<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 second 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 4/1/94 1,267,198 80,071,692 13,345,282 14,612,480
Additions & Revisions
through 6/30/94 - - - -
--------- ----------- ---------- ----------
Balance 1,267,198 80,071,692 13,345,282 14,612,480
Production 2nd Qtr. 1994 (94,399) (4,215,861) (702,644) (797,043)
--------- ----------- ---------- ----------
Balance 6/30/94 1,172,799 75,855,831 12,642,638 13,815,437
--------- ----------- ---------- ----------
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 0 1,162*
Dorchester 0 69*
-- ------
0 1,231*
-- ------
No. of wells drilled 0 2,014
(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 Six Months 1/1/94 1994
---------- ---------- ---------- -----------------
Samedan $6,260,052 $8,350,383 $8,350,383 $10,000,000 (A)
(A) Authorized through December 31, 1994, by Order dated December 21,
1993 (Release No. 35-25958).
<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
6/30/94 6/30/94
--------- ---------
2. Sales to nonaffiliates (Exhibit c.):
Equivalent barrels of fuel produced 797,043 43,779,038
Average price per barrel $ 12.79 $ 14.45
----------- ------------
Sales revenues $10,195,122 $632,701,299
3. Loss to NEP 11,157,895 267,464,887
4. Flow through of excess deferred taxes 1,354,400 74,911,088
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 $22,707,417 $1,011,114,840
----------- -------------
New Program: None.
f. Credits applied to
New England Power Company (NEP):
1. Disposition of proceeds:
Amortization of cost of
fuel reserves $19,694,031 $928,995,051
Production costs 1,637,886 70,654,041
State taxes 1,375,500 5,988,000
Savings to NEP - 8,701,242
Royalty to NEP - 1,099,807
Other - 65,472
----------- -------------
Total $22,707,417 $1,015,503,613
----------- -------------
Net income/(loss)/retained deficit $ - $ (4,388,773)
----------- -------------
<PAGE>
-4-
f. continued
Quarter Inception
Ended Thru
6/30/94 6/30/94
-------- --------
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 $ 38,797,377 $ -
------------ ------------
Losses accrued 10,886,470 267,193,462
Losses passed on to NEP** (6,807,869) (224,317,484)
------------ ------------
Ending balance in account $ 42,875,978 $ 42,875,978
------------ ------------
* 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
March 31, 1994 (net)
Subordinated notes (409,290) 19,517,691 (2) -
Common stock and premium 250,000 - -
------------ ----------- ------------
Total investment by NEES (159,290) 19,517,691 -
Investment by NEES-during the
quarter (net)
Subordinated notes 470,890 (2,300,000) -
Total investment by NEES through
June 30, 1994 (net)
Subordinated notes 61,600 17,217,691 (2) -
Common stock and premium 250,000 - -
----------- ----------- ------------
$311,600 $17,517,691 $ -
----------- ----------- ------------
2. Increase or Reduction in Investment
by NEES:
Date Amount Date Amount Date Amount
---- ------ ---- ------ ---- ------
Issues of subordinated notes
to NEES during quarter
ended June 30, 1994 6/01/94 $458,785 $ - $ -
6/10/94 1,243
6/30/94 10,862
Payments of
subordinated notes to NEES
during quarter ended
June 30, 1994 4/29/94 $ - $ 2,300,000 $ -
-------- ----------- -------
Net change in investment $470,890 $(2,300,000) $ -
-------- ----------- -------
- --------------------
<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 June 30, 1994, (unaudited, subject
to adjustment)
Exhibit h-2 Statement of Income and Retained Deficit of NEEI for the
quarter ended June 30, 1994 (unaudited, subject to adjustment)
Exhibit h-3 Statement of Cash Flows of NEEI for the quarter ended
June 30, 1994 (unaudited, subject to adjustment)
Exhibit h-4 Computation of Bank Interest for the quarter ended June 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) 2nd Quarter
Quantity of fuel (equiv. bbl) 552,263.86
Average net price (per equiv. bbl) $ 11.88
-------------
Cost to NEEI $ 6,563,542
Loss from NEEI fuel
exploration activities 6,807,869
-------------
Cost to NEP 13,371,411
Inspection charges, etc. 19,062
-------------
-----------
Total $13,390,473
===========
j. Copies of filings on Form 423 related to the above sales are
attached. (See Exhibits j-1 through j-3.)
k. Use of Proceeds from Sales of NEEI New Program Production:
None.
<PAGE>
-7-
Sale of NEEI Wells
------------------
Old Program
- -----------
During the period from April 1, 1994 through June 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: August 15, 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 June 30, 1994 Filed herewith
(Unaudited, Subject to Adjustment)
h-2 Statement of Income and Retained Filed herewith
Deficit for the Quarter Ended
June 30, 1994 (Unaudited,
Subject to Adjustment)
h-3 Statement of Cash Flows for the Quarter Filed herewith
Ended June 30, 1994 (Unaudited,
Subject to Adjustment)
h-4 Computation of Bank Interest for the Filed herewith
Quarter Ended June 30, 1994
i Fuel Purchased for NEP for the Quarter Filed herewith
Ended June 30, 1994
j-1 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
April 1994 (Brayton Point) Form SE
j-2 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
May 1994 (Salem Harbor) Form SE
j-3 Monthly Report of Cost and Quality Filed under
of Fuels for Electric Plants cover of
May 1994 (Brayton Point) Form SE
<PAGE>
<TABLE>
Exhibit h-1
NEW ENGLAND ENERGY INCORPORATED
Balance Sheet
June 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 $1,725,000 with affiliated companies $ 1,587,358 $ 160,621 $ 1,747,979
Accounts receivable:
Affiliated companies - accrued loss to be passed
on to affiliate 42,875,977 - 42,875,977
- tax benefits 266,885 47,900 314,785
- other 6,731 449 7,180
Prepaid expenses 342,312 - 342,312
-------------- ------------ --------------
Total current assets 45,079,263 208,970 45,288,233
-------------- ------------ --------------
Property at cost:
Cost of fuel reserves:
Exploration and development costs:
Samedan 735,717,211 - 735,717,211
Dorchester 67,401,440 - 67,401,440
Cost of capital 428,918,410 - 428,918,410
Other 28,946,114 - 28,946,114
-------------- ------------ --------------
1,260,983,175 - 1,260,983,175
Less-accumulated amortization (928,995,051) - (928,995,051)
-------------- ------------ --------------
Net cost of fuel reserves 331,988,124 - 331,988,124
Work in process - Samedan 3,945,078 - 3,945,078
-------------- ------------ --------------
Total property 335,933,202 - 335,933,202
-------------- ------------ --------------
$ 381,012,465 $ 208,970 $ 381,221,435
============== ============ ==============
LIABILITIES AND PARENT COMPANY'S INVESTMENT
- -------------------------------------------
Current liabilities:
Accrued exploration and development costs $ 31,093,213 $ - $ 31,093,213*
Accounts payable 1,656,925 357,416 2,014,341
Accrued interest 1,132,984 - 1,132,984
-------------- ------------ --------------
Total current liabilities 33,883,122 357,416 34,240,538
-------------- ------------ --------------
Deferred income taxes 110,987,275 36,100 111,023,375
-------------- ------------ --------------
Deferred credit 7,408,774 - 7,408,774
-------------- ------------ --------------
Notes payable to banks under credit agreement 232,000,000 - 232,000,000
-------------- ------------ --------------
Parent company's investment:
Subordinated notes payable to parent 1,681,600 15,597,691 17,279,291
Common stock, par value $1 per share 2,500 - 2,500
Paid-in capital 247,500 - 247,500
Retained deficit (5,198,306) (15,782,237) (20,980,543)
-------------- ------------ --------------
Total parent company's investment (3,266,706) (184,546) (3,451,252)
-------------- ------------ --------------
$ 381,012,465 $ 208,970 $ 381,221,435
============== ============ ==============
*Accrued exploration and development costs:
Total
(All Samedan)
------------
Exploration $10,322,637
Development 20,400,390
Work in process 120,305
Advance 249,881
-----------
$31,093,213
===========
</TABLE>
<PAGE>
<TABLE>
Exhibit h-2
NEW ENGLAND ENERGY INCORPORATED
Statement of Income and Retained Deficit
For the Quarter Ended June 30, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Old Program New Program Combined
----------- ------------- ---------
<S> <C> <C> <C>
Operating revenue:
Sales of fuel to an affiliate $13,390,473 $ - $ 13,390,473
Loss passed on to an affiliate (6,807,869) - (6,807,869)
Accrued loss to be passed on to an affiliate 11,157,895 - 11,157,895
Sales to nonaffiliates:
Oil 1,237,999 3,304 1,241,303
Gas 8,957,123 5,400 8,962,523
----------- ------------ ------------
Total operating revenue 27,935,621 8,704 27,944,325
----------- ------------ ------------
Operating expenses:
Purchases of fuel for an affiliate 6,582,604 - 6,582,604
Amortization of cost of fuel reserves 19,694,031 - 19,694,031
Production costs 1,637,886 3,530 1,641,416
General and administrative expense - 1,480 1,480
----------- ------------ ------------
Total operating expenses 27,914,521 5,010 27,919,531
----------- ------------ ------------
Operating income/(loss) 21,100 3,694 24,794
Other income:
Interest income - 2,920 2,920
Interest expense (457,664) - (457,664)
State taxes (1,375,500) - (1,375,500)
----------- ------------ ------------
Operating and other income/(loss) (1,812,064) 6,614 (1,805,450)
----------- ------------ ------------
Federal income taxes:
Current federal income taxes 2,174,600 2,300 2,176,900
Deferred federal income taxes (3,689,200) - (3,689,200)
----------- ------------ ------------
Net federal income taxes (1,514,600) 2,300 (1,512,300)
----------- ------------ ------------
Net income (297,464) 4,314 (293,150)
Retained deficit at beginning of period (4,900,842) (15,786,551) (20,687,393)
----------- ------------ ------------
Retained deficit at end of period $(5,198,306) $(15,782,237) $(20,980,543)
=========== ============ ============
</TABLE>
<PAGE>
<TABLE>
Exhibit h-3
NEW ENGLAND ENERGY INCORPORATED
Statement of Cash Flows
For the Quarter Ended June 30, 1994
(Unaudited, Subject to Adjustment)
<CAPTION>
Old Program New Program Combined
----------- ------------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income $ (297,464) $ 4,314 $ (293,150)
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of cost of fuel reserves 19,694,031 - 19,694,031
Loss passed on to an affiliate 6,807,869 - 6,807,869
Accrued loss to be passed on to an affiliate (11,157,895) - (11,157,895)
Deferred federal income taxes (3,689,200) - (3,689,200)
Deferred state income taxes 775,500 - 775,500
(Increase)/decrease in accounts receivable
(excluding loss to be passed on to affiliate) 4,396,239 (46,281) 4,349,958
Increase/(decrease) in accrued exploration
and development costs 1,055,865 - 1,055,865
Increase/(decrease) in accounts payable (2,161,508) 69 (2,161,439)
Increase/(decrease) in accrued interest payable 479,432 - 479,432
Increase/(decrease) in income taxes payable (9,344,915) 1,796,600 (7,548,315)
------------ ---------- ------------
Net cash provided by operating activities $ 6,557,954 $1,754,702 $ 8,312,656
------------ --------- ------------
Investing Activities:
Investment in property - Samedan:
Exploration (also includes dry holes, depleted
wells and work in process) $ (3,617,629) $ - $ (3,617,629)
Development (also reflects transfer of
depleted wells) (3,214,080) - (3,214,080)
Capital costs (2,390,115) - (2,390,115)
Other (820,128) - (820,128)
------------ --------- ------------
Net cash used in investing activities $(10,041,952) $ - $(10,041,952)
------------ --------- ------------
Financing Activities:
Subordinated notes payable to parent-issues $ 470,890 $ - $ 470,890
Subordinated notes payable to parent-retirements - (2,300,000) (2,300,000)
Changes in notes payable to bank under
credit agreement (2,000,000) - (2,000,000)
------------ --------- ------------
Net cash used in financing activities $(1,529,110)$(2,300,000) $(3,829,110)
------------ --------- ------------
Net increase/(decrease) in cash and cash equivalents $ (5,013,108) $ (545,298) $ (5,558,406)
Cash and cash equivalents at beginning of period 6,600,466 705,919 7,306,385
------------ --------- ------------
Cash and cash equivalents at end of period $ 1,587,358 $ 160,621 $ 1,747,979
------------ ---------------------
</TABLE>
<PAGE>
Exhibit h-4
NEW ENGLAND ENERGY INCORPORATED
Computation of Bank Interest
Quarter Ended June 30, 1994
--------------------------------
Cost of Notes Payable to Banks Under Credit Agreement
-----------------------------------------------------
Date Paid
Date or Maturity Annual
Amount Issued Date Rate % Total
------ ------ ----------- ------ -----
Old Program
- -----------
$ 20,000,000 02/22/94 05/23/94 3.8025 $ 109,850.00
49,000,000 02/24/94 05/24/94 4.2500 306,590.28
37,000,000 03/04/94 09/06/94 4.7500 444,256.94
23,000,000 03/16/94 04/18/94 4.1875 45,480.90
5,000,000 03/22/94 04/22/94 3.9375 11,484.38
85,000,000 03/22/94 04/22/94 4.1875 207,630.21
15,000,000 03/28/94 04/28/94 4.3125 48,515.63
23,000,000 04/18/94 05/18/94 4.3750 83,854.17
27,000,000 04/22/94 05/23/94 4.5625 106,078.13
60,000,000 04/22/94 07/22/94 4.8750 568,750.00
13,000,000 04/28/94 05/31/94 4.5000 53,625.00
24,000,000 05/18/94 06/20/94 5.0000 110,000.00
10,000,000 05/23/94 06/23/94 4.4750 38,534.72
5,000,000 05/23/94 06/23/94 4.6750 20,128.47
20,000,000 05/23/94 08/22/94 4.8550 105,191.67
12,000,000 05/23/94 06/23/94 5.0000 51,666.67
49,000,000 05/24/94 08/23/94 5.1875 268,309.03
15,000,000 05/31/94 06/30/94 5.0000 62,500.00
24,000,000 06/20/94 07/20/94 4.9375 36,208.33
17,000,000 06/23/94 08/10/94 4.6380 17,521.33
10,000,000 06/23/94 07/23/94 4.7750 10,661.11
15,000,000 06/30/94 07/29/94 5.1250 2,135.42
Interest Rate Swap 32,354.14
Fees (Primarily facility) 106,502.65
-------------
Total Old Program $2,847,829.18
-------------
<PAGE>
Exhibit i
NEW ENGLAND ENERGY INCORPORATED
Fuel Purchased for NEP
for the Quarter Ended June 30, 1994
---------------------------------------
Exploration
- -----------
Date purchased (delivered)
Apr. 8, 1994
-------------
Quantity of fuel (bbl) 105,651.12
Average net price (per bbl) $ 9.85
-------------
Cost to NEEI $1,040,663.53
Loss from NEEI fuel
exploration activities 1,302,382.94
-------------
Cost to NEP $2,343,046.47
-------------
Date purchased (delivered) May 14, 1994 May 27, 1994
------------- --------------
Quantity of fuel (bbl) 222,251.53 224,361.21
Average net price (per equiv.bbl) $ 11.88 $ 12.85
------------- -------------
Cost to NEEI $2,639,903.67 $2,882,974.24
Loss from NEEI fuel
exploration activities 2,739,740.02 2,765,746.47
------------- -------------
Cost to NEP $5,379,643.69 $5,648,720.71
------------- -------------
