<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7471
(LOGO) THE NARRAGANSETT ELECTRIC COMPANY
(Exact name of registrant as specified in charter)
Rhode Island 05-0187805
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
280 Melrose Street, Providence, R.I. 02901
(Address of principal executive offices)
Registrant's telephone number, including area code
(401-784-7000)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Common stock, par value $50 per share, authorized and
outstanding: 1,132,487 shares at September 30, 1998.
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE> THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income
Periods Ended September 30
(Unaudited)
<CAPTION>
Quarter Nine Months
------- -----------
1998 1997 1998 1997
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Operating revenue $128,787 $141,980 $366,058 $393,340
-------- -------- -------- --------
Operating expenses:
Fuel for generation and purchased electric
energy, (principally from New England
Power Company, an affiliate) 66,674 85,460 188,921 234,904
Other operation 22,722 17,648 68,849 52,951
Maintenance 2,755 3,375 8,706 9,122
Depreciation 5,762 5,891 17,685 17,594
Taxes, other than federal income taxes 10,799 10,409 31,201 29,882
Federal income taxes 5,974 4,959 13,025 11,427
-------- -------- -------- --------
Total operating expenses 114,686 127,742 328,387 355,880
-------- -------- -------- --------
Operating income 14,101 14,238 37,671 37,460
Other income:
Other income (expense), net 2,028 110 1,294 (1,073)
-------- -------- -------- --------
Operating and other income 16,129 14,348 38,965 36,387
-------- -------- -------- --------
Interest:
Interest on long-term debt 3,707 3,806 11,318 12,301
Other interest 924 686 2,475 1,510
Allowance for borrowed funds used during
construction - credit (12) (6) (72) (64)
-------- -------- -------- --------
Total interest 4,619 4,486 13,721 13,747
-------- -------- -------- --------
Net income $ 11,510 $ 9,862 $ 25,244 $ 22,640
======== ======== ======== ========
Statements of Retained Earnings
Retained earnings at beginning of period $105,550 $122,624 $129,567 $119,978
Net income 11,510 9,862 25,244 22,640
Dividends declared on cumulative
preferred stock (99) (535) (478) (1,607)
Dividends declared on common stock (32,276) (2,265) (69,648) (11,325)
Premium on redemption of preferred stock (1,160) - (1,160) -
-------- -------- -------- --------
Retained earnings at end of period $ 83,525 $129,686 $ 83,525 $129,686
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Income
Twelve Months Ended September 30
(Unaudited)
<CAPTION>
1998 1997
---- ----
(In Thousands)
<S> <C> <C>
Operating revenue $492,756 $512,689
-------- --------
Operating expenses:
Fuel for generation and purchased electric energy,
(principally from New England Power Company,
an affiliate) 263,447 305,803
Other operation 90,273 70,740
Maintenance 12,031 12,115
Depreciation 23,048 23,786
Taxes, other than federal income taxes 40,685 37,964
Federal income taxes 15,845 15,260
-------- --------
Total operating expenses 445,329 465,668
-------- --------
Operating income 47,427 47,021
Other income:
Other income (expense), net 1,617 (428)
-------- --------
Operating and other income 49,044 46,593
-------- --------
Interest:
Interest on long-term debt 15,196 16,607
Other interest 3,440 2,094
Allowance for borrowed funds used during
construction - credit (128) (126)
-------- --------
Total interest 18,508 18,575
-------- --------
Net income $ 30,536 $ 28,018
======== ========
Statements of Retained Earnings
Retained earnings at beginning of period $129,686 $117,400
Net income 30,536 28,018
Dividends declared on cumulative preferred stock (826) (2,142)
Dividends declared on common stock (73,045) (13,590)
Premium on redemption of preferred stock (2,826) -
-------- --------
Retained earnings at end of period $ 83,525 $129,686
======== ========
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Balance Sheets
(Unaudited)
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
------ ---- ----
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $726,338 $760,923
Less accumulated provisions for depreciation 203,908 198,551
-------- --------
522,430 562,372
Construction work in progress 3,037 5,739
-------- --------
Net utility plant 525,467 568,111
-------- --------
Current assets:
Cash 3,208 3,122
Accounts receivable:
From sales of electric energy 50,681 54,109
Other (including $20,582,000 and $1,112,000
from affiliates) 23,483 2,571
Less reserves for doubtful accounts 5,002 4,707
-------- --------
69,162 51,973
Unbilled revenues 19,536 15,997
Fuel, materials and supplies, at average cost 3,564 4,165
Prepaid and other current assets 10,011 14,202
-------- --------
Total current assets 105,481 89,459
-------- --------
Deferred charges and other assets 55,390 55,285
-------- --------
$686,338 $712,855
======== ========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $50 per share,
authorized and outstanding 1,132,487 shares $ 56,624 $ 56,624
Premiums on preferred stocks 80 36
Other paid-in capital 105,714 105,500
Retained earnings 83,525 129,567
Unrealized gain on securities, net 143 112
-------- --------
Total common equity 246,086 291,839
Cumulative preferred stock 7,601 12,800
Long-term debt 170,658 183,545
-------- --------
Total capitalization 424,345 488,184
-------- --------
Current liabilities:
Long-term debt due in one year 8,000 5,000
Short-term debt (including $40,750,000 and $4,425,000
to affiliates) 40,750 16,350
Accounts payable (including $34,356,000 and $50,751,000
to affiliates) 52,334 56,048
Accrued liabilities:
Taxes 3,357 4,314
Interest 3,121 4,810
Other accrued expenses 37,944 21,519
Customer deposits 6,166 5,982
Dividends payable 99 3,587
-------- --------
Total current liabilities 151,771 117,610
-------- --------
Deferred federal income taxes 85,298 82,871
Unamortized investment tax credits 6,656 7,023
Other reserves and deferred credits 18,268 17,167
-------- --------
$686,338 $712,855
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Statements of Cash Flows
Nine Months Ended September 30
(Unaudited)
<CAPTION>
1998 1997
---- ----
(In Thousands)
<S> <C> <C>
Operating Activities:
Net income $ 25,244 $ 22,640
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 17,685 17,594
Deferred federal income taxes and investment
tax credit, net 1,690 209
Allowance for funds used during construction (72) (64)
Decrease (increase) in accounts receivable, net
and unbilled revenues (20,153) 3,940
Decrease (increase) in fuel, materials, and supplies 601 183
Decrease (increase) in prepaid and other current assets 4,191 (6,305)
Increase (decrease) in accounts payable (3,714) 13,835
Increase (decrease) in other current liabilities 13,963 2,686
Other, net 1,119 137
-------- --------
Net cash provided by operating activities $ 40,554 $ 54,855
-------- --------
Investing Activities:
Plant expenditures, excluding allowance for
funds used during construction $(14,860) $(24,248)
Other investing activities (19) (271)
Proceeds from sale of generating assets 39,723 -
-------- --------
Net cash provided by (used in) investing activities$ 24,844 $(24,519)
-------- --------
Financing Activities:
Capital contributions from parent $ 214 $ -
Dividends paid on common stock (73,045) (11,325)
Dividends paid on preferred stock (568) (1,607)
Long-term debt - issues - 3,000
Long-term debt - retirements (10,000) (32,500)
Changes in short-term debt 24,400 12,375
Preferred stock - retirements (5,153) -
Premium on reacquisition of preferred stock (1,160) -
-------- --------
Net cash used in financing activities $(65,312) $(30,057)
-------- --------
Net increase (decrease) in cash and cash equivalents $ 86 $ 279
Cash and cash equivalents at beginning of period 3,122 1,727
-------- --------
Cash and cash equivalents at end of period $ 3,208 $ 2,006
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Note A - Hazardous Waste
- ------------------------
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. The Narragansett Electric Company (the
Company) currently has in place an internal environmental audit
program and an external waste disposal vendor audit and
qualification program intended to enhance compliance with existing
federal, state, and local requirements regarding the handling of
potentially hazardous products and by-products.
The Company has been named as a potentially responsible party
(PRP) by either the United States Environmental Protection Agency
or the Massachusetts Department of Environmental Protection for
three sites (two of which are located in Massachusetts) at which
hazardous waste is alleged to have been disposed. The Company is
currently aware of other possible hazardous waste sites, and may in
the future become aware of additional sites, that it may be held
responsible for remediating.
Gas was manufactured from coal in Rhode Island in the past.
The Company is aware of five sites on which gas was manufactured or
manufactured gas was stored that were owned either by the Company
or by its predecessor companies. It is not known to what extent
the Company would be held liable for hazardous wastes, if any, left
at these manufactured gas locations.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by the Company. A
preliminary review by a consultant hired by the New England
Electric System (NEES) companies of the potential cost of
investigating and, if necessary, remediating Rhode Island
manufactured gas sites resulted in costs per site ranging from less
<PAGE>
than $1 million to $11 million. An informal survey of other
utilities conducted on behalf of NEES and its subsidiaries
indicated costs in a similar range. The NEES companies have
recovered amounts from certain insurers and other third parties,
and, where appropriate, the Company intends to seek recovery from
other insurers and from other PRPs, but it is uncertain whether,
and to what extent, such efforts will be successful. The Company
believes that hazardous waste liabilities for all sites of which it
is aware are not material to its financial position.
Note B - Divestiture of Generating Business
- -------------------------------------------
On September 1, 1998, the Company and New England Power Company
completed the sale of substantially all of their nonnuclear
generating business to USGen New England, Inc. (USGen), an indirect
wholly owned subsidiary of PG&E Corporation. The Company received
approximately $40 million for its share of assets included in the
sale. Effective September 1, 1998, USGen and TransCanada Power
Marketing, Ltd. became the Company's principal suppliers for
meeting obligations for transition service customers. For more
information on the terms and events leading to the sale, the
accounting implications of the sale, and the assets sold, see the
Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Note C - Comprehensive Income
- -----------------------------
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive
Income (FAS 130). FAS 130 establishes standards for reporting
comprehensive income and its components. Comprehensive income for
the period is equal to net income plus "other comprehensive
income," which, for the Company, consists of the change in
unrealized holding gains on available-for-sale securities during
the period. Other comprehensive income was immaterial for the
Company for the third quarter and nine month periods ended
September 30, 1998 and 1997, respectively.
<PAGE>
Note D - New Accounting Standards
- ---------------------------------
In 1997, the Financial Accounting Standards Board (FASB)
released Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information
(FAS 131), which goes into effect in 1998. FAS 131 requires the
reporting in financial statements of certain new additional
information about operating segments of a business. Application of
FAS 131 is not required for interim reporting in the initial year
of application. The Company is currently evaluating the impact
that FAS 131 will have on its future reporting requirements.
In February 1998, the FASB issued Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions
and Other Postretirement Benefits (FAS 132), which revises
disclosure requirements for pension and other postretirement
benefits. The Company will adopt FAS 132 in its financial
statements for the year ending December 31, 1998.
The adoption of FAS 131 and FAS 132 will have no impact on the
Company's operating results, financial position, or cash flows.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities (FAS 133), which establishes accounting and
reporting standards for such instruments. FAS 133 is effective for
fiscal years beginning after June 15, 1999. Currently, the Company
has no such derivative holdings.
Note E
- ------
In the opinion of the Company, these statements reflect all
adjustments (which include normal recurring adjustments) necessary
for a fair statement of the results of its operations for the
periods presented and should be considered in conjunction with the
notes to the financial statements in the Company's 1997 Annual
Report.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
- -----------------------------------------------------------------
This section contains management's assessment of The
Narragansett Electric Company's (the Company) financial condition
and the principal factors having an impact on the results of
operations. This discussion should be read in conjunction with the
Company's financial statements and footnotes and the 1997 Annual
Report on Form 10-K.
Earnings
- --------
Net income for the third quarter and first nine months of 1998
increased $1.6 million and $2.6 million, respectively, as compared
to the corresponding periods in 1997. The increase is due
primarily to a retail rate increase, which went into effect in
January 1998, and increased kilowatthour (kWh) deliveries.
This report contains statements that may be considered forward
looking under the securities laws. Actual results may differ
materially for reasons described in this report.
Industry Restructuring
- ----------------------
For a full discussion of industry restructuring activities in
Rhode Island, stranded cost recovery, accounting implications of
industry restructuring and divestiture, workforce reductions, and
impact of industry restructuring on the distribution business, see
the "Industry Restructuring" section in the Company's Form 10-K for
1997 and the Company's 1997 Annual Report.
Divestiture of Generating Business
On September 1, 1998, the Company and New England Power Company
(NEP) completed the sale of substantially all of their nonnuclear
generating business to USGen New England, Inc. (USGen), an indirect
wholly owned subsidiary of PG&E Corporation. The Company received
approximately $40 million for its share of assets included in the
sale. Effective September 1, 1998, USGen and TransCanada Power
Marketing, Ltd. (TCPM) became the Company's principal suppliers for
meeting its obligations for transition service customers. For more
information on the terms and events leading to the sale, the
accounting implications of the sale, and the assets sold, see the
<PAGE>
Company's Annual Report on Form 10-K for the year ended December
31, 1997.
Year 2000 Computer Issues
- -------------------------
Over the next year, most companies will face a potentially
serious information systems (computer) problem because many
software applications and operational programs written in the past
may not properly recognize calendar dates associated with the year
2000 (Y2K). This could cause computers to either shut down or lead
to incorrect calculations.
During 1996, the NEES companies began the process of
identifying the changes required to their computer software and
hardware to mitigate Y2K issues. The NEES companies established a
Y2K Project team to manage these issues. This team reports project
progress to a recently formed Y2K Executive Oversight Committee
each month. The team also makes regular reports to NEES' Board of
Directors and its Audit Committee. The NEES companies have
separated their Y2K Project into four parts as shown below, along
with the estimated completion dates for each part.
<TABLE>
<CAPTION>
Substantial Contingency Testing,
Completion Documentation,
of Critical and Clean
Category Specific Example Systems Management
- ------- ------------- --------- ----------------
<S> <C> <C> <C>
Mainframe/Midrange Accounting/Customer Fourth quarter Throughout 1999
Systems service integrated 1998
systems
Desktop Systems Personal computers/ Mid-1999 Throughout 1999
Department software/
Networks
Operational/ Dispatching systems/ Mid-1999 Throughout 1999
Embedded Transmission and
Systems Distribution systems/
Telephone systems
External Issues Electronic Data Mid-1999 Throughout 1999
Interchange/Vendor
communications
</TABLE>
The NEES companies are using a three-phase approach in
coordinating their Y2K Project for system-related issues: (I)
Assessment and Inventory, (II) Pilot Testing, and (III) Renovation,
Conversion, or Replacement of Application and Operating Software
Packages and Testing. Phase I, which was an initial assessment of
<PAGE>
all systems and devices for potential Y2K defects, was completed in
mid-1997. Phase II, which consisted of renovation pilots for a
cross-section of systems in order to facilitate the establishment
of templates for Phase III work, was completed in late 1997. Phase
III, which is currently ongoing, requires the renovation,
conversion, or replacement of the remaining applications and
operating software packages.
The NEES companies have also implemented a formalized
communication process with third parties to receive information
related to their progress in remediating their own Y2K issues, and
to communicate the NEES companies' progress in addressing the Y2K
issue. These third parties include major customers, suppliers, and
significant businesses with which the NEES companies have data
links (such as banks). The NEES companies cannot predict the
outcome of other companies' remediation efforts.
The NEES companies believe total costs associated with making
the necessary modifications to all centralized and noncentralized
systems will be approximately $25 million. In addition, the NEES
companies are spending $4 million related to the implementation of
a new human resources and payroll system, the replacement of which
is in part due to the Y2K issue. To date, total Y2K-related costs
of $19 million have been incurred, of which $1 million has been
capitalized.
The NEES companies are in the process of developing Y2K
contingency plans to allow for critical information and operating
systems to function from January 1, 2000 forward. If required,
these plans are intended to address both internal risks as well as
potential external risks related to both suppliers and customers.
Part of the contingency planning for accounting and desktop systems
will include taking extensive data back-ups prior to year-end
closing. For operational systems, the NEES companies have in place
an overall disaster recovery program, which already includes
periodic disaster simulation training (for outages due to severe
weather, for instance). As part of Y2K contingency planning, the
NEES companies will review their disaster recovery plans, modifying
them for Y2K-specific issues. The NEES companies expect that these
contingency plans will be in place by mid-1999.
Interregional and regional contingency plans are being
formulated that address emergency scenarios due to the
interconnection of utility systems throughout the United States.
At a regional level, the NEES companies are participating and
cooperating with the New England Power Pool (NEPOOL) and the
Independent System Operator of the NEPOOL area (ISO New England).
<PAGE>
Overall regional activities, including those of NEPOOL and ISO New
England, will be coordinated by the Northeast Power Coordinating
Council, whose activities will be incorporated into the
interregional coordinating effort by the North American Electric
Reliability Council. The target for completion of this planning
process is mid-1999. The NEES companies have noted that the Y2K
coordination efforts by ISO New England began only during May 1998,
resulting in a demanding and difficult schedule to attain regional
and interregional target dates.
The NEES companies believe the worst case scenario with a
reasonable chance of occurring is temporary disruptions of electric
service. This scenario could result from a failure to adequately
remediate Y2K problems at NEES company facilities or could be
caused by the inability of entities, such as ISO New England, to
maintain the short-term reliability of various generators and/or
transmission lines on a regional or superregional basis. The NEES
companies believe that the contingency plans being developed both
internally and on a regional level, as described above, should
substantially mitigate the risks of this potential scenario. In
the event that a short-term disruption in service occurs, the
Company does not expect that it would have a material impact on its
financial position and results of operations.
While the NEES companies believe that their overall Y2K
program will satisfactorily address all critical operational and
system-related issues, significant risks remain. These risks
include, but are not limited to, the Y2K readiness of third
parties, including other utilities and power suppliers, cost and
timeline estimates of remaining Y2K mitigation efforts, and the
overall accuracy of assumptions made related to future events in
the development of the Y2K mitigation effort.
<PAGE>
Operating Revenue
- -----------------
The following table summarizes the changes in operating
revenue: Increase (Decrease) in Operating Revenue
Third Quarter Nine Months
------------- ------------
1998 vs 1997 1998 vs 1997
------------- ------------
(In Millions)
Industry restructuring-related
rate changes:
Purchased power and transmission-
related $(15) $(33)
Distribution-related 2 5
PBOP rate decrease (1) (3)
KWh deliveries to ultimate
customers 2 3
Other (1) 1
---- ----
$(13) $(27)
==== ====
Historically, the Company purchased all of its electrical
requirements from NEP, under the provisions of an all-requirements
contract at NEP's standard resale rate. Effective January 1, 1998,
the contract was amended, terminating the all-requirements
provision of the contract. The Company's customers also gained the
right to choose their power supplier. NEP continued to supply
power to the Company, at lower rates, for customers that continued
to take power from the Company, until September 1, 1998, when USGen
and TCPM became the Company's principal wholesale power suppliers.
All customers pay rates that include contract termination charges
due NEP for its generation-related stranded costs. The revenues
that the Company bills customers related to power supply costs,
both prior to and subsequent to NEP's sale of its nonnuclear
generating business, are subject to true-up mechanisms. However,
transmission-related costs billed by both NEP and NEPOOL are not
subject to a true-up mechanism until 1999, and the Company incurred
an underrecovery of such costs in the third quarter of 1998. Prior
<PAGE>
to January 1998, the Company had a purchased power cost adjustment
mechanism and a fuel clause mechanism, which allowed NEP's billings
to be passed on to customers.
In accordance with the Rhode Island Restructuring Act of 1996,
a $7 million increase in distribution rates was implemented for the
Company, effective January 1, 1998. The Company also implemented
a rate decrease related to a lower level of postretirement benefits
other than pensions (PBOPs) expenses being incurred and also made
refunds in January 1998 of past overrecoveries of PBOP costs, for
which reserves had previously been established.
KWh deliveries to ultimate customers increased 6.4 percent and
3.5 percent for the third quarter and first nine months of 1998,
respectively, as compared to the corresponding periods in 1997, and
is driven primarily by warmer weather in the third quarter of 1998
as compared to the same period in 1997, as well as a strong
economy.
Operating Expenses
- ------------------
The following table summarizes the changes in operating
expenses:
Increase (Decrease) in Operating Expenses
Third Quarter Nine Months
------------- ------------
1998 vs 1997 1998 vs 1997
-------------- ------------
(In Millions)
Fuel, purchased power and
operation and maintenance:
Fuel, purchased power, generation
and transmission-related $(13) $(30)
PBOP expense (1) (3)
Other - 3
Taxes 1 3
---- ----
$(13) $(27)
==== ====
As noted above, effective January 1, 1998, NEP's billings to
the Company were significantly changed in connection with the
<PAGE>
restructuring of the electric utility industry in Rhode Island.
Not only were NEP's generation rates reduced, prior to the sale of
its generating business on September 1, 1998, but the transmission
portion of NEP's costs are now billed separately and recorded in
operation and maintenance expense instead of as a component of
purchased power expense.
The decrease in other operation and maintenance expense in the
third quarter and for the year-to-date period is primarily due to
a reduction in the cost of PBOPs, for which refunds and a rate
decrease were put into effect in the first quarter. On a year-to-
date basis, this decrease was partially offset by increased
distribution expenses, which reflect accounting write-offs of
approximately $2 million of certain previously capitalized plant
items.
Other Income
- ------------
The increase in other income during the third quarter is
primarily due to NEP's reimbursement to the Company for premiums
incurred on the reacquisition of preferred stock in connection with
the divestiture of the nonnuclear generating business. The Company
charged these premiums to retained earnings.
Utility Plant Expenditures and Financings
- -----------------------------------------
Plant expenditures for the first nine months of 1998 amounted
to $15 million. The funds necessary for utility plant expenditures
were provided by increased short-term debt and proceeds from the
sale of the nonnuclear generating business.
In the first nine months of 1998, the Company retired $10
million of mortgage bonds and increased its short-term debt
outstanding by $24 million.
The Company currently has lines of credit with banks totaling
$41 million. There were no outstanding borrowings under these
lines of credit at September 30, 1998.
In September 1998, the Company repurchased preferred stock with
a par value of $5.2 million. In October 1998, the Company
repurchased additional preferred stock with a par value of
$363,000.
For the twelve-month period ending September 30, 1998, the
ratio of earnings to fixed charges was 3.46.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
- -------------------------------------------------------------
On July 22, 1998, a Special Meeting of Stockholders was held.
By unanimous vote of the 1,132,487 shares having general voting
rights represented at the meeting a supplemental indenture to the
Company's First Mortgage and Deed of Trust was approved.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The Company is filing the following revised exhibit for
incorporation by reference into its registration statement on Form
S-3, Commission file No. 33-61131.
12 Statement re computation of ratios
The Company is filing Financial Data Schedules.
The Company did not file any reports on Form 8-K during the
third quarter of 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-Q for
the quarter ended September 30, 1998 to be signed on its behalf by
the undersigned thereunto duly authorized.
THE NARRAGANSETT ELECTRIC COMPANY
s/John G. Cochrane
John G. Cochrane
Treasurer, Authorized Officer, and
Principal Financial Officer
Date: November 12, 1998
<PAGE>
Exhibit Index
-------------
Exhibit Description Page
- ------- ----------- ----
12 Statement re computation of Filed herewith
ratios
27 Financial Data Schedule Filed herewith
<PAGE>
<TABLE>
THE NARRAGANSETT ELECTRIC COMPANY
Computation of Ratio of Earnings to Fixed Charges
(SEC Coverage)
(Unaudited)
<CAPTION>
12 Months
Ended
September 30, 1998 Years Ended December 31,
Actual -------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Income $30,536 $27,932 $22,954 $23,910 $14,589 $14,274
- ----------
Add income taxes and fixed charges:
Current federal income taxes 14,290 14,185 6,918 7,212 1,020 2,183
Deferred federal income taxes 1,555 79 4,675 3,512 3,930 2,199
Investment tax credits - net (490) (495) (498) (503) (508) (508)
Interest on long-term debt 15,196 16,179 17,205 16,627 14,334 12,715
Interest on short-term debt and other 3,440 2,475 2,883 3,663 2,897 2,074
------- ------- ------- ------- ------- -------
Net earnings available for fixed charges $64,527 $60,355 $54,137 $54,421 $36,262 $32,937
======= ======= ======= ======= ======= =======
Fixed charges:
Interest on long-term debt $15,196 $16,179 $17,205 $16,627 $14,334 $12,715
Interest on short-term debt and other 3,440 2,475 2,883 3,663 2,897 2,074
------- ------- ------- ------- ------- -------
Total fixed charges $18,636 $18,654 $20,088 $20,290 $17,231 $14,789
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 3.46 3.24 2.69 2.68 2.10 2.23
- ----------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED
EARNINGS AND CASH FLOWS OF THE NARRAGANSETT ELECTRIC COMPANY, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 525,467
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 105,481
<TOTAL-DEFERRED-CHARGES> 55,390 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 686,338
<COMMON> 56,624
<CAPITAL-SURPLUS-PAID-IN> 105,794
<RETAINED-EARNINGS> 83,525
<TOTAL-COMMON-STOCKHOLDERS-EQ> 246,086 <F3>
0
7,601
<LONG-TERM-DEBT-NET> 170,658
<SHORT-TERM-NOTES> 40,750
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 213,243
<TOT-CAPITALIZATION-AND-LIAB> 686,338
<GROSS-OPERATING-REVENUE> 366,058
<INCOME-TAX-EXPENSE> 13,025
<OTHER-OPERATING-EXPENSES> 315,362
<TOTAL-OPERATING-EXPENSES> 328,387
<OPERATING-INCOME-LOSS> 37,671
<OTHER-INCOME-NET> 1,294
<INCOME-BEFORE-INTEREST-EXPEN> 38,965
<TOTAL-INTEREST-EXPENSE> 13,721
<NET-INCOME> 25,244
478
<EARNINGS-AVAILABLE-FOR-COMM> 24,766
<COMMON-STOCK-DIVIDENDS> 69,648
<TOTAL-INTEREST-ON-BONDS> 11,318
<CASH-FLOW-OPERATIONS> 40,554
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes other assets.
<F2> Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
<F3> Total common stockholders equity includes the unrealized gain on
securities.
</FN>
