<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated March 10, 1998)
$60,000,000
(LOGO) MASSACHUSETTS ELECTRIC
A NEES company
(A Subsidiary of New England Electric System)
Secured Medium-Term Notes (First Mortgage Bonds, Series V)
Due From Nine Months to Thirty Years From Date of Issue
------------------
Massachusetts Electric Company (the Company) intends to offer, from time
to time, not exceeding $60,000,000 aggregate principal amount of its first
mortgage bonds, which shall be designated as First Mortgage Bonds, Series V
(hereinafter referred to as the New Bonds). The New Bonds may be offered as
one or more issues with maturities ranging from nine months to thirty years.
The New Bonds may be subject to redemption at the option of the Company prior
to maturity and will be issued under a supplement to the Company's First
Mortgage Indenture and Deed of Trust dated as of July 1, 1949. Each issue of
New Bonds will bear interest at a fixed rate, which, together with the price,
maturity date, and redemption provisions (if any) will be established at the
time of issuance and set forth in a pricing supplement (Pricing Supplement)
for the issue. Interest will be payable semiannually on May 1 and November 1
and upon maturity or earlier redemption. The New Bonds will be issued only in
the form of fully registered bonds without coupons in denominations of $1,000
or any integral multiple thereof.
Each issue of New Bonds may be issued either in certificated form or in
book-entry form. In the case that an issue of New Bonds is in book-entry form,
the issue of New Bonds will be represented by a global security registered in
the name of a nominee of The Depository Trust Company or another depositary.
Interests in such New Bonds will be shown on, and transfers thereof will be
effected only through, records maintained by the depositary and its
participants. See "Supplemental Description of the New Bonds".
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY PRICING SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
Maximum Proceeds
Price to Agents' to the
Public(1) Commission(1)(2)Company(1)(2)(3)
- ------------------------------------------------------------------------------
Per New Bond.......... 100.000% .750% 99.250%
- ------------------------------------------------------------------------------
Total................. $60,000,000 $450,000 $59,550,000
- ------------------------------------------------------------------------------
(1) The New Bonds will be sold at 100% of their principal amount except as
may be provided in the applicable Pricing Supplement. The price to
public, agents' commissions, and proceeds to the Company of each issue
will be set forth in the applicable Pricing Supplement.
(2) The Company will pay a commission to Credit Suisse First Boston
Corporation or Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, each as agent (collectively, the Agents, and
singularly, an Agent), in the form of a discount up to a maximum of
.750% of the principal amount of any New Bond sold through such Agent,
depending upon the maturity of the New Bond.
(3) This amount is before deducting other expenses payable by the Company,
estimated to be $205,000, including reimbursement of certain of the
Agents' expenses.
------------------
The New Bonds are being offered by the Company from time to time through
the Agents, each of whom has agreed to use its reasonable best efforts to
solicit purchases of such New Bonds. In addition, the New Bonds may be sold to
any Agent, as principal, for resale to investors. The Company also may sell
the New Bonds directly to investors on its own behalf. The New Bonds will not
be listed on any securities exchange, and there can be no assurance that the
New Bonds offered by this Prospectus will be sold or that there will be a
secondary market for any of the New Bonds. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The Company
or the Agent who solicits any offer may reject such offer. See "Plan of
Distribution".
Credit Suisse First Boston Merrill Lynch & Co.
The date of this Prospectus Supplement is March 10, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NEW BONDS OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SHORT COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION OF THE NEW BONDS".
SUPPLEMENTAL DESCRIPTION OF THE NEW BONDS
The information herein concerning the New Bonds should be read in
conjunction with the statements under "Description of the New Bonds" in the
accompanying Prospectus. The following description will apply to the New
Bonds unless otherwise specified in the applicable Pricing Supplement.
General
The New Bonds will be issued under and secured by a First Mortgage
Indenture and Deed of Trust dated as of July 1, 1949, from the Company to
State Street Bank and Trust Company (formerly Second Bank-State Street Trust
Company, successor to The Second National Bank of Boston), Boston,
Massachusetts, as Trustee, and indentures supplemental thereto, including a
Twenty-first Supplemental Indenture with respect to the New Bonds
(collectively, the Indenture). The principal amount of each issue of New
Bonds, the date of maturity (which date will be not less than nine months nor
more than thirty years from the Original Issue Date (as defined below)), the
interest rate, the provisions for call and redemption (including any premium
or premiums payable thereon), and any other terms not inconsistent with the
provisions of the Indenture, will be established from time to time. This
information will be set forth in the applicable Pricing Supplement for each
issue of the New Bonds.
Payment of Interest and Principal
Each issue of the New Bonds will bear interest beginning from the date as
of which such issue is first certified and delivered (the Original Issue
Date), at the rate established for such issue. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Interest will be payable
semiannually on May 1 and November 1 and at maturity or upon earlier
redemption; provided, however, that the first payment of interest on New Bonds
with an Original Issue Date between April 15 and May 1 or between October 15
and November 1 will be due and payable on the next succeeding November 1 or
May 1, respectively.
The record date with respect to any Interest Payment Date shall be the
April 15 or October 15 next preceding such Interest Payment Date (or if such
day is not a business day, as provided in the Indenture, the next preceding
business day) (the Record Date). Interest payable and punctually paid or duly
provided for on any Interest Payment Date will be paid to the person in whose
name a New Bond is registered at the close of business on the Record Date next
preceding such Interest Payment Date; provided, however, that interest payable
at maturity or upon earlier redemption will be payable to the person to whom
principal shall be payable.
Form of Delivery
The New Bonds may be issued either in certificated form or in book-entry
form, as specified in the applicable Pricing Supplement. New Bonds will be
issued only in the form of fully registered bonds in denominations of $1,000
or any integral multiple thereof. If a New Bond is issued in certificated
form, principal and premium, if any, will be payable at the office of the
Trustee. Interest will be payable at the office of the Trustee or, at the
Company's option, by mailing checks to registered owners at their addresses
set forth in the bond register. It is the Company's general practice to
instruct the Trustee to mail interest checks to registered owners. Any of the
certificated New Bonds may be presented at the office of the Trustee for
exchange for an equal aggregate principal amount of New Bonds of the same
issue of other authorized denominations or for transfer, in either case,
S-2
<PAGE>
without payment of any charge other than stamp taxes or other governmental
charges, if any, required to be paid by the Company.
If New Bonds are issued in book-entry form (Book-Entry New Bonds), a
single global security for that issue (the Global Security) in registered form
will be issued to Depository Trust Company (DTC), another depositary, or a
nominee of either (the Depositary), which will maintain the book-entry system.
The Depositary will be specified in the Pricing Supplement. Each
Book-Entry New Bond will have the same maturity, interest rate, and redemption
provisions as the Global Security for that issue.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depositary for such Global Security
(Participants) or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary for such Global Security (with respect to
interests of Participants) and on the records of Participants (with respect to
interests of persons other than Participants). Upon the issuance of a Global
Security, the Depositary will credit the Participants' accounts with the
respective principal amounts of the New Bonds represented by such Global
Security. Such amounts shall be designated by the Agents.
The Depositary will be considered the sole owner or holder of the
Book-Entry New Bonds represented by such Global Security for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in a Global Security will not be entitled to have Book-Entry New Bonds
represented by such Global Security registered in their names nor will they be
entitled to receive physical delivery of Book-Entry New Bonds in certificated
form.
Principal, premium, if any, and interest payments on Book-Entry New Bonds
will be made to the Depositary to whom the Global Security has been issued and
registered. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Security for such
Book-Entry New Bonds or for maintaining, supervising, or reviewing any records
relating to such beneficial ownership interests.
The Company expects that the Depositary, upon receipt of any payment of
principal, premium, or interest, will immediately credit Participants'
accounts with payments in amounts proportionate to their interests in the
principal amount of the Global Security as shown on the records of the
Depositary. The Company also expects that payments by Participants to owners
of beneficial interests in such Global Security held through such Participants
will be governed by standing instructions and customary practices as is now
the case with securities registered in "street name", and will be the
responsibility of such Participants.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue New Bonds in certificated registered form in
exchange for the Global Security representing such Book-Entry New Bonds. In
such instance, a beneficial owner of a Book-Entry New Bond will be entitled to
physical delivery in certificated form of the New Bonds equal in principal
amount to such Book-Entry New Bond and to have such New Bonds registered in
its name.
DTC has advised the Company and the Agents as follows: DTC is a
limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. DTC's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own DTC. Access to DTC's book-entry
S-3
<PAGE>
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Redemption
The redemption provisions for each issue of New Bonds will be set forth in
the Pricing Supplement for that issue.
PLAN OF DISTRIBUTION OF THE NEW BONDS
The New Bonds are being offered by the Company from time to time through
the Agents, each of whom has agreed to use its reasonable best efforts to
solicit purchases of the New Bonds. The Company will pay a commission for
each New Bond sold through an Agent. This commission will vary depending upon
the maturity of the New Bond, to a maximum of .750% of the principal amount of
the New Bond. Although at this time the Company does not intend to sell the
New Bonds directly to purchasers, it reserves the right to do so. The Company
may also sell New Bonds to any of the Agents, acting as principal, at a
discount to be agreed upon at the time of sale, for resale (i) to one or more
investors at varying prices related to prevailing market prices at the time of
such resale, as determined by such Agent, or (ii) to certain securities
dealers at the public offering price set forth on the cover page of the
applicable Pricing Supplement, less the applicable concession expressed as a
percentage of the principal amount of the New Bonds. The Company has agreed
to reimburse the Agents for certain expenses in connection with the offering
of the New Bonds.
The Company will have the sole right to accept offers to purchase New
Bonds and may reject any proposal to purchase New Bonds in whole or in part.
Each Agent will have the right, in its discretion reasonably exercised, to
reject any offer to purchase New Bonds received by it in whole or in part.
Each of the Agents has in the past engaged in transactions with and
performed services for the Company or its affiliates in the ordinary course of
business.
The New Bonds will not have an established trading market when issued.
The New Bonds will not be listed on any securities exchange. Each Agent may
make a market in the New Bonds, but such Agent is not obligated to do so and
may discontinue any market-making at any time without notice. There can be no
assurance of a secondary market for any New Bonds, or that the New Bonds will
be sold.
The Company has agreed to indemnify each Agent, and each Agent has agreed
to indemnify the Company, against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the 1933 Act). The
Company and each Agent have also agreed to contribute to payments which may be
required to be made by the other party in respect of such civil liabilities.
Each Agent may be deemed to be an "underwriter" within the meaning of the 1933
Act with respect to the New Bonds sold through it.
The Agents, may engage in over-allotment, stabilizing transactions or
syndicate covering transactions in accordance with Regulation M under the
Securities Exchange Act of 1934. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the New Bonds in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Agents to reclaim a selling concession
from a syndicate member when the New Bonds originally sold by such syndicate
member are purchased in a syndicate covering transaction to cover syndicate
short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the New Bonds to be
higher than it would otherwise be in the absence of such transactions. These
transactions, if commenced, may be discontinued at any time.
S-4
<PAGE>
PROSPECTUS
(LOGO) Massachusetts Electric
A NEES company
(A Subsidiary of New England Electric System)
$60,000,000
First Mortgage Bonds
BOND INTEREST WILL BE PAYABLE SEMIANNUALLY.
THE BONDS WILL BE ISSUED ONLY AS FULLY REGISTERED BONDS
IN DENOMINATIONS OF $1,000 OR ANY INTEGRAL MULTIPLE THEREOF.
Massachusetts Electric Company (the Company) intends to offer, from time
to time, not exceeding $60 million aggregate principal amount of its First
Mortgage Bonds (the New Bonds). The New Bonds will be issued under a
supplement to the Company's First Mortgage Indenture and Deed of Trust dated
as of July 1, 1949. The New Bonds may be offered as one or more series and/or
issues, and each series and/or issue of New Bonds will bear interest at a
fixed rate, which, together with the series designation, principal amount,
purchase price, maturity, interest payment dates, redemption terms, and any
other specific provisions, will be established at the time of issuance and set
forth in a prospectus supplement (Prospectus Supplement) for that series
and/or issue. Interest on the New Bonds will be payable semiannually, and
upon maturity or earlier redemption. The New Bonds will be secured by a
direct first mortgage lien on substantially all of the Company's properties.
See "Description of the New Bonds".
The Company may sell the New Bonds by publicly inviting bids for the
purchase of the New Bonds, through negotiation with one or more underwriters,
through agents designated from time to time, or directly to other purchasers.
See "Plan of Distribution". The names of the purchasers, underwriters or
agents, the initial public offering price, any applicable discounts or
commissions and the proceeds to the Company with respect to the New Bonds will
be set forth in a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER CONTAINED HEREIN. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
IN ANY STATE IN WHICH SUCH OFFER MAY NOT LAWFULLY BE MADE.
The date of this Prospectus Is March 10, 1998
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AND ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission (SEC). Certain
information, as of particular dates, with respect to the Company's directors
and officers, their remuneration, and their material interest in transactions
with the Company, if any, is disclosed in the Company's Annual Report on Form
10-K.
The following documents, which have heretofore been filed by the Company
with the SEC pursuant to the Securities Exchange Act of 1934, are incorporated
by reference in this prospectus and shall be deemed to be a part hereof:
(1) Annual Report on Form 10-K for the year ended December 31, 1996
which contains financial statements of the Company as of December 31,
1996, and for the three years ended December 31, 1996 and incorporates by
reference or includes the related reports of Coopers & Lybrand L.L.P.,
independent accountants.
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997, and September 30, 1997.
(3) Current Reports on Form 8-K dated July 14, 1997, August 7, 1997,
December 1, 1997, December 18, 1997, December 30, 1997, and January 7,
1998.
All documents filed by the Company with the SEC pursuant to section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 subsequent to the
date of this prospectus and prior to the termination of the offering made by
this prospectus shall be incorporated herein by reference and shall be deemed
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part
hereof.
Such documents and other information can be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the SEC's regional offices
located at Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and at Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained from the SEC at
prescribed rates through its Public Reference Section at 450 Fifth Street,
N.W., Washington, D.C. 20549. The SEC also maintains a site on the World Wide
Web at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the SEC.
The Company has filed with the SEC a Registration Statement on Form S-3
(Reg. No. 333-46431) under the Securities Act with respect to the New Bonds
offered hereby (including all amendments and supplements thereto, the
Registration Statement). This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the SEC. Statements contained
herein concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
SEC. Each such statement is qualified in its entirety by such reference. The
Registration Statement and the exhibits thereto can be inspected and copied at
the public reference facilities and regional offices of the SEC referred to
above.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS.
WRITTEN OR ORAL REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE TREASURER,
MASSACHUSETTS ELECTRIC COMPANY, 25 RESEARCH DRIVE, WESTBOROUGH, MASSACHUSETTS
01582 (TELEPHONE 508-389-2000).
<PAGE>
SUMMARY INFORMATION
The following material is qualified in its entirety by the information and
financial statements appearing elsewhere in this prospectus and in the
documents and information incorporated herein by reference.
Company......................... Massachusetts Electric Company.
Parent.......................... New England Electric System.
Business........................ Retail electric utility.
Power Supply.................... New England Power Company, an affiliated
wholesale generation company.
Service Area.................... Covers approximately 43% of Massachusetts
with Worcester, Massachusetts, the largest
city served.
Customers....................... Approximately 960,000 as of December 31,
1996.
Revenue Distribution............ For the 12 months ended December 31, 1996,
the Company's revenues from the delivery
of electricity were derived 41% from
residential customers, 37% from commercial
customers, 21% from industrial customers,
and 1% from others.
Securities Offered.............. Not exceeding $60,000,000 principal amount
of First Mortgage Bonds, in one or more
series.
Payment of Interest............. Semiannually on dates to be determined.
Maturity........................ To be determined.
Security Interest............... Secured, together with all other
outstanding First Mortgage Bonds, by a
mortgage on substantially all of the
Company's properties.
Replacement Fund................ For all the Company's First Mortgage
Bonds, the Company will make mandatory
annual replacement fund payments equal to
2.4% of the average investment in
depreciable property during the preceding
year, to be satisfied by First Mortgage
Bonds of any issue or series (including
the New Bonds), cash, or additional
property. See "Description of the New
Bonds -- Replacement Fund".
Redemption...................... To be determined for each series and/or
issue of New Bonds. See "Description of
the New Bonds -- Redemption".
<PAGE>
<TABLE>
Massachusetts Electric Company
SELECTED FINANCIAL INFORMATION
(Dollars in Thousands)
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
12 Months Ended
September 30, 1997
(Unaudited) 1996 1995 1994 1993 1992
--------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue................ $1,570,747 $1,538,537$1,505,676$1,482,070$1,468,540$1,412,948
Net Income....................... $ 48,992 $ 37,926$ 29,101$ 34,726$ 23,779$ 34,905
Ratio of Earnings to
Fixed Charges: (1) 3.21 2.82 2.45 3.06 2.29 3.15
Utility Plant, net (end of
period) (2)....................... $1,115,651 $1,088,430$1,041,476$ 995,995$ 945,285$ 906,293
As of September 30, 1997
(Unaudited)
------------------------
AMOUNT RATIO
-------- -------
CAPITAL STRUCTURE:
First Mortgage Bonds (3) ....... $343,457 41.3%
Cumulative Preferred Stock (4).. 50,000 6.0
Common Stock Equity............. 437,679 52.7
-------- ------
Total...................... $831,136 100.0%
======== ======
- ---------------
<FN>
(1) In determining the ratios of earnings to fixed charges, earnings were arrived at by adding to net income
all income taxes and fixed charges. Fixed charges consist of interest and amortization of debt
premiums, discounts and expense on all indebtedness.
(2) Includes construction work in progress.
(3) Includes $10 million of long-term debt due within one year.
(4) On December 19, 1997, NEES purchased, pursuant to a tender offer, $34 million par value of the Company's
Preferred Stock.
The Company had $21,275,000 of short-term indebtedness outstanding as of September 30, 1997.
</FN>
</TABLE>
<PAGE>
THE COMPANY
The Company, incorporated in Massachusetts in 1887, is a retail electric
utility subsidiary of New England Electric System (NEES), a registered holding
company under the Public Utility Holding Company Act of 1935 (the 1935 Act).
NEES owns all of the Company's common stock. The executive offices of the
Company are at 25 Research Drive, Westborough, Massachusetts 01582 (telephone
508-389-2000).
USE OF PROCEEDS
The proceeds from the sale of the New Bonds will be applied to the cost
of, or the reimbursement of the treasury for, or to the payment of short-term
borrowings incurred for (i) capitalizable additions and improvements to the
plant and property of the Company, (ii) other capitalizable expenditures, or
(iii) if market conditions warrant, the redemption of or the retirement of
outstanding First Mortgage Bonds of the Company. The Company has $56 million
of First Mortgage Bonds maturing in 1998-2000.
CONSTRUCTION AND FINANCING
The Company's construction expenditures, excluding allowance for funds
used during construction, were approximately $88 million in 1997, and are
estimated to be approximately $90 million in each of the years 1998 through
2000. These construction expenditures are incurred principally for
improvements and additions to the Company's distribution system. The Company
conducts a continuing review of its construction program. This program and
the above estimates relating thereto are subject to revisions based upon
changes in assumptions concerning, among other things, load growth and rates
of inflation.
The funds needed to pay for the Company's construction expenditures and
maturing debt will be provided from internal sources and from external
financing. The Company estimates that substantially all of its 1998-2000
construction requirements will be provided from internal sources. The balance
of the funds needed will be provided initially from short-term borrowings, to
be repaid from the proceeds of the sale of long-term securities (First
Mortgage Bonds, including the New Bonds, or preferred stock sold to the
public, common stock sold to NEES, or capital contributions received from
NEES).
Under its Articles of Organization and By-Laws, the Company may issue
additional preferred stock, absent a vote of a majority of the holders of
preferred stock, (a) in the case of a refunding issue, or (b) when (i) gross
income, as defined therein, for any twelve consecutive calendar months within
the preceding fifteen months available for interest on indebtedness and
dividends on its preferred stock is at least 1-1/2 times the annual interest
charges and dividend requirements on all interest bearing indebtedness and all
preferred stock including the new issue, (ii) the aggregate outstanding par
value of all series of preferred stock, including the new issue, does not
exceed $120 million, and (iii) the equity of stock junior to the preferred
stock is at least equal to the par value of the preferred stock. Under the
provision that is currently the most restrictive (the aggregate par value
provision), as of September 30, 1997, the Company could issue $70 million of
new preferred stock. On December 19, 1997, NEES purchased, pursuant to a
tender offer, $34 million par value of the Company's preferred stock.
Including the effect of this transaction, the Company could issue $104 million
of new preferred stock.
For information on limitations on the Company's ability to issue First
Mortgage Bonds, see "Description of the New Bonds -- Additional First Mortgage
Bonds" in this prospectus.
<PAGE>
DESCRIPTION OF THE NEW BONDS
GENERAL
The New Bonds will be issued under and secured by a First Mortgage
Indenture and Deed of Trust dated as of July 1, 1949, from the Company to
State Street Bank and Trust Company (formerly Second Bank -- State Street
Trust Company, successor to The Second National Bank of Boston), Boston,
Massachusetts, as Trustee, and indentures supplemental thereto, including a
Twenty-First Supplemental Indenture to State Street Bank and Trust Company, as
Trustee, with respect to the New Bonds (collectively, the Indenture). Each
series and/or issue of the New Bonds will mature in the year shown in its
title, and will bear interest beginning from the date as of which such issue
of New Bonds is first certified and delivered, at the rate per annum shown in
its title. Interest will be payable semiannually. Principal and premium, if
any, will be payable at the office of the Trustee. Interest will be payable
at the office of the Trustee or, at the Company's option, by mailing checks to
registered owners at their addresses set forth in the bond register. It is
the Company's general practice to mail interest checks to registered owners.
The designation and principal amount of the New Bonds, the date of
maturity (which date will not be more than thirty years from the date on which
such New Bonds were first certified and delivered), the interest rate, the
interest payment dates, and the provisions for redemption (including any
premium or premiums payable thereon) will be separately established for each
series and/or issue and set forth in the applicable prospectus supplement.
The New Bonds will be issued only in the form of fully registered bonds
without coupons in denominations of $1,000 or any integral multiple thereof.
Any of the New Bonds may be presented at the office of the Trustee for
exchange for a like aggregate principal amount of New Bonds of the same series
and/or issue of other authorized denominations or for transfer, without
payment in either case of any charge other than stamp taxes or other
governmental charges, if any, required to be paid by the Company.
The brief summary herein of certain provisions of the Indenture is merely
an outline and does not purport to be complete. It uses defined terms and is
qualified in its entirety by reference to the Indenture which is filed as an
exhibit to the Registration Statement.
REDEMPTION
The redemption provisions of each series and/or issue of the New Bonds
will be described in the prospectus supplement relating thereto.
SECURITY AND PRIORITY
The New Bonds, when duly issued, will be secured, together with all other
outstanding First Mortgage Bonds, by a direct first mortgage lien on
substantially all the properties and franchises then owned by the Company,
subject only to liens permitted by the Indenture. Certain types of property
are excepted from the lien of the Indenture, including consumable property,
fuel, automotive and office equipment, merchandise held for sale, supplies,
cash, receivables, and securities. The after-acquired property clause of the
Indenture, by its terms and to the extent permitted by law, applies the lien
of the Indenture to property subsequently acquired by the Company. The
Indenture provides for the release or substitution of property subject to the
lien of the Indenture under certain circumstances provided that specific
conditions are met.
No other securities may be issued ranking prior to or on a parity with the
New Bonds with respect to the security provided by the Indenture, except
additional First Mortgage Bonds issued in the manner summarized below under
<PAGE>
"Additional First Mortgage Bonds" and obligations existing or created in
connection with the acquisition of after-acquired property, which may not
exceed 60% of the cost or fair value, whichever is less, of such property.
REPLACEMENT FUND
There is a replacement fund applicable to all outstanding Bonds of the
Company with an annual requirement, payable August 1, computed on the basis of
2.4% of the average gross plant investment in depreciable electric utility
property at the beginning and end of each month during the preceding calendar
year. The annual replacement fund requirement may be satisfied in cash or
First Mortgage Bonds (including the New Bonds) of any series or by the
allocation of an amount of additional property (as defined in the Indenture).
The aggregate amount of additional property used to satisfy the replacement
fund requirement may be used to offset net retirements in computing the net
amount of additional property.
Any series and/or issue of New Bonds may be redeemed at special redemption
prices to satisfy the annual replacement fund requirement. However, the use
of cash for redemptions of New Bonds may be restricted by any noncallability
or nonrefundability provisions that may be established for that series and/or
issue of New Bonds.
ADDITIONAL FIRST MORTGAGE BONDS
Additional Bonds of any series may be issued as follows:
(A) against 60% of the net amount of additional property (70% after the
Series R and S First Mortgage Bonds are retired);
(B) to refund a like amount of First Mortgage Bonds of any series which
are not then funded; or
(C) against the deposit of cash (to a limit of $10 million held by the
Trustee at any one time).
When the Series R First Mortgage Bonds are retired, there will be no limit
on the amount of cash that may be deposited with the Trustee. Cash so
deposited with the Trustee may be withdrawn in amounts equal to the principal
amount of First Mortgage Bonds otherwise issuable against additional property
or retired First Mortgage Bonds.
In connection with the issue of First Mortgage Bonds against additional
property or cash (other than cash provided for the retirement of First
Mortgage Bonds) the Company must demonstrate that net earnings for any 12
consecutive calendar months within the preceding 15 months are at least twice
the annual interest charges on all First Mortgage Bonds outstanding and
applied for and on all equal or prior lien indebtedness. For the twelve
months ended September 30, 1997, the ratio of net earnings to annual interest
charges on all Bonds outstanding was 4.26. Except under limited
circumstances, no earnings test is required in connection with the refunding
of a like amount of First Mortgage Bonds.
The Company has the option of using a two-step process in connection with
an issuance of additional First Mortgage Bonds against additional property. In
exercising such option, the Company first must demonstrate to the satisfaction
of the Trustee that the requirements for such an issue (described in clause
(A) immediately above) have been satisfied and then, subject to further
demonstrations in accordance with the Indenture, the Company may later request
the issuance of such additional Bonds from time to time.
The New Bonds will be issued against additional property or against First
Mortgage Bonds theretofore retired. As of September 30, 1997, the Company had
approximately $360 million net amount of additional property against which
<PAGE>
$215 million of additional First Mortgage Bonds could be issued. In addition,
the Company has approximately $55 million of retired Bonds against which First
Mortgage Bonds could be issued.
Pursuant to the limitations described above (the Additional Property and
retired bonds requirement being most restrictive), the Company, as of
September 30, 1997, could have issued approximately $270 million of additional
First Mortgage Bonds.
DIVIDEND RESTRICTION
The Twenty-First Supplemental Indenture for the New Bonds does not contain
provisions restricting the payment of dividends on common stock by the
Company. Dividend restrictions dependent upon earned surplus are binding on
the Company so long as certain prior series of the Company's First Mortgage
Bonds are outstanding. The most restrictive provisions currently binding on
the Company are set forth in the supplemental indenture relating to the Series
R First Mortgage Bonds. Under these provisions, which are applicable so long
as any Series R First Mortgage Bonds are outstanding, approximately $20
million of the Company's retained earnings were unavailable for dividends on
common stock at September 30, 1997.
So long as any preferred stock is outstanding, certain restrictions on
payment of dividends on the common stock would come into effect if the junior
stock equity were, or by reason of payment of such dividends became, less
than 25% of total capitalization. However, the junior stock equity at
September 30, 1997, was approximately 53% of total capitalization and,
accordingly, none of the Company's retained earnings at September 30, 1997,
was restricted as to dividends on common stock under the foregoing
restrictions.
PERIODIC INSPECTION OF PROPERTY
Inspection by an independent engineer is required at least once every five
years or more often if requested by the holders of not less than 25% of the
aggregate principal amount of the Bonds at the time outstanding. The Company
is to make good any maintenance deficiency and to record retirements as called
for by the engineer's report.
MODIFICATION OF THE INDENTURE
Any provision of the Indenture may be modified with the consent of the
holders of not less than 66-2/3% of the aggregate principal amount of the
Bonds at the time outstanding (and, if one or more series of Bonds are
differently affected, with the consent of the holders of 66-2/3% of the
aggregate principal amount of the Bonds of each series so affected). No such
modification may (a) affect certain provisions protecting the Trustee without
the Trustee's assent, (b) affect the payment of principal, premium, or
interest on any Bonds, or extend the maturity or time of payment, without the
consent of the Bondholders affected, (c) permit the creation by the Company of
any lien ranking prior to or on a parity with the lien of the Indenture except
as expressly authorized in the Indenture, (d) reduce the above specified
percentages of Bondholders, or (e) permit, in the opinion of the Trustee, a
substantial impairment of the benefits or lien of the Indenture. No such
modification may be made which would conflict with the Trust Indenture Act of
1939, as at the time in effect.
THE TRUSTEE
The Trustee acts as trustee for affiliates' mortgage bonds. The Trustee
also participates in a line of credit of the parent and an affiliate of the
Company. Through a joint venture the Trustee is also dividend paying and
transfer agent for the Company's and affiliates' preferred stock.
<PAGE>
The Trustee may become the owner or pledgee of First Mortgage Bonds with
the same rights as if it were not the Trustee. The holders of a majority in
aggregate principal amount of the First Mortgage Bonds outstanding may require
the Trustee to take certain action, except when the action would be unlawful,
would involve the Trustee in personal liability, or would be unjustifiably
prejudicial to the nonassenting Bondholders, or when the Trustee would not be
sufficiently indemnified for any expenditures in the action.
DEFAULTS
The following are defaults under the Indenture: (a) failure to pay
principal when due; (b) failure for 30 days to pay interest after due;
(c) failure to pay any installment of the sinking, replacement, or other
analogous fund for 60 days after due; (d) the expiration of 60 days following
the bankruptcy of, the reorganization of, or the appointment of a receiver
for, the Company; (e) certain other acts of bankruptcy, insolvency, or
reorganization; and (f) failure to perform other provisions of the Indenture
for 60 days following a demand by the Trustee to the Company to cure such
failure. The Trustee may withhold notice to the Bondholders of any default,
except default in the payment of principal, interest, or any sinking fund or
replacement fund installment, if certain officers and directors of the Trustee
determine in good faith that withholding such notice is in the interest of the
Bondholders.
EVIDENCE TO BE FURNISHED TO TRUSTEE
The Company must periodically furnish to the Trustee evidence as to the
absence of default in connection with certain annual sinking fund and
replacement fund requirements and as to compliance with certain other terms of
the Indenture. Furthermore, prior to issuance of additional First Mortgage
Bonds, release of property, withdrawal of cash, and various other actions
under the Indenture, evidence must be furnished as to the absence of default
and as to compliance with certain terms of the Indenture. Whenever all
indebtedness secured by the Indenture shall have been paid, or adequate
provision therefor made, the Trustee shall, upon request of the Company and
receipt by the Trustee of evidence as to compliance with conditions precedent
under the Indenture, cancel and discharge the lien of the Indenture.
EXPERTS
The balance sheets of the Company as of December 31, 1996 and 1995 and the
related statements of income, retained earnings, and cash flows for each of
the three years in the period ended December 31, 1996, all incorporated by
reference in Massachusetts Electric Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, incorporated by reference in this
prospectus, have been incorporated herein in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The statements of law and legal conclusions made in this prospectus, not
otherwise attributed, have been reviewed by Kirk L. Ramsauer and/or Robert
King Wulff and are made upon their authority as experts.
LEGAL MATTERS
Legal matters in connection with the securities offered hereby will be
passed upon for the Company by Kirk L. Ramsauer, Associate General Counsel,
and/or Robert King Wulff, Corporation Counsel, 25 Research Drive, Westborough,
Massachusetts, and will be passed upon for the underwriter(s), purchaser(s),
or agent(s) by Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New
York, New York. The opinion of Robert King Wulff and/or Kirk L. Ramsauer as
<PAGE>
to legal matters in connection with the securities offered hereby is filed as
an exhibit to the registration statement.
PLAN OF DISTRIBUTION
The Company may sell the New Bonds in any of the following ways:
(i) through competitive bidding; (ii) through negotiation with one or more
underwriters; (iii) through one or more agents designated from time to time;
(iv) directly to other purchasers; or (v) any combination of the above. The
terms of any offering of the New Bonds, including the name or names of any
underwriters or agents with whom the Company has entered into arrangements
with respect to the sale of such New Bonds, the proceeds to the Company, any
underwriting discounts or commissions and other terms constituting
underwriters' compensation, the initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers, will be set
forth in the prospectus supplement relating to such offering. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If an underwriter or underwriters are involved in the sale of any New
Bonds, the Company will execute an underwriting or purchase agreement with
such underwriters at the time of sale, and the names of the underwriters, the
principal amount of New Bonds to be purchased thereby and the other terms and
conditions of the transaction will be set forth in the prospectus supplement
relating to such sale. The New Bonds will be acquired by the underwriters for
their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of the sale. Unless
otherwise indicated in the prospectus supplement, the underwriting or purchase
agreement will provide that the underwriter or underwriters are obligated to
purchase all of an issue of the New Bonds offered in the prospectus supplement
if any are purchased.
If any New Bonds are sold through an agent or agents designated by the
Company from time to time, the prospectus supplement will name any such agent,
set forth any commissions payable by the Company to any such agent and the
obligations of such agent with respect to such New Bonds. Unless otherwise
indicated in the prospectus supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.
In connection with the sale of the New Bonds, any purchasers,
underwriters, or agents may receive compensation from the Company or from
purchasers in the form of concessions or commissions. The underwriters will
be, and any agents and any dealers participating in the distribution of the
New Bonds may be, deemed to be underwriters within the meaning of the
Securities Act of 1933. The agreement between the Company and any purchasers,
underwriters, or agents will contain reciprocal covenants of indemnity between
the Company and the purchasers, underwriters, or agents against certain
liabilities, including liabilities under the Securities Act of 1933.
<PAGE>
No dealer, salesperson or any other person
has been authorized to give any information
or to make any representations, other than
those contained in this Prospectus
Supplement and the Prospectus (including (LOGO) Massachusetts Electric
any accompanying Pricing Supplement), in A NEES company
connection with the offer contained herein,
and, if given or made, such other
information or representations must not be (A Subsidiary of New England
relied upon as having been authorized by Electric System)
the Company or by any of the Agents.
Neither the delivery of this Prospectus
Supplement or the Prospectus (including
any accompanying Pricing Supplement) nor
any sale made hereunder shall, under any
circumstances, create any implication that
there has been no change in the affairs of
the Company since the date as of which
information is given in this Prospectus
Supplement and the Prospectus (including $60,000,000
any accompanying Pricing Supplement).
This Prospectus Supplement and the Secured Medium-Term Notes
Prospectus (including any accompanying (First Mortgage Bonds, Series V)
Pricing Supplement) do not constitute an
offer or solicitation by anyone in any
jurisdiction in which the person making
such offer or solicitation is not
qualified to do so or to anyone to whom it
is unlawful to make such offer or
solicitation.
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TABLE OF CONTENTS
Page
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Prospectus Supplement
Supplemental Description of the
New Bonds........................... S-2 -----------------------
Plan of Distribution of the PROSPECTUS
New Bonds........................... S-4 SUPPLEMENT
-----------------------
Prospectus
Incorporation of Certain Documents
by Reference and Additional
Information......................... 2
Summary Information................... 3
Selected Financial Information........ 4
The Company........................... 5 Credit Suisse First Boston
Use of Proceeds....................... 5
Construction and Financing............ 5 Merrill Lynch & Co.
Description of the New Bonds.......... 6
Experts............................... 9
Legal Matters......................... 9
Plan of Distribution.................. 10
