<PAGE>
File Nos. 70-5543/70-6958
70-7055/70-6513
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report
Pursuant to Rule 24 under the
Public Utility Holding Company Act of 1935
NEW ENGLAND ELECTRIC SYSTEM (NEES)
NEW ENGLAND ENERGY INCORPORATED (NEEI)
In accordance with the Orders of the Securities and Exchange Commission
dated July 19, 1978, October 22, 1985, October 3, 1991 and December 8, 1987,
following is a report for the third quarter of 1994:
For the purpose of this report and following the Commission's Order dated
October 22, 1985 (Release No. 23873), references herein to "Old Program"
relate to that portion of the NEEI oil and gas exploration and development
program which consists of prospects entered into through December 31, 1983.
Likewise, references to "New Program" relate to prospects entered into since
December 31, 1983. In 1991, NEEI sold substantially all of the properties in
the New Program. No new prospects have been acquired since December 31, 1986.
a. Investment in partnerships by prospect: See Exhibit a.
b. Summary statement of proved and probable reserves:
Old Program
-----------
Natural Gas
Oil and ----------- Total
Condensate Equivalent Equivalent
Bbl. MCF Bbl. Bbl.
---------- ---------- ---------- ----------
Balance 7/1/94 1,172,799 75,855,831 12,642,638 13,815,437
Additions & Revisions
through 9/30/94 - - - -
--------- ----------- ---------- ----------
Balance 1,172,799 75,855,831 12,642,638 13,815,437
Production 3rd Qtr. 1994 (88,781) (4,905,296) (817,549) (906,330)
--------- ----------- ---------- ----------
Balance 9/30/94 1,084,018 70,950,535 11,825,089 12,909,107
--------- ----------- ---------- ----------
New Program
-----------
None.
<PAGE>
-2-
c. Production and revenue by prospect: See Exhibit c.
d. Description of Operations:
NEEI has participated through its partnership with Samedan Oil
Corporation (Samedan) in drilling operations with the results as
summarized below. Also shown are activities on properties acquired
from a former partner, Dorchester Exploration, Inc. (Dorchester),
prior to termination of that partnership. NEEI sold its remaining
interests in "Dorchester" properties as of June 1, 1988.
Old Program
-----------
Since
Quarter Inception
------- ---------
No. of dry holes
Samedan 0 732
Dorchester 0 51
-- -----
0 783
-- -----
No. of productive wells
Samedan 2 1,164*
Dorchester 0 69*
-- ------
2 1,233*
-- ------
No. of wells drilled 2 2,016
(both exploration and development) -- -----
* Includes depleted/sold wells as follows:
Samedan 0 465
Dorchester 0 69
-- -----
0 534
-- -----
New Program
-----------
None.
INVESTMENT
----------
Budget Authorized
Actual By SEC
------------------------------------ -----------------
Since
Quarter Nine Months 1/1/94 1994
---------- ----------- ----------- ----------------
Samedan $4,142,457 $12,492,840 $12,492,840 (1) $15,000,000 (2)
(1) Includes $1,500,399 of management fees thru September 30, 1994.
(2) Authorized through December 31, 1994, by Order dated August 24,
1993 (Release No. 35-26110).
<PAGE>
-3-
e. Fuel Production, Sales and Other Income:
Old Program:
1. Sales to affiliates:
There have been no direct sales of NEEI oil and gas production to
affiliates.
Quarter Inception
Ended Thru
9/30/94 9/30/94
--------- ---------
2. Sales to nonaffiliates (Exhibit c.):
Equivalent barrels of fuel produced 925,528 44,704,566
Average price per barrel $ 11.33 $ 14.39
----------- -------------
Sales revenues $10,488,084 $ 643,189,383
3. Loss to NEP 13,044,332 280,509,219
4. Flow through of excess deferred taxes 1,573,200 76,484,288
5. Investment tax credit - 13,817,248
6. Depletion - 6,740,318
7. Deferred tax related to reserve - 9,080,000
addition
8. Transfer of reserve (net) from NEES - 6,400,000
----------- -------------
Total $25,105,616 $1,036,220,456
----------- -------------
New Program: None.
f. Credits applied to
New England Power Company (NEP):
1. Disposition of proceeds:
Amortization of cost of
fuel reserves $22,876,700 $ 951,871,751
Production costs 1,172,416 71,826,457
State taxes 1,056,500 7,044,500
Savings to NEP - 8,701,242
Royalty to NEP - 1,099,807
Other - 65,472
----------- -------------
Total $25,105,616 $1,040,609,229
----------- -------------
Net income/(loss)/retained deficit $ - $ (4,388,773)
----------- -------------
<PAGE>
-4-
f. continued
Quarter Inception
Ended Thru
9/30/94 9/30/94
-------- --------
2. Royalties prepaid to NEP:
Beginning balance in account $ 342,312 $ -
------------ ------------
Royalties/savings earned - (9,801,049)
Royalties passed on to NEP - 10,143,361 *
------------ ------------
Ending balance in account $ 342,312 $ 342,312
------------ ------------
3. Losses to be passed on to NEP:
Beginning balance in account $ 43,147,403 $ -
------------ ------------
Losses accrued 13,044,332 280,509,219
Losses passed on to NEP** (7,482,773) (231,800,257)
------------ ------------
Ending balance in account $ 48,708,962 $ 48,708,962
------------ ------------
* Includes $8,701,242 savings passed on to NEP for sales prior to 1/1/84
pursuant to Commission Order File No. 70-5543.
** Consistent with pricing policy approved in Release No. 23873, current
year losses cannot be recovered until the following year.
<PAGE>
-5-
g. Investment by NEES compared with Commission Authorization:
<TABLE>
<CAPTION>
Release No./Date
--------------------------------------
24847 24847 24847
----- ----- -----
3/29/89 3/29/89 3/29/89
------- ------- -------
<S> <C> <C> <C>
Maximum NEES Investment authorized: $45,000,000(1) $75,000,000 $400,000,000
----------- ----------- ------------
1. Investments by NEES-inception through
June 30, 1994 (net)
Subordinated notes 61,600 17,217,691 (2) -
Common stock and premium 250,000 - -
------------ ----------- ------------
Total investment by NEES 311,600 17,217,691 -
Investment by NEES-during the
quarter (net)
Subordinated notes 449,139 - -
Total investment by NEES through
September 30, 1994 (net)
Subordinated notes 510,739 17,217,691 (2) -
Common stock and premium 250,000 - -
----------- ----------- ------------
$760,739 $17,217,691 $ -
----------- ----------- ------------
2. Increase or Reduction in Investment
by NEES:
Date Amount Date Amount Date Amount
---- ------ ---- ------ ---- ------
Issues of subordinated notes
to NEES during quarter
ended September 30, 1994 9/06/94 $449,139 $ - $ -
Payments of
subordinated notes to NEES
during quarter ended
September 30, 1994 $ - $ - $ -
-------- ----------- -------
Net change in investment $449,139 $ - $ -
-------- ----------- -------
- --------------------
<FN>
(1) Plus any after-tax net loss attributable to the expensing of interest
on up to $37,200,000 of borrowings in connection with the Old Program.
(2) Includes $1,620,000 authorized for investment in the Old Program.
</TABLE>
<PAGE>
-6-
h. Financial Statements:
Exhibit h-1 Balance Sheet of NEEI at September 30, 1994, (unaudited,
subject to adjustment)
Exhibit h-2 Statement of Income and Retained Deficit of NEEI for the
quarter ended September 30, 1994 (unaudited, subject to adjustment)
Exhibit h-3 Statement of Cash Flows of NEEI for the quarter ended
September 30, 1994 (unaudited, subject to adjustment)
Exhibit h-4 Computation of Bank Interest for the quarter ended
September 30, 1994
i. Fuel purchased during quarter for NEP:
(Summary: See Exhibit i for detail.)
1. From proceeds from sale of NEEI Old Program production
Date purchased (delivered) 3rd Quarter
Quantity of fuel (equiv. bbl) 607,012.98
Average net price (per equiv. bbl) $ 14.18
-------------
Cost to NEEI $ 8,606,136
Loss from NEEI fuel
exploration activities 7,482,773
-------------
Cost to NEP 16,088,909
Inspection charges, etc. 38,595
-------------
-----------
Total $16,127,504
===========
j. Copies of filings on Form 423 related to the above sales are
attached. (See Exhibits j-1 through j-2.)
k. Use of Proceeds from Sales of NEEI New Program Production:
None.
<PAGE>
-7-
Sale of NEEI Wells
------------------
Old Program
- -----------
During the period from July 1, 1994 through September 30, 1994, NEEI did
not dispose of its interest in Existing (Old) Program wells containing proved
or probable reserves.
Losses Passed to NEP
--------------------
Through December 31, 1985, NEEI's Old Program generated customer savings.
Due to precipitous declines in oil and gas market prices, the Old Program
generated operating losses for the first time during 1986. As a result of the
losses during 1986, the crossover reserve, which was $24.1 MM at December 31,
1985, was exhausted. NEEI passed its 1986 losses in excess of the reserve,
$277,732, on to NEP in 1987. NEEI's Old Program incurred losses in 1987
through 1992 totalling $198,673,870 which were passed on to NEP in 1988
through 1993. NEEI's Old Program loss of $46,354,838, incurred in 1993, is
being passed on to NEP in 1994.
<PAGE>
-8-
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each undersigned company has duly caused this report (Commission's File
Nos. 70-5543, 70-6513, 70-6958, and 70-7055) to be signed on its behalf, as
indicated, by the undersigned officer thereunto duly authorized by each such
company.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
Michael E. Jesanis, Treasurer
NEW ENGLAND ENERGY INCORPORATED
s/John G. Cochrane
John G. Cochrane, Treasurer
Date: November 10, 1994
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of the Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
a Investment in partnerships by prospect Filed under
(Old Program) cover of
Form SE
c Production and net revenue (Old Program) Filed under
cover of
Form SE
h-1 Balance Sheet at September 30, 1994 Filed herewith
(Unaudited, Subject to Adjustment)
h-2 Statement of Income and Retained Filed herewith
Deficit for the Quarter Ended
September 30, 1994 (Unaudited,
Subject to Adjustment)
h-3 Statement of Cash Flows for the Quarter Filed herewith
Ended September 30, 1994 (Unaudited,
Subject to Adjustment)
h-4 Computation of Bank Interest for the Filed herewith
Quarter Ended September 30, 1994
i Fuel Purchased for NEP for the Quarter Filed herewith
Ended September 30, 1994
j-1 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
July 1994 (Salem Harbor) Form SE
j-2 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
August 1994 (Salem Harbor) Form SE
<PAGE>
<TABLE>
Exhibit h-1
NEW ENGLAND ENERGY INCORPORATED
Balance Sheet
September 30, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Assets
- -------
Old Program New Program Combined
---------- ---------- ---------
<S> <C> <C> <C>
Current assets:
Cash, including temporary cash investments
of $4,075,000 with affiliated companies $ 4,056,267 $ 52,121 $ 4,108,388
Accounts receivable:
Affiliated companies - accrued loss to be passed
on to affiliate 48,708,962 - 48,708,962
- tax benefits 1,702,585 59,900 1,762,485
- other 16,125 583 16,708
Prepaid expenses 342,312 - 342,312
-------------- ------------ --------------
Total current assets 54,826,251 112,604 54,938,855
-------------- ------------ --------------
Property at cost:
Cost of fuel reserves:
Exploration and development costs:
Samedan 737,693,404 - 737,693,404
Dorchester 67,401,440 - 67,401,440
Cost of capital 431,528,468 - 431,528,468
Other 30,624,364 - 30,624,364
-------------- ------------ --------------
1,267,247,676 - 1,267,247,676
Less-accumulated amortization (951,871,751) - (951,871,751)
-------------- ------------ --------------
Net cost of fuel reserves 315,375,925 - 315,375,925
Work in process - Samedan 1,464,342 - 1,464,342
-------------- ------------ --------------
Total property 316,840,267 - 316,840,267
-------------- ------------ --------------
$ 371,666,518 $ 112,604 $ 371,779,122
============== ============ ==============
LIABILITIES AND PARENT COMPANY'S INVESTMENT
- -------------------------------------------
Current liabilities:
Accrued exploration and development costs $ 27,150,378 $ - $ 27,150,378*
Accounts payable 1,984,497 336,660 2,321,157
Accrued interest 1,147,431 - 1,147,431
-------------- ------------ --------------
Total current liabilities 30,282,306 336,660 30,618,966
-------------- ------------ --------------
Deferred income taxes 107,890,828 36,100 107,926,928
-------------- ------------ --------------
Deferred credit 6,631,446 - 6,631,446
-------------- ------------ --------------
Notes payable to banks under credit agreement 230,000,000 - 230,000,000
-------------- ------------ --------------
Parent company's investment:
Subordinated notes payable to parent 2,130,739 15,597,691 17,728,430
Common stock, par value $1 per share 2,500 - 2,500
Paid-in capital 247,500 - 247,500
Retained deficit (5,518,801) (15,857,847) (21,376,648)
-------------- ------------ --------------
Total parent company's investment (3,138,062) (260,156) (3,398,218)
-------------- ------------ --------------
$ 371,666,518 $ 112,604 $ 371,779,122
============== ============ ==============
*Accrued exploration and development costs:
Total
(All Samedan)
------------
Exploration $10,347,873
Development 16,256,122
Work in process 244,772
Advance 301,611
-----------
$27,150,378
===========
</TABLE>
<PAGE>
<TABLE>
Exhibit h-2
NEW ENGLAND ENERGY INCORPORATED
Statement of Income and Retained Deficit
For the Quarter Ended September 30, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Old Program New Program Combined
----------- ------------- ---------
<S> <C> <C> <C>
Operating revenue:
Sales of fuel to an affiliate $16,127,504 $ - $ 16,127,504
Loss passed on to an affiliate (7,482,773) - (7,482,773)
Accrued loss to be passed on to an affiliate 13,044,332 - 13,044,332
Sales to nonaffiliates:
Oil 1,472,664 4,241 1,476,905
Gas 9,015,420 5,579 9,020,999
----------- ------------ ------------
Total operating revenue 32,177,147 9,820 32,186,967
----------- ------------ ------------
Operating expenses:
Purchases of fuel for an affiliate 8,644,731 - 8,644,731
Amortization of cost of fuel reserves 22,876,700 - 22,876,700
Production costs 1,172,416 3,739 1,176,155
General and administrative expense - 2,149 2,149
----------- ------------ ------------
Total operating expenses 32,693,847 5,888 32,699,735
----------- ------------ ------------
Operating income/(loss) (516,700) 3,932 (512,768)
Other income:
Interest income - 1,736 1,736
Interest expense (493,295) (39,820) (533,115)
State taxes (1,056,500) (53,458) (1,109,958)
----------- ------------ ------------
Operating and other income/(loss) (2,066,495) (87,610) (2,154,105)
----------- ------------ ------------
Federal income taxes:
Current federal income taxes 2,855,700 (12,000) 2,843,700
Deferred federal income taxes (4,601,700) - (4,601,700)
----------- ------------ ------------
Net federal income taxes (1,746,000) (12,000) (1,758,000)
----------- ------------ ------------
Net income (320,495) (75,610) (396,105)
Retained deficit at beginning of period (5,198,306) (15,782,237) (20,980,543)
----------- ------------ ------------
Retained deficit at end of period $(5,518,801) $(15,857,847) $(21,376,648)
=========== ============ ============
</TABLE>
<PAGE>
<TABLE>
Exhibit h-3
NEW ENGLAND ENERGY INCORPORATED
Statement of Cash Flows
For the Quarter Ended September 30, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Old Program New Program Combined
----------- ------------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income $ (320,495) $ (75,610) $ (396,105)
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of cost of fuel reserves 22,876,700 - 22,876,700
Loss passed on to an affiliate 7,482,773 - 7,482,773
Accrued loss to be passed on to an affiliate (13,044,332) - (13,044,332)
Deferred income taxes (4,145,200) - (4,145,200)
(Increase)/decrease in accounts receivable
(excluding loss to be passed on to affiliate) (1,445,095) (12,134) (1,457,229)
Increase/(decrease) in accrued exploration
and development costs (3,942,835) - (3,942,835)
Increase/(decrease) in accounts payable 327,572 (20,756) 306,816
Increase/(decrease) in accrued interest payable 14,447 - 14,447
------------ ---------- ------------
Net cash provided by operating activities $ 7,803,535 $ (108,500) $ 7,695,035
----------- ---------- ------------
Investing Activities:
Investment in property - Samedan:
Exploration (also includes dry holes, depleted
wells and work in process) $ 4,214,420 $ - $ 4,214,420
Development (also reflects transfer of
depleted wells) (3,709,877) - (3,709,877)
Capital costs (2,610,058) - (2,610,058)
Other (1,678,250) - (1,678,250)
------------ --------- ------------
Net cash used in investing activities $ (3,783,765) $ - $ (3,783,765)
------------ --------- ------------
Financing Activities:
Subordinated notes payable to parent-issues $ 449,139 $ - $ 449,139
Subordinated notes payable to parent-retirements - - -
Changes in notes payable to bank under
credit agreement (2,000,000) - (2,000,000)
------------ --------- ------------
Net cash used in financing activities $ (1,550,861) $ - $(1,550,861)
------------ --------- ------------
Net increase/(decrease) in cash and cash equivalents $ 2,468,909 $ (108,500) $ 2,360,409
Cash and cash equivalents at beginning of period 1,587,358 160,621 1,747,979
------------ --------- ------------
Cash and cash equivalents at end of period $ 4,056,267 $ 52,121 $ 4,108,388
------------ --------- ------------
</TABLE>
<PAGE>
Exhibit h-4
NEW ENGLAND ENERGY INCORPORATED
Computation of Bank Interest
Quarter Ended September 30, 1994
--------------------------------
Cost of Notes Payable to Banks Under Credit Agreement
-----------------------------------------------------
Date Paid
Date or Maturity Annual
Amount Issued Date Rate % Total
------ ------ ----------- ------ -----
Old Program
-----------
$ 37,000,000 03/04/94 09/06/94 4.7500 $ 327,090.28
60,000,000 04/22/94 07/22/94 4.8750 170,625.00
20,000,000 05/23/94 08/23/94 4.8550 142,952.78
49,000,000 05/24/94 08/23/94 5.1875 374,220.49
24,000,000 06/20/94 07/20/94 4.9375 62,541.67
10,000,000 06/23/94 07/25/94 5.0000 33,333.33
15,000,000 06/30/94 07/29/94 5.1250 59,791.67
24,000,000 07/20/94 08/23/94 5.1250 116,166.67
60,000,000 07/22/94 10/24/94 5.3125 628,645.84
17,000,000 06/23/94 08/10/94 4.6380 87,606.67
10,000,000 07/25/94 08/25/94 5.1250 44,131.95
15,000,000 07/29/94 08/30/94 5.1250 68,333.33
17,000,000 08/10/94 09/12/94 5.1875 80,838.54
10,000,000 08/23/94 09/23/94 5.0130 43,167.50
5,000,000 08/23/94 09/23/94 5.2500 22,604.17
20,000,000 08/23/94 11/23/94 5.2300 113,316.67
10,000,000 08/23/94 11/23/94 5.2000 56,333.33
44,000,000 08/23/94 09/23/94 5.4375 206,020.83
10,000,000 08/25/94 09/26/94 5.4375 48,333.34
15,000,000 08/30/94 10/31/94 5.5000 73,333.33
37,000,000 09/06/94 03/06/95 5.9375 152,560.76
17,000,000 09/12/94 10/12/94 5.5000 49,347.22
10,000,000 09/23/94 11/23/94 5.2500 11,666.67
20,000,000 09/23/94 11/23/94 5.4000 24,000.00
31,000,000 09/23/94 10/23/94 5.5625 38,319.44
10,000,000 09/26/94 10/26/94 5.0000 6,944.44
Interest Rate Swap (50,899.31)
Fees (Primarily facility) 111,625.35
-------------
Total Old Program $3,102,951.96
-------------
<PAGE>
Exhibit i
NEW ENGLAND ENERGY INCORPORATED
Fuel Purchased for NEP
for the Quarter Ended September 30, 1994
---------------------------------------
Exploration
- -----------
Date purchased (delivered) July 8, 1994 July 12, 1994
------------- --------------
Quantity of fuel (bbl) 204,474.88 99,875.34
Average net price (per equiv.bbl) $14.97$ 16.20
--------------------------
Cost to NEEI $3,060,682.24$1,617,980.51
Loss from NEEI fuel
exploration activities 2,520,603.621,231,183.72
--------------------------
Cost to NEP $5,581,285.86$2,849,164.23
--------------------------
Date purchased (delivered)Aug 27, 1994
-------------
Quantity of fuel (bbl) 193,720.69
Average net price (per equiv.bbl) $12.99
-------------
Cost to NEEI $2,516,238.04
Loss from NEEI fuel
exploration activities 2,388,034.52
-------------
Cost to NEP $4,904,272.56
-------------
Date purchased (delivered)Sept 7, 1994
-------------
Quantity of fuel (bbl) 108,942.07
Average net price (per equiv.bbl) $12.95
-------------
Cost to NEEI $1,411,235.57
Loss from NEEI fuel
exploration activities 1,342,951.15
-------------
Cost to NEP $2,754,186.72
-------------
