loss) Income ($213) $268,718 $469,212 $1,270,432 $2,303,955
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, 1998
<CAPTION>
EUA
EUA EUA EUA EUA Day Matrix
Cogenex Cogenex Nova Day (fka Day I&II
Consolidated Eliminations (Division) (Division) (Division) (Division)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) Income ($1,298,691) $5,835,952 $302,677 ($636,431) $484,917 ($1,449,854)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Acticities
Depreciation and amortization 11,961,370 6,745,147 44,121 94,940 230,008
Deferred taxes (628,047) (980,284)
Gains on sales of investments in energy savings
projects paid for with notes and leases rec. (2,825,578) (2,060,570)
Non - cash costs of energy savings project sales 12,827,388 9,061,792
Pension liability 21,009 18,696 2,313
Amortization of deferred revenues 10,818
Collections and sales of project notes and
leases receivable 17,260,531 14,812,109
Undistributed Equity earnings of subsidiaries 6,687,825 6,687,825
Other - net 1,625,012 1,542,117 3,307,776 (49,619) (416,330) (1)
Net Changes to Working Capital:
Accounts receivable 4,231,839 (3,033,769) (2,846,243) 3,160,155 (959,227) 293
Materials and supplies 2,787 48,215 2,418 27,666 (75,512)
Accounts payable (1,767,098) 3,024,871 1,411,844 (1,268,951) 3,046,599 215,003
Accrued taxes (192,110) (39,267) (12,853) (12,078)
Accrued interest (79,084) (549,456) (79,084) (1,413,187) 98,355 40,405
Other - net (191,922) 559,457 234,911 (5,450) 24,472
Net Cash Provided from (Used in) Operating Act. 40,958,224 14,066,997 36,625,544 (177,484) 2,389,314 (1,039,658)
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for investments in energy savings
projects (26,774,878) (83,725) (19,644,557) (11,462) (1,311,052)
Collections on notes and leases receivable 11,558,419 6,319,996 2,138
Proceeds from sale of Assets 3,853,374 1,989,651 3,860,139 1,982,886
Investments in subsidiaries
Net Cash Provided from (Used in) Investing Act.(11,363,085) 1,905,926 (9,464,422) 1,971,424 (1,308,914)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemption:
Long-term debt (6,700,000) (6,700,000)
Premium on reacquisition and financing expenses
Dividends declared (3,450,000)
Capital contribution - EUA
Partner's contribution(withdrawal) (9,278,357)
Net increase (decrease) in short-term debt (24,585,083) (3,244,566) (21,390,000) (1,752,150) 128,987 1,039,658
Net Cash Provided from (Used in) Fin. Act. (31,285,083) (15,972,923) (28,090,000) (1,752,150) 128,987 1,039,658
NET (DECREASE) INCREASE IN CASH (1,689,944) (928,878) 41,790 1,209,387
Cash and temporary cash investments at beginning
of year 4,472,365 718,132 (41,790) 149,729
Cash and temporary cash investments at end of year $2,782,421 $ ($210,746) $ $1,359,116 $
Cash paid during the year for:
Interest (net of amounts capitalized) $9,086,848 $9,086,848 $0
Income Taxes ($1,171,503) ($1,778,812)
Conversion of investments in energy saving projects
to notes and leases receivable $4,528,788 $3,757,867
( ) 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 (CONTINUED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
EUA EUA EUA EUA
NEM Cogenex Citizens Cogenex West
Inc. Canada Corporation Corporation
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) Income $1,890,312 ($75,476) $222,054 ($513,042)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities
Depreciation and amortization 701,431 15,195 527,360 579,841
Deferred taxes 295,719 83,164 (26,646)
Gains on sales of investments in energy savings
projects paid for with notes and leases receivable (573,318)
Non - cash costs of energy savings projects sales 670,037 1,724,790
Pension liability
Amortization of deferred revenues (124,588) 8,900 41,842
Collections and sales of project notes and leases receivable 759,242
Undistributed Equity earnings of subsidiaries
Other - net (5) 38,354 (79,081) 288,830
Net Changes to Working Capital:
Accounts receivable 46,964 984,286 1,226,028 1,597,762
Materials and supplies
Accounts payable 472,142 (3,509,975) 139,919 (313,785)
Accrued taxes (113,994) 120 (14,038)
Accrued interest 274,638 450,333
Other - net 191,938 178,185 125,087
Net Cash Provided from (Used in) Operating Activities 3,281,975 (2,460,772) 3,284,266 4,085,056
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for investments in energy savings projects (42,827) (1,126,606) (3,433,686)
Collections on notes and leases receivable 5,236,285
Proceeds from sale of Assets
Investments in subsidiaries
Net Cash Provided from (Used in) Investing activities 5,193,458 (1,126,606) (3,433,686)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemption:
Long-term debt
Premium on reacquisition and financing expenses
Dividends declared (3,450,000)
Capital contribution - EUA
Partner's contribution(withdrawal)
Net increase (decrease) in short-term debt (198,222) (3,198,495) (1,709,341) (732,987)
Net Cash Provided from (Used in) Financing Activities (3,648,222) (3,198,495) (1,709,341) (732,987)
NET (DECREASE) INCREASE IN CASH (366,247) (465,809) 448,319 (81,617)
Cash and temporary cash investments at beginning of year 384,367 782,852 (420,831) 239,405
Cash and temporary cash investments at end of year $18,120 $317,043 $27,488 $157,788
Cash paid during the year for:
Interest (net of amounts capitalized) $0 $0 $0
Income Taxes $754,396 $39,674 ($186,761)
Conversion of investments in energy saving projects
to notes and leases receivable $0 $522,229
( ) 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, 1998
<CAPTION>
EUA EUA EUA EUA EUA
MUPA WestCoast FRC II EC&S I EC&S II
(Partn.) (Partn.) (Partn.) (Partn. (Partnership)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) Income ($213) $268,718 $469,212 $1,270,432 $2,303,955
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and amortization 171,383 805,418 2,046,526
Deferred taxes
Gains on sales of investments in energy savings
projects paid for with notes and lease receivable (204,838) 13,148
Non - cash costs of energy savings projects sales 375,527 6,000 989,242
Pension liability
Amortization of deferred revenues 84,664
Collections and sales of project notes and lease receivable 61,095 479,276 1,148,809
Undistributed Equity earnings of subsidiaries
Other - net (15,552) 2 (35,603) 100,002 28,356
Net Changes to Working Capital:
Accounts receivable 39,302 (596,646) 624,364 (561,552) (1,517,416)
Materials and supplies
Accounts payable (3,949) 244,481 82,325 110,168 631,952
Accrued taxes
Accrued interest
Other - net (23,750) (393,593) 22,318 112,008 (98,591)
Net Cash Provided from (Used in) Operating Activities (4,162) 130,967 1,162,616 2,201,578 5,545,981
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for investments in energy savings projects 3,978 (202,740) (82,325) (167,799) (839,527)
Collections on notes and leases receivable
Proceeds from sale of Assets
Investments in subsidiaries
Net Cash Provided from (Used in) Investing Activities 3,978 (202,740) (82,325) (167,799) (839,527)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemption:
Long-term debt
Premium on reacquisition and finacing expenses
Dividends declared
Capital contribution - EUA
Partner's contribution(withdrawal) (500,000) (1,378,357) (2,100,000) (5,300,000)
Net increase (decrease) in short-term debt (17,099)
Net Cash Provided from (Used in) Finacing Activities (500,000) (1,378,357) (2,117,099) (5,300,000)
NET (DECREASE) INCREASE IN CASH (184) (571,773) (298,066) (83,320) (593,546)
Cash and temporary cash investments at beginning of year 184 660,955 350,975 644,701 1,003,686
Cash and temporary cash investments at end of year $ $89,182 $52,909 $561,381 $410,140
Cash paid during the year for:
Interest (net of amounts capitalized) $0
Income Taxes
Conversion of investments in energy savings projects
to notes and leases receivable $202,934 $45,758
( ) 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, 1998
<CAPTION>
EUA
EUA EUA EUA EUA Day Matrix
Cogenex Cogenex Nova Day (fka Day I&II
Consolidated Eliminations (Division) (Division) (Division) (Division)
<S> <C> <C> <C> <C> <C> <C>
Balance of retained earnings at beginning or year $477,171 $32,197,071 $2,659,707 ($1,499,286) $292,182 ($886,734)
Additions:
Net Income (Loss) ($1,298,691) 5,835,952 302,677 (636,431) 484,917 (1,449,854)
Partners Capital contribution
Total (821,520) 38,033,023 2,962,384 (2,135,717) 777,099 (2,336,588)
Deductions:
Dividends:
Common - subsidiaries
Partners withdrawals 9,278,357
Other deductions (2,135,717) 78,484 (2,135,717)
Total (2,135,717) 9,356,841 (2,135,717)
Balance of retained earnings at end of period 1,314,197 28,676,182 2,962,384 777,099 (2,336,588)
Other Paid-In Capital at beginning of year 47,125,406 16,024,016 46,027,874 1,097,532
Additions:
Other
Total 47,125,406 16,024,016 46,027,874 1,097,532
Deductions:
Foreign currency translation adjustments 78,483 78,483
Return of Capital 3,450,000
Total 78,483 3,450,000 78,483
Other Paid-In Capital at end of period $47,046,923 $12,574,016 $45,949,391 $1,097,532
( ) 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, 1998
<CAPTION>
EUA
EUA EUA EUA Cogenex
NEM Cogenex Citizens West
Inc. Canada Corporation Corporation
<S> <C> <C> <C> <C>
Balance of retained earnings at beginning of year $190,866 $860,765 $223,453 ($351,957)
Additions:
Net Income (Loss) 1,890,312 (75,476) 222,054 (513,042)
Partners Capital contribution
Total 2,081,178 785,289 445,507 (864,999)
Deductions:
Dividends:
Common - subsidiaries
Partners withdrawals
Other deductions 78,484
Total 78,484
Balance of retained earnings at end of period 2,081,178 706,805 445,507 (864,999)
Other Paid-In Capital at beginning of year 10,502,050 5,521,966
Additions:
Other
Total 10,502,050 5,521,966
Deductions:
Foreign currency translation adjustments
Return of Capital 3,450,000
Total 3,450,000
Other Paid-In Capital at end of period $7,052,050 $5,521,966
( ) 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, 1998
<CAPTION>
EUA EUA EUA EUA EUA
MUPA WestCoast FRC II EC&S I EC&S II
(Partn.) (Partn.) (Partn.) (Partn.) (Partnership)
<S> <C> <C> <C> <C> <C>
Balance of retained earnings at beginng of year $23,933 $1,249,677 $939,737 $12,636,787 $16,335,112
Additions:
Net Income (Loss) (213) 268,718 469,212 1,270,432 2,303,955
Partners Capital contribution
Total 23,720 1,518,395 1,408,949 13,907,219 18,639,067
Deductions:
Dividends:
Common - subsidiaries
Partners withdrawals 500,000 1,378,357 2,100,000 5,300,000
Other deductions
Total 500,000 1,378,357 2,100,000 5,300,000
Balance of retained earnings at end of period 23,720 1,018,395 30,592 11,807,219 13,339,067
Other Paid-In Capital at beginning of year
Additions:
Other
Total
Deductions:
Foreign currency translation adjustments
Return of Capital
Total
Other Paid-In Capital at end of period
( ) 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, 1998
<CAPTION>
EUA EUA
Energy Energy
Investment Investment EUA
ASSETS Consolidated Eliminations Corporation Transcapacity
<S> <C> <C> <C> <C>
Utility plant and other investments:
Non-utility property $3,307,671 $ $ $1,778,761
Less accumulated provision for depreciation 2,135,122 1,239,057
Net non-utility property 1,172,549 539,704
Investments in subsidiaries (at equity) 7,235,277 (15,785,432) (12,475,322)
Other investments & notes receivable 2,478,052 2,596,151
Total Utility Plant and Other Investments 10,885,878 (15,785,432) (9,879,171) 539,704
Current Assets:
Cash and temporary cash investments 552,017 15,641 504,147
Notes receivable 11,205,958 31,193,965 34,068,965
Accounts receivable - Net 3,065,713 201,965 1,451,118
Accounts receivable - associated companies 633,581 223,851 222,565 100
Other current assets 3,080,919 1,023,933 1,139,485 39,018
Total Current Assets 18,538,188 32,441,749 35,648,621 1,994,383
Deferred Debits:
Other deferred debits 941,539 927,362 10,305
Total Deferred Debits 941,539 927,362 10,305
Total Assets $30,365,605 $16,656,317 $26,696,812 $2,544,392
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
Eastern EUA
Unicord EUA Renova Compression
ASSETS (CONTINUED) Corporation Bioten Services
<S> <C> <C> <C> <C>
Utility plant and other investments:
Non-utility property $ $ $1,528,910 $
Less accumulated provision for depreciation 896,065
Net non-utility property 632,845
Investments in subsidiaries (at equity) 317,539 3,607,628
Other investments & notes receiveivable 53,672 (186,000) 14,229
Total Utility Plant and Other Investments 317,539 3,661,300 446,845 14,229
Current Assets:
Cash and temporary cash investments 32,229
Notes receivable 8,258,000 72,958
Accounts receivable - Net 456 596,837 758,251 57,086
Accounts receivable - associated companies 1,186 633,581
Other current assets 1,967,983 958,366
Total Current Assets 1,642 10,822,820 2,455,385 57,086
Deferred Debits:
Other deferred debits 3,872
Total Deferred Debits 3,872
Total Assets $319,181 $14,484,120 $2,906,102 $71,315
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
EUA EUA
Energy Energy
Investment Investment EUA
LIABILITIES Consolidated Eliminations Corporation Transcapacity
<S> <C> <C> <C> <C>
Capitalization:
Common equity ($24,203,924 ($15,785,432 ($24,203,924 ($8,864,744)
Total Capitalization (24,203,924) (15,785,432) (24,203,924) (8,864,744)
Current Liabilities:
Notes Payable 51,779,436 31,193,965 51,216,713 12,477,641
Accounts payable 150,930 8,166 22,173
Accounts payable - associated companies 1,666,815 223,851 78,214 20,765
Taxes accrued 3,647
Interest accrued 2,326,419 1,023,933 822,601 113,409
Other current liabilities 148,639 181,900
Total Current Liabilities 56,075,886 32,441,749 52,125,694 12,815,888
Deferred Credits:
Other deferred credits and other liabilities (897,024) (1,156,669)
Total Deferred Credits (897,024) (1,156,669)
Accumulated deferred taxes (609,333) (1,224,958) (250,083)
Commitments and contingencies (Note J)
Total liabilities and capitalization $30,365,605 $16,656,317 $26,696,812 $2,544,392
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<CAPTION>
Eastern EUA
Unicord EUA Renova Compression
LIABILITIES (CONTINUED) Corporation Bioten Services
<S> <C> <C> <C> <C>
Capitalization:
Common equity ($1,840,592) ($1,512,699) ($3,311,670) ($255,727)
Total Capitalization (1,840,592) (1,512,699) (3,311,670) (255,727)
Current Liabilities:
Notes Payable 2,245,096 13,852,543 2,844,474 336,934
Accounts payable 120,591
Accounts payable - associated companies 2,120 351,884 1,394,537 43,146
Taxes accrued 3,647
Interest accrued 20,690 870,730 1,503,818 19,104
Other current liabilities (33,261)
Total Current Liabilities 2,267,906 15,075,157 5,833,806 399,184
Deferred Credits:
Other deferred credits and other liabilities 259,645
Total Deferred Credits 259,645
Accumulated deferred taxes (108,133) 921,662 124,321 (72,142)
Commitments and contingencies (Note J)
Total liabilities and capitalization $319,181 $14,484,120 $2,906,102 $71,315
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF CAPITALIZATION
DECEMBER 31, 1998
<CAPTION>
EUA EUA
Energy Energy
Investment Investment EUA
Consolidated Eliminations Corporation Transcapacity
<S> <C> <C> <C> <C>
Common Equity:
Common shares $1 $21 $1 $10
Other paid-in capital 999 (1,134,628) (2,134,718) 1,000,090
Retained earnings (24,204,924) (14,650,825) (22,069,207) (9,864,844)
Total Common Equity (24,203,924) (15,785,432) (24,203,924) (8,864,744)
Total Capitalization ($24,203,924 ($15,785,432 ($24,203,924 ($8,864,744)
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED)
DECEMBER 31, 1998
<CAPTION>
Eastern EUA
Unicord EUA Renova Compression
Corporation Bioten Services
<S> <C> <C> <C> <C>
Common Equity:
Common shares $10 $1 $ $
Other paid-in capital 990 9
Retained earnings (1,841,592) (1,512,709) (3,311,670) (255,727)
Total Common Equity (1,840,592) (1,512,699) (3,311,670) (255,727)
Total Capitalization ($1,840,592) ($1,512,699) ($3,311,670) ($255,727)
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
EUA EUA
Energy Energy
Investment Investment EUA
Consolidated Eliminations Corporation Transcapacity
<S> <C> <C> <C> <C>
Operating Revenues $3,945,425 $ $ $334,658
Operating Expenses:
Operation 8,724,671 472,314 3,407,540
Maintenance 35 7,862
Depreciation and amortization 462,663 21,609 323,544
Taxes Other than income 130,918 15,518 1,885
Income Taxes - Current (credit) (2,297,779) (1,033,632) (1,264,147)
- Deferred (credit) (53,143) 131,263 (189,175)
Total Operating Expenses 6,967,365 (385,066) 2,279,647
Operating (Loss) Income (3,021,940) 385,066 (1,944,989)
Other Income and Deductions:
Interest and dividend income 1,176,528 1,370,140 1,754,059 5,435
Equity in earnings of jointly-owned companies (1,189,761) (4,634,659) (4,901,323)
Allowance for other funds used during construction 0
Other income (deductions) - net 462,299 93,842 (174)
Total Other Income 449,066 (3,264,519) (3,053,422) 5,261
Loss Before Interest Charges (2,572,874) (3,264,519) (2,668,356) (1,939,728)
Interest Charges:
Other interest expense (principally
short-term notes) 2,713,598 1,370,140 2,618,116 691,267
Total Interest Charges 2,713,598 1,370,140 2,618,116 691,267
Net Income (Loss) (5,286,472) (4,634,659) (5,286,472) (2,630,995)
Earnings (Loss) Available for Common Shareholders ($5,286,472) ($4,634,659) ($5,286,472) ($2,630,995)
EUA Energy Common Shares outstanding 100
Loss per share ($52,864.72)
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING INCOME STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Eastern EUA
Unicord EUA Renova Compression
Corporation Bioten Services
<S> <C> <C> <C> <C>
Operating Revenues $ $ $3,610,767 $
Operating Expenses:
Operation 309,511 4,525,006 10,300
Maintenance (7,827)
Depreciation and amortization 35,781 77,758 3,971
Taxes Other than income 2,283 111,072 160
Income Taxes - Current (credit)
- Deferred (credit) 4,769
Total Operating Expenses 347,575 4,710,778 14,431
Operating (Loss) Income (347,575) (1,100,011) (14,431)
Other Income and Deductions:
Interest and dividend income 787,092 82
Equity in earnings of jointly-owner companies (657,452) (265,645)
Allowance for other funds used dring construction
Other income (deductions) - net 287,680 (22,872) 103,823
Total Other Income 417,320 (22,790) (161,822)
Loss Before Interest Charges 69,745 (1,122,801) (176,253)
Interest Charges:
Other interest expense (principally
short-term notes) 702,359 53,151 18,845
Total Interest Charges 702,359 53,151 18,845
Net Income (Loss) (632,614) (1,175,952) (195,098)
Earnings (Loss) Available for Common Shareholders ($632,614) ($1,175,952) ($195,098)
EUA Energy Common Shares outstanding
Loss per share
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
EUA EUA
Energy Energy
Investment Investment
Consolidated Eliminations Corporation
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) ($5,286,472) ($4,634,659) ($5,286,472)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 342,891 14,902
Deferred Taxes 65,063 37,288
Other - Net (729,653) 4,634,660 4,761,422
Changes in Operating Assets and Liabilities:
Accounts receivable (631,237) (176,077) (528,789)
Material and supplies (78,687)
Notes receivable (1,245,548) (9,644,401) (10,094,400)
Accounts payable 452,629 176,077 59,378
Accrued taxes (43,402)
Other - net (449,285) 185,582
Net Cash (Used In) Provided from
Operating Activities (7,603,701) (9,644,400) (10,851,089)
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures (26,661)
Increase/Decrease in Other Investments (6,173,022) (2,560,137)
Net Cash (Used in) Investing Activities (6,199,683) (2,560,137)
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase in short-term debt 13,932,612 9,644,400 13,424,962
Net Cash Provided From Financing Activities 13,932,612 9,644,400 13,424,962
NET (DECREASE) INCREASE IN CASH 129,228 13,736
Cash and temporary cash investments
at beginning of year 422,789 1,905
Cash and temporary cash investments
at end of year $552,017 $15,641
Cash paid during the year for:
Interest (net of Amounts Capitalized) $2,289,084 $630,431 $2,289,084
Income Taxes (Refund) ($2,281,407) ($681,391)
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Eastern EUA
Unicord EUA Renova Compression
Corporation Bioten Services
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) $ ($632,614) ($1,175,952) ($195,098)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities
Depreciation and Amortization 35,781 3,971
Deferred Taxes 284,323 4,769 (72,142)
Other - Net 657,453 (1,779,963) 265,645
Changes in Operating Assets and Liabiailities
Accounts receivable 16,457 (48,952) (23,983)
Material and supplies (78,687)
Notes receivable (795,549) 0
Accounts payable 314,308 237,564 11,015
Accrued taxes (43,402)
Other - net (675,709) (9,108) 10,592
Net Cash (Used In) Provided from
Operating Activities (795,550) (2,893,731)
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures 74,723
Increase/Decrease in Other Investments (3,558,450) 6,763 (61,198)
Net Cash (Used in) Investing Activities (3,558,450) 81,486 (61,198)
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase in short-term debt 4,354,000 2,844,474 61,198
Net Cash Provided From Financing Activities 4,354,000 2,844,474 61,198
NET (DECREASE) INCREASE IN CASH 32,229
Cash and temporary cash investments
at beginning of year
Cash and temporary cash investments
at end of year $ $ $32,229 $
Cash paid during the year for:
Interest (Net of Amounts Capitalized)
Income Taxes (Refund) $738 ($588,460) $ ($7,698)
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
DECEMBER 31, 1998
<CAPTION>
EUA EUA
Energy Energy
Investment Investment EUA
Consolidated Eliminations Corporation Transcapacity
<S> <C> <C> <C> <C>
Balance of retained earnings at begin. of year ($16,782,735 ($10,016,166 ($16,782,735 ($7,233,848)
Additions:
Net Income (Loss) (5,286,472) (4,634,659) (5,286,472) (2,630,995)
Other (2,135,717) (2,135,717)
Balance of retained earnings at end of period ($24,204,924 ($14,650,825 ($24,204,924 ($9,864,843)
( ) Denotes Contra
</TABLE>
<TABLE>
EUA ENERGY INVESTMENT AND SUBSIDIARY
ONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL (CONTINUED)
DECEMBER 31, 1998
<CAPTION>
Eastern EUA
Unicord EUA Renova Compression
Corporation Bioten Services
<S> <C> <C> <C> <C>
Balance of retained earnings at begin. of year ($1,841,592) ($880,095) $0 ($60,631)
Additions:
Net Income (Loss) (632,614) (1,175,952) (195,098)
Other
Balance of retained earnings at end of period ($1,841,592) ($1,512,709) ($1,175,952) ($255,729)
( ) Denotes Contra
</TABLE>
Notes to Consolidated Financial Statements December 31, 1998
(A) Nature of Operations and Summary of Significant Accounting Policies:
General: Eastern Utilities Associates (EUA) is a public utility holding
company headquartered in Boston, Massachusetts. 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. See "Generation Divestiture"
below for a discussion of EUA's planned divestiture of generating capacity.
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, Yankee Atomic, Connecticut Yankee and
Maine Yankee, have been permanently shut down and are in the process of
decommissioning. Montaup's share of total estimated costs for the permanent
shutdown, decommissioning and recovery of the investment in Yankee Atomic,
Connecticut Yankee and Maine Yankee is $3.7 million, $23.8 million and $31.0
million, respectively. These amounts are included with Other Liabilities on
the Consolidated Balance Sheet as of December 31, 1998. Also, due to
anticipated recoverability, a regulatory asset has been recorded for the same
amount and is included with Other Assets. Montaup is entitled to electricity
produced from the remaining facility, Vermont Yankee, 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).
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 partnership interest in BIOTEN, G.P. and for its 20% stock ownership
in Separation Technologies, Inc. EUA is attempting to restructure its
partnership interest in the BIOTEN, G. P. to a preferred equity position.
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 were equivalent to a
composite rate of approximately 3.5% in 1998, 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 commenced recovery of its net investment in generation
related assets through the CTC over a twelve-year period. The difference
between the annual recovery and annual depreciation expense pursuant to
Generally Accepted Accounting Principles is being deferred. 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.
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 1998. 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 Company
(Eastern Edison), Blackstone Valley Electric Company (Blackstone) and Newport
Electric Corporation (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 recording revenues in an
amount management believes to be recoverable pursuant to provisions of
approved settlement agreements and enabling state legislation. Provisions of
the approved restructuring settlement agreements in conjunction with
accounting provisions of SFAS 71 allow Montaup and the retail subsidiaries to
accrue and/or defer revenue related to the future recovery of certain items.
Montaup has accrued revenues and recorded associated regulatory assets and
liabilities for certain items during 1998 commencing with the implementation
of the aforementioned settlement agreements and billing of the Contract
Termination Charge (CTC), January 1, 1998 in Rhode Island and March 1, 1998 in
Massachusetts. Montaup was authorized to accrue an amount of lost revenue
equal to the difference in revenues Montaup would have collected under its
previously approved rates and revenues collected pursuant to the settlement
agreements. The settlements also provide Montaup with a nuclear PBR provision
under which Montaup normalizes expenses and revenues for 80% of going forward
operations of Montaup's nuclear interests. Montaup was also allowed to accrue
a return enhancement related to stranded investments charged to its Rhode
Island retail affiliates during the generation divestiture period as an
incentive to divest. Also, Montaup is normalizing the difference between GAAP
depreciation expense on generation plant assets prior to divestiture and the
recovery level included in the settlement agreements. Montaup has also
accrued revenue related to the two-month delay in implementing the
Massachusetts settlement agreement from January 1, 1998 to March 1, 1998.
Finally, Montaup normalizes for the difference in actual versus estimated CTC
variable components costs and revenues. <PAGE>Settlement provisions and SFAS
71 also provide for Eastern Edison to accrue revenue equal to the approved
deferral of standard offer costs which will be collected in the future.
The following table reflects the nature and amount of accrued and/or deferred
revenue and the associated balance sheet placement.
Amount
Accrued
(Deferred)
$000's Balance Sheet Placement
Lost revenue $ 18,527 Other Asset/Accrued CTC Assets
Mass. Delay Credit 768 Other Asset/Accrued CTC Assets
R.I. Return True-up 1,970 Other Asset/Accrued CTC Assets
Depr. Norm. (12 yr S/L vs.
CTC Level) 10,933 Other Asset/Accrued CTC Assets
Depr. Norm (GAAP vs.
12 yr S/L) (14,294) Other Liab./Reg. Liab.
Nuclear PBR 3,933 Other Asset/Other Reg. Assets
CTC Variable
Component Norm. (23,793) Other Liab./Reg. Liab.
Eastern Edison Standard
Offer Deferral 8,782 Other Accts. Rec./Reg. Assets
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 is
amortizing previously deferred ITC related to generation investments
recoverable through the CTC over a twelve-year period. Unamortized ITC
related to the Canal 2 generating unit was reversed at the time of the Canal 2
sale, December 30, 1998.
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.
Other Assets: The components of Other Assets at December 31, 1998:
($ in thousands) 1998
Regulatory Assets:
Unamortized losses on reacquired debt $ 10,979
Unrecovered plant and decommissioning costs 66,934
Deferred FAS 109 costs (Note B) 50,167
Deferred FAS 106 costs 9,167
Mendon Road judgment (Note J) 6,154
Unrecovered CTC assets 33,161
Accrued CTC assets 32,198
Other regulatory assets 21,947
Total regulatory assets 230,707
Other deferred charges and assets:
Split dollar life insurance premiums 24,803
Unamortized debt expenses 3,381
Goodwill 6,436
Other 29,301
Total Other Assets $294,628
Regulatory assets represent deferred costs for which future revenues are
expected in accordance with regulatory practices. These costs are expensed
when the corresponding revenues are received in order to appropriately match
revenues and expenses.
Regulatory Accounting: 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. Montaup ceased applying SFAS 71 to its ongoing generation portion of
its business effective January 1, 1998. Approved restructuring settlement
agreements with parties in Massachusetts and Rhode Island, the two states in
which Montaup operates, allow Montaup full recovery or stranded generation
investments as of December 31, 1997 and as such Montaup incurred no asset
impairment. As disclosed in Footnote A under the caption "GENERATION
DIVESTITURE", Montaup has agreements to divest all of its generation assets and
power purchase agreements with the exception of its 4.0% (46mw) ownership
interest in the Millstone 3 nuclear station and is 12 mw entitlement from the
Vermont Yankee nuclear unit. Post-divestiture ongoing generation operations
will include the two aforementioned nuclear units in which Montaup will
continue to have an interest. The approved settlement agreements also provide
Montaup with recovery of 100% of embedded nuclear investments as of December
31, 1997 and recovery of 80% of its post 1997 on going nuclear generation
operations. Because only 20% of Montaup's remaining nuclear operations will no
longer be subject to the accounting treatment pursuant to SFAS 71 and would be
subject to market risk, Management believes that the discontinuation of SFAS 71
for Montaup's post-divestiture generation business will not have a material
impact on EUA's results of operations or financial position. EUA believes its
transmission and retail distribution businesses continue to meet the criteria
for continued application of FAS71.
Generation Divestiture: Terms of approved electric utility restructuring
settlement agreements provide that EUA exit the electric generation business.
Through separately negotiated agreements, EUA has agreements to divest all of
its generation assets and power purchase contracts, with the exception of its
4.0% (46 mw) ownership interest in the Millstone 3 nuclear station and its 12
mw entitlement from Vermont Yankee. All of the agreements are subject to
approval of various state and federal regulatory agencies.
EUA has agreed to sell generating assets totaling 509 mw to various parties
for $133.2 million in aggregate. The net proceeds from the sales, as defined
in the settlement agreements, will be recorded as a regulatory liability at
the time of sale and will be returned to customers via a Residual Value Credit
(RVC) through the year 2009.
EUA has also agreed to make contribution payments to two parties in exchange
for their assumption of all future obligations under six purchased power
contracts. These fixed monthly payments ranging from $850,000 to $2.6
million, will be made from the effective date through 2009. EUA may be
required to record a liability for these fixed contributions, but in such an
event would record a regulatory asset for a like amount due to
recoverability. In addition, EUA has agreed to a buyout of its obligations
under the Pilgrim Nuclear purchased power contract in conjunction with the
sale of the unit by Boston Edison Co. (BEC) to Entergy Nuclear Generating Co.
(Entergy). This agreement provides for a buyout payment by EUA to BEC of
$115.8 million, assuming a June 30, 1999 closing, along with a short-term,
fixed-price purchased power agreement with Entergy for declining shares of the
unit's output beginning with 11% in 1999 and ending with 5.5% in 2004.
Entergy will assume all future operating and decommissioning obligations.
EUA will continue to attempt to sell and/or transfer its minority interests in
Millstone 3 and Vermont Yankee. Until such time as these units are divested,
EUA will share 80% of the operating costs and revenues associated with the
units with customers and 20% with shareholders.
(B) Income Taxes:
EUA adopted FASB Statement No. 109, "Accounting for Income Taxes" (FAS109),
which requires recognition of deferred income taxes for temporary differences
that are reported in different years for financial reporting and tax purposes
using the liability method. Under the liability method, deferred tax
liabilities or assets are computed using the tax rates that will be in effect
when temporary differences reverse. Generally, for regulated companies, the
change in tax rates may not be immediately recognized in operating results
because of ratemaking treatment and provisions in the Tax Reform Act of 1986.
Total deferred tax assets and liabilities for 1998 include the following:
Deferred Tax Deferred Tax
Assets Liabilities
($ in thousands) 1998 1998
Plant Related Plant Related
Differences $22,776 Differences $185,590
Deregulation 23,301 Refinancing
Costs 1,325
NOL Deregulation 12,993
Carryforward 1,973 Employee
Benefit
Employee Accruals 4,481
Benefit
Accruals 5,294
Acquisitions 3,334
Other 14,075 Other 8,393
Total $70,753 Total $212,782
As of December 31, 1998, EUA has recorded on its Consolidated Balance Sheet a
regulatory liability to ratepayers of approximately $15.5 million. This
amount primarily represents excess deferred income taxes resulting from the
reduction in the federal income tax rate and also includes deferred taxes
provided on investment tax credits. Also at December 31, 1998, a regulatory
asset of approximately $50.2 million, has been recorded, representing the
cumulative amount of federal income taxes on temporary depreciation
differences which were previously flowed through to ratepayers.
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES:
Components of income and deferred tax expense for Eastern Utilities Associates and Subsidiary Companies
for 1998 are as follows:
<CAPTION>
Blackstone
Eastern EUA Valley Newport
EUA Utilities Service Electric Electric
Consolidated Elimin. Associates Corporation Company Company
<S> <C> <C> <C> <C> <C> <C>
Federal:
Current $30,754,347 $71,765 $ $214,400 $1,173,556 $1,631,297
Deferred (14,054,019) (44,337) (65,350) (44,337) 2,171,830 87,375
Investment Tax Credit, Net (2,999,791) 0 0 0 (178,209) (3,960)
13,700,537 27,428 (65,350) 170,063 3,167,177 1,714,712
State:
Current 5,217,386 0 0 10,832 1,948 2,200
Deferred (960,996) 0 0 69,901 76,175 0
4,256,390 0 0 80,733 78,123 2,200
Charged to Operations (Federal &
State) 17,956,927 27,428 (65,350) 250,796 3,245,300 1,716,912
Charged to Other Income:
Current 4,416,334 0 (116,112) 0 (22,430) (14,023)
Deferred (2,839,318) 0 (1,886,865 0 0 0
Investment Tax Credit, Net (81,360) 0 0 0 0 (81,360)
Total $19,452,583 $27,428 ($2,068,327) $250,796 $3,222,870 $1,621,529
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 $19,763,807 $9,600 $25,087 $179,424 $2,844,598 $1,567,535
(Decrease) Increase in Tax From:
Equity Component of AFUDC (60,486) 0 0
Depreciation of Equity AFUDC 1,319,995 3,541 226,160 40,271
Amortization and Utilization of (3,081,145) (178,209) (85,320)
State Tax, Net of Fed. Income Tax Benefit 2,802,976 0 52,476 50,780 1,430
Other (1,292,564) 17,828 (2,093,414) 15,355 279,541 97,613
Total $19,452,583 $27,428 ($2,068,327) $250,796 $3,222,870 $1,621,529
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES: (CONTINUED)
Components of income and deferred tax expense for Eastern Utilities Associates and Subsidiary
Companies for 1998 are as follows:
<CAPTION>
EUA EUA EUA
Eastern EUA Energy Energy EUA Telecomm-
Edison Cogenex Investment Services Ocean unications
Consolidated Consolidated Consolidated Corporation Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Federal:
Current $32,347,150 ($1,245,477) $(2,301,955) $129,916 ($1,077,155) ($45,620)
Deferred (15,574,551) (598,519) (54,145) (2,324) (6,867) (11,468)
Investment Tax Credit, Net
13,954,977 (1,843,996) (2,356,100) 127,592 (1,084,022) (57,088)
State:
Current 5,177,116 20,209 4,177 755 149
Deferred (814,832) (293,242) 1,002 0 0
4,362,284 (273,033) 5,179 755 149
Charged to Operations (Federal &
State) 18,317,261 (2,117,029) (2,350,921) 128,347 (1,083,873) (57,088)
Charged to Other Income:
Current 443,875 1,060,543 (603,684) 3,667,869 296
Deferred (920,901) 265,139 118,845 (415,536)
Investment Tax Credit, Net
Total $17,840,235 ($791,347) ($2,835,760) $128,347 $2,168,460 ($56,792)
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 $16,641,115 ($731,511) ($2,842,780) ($35,012) $2,182,041 ($57,090)
(Decrease) Increase in Tax From:
Equity Component of AFUDC (60,486)
Depreciation of Equity AFUDC 1,050,023
Amortization and Utilization of ITC (2,817,616)
State Tax, Net of Federal Income
Tax Benefit 2,832,524 (141,323) 4,750 491 1,552 296
Other 194,675 81,487 2,270 162,868 (15,133) 2
Total $17,840,235 ($791,347) ($2,835,760) $128,347 $2,168,460 ($56,792)
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES (Continued):
Components of income and deferred tax expense for Eastern Edison Company and Subsidiary
for 1998 are as follows:
<CAPTION>
Eastern Eastern Montaup
Edison Edison Electric
Consolidated Eliminations Company Company
<S> <C> <C> <C> <C>
Federal:
Current $32,347,150 $ $4,198,993 $28,148,157
Deferred (15,574,551) 3,840,573 (19,415,124)
Investment Tax Credit, Net (2,817,622) (303,708) (2,513,914)
13,954,977 7,735,858 6,219,119
State:
Current 5,177,116 832,920 4,344,196
Deferred (814,832) 1,707,413 (2,522,245)
4,362,284 2,540,333 1,821,951
Charged to Operations (Federal &
State) 18,317,261 10,276,191 8,041,070
Charged to Other Income:
Current 443,875 11,326 432,549
Deferred (920,901) 0 (920,901)
Total $17,840,235 $ $10,287,517 $7,552,718
Federal income tax expense was different than the amounts computed by applying the statutory rates
rates to book income subject to tax for the following reasons:
Tax Computed at Statutory Rates $16,641,115 $ $ 8,562,201 $8,078,914
(Decrease) Increase in Tax From:
Equity Component of AFUDC (60,486) 0 (60,486)
Depreciation of Equity AFUDC 1,050,023 (209,182) 1,259,205
Amortization and Utilization of
ITC (2,817,616) (303,708) (2,513,908)
State Tax, Net of Federal Income
Tax Benefit 2,832,524 1,652,437 1,180,087
Other 194,675 585,769 (391,094)
Total $17,840,235 $ $10,287,517 $7,552,718
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES (Continued):
Components of income and deferred tax expense for EUA Cogenex Corporation and Subsidiary Companies for 1998 are as follows:
<CAPTION>
EUA EUA
Cogenex EUA EUA EUA Cogenex
Corporation Cogenex EUA Cogenex Citizens West
Consolidated Elimin. Corporation NEM Inc. Canada Corpor. Corporation
<S> <C> <C> <C> <C> <C> <C> <C>
Federal:
Current ($1,245,477) $ ($1,859,244) $719,303 ($2,450) $34,875 ($137,961)
Deferred (598,519) (943,645) 287,571 0 83,164 (25,609)
Total (1,843,996 (2,802,889 1,006,874 (2,450) 118,039 (163,570)
State:
Current 20,209 48,777 (18,914) 0 3,506 (13,160)
Deferred (293,242) (300,353) 8,148 0 0 (1,037)
(273,033) (251,576) (10,766) 0 3,506 (14,197)
Charged to Operations (Federal &
State) (2,117,029) (3,054,465 996,108 (2,450) 121,545 (177,767)
Charged to Other Income:
Current 1,060,543 1,060,543
Deferred 265,139 265,139
Total ($791,347) $ ($1,728,783) $996,108 ($2,450) $121,545 ($177,767)
Federal income tax expense was different than the amounts computed by applying the statutory rates
rates to book income subject to tax for the following reasons:
Tax Computed at Statutory Rates ($731,511) $ ($1,592,962) $1,010,248 ($27,274) $120,259 ($241,782)
(Decrease) Increase in Tax From:
State Tax, Net of Federal Income
Tax Benefit ($141,323) (127,376) (6,998) 0 2,279 (9,228)
Other $81,487 (8,445) (7,142) 24,824 (993) 73,243
Total ($791,347) $ ($1,728,783) $996,108 ($2,450) $121,545 ($177,767)
</TABLE>
<TABLE>
NOTE B - INCOME AND DEFERRED TAXES (Continued):
Components of income and deferred tax expense for EUA Energy Investment and Subsidiary Companies for 1998 are as follows:
<CAPTION>
EUA Energy EUA Energy Eastern EUA
Investment Investment EUA Unicord EUA Compression
Consolidated Elimin. Corporation Transcap. Corporation Bioten Renova Services
<S> <C> <C> <C> <C> <C> <C> <C>
Federal:
Current ($2,301,955) $ (1,035,379) (1,266,576 $ $ $ $
Deferred (54,145) 131,263 (189,175) 0 0 3,767 0
(2,356,100) (904,116) (1,455,751) 0 0 3,767 0
State:
Current 4,177 1,747 2,430 0 0 0
Deferred 1,002 0 0 0 1,002 0
5,179 1,747 2,430 0 0 1,002 0
Charged to Operations (Federal &
State) (2,350,921) (902,369) (1,453,321) 0 0 4,769 0
Charged to Other Income:
Current (603,684) 0 0 (572,003) (31,681)
Deferred 118,845 (93,336) 0 0 284,323 (72,142)
Total ($2,835,760) $ ($995,705) ($1,453,321) $ 0 ($287,680) $4,769 ($103,823)
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 ($2,842,780) $ ($991,314) ($1,429,511) $ ($322,103) $4,769 ($104,621)
Increase (Decrease) in Tax From:
State Tax, Net of Federal Income
Tax Benefit 4,750 1,787 1,580 0 1,087 296
Other 2,270 (6,178) (25,390) 0 33,336 502
Total ($2,835,760) $ ($995,705) ($1,453,321) $ ($287,680) $4,769 ($103,823)
</TABLE>
(C) Capital Stock:
The Agreement and Plan of Merger dated February 1, 1999 by and among New
England Electric System (NEES) and EUA, which is subject to EUA shareholder
and various regulatory agencies' approval, provides for NEES to purchase all
of the outstanding EUA shares for $31 per share in cash. The transaction is
expected to be completed by early 2000.
There was no change in the number of common shares outstanding during 1998.
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) and as
permitted under FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (FAS123) .
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 1998, approximately 74,000 shares of
restricted common shares, valued at approximately $1.8 million were granted.
The issued shares 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 approximately
$1.6 million in 1998. There are no material differences in the Company
recording its annual compensation expense under APB25 from the requirements
under FAS123. All of the restricted shares will become immediately vested upon
the completion of EUA's plan of merger with NEES.
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, 1998, 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. On December 30, 1998,
Montaup redeemed $55 million of debenture bonds and paid a $19 million special
dividend to Eastern Edison with proceeds received from the sale of its 50%
ownership share of the Canal 2 generating station. The principal amount of
Montaup securities wholly-owned by Eastern Edison at December 31, 1998 was
approximately $181 million.
Blackstone's Variable Rate Demand Bonds are collateralized by an irrevocable
Letter of Credit which expires on January 21, 2000. 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,
2000, 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 July, Eastern Edison used short-term borrowings to redeem $20 million of
5-7/8% and $40 million of 5-3/4%, First Mortgage and Collateral Trust Bonds at
maturity. On December 30, 1998, Eastern repaid outstanding short-term
borrowings with proceeds received from the redemption of Montaup securities.
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 1998 are:
$21.9 million in 1999, $62.5 million in 2000, $14.3 million in 2001, $46
million in 2002, and $60 million in 2003.
(F) Fair Value Of Financial Instruments:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate:
Cash and Temporary Cash Investments: The carrying amount approximates fair
value because of the short-term maturity of these instruments.
Long Term Notes Receivable and Net Investment in Sales-Type Leases: The fair
value of these assets are based on market rates of similar securities.
Preferred Stock and Long-Term Debt of Subsidiaries: The fair value of the
System redeemable preferred stock and long-term debt were based on quoted
market prices for such securities at December 31, 1998.
The estimated fair values of the System's financial instruments at December 31,
1998 were as follows:
Carrying Amount Fair Value
($ in thousands) 1998 1998
EUA
Cash and Temporary Cash Investments $ - $ -
Redeemable Preferred Stock - -
Long-Term Debt - -
EUA Service
Cash and Temporary Cash Investments 2,422 2,422
Redeemable Preferred Stock - -
Long-Term Debt 6,200 6,515
Blackstone
Cash and Temporary Cash Investments 178 178
Redeemable Preferred Stock - -
Long-Term Debt 33,500 37,102
Newport
Cash and Temporary Cash Investments 142 142
Redeemable Preferred Stock - -
Long-Term Debt 19,794 20,041
Eastern Edison - Consolidated
Cash and Temporary Cash Investments 25,952 25,952
Redeemable Preferred Stock 30,000 32,625
Long-Term Debt 163,000 167,723
EUA Cogenex - Consolidated
Cash and Temporary Cash Investments 2,782 2,782
Redeemable Preferred Stock - -
Long-Term Notes Receivable and
Net Investment in Sales-Type Leases 40,934 42,052
Long-Term Debt 84,100 88,788
EUA Energy - Consolidated
Cash and Temporary Cash Investments 552 552
Redeemable Preferred Stock - -
Long-Term Debt - -
EUA Ocean State
Cash and Temporary Cash Investments 40 40
Redeemable Preferred Stock - -
Long-Term Debt 26,114 30,224
EUA Energy Services
Cash and Temporary Cash Investments 2 2
Redeemable Preferred Stock - -
Long-Term Debt - -
EUA Telecommunications
Cash and Temporary Cash Investments 18 18
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 $145 million
from all sources of short-term credit. As of December 31, 1998, various
financial institutions have committed up to $75 million under the revolving
credit facility. In addition to the $75 million available under the revolving
credit facility, EUA System companies maintain short-term lines of credit with
various banks totaling $90 million for an aggregate amount available of $165
million. At December 31, 1998, the EUA System had unused short-term lines of
credit of approximately $101.4 million. During 1998, the weighted average
interest rate for short-term borrowings was 5.8%.
(H) Jointly Owned Facilities:
At December 31, 1998, in addition to the stock ownership interests discussed
in Note A, Nature of Operations and Summary of Significant Accounting Policies
- - Jointly Owned Companies, Montaup and Newport had direct ownership interests
in the following electric generating facilities:
Accumulated Net
Utility Provision for Utility Construction
Percent Plant in Depreciation Plant in Work in
($ in thousands) Owned Service & Amortization Service Progress
Montaup:
Wyman Unit 4 1.96% $ 4,041 $ 2,388 $ 1,653 $
Seabrook Unit I 2.90% 194,169 47,277 146,892 480
Millstone Unit 3 4.01% 178,598 65,705 112,893 347
Newport:
Wyman Unit 4 0.67% 1,312 805 507
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, 1998,
Montaup's total net investment in nuclear fuel of the Seabrook and Millstone
Units amounted to $2.5 million and $1.9 million, respectively.
Montaup's and Newport's shares of related operating and maintenance expenses
with respect to units reflected in the preceding table are included in the
corresponding operating expenses.
EUA has entered into agreements to sell its joint ownership shares in Wyman
Unit 4 and Seabrook Unit I. Closing of the Wyman sale is expected in the
first quarter of 1999 and the Seabrook sale is expected to close later in
1999. Both agreements are subject to approval of various regulatory agencies.
(I) Financial Information By Business Segments:
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS 131), requires
disclosure of certain financial and descriptive information by operating
segments. The Core Electric Business includes results of the electric utility
operations of Blackstone, Eastern Edison, Newport and Montaup.
Energy Related Business includes results of our diversified energy-related
subsidiaries, EUA Cogenex, EUA Ocean State, EUA Energy Investment Corporation
(EUA Energy), EUA Energy services and EUA Telecommunications.
Corporate results include the operations of EUA Service and EUA Parent. EUA
does not have any intersegment revenues. Financial data for the business
segments are as follows:
Year Ended December 31, 1998
($ in thousands) Core Electric Energy Related Corporate Total
Operating Revenues $480,080 $ 58,721 - $538,801
Pre-Tax Operating
Income 84,586 (2,945) (2,045) 79,596
Income Taxes 22,685 (1,387) (1,845)
19,453
Depreciation and
Amortization 38,804 12,267 8 51,079
Cash Construction
Expenditures 22,888 26,801 1,512 51,201
Equity in Subsidiary
Earnings 1,390 8,134 9,524
Net Interest Charges 23,593 12,219 1,387 37,199
Net Interest Income 528 7,210 63 7,801
Year ended December 31, ($ in thousands) 1998
Total Plant and Other Investments
Core Electric $ 648,281
Energy Related 164,439
Corporate 18,973
Total Plant and Other Investments 831,693
Other Assets
Core Electric 370,360
Energy Related 67,780
Corporate 32,805
Total Other Assets 470,945
Total Assets $1,302,638
(J) Commitments And Contingencies:
Plan of Merger Agreement: On February 1, 1999, EUA and New England Electric
System (NEES) entered into an Agreement and Plan of Merger under which NEES
will acquire all outstanding shares of EUA for $31 per share in cash. Under
certain terms of the merger agreement, if the merger agreement is terminated
by EUA, EUA would pay NEES a termination fee of $20 million plus up to $5
million for documented out-of-pocket expenses.
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.
Montaup has a 4.5% equity ownership in Connecticut Yankee, a nuclear
generating facility which is in the process of decommissioning. Montaup's
share of the total estimated costs for the permanent shutdown, decommissioning,
and recovery of the investment in Connecticut Yankee is approximately $23.8
million. On August 31, 1998, a FERC law judge rejected Connecticut Yankee's
filed plan to decommission the plant. The judge claimed that estimates of
clean-up costs were flawed and certain restoration costs were not supported.
The judge also said Connecticut Yankee could not pass on spent fuel storage
costs to rate-payers. The judge recommended that Connecticut Yankee withdraw
its decommissioning plan and submit a new plan which addresses the issues cited
by him. FERC will review the judge's recommendations and issue a decision on
this case in the coming months. If FERC concurs with the judge's
recommendation, this may result in a write down of certain Connecticut Yankee
plant investments. 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 $31.0 million. In
January 1998, FERC accepted Maine Yankee's rate filing, subject to refund, for
the recovery of its costs during the decommissioning period. On January 19,
1999, Maine Yankee and the active intervening parties filed an Offer of
Settlement with FERC which was supported by FERC trial staff. Upon commission
approval, this agreement will constitute full settlement of issues raised in
this proceeding.
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 $22.4 million
in 1998 dollars, and Seabrook I is $14.4 million in 1998 dollars. These
figures are based on studies performed for the lead owners of the units.
Montaup also pays into decommissioning reserves pursuant to contractual
arrangements with other nuclear generating facilities in which it has an
equity ownership interest or life of the unit entitlement. Such expenses are
currently recoverable through rates.
Pensions: EUA maintains a noncontributory defined benefit pension plan
covering most of the employees of the EUA System (Retirement Plan). Retirement
Plan benefits are based on years of service and average compensation over the
four years prior to retirement. It is the EUA System's policy to fund the
Retirement Plan on a current basis in amounts determined to meet the funding
standards established by the Employee Retirement Income Security Act of 1974.
Total pension (income) expense for the Retirement Plan for 1998 included the
following components:
($ in thousands) 1998
Service cost $ 2,929
Interest cost 10,390
Expected return on assets (15,033)
Net amortization:
Prior service cost 671
Net actuarial (gain) (395)
Transition obligation (asset) (274)
Total periodic pension (income) expense $ (1,712)
Assumptions used to determine pension costs:
Discount Rate 7.25%
Compensation Increase Rate 4.25%
Long-Term Return on Assets 9.50%
The following tables set forth the actuarial present value of projected
benefit obligations, fair value of assets and funded status at December 31,
1998:
Reconciliation of Projected Benefit Obligation
($ in thousands) 1998
Beginning of year benefit obligation $144,915
Service cost 2,929
Interest cost 10,390
Actuarial loss 9,256
Disbursements (8,032)
End of year benefit obligation $159,458
Reconciliation of Fair Value of Assets
($ in thousands) 1998
Beginning of year fair value of assets $182,795
Actual return on plan assets 38,074
Disbursements (8,032)
End of year fair value of assets $212,837
Reconciliation of Funded Status
($ in thousands) 1998
Projected benefit obligation (PBO) $(159,458)
Fair value of plan assets (FVA) 212,837
PBO less than FVA (funded status) 53,379
Unrecognized prior service cost 4,153
Unrecognized net transition obligation (asset) (662)
Unrecognized net actuarial (gain) (54,845)
Net amount recognized $ 2,025
The discount rate used to determine pension obligations, effective January 1,
1999 was changed from 7.25% to 6.75% and was used to calculate the plan's
funded status at December 31, 1998.
At December 31, 1998, approximately $2.7 million was included in other
liabilities for non-qualified pension 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, and policy cash values and death benefits may be available
to offset EUA's obligations under the Supplemental Plans. As of December 31,
1998, approximately $6.5 million was included in accrued expenses and other
liabilities for these plans. Expenses related to the Supplemental Plans were
$1.1 million in 1998.
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 $1.5 million in 1998.
Post-Retirement Benefits: Retired employees are entitled to participate in
health care and life insurance benefit plans. Health care benefits are subject
to deductibles and other limitations. Health care and life insurance benefits
are partially funded by EUA System companies for all qualified employees.
The total cost of post-retirement benefits other than pensions for 1998
includes the following components:
($ in thousands) 1998
Service cost $ 967
Interest cost 4,526
Expected return on assets (1,849)
Net amortization:
Net actuarial (gain) (780)
Transition obligation 3,289
Total periodic postretirement benefit cost $6,153
Assumptions used to determine post-retirement costs
Discount rate 7.25%
Health care cost trend rate
- near-term 6.00%
- long-term 5.00%
Compensation increase rate 4.25%
Long-term return on assets
- union 8.50%
- non-union 7.50%
The following tables set forth the actuarial present value of accumulated
postretirement benefit obligation, fair value of assets and funded status
at December 31, 1998.
Reconciliation of Accumulated Post-retirement Benefit Obligation
($ in thousands) 1998
Beginning of year benefit obligation $64,826
Service cost 967
Interest cost 4,526
Participant contributions 151
Actuarial loss 2,644
Disbursements (3,486)
End of year benefit obligation $69,628
Reconciliation of Fair Value Assets
($ in thousands) 1998
Beginning of year fair value of assets $ 23,729
Actual return on plan assets 3,007
Company contributions 6,794
Participant contributions 151
Disbursements (3,486)
End of year fair value of assets $30,195
Reconciliation of Funded Status
($ in thousands) 1998
Accumulated post-retirement benefit
obligation (APBO) $ (69,628)
Fair value of plan assets (FVA) 30,195
APBO (in excess of) FVA (Funded Status) (39,433)
Unrecognized net transition obligation (asset) 46,046
Unrecognized net actuarial (gain) (13,967)
Net amount recognized $(7,354)
Effect of 1% Change in Assumed Health Care Cost Trend Rate
One Percentage Point
($ in thousands) Increase Decrease
Effect on 1998 service and interest cost
components of net-periodic costs $ 814 $ (649)
Effect on 1998 accumulated post-retirement
benefit obligation $ 8,578 $ (6,996)
The discount rate used to determine post-retirement benefit obligations
effective January 1, 1999 was changed from 7.25% to 6.75% and was used to
calculate the funded status of post-retirement benefits at December 31, 1998.
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, 1998, the aggregate annual minimum commitments for such
contracts are approximately $111 million in 1999, $109 million in 2000, $111
million in 2001, $108 million in 2002, $101 million in 2003 and will aggregate
approximately $927 million for the ensuing years. In addition, the EUA System
is required to pay additional amounts depending on the actual amount of energy
received under contracts in effect. 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. Pending
regulatory approval, certain power contract transfers related to the
divestiture of EUA's generating assets will become effective in 1999. Upon
completion of the power contract transfers, the demand charges will be reduced
to $54 million in 1999, $43 million in 2000, $40 million in 2001, $42 million
in 2002, $26 million in 2003, and $162 million in the ensuing years.
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.
<PAGE>
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 had accumulated since 1985. Due to the uncertainty of the
ultimate outcome of this proceeding and anticipated recoverability whether
through rates, insurance providers or other parties, Blackstone recorded an
asset for the amount funded under the escrow agreement (discussed below)
consistent with provisions of SFAS 5, specifically paragraphs 3, 10, and 13
and SFAS 71, specifically paragraphs 3 and 9. This amount is included with
Other Assets on the Consolidated Balance Sheets at December 31, 1998 and
1997. Should the EPA determine the substance to be non-toxic, the company may
be able to retain the entire escrowed amount and would relieve both the asset
and liability from its balance sheet at that time. However should the EPA
determine that the substance is hazardous, the company would amortize its
asset, net of amounts recovered through insurance proceeds or from other
parties, over a five year period in accordance with the company's established
rate recovery mechanisms of similar costs.
Blackstone filed a Notice of Appeal of the District Court 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.
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, 1998, the EUA System had incurred costs of approximately
$7.7 million (excluding the $5.9 million Mendon Road judgment) in connection
with the investigation and cleanup 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 $2.5 million (excluding the $5.9
million Mendon Road judgment) may be incurred at these sites through 1999,
substantially all of which relates to sites at which Blackstone is a
potentially responsible party. Estimates beyond 1999 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, and 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. Thus no loss
provision is required at this time.
The Clean Air Act Amendments created new regulatory programs and generally
updated and strengthened air pollution control laws. These Amendments
expanded the EPA regulations of emissions from electric generating facilities
and a host of other sources. EUA System generating facilities were first
affected in 1995, when EPA regulations became applicable to the facilities.
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. 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 with these requirements
through, among other things, selective noncatalytic reduction processes.
See Note A regarding EUA's planned divestiture of generation assets.
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. 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 $24.5
million, 10.56% unsecured long-term notes due 2005 and EUA Ocean State's $26.1
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 $4.1 million of the
outstanding debt of these two companies. In addition, Montaup and Newport
have minimum rental commitments which total approximately $11.2 million and
$1.4 million, respectively, under a noncancelable transmission facilities
support agreement for years subsequent to 1998.
Other: Since early 1997, fourteen plaintiffs brought suits 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 $34 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. Four cases have
been dismissed as against the EUA Companies. EUA cannot predict the ultimate
outcome of this matter at this time.
A pending class action, filed on March 2, 1998, in the Massachusetts Supreme
Judicial Court naming all Massachusetts electric distribution companies,
including Eastern Edison, and certain Massachusetts state agencies as
defendants, seeks to invalidate certain sections of the Electric Utility
Restructuring Act of 1997. The Act directs the Massachusetts Department of
Telecommunications and Energy to impose mandatory charges on all electricity
sold to customers, except those served by a municipal lighting plant, to fund
energy efficiency activities and to promote renewable energy projects. In
addition to declaratory judgment, plaintiffs seek remittance of monies paid to
each distribution company by customers along with any interest earned. The
outcome of this class action is unknown at this time, however, Eastern Edison
is vigorously defending the lawsuit.
Cogenex Settlement - EUA Cogenex recorded an after-tax charge of $2.1 million
to earnings related to an arbitration panel's decision in a matter involving
the 1995 sale of a portfolio of cogeneration units by EUA Cogenex to
Ridgewood/Mass Power Partners, et al (Ridgewood). Ridgewood claimed that
financial and other warranties in the purchase and sale agreement had been
breached. EUA Cogenex entered counterclaims seeking recovery of costs of
certain services performed for Ridgewood. The arbitration panel found for the
buyer on some of the warranty claims, and awarded damages of approximately
$2.6 million plus interest. EUA Cogenex was awarded approximately $400,000
plus interest on its counterclaim. EUA Cogenex paid the arbitration panel's
net award less interest and recorded this charge to earnings during the fourth
quarter of 1998. EUA Cogenex continues to contest the panel's findings with
respect to the interest and legal fees.
Termination of Power Marketing Joint Venture - In the third quarter of 1997,
EUA announced the termination of a power marketing joint venture with an
affiliate of Duke Energy Corporation, the establishment of contingency
reserves related to certain of its energy-related business activities and
other expenses. Collectively, these actions resulted in a net after-tax gain
of $1.5 million in third quarter 1997 earnings. The gross pre-tax gain related
to the joint venture termination was $6.6 million. The gain was offset by
contingency reserves for EUA's non-core business operations, industry
restructuring matters, the Millstone 3 outage, interest and insurance
aggregating $4.4 million. Also, EUA recorded expenses of $200,000 related to
industry restructuring efforts.
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 2 1999, 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 2nd day of April, 1999.
EASTERN UTILITIES ASSOCIATES
By /s/Donald G. Pardus
Title: Chairman of the Board
EUA SERVICE CORPORATION EUA COGENEX-CANADA
By /s/Robert G. Powderly By /s/John R. Stevens
Title: Executive Vice President Title: Vice Chairman
BLACKSTONE VALLEY ELECTRIC COMPANY EUA ENERGY INVESTMENT CORPORATION
By /s/John D. Carney By /s/John R. Stevens
Title: President Title: President
EASTERN EDISON COMPANY EASTERN UNICORD CORPORATION
By /s/Michael J. Hirsh By /s/John R. Stevens
Title: Vice President Title: President
MONTAUP ELECTRIC COMPANY EUA TRANSCAPACITY, INC.
By /s/Kevin A. Kirby By /s/John R. Stevens
Title: Vice President Title: President
EUA COGENEX CORPORATION EUA BIOTEN, INC.
By /s/Edward T. Liston By /s/John R. Stevens
Title: President Title: President
NORTHEAST ENERGY MANAGEMENT, INC. EUA OCEAN STATE CORPORATION
By /s/Edward T. Liston By /s/Clifford J. Hebert, Jr.
Title: President Title: Treasurer
EUA HIGHLAND CORPORATION NEWPORT ELECTRIC CORPORATION
By /s/Mark White By /s/Barbara A. Hassan
Title: Executive Vice President Title: Vice President
EUA CITIZENS CONSERVATION SERVICES, INC. EUA ENERGY SERVICES, INC.
By /s/Edward T. Liston By /s/Kevin A. Kirby
Title: Executive Vice President Title: Vice President
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