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: July, 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 July, 1998
Item 5(a) Other Material Events - Agreement on Sale of Generating
Assets.
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 divest of its generating assets in
accordance with Maine's restructuring legislation are
discussed.
On July 7, 1998, the Company announced that it has agreed to
sell its electric generating assets to WPS Power Development,
Inc. (WPS-PDI) located in Green Bay, Wisconsin, a wholly-owned
subsidiary of WPS Resources Corporation. Both parties signed
a purchase and sale agreement providing a sales price of $37.4
million for the Company's 91.8 megawatts of generating
capacity, which is 3.2 times higher than the net book value of
the assets. If the Maine Public Utilities Commission (MPUC)
approves the sale by the first quarter of 1999, the Company
would agree not to increase customer rates by 3.1% on February
1, 1999 now scheduled under its Rate Stability Plan (see the
Company's Form 10-Q for the quarter ended March 31, 1998). In
addition, the net sale proceeds will reduce stranded
investment by approximately $21.3 million, which will decrease
future customer rates. In addition to the MPUC's approval,
approval must also be obtained from the New Brunswick Lt.
Governor in Council before the sale can be consummated.
The proposed sale is the result of a law passed last year by
the Maine Legislature that was designed to create competition
in the electric industry beginning March 1, 2000. This law
requires all Maine utilities to sell their U.S. generating
plants and the output from foreign plants. Bangor Hydro-
Electric Company, Maine's second largest electric utility, has
solicited invitations for bids on their generating assets.
Central Maine Power, the State's largest electric utility,
announced in January, 1998, that it has agreed to sell their
generating assets to the Florida-based FPL Group.
In the MPUC Order approving the Company's divestiture plan,
the Commission noted a number of concerns that it would
address when the final sale is brought for approval. These
concerns include whether the sale of the assets of the
Canadian subsidiary should be delayed pending the development
of a retail market for electricity in Canada or until the MPUC
completes its final study on the efficiency of competitive
markets in Northern Maine and whether any sale would create,
or exacerbate, a concentration of generation market power to
the detriment of the Company's customers. The Company
believes that an adequate market exists both in the local
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Current Report, Form 8-K for Date of Report
Maine Public Service Company July, 1998
Item 5(a) Other Material Events - Agreement on Sale of Generating
Assets - Continued
service area and the much larger Maritime and Quebec region
and intends to present to the MPUC its arguments supporting
this belief.
In August, 1997, the Company solicited bids for its non-
nuclear generation assets and power entitlements, including
its Canadian subsidiary. Several bids were reviewed from both
Canada and the United States buyers before selecting the
successful bidder. The Company has been negotiating with WPS-
PDI since March to work out the details of the proposed asset
sale agreement.
Facilities being sold total 91.8 megawatts of generating
capacity and include: 34.5 MW of hydroelectric and diesel
generating units at the Canadian subsidiary, Maine & New
Brunswick Electrical Power Co., Ltd., (Tinker Plant), as well
as its transmission system and interconnection with NB Power;
31 MW of hydroelectric, oil-fired steam, and diesel generating
facilities at the Caribou Generating Station; 1.4 MW at Squa
Pan Hydroelectric generating station and storage dam; 4.2 MW
at Flo's Inn diesel generating station; a dismantled diesel
unit at Houlton; the Millinocket Lake Storage Dam; and the
Company's joint ownership share equivalent to 20.7 MW of Wyman
Unit No. 4, an oil-fired plant in Yarmouth, Maine.
The Company's 5% ownership share in Maine Yankee was not part
of the sale because the plant was permanently shut down last
August and is now undergoing decommissioning. The rights to
the 18.1 MW output being purchased under a power purchase
agreement with Wheelabrator-Sherman were offered in the
initial request for proposal, but were not included in the
final sale. When retail access begins, the Company will
auction the Wheelabrator-Sherman entitlement to a third party
until 2006, when the agreement with W-S expires. The Company
has agreed to buy back electricity from WPS-PDI at a set price
to cover the period between the closing date and February 29,
2000, when retail access begins.
Nineteen employees who operate and maintain the plants located
in Maine and in New Brunswick will be affected by the sale.
It is expected that some employees will be hired by WPS-PDI,
while other positions will be eliminated. Those individuals
not offered employment by the buyer will be eligible for an
enhanced severance and extended benefits transition package
consistent with Maine's restructuring statute.
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Current Report, Form 8-K for Date of Report
Maine Public Service Company July, 1998
Item 5(a) Other Material Events - Agreement on Sale of Generating
Assets - Continued
The Company cannot predict whether the sale will be approved
by the MPUC, after considering the concerns expressed by the
MPUC or, if approved, under what terms.
MAINE PUBLIC SERVICE COMPANY
Registrant
Dated: July 7, 1998 /s/ Kurt A. Tornquist
Kurt A. Tornquist, Controller -
Asst. Secretary-Treasurer
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