<PAGE>
File No. 70-8921
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, DC 20549
AMENDMENT NO. 1
TO
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC SYSTEM
and
NEES ENERGY, INC.
(Name of companies filing this statement)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Kirk L. Ramsauer
Treasurer Associate General Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
(Names and address of agents for service)
<PAGE>
1. Item 1 is hereby amended to read in its entirety as follows:
"New England Electric System (NEES) is a registered holding
company under the Public Utility Holding Company Act of 1935 (the
Act) whose subsidiary companies include New England Power Company,
an electric generation subsidiary (NEP), retail electric utility
subsidiaries (the Retail Companies), New England Power Service
Company (NEPSCO, a service company subsidiary), New England
Electric Resources, Inc. (NEERI), a wholly-owned, non-utility
subsidiary of NEES, an energy company subsidiary, and two electric
power marketing subsidiaries (collectively, the NEES System) and a
proposed new energy marketing subsidiary: AllEnergy Marketing
Company L.L.C., having offices at 3 University Office Park, 95
Sawyer Road, Waltham, Massachusetts 02154.
By its Order dated May 23, 1996 (HCAR No. 26520) (the May
Order) and August 28, 1996 (HCAR No. 26563) (the August Order),
the Commission approved the formation of one or more marketing
companies (Marketing Companies) by NEES. In the May Order the
Commission authorized the formation of Marketing Companies in
Massachusetts, New Hampshire, Rhode Island, Maryland, Delaware,
Pennsylvania, New Jersey, and New York; in the August Order the
Commission authorized the formation of Marketing Companies in
Connecticut, Maine, and Vermont. The May and August Orders
authorized Marketing Companies to: (i) market electric power at
wholesale, (ii) market electric power at retail pursuant to
participation in the New Hampshire retail competition pilot
program and two Massachusetts retail competition pilot programs,
and (iii) provide a broad range of electrical related services,
including, but not limited to, audits, power quality, fuel supply,
repair, maintenance, construction, design, engineering, and
consulting. In the May and August Orders, the Commission reserved
jurisdiction over retail electric sales by Marketing Companies,
except to the extent electric retail marketing is permitted under
the aforementioned New Hampshire and Massachusetts pilot programs,
pending a filing demonstrating that the relevant jurisdiction has
authorized such retail sales. The May and August Orders
authorized NEES to invest not exceeding $15 million in the
Marketing Companies. Pursuant to the May Order, NEES has formed
NEES Energy, Inc. (NEES Energy), a Massachusetts corporation, and
Granite State Energy, Inc. (Granite State Energy), a New Hampshire
corporation, to undertake marketing activities consistent with the
Commission's Orders.
A. AllEnergy LLC Investment
----------------------------
NEES Energy intends to enter into a joint venture with a
subsidiary of Eastern Enterprises (Eastern) to engage in the
marketing of energy and related services and products. The retail
electric utility subsidiaries of NEES serve approximately 1.3
million customers and have peak demand and capacity resources
above 4300 MW and 5500 MW, respectively. Eastern, an exempt
<PAGE>
public utility holding company, owns and operates Boston Gas
Company, New England's largest distributor of natural gas, serving
over 500,000 customers in eastern and central Massachusetts
including Boston, and Midland Enterprises, Inc. a coal and other
dry bulk cargo inland waterway carrier.
NEES Energy proposes to invest, from time to time, not
exceeding $50 million in, and be a voting member of, AllEnergy
Marketing Company, L. L. C., a limited liability corporation to be
formed under the laws of The Commonwealth of Massachusetts on
September 18, 1996 (AllEnergy LLC) pursuant to a Limited Liability
Company Agreement (the LLC Agreement), a copy of which is attached
hereto as Exhibit B-1. NEES Energy proposes to own not exceeding a
fifty percent (50%) voting interest in AllEnergy LLC. The
remaining fifty percent (50%) voting interest in AllEnergy LLC
will initially be owned by AllEnergy Marketing Company, Inc., a
wholly owned subsidiary of Eastern Enterprises (Eastern Sub). The
LLC Agreement makes NEES Energy's obligation to invest in
AllEnergy LLC conditional upon NEES Energy's receipt of investment
authorization from the Commission in a satisfactory form. Third
parties may later invest in owning an interest in AllEnergy LLC
pursuant to the terms of the LLC Agreement.
AllEnergy LLC will engage in the business of marketing and
selling: (i) energy commodities, including electricity, natural
gas, oil and other energy sources as well as options, futures
contracts, forward contracts, collars, spot contracts or swap
contracts related to the choice, purchase or consumption of any
such energy commodity and any other financial products marketed or
used in connection therewith (see, e.g. American Electric Power
Company, Inc., Holding Company Act Release No. 26583, September
27, 1996), and (ii) incidental and reasonably necessary products
and services related to the choice, purchase or consumption of any
such energy commodity, such as, but not limited to, audits, power
quality, fuel supply, repair, maintenance, construction, design,
engineering, and consulting, whether or not sold or provided on a
bundled basis with such natural gas, electricity, oil, or other
energy source(see, e.g. SEI Holdings, Inc., Holding Company Act
Release No. 26581, September 26, 1996). AllEnergy LLC will employ
various risk-reduction measures to limit potential losses that
could be incurred through AllEnergy LLC activities. These
measures may include energy commodity hedging transactions;
provided, however, that AllEnergy LLC will not engage in
speculative trading. Management of AllEnergy LLC will be by its
members, NEES Energy, Eastern Sub, and other entities (if any)
subsequently admitted to membership in AllEnergy LLC. The members
of AllEnergy LLC may delegate powers and authority to officers of
AllEnergy LLC, subject to the restrictions of the LLC Agreement.
AllEnergy LLC has developed a five year business plan to implement
its marketing strategy. Although AllEnergy LLC's initial efforts
will be focused on the Northeast region, AllEnergy LLC may expand
its business to all 50 United States and Canada. AllEnergy LLC
will engage in brokering and retail marketing of electric power
<PAGE>
and natural gas within a state or other jurisdiction only to the
extent permitted or authorized under such state's or other
jurisdiction's laws or programs. (See, e.g. Eastern Utilities
Associates, Holding Company Act Release No. 26586, October 2,
1996). The applicants request that the Commission reserve
jurisdiction over AllEnergy LLC's doing business as outlined in
this filing outside of the United States.
To date, three New England states have initiated programs for
the retail wheeling of electricity. Granite State Energy is
participating in the New Hampshire pilot program to establish
retail electric competition adopted by the New Hampshire Public
Utilities Commission. NEES Energy is participating in two of the
Massachusetts retail electric competition pilot programs approved
by the Massachusetts Department of Public Utilities. On August 7,
1996, the Governor of Rhode Island signed into law the Electric
Restructuring Act of 1996 (96-H 8124 SUB B; the RI Act). The RI
Act authorizes retail wheeling in Rhode Island on the following
timetable for the indicated customer classes:
July 1, 1997 -- All new customers over 200 KW, existing
manufacturing customers over 1500 KW, and all state accounts
January 1, 1998 -- All manufacturing customers over 200 KW,
and all municipal accounts
July 1, 1998 -- All remaining customers
The RI Act provides that, if 40 percent of New England has
customer choice before July 1998, all Rhode Island customers will
have choice within three months, regardless of the above
timetable.
Gas deregulation in Massachusetts is proceeding on a company
by company basis. Boston Gas Company has a rate case on file with
the Massachusetts Department of Public Utilities setting forth a
plan to transition from traditional bundled service to a
"distribution only" company (by exiting the merchant function of
buying and arranging transport of gas) by the end of 1999 for all
commercial/industrial and residential customers; Boston Gas
Company's system is presently open for its largest customer class.
AllEnergy LLC may choose to form one or more subsidiaries in
order, among other things, to pursue its business in a particular
state; AllEnergy LLC requests authority to form such subsidiaries.
AllEnergy LLC will make an initial equity contribution not
exceeding $100,000 in any such subsidiary. The form of AllEnergy
LLC's initial equity investment, together with the formalities of
the subsidiary's formation, may differ based on the type of entity
organized: if such a subsidiary is a corporation, AllEnergy LLC's
initial investment may involve a purchase of common shares; if
such a subsidiary is a limited liability corporation or a
partnership, AllEnergy LLC may enter into an organization
<PAGE>
agreement and purchase a membership or partnership interest.
Subsequent capital contributions or open account advances without
interest, loans, or extension of credit, from AllEnergy LLC to any
such subsidiary in accordance with Rule 45 of the Act are exempt
from the requirement of authorization from the Commission.
AllEnergy LLC may have opportunities to acquire businesses to
complement its business such as, without limitation, engineering
services providers and propane gas businesses, and rather than
acquire assets may prefer to acquire the securities thereof, but
will not acquire any securities of third parties without the
further authorization of the Commission. The applicants request
that the Commission reserve jurisdiction over AllEnergy LLC's
acquisition of such other businesses.
AllEnergy LLC requests authorization to acquire or construct
physical assets that are incidental and reasonably necessary in
the day-to-day conduct of its operations.
Prior to the issuance of the Commission's Order in connection
with this filing, AllEnergy LLC may have entered into a commitment
to acquire a propane gas marketing business located in the Eastern
United States; the applicants request authorization to acquire an
interest in the business of such propane gas marketing business,
paying therefore not exceeding $3.5 million. The terms of such
acquisition will likely require, without limitation, (i) the
payment or cancellation of the acquired entity's outstanding debt
prior to the acquisition, (ii) execution of agreements by key
employees of the acquired entity to continue employment with such
entity for a period of time following the acquisition, (iii) the
assignment, without violation of the terms thereof, of material
contracts, contract rights, and leases , and other rights and
commitments of the acquired entity to AllEnergy LLC, and (iv) the
making of customary representations and warranties by the acquired
entity and AllEnergy LLC, respectively.
AllEnergy LLC will not acquire any utility assets or gas
distribution facilities, as those terms are defined under the Act
and regulations and orders issued thereunder, and will, therefore,
not be either an electric or gas utility under the Act.
NEES and/or NEES Energy may also be required to supply
guarantees or other credit support agreements for the benefit of
AllEnergy LLC in the ordinary course of AllEnergy LLC's business
including, without limitation, in connection with its execution of
office leases, or of long term gas or electrical supply contracts.
NEES and NEES Energy request authorization to provide such
guarantees or credit support in amounts not to exceed, in the
aggregate and inclusive of guarantees or credit support provided
in connection with short term borrowing as set forth in Section E
of this filing, $20 million.
<PAGE>
B. LLC Agreement Loan and Transfer Provisions
----------------------------------------------
Section 3.7 of the LLC Agreement provides that in the event
an AllEnergy LLC member defaults in making a required capital
contribution to AllEnergy LLC, the non-defaulting member may, at
its discretion, advance to AllEnergy LLC on behalf of the
defaulting member all or a portion of such required capital
contribution (a Member Default Loan). The defaulting member is
responsible for repaying the Member Default Loan to the member
making such loan in accordance with Section 3.7.3 of the LLC
Agreement. In the event that (i) the non-defaulting member elects
not to make such a Member Default Loan, or (ii) the Member Default
Loan is not repaid, then the members' percentage interests in
AllEnergy LLC shall, at the election of the non-defaulting member,
be adjusted to reflect the failure of the defaulting member to
either make the required capital contribution, or repay the Member
Default Loan, as the case may be, in accordance with a formula set
forth in Section 3.7.4 of the LLC Agreement. The applicants
request authorization to make or repay any such Member Default
Loan, or effect such adjustments of member interests, pursuant to
the terms of the LLC Agreement.
Members of AllEnergy LLC may effect a transfer of all or a
portion of their interest therein in accordance with Article 9 of
the LLC Agreement. Such transfers may include required regulatory
transfers, transfers to affiliates, transfers to another member of
AllEnergy LLC, and transfers to third parties. Section 9.3 of the
LLC Agreement provides that, in the event an AllEnergy LLC member
receives an offer to purchase its interest therein and intends to
transfer its interest pursuant to such offer, or must make a
required regulatory transfer of all or a portion of its interest,
the other member shall have a right to purchase such interest at
the offer price, or at the fair market value of the transferred
portion of such interest (in the case of a required regulatory
transfer), (the Purchase Right). The applicants request
authorization to make from time to time such transfers, and to
exercise such Purchase Right, pursuant to the terms of the LLC
Agreement.
The LLC Agreement provides a mechanism whereby either NEES
Energy or Eastern Sub may trigger a withdrawal of either party
from AllEnergy LLC by means of a buy/sell transaction (the
Buy/Sell Provision). In summary, the Buy/Sell Provision permits
either party to withdraw by giving the other party a notice of
intention to withdraw indicating a cash price at which the
withdrawing party would be willing to either buy or sell its
interest in AllEnergy LLC. The party receiving such notice may
then either buy the other party's AllEnergy LLC interest, or sell
its own AllEnergy LLC interest to such other party, at such price.
The Buy/Sell Provision may, among other things, be used to address
conflicts between NEES Energy and Eastern Sub in connection with
AllEnergy LLC which the parties are unable to resolve. The
<PAGE>
Buy/Sell Provision is set forth in detail in Section 9.6 of the LLC
Agreement (see Exhibit B-1). The applicants request authorization
to consummate a Buy/Sell Provision transaction, should this become
necessary, without further approval from the Commission.
C. Financing of AllEnergy LLC Investment
-----------------------------------------
NEES proposes to provide initial financing for NEES
Energy's investment in AllEnergy LLC by making capital
contributions and/or loans to NEES Energy from time to time,
provided that such NEES financing shall not be in excess of $50
million in the aggregate outstanding at any one time, including
any short term loans made by NEES and/or NEES Energy pursuant to
the authority requested in Item 1, Part E hereof and any amounts
provided by NEES and/or NEES Energy which are used by AllEnergy
LLC to acquire the assets or securities of third parties, or to
invest in a subsidiary, pursuant to the authority requested in
Item 1, Part A hereof, and excluding any guarantees from NEES
and/or NEES Energy supplied pursuant to the authority requested in
the last paragraph of Item 1, Part A. Any such loans will be in
the form of non-interest bearing subordinated notes payable in
twenty years or less from the date of issue (see Exhibit B-2
hereto). NEES Energy may prepay any or all of such outstanding
notes, in whole or in part, at any time and from time to time
without premium or penalty. NEES shall only make such loans
provided: (a) there shall be in full force and effect appropriate
orders of all regulatory authorities having jurisdiction in the
premises; (b) the making of such loan shall not contravene any
provision of law or any provision of the certificate of
incorporation or by-laws of NEES Energy or any agreement binding
upon NEES Energy; and (c) the making of such loan shall not
contravene any provision of law or any provision of the Agreement
and Declaration of Trust of NEES. Subsequent capital
contributions or open account advances without interest, loans, or
extensions of credit, from NEES to NEES Energy in accordance with
the terms of Rule 45 of the Act, are exempt from the requirement of
authorization by the Commission. It is proposed that the above
investments be authorized through December 31, 2001.
D. Personnel
-------------
AllEnergy LLC staffing is expected to begin with a small
group of employees. It is intended that four employees of NEPSCO
will be assigned to AllEnergy LLC on a full-time basis; to the
extent any more NEPSCO personnel are assigned to AllEnergy LLC,
they will become employees of AllEnergy LLC. Other than such four
NEPSCO employees, AllEnergy LLC will have its own employees and
only rely on NEPSCO or an Eastern subsidiary for administrative
services such as accounting, tax, legal, information services,
insurance, and personnel management. All costs associated with
<PAGE>
these NEPSCO services, and with services of the above four NEPSCO
employees assigned to AllEnergy LLC on a full-time basis, would be
fully reimbursed on a cost basis by AllEnergy LLC in accordance
with Rules 90 and 91 of the Act; reimbursements for these costs
will be on a thirty-day cycle basis.
E. Short-term Borrowing
------------------------
AllEnergy LLC intends to engage in short-term borrowing from
third parties pursuant to Rule 52(b) of the Act. Such borrowings
will be solely for the purpose of financing AllEnergy LLC's
existing business; the interest rates and maturity dates of any
debt security issued to an associate company of AllEnergy LLC will
be designed to parallel the effective cost of capital of that
associate company.
In connection with such borrowings, it may be necessary for
NEES and/or NEES Energy to enter into guarantee or other credit
support agreements with lenders. NEES and NEES Energy request
authorization to enter into such agreements from time to time in
connection with such borrowings.
F. Compliance with Rule 53
---------------------------
Neither NEES nor any subsidiary currently has an ownership
interest in an exempt wholesale generator ("EWG") as defined in
Section 32 of the Act or a foreign utility company ("FUCO") as
defined in Section 33 of the Act. Additionally, neither NEES nor
any subsidiary is a party to, or has any rights under, a service,
sales, or construction agreement with an EWG or FUCO. By its Order
dated April 15, 1996 (HCAR 35-26504), the Commission has
authorized financings by NEES and/or NEERI for the purpose of
acquiring EWGs and FUCOs as set forth in their
Application/Declaration in File No. 70-8783. In the event that
the total amount of authority requested in the above-referenced
Application/Declaration (File No. 70-8783) is invested in
connection with EWGs and FUCOs, NEES' "aggregate investment"
(determined in accordance with Rule 53(a)(1)(i)) in EWGs and FUCOs
would not exceed 50% of NEES' "consolidated retained earnings" (as
defined in Rule 53(a)(1)(ii)) in compliance with the provisions
set forth in Rule 53 under the Act. NEES and its subsidiaries
shall comply with the requirements of Rules 53 and 54 of the Act in
connection with EWG and FUCO acquisitions and financings. No
funds or borrowings requested in this filing will be used by NEES,
NEERI, NEES Energy, AllEnergy LLC, or any associated company to
invest in EWGs and/or FUCOs.
<PAGE>
G. Rule 24 Certificates
------------------------
NEES Energy and AllEnergy LLC shall file certificates with
the Commission pursuant to the terms and conditions of Rule 24
under the Act on an annual basis, within 90 days of the end of each
year, in connection with the business of AllEnergy LLC. As part of
such Rule 24 filings, NEES Energy and AllEnergy LLC shall provide
the Commission with: (1) a report of the number of permanent
employees assigned to AllEnergy LLC during such period, (2) a
balance sheet, twelve months ending income statement, and
statement of cash flow for AllEnergy LLC, and (3) a description of
the general category of energy commodity related services and
products provided by AllEnergy LLC during such period.
In addition, AllEnergy LLC shall file a Rule 24 certificate
with the Commission informing it of any of the following
transactions, within thirty (30) days following the consummation
of any such transaction: (i) the formation of any subsidiary of
AllEnergy LLC, (ii) a Buy/Sell Provision transaction, or (iii) any
other transaction resulting in a change in the ownership of
membership interests in AllEnergy LLC.
Finally, within 90 days after the end of each calendar
quarter, AllEnergy LLC will file a Rule 24 certificate covering
the transactions effected pursuant to the short-term borrowing
authority requested in Section E hereof during such quarter. Such
certificate will show the dates and amounts of all new money
borrowings, the names of the lenders, the maximum concurrent
amount of notes outstanding to the lenders, the aggregate total
outstanding at any one time, and the aggregate total outstanding
at the end of such quarter. Each certificate will include a
statement of whether any of the funds borrowed were paid by a
subsidiary company to NEES through dividends for the purpose of
NEES acquiring an interest in an exempt wholesale generator or
foreign utility company. The amount of such dividend payment must
be given. The final certificate of notification will be
accompanied by the required past-tense opinion of counsel."
2. Item 6 (a) is hereby amended by filing the following
exhibits:
*B-1 LLC Agreement
G-1 Financial Data Schedule for NEES
(Parent Company Only)
G-2 Financial Data Schedule for NEES (Consolidated)
G-3 Financial Data Schedule for NEES Energy
<PAGE>
Pursuant to Section 22 and Rule 104, the applicants hereby
object to the public disclosure of any part or parts of Exhibit B-1
and request confidential treatment therefor. The information
contained in Exhibit B-1 is commercially sensitive and the public
disclosure of such information has the potential to harm
commercial prospects for AllEnergy LLC and/or the applicants.
Since the contents of Exhibit B-1 are of a technical nature or
concern the rights and obligations as between the private parties
to the LLC Agreement, public disclosure of such information is not
necessary or appropriate in the public interest or for the
protection of consumers or investors.
*Filed under cover of Form SE
3. Item 6(b) is hereby amended by filing the following financial
statements:
(b) Financial Statements
1-A Balance Sheet of NEES at June 30, 1996,
Actual and Pro Forma (Parent Company Only)
1-B Statement of Income and Retained Earnings
for NEES for twelve months ended June 30, 1996,
Actual and Pro Forma (Parent Company Only)
2-A Consolidated Balance Sheet of NEES at
June 30, 1996, Actual and Pro Forma
2-B Statement of Consolidated Income for NEES for
twelve months ended June 30, 1996, Actual and
Pro Forma
3-A Balance Sheet of NEES Energy at June 30, 1996,
Actual and Pro Forma
3-B Statement of Income and Retained Earnings
for NEES Energy for twelve months ended June 30, 1996,
Actual and Pro Forma
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this Amendment No. 1 to their Application/Declaration on Form U-1
to be signed on their behalf, as indicated by the undersigned
officers thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
_______________________________________
Michael E. Jesanis, Treasurer
NEES ENERGY, INC.
s/John G. Cochrane
_______________________________________
John G. Cochrane, Treasurer
Dated: October 31, 1996
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 therefore.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. Description Page
- ----------- ----------------------------- ---------------
B-1 LLC Agreement Filed under
cover of
Form SE
G-1 Financial Data Schedule Filed herewith
for NEES (Parent Company Only)
G-2 Financial Data Schedule Filed herewith
for NEES (Consolidated)
G-3 Financial Data Schedule Filed herewith
for NEES Energy
FINANCIAL STATEMENT INDEX
Financial
Statement No. Description Page
- ------------- ----------- ----
1-A Balance Sheet of NEES at Filed herewith
June 30, 1996, Actual and
Pro Forma (Parent Company
only)
1-B Statement of Income and Filed herewith
Retained Earnings for
NEES for twelve months ended
June 30, 1996, Actual and
Pro Forma (Parent Company
only)
2-A Consolidated Balance Filed herewith
Sheet of NEES at June 30,
1996, Actual and Pro Forma
2-B Statement of Consolidated Filed herewith
Income for NEES for
twelve months ended
June 30, 1996, Actual and
Pro Forma
3-A Balance Sheet of Filed herewith
NEES Energy at June 30,1996,
Actual and Pro Forma
3-B Statement of Income for Filed herewith
NEES Energy for twelve
months ended June 30, 1996,
Actual and Pro Forma
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME AND
RETAINED EARNINGS OF NEW ENGLAND ELECTRIC SYSTEM (PARENT
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FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 12-MOS
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<TOTAL-ASSETS> 1,696,518
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<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,652,925
0
0
<LONG-TERM-DEBT-NET> 0
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0
<CAPITAL-LEASE-OBLIGATIONS> 0
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<OPERATING-INCOME-LOSS> (3,770)
<OTHER-INCOME-NET> 224,271
<INCOME-BEFORE-INTEREST-EXPEN> 220,501
<TOTAL-INTEREST-EXPENSE> 333
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0
<EARNINGS-AVAILABLE-FOR-COMM> 220,168
<COMMON-STOCK-DIVIDENDS> 153,328
<TOTAL-INTEREST-ON-BONDS> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS OF NEW ENGLAND
ELECTRIC SYSTEM, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 12-MOS
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<TOTAL-NET-UTILITY-PLANT> 3,889,104
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<TOTAL-DEFERRED-CHARGES> 389,639
<OTHER-ASSETS> 0
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<COMMON> 64,970
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<RETAINED-EARNINGS> 850,939
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,650,222
0
132,016
<LONG-TERM-DEBT-NET> 1,609,179
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 195,902
<LONG-TERM-DEBT-CURRENT-PORT> 52,585
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,506,772
<TOT-CAPITALIZATION-AND-LIAB> 5,146,676
<GROSS-OPERATING-REVENUE> 2,317,179
<INCOME-TAX-EXPENSE> 139,481
<OTHER-OPERATING-EXPENSES> 1,823,448
<TOTAL-OPERATING-EXPENSES> 1,962,929
<OPERATING-INCOME-LOSS> 354,250
<OTHER-INCOME-NET> 5,891
<INCOME-BEFORE-INTEREST-EXPEN> 360,141
<TOTAL-INTEREST-EXPENSE> 124,013
<NET-INCOME> 220,061
8,510
<EARNINGS-AVAILABLE-FOR-COMM> 220,061
<COMMON-STOCK-DIVIDENDS> 153,221
<TOTAL-INTEREST-ON-BONDS> 110,343
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> $3.39
<EPS-DILUTED> $3.39
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET OF NEES ENERGY, INC.,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
FINANCIAL STATEMENT 1-A
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Balance Sheet
At June 30, 1996
(Actual and Pro Forma)
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
ActualAdjustments Pro Forma
----------------- ---------
(In Thousands)
<S> <C> <C> <C>
Investments:
Common stocks of subsidiaries, at equity $1,619,806 $1,619,806
Notes of subsidiaries 25,784 $50,000 75,784
Other investments 3,652 3,652
---------- -----------------
Total investments 1,649,242 50,000 1,699,242
---------- -----------------
Current assets:
Cash 113 113
Temporary cash investments - subsidiary companies 1,225 1,225
Accounts receivable 2 2
Interest and dividends receivable of subsidiaries 43,047 43,047
Other current assets 44 44
---------- -----------------
Total current assets 44,431 44,431
---------- -----------------
Deferred federal income taxes 2,845 2,845
---------- -----------------
$1,696,518 $50,000$1,746,518
========== =================
CAPITALIZATION AND LIABILITIES
------------------------------
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Issued - 64,969,652 shares $ 64,970 $ 64,970
Paid-in capital 736,566 736,566
Retained earnings (including $611,566,000 of
undistributed subsidiary earnings) 851,389 851,389
---------- -----------------
Total common share equity 1,652,925 1,652,925
---------- -----------------
Current liabilities:
Short-term debt $50,000 50,000
Accounts payable 895 895
Other accrued expenses 1,439 1,439
Dividends payable 34,194 34,194
---------- -----------------
Total current liabilities 36,528 50,000 86,528
---------- -----------------
Deferred credits 7,065 7,065
---------- -----------------
$1,696,518 $50,000$1,746,518
========== =================
</TABLE>
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Balance Sheet at June 30, 1996 are as follows:
Debit - Notes of subsidiaries $50,000,000
Credit - Short-term debt $50,000,000
To reflect (1) a subordinated interest-free note from New England Electric
System in the amount of $50 million to NEES Energy, Inc. and (2) the funding of
this contribution through the issuance of short-term debt.
<PAGE>
FINANCIAL STATEMENT 1-B
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Statement of Income
Twelve Months Ended June 30, 1996
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual AdjustmentsPro Forma
------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Equity in earnings of subsidiaries $ 223,691 $ 223,691
Interest income - subsidiaries 470 470
--------- ----------------
Total income from subsidiaries 224,161 224,161
Other income 110 110
--------- ----------------
Total income 224,271 224,271
Corporate and fiscal expenses (includes
$1,798,000 for cost of services billed
by an affiliated company) 4,303 4,303
Federal income taxes (533) $(1,750) (2,283)
--------- ----------------
Income before interest 220,501 1,750 222,251
Interest 333 5,000 5,333
--------- ----------------
Net income $ 220,168 $(3,250)$ 216,918
========= ================
Statement of Retained Earnings
Retained earnings at beginning of period$ 784,549
Net income 220,168
Dividends declared on common shares (153,328)
---------
Retained earnings at end of period $ 851,389
=========
</TABLE>
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Statement of Income for the twelve months ended
June 30, 1996 are as follows:
Debit - Interest $5,000,000
Interest calculated on $50,000,000 principal amount of New Note issue at
assumed interest rate of 10 percent.
Credit - Federal income taxes $1,750,000
To reflect the federal income tax effect as a result of the above
adjustment to interest expense.
<PAGE>
FINANCIAL STATEMENT 2-A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Balance Sheet
At June 30, 1996
(Actual and Pro Forma)
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Utility plant, at original cost $5,581,144 $5,581,144
Less accumulated provisions for depreciation
and amortization 1,783,968 1,783,968
---------- ------- ----------
3,797,176 3,797,176
Net investment in Seabrook 1 under rate settlement 7,605 7,605
Construction work in progress 84,323 84,323
---------- ------- ----------
Net utility plant 3,889,104 3,889,104
---------- ------- ----------
Oil and gas properties, at full cost 1,272,417 1,272,417
Less accumulated provision for amortization 1,063,471 1,063,471
---------- ------- ----------
Net oil and gas properties 208,946 208,946
---------- ------- ----------
Investments:
Nuclear power companies, at equity 47,524 47,524
Other subsidiaries, at equity 38,322 $50,000 88,322
Other investments, at cost 90,134 90,134
---------- ------- ----------
Total investments 175,980 50,000 225,980
---------- ------- ----------
Current assets:
Cash 2,759 2,759
Accounts receivable, less reserves of $20,226,000 255,710 255,710
Unbilled revenues 60,139 60,139
Fuel, materials and supplies, at average cost 83,385 83,385
Prepaid and other current assets 81,014 81,014
---------- ------- ----------
Total current assets 483,007 483,007
---------- ------- ----------
Deferred charges and other assets 389,639 389,639
---------- ------- ----------
$5,146,676 $50,000 $5,196,676
========== ======== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Issued - 64,969,652 shares
Outstanding - 64,898,262 shares $ 64,970 $ 64,970
Paid-in capital 736,814 736,814
Retained earnings 850,939 850,939
Treasury stock - 71,390 shares (2,501) (2,501)
---------- ------- ----------
Total common share equity 1,650,222 1,650,222
Minority interests in consolidated subsidiaries 47,697 47,697
Cumulative preferred stock of subsidiaries 132,016 132,016
Long-term debt 1,609,179 1,609,179
---------- ------- ----------
Total capitalization 3,439,114 3,439,114
---------- ------- ----------
Current liabilities:
Long-term debt due within one year 52,585 52,585
Short-term debt 195,902 $50,000 245,902
Accounts payable 132,163 132,163
Accrued taxes 31,289 31,289
Accrued interest 26,857 26,857
Dividends payable 37,626 37,626
Other current liabilities 113,743 113,743
---------- ------- ----------
Total current liabilities 590,165 50,000 640,165
---------- ------- ----------
Deferred federal and state income taxes 755,666 755,666
Unamortized investment tax credits 92,575 92,575
Other reserves and deferred credits 269,156 269,156
---------- ------- ----------
$5,146,676 $50,000 $5,196,676
========== ======= ==========
</TABLE>
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARES
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Balance Sheet at June 30, 1996 are as follows:
Debit - Other subsidiaries, at equity $50,000,000
Credit - Short-term debt $50,000,000
To reflect an increase in investment in a subsidiary, at equity due to the
issuance of short-term debt by a wholly-owned subsidiary.
<PAGE>
FINANCIAL STATEMENT 2-B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statement of Consolidated Income
Twelve Months Ended June 30, 1996
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Operating revenue $2,317,179 $2,317,179
---------- ------- ----------
Operating expenses:
Fuel for generation 276,803 276,803
Purchased electric energy 513,168 513,168
Other operation 511,184 511,184
Maintenance 127,853 127,853
Depreciation and amortization 254,747 254,747
Taxes, other than income taxes 139,693 139,693
Income taxes 139,481 $(1,750) 137,731
---------- ------- ----------
Total operating expenses 1,962,929 (1,750) 1,961,179
---------- ------- ----------
Operating income 354,250 1,750 356,000
Other income:
Allowance for equity funds used during
construction 2,471 2,471
Equity in income of generating companies 10,710 10,710
Other income (expense), net (7,290) (7,290)
---------- ------- ----------
Operating and other income 360,141 1,750 361,891
---------- ------- ----------
Interest:
Interest on long-term debt 110,343 110,343
Other interest 22,048 $ 5,000 27,048
Allowance for borrowed funds used during
construction (8,378) (8,378)
---------- ------- ----------
Total interest 124,013 5,000 129,013
---------- ------- ----------
Income after interest 236,128 (3,250) 232,878
Preferred dividends of subsidiaries 8,510 8,510
Minority interests 7,557 7,557
---------- ------- ----------
Net income (loss) $ 220,061 $(3,250) $ 216,811
========== ======= ==========
Average common shares 64,906,229 64,906,229
Net income (loss) per average common share $3.39 $(.05) $3.34
Statement of Retained Earnings
Retained earnings at beginning of period $ 784,549
Net income 220,061
Dividends declared on common shares (153,221)
Premium on redemption of preferred stock (450)
---------
Retained earnings at end of period $ 850,939
=========
</TABLE>
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARES
The pro forma adjustments to show the estimated effect of the proposed
transactions as applied to the foregoing Statement of Income for the twelve
months ended June 30, 1996 are as follows:
Debit - Other interest $5,000,000
Interest calculated on $50,000,000 principal amount of New Note issued at
assumed interest rate of 10 percent.
Credit - Income taxes $1,750,000
To reflect the federal income tax effect as a result of the above
adjustment to interest expense.
<PAGE>
FINANCIAL STATEMENT 3-A
NEES ENERGY, INC.
Balance Sheet
At June 30, 1996
(Actual and Pro Forma)
(Unaudited)
ASSETS
------
Actual Adjustments Pro Forma
------ ----------- ---------
(In Thousands)
Investment in AllEnergy LLC $0 $50,000 $50,000
---- ------- -------
$0 $50,000 $50,000
==== ======= =======
PARENT COMPANY'S INVESTMENT AND LIABILITIES
-------------------------------------------
Long-term note payable to parent $0 $50,000 $50,000
---- ------- -------
$0 $50,000 $50,000
==== ======= =======
<PAGE>
NEES ENERGY, INC.
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Balance Sheet at June 30, 1996 are as follows:
Debit - Cash $50,000,000
Credit - Long-term note payable to parent $50,000,000
To reflect cash received from New England Electric System.
Debit - Investment in AllEnergy LLC $50,000,000
Credit - Cash $50,000,000
To reflect the use of the above non-interest bearing note proceeds to
fund a proposed 50 percent investment in AllEnergy Marketing Company, L.L.C.
<PAGE>
EXHIBIT 3-B
There was no income statement for NEES Energy, Inc. for the twelve
months ended June 30, 1996.
