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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NARRAGANSETT ENERGY RESOURCES COMPANY
280 Melrose Street
Providence, Rhode Island 02901
NEW ENGLAND ELECTRIC SYSTEM
25 Research Drive
Westborough, MA 01582
(Name of companies filing this statement and
addresses of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Kirk L. Ramsauer
Treasurer Assistant General Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
(Name and address of agents for service)
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Item 1. Description of Proposed Transaction
____________________________________________
Narragansett Energy Resources Company (the Company),
incorporated under the laws of the State of Rhode Island, is a
direct, wholly-owned subsidiary of New England Electric System
(NEES), a holding company registered under the Public Utility
Holding Company Act of 1935 (the Act). The Company is a general
partner with a 20% interest in two partnerships owning the Ocean
State Power Project (OSP). OSP is a two-unit combined cycle
electric generating facility located in Burrillville, Rhode Island.
Both units are currently in commercial operation.
By prior orders, the Commission (i) approved the acquisition
by the Company of a 20% equity interest in OSP, (ii) authorized
NEES to fund the Company's obligation to contribute to the capital
of OSP under the OSP partnership agreement and guarantee such
obligation, and (iii) approved the construction financing of OSP.
(HCAR No. 24727, dated October 13, 1988, and HCAR No. 24790, dated
December 23, 1988.) As of June 30, 1995, total capitalization of
the Company was approximately $34 million, 100% of which was in the
form of common equity.
By this Application/Declaration, the Company seeks
authorization to refinance a portion of its outstanding common
equity, on or before December 31, 1996, not in excess of an
aggregate principal amount of $33 million, by issuing and selling
one or more long-term notes (the Note). The Note would be
collateralized through an assignment of the Company's OSP
partnership interests which includes a security interest in OSP
partnership distributions.
By this Application/Declaration, NEES seeks authorization to
pledge its stock in the Company (the Stock) to the purchaser(s) of
the Note as limited security for the repayment of the Note.
Proposed Issue and Sale of the Note
___________________________________
The Company proposes to issue and sell, on or before December
31, 1996, the Note in an aggregate principal amount not to exceed
$33 million. The Note will be issued pursuant to a note agreement
(the Note Agreement), the specific terms of which will be
negotiated with a purchaser. The Note will have a maturity of up
to 17 years from the time of issuance. The Note will bear interest
at a fixed rate not to exceed 12% per annum. The Note Agreement
may provide for a sinking fund or other mandatory pre-payments and
limitations on callability or refundability, depending upon market
conditions. The Company proposes that the Note will be redeemable
at any time at its option, upon reasonable notice, at the then
outstanding principal amount plus accrued interest and redemption
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premium, and may include a yield to maturity premium. The Note
would be secured by an assignment of the Company's OSP partnership
interests which also will give the purchaser(s) a first priority
security interest in all distributions in the form of cash and
other property received by the Company in respect to these
partnership interests. The Company will propose to potential
lenders that the terms and conditions of the financing be those
listed in Exhibit A-1 hereto. The Company proposes that the
security interest be given under the terms and conditions in the
proposed Assignment and Security Agreement in Exhibit A-2 hereto.
The proceeds from the proposed issue and sale of the Note will
be applied by the Company to the retirement of subordinated notes
issued by the Company to NEES in order to fund the Company's
initial equity contributions to both OSP units.
The Company has retained an experienced investment banking
firm to assist it in finding potential lenders and placing the
Note.
Proposed Stock Pledge
_____________________
NEES asks for authorization to give a first-priority pledge of
all of the Stock to the purchaser(s) of the Note as collateral for
the repayment of the Note. NEES proposes that the pledge of the
Stock be under the terms and conditions in the proposed stock
pledge agreement in Exhibit A-3 hereto. Except upon the occurrence
of an event of default under the Note, NEES would be entitled to
exercise all voting rights and receive and retain all dividends in
respect of the pledged Stock. NEES would have no liability with
respect to the repayment of the principal amount of the Note and
interest thereon, except for the pledged Stock. The purpose of the
pledge is to have the Note partially collateralized to obtain a
more favorable interest rate on the Note.
EWG or FUCO Ownership Interest
______________________________
Neither the Company nor NEES has 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, neither the Company nor NEES is a party to, or has
any rights under, a service, sales, or construction agreement with
an EWG or FUCO. We understand that one or more of the other
general partners in OSP has filed for and obtained the status of an
EWG.
None of the proceeds of the transaction proposed will be used
by the Company, NEES, or any affiliated company for acquisition of
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an interest in an EWG or FUCO without further approval from the
Commission.
Item 2. Fees, Commissions and Expenses
_______________________________________
The estimated fees plus expenses in connection with the
proposed issue and sale of the Note, including the cost of services
of an investment banking firm, are set forth in Exhibit G hereto.
Certain services in connection with the proposed transactions,
including services in connection with negotiating the terms of the
Note with a potential investor, will be performed at the actual
cost thereof by New England Power Service Company, an affiliated
service company operating pursuant to Section 13 of the Act and the
Commission's rules thereunder. The services of such company will
also consist of services performed by the Executive and
Administrative Department, the Corporate Department (including
attorneys), the Treasury Department (including accountants), and
the Office Services Department.
Item 3. Applicable Statutory Provisions
________________________________________
1. The proposed issue and sale of the Note is subject to
Sections 6(a), 7, and 12 of the Act and Rule 42.
2. The proposed pledge of the Stock is subject to Sections
6(a), 7, and 12 of the Act and Rule 45(a).
3. The retirement of subordinated notes from the proceeds of
the proposed financing is subject to Sections 9(a), 10
and 12 of the Act and Rule 42.
Item 4. Regulatory Approval
____________________________
No State or Federal Commission (other than the Securities and
Exchange Commission) has jurisdiction over the proposed
transactions.
Item 5. Procedure
__________________
The Company and NEES request that the Commission take action
with respect to this Application/Declaration without a hearing
being held and that an order or orders be issued allowing this
Application/Declaration to become effective as soon as practicable.
Specifically, the Company and NEES request that the Commission
issue an order approving the terms and conditions of the issue and
sale of the Note and the issuance of the Stock pledge.
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The Company and NEES (i) do not request a recommended decision
by a hearing officer, (ii) do not request a recommended decision by
any other responsible officer of the Commission, (iii) hereby
specify that the Division of Corporate Regulation may assist in the
preparation of the Commission's decision, and (iv) hereby request
that there be no 30-day waiting period between the date of issuance
of the Commission's order and the date it is to become effective.
Item 6. Exhibits and Financial Statements
__________________________________________
(a) Exhibits
*A-1 Proposed Draft Terms and Conditions of Note
Agreement
*A-2 Proposed Draft Assignment and Security Agreement
*A-3 Proposed Draft Pledge Agreement
*F Opinion of Counsel
G Schedule of Fees and Expenses
H Proposed Form of Notice
*To be supplied by amendment
(b) Financial Statements **
*1-a Balance sheet of Narragansett Energy Resources
Company as of June 30, 1995, actual and pro forma.
*1-b Balance sheet of NEES and subsidiaries consolidated
as of June 30, 1995, actual and pro forma.
*2-a Statement of Income and Retained Earnings of
Narragansett Energy Resources Company for the
twelve months ended June 30, 1995, actual and pro
forma.
*2-b Statement of Income and Retained Earnings of NEES
and subsidiaries consolidated for the twelve months
ended June 30, 1995, actual and pro forma.
**Pro Forma effect of the issuance of a $33 million
Note has been shown.
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(c) Financial Data Schedules
*1 Financial Data Schedule for the Company as of June
30, 1995
*2 Financial Data Schedule for NEES as of June 30,
1995
Item 7. Statement of Effect on the Quality of the Human Environment
___________________________________________________________________
The transactions proposed by this Application/Declaration do
not involve any major Federal action significantly affecting the
quality of the human environment.
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, each undersigned company has duly caused this
statement to be signed on its behalf, as indicated, by the
undersigned officer thereunto duly authorized by each such company.
NARRAGANSETT ENERGY RESOURCES COMPANY
s/John G. Cochrane
By:_________________________________
John G. Cochrane
Treasurer
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By:_________________________________
Michael E. Jesanis
Treasurer
Date: August 10, 1995
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 No. Description Page
----------- ----------- ----
A-1 Proposed Draft Terms and To be filed by
Conditions of Note Agreement amendment
A-2 Proposed Draft Assignment and To be filed by
Security Agreement amendment
A-3 Proposed Draft Pledge Agreement To be filed by
amendment
F Opinion of Counsel To be filed by
amendment
G Schedule of Estimated Fees Filed herewith
and Expenses
H Proposed Form of Notice Filed herewith
Financial
Statement No. Description Page
------------- ----------- ----
1-a Balance sheet of Narragansett To be filed by
Energy Resources Company as of amendment
June 30, 1995, actual and pro forma
1-b Balance sheet of NEES and To be filed by
subsidiaries consolidated as of amendment
June 30, 1995, actual and pro forma
2-a Statement of Income and Retained To be filed by
Earnings of Narragansett Energy amendment
Resources Company for the twelve
months ended June 30, 1995,
actual and pro forma
2-b Statement of Income and Retained To be filed by
Earnings of NEES and subsidiaries amendment
consolidated for the twelve months
ended June 30, 1995,
actual and pro forma
Financial
Data Schedules Description Page
-------------- ----------- ----
1 Financial Data Schedule for the To be filed by
Company as of June 30, 1995 amendment
2 Financial Data Schedule for NEES To be filed by
as of June 30, 1995 amendment
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EXHIBIT G
_________
Schedule of Estimated Fees and Expenses in Connection
with the Proposed Issue and Sale of
$33 Million Narragansett Energy Resources Company Notes
Fee for filing under the 1935 Act $ 2,000
Services of NEPSCO*:
Executive and Administrative Department 1,000
Corporate Department (including attorneys) 17,500
Treasury Department (including accountants) 10,500
Other Departments 1,000
_________
$ 30,000
Fees and expenses of Financial Advisor 435,000
Fees and expenses of Counsel for the Purchasers 55,000
Rating Agency Fee 5,000
Miscellaneous 13,000
=========
Total $ 540,000
_______________________
* New England Power Service Company (NEPSCO) is 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 are performed at the actual cost
thereof.
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EXHIBIT H
_________
PROPOSED FORM OF NOTICE
________________________
Narragansett Energy Resources Company (the Company), 280
Melrose Street, Providence, Rhode Island, a subsidiary company of
New England Electric System (NEES), a registered holding company,
and NEES have filed an Application/Declaration with this
Commission pursuant to Sections 6(a), 7, 9(a), 10, and 12 of the
Public Utility Holding Company Act of 1935 (the Act) and Rules 42
and 45 thereunder.
The Company is a general partner with 20% interest in each
of two partnerships owning the Ocean State Power Project (OSP).
OSP owns a two-unit combined cycle electric generating facility
located in Burrillville, Rhode Island. These units are currently
in commercial operation.
The Company proposes to issue and sell, on or before
December 31, 1996, one or more long term notes in an aggregate
principal amount not to exceed $33 million (the Note). The Note
will be issued pursuant to a note agreement, the specific terms
of which will be negotiated with the purchaser (the Note
Agreement). The Note will have a maturity of up to 17 years, may
provide for a sinking fund or other mandatory pre-payments, and
may have limitations on callability or refundability depending
upon market conditions. The Company proposes that the Note will
be redeemable at any time at its option, upon reasonable notice,
at the then outstanding principal amount plus accrued interest
and redemption premium, and may include a yield to maturity
premium. The interest rate for the Note will not exceed 12% per
annum. The Note would be secured by an assignment of the
Company's OSP partnership interests which will include a security
interest in distributions to the Company from the OSP
partnerships.
NEES proposes to have the authorization to pledge its stock
in the Company to the purchaser(s) of the Note as limited
security for the Note.
The proceeds from the proposed transactions will be applied
by the Company to the retirement of subordinated notes issued by
the Company to NEES in order to fund the Company's initial equity
contributions to both OSP units.
The Company has retained an experienced investment banking
firm to assist in finding potential lenders and placing the Note.
