<PAGE>
File No. 33-61131
424B3
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 18, 1995)
$50,000,000
(LOGO) THE NARRAGANSETT ELECTRIC COMPANY
(A Subsidiary of New England Electric System)
Secured Medium-Term Notes (First Mortgage Bonds, Series W)
Due from Nine Months to Thirty Years from Date of Issue
--------------------
The Narragansett Electric Company (the Company) may offer, from time to
time, up to $50,000,000 aggregate principal amount of its first mortgage
bonds, which shall be designated as First Mortgage Bonds, Series W
(hereinafter referred to as the New Bonds). The New Bonds may be offered in
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 September 1, 1944.
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 June 1 and December 1 and upon maturity or earlier redemption.
The New Bonds will be issued only as fully registered bonds 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. Interest 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%
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Total................. $50,000,000 $375,000 $49,625,000
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(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 CS First Boston Corporation or
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 $186,616, 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."
CS First Boston Merrill Lynch & Co.
--------------------
The date of this Prospectus Supplement is August 18, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NEW BONDS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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 September 1, 1944, from the Company to
Rhode Island Hospital Trust Company, Providence, Rhode Island, as Trustee, and
indentures supplemental thereto, including a Twenty-Second 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 June 1 and December 1 (each an Interest Payment Date), and at
maturity or upon earlier redemption; provided, however, that the first payment
of interest on New Bonds with an Original Issue Date between May 15 and June 1
or between November 15 and December 1 will be due and payable on the next
succeeding December 1 or June 1, respectively.
The record date with respect to any Interest Payment Date shall be the May
15 or November 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 fully registered form 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
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equal aggregate principal amount of New Bonds of the same issue of other
authorized denominations or for transfer, in either case, 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 The 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
S-3
<PAGE>
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
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, if any, for each issue of New Bonds will be set
forth in a certificate as to form and 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.
S-4
<PAGE>
PROSPECTUS
(LOGO)
THE NARRAGANSETT ELECTRIC COMPANY
(A SUBSIDIARY OF NEW ENGLAND ELECTRIC SYSTEM)
$50,000,000
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.
The Narragansett Electric Company (the Company) intends to offer, from
time to time, not exceeding $50 million aggregate principal amount of its
First Mortgage Bonds (New Bonds). The New Bonds will be issued under one or
more supplements to the Company's First Mortgage Indenture and Deed of Trust
dated as of September 1, 1944. 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, and 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) with respect to each series and/or issue of New Bonds. 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 one or more agents, to one or more agents as principal for resale to
investors, or through negotiation directly with investors. 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 August 18, 1995.
<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, 1994 which
incorporates by reference the financial statements of the Company as
of December 31, 1994 and 1993, and for the three years ended
December 31, 1994 and incorporates by reference the related report of
Coopers & Lybrand L.L.P., independent accountants.
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995
and June 30, 1995.
(3) Current Reports on Form 8-K dated March 6, 1995 and July 5, 1995.
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 Room in the office of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. or at SEC Regional Offices at 7 World Trade Center, New York,
New York, and 500 West Madison Street, Chicago, Illinois. Copies of such
material can be obtained from the Public Reference Section of the SEC,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
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 SECRETARY,
THE NARRAGANSETT ELECTRIC COMPANY, 280 MELROSE STREET, PROVIDENCE, RHODE
ISLAND 02907 (TELEPHONE 401-784-7000).
<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.
THE COMPANY
Company. . . . . . . . . . . . . .The Narragansett Electric Company.
Parent . . . . . . . . . . . . . .New England Electric System.
Business . . . . . . . . . . . . .Retail electric utility.
Power Supply . . . . . . . . . . .New England Power Company (NEP), an
affiliated wholesale generation company.
Service Area . . . . . . . . . . .Covers approximately 80% of Rhode
Island with Providence, Rhode Island, the
largest city served.
Customers. . . . . . . . . . . . .Approximately 324,000 as of December 31,
1994.
Revenue Distribution . . . . . . .For the 12 months ended December 31, 1994,
the Company's revenues from the sale of
electricity were derived 43% from
residential customers, 40% from commercial
customers, 15% from industrial customers,
and 2% from others.
THE OFFERING
Securities Offered . . . . . . . .Not exceeding $50,000,000 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.
Improvement Fund . . . . . . . . .For all the Company's First Mortgage Bonds,
including the New Bonds, the Company will
make mandatory annual improvement fund
payments equal to 2-1/2% 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 - Improvement Fund".
Redemption . . . . . . . . . . . .To be determined for each series and/or
issue of New Bonds. See "Description of the
New Bonds - Redemption".
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<CAPTION>
12 Months Ended Years Ended December 31,
June 30, 1995 -----------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990
--------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating Revenue............ $493,854 $481,669 $483,028 $468,252 $457,510 $412,273
Net Income................... $ 20,112 $ 14,589 $ 14,274 $ 21,052 $ 16,820 $ 17,599
Ratio of Earnings to Fixed
Charges (1)................ 2.45 2.10 2.23 3.04 2.55 2.79
Utility Plant, net (end of
period) (2)................... $516,845 $491,915 $421,577 $375,210 $358,348 $340,046
<CAPTION>
AS OF JUNE 30, 1995
(Unaudited)
----------------------
ACTUAL RATIO
-------- -------
<S> <C> <C>
CAPITAL STRUCTURE:
Long-Term Debt-First Mortgage
Bonds ............................. $203,827 44.9%
Cumulative Preferred Stock........... 36,500 8.0
Common Equity........................ 214,139 47.1
-------- -----
Total........................... $454,466 100.0%
======== ======
---------------
<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.
The Company had $27,850,000 of short-term indebtedness outstanding as of June 30, 1995.
</FN>
</TABLE>
<PAGE>
THE COMPANY
The Company, incorporated by Special Act of the Rhode Island General
Assembly, 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 280 Melrose Street,
Providence, Rhode Island 02907 (telephone 401-784-7000).
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) the retirement or refunding of certain series of
outstanding First Mortgage Bonds, (ii) capitalizable additions and
improvements to the plant and property of the Company, or (iii) other
capitalizable expenditures.
CONSTRUCTION AND FINANCING
The Company's major construction project is the repowering of the
Manchester Street Station, a 140 megawatt electric generating station in
Providence, Rhode Island. Repowering will more than triple the power
generation capacity of Manchester Street Station and substantially increase
the plant's thermal efficiency. The repowering of the Manchester Street
generating station, scheduled to commence commercial operation in late 1995,
is estimated to cost approximately $510 million, excluding transmission
facilities. To facilitate financing this project, the Company sold a 90
percent interest in the existing station to NEP effective July 1, 1992.
The Company's construction expenditures, excluding allowance for funds
used during construction (AFDC) but including the Repowering Project, totaled
$93 million in 1994, and are estimated to be $55 million in 1995, $50 million
in 1996, and $40 million in 1997. These construction expenditures were and
will be incurred principally for improvements and additions to the Company's
distribution and transmission 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.
Approximately 40% and 60% of the funds needed to pay for construction
expenditures during 1995 and 1996, respectively, are expected to be provided
from internal sources and the balance from additional financing. It is
expected that any such additional financing will be provided initially from
short-term borrowings to be repaid either from the proceeds of the sale of
additional First Mortgage Bonds or from capital contributions made by NEES.
The Company's preferred stock preference provisions (which are an exhibit
to the Registration Statement and which reference hereto shall include terms
as defined therein) limit the amount of short-term unsecured indebtedness
which may be outstanding to 10% of the sum of secured indebtedness, capital,
premiums, and retained earnings, unless a higher amount is authorized by vote
of the preferred stockholders. The preferred stockholders have voted to
increase this limit to 20% for debt issued through September 30, 1998. At
June 30, 1995, this limit was approximately $90 million.
Without a vote of a majority (and 75% of the total number of shares
present or represented at the meeting, with respect to (b)(i) and (b)(iv), if
any of the 4-1/2% Series Cumulative Preferred Stock is outstanding) of the
outstanding Cumulative Preferred Stock and parity stock, voting together, the
Company shall not, pursuant to the preferred stock preference provisions:
(a) issue Cumulative Preferred Stock or any other stock ranking on a
parity therewith as to dividends or assets if after such issue the
aggregate combined outstanding par value of all series thereof would
exceed $60 million; or
<PAGE>
(b) issue Cumulative Preferred Stock or any stock of prior or equal
rank as to dividends or assets unless (i) so long as any of the 4-1/2%
Series Cumulative Preferred Stock is outstanding, the par value of any
stock ranking junior to the Cumulative Preferred Stock as to dividends and
assets to be outstanding immediately after such issue shall at least equal
the greater of the aggregate par value of all preferred stock and of any
other such prior or parity stock or the aggregate amount payable upon
liquidation on all preferred stock and of any other such prior or parity
stock; (ii) immediately after such issue the Junior Stock Equity shall at
least equal the aggregate amount payable on liquidation or dissolution of
the Company to holders of Cumulative Preferred Stock and any other parity
stock; provided, however, that if for this purpose it shall have been
necessary to take into consideration any earned surplus of the Company,
the Company shall not (until such Junior Stock Equity exclusive of such
portion of earned surplus shall equal such aggregate) pay any dividends or
make any distribution on shares of its stock ranking junior to the
Preferred Stock as to dividends or assets which would result in reducing
such Junior Stock Equity to an amount less than such aggregate amount
payable on involuntary liquidation, dissolution or winding up of the
affairs of the Company; (iii) the gross income of the Company available
for interest on its indebtedness and for dividends on its Preferred Stock
and any other such prior or parity stock during a period of twelve
consecutive months in the preceding fifteen-month period is at least 1-1/2
times the annual interest charges and dividend requirements on all
interest bearing indebtedness and all Cumulative Preferred Stock and such
prior or parity stock to be outstanding immediately after the proposed
issue; and (iv) so long as any of the 4-1/2% Series Cumulative Preferred
Stock is outstanding, the net earnings of the Company available for
dividends are at least 2-1/2 times the annual dividend requirements of all
Cumulative Preferred Stock and any parity stock to be outstanding
immediately after the proposed issue. Under the most restrictive of these
issuance tests (the aggregate number of shares test), the Company could
issue approximately $24 million of new preferred stock at June 30, 1995.
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.
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 September 1, 1944, from the Company to
Rhode Island Hospital Trust Company, Providence, Rhode Island, as Trustee, and
indentures supplemental thereto, including one or more supplemental indentures
relating to the New Bonds to Rhode Island Hospital Trust National Bank
(formerly Rhode Island Hospital 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.
<PAGE>
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 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, but not limited to,
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
"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.
IMPROVEMENT FUND
There is an improvement fund applicable to all outstanding bonds of the
Company with an annual requirement, payable July 1, computed on the basis of
2-1/2% of the average investment in depreciable property during the preceding
calendar year. The annual improvement 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 improvement
fund requirement may be used to offset net retirements in computing the net
amount of additional property. For 1994, the improvement fund requirement was
approximately $13 million.
Any series and/or issue of New Bonds may be redeemed at special redemption
prices to satisfy the annual improvement 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.
<PAGE>
ADDITIONAL FIRST MORTGAGE BONDS
Additional First Mortgage Bonds of any series may be issued as follows:
(A) against 60% of the net amount of additional property (70% after the
Series S, T, and U First Mortgage Bonds are retired);
(B) to refund a like amount of First Mortgage Bonds of any series
theretofore retired or for which retirement the Company has made
provision; and
(C) against the deposit of cash (to a limit of $10 million or 25% of the
principal amount of all First Mortgage Bonds outstanding immediately
after such issue, whichever is less, held by 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 twelve
consecutive calendar months within the preceding fifteen 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 June 30, 1995, the ratio of net earnings to annual interest
charges on all Bonds outstanding was 2.68. Except under limited
circumstances, no earnings test is required in connection with the refunding
of a like amount of First Mortgage Bonds. The evidence of additional property
and net earnings may be demonstrated at a date prior to the actual issuance of
the First Mortgage Bonds.
The New Bonds will be issued against additional property or against First
Mortgage Bonds, which could include retired bonds or Unissued Bonds which have
been previously certified against additional property. At June 30, 1995, the
Company had approximately $290 million net amount of additional property
against which approximately $175 million of First Mortgage Bonds could be
issued.
Pursuant to the limitations described above (the net earnings requirement
currently being the most restrictive), the Company as of June 30, 1995 could
have issued approximately $67 million of additional First Mortgage Bonds.
DIVIDEND RESTRICTION
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 June 30,
1995, was approximately 47% of total capitalization and, accordingly, none of
the Company's retained earnings at June 30, 1995, were 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 Bond holders. 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
First Mortgage Bonds at the time outstanding (and, if one or more series of
First Mortgage Bonds are differently affected, with the consent of the holders
of 66-2/3% of the aggregate principal amount of the First Mortgage Bonds of
each series so affected). No such modification may (a) affect certain
<PAGE>
provisions protecting the Trustee without the Trustee's assent, (b) affect the
payment of principal, premium, or interest on any First Mortgage Bonds, or
extend the maturity or time of payment, without the consent of the Bond
holders 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
Bond holders, 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 Company has a demand deposit account and a line of credit with the
Trustee under which borrowings have been made. RIHT Financial Corporation,
the parent of the Trustee, is wholly owned by Bank of Boston Corporation.
John W. Rowe, a director of the Company and President and Chief Executive
Officer of NEES, is a director of Bank of Boston Corporation. William Watkins
Jr., an officer of the Company, is a director of the Trustee. If the Trustee
acquires any conflicting interest, it is required to either eliminate the
conflicting interest or resign. There are limitations on the rights of the
Trustee in respect of certain payments and property received by the Trustee
within four months prior to a default (as defined below).
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 actions, except when any such action would be
unlawful, would involve the Trustee in personal liability, or would be
unjustifiably prejudicial to the nonassenting Bond holders, or when the
Trustee would not be sufficiently indemnified for any expenditures in the
action.
DEFAULT
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 improvement 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 Company must
pay interest on overdue installments of interest at the rate of 6% per annum;
further, interest must be paid, under certain conditions, on overdue principal
at the rate of 6% per annum. The Trustee may withhold notice to the Bond
holders of any default, except default in the payment of principal, interest,
or any improvement fund installment, if certain officers and directors of the
Trustee determine in good faith that withholding such notice is in the
interest of the Bond holders.
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 improvement fund requirements
and as to compliance with certain other terms of the Indenture. Further,
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.
<PAGE>
HIGHLY LEVERAGED TRANSACTIONS
The provisions of the Indenture which provide holders of the Company's
outstanding First Mortgage Bonds with some protection in the event of a highly
leveraged transaction are described above under Security and Priority,
Additional First Mortgage Bonds, and Modification of the Indenture. The
restrictions on dividend payments provided in the preferred stock provisions
of the Company are described under Dividend Restriction. Restrictions on the
issuance of additional preferred stock and unsecured debt are described under
Construction and Financing. Further, the issuance of debt instruments or
additional common stock, the sale of significant assets, or any disposition of
the Company's stock by NEES, are regulated by the Rhode Island Public
Utilities Commission and/or the Securities and Exchange Commission under the
Public Utility Holding Company Act of 1935, as amended.
The Indenture provides that no sale of the Company substantially as an
entity or merger of the Company shall be made on terms which impair the lien
or security of the Indenture. Any successor to the Company must expressly
assume the obligations of the Company under the Indenture.
EXPERTS
The balance sheets as of December 31, 1994 and 1993 and the statements of
income, retained earnings, and cash flows for each of the three years in the
period ended December 31, 1994, all incorporated by reference in The
Narragansett Electric Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, incorporated by reference in this prospectus, have
been incorporated herein in reliance on the report 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 Robert King Wulff, Corporation
Counsel, and/or Kirk L. Ramsauer, Assistant General Counsel, 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 Robert King Wulff and/or Kirk L. Ramsauer,
25 Research Drive, Westborough, Massachusetts, and as to franchises, by
Edwards & Angell, One Hospital Trust Plaza, Providence, Rhode Island, and will
be passed upon for the purchasers by Milbank, Tweed, Hadley & McCloy, 1 Chase
Manhattan Plaza, New York, New York. The opinion of Messrs. Wulff and
Ramsauer as 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; (iv) to one or more agents as
principal for resale to investors; (v) through negotiation directly with
investors; or (vi) 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.
<PAGE>
If an underwriter or underwriters are involved in the sale of any of the
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 the 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 the New Bonds offered in the prospectus
supplement if any are purchased.
If any of the 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 the 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 any accompanying (LOGO) The
Pricing Supplement), in connection with the
offer contained herein, and, if given or made, Narragansett
such other information or representations must
not be relied upon as having been authorized Electric Company
by the Company or by any of the agents. Nei-
ther the delivery of this Prospectus Supple- (A Subsidiary of New England
ment or the Prospectus (including any accom-
panying Pricing Supplement) nor any sale Electric System)
made hereunder shall, under any circumstanc-
es, 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 (in- $50,000,000
cluding any accompanying Pricing Supple-
ment). This Prospectus Supplement and the
Prospectus (including any accompanying Pric-
ing Supplement) do not constitute an offer or
solicitation by anyone in any jurisdiction in
which the person making such offer or solicita- Secured Medium-Term Notes
tion is not qualified to do so or to anyone to First Mortgage Bonds, Series W
whom it is unlawful to make such offer or so-
licitation.
__________________
TABLE OF CONTENTS
Page
----
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 CS First Boston
Use of Proceeds....................... 5
Construction and Financing............ 5 Merrill Lynch & Co.
Description of the New Bonds.......... 6
Highly Leveraged Transactions......... 10
Experts............................... 10
Legal Matters......................... 10
Plan of Distribution.................. 10
