<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
----------------
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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 1-8154
ESSEX GAS COMPANY
(Exact name of Registrant as specified in its charter)
(Formerly Essex County Gas Company)
Massachusetts 04-1427020
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One Beacon Street (617) 742-8400
Boston, Massachusetts 02108 (Registrant's Telephone Number)
(Address of Principal Executive
Offices)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Class Exchange
-------------- --------
<S> <C>
None None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate number of shares outstanding of registrant's common stock, no par
value, as of March 1, 2000.
All common stock, 100 shares, are held by Eastern Enterprises.
The registrant meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K and is therefore filing this form with reduced
disclosure format.
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<PAGE>
ESSEX GAS COMPANY
FORM 10-K
Fiscal Year Ended December 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. Topic Page
-------- ----- ----
<C> <S> <C>
PART I
1. Business...................................................... 1
General....................................................... 1
Competition................................................... 2
Gas Throughput................................................ 2
Gas Supply.................................................... 2
Regulation.................................................... 3
Seasonality and Working Capital............................... 4
Environmental Matters......................................... 4
Employees..................................................... 4
2. Properties.................................................... 5
3. Legal Proceedings............................................. 5
4. Submission of Matters to a Vote of Security Holders........... 5
Glossary...................................................... 6
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters.......................................... 7
6. Selected Financial Data....................................... 7
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 7
8. Financial Statements and Supplementary Data................... 9
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 9
PART III
10. Directors and Executive Officers of the Registrant............ 10
11. Executive Compensation........................................ 10
12. Security Ownership of Certain Beneficial Owners and
Management................................................... 10
13. Certain Relationships and Related Transactions................ 10
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K............................................................ 11
</TABLE>
<PAGE>
PART I
Item 1: Business.
General
Essex Gas Company ("The Company") is a regulated public utility organized
under the laws of the Commonwealth of Massachusetts in 1853 that is engaged in
the transportation and sale of natural gas to approximately 43,000
residential, commercial and industrial customers in northeastern
Massachusetts. The Company operates in the cities of Haverhill, Newburyport,
and Amesbury and fourteen smaller municipalities covering an area of
approximately 280 square miles. The Company's service area is primarily
comprised of residential communities with a number of small commercial and
diverse industrial businesses.
As discussed in Note 1 of the Notes to Consolidated Financial Statements,
pursuant to an Agreement and Plan of Merger dated as of December 19, 1997, by
and between the Company and Eastern Enterprises ("Eastern"), ECGC Acquisition
Gas Company, a wholly-owned subsidiary of Eastern, merged with and into the
Company on September 30, 1998, through an exchange of all of the Company's
stock for approximately 2,047,000 shares of Eastern common stock, with the
Company surviving the merger as a wholly-owned subsidiary of Eastern (the
"Acquisition"). On November 6, 1998, the Company changed its name from Essex
County Gas Company to Essex Gas Company. On December 7, 1998, the Company
changed its fiscal year end from August 31 to December 31, and accordingly has
prepared Consolidated Financial Statements for the period beginning September
1, 1998 and ending December 31, 1998 ("Transition Period").
On November 4, 1999, Eastern signed a definitive agreement to be acquired by
KeySpan Corporation. Subject to receipt of satisfactory regulatory approvals
and the approval of Eastern shareholders, the transaction is expected to close
in mid to late 2000, although it is possible that the transaction will not
close until 2001.
For definitions of certain industry specific terms, see the Glossary at the
end of Part I and appearing on page 6.
The Company provides local transportation services and gas supply to all
customer classes. The Company's services are available on a firm and non-firm
basis. Firm transportation service and sales are provided under rate tariffs
and/or contracts filed with the Massachusetts Department of Telecommunications
and Energy ("Department"), that typically obligate the Company to provide
service without interruption throughout the year. Non-firm transportation
service and sales are generally provided to large commercial/industrial
customers who can use gas or another energy source interchangeably. Non-firm
services are provided through individually negotiated contracts and, in most
cases, the price charged takes into account the price of the customer's
alternative fuel.
The Company offers unbundled services to all commercial/industrial users,
who are allowed to purchase local transportation from the Company separately
from the purchase of gas supply, which the customer may buy from third party
suppliers. The Company views these third party suppliers as partners in
marketing gas and increasing throughput and expects to work closely with them
to facilitate the unbundling process and ensure a smooth transition,
especially in the tracking and processing of transactions. The Company has
also implemented a program to educate commercial/industrial customers about
the opportunity to purchase gas from third-party suppliers, while still
relying on the utility for delivery. As of December 31, 1999, the Company had
approximately 98 firm transportation customers. Service to all residential
customers currently is on a bundled basis. Unbundled service to residential
customers is expected to be offered beginning in June 2000. While the
migration of customers to transportation-only service will lower the Company's
revenues, it has no impact on its operating earnings. The Company earns all of
its margins on the local distribution of gas and none on the resale of the
commodity itself.
<PAGE>
Competition
The Company competes with other fuel distributors, primarily oil dealers and
electricity providers, throughout its service territory. The Company currently
serves approximately 53% of the potential customers within its service
territory.
Gas Throughput
The following table provides information with respect to the volumes of gas
sold and transported by the Company in thousands of dekatherms ("Dth") during
the year ended December 31, 1999, the four months ended December 31, 1998 (the
"Transition Period") and the two fiscal years ended August 31, 1998.
<TABLE>
<CAPTION>
Transition Fiscal Years Ended
Year Ended Period Ended August 31,
December 31, December 31, -------------------
1999 1998 1998 1997
------------ ------------ --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Residential..................... 3,604 904 3,585 3,680
Commercial and Industrial ...... 1,729 488 1,983 2,062
Interruptible................... 40 184 55 758
----- ----- --------- ---------
Total Sales................... 5,373 1,576 5,623 6,500
Transportation of Customer-Owned
Gas............................ 487 13 30 --
----- ----- --------- ---------
Total Throughput.............. 5,860 1,589 5,653 6,500
===== ===== ========= =========
Total Firm Throughput......... 5,557 1,405 5,568 5,742
===== ===== ========= =========
</TABLE>
The above table excludes the effect of adopting the accrual method of
revenue recognition as discussed in Note 1 of Notes to Consolidated Financial
Statements.
In 1999, residential customers comprised 90% of the customer base, while
commercial and industrial establishments accounted for the remaining 10%.
Volumetrically, residential customers accounted for 61% of total throughput
and 65% of total firm throughput, while commercial and industrial customers
accounted for 39% of total throughput and 35% of total firm throughput.
No customer, or group of customers under common control, accounted for 2% or
more of total firm revenues in 1999.
Gas Supply
The following table shows the sources of the Company's gas supply
requirements in thousands of Dth for the year ended December 31, 1999, the
Transition Period and the two fiscal years ended August 31, 1998.
<TABLE>
<CAPTION>
Fiscal
Transition Years Ended
Year Ended Period Ended August 31,
December 31, December 31, ------------
1999 1998 1998 1997
------------ ------------ ----- -----
(In thousands)
<S> <C> <C> <C> <C>
Gas Supply (Dth):
Natural gas pipeline purchased........ 4,551 2,023 4,952 5,376
Underground storage withdrawal........ 901 120 646 1,007
Liquefied natural gas purchased....... 228 64 183 253
----- ----- ----- -----
Total source of supply.............. 5,680 2,207 5,781 6,636
Company use, unbilled and other......... (307) (631) (158) (136)
----- ----- ----- -----
Total sales........................... 5,373 1,576 5,623 6,500
===== ===== ===== =====
</TABLE>
2
<PAGE>
The Company's supply requirements are purchased directly from producers and
marketers pursuant to contracts that have been approved by the Department or
by the Federal Energy Regulatory Commission ("FERC").
Pipeline supplies are transported on interstate pipeline systems to the
Company's service territory pursuant to long-term contracts. FERC-approved
tariffs provide for fixed demand charges for the firm capacity rights under
these contracts. The interstate pipeline company that provides firm
transportation service to the Company's service territory, the peak daily and
annual capacity and the contract expiration dates are as follows:
<TABLE>
<CAPTION>
Capacity in Dth
-----------------
Pipeline Daily Annual Expiration Dates
-------- ------ ---------- ----------------
<S> <C> <C> <C>
Tennessee Gas Pipeline Company......... 28,590 10,435,350 2003-2011
</TABLE>
In 1999, the Company restructured its long-term capacity contracts with
Tennessee Gas Pipeline. As a result, no contracts expire before 2003.
The Company also has two contracts with pipeline companies for the storage
of natural gas in underground storage fields in New York and Pennsylvania.
These contracts provide storage capacity of approximately 1.2 BCF and
approximately .009 BCF of peak day deliverability.
In the fall of 1999, the Company, and its affiliates Boston Gas Company and
Colonial Gas Company, entered into a portfolio management contract with El
Paso Energy Marketing, Inc. For a three year term commencing November 1, 1999,
El Paso will provide all of the city gate supply requirements to the three
companies at market prices and manage certain of the companies' upstream
capacity, underground storage and term supply contracts. The Department
approved the contract in October 1999.
Peak day firm throughput in BCF was 0.049 in 1999, 0.043 in 1998 and 0.047
in 1997. The Company has entered into an agreement with Distrigas of
Massachusetts Corporation which expires on October 31, 2006, that allows the
Company to purchase up to 4,000 Dth per day for 151 days of liquefied natural
gas ("LNG") in either liquid or vapor form. The Company, at its discretion,
may increase purchases under the contract by up to 2,000 Dth per day after
appropriate notice. The Company may also reduce quantities purchased if sales
fall below the normal 1994-95 heating season sendout.
Through a wholly-owned subsidiary, the Company owns a LNG storage facility
located in Haverhill, Massachusetts. The LNG storage facility has storage
capacity of 410,000 Dth and daily sendout capacity of 30,000 Dth. At the same
location, the Company owns and operates a propane plant that has storage
capacity of approximately 42,000 Dth with total daily sendout capacity of
3,500 Dth. The Company considers its peak day sendout capacity, based on its
total supply resources, to be adequate to meet the requirements of its firm
customers.
Regulation
The Company's operations are subject to Massachusetts statutes applicable to
gas utilities. Rates for transportation service, gas purchases and sales,
pipeline safety regulations, issuance of securities, and affiliate
transactions are regulated by the Department. Rates for firm transportation
and sales are subject to approval by, and are on file with, the Department. In
addition, the Company has a cost of gas adjustment clause ("CGAC") that allows
for the adjustment of billing rates for firm gas sales to enable it to recover
the actual cost of gas delivered to firm customers, including the demand
charges for capacity on the interstate pipeline system. Similarly, through its
local distribution adjustment clause ("LDAC"), the Company recovers the costs
of remediating former manufactured gas plant sites from all firm customers,
including those purchasing gas supply from third parties.
3
<PAGE>
On September 30, 1998, the Company was acquired by Eastern, the Weston,
Massachusetts based owner of Boston Gas Company ("Boston Gas"). On September
17, 1998, the Department approved the merger and rate plan. Under the approved
rate plan, there was an immediate five percent price reduction for the
Company's customers and a ten year freeze of base rates. The freeze on base
rates is subject only to certain exogenous factors, such as changes in tax
laws, accounting changes, or regulatory, judicial, or legislative changes. As
a result of the rate plan, the Company discontinued its application of SFAS
No. 71, as described in Note 1 of Notes to Consolidated Financial Statements.
Gas supply savings resulted from the consolidation of the Company's resource
portfolio with the Boston Gas portfolio. Many of the administrative,
operations and maintenance functions of the Company have been integrated with
those of Boston Gas.
All of the Company's 4,300 commercial and industrial customers are eligible
to purchase unbundled local transportation service from the Company and to
purchase their gas supply from third parties. As of December 31, 1999, the
Company had 98 firm transportation customers.
Anticipating a date of June 1, 2000 for offering residential customers the
opportunity to purchase gas supply from third parties, the Department has
approved Model Terms and Conditions to which LDC tariffs for all residential
customers will substantially conform. The Model Terms and Conditions approved
by the Department are consistent with the Department's order of February 1,
1999, which provided that, for a five year transition period, LDC contractual
commitments to upstream capacity will be assigned on a mandatory, pro rata
basis to marketers selling gas supply to the LDC's customers. The approved
mandatory assignment method eliminates the possibility that the costs of
upstream capacity purchased by the Company to serve firm customers will be
absorbed by the LDC or other customers through the transition period. The
Department also found that, through the transition period, LDC's will retain
primary responsibility for upstream capacity planning and procurement to
assure that adequate capacity is available at Massachusetts city gates to
support customer requirements and growth. In year three of the five year
transition period, the Department intends to evaluate the extent to which the
upstream capacity market for Massachusetts is workably competitive based on a
number of factors, and accelerate or decelerate the transition period
accordingly. The Department's Model Terms and Conditions also require that
LDC's provide default and peaking supply services at cost-based rates.
Seasonality and Working Capital
The Company's revenues, earnings and cash flows are highly seasonal as most
of its transportation services and sales are directly related to temperature
conditions. Because the majority of its revenues are billed in the November
through April heating season, significant cash flows are generated from late
winter to early summer. In addition, through the cost of gas adjustment
clause, the Company bills its customers over the heating season for the
majority of the pipeline demand charges paid by the Company over the entire
year. This difference, along with other costs of gas distributed but unbilled,
is reflected as deferred gas costs and is financed through short-term
borrowings. Short-term borrowings are also required from time to time to
finance normal business operations. As a result of these factors, short-term
borrowings are generally highest during the late fall and early winter.
Environmental Matters
The Company may have or share responsibility under applicable environmental
law for the remediation of four former manufactured gas plants ("MGP"), one
former gas holder site associated with MGP operations and one non-MGP site,
and may share responsibility with respect to two federal superfund sites.
Information with respect to these matters may be found at Note 10 of Notes to
Consolidated Financial Statements. Such information is incorporated herein by
reference.
Employees
As of December 31, 1999, the Company had 62 employees, 84% of whom are
organized in a local union with which the Company has a collective bargaining
agreement that expires in 2002. During 1999, the Company entered into a new
three-year agreement with the bargaining unit representing union employees.
4
<PAGE>
Item 2: Properties.
The Company's property consists primarily of its distribution system and
related facilities. The Company also owns a propane plant with a storage
capacity of 42,000 Dth. In addition, the Company, through its wholly-owned
subsidiary, LNG Storage, Inc., owns a LNG storage facility with a storage
capacity of 410,000 Dth.
Substantially all of the properties owned by the Company, other than
expressly exempted property, are subject to a lien under the indenture
securing the Company's First Mortgage Bonds. The indenture calls for a trustee
or receiver to take possession of the property if there is a default under its
terms. The property exempted from the lien includes cash, receivables,
supplemental fuel inventories, materials and supplies, rental appliances,
office furniture and equipment, and the LNG storage facility.
The Company leases a 30,000 square foot building which expires in October,
2005.
On December 31, 1999, the Company's distribution system included
approximately 800 miles of gas mains, 37,000 services and 44,000 active
customer meters.
The Company's gas mains and services are usually located on public ways or
private property not owned by it. In general, the Company's occupation of such
property is pursuant to easements, licenses, permits or grants of location.
Except as stated above, the principal items of property of the Company are
owned in fee.
In 1999, the Company's capital expenditures were $5.1 million. Capital
expenditures were principally made for improvements to the distribution system
and for system expansion to meet customer growth. The Company plans to spend
approximately $8 million for similar purposes in 2000.
Item 3: Legal Proceedings.
Other than certain routine claims incidental to its business, there are no
material pending legal proceedings involving the Company.
Item 4: Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of Security Holders in the fourth quarter
of 1999.
5
<PAGE>
Glossary
BCF--Billions of cubic feet of natural gas at 1,000 Btu per cubic foot.
Bundled Service--Two or more services tied together as a single product.
Services include gas sales at the city gate, interstate transportation, local
transportation, balancing daily swings in customer loads, storage, and peak-
shaving services.
Capacity--The capability of pipelines and supplemental facilities to deliver
and/or store gas.
City Gate--Physical interconnection between an interstate pipeline and the
local distribution company.
Dekatherm--1,000 cubic feet of natural gas at 1,000 Btu per cubic foot.
Firm Service--Sales and/or transportation service provided without
interruption throughout the year. Uninterrupted seasonal services are also
available for less than 365 days. Firm services are provided under either
filed rate tariffs or through individually negotiated contracts.
Gas Marketer (Broker)--A non-regulated buyer and seller of gas.
Interstate Transportation--Transportation of gas by an interstate pipeline
to the city gate.
Local Distribution Company (LDC)--A utility that owns and operates a gas
distribution system for the delivery of gas supplies from the city gate to
end-user facilities.
Local Transportation Service--Transportation of gas by the LDC from the city
gate to end-user facilities.
Non-Firm Service--Sales and transportation service offered at a lower level
of reliability and cost. Under this service, the LDC can interrupt customers
on short notice, typically during the winter season. Non-firm services are
provided through individually negotiated contracts and, in most cases, the
price charged takes into account the price of the customer's energy
alternative.
Throughput--Gas volume delivered to customers through the LDC's gas
distribution system.
Unbundled Service--Service that is offered and priced separately, such as
separating the cost of gas commodity delivered to the LDC's city gate from the
cost of transporting the gas from the city gate to the end user. Unbundled
services can also include daily or monthly balancing, back-up or stand-by
services and pooling. With unbundled services, customers have the opportunity
to select only the services they desire.
6
<PAGE>
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters.
Eastern has been the holder of record of all the outstanding common equity
securities of the Company since September 30, 1998. Dividends paid to Eastern
amounted to $5.6 million in 1999.
Item 6: Selected Financial Data.
Not required.
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
1999 Compared to 1998
Net earnings for the year ended December 31, 1999 were $5.9 million compared
to $4.3 million for the fiscal year ended August 31, 1998. The improvement in
earnings was principally due to lower operations and maintenance expenses,
merger related synergies resulting from reduced employee levels and associated
benefits, partially offset by a $1.3 million early retirement and severance
charge.
The four months ended December 31, 1998 Compared to the four months ended
December 31, 1997
Results for the four month period ended December 31, 1998 and 1997 are not
comparable due to the effect of merger related expenses, the impact of
discontinuing the application of Statement of Financial Accounting Standards
No. 71 "Accounting for the Effects of Certain Types of Regulation" ("SFAS No.
71") and the impact of 23% warmer weather than the prior year. Merger related
expenses for professional fees, termination benefits, and other related costs
were $7.9 million on a pre-tax basis. As a result of the rate plan and
extended base rate freeze, the Company was required to discontinue the
application of SFAS No. 71 and adopt the accrual method of accounting for
revenues. These changes resulted in an extraordinary charge of approximately
$2.9 million, net, principally due to the write off of regulatory assets
associated with postretirement benefits. The impact of significantly warmer
weather was offset by the adoption of the accrual method of accounting for
revenue.
August 31, 1998 Compared to August 31, 1997
Net earnings applicable to common stock for 1998 were $4.3 million, an
increase of $.3 million or 8% as compared to 1997. The increase primarily
reflects customer growth, the annualized effect of a base rate increase
granted by the Department effective December 1, 1996 and lower operations and
maintenance expense. The improvement in earnings was partially offset by
warmer weather and a higher charge for depreciation reflecting continued
investment in system replacement and expansion. Weather for 1998 was 11%
warmer than normal and 9% warmer than 1997.
YEAR 2000 ISSUE
The Company experienced no significant issues as a result of the transition
from December 31, 1999 to January 1, 2000. The Company does not expect to
incur any significant Year 2000 related costs beyond January 2000. On
September 30, 1998, the Company was merged with Eastern, the parent company of
Boston Gas Company. In connection with the merger, the Company addressed any
remaining Year 2000 issues through conversion to systems operated by Boston
Gas Company.
FORWARD-LOOKING INFORMATION
This report and other Company reports and statements issued or made from
time to time contain certain "forward-looking statements" concerning projected
future financial performance, expected plans or future operations. The Company
cautions that actual results and developments may differ materially from such
projections or expectations.
7
<PAGE>
Investors should be aware of important factors that could cause actual
results to differ materially from forward-looking projections or expectations.
These factors include, but are not limited to: the effect of strategic
initiatives on earnings and cash flow, the impact of any merger-related
activities, the ability to successfully integrate natural gas distribution
operations, temperatures above or below normal, changes in economic
conditions, including interest rates, regulatory and court decisions and
developments with respect to previously-disclosed environmental liabilities.
Most of these factors are difficult to predict accurately and are generally
beyond the control of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $10 million line of credit for the exclusive purpose of
funding its fuel inventory.
The Company expects capital expenditures for 2000 to be $8 million. Capital
expenditures will be primarily for improvements to the distribution system and
for system expansion to meet customer growth.
The Company believes that projected cash flow from operations, in
combination with currently available resources, is more than sufficient to
meet 2000 capital expenditures, working capital requirements, dividend
payments and normal debt repayments.
OTHER MATTERS
Regulatory and Accounting Issues
The Company's operations are subject to Massachusetts statutes applicable to
gas utilities. Rates, gas purchases, pipeline safety regulations, issuance of
securities, and affiliate transactions are regulated by the Department. Rates
for firm transportation and sales are subject to approval by, and are on file
with, the Department. In addition, the Company has a cost of gas adjustment
clause ("CGAC") that allows for the adjustment of billing rates for firm gas
sales to enable it to recover the actual cost of gas delivered to firm
customers, including the demand charges for capacity on the interstate
pipeline system. Similarly, through its local distribution adjustment clause
("LDAC"), the Company recovers the actual costs of remediating former
manufactured gas plant sites from all firm customers, including those
purchasing gas supply from third parties.
On September 30, 1998, the Company was acquired by Eastern, the Weston,
Massachusetts based owner of Boston Gas Company ("Boston Gas"). On September
17, 1998, the Department approved the merger and rate plan. Under the approved
rate plan, there was an immediate five percent price reduction for the
Company's customers and a ten year freeze of base rates. The freeze on base
rates is subject only to certain exogenous factors, such as changes in tax
laws, accounting changes, or regulatory, judicial, or legislative changes. Gas
supply savings resulted from the consolidation of the Essex Gas resource
portfolio with the Boston Gas portfolio. As a result of the rate plan, the
Company discontinued its application of SFAS No. 71, as described in Note 1 of
Notes to Consolidated Financial Statements. Many of the administrative,
operations and maintenance functions of the Company have been integrated with
those of Boston Gas.
All of the Company's 4,300 commercial and industrial customers are eligible
to purchase unbundled local transportation service from the Company and to
purchase their gas supply from third parties. As of December 31, 1999, the
Company had 98 firm transportation customers.
Anticipating a date of June 1, 2000 for offering residential customers the
opportunity to purchase gas supply from third parties, the Department has
approved Model Terms and Conditions to which LDC tariffs for all residential
customers will substantially conform. The Model Terms and Conditions approved
by the Department are consistent with the Department's order of February 1,
1999, which provided that, for a five year transition period, LDC contractual
commitments to upstream capacity will be assigned on a mandatory, pro rata
basis to marketers selling gas supply to the LDC's customers. The approved
mandatory assignment method eliminates the possibility that the costs of
upstream capacity purchased by the Company to serve firm customers
8
<PAGE>
will be absorbed by the LDC or other customers through the transition period.
The Department also found that, through the transition period, LDC's will
retain primary responsibility for upstream capacity planning and procurement
to assure that adequate capacity is available at Massachusetts city gates to
support customer requirements and growth. In year three of the five year
transition period, the Department intends to evaluate the extent to which the
upstream capacity market for Massachusetts is workably competitive based on a
number of factors, and accelerate or decelerate the transition period
accordingly. The Department's Model Terms and Conditions also require that
LDC's provide default and peaking supply services at cost-based rates.
Environmental Matters
The Company may have or share responsibility under applicable environmental
law for the remediation of four former manufactured gas plants ("MGP"), one
former gas holder site associated with MGP operations, and one non-MGP site,
and may share responsibility with respect to two federal superfund sites.
Information with respect to these matters may be found at Note 10 of Notes to
Consolidated Financial Statements. Such information is incorporated herein by
reference.
Item 8: Financial Statements and Supplementary Data
Information with respect to this item appears commencing on Page F-1 of this
Report. Such information is incorporated herein by reference.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
9
<PAGE>
PART III
Item 10: Directors and Executive Officers of the Registrant.
Not required.
Item 11: Executive Compensation.
Not required.
Item 12: Security Ownership of Certain Beneficial Owners and Management.
Not required.
Item 13: Certain Relationships and Related Transactions.
Not required.
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
List of Financial Statements and Financial Statement Schedules.
Information with respect to these items appears on Page F-1 of this Report.
Such information is incorporated herein by reference.
(3) List of Exhibits.
<TABLE>
<C> <S>
3.1 --Restated Articles of Organization of Essex County Gas Company
dated September 30, 1998, Amending Exhibit 3.1 to the Company's
Form 10-Q for the quarter ended February 28, 1995. (Filed
herewith).
3.2 Articles of Amendment of Essex Gas Company amending Exhibit 3.1.2
dated October 30, 1998. (Filed herewith).
3.2.1 Bylaws of Essex County Gas Company, dated September 30, 1998
amending Exhibit 3.2 to the Company's Form 10-Q for the quarter
ended February 28, 1995. (Filed herewith).
4.1 --Indenture dated as of June 1, 1986 between the Company and
Centerre Trust Company of St. Louis, Trustee. (Filed as an
Exhibit to Company's registration statement on Form S-2, filed
June 19, 1986, File No. 33-6597).*
4.2 --Eleventh Supplemental Indenture dated as of September 15, 1988,
providing for a 10.25 percent Series due 2003. (Filed as Exhibit
4.13 to the Company's Form 10-K for the fiscal year ended August
31, 1988).*
4.3 --Twelfth Supplemental Indenture dated as of December 1, 1990,
providing for a 10.10 percent Series due 2020. (Filed as Exhibit
4-14 to the Company's Form 10-Q for the quarter ended February
28, 1991).*
4.4 --Revolving Credit Agreement dated November 14, 1995 between Essex
County Gas Company and the First National Bank of Boston. (Filed
as Exhibit 4.5 to the Company's Form 10-Q for the quarter ended
November 30, 1995).*
4.5 --Fifteenth Supplemental Indenture dated as of December 1, 1996
providing for a 7.28 percent Series due 2017. (Filed as Exhibit
4.6 to the Company's Form 10-Q for the quarter ended February 28,
1997).*
10.1 --LNG Storage, Inc., Lease Indenture of Mortgage and Deed of Trust
dated April 10, 1972 (Filed as an Exhibit to Company's
registration statement on Form S-7, filed October 23, 1981, File
No. 2-74531)*.
10.2 --Haverhill Familee Investment Corporation--Lease of Corporate
Headquarters dated November 1, 1975. (Filed as an Exhibit to
Company's registration statement on Form S-7, filed October 23,
1981, File No. 2-74531).*
10.3 --Arlington Trust Company--Purchase Contract, Credit Agreement,
Trust Agreement and Storage Agreement dated October 1, 1980.
(Filed as an Exhibit to Company's registration statement on Form
S-7, filed October 23, 1981, File No. 2-74531).*
10.4 --Consolidated Gas Supply Corporation--Underground Storage Contract
dated February 18, 1980. (Filed as an Exhibit to Company's
registration statement on Form S-7, filed October 23, 1981, File
No. 2-74531).*
10.5 --Canadian Gas Transportation Contract between Tennessee Gas
Pipeline Company and Essex County Gas Company dated December 1,
1987. (Filed as an Exhibit to Company's Form 10-K for the year
ended August 31, 1988).*
</TABLE>
11
<PAGE>
<TABLE>
<C> <S>
10.6 --Phase 2 Gas Sales Agreement between Boundary Gas and Essex
County Gas Company dated September 14, 1987. (Filed as an
Exhibit to Company's Form 10-K for the year ended August 31,
1988).*
10.7 --Bond Purchase Agreement dated December 1, 1990, between Allstate
Life Insurance Company of New York, and Essex County Gas
Company. (Filed as an Exhibit to Company's Form 10-Q for the
quarter ended February 28, 1991).*
10.8 --Iroquois Gas Transmission System, L.P. Gas Transportation
Contract for Firm Reserved Service Dated February 7, 1991.
(Filed as an Exhibit to Company's Form 10-Q for the quarter
ended May 31, 1991).*
10.9 --Alberta Northeast Gas Limited (ANE), Gas Sales Agreement No. 1
dated February 7, 1991. (Filed as an Exhibit to Company's Form
10-Q for the quarter ended May 31, 1991).*
10.10 --Tennessee Gas Pipeline Transportation Contract dated February 7,
1991. (Filed as Exhibit 10.16 to Company's Form 10-K for the
fiscal year ended August 31, 1992).*
10.11 --Tennessee Gas Pipeline Company Gas Storage Contract (SS-NE)
TGP002099STO dated November 10, 1992. (Filed as Exhibit 10.22 to
Company's Form 10-K for the fiscal year ended August 31, 1992).*
10.12 --Gas Transportation Agreement between Essex County Gas Company
and Tennessee Gas Pipeline Company (for use under FT-A Rate
Schedule) dated September 1, 1993. (Filed as Exhibit 10.22 to
Company's Form 10-K for the fiscal year ended August 31, 1993).*
10.13 --Gas Transportation Agreement between Essex County Gas Company
and Tennessee Gas Pipeline Company (for use under Transportation
Service "CGT-NE" Rate Schedule) dated September 1, 1993. (Filed
as Exhibit 10.24 to Company's Form 10-K for the fiscal year
ended August 31, 1993).*
10.13.1 --Agreement between Essex County Gas Company and Tennessee Gas
Pipeline amending Exhibit 10.13 dated July 1, 1995. (Filed
herewith).
10.14 --Agreement between Essex County Gas Company and Tennessee Gas
Pipeline Company amending Exhibit 10.22 dated July 1, 1995.
(Filed herewith).
10.15 --Gas Transportation Agreement between Essex County Gas Company
and Tennessee Gas Pipeline Company (for use under Rate Schedule
FS) dated September 1, 1993. (Filed as Exhibit 10.26 to
Company's Form 10-K for the fiscal year ended August 31, 1993).*
10.15.1 --Agreement between Essex County Gas Company and Tenenssee Gas
Pipeline amending Exhibit 10.15 dated December 1, 1994. (Filed
herewith).
10.16 --Agreement between Essex Gas Company and Tennessee Gas Pipeline
Company amending Exhibit 10.24 dated December 1, 1994 (Filed
herewith).
10.17 --Contract Restructuring Agreement between the Company and
Tennessee Gas Pipeline dated as of August 2, 1999 amending
Exhibit 10.20. (Filed herewith).
10.18 --Redacted Gas Resource Portfolio Management and Gas Sales
Agreement between the Company, Colonial Gas Company, Boston Gas
Company and El Paso Energy Marketing Company dated as of
September 14, 1999, as amended. (Filed as Exhibit 10.1 to the
Form 10-K of Eastern Enterprises for the year ended December 31,
1999, and incorporated herein by reference).
10.19 --Gas Transportation Agreement between Essex Gas Company and
Tennessee Gas Pipeline Company dated November 1, 1994 (for use
under FT-A Rate Schedule). (Filed herewith).
21 --Subsidiaries of the Registrant.
27 --Financial Data Schedule for the twelve months ended December 31,
1999.
</TABLE>
There were no reports on Form 8-K filed in the fourth quarter of 1999.
- --------
* Not filed herewith. In accordance with Rule 12(b) (32) of the General Rules
and Regulations under the Securities and Exchange Act of 1934, references
made to the document previously filed with the Commission.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Essex Gas Company
Registrant
Joseph F. Bodanza
By: _________________________________
Joseph F. Bodanza
Senior Vice President and
Treasurer
(Principal Financial and
Accounting Officer)
Dated: March 14, 2000
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 14th day of March, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
Chester R. Messer Director and President
______________________________________
Chester R. Messer
Anthony J. DiGiovanni Director and Senior Vice President
______________________________________
Anthony J. DiGiovanni
Joseph F. Bodanza Director and Senior Vice President
______________________________________ and Treasurer (Principal Financial
Joseph F. Bodanza and Accounting Officer)
J. Atwood Ives Director
______________________________________
J. Atwood Ives
Fred C. Raskin Director
______________________________________
Fred C. Raskin
Walter J. Flaherty Director
______________________________________
Walter J. Flaherty
L. William Law, Jr. Director
______________________________________
L. William Law, Jr.
</TABLE>
13
<PAGE>
ESSEX GAS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(Information required by Items 8 and 14 (a) of Form 10-K)
<TABLE>
<S> <C>
Report of Independent Public Accountants.......................... F-17
Consolidated Statements of Earnings for the Year Ended December
31, 1999, the Transition Period Ended December 31, 1998 and the
Fiscal Years Ended August 31, 1998 and 1997.................... F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998.... F-3 and F-4
Consolidated Statements of Retained Earnings for the Year Ended
December 31, 1999, the Transition Period Ended December 31,
1998 and the Fiscal Years Ended August 31, 1998 and 1997....... F-5
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1999, the Transition Period Ended December 31,
1998 and the Fiscal Years Ended August 31, 1998 and 1997....... F-6
Notes to Consolidated Financial Statements...................... F-7 to F-16
Interim Financial Information for the Year Ended December 31,
1999 and the Fiscal Year Ended August 31, 1998 (Unaudited)..... F-18
Schedule for the Year Ended December 31, 1999, the Transition
Period Ended December 31, 1998 and the Fiscal Years Ended
August 31, 1998 and 1997.......................................
II--Valuation and Qualifying Accounts......................... F-19 to F-21
</TABLE>
Schedules other than those listed above have been omitted as the information
has been included in the consolidated financial statements and related notes
or is not applicable nor required.
F-1
<PAGE>
ESSEX GAS COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Transition Fiscal Years
Year Ended Period Ended Ended August 31,
December 31, December 31, ------------------
1999 1998 1998 1997
------------ ------------ -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenues............... $44,096 $16,637 $ 50,820 $ 53,534
Cost of gas sold................. 18,165 7,554 24,154 27,272
------- ------- -------- --------
Operating margin............. 25,931 9,083 26,666 26,262
------- ------- -------- --------
Operating expenses:
Operations and maintenance..... 9,106 4,555 11,772 12,292
Depreciation and amortization.. 3,733 1,235 3,753 3,373
Taxes, other than income....... 1,465 537 1,623 1,596
Income taxes................... 3,415 (595) 2,399 2,280
Merger related expenses........ -- 7,904 -- --
------- ------- -------- --------
Total operating expenses..... 17,719 13,636 19,547 19,541
------- ------- -------- --------
Operating earnings (loss)........ 8,212 (4,553) 7,119 6,721
Other earnings, net.............. 481 61 228 338
------- ------- -------- --------
Earnings (loss) before interest
expense......................... 8,693 (4,492) 7,347 7,059
------- ------- -------- --------
Interest expense:
Long-term debt................. 2,464 819 2,515 2,338
Other, including amortization
of debt expense............... 338 251 587 781
Less--Interest during
construction.................. (45) (3) (27) (27)
------- ------- -------- --------
Total interest expense....... 2,757 1,067 3,075 3,092
------- ------- -------- --------
Earnings (loss) before
extraordinary item.............. 5,936 (5,559) 4,272 3,967
Extraordinary item, net of tax... -- (2,874) -- --
------- ------- -------- --------
Net earnings (loss).............. $ 5,936 $(8,433) $ 4,272 $ 3,967
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
ESSEX GAS COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
(In Thousands)
<S> <C> <C>
Gas plant, at cost......................................... $117,476 $112,540
Less--Accumulated depreciation........................... (33,846) (29,821)
-------- --------
Net plant.............................................. 83,630 82,719
-------- --------
Current assets:
Cash..................................................... 122 66
Accounts receivable less reserves of $748 at December 31,
1999 and $745 at December 31, 1998...................... 3,660 3,906
Accrued utility margin................................... 2,414 2,285
Deferred gas costs....................................... 2,828 --
Natural gas and other inventories, at average cost....... 1,155 3,891
Materials and supplies, at average cost.................. 484 396
Current income taxes..................................... 913 2,504
Prepaid expenses......................................... 25 265
-------- --------
Total current assets................................... 11,601 13,313
-------- --------
Other assets:
Unamortized debt expense and other assets................ 1,965 1,909
-------- --------
Total other assets..................................... 1,965 1,909
-------- --------
Total assets........................................... $ 97,196 $ 97,941
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ESSEX GAS COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------- -------
(In Thousands)
<S> <C> <C>
Capitalization:
Common stockholder's investment--
Common stock, no par value, 200,000 authorized shares.
Issued and outstanding 100 shares at December 31, 1999 and
1998..................................................... $27,805 $27,805
Unrealized gain (loss) on investments available for sale,
net....................................................... 22 (24)
Retained earnings.......................................... 7,729 7,356
------- -------
Total common stockholder's investment..................... 35,556 35,137
------- -------
Long-term obligations, less current portion................... 27,365 28,071
------- -------
Total capitalization...................................... 62,921 63,208
------- -------
Current liabilities:
Current portion of long-term obligations.................... 665 660
Notes payable............................................... -- 8,935
Notes payable to Parent Company............................. 4,000 --
Accounts payable............................................ 5,042 2,576
Accounts payable, affiliate................................. 4,687 --
Gas inventory financing..................................... 1,234 4,345
Accrued interest............................................ 290 445
Taxes payable............................................... 54 21
Refundable gas costs due customers.......................... -- 198
Refunds due customers....................................... 55 34
Other....................................................... 148 553
------- -------
Total current liabilities................................. 16,175 17,767
------- -------
Reserves and deferred credits:
Deferred income taxes....................................... 8,967 7,359
Unamortized investment tax credits.......................... 977 1,048
Deferred directors' fees.................................... 176 977
Retirement benefit liability................................ 7,238 5,500
Other reserves.............................................. 742 2,082
------- -------
Total reserves and deferred credits....................... 18,100 16,966
------- -------
Total capitalization and liabilities...................... $97,196 $97,941
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ESSEX GAS COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Fiscal Years
Transition Ended August
Year Ended Period Ended 31,
December 31, December 31, ----------------
1999 1998 1998 1997
------------ ------------ ------- -------
(In Thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period...... $ 7,356 $16,515 $15,094 $13,834
Net earnings (loss)............... 5,936 (8,433) 4,272 3,967
Cash dividends on common stock.... (5,563) (726) (2,851) (2,707)
------- ------- ------- -------
Balance at end of period............ $ 7,729 $ 7,356 $16,515 $15,094
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ESSEX GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Years Ended
August 31,
--------------------
Transition
Year Ended Period Ended
December 31, December 31,
1999 1998 1998 1997
------------ ------------ --------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings (loss)........... $ 5,936 $(8,433) $ 4,272 $ 3,967
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Extraordinary charge related
to discontinuance of SFAS
No. 71....................... -- 2,874 -- --
Depreciation and
amortization, including
amounts related to non-
utility operations........... 4,228 1,463 4,167 3,788
Deferred income taxes......... 1,608 1,769 383 (813)
Other changes in assets and
liabilities:
Accounts receivable.......... 117 (4,065) 874 (781)
Inventories including fuel... 2,648 403 2 (132)
Accounts payable............. 2,466 770 (1,069) (971)
Accounts payable,
affiliates.................. 4,687 -- -- --
Supplier refund
obligations................. 20 (125) (1,408) 1,292
Taxes payable/receivable..... 1,624 (1,127) (1,370) 1,019
Recoverable (refundable) gas
costs....................... (3,026) (523) 1,042 150
Deferred merger costs........ -- 1,666 (1,666) --
Other, net................... (1,113) (211) (215) 544
------- ------- --------- ---------
Cash provided by (used for)
operating activities....... 19,195 (5,539) 5,012 8,063
------- ------- --------- ---------
Cash flows from investing
activities:
Utility capital expenditures.. (5,074) (1,476) (6,591) (6,895)
Net cost of removal........... 245 (170) (74) (100)
Purchase of investment........ -- -- -- (570)
Sale of investment............ -- -- -- 570
------- ------- --------- ---------
Cash used for investing
activities................. (4,829) (1,646) (6,665) (6,995)
------- ------- --------- ---------
Cash flows from financing
activities:
Dividends paid................ (5,563) (726) (2,851) (2,707)
Issuance of common stock...... -- -- 1,447 1,049
Issuance of long-term debt.... -- -- -- 9,827
Principal retired on long-term
debt......................... (701) (675) (885) (855)
Changes in gas inventory
financing.................... (3,111) 288 249 450
Changes in notes payable...... (4,935) 2,110 3,512 (8,626)
Capital contribution from
Eastern...................... -- 6,000 -- --
Payment of ESOP debt.......... -- -- -- (75)
------- ------- --------- ---------
Cash (used for) provided by
financing activities....... (14,310) 6,997 1,472 (937)
------- ------- --------- ---------
Increase (decrease) in cash and
cash equivalents.............. 56 (188) (181) 131
Cash at beginning of period.... 66 254 435 304
------- ------- --------- ---------
Cash at end of period.......... $ 122 $ 66 $ 254 $ 435
======= ======= ========= =========
Supplemental disclosure of cash
flow information:
Cash paid (received) during
the period for:
Interest, net of amounts
capitalized................ $ 2,778 $ 1,441 $ 3,058 $ 3,228
======= ======= ========= =========
Income taxes................ $ (166) $ 619 $ 3,519 $ 2,682
======= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
General
Essex Gas Company (the "Company") is a public utility engaged in the
distribution and sale of natural gas for residential, commercial and
industrial uses. Its service area is northeastern Massachusetts.
Principles of Consolidation
The consolidated financial statements include the accounts of LNG Storage,
Inc., a wholly-owned subsidiary. All material intercompany balances and
transactions have been eliminated.
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.
Merger
On September 30, 1998, the Company merged with ECGC Acquisition Company, a
wholly-owned subsidiary of Eastern Enterprises ("Eastern"), through the
exchange of all the Company's stock for approximately 2,047,000 shares of
Eastern common stock. The merger was accounted for as a pooling of interests
by Eastern.
On December 7, 1998, the Company changed its fiscal year end from August 31
to December 31 to conform to Eastern's fiscal year end. The transition period
("Transition Period") ended December 31, 1998 reflects the results of
operations and cash flows for the four months then ended and precedes the
start of the new fiscal year. Unaudited financial results of operations for
the four months ended December 31, 1997 are reflected on a comparative basis
in Note 11 of the Notes to Consolidated Financial Statements.
The merger related transaction fees, termination benefits and related
expenses charged against pre-tax earnings during the Transition Period totaled
$7,904,000.
In connection with the merger, the Massachusetts Department of
Telecommunications and Energy ("the Department") approved a rate plan that
resulted in an immediate five percent price reduction through the cost of gas
adjustment clause ("CGAC") and a ten year freeze of base rates at current
levels. Given the length of the base rate freeze, the Company was required to
discontinue its application of Statement of Financial Accounting Standards
(SFAS) No. 71 "Accounting for the Effects of Certain Types of Regulation"
during the Transition Period. Accordingly, the Company wrote off net
regulatory assets of $4,835,000, consisting principally of postretirement
costs. In addition, the Company was required to adopt certain accounting
practices in order to comply with generally accepted accounting principles for
nonregulated entities and to maintain consistency with its new parent. As
such, the Company recorded a nonrecurring pre-tax gain of $335,000 due to the
adoption of a revenue method that reflects full accrual accounting, as
discussed below. Adjustments to reflect this new practice and the
discontinuance of SFAS No. 71 are included in the extraordinary item, net of
tax in the Consolidated Statements of Earnings.
Regulation
The Company's operations are subject to Massachusetts statutes applicable to
gas utilities.
F-7
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(1) Summary of Significant Accounting Policies (continued)
For the periods prior to the approval of the merger and rate plan, the
accounting policies conformed to generally accepted accounting principles as
applied to regulated public utilities and reflected the effects of the
ratemaking process in accordance with SFAS No. 71. Under SFAS No. 71, the
Company was allowed to defer certain costs that otherwise would be expensed in
recognition of the ability to recover them in future rates. As described
above, the Company discontinued application of SFAS No. 71 as a result of the
rate plan approved by the Department in connection with its approval of the
merger of the Company with Eastern.
Gas Operating Revenues
As previously mentioned, effective with the merger and the ten year base
rate freeze, the Company discontinued the application of SFAS No. 71,
resulting in a change in its method of accounting for revenues. Previously,
substantially all revenues were recorded when billed. Under the unbilled
method, gas operating revenues are accrued based upon the amount of gas
delivered to utility customers through the end of the accounting period.
Accrued Utility Margin of $2,414,000 and $2,285,000, as reported in the
Consolidated Balance Sheets at December 31, 1999 and 1998, respectively,
represent the accrual of unbilled operating revenues net of related gas costs.
The impact on Transition Period earnings due to this change was an increase in
margin of $2,285,000.
Cost of Gas Adjustment Clause and Deferred Gas Costs
The CGAC requires the Company to adjust its rates semi-annually for firm gas
sales to track changes in the cost of gas distributed, with an annual
adjustment of subsequent rates for any over or under recovery of actual costs
incurred. As a result, the Company defers the cost of any firm gas that has
been distributed, but is unbilled at the end of a period, to a period in which
the gas is billed to customers. The local distribution adjustment clause
("LDAC") allows the Company to recover from all firm customers the
amortization of environmental response costs associated with former
manufactured gas plant ("MGP") sites and FERC Order 636 transition costs.
These costs were previously recovered through the CGAC. Upon the
discontinuance of the application of SFAS No. 71 as of September 30, 1998, the
Company records amounts recoverable under the LDAC as revenue when it is
billable to its customers.
Depreciation
Depreciation is provided at rates designed to amortize the cost of
depreciable property, plant and equipment over their estimated remaining
useful lives. The composite depreciation rate, expressed as a percentage of
the average depreciable property in service for the year ended December 31,
1999, was 3.70% and for the Transition Period, was 3.69%. For the fiscal years
ended August 31, the composite rate was 3.70% in 1998 and 3.53% in 1997.
Accumulated depreciation is charged with the original cost and cost of
removal, less salvage value, of units retired. Expenditures for repairs,
upkeep of units of property and renewal of minor items of property replaced
independently of the unit of which they are a part are charged to maintenance
expense as incurred.
Pending Accounting Changes
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by SFAS No. 137, is effective for fiscal quarters of
all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or a liability measured at
its fair value. SFAS No. 133 requires that changes in the derivative's fair
value be recognized
F-8
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(1) Summary of Significant Accounting Policies (continued)
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. The Company has
not yet quantified the impact of adopting SFAS No. 133 on the consolidated
financial statements. However, SFAS No. 133 could increase volatility in
earnings and other comprehensive income.
Reclassifications
Certain prior year financial statement amounts have been reclassified for
consistent presentation with the current year.
(2) Common Stock
Common stock activity for the previous two fiscal years, the Transition
Period and the current year are as follows:
<TABLE>
<CAPTION>
Number of
Shares Common Stock
---------- --------------
(In Thousands)
<S> <C> <C>
BALANCE, AUGUST 31, 1996.......................... 1,642,490 $19,235
Dividend reinvestment plan........................ 19,733 476
Amortization of capital stock expense............. -- 37
Employee stock plans.............................. 17,794 438
Sale of common stock.............................. 5,301 135
---------- -------
BALANCE, AUGUST 31, 1997.......................... 1,685,318 20,321
Dividend reinvestment plan........................ 12,652 477
Amortization of capital stock expense............. -- 37
Employee stock plans.............................. 27,967 865
Sale of common stock.............................. 3,070 105
---------- -------
BALANCE, AUGUST 31, 1998.......................... 1,729,007 21,805
Merger with Eastern:
Exchange of common stock........................ (1,729,007) --
Issuance of common stock to Eastern............. 100 --
Capital contribution from Eastern................. -- 6,000
---------- -------
BALANCE, DECEMBER 31, 1998 and 1999............... 100 $27,805
========== =======
</TABLE>
(3) Income Taxes
For the year ended December 31, 1999, and for the Transition Period ended
December 31, 1998, the Company was a member of an affiliated group of
companies that files a consolidated federal income tax return. For the years
ended August 31, 1998 and August 31, 1997, the Company was a member of a
different consolidated group. The Company follows the policy, established for
the group, of providing for income taxes that would be payable on a separate
company basis. The Company's effective income tax rate was 36.5% for the year
ended December 31, 1999, 9.7% for the Transition Period ended December 31,
1998 and 36% and 36.6% for the fiscal years ended August 31, 1998 and August
31, 1997, respectively. State taxes represent the majority of the difference
between the effective rate and the Federal income tax rate for August 31, 1997
and August 31, 1998. For the transition period ended December 31, 1998 and for
the year ended December 31, 1999, non-deductible merger related costs were the
major component affecting the effective tax rate.
F-9
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) Income Taxes (continued)
A summary of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
Fiscal Years
Transition Ended August
Year Ended Period Ended 31,
December 31, December 31, --------------
1999 1998 1998 1997
------------ ------------ ------ ------
(In Thousands)
<S> <C> <C> <C> <C>
Current:
Federal........................... $2,107 $1,063 $1,948 $2,258
State............................. 251 76 396 455
------ ------ ------ ------
Total Current Provision............. 2,358 1,139 2,344 $2,713
Deferred:
Federal........................... 70 (1,365) 104 (299)
State............................. 987 (346) 21 (64)
------ ------ ------ ------
Total Deferred Provision............ 1,057 (1,711) 125 (363)
Amortization of investment tax
credit............................. -- (23) (70) (70)
------ ------ ------ ------
Provision for income taxes.......... $3,415 $ (595) $2,399 $2,280
====== ====== ====== ======
</TABLE>
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Generally, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company recognized a 1% rate difference in the transition period ended
December 31, 1998 due to becoming a member of an affiliated group of companies
taxed at the 35% statutory rate.
For income tax purposes, the Company uses accelerated depreciation and
shorter depreciation lives, as permitted by the Internal Revenue Code.
Deferred federal and state taxes are provided for the tax effects of all
temporary differences between financial reporting and taxable income.
Significant items making up deferred tax assets and liabilities at December
31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Assets:
Post retirement benefits............................ $ 1,218 $ 2,402
Other............................................... 3,930 2,778
-------- --------
Total deferred tax assets........................... $ 5,148 $ 5,180
======== ========
Liabilities:
Accelerated Depreciation............................ $(12,516) $(12,213)
Deferred Gas Costs.................................. (1,050) --
Other............................................... (549) (326)
-------- --------
Total deferred tax liabilities...................... $(14,115) $(12,539)
-------- --------
Total net deferred taxes............................ $ (8,967) $ (7,359)
======== ========
</TABLE>
F-10
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Commitments
Long-Term Obligations
The following table provides information on long-term obligations:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------- -------
(In Thousands)
<S> <C> <C>
First mortgage bonds:
10.25%, due serially from 1994 to 2003....................... $ 2,400 $ 3,000
10.10%, due serially from 2010 to 2020....................... 8,000 8,000
7.28%, due serially from 2008 to 2016........................ 10,000 10,000
Debentures:
8.625%, due 2006............................................. 2,245 2,245
8.15%, due 2017.............................................. 4,914 4,954
Obligations under capital lease................................ 471 532
------- -------
Total debt................................................... 28,030 28,731
Less: Current portion........................................ 665 660
------- -------
Total long-term debt....................................... $27,365 $28,071
======= =======
</TABLE>
Substantially all plant assets are pledged as collateral under the terms of
the Indenture of First Mortgage Bonds. Sinking fund requirements for the next
five years are $600,000 annually for the years 2000 through 2003.
Annual maturities of capital lease obligations are $65,000, $71,000,
$77,000, $84,000 and $91,000 for the years 2000 through 2004, respectively,
and cumulatively $83,000 thereafter.
Gas Inventory Financing
The Company, with Department approval, finances its inventory of gas
supplies through a single purpose financing arrangement extending through
December 31, 2000. The credit agreement provides for a total commitment of up
to $10,000,000 and is secured by storage gas. All costs related to the
financing are recoverable from customers.
(5) Restriction on Retained Earnings
Under the terms of the Indenture of First Mortgage Bonds, substantially all
of the Company's retained earnings in the amount of $6,895,000 as of December
31, 1999 were restricted as to the payment of cash dividends.
(6) Retiree Benefits
Effective September 1, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post-retirement Benefits," which revises
prior disclosure requirements. The information for fiscal years ended August
31, 1998 and 1997 have been restated to conform to the current presentation.
F-11
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) Retiree Benefits (continued)
Pension Plans
The Company has two pension plans covering substantially all employees. The
funding of retirement and employee benefit plans is in accordance with the
requirements of the plans and, where applicable, in sufficient amounts to
satisfy the "Minimum Funding Standards" of the Employee Retirement Income
Security Act ("ERISA"). The net periodic pension cost was as follows:
<TABLE>
<CAPTION>
Fiscal
Transition Years Ended
Year Ended Period Ended August 31,
December 31, December 31, ------------
1999 1998 1998 1997
------------ ------------ ----- -----
(In Thousands)
<S> <C> <C> <C> <C>
Service cost.......................... $143 $ 107 $ 319 $ 286
Interest cost on projected benefit
obligation........................... 766 259 779 753
Expected return on plan assets........ (817) (301) (904) (754)
Amortization of prior service cost.... 119 55 164 139
Amortization of transition
obligation........................... (16) 3 9 9
Recognized actual gain................ -- (15) (41) --
Curtailment (gain) loss............... 130 (635) -- --
---- ----- ----- -----
Total net pension cost................ $325 $(527) $ 326 $ 433
==== ===== ===== =====
</TABLE>
The table above does not reflect retirement pension enhancements of $527,000
and $623,000 for the fiscal year ended December 31, 1999 and the transition
period ended December 31, 1998, respectively.
Postretirement Health Care
Net periodic expenses for postretirement benefits other than pensions was as
follows:
<TABLE>
<CAPTION>
Fiscal
Transition Years Ended
Year Ended Period Ended August 31,
December 31, December 31, ------------
1999 1998 1998 1997
------------ ------------ ----- -----
(In Thousands)
<S> <C> <C> <C> <C>
Service cost.......................... $ 62 $ 38 $ 114 $ 103
Interest cost on accumulated benefit
obligation........................... 409 120 359 345
Expected return on plan assets........ (119) (34) (102) (62)
Amortization of prior service cost.... (9) -- -- --
Amortization of transition
obligation........................... 2 68 204 204
Curtailment gain...................... -- (85) -- --
---- ---- ----- -----
Total net retiree health care cost.... $345 $107 $ 575 $ 590
==== ==== ===== =====
</TABLE>
The table above does not reflect retirement health care enhancements of
$353,000 and $555,000 for the fiscal year ended December 31, 1999 and the
transition period ended December 31, 1998, respectively.
As discussed in Note 1 of the Notes to Consolidated Financial Statements,
the Company conformed to Eastern's method of accounting for post-retirement
benefits other than pensions by recognizing the remaining unamortized
transition obligation of $3,000,000 during the Transition Period.
F-12
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) Retiree Benefits (continued)
The following tables set forth the change in benefit obligation and plan
assets and reconciliation of the funded status of Company plans and amounts
recorded in the Company's balance sheet as of December 31, 1999 and 1998 and
August 31, 1998, using actuarial measurement dates of October 1, 1999 and 1998
and August 31, 1998, respectively.
<TABLE>
<CAPTION>
Pensions Health Care
------------------------------------ ------------------------------------
Transition Fiscal Transition Fiscal
Year Ended Period Ended Year Ended Year Ended Period Ended Year Ended
December 31, December 31, August 31, December 31, December 31, August 31,
1999 1998 1998 1999 1998 1998
------------ ------------ ---------- ------------ ------------ ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Change in benefit
obligation
Balance at beginning of
period................. $11,400 $ 11,721 $10,689 $ 5,710 $ 5,388 $ 4,858
Service cost............ 143 80 319 62 9 114
Interest cost........... 766 195 778 409 29 359
Plan amendments......... 233 -- -- (168) -- --
Curtailment (gain) or
loss................... 98 (635) -- (106) (85) --
Special termination
benefits............... 527 623 -- 353 555 --
Benefits paid........... (898) (161) (642) (274) (21) (256)
Actuarial (gain) or
loss................... (302) (423) 577 (56) (165) 313
------- -------- ------- ------- ------- -------
Balance at end of
period................. $11,967 $ 11,400 $11,721 $ 5,930 $ 5,710 $ 5,388
======= ======== ======= ======= ======= =======
Change in plan assets
Fair value, beginning of
period................. $10,003 $ 11,460 $10,211 $ 1,687 $ 1,754 $ 1,386
Actual return on plan
assets................. 1,125 (1,296) 1,701 163 (46) 53
Employer contributions.. -- -- 190 5 -- 571
Benefits paid........... (898) (161) (642) (274) (21) (256)
------- -------- ------- ------- ------- -------
Fair value, end of
period................. $10,230 $ 10,003 $11,460 $ 1,581 $ 1,687 $ 1,754
======= ======== ======= ======= ======= =======
Reconciliation of funded
status
Funded status........... $(1,737) $ (1,397) $ (261) $(4,349) $(4,023) $(3,634)
Unrecognized actuarial
(gain) or loss......... (1,181) (668) (1,766) (40) 166 371
Unrecognized transition
obligation............. (143) (159) (16) -- -- --
Unrecognized prior
service................ 1,102 1,118 1,472 (161) -- --
------- -------- ------- ------- ------- -------
Net amount recognized at
end of period.......... $(1,959) $ (1,106) $ (571) $(4,550) $(3,857) $(3,263)
======= ======== ======= ======= ======= =======
Amounts recognized in
balance sheet
Intangible asset........ $ 525 $ 537 $ 35 $ -- $ -- $ --
Accrued benefit
liability.............. (2,484) (1,643) (606) (4,550) (3,857) (3,263)
------- -------- ------- ------- ------- ------- ---
Net amount.............. $(1,959) $ (1,106) $ (571) $(4,550) $(3,857) $(3,263)
======= ======== ======= ======= ======= =======
</TABLE>
Plan assets are invested in debt and equity marketable securities.
To fund health care benefits under its collective bargaining agreements, the
Company maintains a Voluntary Employee Beneficiary Association ("VEBA") Trust
to which it makes contributions from time to time. Plan assets are invested in
debt and equity marketable securities.
Following are the weighted-average assumptions used in developing the
projected benefit obligation:
<TABLE>
<CAPTION>
August
December 31, 31,
-------------- ----------
1999 1998 1998 1997
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Discount rate................................. 7.5% 7.25% 7.0% 7.5%
Return on plan assets......................... 8.5% 8.5% 8.0% 8.0%
Increase in future compensation............... 4.0-4.5% 5.0% 5.0% 5.0%
Health care inflation trend................... 8.0-10.0% 8.0% 7.0% 8.0%
</TABLE>
F-13
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(6) Retiree Benefits (continued)
The health care inflation rate for 2000 is assumed to be 8.0% and 10.0% for
pre-65 and post-65 health care benefits, respectively. The rate is assumed to
decrease gradually to 5.0% in 2006 for pre-65 benefits (2008 for post-65
benefits) and remain at that level thereafter. A one percentage point increase
or decrease in the assumed health care trend rate for 1999 would have the
following effects:
<TABLE>
<CAPTION>
One-Percentage One-Percentage
Point Increase Point Decrease
-------------- --------------
(In Thousands)
<S> <C> <C>
Service cost and interest cost
components.............................. $ 24 $ (23)
Post-retirement benefit obligation....... $541 $(466)
</TABLE>
(7) Leases
The Company is obligated under various lease agreements for certain
facilities and equipment used in operations. Total expenditures under
operating leases were $318,000 for year ended December 31, 1999, $51,000 for
the Transition Period and $285,000 and $299,000 for the fiscal years 1998 and
1997, respectively. The property classified as a capital lease as of December
31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Buildings....................................... $1,124 $1,124
Less: Accumulated depreciation.................. (653) (592)
------ ------
$ 471 $ 532
====== ======
</TABLE>
Depreciation expense of $61,000, $19,000, $54,000, and $50,000 along with
interest of $42,000, $15,000, $49,000, and $53,000 related to the capital
lease is included in other operating expenses for the year ended December 31,
1999, Transition Period ended December 31, 1998 and fiscal years ended August
31, 1998 and 1997, respectively.
The Company also has various operating lease agreements for equipment,
vehicles and office space. The remaining minimum annual rental commitment for
these and all other non-cancelable leases is as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
(In Thousands)
<S> <C> <C>
2000.................................................... $ 103 $57
2001.................................................... 103 11
2002.................................................... 103 --
2003.................................................... 103 --
Thereafter.............................................. 186 --
----- ---
Total minimum lease payments............................ 598 $68
===
Less: Amount representing interest...................... 127
-----
$ 471
=====
</TABLE>
F-14
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(8) Fair Values of Financial Instruments
The following methods and assumptions were used to estimate the fair values
of financial statements:
Cash and Cash Equivalents--The carrying amounts approximate fair value.
Short-Term Debt--The carrying amounts of the Company's short-term debt,
including notes payable and gas inventory financing, approximate their
fair value.
Long-Term Debt--The fair value of long-term debt is estimated based on
currently quoted market prices.
The carrying amounts and estimated fair values of the Company's long-term
debt for the periods noted below are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
(In Thousands)
<S> <C> <C>
December 31, 1999........................................ $28,030 $28,853
December 31, 1998........................................ $28,731 $33,996
</TABLE>
(9) Related Party Transactions
The Company incurred $400,000 in 1999 for legal, tax and corporate services
provided by Eastern. Included in the Consolidated Balance Sheet at December 31,
1999 is a note payable to Eastern in the amount of $4,000,000. Interest is
charged based on the quarterly short-term applicable federal rate issued by the
Internal Revenue Service, and was 5.45% as of December 31, 1999.
Substantially all of the administrative functions and information technology
systems are integrated with those of Boston Gas Company, an affiliated company.
As allowed by the Department, Essex is charged for only those costs
incrementally incurred to provide these services.
(10) Environmental Matters
The Company, like many other companies in the natural gas industry, is party
to governmental proceedings requiring investigation and possible remediation of
former manufactured gas plant ("MGP") operations, including former operating
plants and a gas holder site. The Company may have or share responsibility
under applicable environmental laws for the remediation of four former MGP's
and one former gas holder site, as well as for one non-MGP site. The Company
has estimated its potential share of the costs of investigating and remediating
these sites in accordance with SFAS No. 5, "Accounting for Contingencies," and
the American Institute of Certified Public Accountants Statement of Position
96-1, "Environmental Remediation Liabilities." The Company has recorded a
liability of approximately $300,000, which represents its best estimate at this
time of remediation costs. However, there can be no assurance that actual cost
will not vary considerably from this estimate. Factors that may bear on actual
costs differing from estimates include, without limit, changes in regulatory
standards, changes in remediation technologies and practices and the type and
extent of contaminants discovered at the sites.
The Company has received and responded to Requests for Information from the
U.S. Environmental Protection Agency ("EPA") pursuant to Section 104 of the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), regarding two federal superfund sites that the EPA is currently
investigating. It is not possible at this time to reasonably estimate the
amount of the Company's obligation for remediation of the sites; however, the
Company expects that its share, if any, will be de minimis.
F-15
<PAGE>
ESSEX GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) Environmental Matters (continued)
By a rate order issued on May 25, 1990, the Department approved recovery of
all prudently incurred environmental response costs associated with former MGP
related sites over separate, seven-year amortization periods, without a return
on the unamortized balance. The Company currently believes, in light of the
Department rate order, that it is not probable that actual costs will
materially affect its financial condition or results of operations.
(11) Selected Comparative Financial Information
<TABLE>
<CAPTION>
Four Months Ended
-------------------------
December 31, December 31,
1998 1997
------------ ------------
Unaudited
<S> <C> <C>
Operating Revenues.................................... $16,637 $16,297
------- -------
Operating Margin...................................... $ 9,083 $ 8,539
------- -------
Operating Expenses.................................... $13,636 $ 6,342
------- -------
Earnings (loss) Before Extraordinary Item............. $(5,559) $ 1,189
------- -------
Extraordinary Item, Net of Tax........................ $(2,874) $ --
------- -------
Net Earnings (loss)................................... $(8,433) $ 1,189
======= =======
</TABLE>
The significant increase in operating expenses for the four months ended
December 31, 1998 as compared to the four months ended December 31, 1997, is
primarily due to merger related expenses as discussed in Note 1.
This financial information is presented herein for comparative purposes and
includes any adjustments which are, in the opinion of management, necessary
for a fair presentation.
(12) Merger
On November 4, 1999, Eastern signed a definitive agreement to be acquired by
KeySpan Corporation. Subject to receipt of satisfactory regulatory approvals
and the approval of Eastern shareholders, the transaction is expected to close
in mid to late 2000, although it is possible that the transaction will not
close until 2001.
F-16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Essex Gas Company:
We have audited the accompanying consolidated balance sheets of Essex Gas
Company (a Massachusetts corporation and wholly owned subsidiary of Eastern
Enterprises) and subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of income, retained earnings and cash flows for the
year ended December 31, 1999, for the four-month period ended December 31,
1998, and each of the two years in the period ended August 31, 1998. These
consolidated financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Essex Gas Company and
subsidiary as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for the year ended December 31, 1999, the four-month period
ended December 31, 1998, and each of the two years in the period ended August
31, 1998, in conformity with accounting principles generally accepted in the
United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
consolidated financial statements are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not a part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state, in all material respects, the financial data required
to be set forth therein in relation to the basic financial statements taken as
a whole.
As discussed in Note 1, as a result of the merger, the approved rate plan
and related discontinuance of SFAS No. 71, the Company changed certain
accounting practices to comply with generally accepted accounting principles
for non-regulated entities.
Arthur Andersen LLP
Boston, Massachusetts
January 21, 2000
F-17
<PAGE>
ESSEX GAS COMPANY
INTERIM FINANCIAL INFORMATION
For the Two Years Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenues.............. $22,049 $ 4,410 $3,718 $13,919
Operating margin................ $12,048 $ 2,707 $2,862 $ 8,314
Operating earnings (loss)....... $ 4,561 $ (859) $ 921 $ 3,589
Net earnings (loss)............. $ 3,969 $(1,346) $ 249 $ 3,064
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------
February 28, May 31, August 31, December 31,
1998 1998 1998 1998
------------ ------- ---------- ------------
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenues................ $23,028 $14,154 $4,604 $15,009
Operating margin.................. $11,695 $ 7,400 $2,728 $ 8,129
Operating earnings (loss)......... $ 3,902 $ 1,683 $ 593 $ 2,953
Net earnings (loss)............... $ 3,246 $ 1,000 $ (150) $ 1,357
</TABLE>
In the opinion of management, the quarterly financial data includes all
adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of such information. Quarterly data for the prior period
reflects the last three fiscal quarters for the fiscal year ended August 31,
1998 plus the three months ended December 31, 1998.
F-18
<PAGE>
SCHEDULE II
ESSEX GAS COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended December 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Additions
-------------------
Balance, Charged Charged Net Balance,
December 31, (credited) to other Deductions December 31,
Description 1998 to income accounts from Reserves 1999
----------- ------------ ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Reserves for doubtful
accounts............ $ 745 $ 637 $ -- $ 634 $ 748
====== ====== ===== ===== ======
RESERVES INCLUDED IN
LIABILITIES:
Reserve for
postretirement
benefit cost........ $3,857 $ 965 $ -- $ 20 $4,802
Reserve for self-
insurance........... 100 166 -- -- 266
Reserve for
environmental
expenses............ 377 -- -- 77 300
Reserve for pension.. 1,643 709 84 -- 2,436
------ ------ ----- ----- ------
Total reserves
included in
liabilities....... $5,977 $1,840 $ 84 $ 97 $7,804
====== ====== ===== ===== ======
</TABLE>
F-19
<PAGE>
SCHEDULE II
ESSEX GAS COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the Transition Period Ended December 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Additions
-------------------
Balance, Charged Charged Net Balance,
August 31, (credited) to other Deductions December 31,
Description 1998 to income accounts from Reserves 1998
----------- ---------- ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Reserves for doubtful
accounts............ $ 559 $ 169 $ -- $(17) $ 745
====== ====== ===== ==== ======
RESERVES INCLUDED IN
LIABILITIES:
Reserve for
postretirement
benefit cost........ $3,263 $ 661 $ -- $ 67 $3,857
Reserve for self-
insurance........... 100 -- -- -- 100
Reserve for
environmental
expenses............ 100 -- 277 -- 377
Reserve for pension.. 606 535 502 -- 1,643
------ ------ ----- ---- ------
Total reserves
included in
liabilities....... $4,069 $1,196 $ 779 $ 67 $5,977
====== ====== ===== ==== ======
</TABLE>
F-20
<PAGE>
SCHEDULE II
ESSEX GAS COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the Fiscal Year Ended August 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Additions
-------------------
Balance, Charged Charged Net Balance,
August 31, (credited) to other Deductions August 31,
Description 1997 to income accounts from Reserves 1998
----------- ---------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Reserves for doubtful
accounts............ $ 772 $ 431 $-- $ 644 $ 559
======= ===== ==== ===== =======
RESERVES INCLUDED IN
LIABILITIES:
Reserve for
postretirement
benefit cost........ $ 3,463 $ 575 $-- $ 775 $ 3,263
Reserve for self-
insurance........... 100 -- -- -- 100
Reserve for
environmental
expenses............ -- -- 100 -- 100
Reserve for
pension............. 479 326 -- 199 606
------- ----- ---- ----- -------
Total reserves
included in
liabilities....... $ 4,042 $ 901 $100 $ 974 $ 4,069
======= ===== ==== ===== =======
</TABLE>
F-21
<PAGE>
SCHEDULE II
ESSEX GAS COMPANY
VALUATION AND QUALIFYING ACCOUNTS
For the Fiscal Year Ended August 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
Additions
-------------------
Balance, Charged Charged Net Balance,
August 31, (credited) to other Deductions August 31,
Description 1996 to income accounts from Reserves 1997
----------- ---------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Reserves for doubtful
accounts............ $ 653 $ 614 $ -- $495 $ 772
====== ====== ===== ==== ======
RESERVES INCLUDED IN
LIABILITIES:
Reserve for
postretirement
benefit cost........ $3,642 $ 590 $ -- $769 $3,463
Reserve for self-
insurance........... 100 -- -- -- 100
Reserve for pension.. 2 433 44 -- 479
------ ------ ----- ---- ------
Total reserves
included in
liabilities....... $3,744 $1,023 $ 44 $769 $4,042
====== ====== ===== ==== ======
</TABLE>
F-22
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-1427020
EXHIBIT 3.1
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 164, Section 8C)
We, L. William Law, Jr. ,*President/
----------------------------------------------------------------
and W. Brett Davis ,/*Assistant Clerk,
---------------------------------------------------------
of Essex County Gas Company ,
----------------------------------------------------------------------------
(Exact name of corporation)
located at 7 North Hunt Road, Amesbury, MA 01913 ,
---------------------------------------------------------------------
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted by written consent on September 30, 1998 by a vote of the
directors and:
100 shares of Common Stock of 100 shares outstanding,
- ---- ---------------------------- -----
(type, class & series, if any)
shares of of shares outstanding, and
- ---- ----------------------------- -----
(type, class & series, if any)
shares of shares outstanding,
- ---- ------------------------------- -----
(type, class & series, if any)
**being at least two-thirds of each type, class or series outstanding and
entitled to vote thereon and of each type, class or series of stock whose rights
are adversely affected thereby:
ARTICLE I
The name of the corporation is:
Essex County Gas Company
ARTICLE II
The purpose of the corporation is to engage in the following business
activity(ies):
See attached continuation Sheet 2
*Delete the inapplicable words. **Delete the inapplicable clause.
Note. If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch. Additions to more than one article
may be made on a single sheet so long as each article requiring each addition is
clearly indicated.
<PAGE>
CONTINUATION SHEET 2
To engage in business as a gas utility company in any city or town of the
Commonwealth of Massachusetts; to exercise any and all rights, powers, licenses,
permits, privileges, authorizations and franchises at any time possessed by the
corporation or by any predecessor or constituent corporation; to engage in any
activity in any way connected with, incident to or in furtherance of the
foregoing activities; to engage in any other activity lawful for a corporation
subject to Chapter 164 of the Massachusetts General Laws; to engage in any
business, operation or activity through a wholly or partly owned subsidiary; and
to engage in any business, operation or activity referred to above to the same
extent as might an individual, whether as principal, agent, contractor or
otherwise, and either alone or in conjunction or a joint venture or other
arrangement with any corporation, association, trust, firm or individual.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: 200,000 Common:
- --------------------------------------------------------------------------------
Preferred: 1,200,000 Preferred:
- --------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Continuation Sheet 4
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of Its
directors or stockholders, or of any class of stockholders:
See continuation sheet 6A, 6B and 6C
**If there are no provisions state "None".
Note: The preceding six (6) articles are considered to permanent and may ONLY be
changed by filing appropriate Articles of Amendment.
<PAGE>
CONTINUATION SHEET 4
Preferred Stock
The shares of Preferred Stock may be issued from time to time in one or more
series. The directors shall determine the preferences, voting powers,
qualifications and special or relative rights or privileges, if any, of any such
series before the issuance of any shares of that series. The directors shall
determine the number of shares constituting each series of Preferred Stock and
each series shall have a distinguishing designation.
Common Stock
The holders of the Common Stock shall have the exclusive right to vote for the
election of directors and on all other matters requiring action by the
stockholders or submitted to the stockholders for action, except as may be
determined by the directors pursuant to this Article 4 or as may otherwise be
required by law, and each share of the Common Stock shall entitle the holder
thereof to one vote.
The holders of the Common Stock shall be entitled to receive, to the extent
permitted by law, such dividends as may from time to time be declared by the
directors.
Upon any voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Common Stock shall be entitled to receive the net
assets of the Company, after the Company shall have satisfied or made provision
for its debts and obligations and for payment to the holders of shares of any
class or series having preferential rights to receive distributions of the net
assets of the Company.
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-1427020
EXHIBIT 3.2
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 164, Section 8A)
We, Chester R. Messer, II, *President /
and Catherine L. Nesser, *Clerk /
of Essex County Gas Company
--------------------------------------------------------------------------- ,
(Exact name of corporation)
located at One Beacon Street, Boston, Massachusetts 02108
------------------------------------------------------------------- ,
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
Article I
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on September
30, 1998, by vote of:
100 shares of Common of 100 shares outstanding,
- ----- ------------------------------ -----
(type, class & series, if any)
shares of of shares outstanding, and
- ----- ------------------------------ -----
(type, class & series, if any)
shares of of shares outstanding.
- ----- ------------------------------ -----
(type, class & series, if any)
(1)**being at least a majority of each type, class or series outstanding and
entitled to vote thereon: / or (2)
*Delete the inapplicable words. **Delete the inapplicable clause.
(1) For amendments adopted pursuant to Chapter 156B, Section 70.
(2) For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 X
11 sheets of paper with a left margin of at least 1 inch. Additions to more than
one article may be made on a single sheet so long as each article requiring each
addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------------------------------------ --------------------- ------------------------------ ------------------------
<S> <C> <C> <C> <C>
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------- -------------------------------- --------------------- ------------------------------ ------------------------
Common: Common:
- --------------------- -------------------------------- --------------------- ------------------------------ ------------------------
Preferred: Preferred:
- --------------------- -------------------------------- --------------------- ------------------------------ ------------------------
</TABLE>
<TABLE>
<CAPTION>
Change the total authorized to:
- ------------------------------------------------------ -----------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------------------------------------ --------------------- ------------------------------ ------------------------
<S> <C> <C> <C> <C>
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------- -------------------------------- --------------------- ------------------------------ ------------------------
Common: Common:
- --------------------- -------------------------------- --------------------- ------------------------------ ------------------------
Preferred: Preferred:
- --------------------- -------------------------------- --------------------- ------------------------------ ------------------------
</TABLE>
ARTICLE I
The name of the Corporation is Essex Gas Company.
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: ____________________________ .
SIGNED UNDER THE PENALTIES OF PERJURY, this 30th day of October, 1998
/s/ Chester R. Messer, II *President /
- --------------------------------------------------------
Chester R. Messer, II
/s/ Catherine L. Nesser *Clerk /
- --------------------------------------------------------
Catherine L. Nesser
*Delete the inaplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
================================================
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $100.00 having been paid, said articles are deemed to have been filed
with me this 6th day of November, 1998.
Effective date: _______________________________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Catherine L. Nesser, Clerk
-------------------------------------------------------
Essex Gas Company
-------------------------------------------------------
c/o Boston Gas Company
-------------------------------------------------------
One Beacon Street, Boston, Massachusetts 02108
Telephone: (617) 742-8400
---------------------------------------
<PAGE>
EXHIBIT 3.2.1
CONTINUATION SHEET 6A
BY-LAWS
The directors may make, amend or repeal the by-laws in whole or in part, except
with respect to any provision thereof which by law or the by-laws requires
action by the stockholders.
STOCKHOLDERS MEETINGS
Meetings of the stockholders may be held anywhere in the United States.
RELIANCE UPON BOOKS OF ACCOUNT, ETC.
Each director and officer of the corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account of
the corporation, reports made to the corporation by any of its officers or
employees or by counsel, accountants, appraisers or other experts or consultants
selected with reasonable care by the directors, or upon other records of the
corporation.
CERTAIN TRANSACTIONS
The directors shall have the power to fix from time to time their compensation.
No person shall be disqualified from holding any office by reason of any
interest. In the absence of fraud, any director, officer or stockholder of this
corporation individually, or any individual having any interest in any concern
which is a stockholder of this corporation, or any concern in which any such
directors, officers, stockholders or individuals have any interest, may be a
party to, or may be pecuniarily or otherwise interested in, any contract,
transaction or other act of this corporation, and
(1) such contract, transactions or act shall not be in any way
invalidated or otherwise affected by that fact;
(2) no such director, officer, stockholder or individual shall be liable
to account to this corporation for any profit or benefit realized
through any such contract, transaction or act; and
(3) any such director of this corporation may be counted in determining
the existence of a quorum at any meeting of the directors or of any
committee thereof which shall authorize any such contract,
transaction or act, and may vote to authorize the same;
<PAGE>
CONTINUATION SHEET 6B
provided, however, that any contract, transaction or act in which any director
or officer of this corporation is so interested individually or as a director,
officer, trustee or member of any concern which is not a subsidiary or affiliate
of this corporation, or in which any directors or officers are so interested as
holders, collectively, of a majority of shares of capital stock or other
beneficial interest at the time outstanding in any concern which is not a
subsidiary or affiliate of this corporation, shall be duly authorized or
ratified by a majority of the directors who are not so interested and to whom
the nature of such interest has been disclosed;
the term "interest" including personal interest and interest as a
director, officer, stockholder, shareholder, trustee, member or
beneficiary of any concern;
the term "concern" meaning any corporation, association, trust,
partnership, firm, person or other entity other than this corporation; and
the phrase "subsidiary or affiliate" meaning a concern in which a majority
of the directors, trustees, partners or controlling persons are elected or
appointed by the directors of this corporation, or are constituted of the
directors or officers of this corporation.
To the extent permitted by law, the authorizing or ratifying vote of a majority
in interest of each class of the capital stock of this corporation outstanding
and entitled to vote for directors at any annual meeting or a special meeting
duly called for the purpose (whether such vote is passed before or after
judgment rendered in a suit with respect to such contract, transaction or act)
shall validate any contract, transaction or act of this corporation, or of the
board of directors or any committee thereof, with regard to all stockholders of
this corporation, whether or not of record at the time of such vote, and with
regard to all creditors and other claimants under this corporation;
provided, however, that with respect to the authorization or ratification
of contracts, transactions or acts in which any of the directors, officers
or stockholders of this corporation have an interest, the nature of such
contracts, transactions or acts and the interest of any director, officer
or stockholder therein shall be summarized in the notice of any such
annual or special meeting, or in a statement or letter accompanying such
notice, and shall be fully disclosed at any such meeting;
provided, also, that stockholders so interested may vote at any such
meeting; and
<PAGE>
CONTINUATION SHEET 6C
provided, further, that any failure of the stockholders to authorize or
ratify such contract, transaction or act not be deemed in any way to
invalidate the same or to deprive this corporation, its directors,
officers or employees of its or their right to proceed with such contract,
transaction or act.
No contract, transaction or act shall be avoided by reason of any
provision of this paragraph which would be valid but for those provisions.
PARTNERSHIP
The corporation may be a partner in any business enterprise which the
corporation would have power to conduct by itself.
<PAGE>
ARTICLE VII
effective date of the restated Articles of Organization of the corporation shall
be the date approved and filed by the Secretary of the Commonwealth. If a later
effective date is desired, specify such date which shall not be more than thirty
days after the date of filing. N/A.
ARTICLE VIII
The Information contained in Article VIII is not a permanent part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
7 North Hunt Road, Amesbury, MA 01913
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President:
Treasurer:
Clerk: See attached
Directors:
c. The fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of: December 31
d. The name and business address of the resident agent, if any, of the
corporation is: N/A
e. The date fixed by the by-laws for the annual meeting of stockholders is: the
2nd Thursday in March unless otherwise determined by the Board of Directors.
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
Article II: Purposes
Article III: Authorized Stock
Article IV: Designation for each Class of Stock
Article VI: Other Provisions
SIGNED UNDER THE PENALTIES OF PERJURY, this 30th day of September, 1998.
/s/ L. William Law, Jr. *President
- ----------------------------------------- ,
L. William Law, Jr.
/s/ W. Brett Davis *Assistant Clerk.
- ----------------------------------------- ,
W. Brett Davis
*Delete the inapplicable words. **If there are no amendments, state 'None'.
<PAGE>
EXHIBIT 10.13.1
Tenneco Energy
1010 Milam Street
P0 Box 2511
Houston, Texas 77252 2511
Tel 713 757 2131
[LOGO] TENNECO
December 28, 1995 Energy
ESSEX COUNTY GAS COMPANY
7 North Hunt Street
P.O. Box 500
Amesbury, MA 01913
Attention: Allen R. Neale
Vice President, Supply Planning
Dear Allen:
Re: Amendment No. 1 to
Gas Transportation Agreement
Dated September 1, 1993
Service Package No. 2065
TENNESSEE GAS PIPELINE COMPANY and ESSEX COUNTY GAS COMPANY agree to amend the
Gas Transportation Agreement, effective July 1, 1995, to change the
Transportation Quantity from 1,033 dekatherms to 645 dekatherms.
Except as amended herein, all terms and provisions of the Agreement shall remain
in full force and effect as written.
If the foregoing is in accordance with your understanding of the Agreement,
please so indicate by signing and returning to my attention both originals of
this letter. Upon Tennessee's execution, an original will be forwarded to you
for your files.
If I may be of further assistance, please contact me at (713) 757-3636. Your
prompt cooperation to this matter is greatly appreciated.
Sincerely,
/s/ Paige Metersky
Paige Metersky
Customer Service Representative
PM/egg
Enclosures
cc: K. Haas - w/enc.
M. Sprague - w/enc.
<PAGE>
ESSEX COUNTY GAS COMPANY
December 28, 1995
Page 2
Service Package 2065
Amendment No. 1
Amendment Effective Date: July 1, 1995
ACCEPTED AND AGREED TO this _____
day of ___________, 1995.
TENNESSEE GAS PIPELINE COMPANY
By: __________________________________
Agent and Attorney-in-Fact
ACCEPTED AND AGREED TO this _____
day of ___________, 1995.
ESSEX COUNTY GAS COMPANY
By: __________________________________
Agent and Attorney-in-Fact
<PAGE>
EXHIBIT 10.14
[Tenneco Letterhead]
September 12, 1995
Mr. John Cameron
Essex County Gas Company
7 North Hunt Street
P. 0.. Box 500
Amesbury, MA 01913
Re: CGT Conversion
Effective July 1, 1995
CGT Contract No. 2065
FT-A Contract No. 2066
Dear John:
Pursuant to Essex's election, effective July 1, 1995, 388 Dth/d of capacity was
converted to a FT-A rate schedule (under FT-A contract No. 2066) from the above
referenced CGT contract.
Amendments to both contracts were prepared electronically on Tenn-Speed 2 for
Essex's execution, however, Tenn-Speed 2 rejected the amendment to effectively
reduce the CGT contract, while correctly transmitting the FT-A amendment which
Essex executed on-line. A special validation on CGT contracts is the problem.
This incident has been reported, but as of this date, this validation has not
been changed.
Since the Tenn-Speed 2 system does not recognize a reduction under the CGT
contract, the billing for the CGT contract has been incorrect beginning with
July's invoice. Our Information Services department is working on the problem,
and as soon as they determine when it will be resolved, we will let you know.
To minimize confusion and to verify the correct Dth's for billing and
transportation purposes under these contracts, please note the following:
Previous Amount New
MDQ Converted 07/01/95 Effective 07/01/95
--- ------------------ ------------------
CGT Contract No. 2065 1,033 Dth -388 Dth 645 Dth
FT-A Contract No. 2066 588 Dth +388 Dth 976 Dth
We apologize for the inconvenience this is causing. The CGT amendment will be
made effective July 1, 1995 and you will see a retroactive adjustment on your
invoice.
If you have any questions, please give me a call at (713) 757-3562 or Bill Weber
at (713) 757-3387.
Very truly yours,
/s/ David Trappey
David Trappey
Northern Accounts
<PAGE>
EXHIBIT 10.15.1
Service Package: 2272
GAS STORAGE CONTRACT
(For Use Under Rate Schedule FS)
This Contract is made as of the 1st day of December, 1994, by and between
TENNESSEE GAS PIPELINE COMPANY, a Delaware corporation herein called
"Transporter," and ESSEX COUNTY GAS COMPANY, a MASSACHUSETTS Corporation, herein
called "Shipper." Transporter and Shipper collectively shall be referred to
herein as the "Parties."
ARTICLE I - SCOPE OF AGREEMENT
Following the commencement of service hereunder, in accordance with the terms of
Transporter's Rate Schedule FS, and of this Agreement, Transporter shall receive
for injection for Shipper's account a daily quantity of gas up to Shipper's
Maximum Injection Quantity of 5,476 dekatherms (Dth) and Maximum Storage
Quantity (MSQ) of 821,460 (Dth) (on a cumulative basis) and on demand shall
withdraw from Shipper's storage account and deliver to Shipper a daily quantity
of gas up to Shipper's Maximum Daily Withdrawal Quantity (MDWQ) of 10,466 Dth;
provided however, that when Shipper's storage balance is equal to or less than
30% of the MSQ but greater than 20% of the MSQ, the Maximum Daily Withdrawal
Quantity shall be 9,425 Dth; and provided further, that when Shipper's storage
balance is less than or equal to 20% of the MSQ, the Maximum Daily Withdrawal
Quantity shall be 5,207 Dth. For demand charge purposes, the MDWQ for balances
greater than 30% of the MSQ shall be used.
ARTICLE II - SERVICE POINT
The point or points at which the gas is to be tendered for delivery by
Transporter to Shipper under this Agreement shall be at the storage service
point at Transporter's Compressor Station 313.
ARTICLE III - PRICE
1. Shipper agrees to pay Transporter for all natural gas storage service
furnished to Shipper hereunder, including compensation for system fuel and
losses, at Transporter's legally effective rate or at any effective
superseding rate applicable to the type of service specified herein.
Transporter's present legally effective rate for said service is contained
in Transporter's Tariff as filed with the Federal Energy Regulatory
Commission.
2. Shipper agrees to reimburse Transporter for any filing or similar fees,
which have not been previously paid by Shipper, which Transporter incurs
in rendering service hereunder.
<PAGE>
3. Shipper agrees that Transporter shall have the unilateral right to file
with the appropriate regulatory authority and make changes effective in
(a) the rates and charges applicable to service pursuant to Transporter's
Rate Schedule FS, (b) the rate schedule(s) pursuant to which service
hereunder is rendered, or (c) any provision of the General Terms and
Conditions applicable to those rate schedules. Transporter agrees that
Shipper may protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for such
adjustment of Transporter's existing FERC Gas Tariff as may be found
necessary to assure Transporter just and reasonable rates.
ARTICLE IV - INCORPORATION OF RATE SCHEDULE AND TARIFF PROVISIONS
This agreement shall be subject to the terms of Transporter's Rate Schedule FS,
as filed with the Federal Energy Regulatory Commission, together with the
General Terms and Conditions applicable thereto (including any changes in said
Rate Schedule or General Terms and Conditions as may from time to time be filed
and made effective by Transporter).
ARTICLE V - TERM OF AGREEMENT
This Agreement shall be effective as of the December 1, 1994 and shall remain in
force and effect until November 1, 2000, ("Primary Term") and on a month to
month basis thereafter unless terminated by either Party upon at least thirty
(30) days prior written notice to the other Party; provided, however, that if
the Primary Term is one year or more, then unless Shipper elects upon one year's
prior written notice to Transporter to request a lesser extension term, the
Agreement shall automatically extend upon the expiration of the Primary Term for
a term of five years; and shall automatically extend for successive five year
terms thereafter unless Shipper provides notice described above in advance of
the expiration of a succeeding term; provided further, if the FERC or other
governmental body having jurisdiction over the service rendered pursuant to this
Agreement authorizes abandonment of such service, this Agreement shall terminate
on the abandonment date permitted by the FERC or such other governmental body.
This Agreement will terminate upon notice from Transporter in the event Shipper
fails to pay all of the amount of any bill for service rendered by Transporter
hereunder in accordance with the terms and conditions of Article VI of the
General Terms and Conditions of Transporters Tariff.
ARTICLE VI - NOTICES
Except as otherwise provided in the General Terms and Conditions applicable to
this Agreement, any notice under this Agreement shall be in writing and mailed
to the post office address of the Party intended to receive the same, as
follows:
<PAGE>
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.0. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Services
SHIPPER:
NOTICES: ESSEX COUNTY GAS COMPANY
7 North Hunt Road
P.O. Box 500
Amesbury, MA 01913
Attention: John J. Cameron
BILLING: ESSEX COUNTY GAS COMPANY
7 North Hunt Road
P.O. Box 500
Amesbury, MA 01913
Attention: John J. Cameron
or to such other address as either Party shall designate by formal written
notice to the other.
ARTICLE VII - ASSIGNMENT
Any company which shall succeed by purchase, merger or consolidation to the
properties, substantially as an entirety, of Transporter or of Shipper, as the
case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Agreement. Otherwise no
assignment of the Agreement or any of the rights or obligations thereunder shall
be made by Shipper, except pursuant to the General Terms and Conditions of
Transporter's FERC Gas Tariff.
It is agreed, however, that the restrictions on assignment contained in this
Article shall not in any way prevent either Party to the Agreement from pledging
or mortgaging its rights thereunder as security for its indebtedness.
ARTICLE VIII - MISCELLANEOUS
8.1 The interpretation and performance of this Agreement shall be in
accordance with and controlled by the laws of the State of Texas, without
regard to doctrines governing choice of law.
8.2 If any provision of this Agreement is declared null and void, or voidable,
by a court of competent jurisdiction, then that provision will be
considered severable at either Party's option; and if the severability
option is exercised, the remaining provisions of the Agreement shall
remain in full force and effect.
<PAGE>
8.3 Unless otherwise expressly provided in this Agreement or Transporter's
Tariff, no modification of or supplement to the terms and provisions
stated in this Agreement shall be or become effective, until Shipper has
submitted a request for change through the TENN-SPEED 2 System and Shipper
has been notified through TENN-SPEED 2 of Transporter's agreement to such
change.
8.4 Transporter and Shipper agree that this Agreement, as of the date hereof,
shall supersede and cancel the Gas Storage Contract Number 2272, dated
September 1, 1993 between the Parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their authorized agents.
TENNESSEE GAS PIPELINE COMPANY
BY /s/ Randall G. Schorre
-------------------------------
RANDALL G. SCHORRE
Agent and Attorney-in-Fact
DATE 1/6/95
-----------------------------
ESSEX COUNTY GAS COMPANY
BY /s/ Allen R. Neale
-------------------------------
TITLE Vice-President
----------------------------
DATE 11/29/94
-----------------------------
<PAGE>
GAS STORAGE SERVICE AGREEMENT
EXHIBIT "A"
TO FIRM GAS STORAGE SERVICE AGREEMENT
DATED DECEMBER 1, 1994
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
ESSEX COUNTY GAS COMPANY
SERVICE PACKAGE MSQ: 821,460 Dth
MAXIMUM DAILY INJECTION QUANTITY: 5,476 Dth
MAXIMUM DAILY WITHDRAWAL QUANTITY (MDWQ):
STORAGE BALANCE STORAGE BALANCE MAXIMUM DAILY WITHDRAWAL
FROM DTH TO DTH QUANTITY DTH
246,439 821,460 10,466 Ratchet 0
164,293 246,438 9,425 Ratchet 1
0 164,292 5,207 Ratchet 2
SERVICE POINT: Compressor Station 313
INJECTION METER: 060018 TGP-NORTHERN STORAGE INJECTION
WITHDRAWAL METER: 070018 TGP-NORTHERN STORAGE WITHDRAWAL
<TABLE>
<CAPTION>
STORAGE STORAGE MDIQ
METER METER NAME COUNTY ST ZONE I/W LEG BALANCE FROM BALANCE TO MDWQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
060018 TGP-NORTHERN STORAGE INJECTION POTTER PA 04 I 300 5,476
070018 TGP-NORTHERN STORAGE WITHDRAWAL POTTER PA 04 W 300 246,439 821,460 10,466 Ratchet 0
164,293 246,438 9,425 Ratchet 1
0 164,292 5,207 Ratchet 2
</TABLE>
<PAGE>
Tennessee Gas Pipeline 1010 Milam Street [LOGO]
A Tenneco Company P.O. Box 2511
Houston Texas 77252-2511
(713) 757-2131
EXHIBIT 10.16
July 21, 1995
Mr. Allen R. Neale
Essex County Gas Co
7 North Hunt Road; P.O. Box 500
Amesbury, MA 01913
Re: Amendment No. 1 to Gas Storage
Contract Dated December 1, 1994
Service Package No. 2272
Dear Allen:
TENNESSEE GAS PIPELINE COMPANY (TENNESSEE) AND ESSEX COUNTY GAS CO (ESSEX) agree
to amend the above referenced gas storage contract effective July 1, 1995, to
increase the Maximum Daily Withdrawal Quantity (MDWQ) when Shipper's storage
balance is equal to or less than 30% of the Maximum Storage Quantity (MSQ) and
20% of the MSQ, respectively, as reflected in the attached Exhibit A-1 and as
described below.
The parties agree to amend Article I of the subject gas storage contract as
follows:
Following the commencement of services hereunder, in accordance with the terms
of Transporter's Rate Schedule FS, and of this Agreement, Transporter shall
receive for injection for Shipper's account a daily quantity of gas up to
Shipper's Maximum Injection Quantity of 5,476 dekatherms (Dth) and Maximum
Storage Quantity (MSQ) of 821,460 (Dth) (on a cumulative basis) and on demand
shall withdraw from Shipper's storage account and deliver to Shipper a daily
quantity of gas up to Shipper's Maximum Daily Withdrawal Quantity (MDWQ) of
10,466 Dth; provided however, that when Shipper's storage balance is equal to or
less than 30% of the MSQ but greater than 20% of the MSQ, the Maximum Daily
Withdrawal Quantity shall be 9,540 Dth; and provided further, that when
Shipper's storage balance is less than or equal to 20% of the MSQ, the Maximum
Daily Withdrawal Quantity shall be 5,322 Dth. For demand charge purposes, the
MDWQ for balances greater than 30% of the MSQ shall be used.
Except as amended herein, all terms and provisions of the above referenced gas
storage contract shall remain in full force and effect as written.
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing and returning to my attention both originals of
this letter. Upon Tennessee's execution, an original will be forwarded to you
for your files.
<PAGE>
Tennessee Gas Pipeline
ESSEX COUNTY GAS CO
July 21, 1995
Page 2
Contract Number: 2272
Amendment number: 1
Amendment effective date: July 1, 1995
Should you have any questions, please do not hesitate to contact me at (713)
757-5125.
Sincerely,
/s/ John L. Templet
John L. Templet
Account Manager
ACCEPTED AND AGREED TO
This _____ day of ___________, 1995.
TENNESSEE GAS PIPELINE COMPANY
By: __________________________________
Title: Agent and Attorney-in-Fact
Date: ________________________________
ACCEPTED AND AGREED TO
This _____ day of ___________, 1995.
ESSEX COUNTY GAS CO
By: __________________________________
Title: _______________________________
Date: ________________________________
<PAGE>
GAS STORAGE SERVICE AGREEMENT
EXHIBIT "A-1"
SHOWING REQUESTED CHANGES
AMENDMENT #1 TO GAS STORAGE CONTRACT
DATED December 1, 1994
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
ESSEX COUNTY GAS COMPANY
SERVICE PACKAGE MSQ: 821,460 Dth
MAXIMUM DAILY INJECTION QUANTITY: 5,476 Dth
MAXIMUM DAILY WITHDRAWAL QUANTITY (MDWQ):
STORAGE BALANCE STORAGE BALANCE MAXIMUM DAILY WITHDRAWAL
FROM DTH TO DTH QUANTITY DTH
246,439 821,460 10,466 Ratchet 0
164,293 246,438 9,540 Ratchet 1
0 164,292 5,322 Ratchet 2
SERVICE POINT: Compressor Station 313
INJECTION METER: 060018 TGP-NORTHERN STORAGE INJECTION
WITHDRAWAL METER: 070018 TGP-NORTHERN STORAGE WITHDRAWAL
<TABLE>
<CAPTION>
STORAGE STORAGEMDIQ
METER METER NAME COUNTY ST ZONE I/W LEG BALANCE FROM BALANCE TO MDWQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
060018 TGP-NORTHERN STORAGE INJECTION POTTER PA 04 I 300 5,476
070018 TGP-NORTHERN STORAGE WITHDRAWAL POTTER PA 04 W 300 246,439 821,460 10,466 Ratchet 0
164,293 246,438 9,540 Ratchet 1
0 164,292 5,322 Ratchet 2
</TABLE>
<PAGE>
EXHIBIT 10.17
[Tennessee Gas Pipeline Letterhead]
August 2, 1999
Boston Gas Company
One Beacon St.
Boston, Ma 02108
Attention: Mr. William R. Luthern via facsimile: (617) 742-0041
RE: CONTRACT RESTRUCTURING LETTER AGREEMENT
Dear Bill:
This Contract Restructuring Letter Agreement ("Letter Agreement") is
entered into by and between Tennessee Gas Pipeline Company ("Tennessee"), Boston
Gas Company ("Boston Gas") and Essex County Gas ("Essex") (Boston Gas and Essex
are referred to collectively as "Shippers"). Whereas, Tennessee, Boston Gas and
Essex (being hereinafter referred to as a "Party" and collectively referred to
as the "Parties"), have agreed upon the terms and conditions under which to
extend and amend certain Firm Transportation and Storage Service Agreements
("Firm Agreements") to restructure the firm services received by Shippers from
Tennessee (hereinafter referred to as "Contract Restructuring"). The Parties
wish to proceed with the Contract Restructuring based on the following terms and
principles subject to the execution and regulatory approval of final agreements
effectuating the provisions described herein.
1. Primary Point Amendment
Subject to Shippers' participation in an open season to change primary
points in accordance with Article XXVIII, Section 5.7 of the General Terms
and Conditions of Tennessee's FERC Gas Tariff, Tennessee shall allow
Shippers to amend the Firm Agreements identified below to effectuate a
change in primary receipt points from meters located in Zones 00, 0L, and
01 to meter number 07-0018, Tennessee's Northern Storage Withdrawal
(located in Tennessee's Zone 4) to be effective in accordance with the
quantity limitations detailed in Appendix A attached hereto. The reduction
of primary firm receipt meter TQ by the applicable percentages and
resulting quantities from the current primary receipt points in Zones 00,
0L, and 01 shall be implemented pro-rata across the Firm Agreements
identified below at all affected meters. Thus, the currently existing
Zones 00, 0L, and 01 primary receipt points by Firm Agreement shall each
be reduced individually by the applicable amendment percentage and meter
number 07-0018
<PAGE>
Contract Restructuring Letter Agreement
August 2, 1999
Page 2
shall be increased by the like quantity so that the receipt quantity of
each Firm Agreement is thereby preserved.
As detailed below, Essex' decision regarding renewal of 100% of the
current MDQ on Essex' FT-A Agreement No. 8518 for a period of three years
impacts the allowable amendment percentage available to Shippers. The
table below briefly outlines the allowable amendment percentages by Firm
Agreement number:
K# 10/31/2003
-- ----------
Retain 100% of Firm Agreements 2062 15%
(Identified in Item 2 below)
Inclusive of FT-A Agreement 8518 8518 15%
Retain 100% of Firm Agreements 2062 15%
(Identified in Item 2 below)
Exclusive of FT-A Agreement 8518 8518 N/A
Appendix A also details the associated buyout amounts by Firm Agreement.
The buyout amounts outlined in Appendix A are equivalent to 60% of the
effective upstream (Zones 00/01 to Zone 04) annual demand charge
multiplied by the applicable amendment quantity. The buyout payment will
be due to Tennessee prior to October 31, 1999.
2. Term
Subject to Shipper's amendment of the Firm Agreements as described in Item
1 above, Shippers shall elect to extend 100% of the currently existing
Transportation Quantity ("TQ") or Maximum Storage Quantity ("MSQ"), as
applicable, of each of the following Firm Agreements pursuant to Article
III, Section 10.5 of the General Terms and Conditions of Tennessee's FERC
Gas Tariff for a period of three years, such that the subsequent
expiration date of each of the Firm Agreements is October 31, 2003: Boston
Firm Agreement Nos. 20241, 623, 2062, and 527; Essex Firm Agreement Nos.
577 and 2272. Each extension shall continue the Primary Extended Term as
outlined in Section 10.5. Unless otherwise expressly agreed by Tennessee,
as applicable, Shippers currently existing Maximum Daily Injection
Quantity, Maximum Daily Withdrawal Quantity and ratchet levels shall
remain in effect through the Primary Extended Term in each applicable Firm
Agreement.
<PAGE>
Contract Restructuring Letter Agreement
August 2, 1999
Page 3
At Essex' option, on or before September 30, 1999, Essex will submit a
rollover election pursuant to Article III, Section 10.5 of the General
Terms and Conditions of Tennessee's FERC Gas Tariff to extend up to 100%
of the current MDQ of Essex' FT-A Agreement 8518 for a period of three
years, such that the subsequent expiration date of the FT-A Agreement is
October 31, 2003. This extension shall constitute the Primary Extended
Term as outlined in Section 10.5.
In the event Essex elects by September 30, 1999 to extend 100% of the
current MDQ of the FT-A Agreement, Tennessee agrees to allow Essex to
amend its primary receipt zone in accordance with Tennessee's FERC Gas
Tariff as described in Item 1 above.
3. Rate
Subject to Shipper's amendment of the Firm Agreement as described in Item
1 above and to Shipper's extension of the FT-A Agreements as described in
Item 2 above and for the period commencing November 1, 1999 and extending
through the Primary Extended Term, Shippers shall pay a negotiated rate
for service comprised of the following: (1) Tennessee's Base Reservation
Rate effective as of November 1, 1999; and (2) Tennessee's Base Commodity
Rate effective as of November 1, 1999. In addition, Shippers shall pay all
then-effective surcharges and applicable fuel. (The rates are therefore
fixed, but the surcharges and fuel charges are not).
Subject to Shipper's amendment of the Firm Agreements as described in Item
1 above and to Shipper's extension of the FS-MA Agreements as described in
Item 2 above and for the period commencing November 1, 1999 and extending
through the Primary Extended Term, Shippers shall pay a negotiated rate
for service comprised of the following: Tennessee's Tariff Rate effective
as of November 1, 1999 for deliverability, space, injection, withdrawal
and overrun. In addition, Shippers shall pay all then-effective surcharges
and applicable fuel. (The rates are therefore fixed, but the surcharges
and fuel charges are not).
During the period defined above, this Letter Agreement shall be the sole
agreement between the Parties affecting the rates.
4. National Fuel/Tennessee Northern Storage Receipt Point Amendment
Pursuant to the NPV open season process outlined in Section 5.7 of Article
XXVIII of Tennessee's FERC Gas Tariff on or before August 31, 1999,
Shippers will submit an amendment request effective April 1, 2000 or
November 1, 2000 to amend approximately 5,945 Dth/d of receipt point
capacity on Boston Gas' FT-A Agreement No. 20241 and 807 Dth/d of receipt
point capacity on Essex's FTA Agreement No. 10788 from the National Fuel
Andrews Settlement receipt point (meter number 1-1693) to Tennessee
Northern Storage (meter number 7-0018).
<PAGE>
Contract Restructuring Letter Agreement
August 2, 1999
Page 4
Letter Agreement
This Letter Agreement shall be treated as confidential and the Parties
agree not to disclose any information concerning this Letter Agreement
including, without limitation, the existence of this letter Agreement
without the prior written consent of the other Party except to employees,
consultants, agents and advisors who must be aware of the Letter Agreement
to perform the Party's obligations hereunder if these persons have agreed
to be bound by the parties' confidentiality obligations; provided,
however, either Party may disclose the terms of this letter Agreement if:
one, such disclosure is required in a judicial or administrative process
in connection with any action, suit, proceeding, investigation, audit or
claim or otherwise by applicable law and two, the Party requests
confidential treatment of the disclosure in the judicial or administrative
process.
Notwithstanding anything herein to the contrary, this Letter Agreement and
the execution of any agreements to effectuate the arrangements proposed in
this Letter Agreement shall be in accordance with and subject to the terms
of Tennessee's FERC Gas Tariff and to all valid laws, orders, rules and
regulations of duly constituted authorities having jurisdiction as amended
from time to time and to the receipt and acceptance of all regulatory
authorizations necessary on terms acceptable to Tennessee; provided
further, if the regulatory authorizations are not received in time to
implement all of the terms of this Letter Agreement by November 1, 1999,
Tennessee shall have the right to terminate this Letter Agreement at any
time prior to November 1, 1999.
Shippers and Tennessee agree to cooperate in the preparation and filing of
all necessary applications for authorizations and to support such filings
in their entirety to effectuate the arrangements proposed in this Letter
Agreement.
If this Letter Agreement accurately represents your understanding of the
agreement among Tennessee and Shippers, please have the appropriate party
execute the facsimile copy of this Letter Agreement and return same to the
undersigned. Upon execution by Tennessee, I will fax two (2) fully executed
originals of the Letter Agreement for your retention. If you have any questions,
please do not hesitate to contact me at (713) 420-3627.
Sincerely
/s/ James R. Eckert
James R. Eckert
Account Manager
Marketing Northern Accounts
<PAGE>
Contract Restructuring Letter Agreement
August 2, 1999
Page 5
AGREED TO AND ACCEPTED AGREED TO AND ACCEPTED
THIS 19TH DAY OF AUGUST, 1999, THIS 18TH DAY OF AUGUST, 1999,
TENNESSEE GAS PIPELINE BOSTON GAS COMPANY
COMPANY
By: /s/ Mary M. Melendez By: /s/ William R. Luthern
-------------------------------- ------------------------------
Name: Mary M. Melendez Name: William R. Luthern
-------------------------------- ------------------------------
Its: Agent and Attorney-in-Fact Its: Vice President
-------------------------------- ------------------------------
AGREED TO AND ACCEPTED
THIS 18TH DAY OF AUGUST, 1999,
ESSEX COUNTY GAS
COMPANY
By: /s/ William R. Luthern
--------------------------------
Name: William R. Luthern
--------------------------------
Its: Vice President
--------------------------------
<PAGE>
Contract Restructuring Letter Agreement
Between Tennessee and Shippers
Appendix A
1/ FT-A Agreement No. 2062 FT-A Agreement No. 8518
Amendment -------------------------- -----------------------
Percentage Zone 0 Zone L Zone 1 Zone 0 Zone L Zone 1 Total Dth/d
- ---------- -------------------------- ----------------------- -----------
15% 4,852 9,195 - 780 1,533 48 16,508
10% 2/ 3,301 8,130 - N/A N/A N/A 8,431
2/ FT-A Agreement No. 2062 FT-A Agreement No. 8518
Amendment -------------------------- ----------------------- Total
Percentage Zone 0 Zone L Zone 1 Zone 0 Zone L Zone 1 Buyout
- ---------- -------------------------- ----------------------- -----------
15% 435,553 713,040 - 66,666 118,856 3,534 $1,339,773
10% 2/ 290,436 473,350 - N/A N/A N/A $ 765,795
Footnote
- --------
1/ Shippper's decision and subsequent notification to Tennessee by
September 30, 1999 regarding the renewal of 100% of the current MDQ
on Essex' FT-A Agreement No. 8518 for a Primary Extended Term of at
least 3 years directly impacts the allowable amendment percentage
available to Shippers.
2/ Amendment percentage and corresponding limitation assuming Essex
decides to not renew 100% of the current MDQ on Essex' FT-A Agreement
No. 8518 for a Primary Extended Term of at least 3 years.
<PAGE>
EXHIBIT 10.19
SERVICE PACKAGE NO. 8518
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
THIS AGREEMENT is made and entered into as of the 1st day of November, 1994, by
and between TENNESSEE GAS PIPELINE COMPANY, a Delaware Corporation, hereinafter
referred to as "Transporter" and ESSEX COUNTY GAS CO., a MASSACHUSETTS
Corporation, hereinafter referred to as "Shipper." Transporter and Shipper shall
collectively be referred to herein as the "Parties."
ARTICLE I
DEFINITIONS
1.1 TRANSPORTATION QUANTITY (TQ) - shall mean the maximum daily quantity of
gas which Transporter agrees to receive and transport on a firm basis,
subject to Article II herein, for the account of Shipper hereunder on each
day during each year during the term hereof, which shall be 15,728
dekatherms. Any limitations of the quantities to be received from each
Point of Receipt and/or delivered to each Point of Delivery shall be as
specified on Exhibit "A" attached hereto.
1.2 EQUIVALENT QUANTITY - shall be as defined in Article I of the General
Terms and Conditions of Transporter's FERC Gas Tariff.
ARTICLE II
TRANSPORTATION
Transportation Service - Transporter agrees to accept and receive daily on a
firm basis, at the Point(s) of Receipt from Shipper or for Shipper's account
such quantity of gas as Shipper makes available up to the Transportation
Quantity, and to deliver to or for the account of Shipper to the Point(s) of
Delivery an Equivalent Quantity of gas.
ARTICLE III
POINT(S) OF RECEIPT AND DELIVERY
The Primary Point(s) of Receipt and Delivery shall specified on Exhibit "A"
attached hereto.
ARTICLE IV
All facilities are in place to render the service provided for in this
Agreement.
1
<PAGE>
SERVICE PACKAGE NO. 8518
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE V
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENT
For all gas received, transported and delivered hereunder the Parties agree to
the Quality Specifications and Standards for Measurement as specified in the
General Terms and Conditions of Transporter's FERC Gas Tariff Volume No. 1. To
the extent that no new measurement facilities are installed to provide service
hereunder, measurement operations will continue in the manner in which they have
previously been handled. In the event that such facilities are not operated by
Transporter or a downstream pipeline, then responsibility for operations shall
be deemed to be Shipper's.
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 TRANSPORTATION RATES - Commencing upon the effective date hereof, the
rates, charges, and surcharges to be paid by Shipper to Transporter for
the transportation service provided herein shall be in accordance with
Transporter's Rate Schedule FT-A and the General Terms and Conditions of
Transporter's FERC Gas Tariff.
6.2 INCIDENTAL CHARGES - Shipper agrees to reimburse Transporter for any
filing or similar fees, which have not been previously paid for by
Shipper, which Transporter incurs in rendering service hereunder.
6.3 CHANGES IN RATES AND CHARGES - Shipper agrees that Transporter shall have
the unilateral right to file with the appropriate regulatory authority and
make effective changes in (a) the rates and charges applicable to service
pursuant to Transporter's Rate Schedule FT-A, (b) the rate schedule(s)
pursuant to which service hereunder is rendered, or (c) any provision of
the General Terms and Conditions applicable to those rate schedules.
Transporter agrees that Shipper may protest or contest the aforementioned
filings, or may seek authorization from duly constituted regulatory
authorities for such adjustment of Transporter's existing FERC Gas Tariff
as may be found necessary to assure Transporter just and reasonable rates.
ARTICLE VII
BILLINGS AND PAYMENTS
Transporter shall bill and Shipper shall pay all rates and charges in accordance
with Articles V and VI, respectively, of the General Terms and Conditions of
Transporter's FERC Gas Tariff.
2
<PAGE>
SERVICE PACKAGE NO. 8518
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
This Agreement shall be subject to the effective provisions of Transporter's
Rate Schedule FT-A and to the General Terms and Conditions incorporated
therein, as the same may be changed or superseded from time to time in
accordance with the rules and regulations of the FERC.
ARTICLE IX
REGULATION
9.1 This Agreement shall be subject to all applicable and lawful governmental
statutes, orders, rules and regulations and is contingent upon the receipt
and continuation of all necessary regulatory approvals or authorizations
upon terms acceptable to Transporter. This Agreement shall be void and of
no force and effect if any necessary regulatory approval is not so
obtained or continued. All Parties hereto shall cooperate to obtain or
continue all necessary approvals or authorizations, but no Party shall be
liable to any other Party for failure to obtain or continue such approvals
or authorizations.
9.2 The transportation service described herein shall be provided subject to
Subpart G, Part 284, of the FERC Regulations.
ARTICLE X
RESPONSIBILITY DURING TRANSPORTATION
Except as herein specified, the responsibility for gas during transportation
shall be as stated in the General Terms and Conditions of Transporter's FERC Gas
Tariff Volume No. 1.
ARTICLE XI
WARRANTIES
11.1 In addition to the warranties set forth in Article IX of the General Terms
and Conditions of Transporter's FERC Gas Tariff, Shipper warrants the
following:
(a) Shipper warrants that all upstream and downstream transportation
arrangements are in place, or will be in place as of the requested
effective date of service, and that it has advised the upstream and
downstream transporters of the receipt and delivery points under
this Agreement and any quantity limitations for each point as
specified on Exhibit "A" attached hereto. Shipper agrees to
indemnify and hold Transporter harmless for refusal to transport gas
hereunder in the event any upstream or downstream transporter fails
to
3
<PAGE>
SERVICE PACKAGE NO. 8518
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
receive or deliver gas as contemplated by this Agreement.
(b) Shipper agrees to indemnify and hold Transporter harmless from all
suits, actions, debts, accounts, damages, costs, losses and expenses
(including reasonable attorneys fees) arising from or out of breach
of any warranty by Shipper herein.
11.2 Transporter shall not be obligated to provide or continue service
hereunder in the event of any breach of warranty.
ARTICLE XII
TERM
12.1 This Agreement shall be effective as of the 1st day of November, 1994, and
shall remain in force and effect until the 1st day of November, 2000,
("Primary Term") and on a month to month basis thereafter unless
terminated by either Party upon at least thirty (30) days prior written
notice to the other Party; provided, however, that if the Primary Term is
one year or more, then unless Shipper elects upon one year's prior written
notice to Transporter to request a lesser extension term, the Agreement
shall automatically extend upon the expiration of the Primary Term for a
term of five years and shall automatically extend for successive five year
terms thereafter unless Shipper provides notice described above in advance
of the expiration of a succeeding term; provided further, if the FERC or
other governmental body having jurisdiction over the service rendered
pursuant to this Agreement authorizes abandonment of such service, this
Agreement shall terminate on the abandonment date permitted by the FERC or
such other governmental body.
12.2 Any portions of this Agreement necessary to resolve or cash-out imbalances
under this Agreement as required by the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1, shall survive the other parts
of this Agreement until such time as such balancing has been accomplished;
provided, however, that Transporter notifies Shipper of such imbalance no
later than twelve months after the termination of this Agreement.
12.3 This Agreement will terminate automatically upon written notice from
Transporter in the event Shipper fails to pay all of the amount of any
bill for service rendered by Transporter hereunder in accord with the
terms and conditions of Article VI of the General Terms and Conditions of
Transporter's FERC Tariff.
4
<PAGE>
SERVICE PACKAGE NO. 8518
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE XIII
NOTICE
Except as otherwise provided in the General Terms and Conditions applicable to
this Agreement, any notice under this Agreement shall be in writing and mailed
to the post office address of the Party intended to receive the same, as
follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Marketing
SHIPPER:
NOTICES: ESSEX COUNTY GAS CO
7 NORTH HUNT ROAD
AMESBURY, MA 01913
Attention: ALLEN R. NEALE
BILLING: ESSEX COUNTY GAS CO
P.O. BOX 500
7 NORTH HUNT ROAD
AMESBURY, MA 01913
Attention: JOHN J. CAMERON
or to such other address as either Party shall designate by formal written
notice to the other.
ARTICLE XIV
ASSIGNMENTS
14.1 Either Party may assign or pledge this Agreement and all rights and
obligations hereunder under the provisions of any mortgage, deed of trust,
indenture, or other instrument which it has executed or may execute
hereafter as security for indebtedness. Either Party may, without
relieving itself of its obligation under this Agreement, assign any of its
rights hereunder to a company with which it is affiliated. Otherwise,
Shipper shall not assign this Agreement or any of its rights hereunder,
except in accord with Article III, Section 11 of the General Terms and
Conditions of Transporter's FERC Gas Tariff.
14.2 Any person which shall succeed by purchase, merger, or consolidation to
the properties, substantially as an entirety, of either Party hereto shall
be entitled to the rights and shall be subject to the obligations of its
predecessor in interest under this Agreement.
5
<PAGE>
SERVICE PACKAGE NO. 8518
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE XV
MISCELLANEOUS
15.1 The interpretation and performance of this Agreement shall be in
accordance with and controlled by the laws of the State of Texas, without
regard to the doctrines governing choice of law.
15.2 If any provisions of this Agreement is declared null and void, or
voidable, by a court of competent jurisdiction, then that provision will
be considered severable at either Party's option; and if the severability
option is exercised, the remaining provisions of the Agreement shall
remain in full force and effect.
15.3 Unless otherwise expressly provided in this Agreement or Transporter's Gas
Tariff, no modification of or supplement to the terms and provisions
stated in this agreement shall be or become effective until Shipper has
submitted a request for change through the TENN-SPEED 2 System and Shipper
has been notified through TENN-SPEED 2 of Transporter's agreement to such
change.
15.4 Exhibit "A" attached hereto is incorporated herein by reference and made a
part hereof for all purposes.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the date first hereinabove written.
TENNESSEE GAS PIPELINE COMPANY
BY: /s/ Byron S. Wright
------------------------------
Agent and Attorney-in-Fact
Byron S. Wright
ESSEX COUNTY GAS CO
BY: /s/ Allen R. Neale
------------------------------
TITLE: Vice-President
----------------------------
DATE: 4/18/95
-----------------------------
6
<PAGE>
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
EXHIBIT "A"
AMENDMENT #0 TO GAS TRANSPORTATION AGREEMENT
DATED November 1, 1994
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
ESSEX COUNTY GAS CO
ESSEX COUNTY GAS CO
EFFECTIVE DATE OF AMENDMENT: November 1, 1994
TE SCHEDULE: FT-A
SERVICE PACKAGE: 8518
SERVICE PACKAGE TQ: 15,728 Dth
<TABLE>
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0807 SAMEDAN-BRAZOS BLK A-52 C OFFSHORE-FEDERA OT 00 R 100
1034 SEAGULL OPERATING - GALVESTON I SEAGULL ENERGY E&P INC OFFSHORE-FEDERA OT 00 R 100
1366 TRANSCONTINENTAL - UTOS EXCHAN CAMERON LA 01 R 800
0454 AMERICAN-N KEERAN WELL ROCKLAND PIPELINE COMPANY VICTORIA TX 00 R 100
0688 APACHE-LAKE RACCOURCI DEHYD APACHE CORPORATION LAFOURCHE LA 01 R 500
0734 VALLEY-HACKBERRY DEHYD TRANS VALLEY GAS TRANSMISSION INC CAMERON LA 01 R 800
0864 KOCH-MONROE DEHYD TRANS KOCH GATEWAY PIPELINE COMPANY OUACHITA LA 01 R 100
1119 CHEVRON-S MARSH IS BLK 61 C LOUISIANA LAND AND EXPLORATION OFFSHORE-FEDERA OL 01 R 500
1306 CHANNEL-AGUA DULCE EXCH CHANNEL INDUSTRIES GAS CO NUECES TX 00 R 100
1330 FITE-CHEMARD LAKE DEHYD FITE OIL & GAS INC DE SOTO LA 01 R 100
1353 AMOCO-EUGENE IS BLK 322 A AMOCO PRODUCTION CO OFFSHORE-FEDERA OL 01 R 500
1488 SOUTHERN-TOCA EXCH SOUTHERN NATURAL GAS CO ST BERNARD LA 01 R 500
1972 GREAT - SOUTH MARSH ISLAND 798 GREAT WESTERN OFFSHORE INC OFFSHORE-FEDERA OL 01 R 500
2011 ENERGY - VERMILLION 117 (119G) ENERGY DEVELOPMENT CORP OFFSHORE-FEDERA OL 01 R 800
2020 TRANSCO - FALFURRIAS TRANSPORT JIM WELLS TX 00 R 100
2 FOREST - EUGENE ISLAND BLK 325 FOREST OIL CORP OFFSHORE-FEDERA OL 01 R 500
2 VALERO - MONTE CHRISTO EXCHANG VALERO TRANSMISSION LP HIDALGO TX 00 R 100
2273 ZILKHA - WEST CAMERON 53 OFFSHORE-FEDERA OL 01 R 800
2298 M W - WELCH DEHYDRATION JEFFERSON DAVIS LA 01 R 500
8029 COLUMBIA SHIP SHOAL BLK 247F OFFSHORE-FEDERA OL 01 R 500
Total Receipt TQ:
0122 ESSEX-HAVERHILL SMS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
0138 ESSEX-WENHAM MASS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
0323 ESSEX-ESSEX MASS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME METER-TQ Minimum Pressure
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0807 SAMEDAN-BRAZOS BLK A-52 C 881
1034 SEAGULL OPERATING - GALVESTON I SEAGULL ENERGY E&P INC 353
1366 TRANSCONTINENTAL - UTOS EXCHAN 1,343
0454 AMERICAN-N KEERAN WELL ROCKLAND PIPELINE COMPANY 219
0688 APACHE-LAKE RACCOURCI DEHYD APACHE CORPORATION 569
0734 VALLEY-HACKBERRY DEHYD TRANS VALLEY GAS TRANSMISSION INC 926
0864 KOCH-MONROE DEHYD TRANS KOCH GATEWAY PIPELINE COMPANY 309
1119 CHEVRON-S MARSH IS BLK 61 C LOUISIANA LAND AND EXPLORATION 1,940
1306 CHANNEL-AGUA DULCE EXCH CHANNEL INDUSTRIES GAS CO 2,110
1330 FITE-CHEMARD LAKE DEHYD FITE OIL A GAS INC 90
1353 AMOCO-EUGENE IS BLK 322 A AMOCO PRODUCTION CO 1,592
1488 SOUTHERN-TOCA EXCH SOUTHERN NATURAL GAS CO 1,100
1972 GREAT - SOUTH MARSH ISLAND 798 GREAT WESTERN OFFSHORE INC 306
2011 ENERGY - VERMILLION 117 (119G) ENERGY DEVELOPMENT CORP 108
2020 TRANSCO - FALFURRIAS TRANSPORT 1,235
2 FOREST - EUGENE ISLAND BLK 325 FOREST OIL CORP 347
2 VALERO - MONTE CHRISTO EXCHANG VALERO TRANSMISSION LP 309
2273 ZILKHA - WEST CAMERON 53 926
2298 M W - WELCH DEHYDRATION 669
8029 COLUMBIA SHIP SHOAL BLK 247F 396
15,728
0122 ESSEX-HAVERHILL SMS ESSEX COUNTY GAS CO 17,300 100 LBS
0138 ESSEX-WENHAM MASS ESSEX COUNTY GAS CO 4,100 100 LBS
0323 ESSEX-ESSEX MASS ESSEX COUNTY GAS CO 900 100 LBS
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0578 PENN-NFG-ANDREWS SETTLEMENT SA PENN YORK ENERGY CORPORATION POTTER PA 04 D 300
0018 TGP - NORTHERN STORAGE INJECTI POTTER PA 04 D 300
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME METER-TQ Minimum Pressure
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0578 PENN-NFG-ANDREWS SETTLEMENT SA PENN YORK ENERGY CORPORATION 2,333 2,333
0018 TGP - NORTHERN STORAGE INJECTI 8,354 8,354
Total Delivery TQ: 32,987 32,987
</TABLE>
NUMBER OF RECEIPT POINTS AFFECTED: 20
NUMBER OF DELIVERY POINTS AFFECTED: 5
THE SUM OF TRANSPORTER'S DELIVERIES TO SHIPPER FOR ALL TRANSPORTATION CONTRACTS
CONVERTED FROM FIRM SALES CANNOT ON ANY DAY EXCEED THE FOLLOWING QUANTITIES:
<TABLE>
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0122 0 ESSEX-HAVERHILL SMS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
0138 0 ESSEX-WENHAM MASS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
0 ESSEX-ESSEX MASS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
0 PENN-NFG-ANDREWS SETTLEMENT SA PENN YORK ENERGY CORPORATION POTTER PA 04 D 300
10018 0 TGP - NORTHERN STORAGE INJECTI POTTER PA 04 D 300
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME METER-TQ Minimum Pressure
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0122 0 ESSEX-HAVERHILL SMS ESSEX COUNTY GAS CO 17,300
0138 0 ESSEX-WENHAM MASS ESSEX COUNTY GAS CO 4,100
0 ESSEX-ESSEX MASS ESSEX COUNTY GAS CO 900
0 PENN-NFG-ANDREWS SETTLEMENT SA PENN YORK ENERGY CORPORATION 2,333
10018 0 TGP - NORTHERN STORAGE INJECTI 8,354
</TABLE>
THE SUM OF TRANSPORTER'S DELIVERIES TO SHIPPER FOR ALL TRANSPORTATION CONTRACTS
CONVERTED FROM FIRM SALES CANNOT EXCEED 4,100 DTH/DAY FOR THE FOLLOWING METERS.
<TABLE>
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20138 0 ESSEX-WENHAM MASS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
20323 0 ESSEX-ESSEX 14ASS ESSEX COUNTY GAS CO ESSEX MA 06 D 200
<CAPTION>
METER METER NAME INTERCONNECT PARTY NAME METER-TQ Minimum Pressure
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
20138 0 ESSEX-WENHAM MASS ESSEX COUNTY GAS CO
20323 0 ESSEX-ESSEX 14ASS ESSEX COUNTY GAS CO
</TABLE>
METERS 060018 AND 070018 ARE FOR NOMINATION PURPOSES ONLY AND DO NOT DENOTE
CAPACITY AT THESE SPECIFIC POINTS.
Note: Exhibit "A" is a reflection of the contract and all amendments as of the
amendment effective date.
8
<PAGE>
EXHIBIT 21
Essex Gas Company Subsidiaries
LNG Storage, Inc., a Massachusetts Corporation
Northern Energy Company, Inc., a Massachusetts Corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 83,630
<OTHER-PROPERTY-AND-INVEST> 841
<TOTAL-CURRENT-ASSETS> 11,601
<TOTAL-DEFERRED-CHARGES> 1,124
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 97,196
<COMMON> 27,805
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 7,751
<TOTAL-COMMON-STOCKHOLDERS-EQ> 35,556
0
0
<LONG-TERM-DEBT-NET> 26,959
<SHORT-TERM-NOTES> 5,234
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 600
0
<CAPITAL-LEASE-OBLIGATIONS> 406
<LEASES-CURRENT> 65
<OTHER-ITEMS-CAPITAL-AND-LIAB> 28,376
<TOT-CAPITALIZATION-AND-LIAB> 97,196
<GROSS-OPERATING-REVENUE> 44,096
<INCOME-TAX-EXPENSE> 3,415
<OTHER-OPERATING-EXPENSES> 32,469
<TOTAL-OPERATING-EXPENSES> 35,884
<OPERATING-INCOME-LOSS> 8,212
<OTHER-INCOME-NET> 481
<INCOME-BEFORE-INTEREST-EXPEN> 8,693
<TOTAL-INTEREST-EXPENSE> 2,757
<NET-INCOME> 5,936
0
<EARNINGS-AVAILABLE-FOR-COMM> 5,936
<COMMON-STOCK-DIVIDENDS> 5,563
<TOTAL-INTEREST-ON-BONDS> 2,464
<CASH-FLOW-OPERATIONS> 19,195
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
