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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC SYSTEM
25 Research Drive
Westborough, Massachusetts 01582
(Name of company filing this statement and
address of principal executive office)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Robert King Wulff
Treasurer Corporation Counsel
25 Research Drive 25 Research Drive
Westborough, Massachusetts 01582 Westborough, Massachusetts 01582
(Names and addresses of agents for service)
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Item 1. Description of Proposed Transaction
____________________________________________
New England Electric System (NEES) is a voluntary association
created in Massachusetts by an Agreement and Declaration of Trust
dated January 2, 1926, as amended, and is a registered holding
company under the Public Utility Holding Company Act of 1935
(the Act).
Pursuant to Commission's order in File No. 70-8043, NEES is
authorized to issue and sell short-term promissory notes to banks
up to a maximum aggregate principal amount outstanding at any time
not exceeding $100 million. This borrowing authority expires
October 31, 1994.
By this Application/Declaration, NEES proposes that it be
granted authority to issue and sell short-term promissory notes to
banks from time to time between November 1, 1994, and October 31,
1996 The maximum aggregate principal amount of such notes to be
outstanding will not at any one time exceed $100 million.
NEES currently does not expect to incur short-term borrowings
during the applicable period. Nevertheless, NEES believes the
requested short-term borrowing authority is necessary in order for
it to be prepared for unforeseen events. Without this modest level
of short-term borrowing authority in place, NEES will lose the
ability to act quickly in response to an emergency affecting one or
more of its subsidiaries.
NEES does not have an ownership interest in an exempt
wholesale generator (EWG) or foreign utility company (FUCO) as
defined in Sections 32 and 33 of the Act. Additionally, NEES is
not a party to, nor has any rights under, a service, sales, or
construction agreement with an EWG or a FUCO. Although NEES does
not have any current intention to secure an ownership interest in
an EWG or FUCO, it wishes to retain the flexibility to invest up to
a total of $100 million in one or more EWG's or FUCO's, subject to
such Commission rules and regulations and approvals as may then be
required.
Borrowings from Banks
_____________________
The proposed borrowings from banks by NEES will be evidenced
by notes payable maturing in less than one year from the date of
issuance.
NEES will negotiate with banks the interest costs of such
borrowings. NEES pays fees to the banks in lieu of compensating
balance arrangements. The effective interest cost of borrowings
from a bank will not exceed the greater of the bank's base or prime
lending rate, or the rate published in the Wall Street Journal as
the high federal funds rate, plus, in either case, one percent.
Certain of such borrowings may be without prepayment privileges.
Based on the current base lending rate of 7.25% and an equivalent
or lower high federal funds rate, the effective interest costs of
such borrowing would not exceed 8.25% per annum.
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Payment of any short-term promissory notes prior to maturity
will be made on the basis most favorable to NEES, taking into
account fixed maturities, interest rates, and any other relevant
financial consideration.
Filing of Certificates of Notification
______________________________________
Within 45 days after the end of each calendar quarter, NEES
will file a certificate of notification covering the transactions
effective pursuant to the authority requested hereby during such
quarter. Such certificates will show the dates and amounts of all
new money borrowings, the names of the lenders, the maximum amount
of notes outstanding at any one time during the quarter, and the
total amount of notes outstanding at the end of such quarter. The
final certificate of notification will be accompanied by the
required past tense opinion of counsel.
Item 2. Fees, Commissions and Expenses
_______________________________________
No underwriters' fees or commissions are to be paid with
respect to the proposed transactions. Certain services are to be
performed at the actual cost by New England Power Service Company,
(NEPSCO) an affiliated service company, operating pursuant to the
provisions of Section 13 of the Act and the Commission's rules
thereunder. The services of NEPSCO will consist principally of
services performed by the Executive and Administrative Department,
the Corporate Department (including attorneys), the Treasury
Department (including accountants and financial analysts), and the
Office Service Department, and are estimated not to exceed $1,000.
The only other expense to be borne by NEES will be the fee for
filing under the Act of $2,000. Total estimated expenses in
connection with the proposed transactions are $3,000.
Item 3. Applicable Statutory Provisions
________________________________________
Sections 6(a) and 7 of the Act are applicable to the issue and
sale of notes by NEES to banks. The payment of note of
indebtedness from the proceeds of the proposed borrowings is
exempted from Sections 9(a) and 12 of the Act by Rule 42.
Item 4. Regulatory Approval
____________________________
No state commission and no Federal commission (other than the
Securities and Exchange Commission) has jurisdiction over the issue
and sale of the notes by NEES.
Item 5. Procedure
__________________
It is requested that the Commission take action with respect
to this Application/Declaration without a hearing being held and
that an order be issued allowing this Application/Declaration to
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become effective on or before October 15, 1994 or as soon as
practicable.
NEES (i) does not request a recommended decision by an
administrative law judge, (ii) does not request a recommended
decision by any other responsible officer of the Commission,
(iii) hereby specifies that the Division of Investment Management
may assist in the preparation of the Commission's decision, and
(iv) hereby requests that there be no 30-day waiting period between
the date of issuance of the Commission's order and the date on
which it is to become effective.
Item 6. Exhibits and Financial Statements
__________________________________________
(a) Exhibits
*F Opinion of Counsel
G Proposed Form of Notice
*To be supplied by amendment.
(b) Financial Statements
1 Balance Sheets of NEES and of NEES and Subsidiaries
Consolidated, as of March 31, 1994, on an actual
basis. (1)
2 Statements of Income and Retained Earnings of NEES
and of NEES and Subsidiaries Consolidated for the
twelve months ended March 31, 1994.
(1) The proposed transactions will have no material effect on
the Balance Sheets of NEES or of NEES and Subsidiaries
Consolidated; therefore, pro forma statements are
omitted.
Since the date of the balance sheets, there have been no
material changes which were not in the ordinary course of business.
Item 7. Information as to Environmental Effects
________________________________________________
The proposed transaction does not involve a major Federal
action significantly affecting the quality of the human
environment.
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SIGNATURE
_________
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
statement to be signed on its behalf by the undersigned officer
thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
By: s/Michael E. Jesanis
___________________________
Michael E. Jesanis
Treasurer
Date: August 12, 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.
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Exhibit Index
_____________
Exhibit Description Page
_______ ___________ ____
G Proposed Form of Notice Filed herewith
1 Balance Sheets of NEES and Filed herewith
of NEES and Subsidiaries
Consolidated, as of March 31,
1994, on an actual basis
2 Statements of Income and Filed herewith
Retained Earnings of NEES
and of NEES and Subsidiaries
Consolidated for the twelve
months ended March 31, 1994
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EXHIBIT G
Proposed Form of Notice
_______________________
New England Electric System ("NEES"), 25 Research Drive,
Westborough, Massachusetts 01582, a registered holding company, has
filed an application/declaration with this Commission pursuant to
Sections 6(a) and 7 of the Public Utility Holding Company Act of
1935 ("Act").
NEES proposes to issue and sell up to a maximum aggregate
outstanding principal amount of $100,000,000 of short-term notes to
banks from time to time through October 31, 1996. The notes will
mature in less than one year from the date of issuance. The
effective interest cost of borrowings will not exceed the effective
interest cost of borrowings at the greater of the bank's base or
prime lending rate, or the rate published by the Wall Street
Journal as the high federal funds rate plus, in either case, 1%.
NEES pays fees to the banks in lieu of compensating balance
arrangements. Based upon the current base lending rate of 7.25%
and an equivalent or lower federal funds rate, the effective
interest cost would not exceed 8.25% per annum. NEES believes the
requested short-term borrowing authority is necessary in order to
be prepared for unforeseen events, including the ability to respond
to the emergency needs of its subsidiaries.
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<TABLE>
Financial Statement 1
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Balance Sheet
At March 31, 1994
(Unaudited)
<CAPTION>
ASSETS
------
(In Thousands)
<S> <C>
Investments:
Common stocks of subsidiaries, at equity $1,507,269
Notes of subsidiaries 53,538
Other investments 657
----------
Total investments 1,561,464
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Current assets:
Cash 46
Temporary cash investments - subsidiary company 2,650
Interest, dividends and accounts receivable
from subsidiaries 35,954
Other current assets 170
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Total current assets 38,820
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Deferred federal income taxes 2,245
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$1,602,529
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CAPITALIZATION AND LIABILITIES
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Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Outstanding - 64,969,652 shares $ 64,970
Paid-in capital 736,567
Retained earnings (including $564,119,000 of
undistributed subsidiary earnings) 760,965
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Total common share equity 1,562,502
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Current liabilities:
Accounts payable (including $519,000 to subsidiaries) 1,519
Other accrued expenses 1,037
Dividends payable 31,563
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Total current liabilities 34,119
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Deferred credits 5,908
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$1,602,529
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</TABLE>
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<TABLE>
Financial Statement 1
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Balance Sheet
At March 31, 1994
(Unaudited)
<CAPTION>
ASSETS
------
(In Thousands)
<S> <C>
Utility plant, at original cost $4,697,392
Less accumulated provisions for depreciation and amortization 1,540,179
----------
3,157,213
Net investment in Seabrook 1 under rate settlement 87,725
Construction work in progress 287,022
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Net utility plant 3,531,960
----------
Oil and gas properties, at full cost 1,224,849
Less accumulated provision for amortization 909,301
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Net oil and gas properties 315,548
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Investments:
Nuclear power companies, at equity 46,559
0ther subsidiaries, at equity 44,371
Other investments, at cost 32,599
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Total investments 123,529
----------
Current assets:
Cash 4,447
Accounts receivable, less reserves of $16,288,000 273,481
Unbilled revenues 37,400
Fuel, materials, and supplies, at average cost 88,966
Prepaid and other current assets 64,491
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Total current assets 468,785
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Accrued Yankee Atomic costs 96,284
Deferred charges and other assets 293,875
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$4,829,981
==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Outstanding - 64,969,652 shares $ 64,970
Paid-in capital 736,823
Retained earnings 760,965
----------
Total common share equity 1,562,758
Minority interests in consolidated subsidiaries 55,092
Cumulative preferred stock of subsidiaries 147,528
Long-term debt 1,509,306
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Total capitalization 3,274,684
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Current liabilities:
Long-term debt due within one year 22,920
Short-term debt 60,370
Accounts payable 122,890
Accrued taxes 45,208
Accrued interest 19,138
Dividends payable 35,544
Other current liabilities 152,626
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Total current liabilities 458,696
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Deferred federal and state income taxes 700,723
Unamortized investment tax credits 98,713
Accrued Yankee Atomic costs 96,284
Other reserves and deferred credits 200,881
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$4,829,981
==========
</TABLE>
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<TABLE>
Financial Statement 2
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Statement of Income
Twelve Months Ended March 31, 1994
(Unaudited)
<CAPTION>
(In Thousands)
<S> <C>
Equity in earnings of subsidiaries $ 200,798
Interest income - subsidiaries 307
---------
Total income from subsidiaries 201,105
Other income 110
---------
Total income 201,215
Corporate and fiscal expenses (includes $1,924,000 for cost
of services billed by an affiliated company) (9,033)
Federal income taxes 4,206
---------
Income before interest 206,042
Interest 132
---------
Net income $ 205,910
=========
Statement of Retained Earnings
Retained earnings at beginning of period $ 702,635
Net income 205,910
Dividends declared on common shares (145,533)
Premium on redemption of preferred stock of subsidiaries (2,047)
---------
Retained earnings at end of period $ 760,965
=========
</TABLE>
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<TABLE>
Financial Statement 2
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statement of Consolidated Income
Twelve Months Ended March 31, 1994
(Unaudited)
<CAPTION>
(In Thousands)
<S> <C>
Operating revenue $2,231,395
----------
Operating expenses:
Fuel for generation 226,928
Purchased electric energy 521,739
Other operation 473,235
Maintenance 143,921
Depreciation and amortization 296,051
Taxes, other than income taxes 122,620
Income taxes 132,808
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Total operating expenses 1,917,302
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Operating income 314,093
Other income:
Allowance for equity funds used during construction 5,092
Equity in income of generating companies 10,556
Other income (expense) - net (2,362)
----------
Operating and other income 327,379
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Interest:
Interest on long-term debt 97,059
Other interest 9,819
Allowance for borrowed funds used during
construction (3,490)
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Total interest 103,388
----------
Income after interest 223,991
Preferred dividends of subsidiaries 10,122
Minority interests 7,959
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Net income $ 205,910
==========
Statement of Consolidated Retained Earnings
Retained earnings at beginning of period $ 702,635
Net income 205,910
Dividends declared on common shares (145,533)
Premium on redemption of preferred
stock of subsidiaries (2,047)
----------
Retained earnings at end of period $ 760,965
==========
</TABLE>
