FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June, 1998
MAINE PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Maine 1-3429 01-0113635
(State, or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
209 State Street, Presque Isle, Maine 04769
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 207-768-5811
Current Report, Form 8-K for Date of Report
Maine Public Service Company June, 1998
Item 5(a) Other Material Events - Restructuring of Purchase Power
Agreement with Wheelabrator-Sherman Energy Company.
Reference is made to the Company's Form 10-K for December 31,
1997 and Form 10-Q for the quarter ended March 31, 1998, where
the Company's efforts to restructure the Purchase Power
Agreement with Wheelabrator-Sherman are discussed.
The Company has a Power Purchase Agreement (PPA) with the
Wheelabrator-Sherman Energy Company (W-S) under which the
Company is obligated to purchase the entire output (up to
126,582 MWH) of a 17.6 MW biomass plant owned by W-S. The
current term of the PPA expires on December 31, 2000, but was
renewable by either party for an additional fifteen years at
prices to be determined by mutual agreement or, absent mutual
agreement, by the Maine Public Utilities Commission (MPUC).
On October 15, 1997, the Company and W-S agreed to amend the
PPA. Under the terms of this amendment, W-S agreed to
reductions in the price of the purchased power of
approximately $10 million over the PPA's current term in
exchange for a buydown payment of $8.7 million. The Company
and W-S have also agreed to renew the PPA for an additional
six years at agreed-upon prices. The Company believes the
amended PPA will help relieve the financial pressure caused by
the recent closure of Maine Yankee as well as the need for
substantial increases in its retail rates, and is therefore in
the best interests of the Company, its customers and
shareholders.
In order to finance the upfront payment to W-S, the Company
concluded that it must obtain funds from the Finance Authority
of Maine (FAME); absent FAME financing the Company did not
believe it could obtain the funds on terms sufficiently
economic to justify the arrangement with W-S. Before the
Company obtained the required financing, the MPUC had to
approve the amended PPA. In Docket No. 97-727, the Company
requested approval of the amended PPA and also asked the MPUC
for a determination that any so-called stranded costs created
by the amended PPA will be recoverable from customers to the
extent permitted by Maine law. On December 22, 1997, the MPUC
approved the amended PPA and determined that the upfront
payment created by the amended PPA will be treated as stranded
cost. On February 19, 1998 and May 21, 1998, the FAME Board
of Directors voted to provide the Company with the financing
necessary to support the amended PPA.
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Current Report, Form 8-K for Date of Report
Maine Public Service Company June, 1998
Item 5(a) Other Material Events - Restructuring of Purchase Power
Agreement with Wheelabrator-Sherman Energy Company - Continued
On May 29, 1998, FAME issued $11,540,000 of its Taxable
Electric Rate Stabilization Revenue Notes, Series 1998A (Maine
Public Service Company) (the Notes) on behalf of the Company.
The Notes were issued pursuant to, and are secured under, a
Trust Indenture by and between FAME and Peoples Heritage Bank,
Portland, Maine, as Trustee (the Trustee), for the purpose of:
(i) financing the buydown payment to W-S of approximately $8.7
million, as required under the amended purchase power
agreement described above; (ii) for the Capital Reserve Fund,
as required by FAME under their Electric Rate Stabilization
Program; and (iii) for issuance costs. The Notes are limited
obligations of FAME, payable solely out of the trust estate
available under the Indenture, principally the Loan Note and
Loan Agreement with the Company and the Capital Reserve Fund
held by the Trustee. The Company has issued $4 million of its
First Mortgage Bonds and $7.54 million of its Second Mortgage
Bonds as collateral for its performance under the Loan Note
issued pursuant to the Loan Agreement.
The Notes will bear interest at a Floating Interest Rate,
initially at 5.7% per annum, and will be adjusted weekly. The
Company can convert to a Fixed Interest Rate. As long as the
Notes bear interest at the Floating Interest Rate, interest is
payable monthly and, upon conversion to a Fixed Interest Rate,
interest is payable semiannually. If the Notes cannot be
remarketed, the Company's obligation to purchase Notes, while
bearing interest at a Floating Interest Rate, will be funded
by Fleet National Bank pursuant to a Standby Note Purchase
Agreement. Payment of the regularly scheduled principal
(including by mandatory sinking fund redemption) and interest
on the Notes when due will be insured by a municipal bond
insurance policy issued, concurrently with the Notes, by AMBAC
Assurance Corporation. Moody's Investor Service has assigned
its municipal bond ratings of "Aaa/VMIG-1" to the Notes.
On May 29, 1998, with the completion of the financing, the
Company made the buydown payment of $8.7 million to W-S,
thereby completing all of the conditions required under the
amended purchase power agreement. On June 1, 1998, the
Company purchased an interest rate cap of 7% to limit its
interest rate exposure, while using the Floating Interest Rate
option.
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Current Report, Form 8-K for Date of Report
Maine Public Service Company June, 1998
Item 5(a) Other Material Events - Restructuring of Purchase Power
Agreement with Wheelabrator-Sherman Energy Company - Continued
MAINE PUBLIC SERVICE COMPANY
Registrant
Dated: June 3, 1998 /s/ Larry E. LaPlante
Larry E. LaPlante, Vice President,
Finance, Administration & Treasurer
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