SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ___________
Commission file number 1-8291
GREEN MOUNTAIN POWER CORPORATION
(Exact name of registrant as specified in its charter)
Vermont 03-0127430
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
25 Green Mountain Drive
South Burlington, VT 05403
Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (802) 864-5731
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class - Common Stock Outstanding June 30, 1998
$3.33 1/3 Par Value 5,233,582
<TABLE>
<CAPTION>
GREEN MOUNTAIN POWER CORPORATION
Consolidated Comparative Balance Sheets
Part 1 - Item 1
June 30 December 31
----------------------------------- ----------------
1998 1997 1997
---------------- ---------------- ----------------
(Unaudited) (In thousands)
(In thousands)
ASSETS
<S> <C> <C> <C>
Utility Plant
Utility plant, at original cost.................... $269,649 $249,511 $265,441
Less accumulated depreciation...................... 92,330 85,492 87,689
---------------- ---------------- ----------------
Net utility plant................................ 177,319 164,019 177,752
Property under capital lease....................... 8,342 9,006 8,342
Construction work in progress...................... 11,469 20,586 10,626
---------------- ---------------- ----------------
Total utility plant, net......................... 197,130 193,611 196,720
---------------- ---------------- ----------------
Other Investments
Associated companies, at equity ................... 15,321 14,026 15,860
Other investments.................................. 5,382 5,271 6,137
---------------- ---------------- ----------------
Total other investments.......................... 20,703 19,297 21,997
---------------- ---------------- ----------------
Current Assets
Cash and cash equivalents.......................... 208 131 118
Accounts receivable, customers and others,
less allowance for doubtful accounts............. 14,277 14,805 17,365
Accrued utility revenues .......................... 5,459 5,438 6,505
Fuel, materials and supplies, at average cost...... 3,501 3,478 3,261
Prepayments........................................ 8,719 524 1,563
Prepaid taxes...................................... 2,182 -- --
Other.............................................. 264 354 313
---------------- ---------------- ----------------
Total current assets............................. 34,610 24,730 29,125
---------------- ---------------- ----------------
Deferred Charges
Demand side management programs.................... 11,734 14,690 13,692
Purchased power costs.............................. 9,437 9,963 4,283
Other.............................................. 12,656 12,781 9,415
---------------- ---------------- ----------------
Total deferred charges........................... 33,827 37,434 27,390
---------------- ---------------- ----------------
Non-Utility
Cash and cash equivalents.......................... 1,233 165 153
Other current assets............................... 8,893 5,192 11,501
Property and equipment............................. 1,220 12,321 10,784
Intangible assets.................................. 20 2,184 2,116
Equity investment in energy related businesses..... 12,146 13,661 12,824
Other assets....................................... 5,188 12,994 4,682
---------------- ---------------- ----------------
Total non-utility assets......................... 28,700 46,517 42,060
---------------- ---------------- ----------------
Total Assets........................................... $314,970 $321,589 $317,292
================ ================ ================
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stock Equity
Common stock,$3.33 1/3 par value,
authorized 10,000,000 shares (issued
5,249,438, 5,134,286 and 5,195,432)........... $17,634 $17,095 $17,318
Additional paid-in capital....................... 71,326 69,733 70,720
Retained earnings................................ 21,379 25,344 26,717
Treasury stock, at cost (15,856 shares).......... (378) (378) (378)
---------------- ---------------- ----------------
Total common stock equity...................... 109,961 111,794 114,377
Redeemable cumulative preferred stock.............. 17,735 19,310 17,735
Long-term debt, less current maturities............ 88,500 93,200 93,200
---------------- ---------------- ----------------
Total capitalization........................... 216,196 224,304 225,312
---------------- ---------------- ----------------
Capital lease obligation............................... 8,342 9,006 8,342
---------------- ---------------- ----------------
Current Liabilities
Current maturuties of long-term debt............... 4,700 1,700 1,700
Short-term debt.................................... 3,516 6,316 2,616
Accounts payable, trade, and accrued liabilities... 5,857 6,367 6,828
Accounts payable to associated companies........... 6,313 7,514 7,661
Dividends declared................................. 355 375 350
Customer deposits.................................. 537 507 721
Taxes accrued...................................... -- 491 2,843
Interest accrued................................... 1,312 1,335 1,311
Deferred revenues ................................. 2,436 2,854 --
Other.............................................. 3,300 811 1,256
---------------- ---------------- ----------------
Total current liabilities...................... 28,326 28,270 25,286
---------------- ---------------- ----------------
Deferred Credits
Accumulated deferred income taxes.................. 28,264 27,467 23,501
Unamortized investment tax credits................. 4,401 4,705 4,542
Other.............................................. 22,023 15,429 17,239
---------------- ---------------- ----------------
Total deferred credits......................... 54,688 47,601 45,282
---------------- ---------------- ----------------
Non-Utility
Current liabilities................................ 868 1,084 1,119
Other liabilities.................................. 6,550 11,324 11,951
---------------- ---------------- ----------------
Total non-utility liabilities.................. 7,418 12,408 13,070
---------------- ---------------- ----------------
Total Capitalization and Liabilities................... $314,970 $321,589 $317,292
================ ================ ================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GREEN MOUNTAIN POWER CORPORATION
Consolidated Comparative Income Statements
(Unaudited)
Part 1 - Item 1
Three Months Ended Six Months Ended
June 30 June 30
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(In thousands, except amounts per share)
<S> <C> <C> <C> <C>
Operating Revenues ........................................... $43,733 $42,682 $90,665 $89,886
------------ ------------ ------------ ------------
Operating Expenses
Power Supply
Vermont Yankee Nuclear Power Corporation ................ 7,274 8,473 15,255 16,239
Company-owned generation................................. 1,194 1,199 4,029 2,045
Purchases from others.................................... 17,350 14,948 40,391 32,728
Other operating............................................. 4,840 4,007 9,256 8,242
Transmission................................................ 2,407 2,914 4,668 5,961
Maintenance................................................. 1,262 1,141 2,464 2,259
Depreciation and amortization............................... 3,879 4,152 8,304 8,392
Taxes other than income..................................... 1,810 1,692 3,766 3,608
Income taxes................................................ 906 1,165 (595) 3,170
------------ ------------ ------------ ------------
Total operating expenses................................. 40,922 39,691 87,538 82,644
------------ ------------ ------------ ------------
Operating Income....................................... 2,811 2,991 3,127 7,242
------------ ------------ ------------ ------------
Other Income (Expense)
Equity in earnings (loss)of affiliates and non-utility......
operations................................................. 262 (289) (311) 130
Allowance for equity funds used during construction......... 45 200 98 394
Other income and deductions, net............................ 32 119 (887) 401
------------ ------------ ------------ ------------
Total other income (expense).............................. 339 30 (1,100) 925
------------ ------------ ------------ ------------
Income before interest charges.......................... 3,150 3,021 2,027 8,167
------------ ------------ ------------ ------------
Interest Charges
Long-term debt.............................................. 1,784 1,826 3,583 3,690
Other....................................................... 127 85 344 161
Allowance for borrowed funds used during construction...... (32) (120) (106) (229)
------------ ------------ ------------ ------------
Total interest charges.................................... 1,879 1,791 3,821 3,622
------------ ------------ ------------ ------------
Net Income (Loss)............................................. 1,271 1,230 (1,794) 4,545
Dividends on preferred stock.................................. 340 374 681 749
------------ ------------ ------------ ------------
Net Income (Loss) Applicable to Common Stock.................. $931 $856 ($2,475) $3,796
============ ============ ============ ============
Common Stock Data
Basic earnings (loss) per share............................. $0.18 $0.17 ($0.48) $0.75
Cash dividends declared per share........................... $0.275 $0.53 $0.55 $1.06
Weighted average shares outstanding......................... 5,222 5,096 5,209 5,070
Consolidated Comparative Statements of Retained Earnings
(Unaudited)
Balance - beginning of period................................. $21,884 $27,187 $26,717 $26,916
Net Income (Loss)............................................. 1,271 1,230 (1,794) 4,545
------------ ------------ ------------ ------------
23,155 28,417 24,923 31,461
------------ ------------ ------------ ------------
Cash Dividends - redeemable cumulative preferred stock........ 340 374 681 749
- common stock................................. 1,436 2,699 2,863 5,368
------------ ------------ ------------ ------------
1,776 3,073 3,544 6,117
------------ ------------ ------------ ------------
Balance - end of period....................................... $21,379 $25,344 $21,379 $25,344
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GREEN MOUNTAIN POWER CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Part 1 - Item 1
Six Months Ended
June 30
---------------------------------------
1998 1997
----------------- -----------------
(In thousands)
<S> <C> <C>
Operating Activities:
Net Income (Loss).................................................... ($1,794) $4,545
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................... 8,304 8,392
Dividends from associated companies less equity income........... 538 1,743
Allowance for funds used during construction..................... (204) (623)
Amortization of purchased power costs............................ 2,571 (1,732)
Deferred income taxes............................................ 4,890 994
Deferred revenues ............................................... 2,437 2,854
Deferred purchased power costs................................... (7,725) (25)
Amortization of investment tax credits........................... (141) (120)
Environmental proceedings costs, net............................. (891) (804)
Conservation expenditures........................................ (649) (1,052)
Changes in:
Accounts receivable............................................ 3,089 2,928
Accrued utility revenues....................................... 1,047 1,224
Fuel, materials and supplies................................... (240) 143
Prepayments and other current assets........................... (4,501) 556
Accounts payable............................................... (2,319) 1,120
Taxes accrued.................................................. (5,024) (495)
Interest accrued............................................... 1 (46)
Other current liabilities...................................... 1,611 (835)
Other............................................................ 121 (6,259)
----------------- -----------------
Net cash provided by operating activities.......................... 1,121 12,508
----------------- -----------------
Proceeds from sale of propane subsidiary........................... 11,500 --
Investing Activities:
Construction expenditures.......................................... (6,541) (9,148)
Investment in non-utility property................................. 495 (1,040)
Proceeds from sale of propane subsidiary........................... 11,500 --
----------------- -----------------
Net cash provided by (used in) investing activities.............. 5,454 (10,188)
----------------- -----------------
Financing Activities:
Issuance of common stock........................................... 921 1,813
Short-term debt, net............................................... 900 5,300
Cash dividends..................................................... (3,543) (6,117)
Reduction in long-term debt........................................ (3,683) (3,769)
----------------- -----------------
Net cash used in financing activities............................ (5,405) (2,773)
----------------- -----------------
Net increase (decrease) in cash and cash equivalents............... 1,170 (453)
Cash and cash equivalents at beginning of period................... 271 749
----------------- -----------------
Cash and Cash Equivalents at End of Period............................. $1,441 $296
================= =================
Supplemental Disclosure of Cash Flow Information:
Cash paid year-to-date:
Interest (net of amounts capitalized)........................... $3,796 $3,787
Income taxes.................................................... 938 1,849
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
GREEN MOUNTAIN POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
Part 1 -- ITEM 1
1. SIGNIFICANT ACCOUNTING POLICIES
Pursuant to an order of the Vermont Public Service Board (VPSB), the
Company's rate structure is seasonally differentiated, with higher rates
billed during the four winter months and lower rates billed during the
remaining eight months of the year. In order to match revenues with
related costs more accurately on an interim basis, the Company
recognizes revenue in a manner that seeks to eliminate the impact of
such seasonally differentiated rates. At June 30, 1998 and 1997, the
Company had recorded deferred revenues of $2.4 million and $2.9 million,
respectively, in accordance with this policy. These deferred revenues
are recognized in subsequent interim periods. In its pending rate
filing, the Company has requested a redesign of its rates to eliminate
the seasonal differential.
Included in equity in earnings of affiliates and non-utility operations
in the Other Income section of the Consolidated Comparative Income
Statements are the results of operations of the Company's rental water
heater program, which is not regulated by the VPSB, and five of the
Company's wholly-owned subsidiaries, Green Mountain Propane Gas, Limited
(GMPG), Mountain Energy, Inc., GMP Real Estate Corporation, Green
Mountain Resources, Inc. and Lease-Elec, Inc., all of which are
unregulated. On March 16, 1998, the Company sold all assets of GMPG to
VGS Propane LLC. The sale did not have a material impact on the
Company's results of operations. Summarized financial information for
the rental water heater program and such wholly-owned subsidiaries is as
follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ---------------
1998 1997 1998 1997
---- ---- ---- ----
(In Thousands) (In Thousands)
Revenue . . . . . . . . . $ 240 $2,498 $2,109 $6,036
Expenses . . . . . . . . . 475 3,295 3,403 6,973
------- ------- -------- -------
Net Loss . . . . . . . . .$ (235) $ (797) $(1,294) $ (937)
======= ======= ======== =======
2. INVESTMENT IN ASSOCIATED COMPANIES
The Company accounts for its investment in the companies listed below
using the equity method. Summarized financial information is as
follows:
Vermont Yankee Nuclear Power Corporation
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(In Thousands) (In Thousands)
Gross Revenue . . . . . $51,913 $44,383 $109,083 $84,804
Net Income Applicable
to Common Stock . . . 1,806 1,748 3,508 3,523
Company's Equity in
Net Income . . . . . 315 309 613 646
Vermont Electric Power Company, Inc.
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
(In Thousands) (In Thousands)
Gross Revenue . . . . . . $8,860 $12,700 $20,680 $25,136
Net Income
Before Dividends . . . 298 280 584 709
Company's Equity in
Net Income (Includes
preferred equity) . . . 96 92 163 205
3. ENVIRONMENTAL MATTERS
Public concern for the environment has resulted in increased government
regulation of the licensing and operation of electric generation,
transmission and distribution facilities. The electric industry
typically uses or generates a range of potentially hazardous products in
its operations. The Company must meet various land, water, air and
aesthetic requirements as administered by local, state and federal
regulatory agencies. The Company maintains an environmental compliance
and monitoring program that includes employee training, regular
inspection of Company facilities, research and development projects,
waste handling and spill prevention procedures and other activities.
Subject to developments concerning the Pine Street Barge Canal site
discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 under the caption -"Management's Discussion and
Analysis of Financial Condition and Results of Operations-Environmental
Matters", and below, the Company believes that it is in substantial
compliance with such requirements, and that no material complaints
concerning compliance by the Company with present environmental
protection regulations are outstanding.
As of June 30, 1998, total expenditures for the Pine Street Barge Canal
site were $15.7 million, inclusive of the $11.7 million as previously
described in the Company's Annual Report on Form 10-K for year ended
December 31, 1997, of which $5.4 million has been amortized.
As previously stated in the Company's Annual Report on Form 10-K for
year ended December 31, 1997, past response cost claims of the EPA in an
amount exceeding $11 million (including interest) have been asserted
against the Company. Upon the request of the government, the Company
initiated fast-track negotiations with the EPA and the Department of
Justice concerning those claims and certain contribution claims by the
Company against the government during the first quarter of 1998. Those
negotiations are continuing.
In an Order released March 2, 1998, the VPSB suspended the amortization
of expenditures associated with the Pine Street Barge Canal site pending
further proceedings. Although it did not eliminate the rate base
deferral of these expenditures, or make any specific order in this
regard, the VPSB indicated that it was inclined to agree with other
parties in the case that the ultimate costs of the Pine Street Barge
Canal site, taking into account recoveries from insurance carriers and
other PRP's, should be shared between customers and shareholders of the
Company. In its reconsideration order, however, the VPSB stated that
it is their intent "to reserve for a future docket all issues pertaining
to the sharing of remediation-related costs between the Company and its
customers".
In June 1998, the Coordinating Council, a stakeholders group,
established by the EPA in 1994, reached final agreement on a plan to
clean up the Pine Street Barge Canal site. The Plan provides for the
construction of an underwater cover over the canal sediments that
present the highest risk to the environment, the placement of a soil cap
over certain contaminated wetland areas, and the monitoring of the site
to ensure that the cap is effective over the long term and that
contamination is not migrating offsite. The estimated cost of the
cleanup plan is approximately $4.5 to $8.0 million. Final EPA approval
of the Plan is pending. The Company has entered into various
confidential settlement agreements with other potentially responsible
parties that provide for sharing of past response costs and cleanup
liability. In conjunction with reaching agreement with the Coordinating
Council on a recommended cleanup plan, the Company has agreed to fund
environmentally beneficial projects in Burlington, the cost of which may
reach $3.0 million. The Company does not expect that the ultimate outcome
will have a material impact on the Company's results of operations.
4. 1997 Retail Rate Case
On June 16, 1997, the Company filed a request with the VPSB to increase
retail rates by 16.7 percent ($26 million in additional annual revenues)
and the target return on common equity from 11.25 percent to 13 percent.
The Company had sought in its final submissions to the VPSB an increase
of 14.4 percent ($22 million) in revenue to cover increased cost of
service. On March 2, 1998, the VPSB released its Order dated February
27, 1998 in the pending rate case. The VPSB authorized the Company to
increase rates by 3.61 percent, resulting in increased annual revenues
of $5.6 million.
Approximately $11 million of the shortfall from the Company's revenue
request resulted primarily from the VPSB's modification
of the Company's calculation of rate base, the exclusion of future
capital projects from rate base, various cost of service reductions in
areas of payroll and operations and maintenance, and a reduction in the
requested allowed return on equity from 13 percent to 11.25 percent.
Furthermore, the VPSB denied the recovery by the Company of $5.48
million in costs related to its Hydro-Quebec power contract. The
decision stated that the Company had been imprudent in committing to the
power contract in August 1991 and that the contract power would not be
used and useful to utility customers to the extent that power costs,
after accounting for the imprudence disallowance, were in excess of
current estimates of market prices for power. In the first quarter of
1998, the Company expensed $4.6 million of the $5.48 million VPSB
disallowances of purchased power costs. The Company was able to limit
the amount expensed to $4.6 million inasmuch as it anticipates that new
rates will become effective in January 1999 as the result of a May 8,
1998 rate filing. The eventual realization of the remaining
disallowances, if any, will depend upon the resolution of the Company's
1998 rate case. (For a discussion of the May 8, 1998 rate filing, See
Note 5 of the Notes to Consolidated Financial Statements.)
The Order discussed the VPSB's policies of disallowing the recovery of
imprudent expenditures and power contract purchases that it determines
not to be used and useful. However, the Order also stated that the
methodologies and measures used in this rate case were provisional and
applicable in that proceeding only. If the VPSB
were to apply the methodologies and measures used in the Order (or
similar methodologies and measures) to future power contract costs
in the Company's currently pending rate case (See 1998 Retail Rate
Case), the Company would likely be required under Statement of Financial
Accounting Standards No. 5, Accounting for Contingencies, to record an
expense of approximately $180 million (pretax) based on the estimated
future market price of power used by the VPSB in its Order. However,
the Company will not be able to estimate the loss to be recorded, if any,
until such subsequent proceedings are completed.
Furthermore, if the VPSB's ruling that above-market Hydro-Quebec power
contract costs are not used and useful and should be shared equally
between ratepayers and shareholders is not modified in future regulatory
proceedings, then the Company's rates may be set, effectively, on a
basis other than its costs to provide service. The setting of rates
on a basis other than its costs to provide service would
require the Company to discontinue the application of Statement of
Financial Accounting Standards No. 71, Accounting for the Effect of
Certain Types of Regulation, resulting in the write-off of regulatory
assets and liabilities with a charge to earnings, as an extraordinary
item. Based on the June 30, 1998 balance sheet, the Company would be
required to take a charge to earnings of approximately $19 million
attributable to net regulatory assets.
In addition to the Hydro-Quebec power contract disallowances described
above, the Order also required the Company to create a deferred credit
for $9.1 million of payments received by the Company in 1997 pursuant to
two arrangements with Hydro-Quebec that were designed to decrease the
costs of the contract power. The Order, contrary to the VPSB's prior
Accounting Order dated December 31, 1996, required the Company to
amortize this deferred credit over the remaining lives of the related
power contracts. On May 12, 1998, the VPSB notified the Company, as
described below, that it would issue an order relieving the Company from
this ruling.
On March 20, 1998, the Company filed with the VPSB a Motion for
Reconsideration of and to Alter or Amend the VPSB's Order issued on
March 2, 1998. The principal areas in which the Company requested that
the VPSB change its ruling include the following: a correction to the
VPSB's calculation of the $5.48 million Hydro-Quebec contract power cost
disallowance; reversal of the accounting treatment specified by the VPSB
for cash payments made by Hydro-Quebec under arrangements that the
Company had previously negotiated in order to avoid rate increases in
prior years for customers; restoration of $418,000 of costs associated
with the construction of the Searsburg wind facility; restoration of
various other compensation and payroll costs; and a request to increase
the allowed rate of return from 11.25 percent to 12 percent.
On May 12, 1998, in response to the Company's request for a ruling on
the pending motion in advance of the filing date for this report, the
VPSB furnished the Company with a letter stating that "GMP's motion to
amend the February 27, 1998 rate order with respect to the accounting
treatment given to $9.1 million of credits to the cost of service under
previously issued accounting orders, will be granted."
On June 8, 1998, the VPSB issued an order on GMP's Motion for
Reconsideration which reaffirmed the VPSB's earlier ruling disallowing
the $5.48 million in Hydro-Quebec contract power costs. The VPSB
reasserted that the ruling applies only to this rate case, and said "our
rate making treatment for the Hydro-Quebec contract was provisional.
The amount of and the methodology by which we calculated the
disallowance arising from our conclusion that GMP's lock-in of the
Contract was imprudent and the Contract is not fully used-and-useful is
provisional. It applies solely to the rates we establish for the
adjusted test year in this case." The VPSB affirmed the accounting
treatment given to the $9.1 million of credits to the cost of service
discussed above. The VPSB also restored the $418,000 of costs
associated with the construction of the Searsburg wind facility.
However, the VPSB did not grant any other material aspects of the
Company's motion. Additionally, the VPSB disallowed a $585,000 pre-tax
charge related to pension benefits granted to employee of Green Mountain
Energy Resource, Inc. (GMER) at the time such former Company employees
assumed employment with GMER.
Immediately following the issuance of the June 8, 1998 VPSB order, Duff
& Phelps and Standard & Poor's lowered the Company's securities credit
ratings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources".
On June 22, 1998, the Company noticed its appeal to the Vermont Supreme
Court from the VPSB's February 27 order and the June 8 reconsideration
order. The record was transmitted from the VPSB to the Vermont Supreme
Court on June 22, 1998 and briefing will be completed in the fall. A
number of other Vermont utilities have undertaken to submit briefs as
amicus curiae in support of the Company.
The Company believes that the decisions set forth in the Order are
inaccurate factually and incorrect legally. The VPSB's ruling, if not
changed could have a significant impact on the Company's reported
financial condition, and could impact the Company's credit ratings,
dividend policy and financial viability.
5. 1998 Retail Rate Case
On May 8, 1998, the Company filed a request with the VPSB to increase
retail rates by 12.93 percent. The retail rate increase is needed to
cover higher power supply costs, the cost of the January 1998 ice storm,
higher taxes and investments in new plant and equipment. The VPSB
suspended the tariff filings on June 15, 1998. The new rates would be
expected to become effective as of January 22, 1999. Discovery is
underway in the case.
6. SFAS 128
In March 1997, the Financial Accounting Standards Board issued a new
accounting standard, Statement of Financial Accounting Standards No.
128, Earnings per Share (SFAS 128). SFAS 128, effective for financial
statements issued for periods ending after December 15, 1997, replaces
the definition of primary earnings per share, calculated in accordance
with the provisions of APB 15, with a new calculation, basic earnings
per share. Fully diluted earnings per share, now called diluted
earnings per share, is still required. Since the Company has not issued
any potentially dilutive securities, both calculations are the same.
7. COMPETITION AND RESTRUCTURING
For information regarding competition and restructuring, see
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Competition and Restructuring".
8. RECLASSIFICATION
Certain line items on the prior year's financial statements have been
reclassified for consistent presentation with the current year.
The Consolidated Financial Statements are unaudited
and, in the opinion of the Company, reflect the
adjustments necessary to a fair statement of the
results of the interim periods. All such
adjustments, except as specifically noted in the
Consolidated Financial Statements, are of a normal,
recurring nature.
GREEN MOUNTAIN POWER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
June 30, 1998
Part 1 -- ITEM 2
This section presents management's assessment of Green Mountain Power
Corporation's (the Company) financial condition and the principal
factors having an impact on the results of its operations. This
discussion should be read in conjunction with the consolidated financial
statements and notes thereto contained in this quarterly report. This
section contains forward-looking statements as defined under the
securities laws. Actual results could differ materially from those
projected. This section, particularly under "Competition and
Restructuring" and "Year 2000 Computer Compliance", lists some of the
reasons why results could differ materially from those projected.
RESULTS OF OPERATIONS
Earnings Summary
Earnings per share of common stock in the second quarter of 1998 were
$0.18 compared to $0.17 in the second quarter of 1997. Higher power
supply expenses were partially offset by a 7.4 percent increase in sales
to business customers and a 3.6 percent retail rate increase that went
into effect in March 1998. Mountain Energy Inc., the Company's wholly-
owned subsidiary that invests in energy generation and energy and waste
water efficiency projects, experienced a $913,000 decrease in earnings
due to start-up operating losses incurred by Micronair LLC. This
decrease was offset by a $1.1 million reduction in the loss experienced
by Green Mountain Resources, Inc. (GMRI), the subsidiary that holds an
interest in Green Mountain Energy Resources L.L.C. (GMER), due to a
reduction in start-up expenses as compared to those incurred in 1997.
GMER is competing in the emerging consumer retail energy market in
California and Pennsylvania.
For the six months ended June 30, 1998, the loss per share of common
stock was $0.48 compared to earnings of $0.75 per share for the six
months ended June 30, 1997.
Operating Revenues and MWh Sales
Operating revenues, megawatthour (MWh) sales and average number of
customers are summarized as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ---------------
1998 1997 1998 1997
---- ---- ---- ----
Operating Revenues
(In thousands)
Retail . . . . . . . $ 39,314 $ 37,373 $81,166 $79,051
Sales for Resale . . 3,771 4,619 8,149 9,384
Other . . . . . . . 648 690 1,350 1,451
-------- -------- -------- --------
Total Operating
Revenues . . . . . $ 43,733 $ 42,682 $ 90,665 $ 89,886
======== ======== ======== ========
Three Months Ended Six Months Ended
June 30 June 30
------------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
MWh Sales
Retail . . . . . . . . 435,228 422,457 910,930 899,069
Sales for Resale . . . 115,693 157,645 224,879 318,581
------- ------- --------- ---------
Total MWh Sales . . . 550,921 580,102 1,135,809 1,217,650
======= ======= ========= =========
Average Number of Customers
Residential . . . . . 71,221 70,581 71,178 70,572
Commercial &
Industrial . . . . . 12,170 12,000 12,141 11,978
Other . . . . . . . . 69 75 70 75
------ ------ ------ ------
Total Customers . . 83,460 82,656 83,389 82,625
====== ====== ====== ======
Total operating revenues in the second quarter of 1998 increased 2.5
percent over the same period in 1997. Retail revenues increased 5.2
percent in the second quarter of 1998 over the same period in 1997
primarily due to a 7.4 percent increase in sales of electricity to the
Company's commercial and industrial customers resulting from an increase
in usage by IBM, warmer than normal spring temperatures which resulted
in increased air conditioning needs, modest customer growth and a 3.6
percent retail rate increase that went into effect in March 1998. This
increase was partially offset by a 5.8 percent decrease in sales of
electricity to the Company's residential customers caused by warmer than
normal early spring temperatures. Wholesale revenues decreased 18.4
percent in the second quarter of 1998 compared to the same period in
1997 primarily due to a reduction in low-margin, off-system sales.
For the six months ended June 30, 1998, total operating revenues
increased 0.9 percent over the same period in 1997. Retail revenues
increased 2.7 percent for the six months ended June 30, 1998 over the
same period in 1997 primarily due to a 4.1 percent increase in sales of
electricity to the Company's commercial and industrial customers for the
same reasons discussed above. This increase was partially offset by a
5.0 percent decrease in sales to the Company's residential customers
caused by warmer than normal winter and early spring temperatures.
Wholesale revenues decreased 13.2 percent over the same period in 1997
primarily due to a reduction in low-margin, off-system sales.
Operating Expenses
Power supply expenses increased 4.9 percent in the second quarter of
1998 over the same period in 1997. Power purchased from Vermont Yankee
decreased 14.1 percent in the second quarter of 1998 compared to the
same period in 1997 primarily due to a scheduled refueling outage in
1998. The scheduled outage lasted one month longer than anticipated.
Scheduled outage costs are amortized over an 18-month refueling cycle.
Company-owned generation expenses were virtually unchanged in the second
quarter of 1998 compared to the same period in 1997. Power purchased
from others increased 16.1 percent in the second quarter of 1998 over
the same period in 1997 primarily due to a $2.4 million reduction
recorded in 1997 related to recognition, consistent with allowed
ratemaking treatment, of a payment received from Hydro-Quebec in
December 1997 under a Memorandum of Understanding entered into in
November 1996.
For the six months ended June 30, 1998, power supply expenses increased
17.0 percent over the same period in 1997. Company-owned generation
expenses increased 97.0 percent over the same period in 1997 primarily
due to an increase in the usage of high-cost generating facilities that
replaced power that was unavailable from Hydro-Quebec during a severe
ice storm that crippled much of Vermont, the Northeast United States and
Quebec in early January. The Company and the other Vermont Joint Owners
(VJO) of the Hydro-Quebec contract are exploring whether the suspension
of deliveries to Vermont during and after the January ice storm
constitutes default by Hydro-Quebec under the terms of the contract, or
gives rise to other possible claims. The VJO requested, but has not
received, some answers to certain requests for information with respect
to the Hydro-Quebec transmission system in order to investigate the
matter further. Hydro-Quebec has maintained that the "force majeure"
provision in the contract applies, excusing its non-performance. The
VJO has requested an arbitration proceeding to determine the propriety
of Hydro-Quebec's failure to answer interrogatories concerning various
aspects of its utility transmission system.
Power purchased from others increased 23.4 percent over the same period
in 1997 primarily due to the accrual losses related to the Company's
long-term Hydro-Quebec power contract, resulting from an order issued by
the VPSB in the Company's recent rate case and a $3.2 million reduction
in 1997 related to recognition, consistent with allowed ratemaking
treatment, of a payment received from Hydro-Quebec in December 1997
under a Memorandum of Understanding entered into in November 1996.
Power purchased from Vermont Yankee decreased 6.1 percent compared to
the same period in 1997 primarily due to the amortization in 1997 of
costs associated with a scheduled refueling outage.
Other operating expenses increased 20.8 percent in the second quarter of
1998 over the same period in 1997 primarily due to higher overhead costs
for the Company resulting from less overhead charged to GMRI, the
subsidiary that holds an interest in GMER and an increase in the reserve
for injuries and damages. For the six months ended June 30, 1998, other
operating expenses increased 12.3 percent over the same period in 1997
for the same reasons.
Transmission expenses decreased 17.4 percent in the second quarter of
1998 compared to the same period in 1997 primarily due to a refund
received from New England Power Company for changes that will
incorrectly amended to the Company during 1997. For the six months
ended June 30, 1998, transmission expenses decreased 21.7 percent
compared to the same period in 1997 primarily due to a refund received
from Central Vermont Public Service Corporation (CVPS), resulting from
reduced levels of demand on the CVPS transmission system in 1997 and
lower charges in 1998 based on the same reduced usage and a refund of
charges that were incorrectly assessed to the Company during 1997 by New
England Power Company.
Maintenance expenses increased 10.6 percent in the second quarter of
1998 over the same period in 1997 primarily due to an increase in
scheduled maintenance activity. For the six months ended June 30, 1998,
maintenance expenses increased 9.1 percent over the same period in 1997
for the same reason.
Depreciation and amortization expenses decreased 6.6 percent in the
second quarter of 1998 compared to the same period in 1997 primarily due
to a decrease in the amortization of expenditures related to the Pine
Street site. These amortization charges were suspended by the VPSB in an
order released March 2, 1998. For the six months ended June 30, 1998,
depreciation and amortization expenses decreased 1.1 percent compared to
the same period in 1997 primarily due to the decrease in amortization
discussed above. This decrease was partially offset by an increase in
depreciation expenses associated with additional investment in the
Company's utility plant.
Taxes other than income increased 6.9 percent in the second quarter of
1998 over the same period in 1997 primarily due to an increase in
municipal property taxes associated with the wind generating facility in
Searsburg, Vermont that went into commercial operation in June 1997. For
the six months ended June 30, 1998, taxes other than income increased
4.4 percent for the same reason. In June 1997, Governor Howard Dean
signed legislation that changed the method of municipal property
taxation in Vermont. The legislation has resulted in a statewide uniform
property tax rate but provides localities the flexibility to levy local
taxes. Currently, Vermont municipalities are evaluating the impact of
this legislation on future tax assessments. The Company believes that
this legislation will not have a material impact on the Company's
operations.
Income taxes decreased in the second quarter of 1998 compared to the
same period in 1997 due to a decrease in taxable income. Income taxes
decreased for the six months ended June 30, 1998 for the same reason.
Other income increased in the second quarter of 1998 over the same
period in 1997. The loss experienced by GMRI in the second quarter of
1998 was $1.1 million lower than the loss experienced in 1997 due to a
reduction in start-up expenses incurred in 1997. This increase was
offset by a $913,000 decrease in earnings experienced by Mountain
Energy, Inc. due to start-up operating losses incurred by Micronair LLC,
a decrease in the allowance for equity funds used during construction
resulting from lower construction work in progress balances during the
period, a decrease in other income due primarily to higher interest
income recorded in 1997 resulting from the accrual of interest related
to a $8.0 million payment received from Hydro-Quebec in December 1997
and a charge in 1998 related to the disallowance by the VPSB of pension
benefits granted to employees of GMER at the time such former Company
employees assumed employment with GMER.
For the six months ended June 30, 1998, other income decreased compared
to the same period in 1997. Mountain Energy Inc. experienced a $1.6
million decrease in earnings primarily due to start-up operating losses
incurred by Micronair LLC. This decrease was partially offset by a $1.3
million reduction in the loss experienced by GMRI due to a reduction in
start-up expenses. The allowance for funds used during construction
decreased 75.1 percent compared to the same period in 1997 for the same
reason discussed above. For the six months ended June 30, 1998, other
deductions increased over the same period in 1997 primarily due to a
write-off of $900,000 in costs associated with the wind generating
facility in Searsburg that were disallowed by the VPSB.
Interest Charges
Interest charges increased 4.9 percent in the second quarter of 1998
over the same period in 1997 primarily due to a decrease in the
allowance for funds used during construction resulting from lower
construction work in progress balances during the period and an increase
in short-term interest expense related to a higher amount of short-term
debt outstanding during the period. These increases were partially
offset by a decrease in long-term interest charges related to a lower
amount of long-term debt outstanding during the period. Interest charges
increased 5.5 percent for the six months ended June 30, 1998 over the
same period in 1997 for the same reasons.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, construction and conservation
expenditures totaled $8.1 million. Such expenditures in 1998 are
expected to be approximately $17.0 million, principally for expansion
and improvements of the Company's transmission and distribution plant,
for conservation measures and for management information systems.
At June 30, 1998, the Company had a revolving credit agreement in the
amount of $45 million with three banks, with borrowings outstanding of
$3.5 million. The Company is required to certify as a condition of
borrowing that no event shall have occurred that has had or would
reasonably be expected to have a material adverse effect since the date
of the last borrowing. In light of the current disallowances in the
VPSB's Order dated February 27, 1998, coupled with the accounting
treatment under SFAS 5 that might result if the VPSB were to apply the
methodologies and measures used in the Order (or similar methodologies
and measures) to future power contract costs, or under SFAS 71, if the
VPSB's used and useful ruling should not be modified, as previously
described, the Company could not provide the necessary certification
required for future borrowings under the current agreement, absent a
renegotiation of its terms.
Following discussions with the banks, modified terms were agreed to by
the Company and the banks in order to allow the Company to continue to
borrow until such time that the banks have determined that the Company
has successfully resolved the regulatory and contractual issues of the
Hydro-Quebec contract. The modified terms call for shortening the term
of the agreement to June 1999; securing the loans made pursuant to the
agreement by granting the banks a second priority mortgage, lien and
security interest in the collateral pledged under the Company's first
mortgage bond indenture; and increasing the interest rates, facility
fees and other fees required to be paid pursuant to the agreement.
On April 20, 1998, the Company filed for the necessary approvals on the
modified terms with the VPSB, and such approval has been received. The
Company expects to execute the restated final loan documents in August
1998.
The Company had lines of credit with two banks that were terminated July
1, 1998, following the VPSB order on GMP's motion for reconsideration.
Reflecting the negative outcome of the recent rate case and the VPSB's
order on a motion for reconsideration (See Note 4 of the Notes to
Consolidated Financial Statements) in June 1998, the credit ratings of
the Company's securities by Duff & Phelps and Standard & Poor's were
lowered as follows:
Duff & Phelps Standard & Poor's
From To From To
---- -- ---- --
First Mortgage Bonds BBB+ BBB A- BBB
Unsecured medium term BBB BBB- BBB BB+
Preferred stock BBB BB+ BBB BB+
Standard & Poor's also lowered the Company's corporate credit rating
from "BBB+" to "BBB-". Duff & Phelps' credit ratings for the Company
remain on Rating Watch-Down due to the high level of regulatory and
public policy uncertainty in Vermont.
Dividend Policy - On September 17, 1997, the Company's Board of
Directors announced a reduction in the quarterly dividend from $0.53 per
share to $0.275 per share on the Company's common stock.
The Company's dividend policy reflects the greater risks facing the
Company as a result of the changing environment of the electric utility
industry. The policy assumes fair and appropriate ratemaking. However,
the disallowances contained in the VPSB's recent rate Order issued March
2, 1998, if continued, and conditions or contingencies beyond the
Company's control will require the Company to reassess the current
dividend level.
On August 10, 1998 the Board of Directors declared a dividend of $0.275
per share of common stock, payable September 30, 1998 to holders of
record at the close of business on September 15, 1998.
COMPETITION AND RESTRUCTURING
The electric utility business is being subjected to rapidly increasing
competitive pressures stemming from a combination of trends, including
the presence of surplus generating capacity, a disparity in electric
rates among and within various regions of the country, improvements in
generation efficiency, increasing demand for customer choice, and new
regulations and legislation intended to foster competition. For a
discussion of restructuring proceedings in Vermont, refer to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Future Outlook".
The 1998 session of the Vermont General Assembly adjourned on April 16,
1998 without enacting any restructuring legislation.
The Company cannot predict whether restructuring legislation, if enacted
in the future by the Vermont General Assembly, or any subsequent report
or actions of, or proceedings before, the VPSB or Vermont General
Assembly would have a material adverse effect on the Company's
operations, financial condition or credit ratings. The Company's
failure to recover a significant portion of its purchased power costs,
or to retain and attract customers in a competitive environment, would
likely have a material adverse effect on the Company's business,
including its operating results, cash flows and ability to pay dividends
at current levels.
On July 22, 1998, Governor Howard Dean created a five-member working
group which will "determine the best structure for the electric industry
in Vermont so as to deliver the lowest current and long-term electric
costs for all classes of Vermont's electric consumers". The group is
required to report back to Governor Dean by December 15, 1998 and will
also share its findings with the leadership of the Vermont Senate and
House of Representatives.
In June 1998 the chair of the VPSB, Richard Cowart, announced an effort
to search for ways to lower power costs in Vermont, with or without
restructuring of the industry. A series of workshops will take place to
study issues in the electric, natural gas and telecommunications
industries.
YEAR 2000 COMPUTER COMPLIANCE
The Company utilizes software and related technologies throughout its
businesses that could be affected by the date change in the year 2000.
In order to meet current and future business needs, the Company has, or
is in the process of implementing, new customer service and financial
management systems that are year 2000 compliant. These new systems,
coupled with company-wide equipment replacement over the past two years,
have left the Company relatively free of mission critical compliance
issues. The Company has, however, initiated an inventory of software,
hardware, and other equipment that may contain computer chips, such as
meters, and conducted assessments, which are approximately 50 percent
complete. Remedial work is underway on an engineering information
system that was found to be non-compliant. At this time, no other
mission critical compliance issues are outstanding. The Company expects
to have achieved compliance with year 2000 requirements for all of its
financial and operating systems by June 30, 1999.
The Company's operations would be adversely impacted if a date-related
system failure occurred with one of its major power suppliers, such as
Hydro-Quebec or Vermont Yankee, or with Vermont Electric Power Company,
the company responsible for transmission in Vermont. Other delivery
systems outside the state could, in the event of a date-related system
failure, cause additional power supply interruptions. The Company has
requested written reports from its power supply vendors regarding each
company's status relative to year 2000 compliance and is awaiting such
vendors' reports. All other major vendors or business associates will
be sent inquiries before September 30, 1998.
Maintenance or modification costs will be expensed as incurred, while
the cost of new software will be capitalized and amortized over the
software's useful life. The estimated costs of the remedial work
required solely for year 2000 compliance is $100,000.
Failure on the part of the Company to comply by December 31, 1999 would
have a material adverse effect on the Company's operations. The Company
has, however, a contingency plan that will provide electricity to its
customers on a priority basis in the event of power outages and includes
"black start" capabilities at several plant sites in the event of a
total power failure. The State of Vermont has also developed a
contingency plan that deals with electrical emergencies.
Similarly, failures of the Company's principal power and transmission
suppliers to remedy year 2000 compliance issues, could have a material
adverse effect or the Company should non-compliance result interruptions
of power supply on transmission.
GREEN MOUNTAIN POWER CORPORATION
June 30, 1998
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
See Notes 3 and 4 of Notes to Consolidated Financial
Statements
ITEM 2 Changes in Securities
NONE
ITEM 3 Defaults Upon Senior Securities
NONE
ITEM 4 Submission of Matters to a Vote of Security Holders
At the Annual Shareholders Meeting held May 21, 1998,
Shareholders elected the nominees listed below as Directors of
this company. The voting results are set forth below. There
were no other items brought before the meeting.
Election of Directors
Shareholders elected the nominees for Director as follows:
Broker
Total Votes Total Votes Non-Votes
Nominee FOR AGAINST Absentions
------- ----------- ----------- ----------
Class III (term expires 2001)
Nordahl L. Brue 4,245,823 132,536 813,056
Lorraine E. Chickering 4,235,723 142,636 813,056
John V. Cleary 4,234,794 143,565 813,056
Euclid A. Irving 4,224,271 154,088 813,056
Directors Continuing in Office
Class I (term expires 1999)
William H. Bruett
Richard I. Fricke
Martin L. Johnson
Thomas P. Salmon
Class II (term expires 2000)
Merrill O. Burns
Christopher L. Dutton
Ruth W. Page
ITEM 5 Other Information
NONE
ITEM 6. (a) EXHIBITS
27 Financial Data Schedule
3-b By-laws of the Company, as amended
June 17, 1998
(b) REPORT ON FORM 8-K
A report on Form 8-K was filed on June 19,1998 setting
forth the dividend distribution of one Common Share
Purchase Right plan.
GREEN MOUNTAIN POWER CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GREEN MOUNTAIN POWER CORPORATION
(Registrant)
Date: August 14, 1998 /s/ E. M. Norse
E. M. Norse, Vice President, Chief
Financial Officer and Treasurer
Date: August 14, 1998 /s/ R. J. Griffin
R. J. Griffin, Controller
Exhibit 3-b
BYLAWS
OF
GREEN MOUNTAIN POWER CORPORATION
(As Amended Through June 17, 1998)
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the
stockholders shall be held at such place within the State of Vermont as
is designated in the notice of the meeting, on the third Thursday in
May in each year, if it be not a legal holiday, and if it be a legal
holiday, on the next succeeding day not a legal holiday; provided,
however, that a majority of the board of directors, acting at a regular
or special meeting of such board, may specially determine an
alternative time for the holding of any annual meeting. (Amended
December 4, 1975 and August 31, 1982.)
Section 2. Special Meetings. Special meetings of the
stockholders may be called, to be held at such place within or without
the State of Vermont as is designated in the notice of the meeting, by
the chairman of the board of directors, the chief executive officer,
the president or a majority of directors, and, subject to the
provisions of law and of the articles of association, as amended, shall
be called by the secretary, or in case of the death, absence,
incapacity or refusal of the secretary, by any other officers of the
Corporation, upon writ-ten application of stockholders who are entitled
to vote and who hold at least thirty-three percent of all the shares at
the time issued and outstanding and entitled to vote at the meeting,
stating the time, place and purpose of the meeting. (Amended May 13,
1981, and September 8, 1988.)
Section 3. Notice of Meeting. A written or printed notice of
each meeting of stockholders, stating the place, day and hour thereof
and, in case of a special meeting, the purpose for which the meeting is
called, shall be given by the secretary, at least 10 days and not more
than 60 days before such meeting, to each stockholder entitled to vote
thereat, by leaving such notice with him or at his residence or usual
place of business, or by mailing it, postage prepaid and addressed to
such stockholder at his address as it appears upon the books of the
Corporation. In the absence or disability of the secretary, such
notice may be given by a person designated either by the secretary or
by the person or persons calling the meeting or by the board of
directors. No notice of the time, place or purpose of any regular or
special meeting of the stockholders shall be required if every
stockholder entitled to notice thereof is present in person or is
represented at the meeting by proxy or if every such stockholder, or
his attorney thereunto authorized by a writing which is filed with the
records of the meeting, waives such notice. Notwithstanding the above,
if the purpose for such a special meeting of stockholders requested by
written application of stockholders under Section 2 of Article I of
these bylaws relates to or involves in any way a merger or con-
solidation of the corporation or a sale, lease, exchange, pledge or
other disposition of all, or substantially all, the property and assets
of the Corporation not made in the usual and regular course of
business, such notice must be given at least 30 days and not more than
60 days before such special meeting. (Amended September 8, 1988 and
March 7, 1994.)
Section 4. Quorum. At any meeting of the stockholders, a
majority of interest of all stock issued and outstanding and entitled
to vote upon a question to be considered at the meeting shall
constitute a quorum for the consideration of such question, but a less
interest may adjourn any meeting from time to time, and the meetings
may be held as adjourned without further notice. When a quorum is
present at any meeting, a majority of the stock represented thereat and
entitled to vote shall, except where a larger vote is required by law,
by the articles of association, or by these bylaws, decide any question
brought before such meeting.
Section 5. Proxies and Voting. Stockholders who are entitled to
vote shall have one vote for each share of stock owned by them.
Stockholders may vote either in person or by proxy in writing dated not
more than 11 months before the meeting named therein, which shall be
filed with the secretary of the meeting before being voted. Such
proxies shall entitle the holders thereof to vote at any adjournment of
such meeting, but shall not be valid after the final adjournment of
such meeting.
ARTICLE II
Directors
Section 1. Powers. The board of directors shall have, and may
exercise all the powers of the Corporation, except such as are
conferred upon the stockholders by law, by the articles of association,
and by these bylaws.
Section 2. Election. The board of directors shall consist of
eleven members and shall be elected at the annual meeting of the
stockholders or at a special meeting held in place thereof. Subject to
law, to the articles of association and to the other provisions of
these bylaws, each director shall hold office until his or her term of
office expires and until his or her successor shall have been elected
and qualified. The directors shall be divided, with respect to the
terms for which they severally hold office, into three classes, hereby
designated as Class I, Class II and Class III. Each class shall have
at least three directors and the three classes shall be as nearly equal
in number as possible. The initial terms of office of the Class I,
Class II and Class III directors, elected at the 1995 annual meeting of
shareholders, shall expire at the next succeeding annual meeting of
shareholders the second succeeding annual meeting of shareholders and
the third succeeding annual meeting of shareholders, respectively. At
each annual meeting of shareholders after 1995, the successors of the
class of directors whose term expires at that meeting shall be elected
to hold office for a term expiring at the annual meeting of
shareholders to be held in the third year following the year of their
election. No director may be removed from office prior to the
expiration of his or her term of office except for cause. For purposes
of this Section, the term "cause" means a willful and continued failure
to perform the duties of a director (other than failure resulting from
incapacity due to physical or mental illness) or conduct which is
demonstrably and materially injurious to the corporation, monetarily or
otherwise. Such removal from office can be effected only upon the
affirmative vote of three quarters of the remaining membership of the
board of directors. The board of directors shall elect from its
members a chairman of the board of directors who will serve as such for
one year or during the balance of his or her term as a director,
whichever is less, and until a successor is elected and qualified.
(Amended May 18, 1995, and February 10, 1997.)
Section 3. Duties of the Chairman. The chairman of the board of
directors shall, when present, preside at all meetings of the
stockholders and at all meetings of the board of directors. He shall
perform such other duties as may be from time to time delegated to him
by the board of directors. (Amended May 13, 1981.)
Section 4. Regular Meetings. Regular meetings of the board of
directors may be held at such places and at such times as the board may
by vote from time to time determine, and if so determined, no notice
thereof need be given. A regular meeting of the board of directors may
be held without notice immediately after, and at the same place as the
annual meeting of the stock-holders, or the special meeting of the
stockholders held in place of such annual meeting.
Section 5. Special Meetings. Special meetings of the board of
directors may be held at any time and at any place when called by the
chairman of the board of directors, chief executive officer, president,
treasurer, or two or more directors, reasonable notice thereof being
given to each director, or at any time without call or formal notice,
provided all the directors are present or waive notice thereof by a
writing which is filed with the records of the meeting. In any case it
shall be deemed sufficient notice to a director to give him personal
notice or to send notice by mail or telegram at least forty-eight hours
before the meeting addressed to him at his usual or last known business
or residence address.
Section 6. Quorum and Participation. (a) A majority of the board
of directors shall constitute a quorum for the transaction of business,
but a less number may adjourn any meeting from time to time, and the
meeting may be held as adjourned without further notice. When a quorum
is present at any meeting, a majority of the members in attendance
thereat shall decide any question brought before such meeting. (b)
Members of the board of directors and any committee designated by the
board of directors, may participate in a meeting of such board or
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting
can hear each other, and participation in a meeting in such a manner
shall constitute presence in person at such meeting for all purposes.
(Amended September 21, 1973, and May 13, 1981.)
ARTICLE III
Executive and Other Committees
Section 1. Executive Committee. The board of directors may, by
vote of a majority of their entire number, elect from their own number
an executive committee of not less than three members, which committee
may be vested with the management of the current and ordinary business
of the Corporation, including the declaration of dividends, the fixing
and altering of the powers and duties of the several officers and
agents of the Corporation, the election of additional officers and
agents, and the filling of vacancies other than on the board of
directors, and with power to authorize purchases, sales, contracts,
offers, conveyances, transfers and negotiable instruments except as
otherwise provided by law. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business,
but a lesser number may adjourn any meeting from time to time, and the
meeting may be held as adjourned without further notice. The executive
committee may make rules not inconsistent herewith for the holding and
conduct of its meetings. The chief executive officer shall at all
times be ex officio a member of the executive committee. The executive
committee shall elect from its members a chairman of the executive
committee who shall preside at meetings of the executive committee,
when present, and, in his or her absence, the chief executive officer
of the Corporation shall preside. The chairman shall also perform such
other duties as may be from time to time delegated to him or her by the
executive committee, and will serve as such for one year or during the
balance of his or her term as a member of the executive committee,
whichever is less, and until a successor is elected and qualified. In
the absence of a quorum at any meeting of the executive committee, its
chairman or, in his or her absence, the chief executive officer, may
designate a director of the Corporation who is not a member of the
executive committee temporarily as a member of the executive committee
to act as such during such meeting. Any action taken by the executive
committee will require the unanimous vote of all members of the
executive committee present and voting at any meeting. (Amended March
20, 1974; June 13, 1974; June 12, 1975; February 28, 1980; May 13,
1981, and March 1, 1985.)
The executive committee shall report its action to the board of
directors. The board of directors shall have the power to rescind any
vote or resolution of the executive committee, but no such rescission
shall have retroactive effect.
Section 2. Other Committees. The board of directors may, by
majority vote at any meeting, create any other commit-tees and delegate
to such committees any powers, duties and responsibilities as may be
consistent with the laws of the State of Vermont and the articles of
association of the Corporation. The resolutions creating such
committees or electing its members may provide for a chairman of the
committee or such selection may be left to the committee itself. The
compensation, if any, to be paid members of the committees for
committee services shall be established by the board of directors or
its executive committee. (Amended August 17, 1976.)
ARTICLE IV
Officers and Agents
Section 1. Election and Appointment. The officers shall be a
chief executive officer, a president, a secretary, a treasurer, and
such other officers and agents as the board of directors and executive
committee may elect. The chief executive officer, president, treasurer
and secretary shall be elected annually by the board of directors after
its election by the stockholders and will hold office for one year and
until their successors are elected and qualified. Any two or more
offices may be filled by the same person except the offices of
president and secretary. The other officers and agents shall hold
office during the pleasure of the board of directors or for such terms
as the board of directors or executive committee shall prescribe. Each
officer shall, subject to these bylaws, have in addition to the duties
and powers herein set forth such duties and powers as are commonly
incident to his office, and such duties and powers as the board of
directors or executive committee shall from time to time designate.
(Amended March 20, 1974, and May 13, 1981.)
Section 2. (Repealed March 20, 1974.)
Section 3. (Repealed March 20, 1974.)
Section 4. Chief Executive Officer, President and Vice
Presidents. The chief executive officer shall have all powers and
perform all duties incidental to such office and, in the absence of the
chairman of the board of directors, he shall preside at all meetings of
the stockholders and the board of directors, and in the absence of the
chairman of the executive committee, at all meetings of the executive
committee. The president shall be the chief administrative officer of
the Corporation and shall have all powers and perform all duties
incidental thereto. He shall have custody of any treasurer's bond.
Any vice president shall have such powers as the board of directors or
executive committee shall from time to time designate. (Amended March
20, 1974; February 28, 1980, and May 13, 1981.)
Section 5. Secretary. The secretary shall record all votes and
proceedings of the stockholders and of the directors or any executive
committee thereof and shall have custody of the corporate seal and of
the corporate records and keep such records at the principal office of
the Corporation. He shall keep a record book containing the names of
the stockholders, their addresses and the number of shares held by
each, the time when they respectively acquired the shares and the time
of any transfer thereof unless a majority of the stockholders approves
a transfer agent to keep such record book, rather than the secretary.
He shall procure and file in his own office certified copies of all
documents required to be filed with the secretary of state, except the
annual report of the company. In the absence of the secretary at any
meeting, a temporary secretary shall be chosen to record the
proceedings of such meeting. (Amended May 13, 1976.)
Any assistant secretary will have such powers as the board of
directors or executive committee shall from time to time designate,
except those powers set forth in Sec. 1894 of Title II of the Vermont
Statutes Annotated.
Section 6. Treasurer. The treasurer shall, subject to the
direction and under the supervision of the board of directors and
executive committee, have general charge of the financial concerns of
the Corporation and the care and custody of the funds and valuable
papers of the Corporation, except his own bond, and he shall have power
to endorse for deposit or collection all notes, checks, drafts, etc.,
payable to the Corporation or its order, and to accept drafts on behalf
of the Corporation. He shall keep, or cause to be kept, accurate books
of account, which shall be the property of the Corporation. If
required by the board of directors, he shall give bond for the faithful
performance of his duty in such form, in such sum, and with such
sureties as the board of directors or executive committee shall
require.
Any assistant treasurer shall have such powers as the board of
directors or executive committee shall from time to time designate.
Section 7. Removals. The board of directors may remove from the
executive committee any member thereof and remove from office any
officer or agent of the Corporation whenever in its judgment the best
interests of the Corporation will be served thereby.
Section 8. Vacancies. If the office of any director or member of
the executive committee or of any officer or agent, one or more,
becomes vacant by reason of death, resignation, removal,
disqualification or otherwise, the directors or the remaining
directors, though less than a quorum, may choose by a majority vote of
their entire number a successor or successors, who shall hold office
for the unexpired term, subject to the provisions of the articles of
association and Section 1 of this Article IV. The executive committee
shall have like power to fill any such vacancy in any office to which
the executive committee has power to appoint, unless such vacancy shall
have been filled by the board of directors. Any directorship to be
filled by reason of an increase in the number of directors, however,
shall be filled by election at an annual meeting or at a special
meeting of the stockholders called for that purpose.
Section 9. Indemnification. This corporation shall indemnify any
person threatened with or made a party to any action, suit or
proceeding, civil or criminal, by reason of the fact that he, his
testator or intestate, is or was a director or officer of this
corporation or of any corporation which he served as such at the
request of this corporation, against judgments, fines or penalties, and
the reasonable cost and expenses, including but not restricted to
attorney's fees, actually and reasonably incurred by him in connection
with the defense of such action, suit or proceeding or in connection
with any appeal therein, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such director
or officer is liable for gross negligence or misconduct in the
performance of duty to the Corporation; provided, however, that as to
any matter disposed of by compromise by such person, pursuant to a
consent decree or otherwise, no indemnification either for a compromise
payment or for any other expenses shall be provided unless such
compromise shall be approved as in the best interests of the
Corporation after notice that it involves such indemnification: (a) by
a disinterested majority of the directors then in office; or (b) by a
majority of the disinterested directors then in office, provided that
there has been obtained an opinion in writing of independent legal
counsel to the effect that such person, his testator or intestate, as
the case may be, appears not to be liable for gross negligence or
misconduct in the performance of duty to the Corporation; or (c) by the
holders of a majority of the outstanding stock at the time entitled to
vote for directors, voting as a single class, exclusive of any stock
owned by any interested director or officer. Expenses reasonably
incurred by any such person in connection with the defense or
disposition of any such action, suit or other proceeding shall be paid
from time to time by this corporation in advance of the final
determination thereof upon receipt of a written undertaking from such
person to repay the amounts so paid by the Corporation if it is
ultimately deter-mined that indemnification for such expenses is not
required under this section. The foregoing right to indemnity shall
not be deemed exclusive of any other rights to which such director or
officer may be entitled apart from the provisions of this paragraph.
(Amended March 9, 1978, and March 2, 1983.)
ARTICLE V
Capital Stock
Section 1. Certificates. Each stockholder shall be entitled to a
certificate or certificates signed by the president and the treasurer
or secretary and separately by the chief executive officer, if that
position is not held by the president, and which shall certify the
number and class of paid-up shares held by him in the Corporation.
These signatures may be facsimiles if the certificate is countersigned
by a transfer agent or registered with and signed by a registrar other
than the Corporation or an employee thereof. Such certificate shall be
in such form, consistent with the articles of association and Vermont
law, as may be prescribed by the board of directors or the executive
committee, duly numbered and sealed with the corporate seal of this
corporation or a facsimile thereof. No certificate for any share of
this corporation shall be issued until it is fully paid. The board of
directors or the executive committee may appoint one or more transfer
agents and/or registrars for its stock of any class or classes and may
require stock certificates to be countersigned and/or registered by one
or more of them. In case any officer or officers who shall have signed
or whose facsimile signature shall have been used or printed on any
certificate or certificates for shares shall cease to be such officer
or officers of the Corporation before such certificate or certificates
shall have been delivered by the Corporation, such certificate or
certificates shall nevertheless be conclusively deemed to have been
adopted by the Corporation by the use and delivery thereof and shall be
as effective in all respects as though signed by a duly elected,
qualified and authorized officer or officers and as though the person
or persons who signed such certificate or certificates or whose
facsimile signature or signatures had been used thereon had not ceased
to be such officer or officers of this corporation. (Amended March 4,
1982.)
Section 2. Transfer Books. The secretary or an assistant
secretary appointed by the board of directors shall keep the stock and
transfer books of the Corporation and a record of all certificates of
stock issued and of all transfers of stock and a register of all the
stockholders, their addresses, the number of shares held by each, the
time when they acquired the shares and the time of any transfers
thereof in books provided and approved by the board of directors or
executive committee for that purpose, except that such books may be
kept by a transfer agent rather than the secretary when such transfer
agent is approved by the vote of a majority of the stockholders. The
transfer books of the capital stock of the Corporation may be closed
for such period from time to time in anticipation of stockholders'
meetings or the declaration or payment of dividends, as the board of
directors or executive committee may determine but such period shall
not exceed 60 days, and, if the transfer books are closed for the
purpose of determining stock-holders entitled to notice of or to vote
at a meeting of stock-holders, such books shall be closed for at least
10 days immediately preceding such meeting.
In lieu of closing the stock transfer books as provided in the
preceding paragraph, the board of directors or the executive committee
may fix in advance a date preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change, conversion or
exchange of capital stock shall go into effect, as a record date for
the determination of the stockholders entitled to notice of and to vote
at any such meeting, or entitled to receive payment of any such
dividend, or to any such allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock,
and in such case only such stockholders as shall be stockholders of
record on the date fixed shall be entitled to such notice of and to
vote at such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the
case may be, notwithstanding any transfer of any stock on the books of
the Corporation after any such record date fixed as aforesaid, but such
record date shall not in any case be more than 60 days and, in the case
of a meeting of stockholders, shall not be less than 10 days prior to
the date on which the particular action, requiring such determination
of stockholders, is to be taken. (Amended March 7, 1994.)
Section 3. Transfer of Shares. Subject to the restrictions, if
any, imposed by the articles of association, title to a certificate of
stock and to the shares represented thereby shall be transferred only
by delivery of the certificate properly endorsed, or by delivery of the
certificate accompanied by a written assignment of the same, or a
written power of attorney to sell, assign, or transfer the same or the
shares represented thereby, properly executed; but the person
registered on the books of the Corporation as the owner of shares shall
have the exclusive right to receive dividends thereon and to vote
thereon as such owner, shall be held liable for such calls and
assessments, if any, as may lawfully be made thereon, and except only
as may be required by law, may in all respects be treated by the
Corporation as the exclusive owner thereof.
It shall be the duty of each stockholder to notify the Corporation
of his post office address.
Section 4. Loss of Certificates. In case of the alleged loss or
destruction, or the mutilation of a certificate of stock, a duplicate
certificate may be issued in place thereof, upon such reasonable terms
as the board of directors may prescribe.
ARTICLE VI
Seal
The seal of the Corporation shall, subject to alteration by the
board of directors or executive committee, consist of a flat-faced
circular die with words Green Mountain Power Corporation: Corporate
Seal 1893, cut or engraved thereon.
ARTICLE VII
Execution of Papers
Except as the board of directors or executive committee may
generally or in particular cases authorize the execution thereof in
some other manner, all deeds, leases, transfers, contracts, bonds,
notes, checks, drafts and other obligations made, accepted or endorsed
by the Corporation, shall be signed by the chairman of the board, chief
executive officer, president, a vice president or the treasurer, or
such other officer or employee as designated in writing by the
president. (Amended May 13, 1981, and May 15, 1986.)
ARTICLE VIII
Fiscal Year
Except as from time to time otherwise provided by the board of
directors, the fiscal year of the Corporation shall be the calendar
year.
ARTICLE IX
Amendments
These bylaws may be amended, altered or repealed by the board of
directors or at any meeting of the stockholders, by the holders of a
majority of all stock issued, outstanding and entitled to vote,
provided notice of the proposed amendment, alteration or repeal is
given in the notice of said meeting.
ARTICLE X
Restrictions on Transfer
The restrictions on transfer of Rights to purchase Common Stock
contained in the Rights Agreement between the Corporation and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (or any
successor Rights Agent duly appointed in accordance with the terms of
the Rights Agreement), dated as June 17, 1998, are hereby authorized
and imposed by these bylaws.
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This schedule contains summary financial information extracted from the
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