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File No. 33-59775
Rule 424(b)(3)
160,000 COMMON SHARES
Par Value $1 Per Share
[LOGO] NEW ENGLAND ELECTRIC SYSTEM
(A Voluntary Association)
New England Electric System (the Company) has registered 160,000 of
its Common Shares, $1.00 par value (the Common Shares), which will be
available to be offered by this Prospectus in connection with an acquisition
of Nantucket Electric Company (NEC).
The Common Shares covered by this Prospectus will be issued by the
Company in exchange for shares of capital stock of NEC. Underwriting
discounts or commissions will generally not be paid by the Company.
This Prospectus, as amended or supplemented if appropriate, has also
been prepared for use by the persons who have or will receive Common Shares
issued by the Company in the acquisition of NEC, including Common Shares
sold hereunder, and who wish to offer and sell such Common Shares, on terms
then obtainable, in transactions in which they may be deemed underwriters
within the meaning of the Securities Act of 1933. Any profits realized on
such sales by such persons may be regarded as underwriter compensation
within the meaning of the Securities Act of 1933.
The Common Shares of the Company are listed on the New York and Boston
Stock Exchanges under the symbol "NES." On March 1, 1996, the last reported
sale price of the Common Shares on the New York and Boston Stock Exchanges
composite tape was $38-5/8 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Upon the merger of NEC with a subsidiary of the Company, holders of
NEC common shares are entitled to receive 3.4646 common shares of NEES in
exchange for each share of the stock of NEC, and to the extent a fractional
share of NEES common shares results from such, a cash payment of $39.1688
times such fraction. No fractional shares will be issued.
This Prospectus is dated March 26, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the 1934 Act) and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(SEC). Certain information, as of particular dates, with respect to the
Company's directors and officers, their remuneration, and any material interest
of such persons in transactions with the Company is disclosed in proxy
statements distributed to shareholders of the Company and filed with the SEC.
Such reports, proxy statements, and other information can be inspected and
copied at the public reference facilities maintained by the SEC at its
principal office at 450 Fifth Street, N.W., Washington, D.C. and at the
regional offices of the SEC located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the SEC, at its principal office, at
prescribed rates. The Company's Common Shares are listed on the New York and
Boston Stock Exchanges. Reports, proxy statements, and other information
concerning the Company can be inspected at the offices of these stock
exchanges: New York Stock Exchange, Inc., 20 Broad Street, New York, New York;
Boston Stock Exchange Incorporated, One Boston Place, Boston, Massachusetts.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this prospectus the following
documents heretofore filed with the SEC pursuant to the 1934 Act:
a) The Company's Annual Report on Form 10-K for the year ended December 31,
1994, which incorporates by reference consolidated financial statements of
the Company as of December 31, 1994, and for the three years in the period
ended December 31, 1994, and incorporates by reference the related report
of Coopers & Lybrand L.L.P., independent accountants.
b) The Company's definitive Proxy Statement, dated March 11, 1996, for the
Annual Meeting of Shareholders held on April 23, 1996.
c) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995, and September 30, 1995.
d) The Company's Current Reports on Form 8-K dated January 19, 1995,
February 9, 1995, March 6, 1995, March 22, 1995, May 22, 1995, July 5, 1995,
August 23, 1995, September 11, 1995, October 3, 1995, February 7, 1996, and
February 16, 1996.
All documents filed by the Company with the SEC pursuant to Sections 13(a),
13(c), 14, or 15(d) of the 1934 Act subsequent to the date of this prospectus
and prior to the termination of the offering made by this prospectus shall be
incorporated herein by reference and shall be deemed to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part hereof.
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THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM
A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST
DIRECTED TO THE TREASURER AT THE ADDRESS PROVIDED BELOW OF SUCH PERSON, A COPY
OF ANY OR ALL OTHER DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE
INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, AS WELL AS A COPY OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR
1995.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
the Treasurer, New England Electric System, 25 Research Drive, Westborough,
Massachusetts 01582, (508) 389-2000.
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SUMMARY INFORMATION
The following material is qualified in its entirety by the detailed
information and financial statements included elsewhere in this prospectus,
including the information incorporated by reference.
THE OFFERING
Company New England Electric System
25 Research Drive
Westborough, Massachusetts 01582
(508) 389-2000
NEC (1) Nantucket Electric Company
2 Fairgrounds Road
Nantucket, Massachusetts 02554-0179
(508) 228-1870
Securities Offered Not exceeding 160,000 of the Company's Common Shares
Use of Proceeds Acquisition of outstanding Capital Stock of NEC
Listed New York and Boston Stock Exchanges (Symbol: NES)
Latest Quarterly 59 cents per share payable on April 1, 1996
Dividend
THE COMPANY
Business Electric utility holding company owning outstanding
common stock of the following subsidiaries (with
percentage of ownership):
Granite State Electric Company (100%)
Massachusetts Electric Company (100%)
Nantucket Cable Electric Company (100%)
The Narragansett Electric Company (100%)
Narragansett Energy Resources Company (100%)
New England Electric Resources, Inc. (100%)
New England Electric Transmission Corporation (100%)
New England Energy Incorporated (100%)
New England Hydro-Transmission Corporation (50.4%)
New England Hydro-Transmission Electric Company, Inc.
(50.4%)
New England Power Company (100%)
New England Power Service Company (100%)
Service Area Cities and towns in parts of Massachusetts and Rhode
Island and a portion of New Hampshire
Customers Approximately 1,300,000
(1) For Summary Information concerning NEC, please see the March 29, 1995,
NEC Proxy Statement and the NEC 1994 Report to Stockholders (together, the "NEC
Documents").
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Share Control
For a discussion of the NEC shareholder vote needed to approve the
acquisition of NEC by the Company and any share control matters, please see the
NEC Documents, which have been delivered to all NEC stockholders.
Regulatory Requirements
Regulatory approvals are required from the Securities and Exchange
Commission (SEC) under the Public Utility Holding Company Act of 1935 (the 1935
Act), the Federal Energy Regulatory Commission (FERC), and the Massachusetts
Department of Public Utilities (MDPU) for consummation of the transaction. The
Company has obtained these approvals.
Appraisal Rights of Dissenting Stockholders
Please see the NEC Documents for a discussion of any appraisal rights of
dissenting NEC stockholders.
Tax Consequences
For a brief statement of tax consequences of the transaction, refer to Tax
Consequences below.
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<TABLE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
NEW ENGLAND ELECTRIC SYSTEM
(In thousands except share and per share data)
<CAPTION>
Twelve Months Ended Years Ended December 31,
December 31, 1995 -----------------------------------------------------------
(audited) 1994 1993 1992 1991 1990
------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenue $2,271,712 $2,243,029$2,223,978 $2,181,676 $2,094,378 $1,908,826
Net income $ 204,757 $ 199,426$ 190,223 $ 185,037 $ 179,810 $ 262,050
Average common shares 64,944,18764,969,652 64,969,652 64,969,652 64,916,59963,818,386
Net income per average share $ 3.15 $ 3.07 $ 2.93 $ 2.85 $ 2.77 $ 4.11*
Dividends declared per share $ 2.345 $ 2.285 $ 2.22 $ 2.14 $ 2.07 $ 2.04
Book value per share-period end $ 25.13 $ 24.33 $ 23.55 $ 22.88 $ 22.17 $ 21.43
Total assets $5,190,876 $5,084,841 $4,795,878 $4,584,796 $4,450,077 $4,407,514
Long-term debt and
preferred stock $1,846,146 $1,733,424 $1,672,037 $1,708,613 $1,815,511 $1,879,845
*Includes $1.80 per share due to the reversal of a portion of a 1988 write-down.
As of December 31, 1995
(In Thousands)
(audited)
------------------------
Actual (1) Ratio
---------- -----
Capitalization:
Long-term Debt $1,699,130 48%
Minority Interest in
Consolidated Subsidiaries 48,912 1%
Preferred Stock 147,016 4%
Common Share Equity 1,631,779 47%
---------- ----
Total $3,526,837 100%
Total Assets $5,190,876
<FN>
(1) Pro Forma effects of this transaction are immaterial.
Note: For Selected Financial Information on NEC, see the NEC 1994, 1993, and 1992 Reports to Stockholders.
</FN>
</TABLE>
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COMMON SHARE PRICE RANGE AND DIVIDENDS
The high and low prices of the Common Shares of the Company, as reported in
The Wall Street Journal for the New York Stock Exchange -- Composite
Transactions, were:
Dividends
Year High Low Declared
---- ---- --- ---------
1993
----
First Quarter $42-1/4 $36-7/8 $.54
Second Quarter $42-7/8 $39-3/8 $.56
Third Quarter $43-3/8 $40-3/4 $.56
Fourth Quarter $42 $37 $.56
1994
----
First Quarter $39 $35-1/8 $.56
Second Quarter $37-5/8 $31-1/2 $.575
Third Quarter $34 $28-7/8 $.575
Fourth Quarter $32-7/8 $29-1/2 $.575
1995
----
First Quarter $34-1/4 $30-5/8 $.575
Second Quarter $35-1/4 $29-5/8 $.59
Third Quarter $37-1/4 $32-7/8 $.59
Fourth Quarter $40 $37 $.59
1996
----
First Quarter $40-5/8 $38-3/8 $.59
(through March 1,
1996)
The reported last sale price of the Common Shares on the New York Stock
Exchange -- Composite Transactions on March 1, 1996, was $38-5/8 per share.
Book value per share on December 31, 1995, was $25.13.
The Company has paid 194 consecutive quarterly dividends since Common
Shares of the Company were first issued in 1947. Dividends are normally paid
on the first business day of January, April, July, and October. On February 27,
1996, a dividend of 59 cents per common share was declared payable April 1,
1996, to shareholders of record on March 11, 1996. Future dividends will depend
on earnings (which are derived from dividends paid by subsidiaries), the
financial condition of the Company, and other factors. (See Description of the
Common Shares of the Company for a summary of limitations on dividends.)
MATERIAL FEATURES OF THE PROPOSED TRANSACTION
1. THE COMPANY
The Company is a voluntary association created under the laws of The
Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
January 2, 1926, and is a public utility holding company registered under the
Public Utility Holding Company Act of 1935 (the 1935 Act). Subsidiaries
include three retail operating companies: Massachusetts Electric Company,
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which serves 942,000 customers in 149 communities; The Narragansett Electric
Company, which serves 326,000 customers in 27 Rhode Island communities; and
Granite State Electric Company, which serves 36,000 customers in 21 New
Hampshire communities. New England Power Company, the Company's wholesale
generation and transmission subsidiary, owns and operates a number of
generating stations. Other subsidiaries include an oil and gas exploration and
fuels supply company, New England Energy Incorporated; three transmission
companies: New England Electric Transmission Corporation, New England
Hydro-Transmission Corporation, and New England Hydro-Transmission Electric
Company, Inc.; a non-utility company, New England Energy Resources, Inc.; a
wholesale generation company, Narragansett Energy Resources Company; a service
company, New England Power Service Company; and a merger subsidiary, Nantucket
Cable Electric Company.
2. NEC
For a description of NEC, please see the NEC Documents.
3. TERMS OF THE MERGER AGREEMENT
For a brief description of the terms of the merger agreement between and
among the Company, Nantucket Cable Electric Company ("Nantucket Cable" to serve
as NEWCO thereunder), and NEC (the "Merger Agreement" which is attached hereto
as Exhibit 2.1 and shall be incorporated by reference as if fully set forth
herein), and the conditions precedent to the transaction becoming effective,
please see the NEC Documents.
4. REASONS FOR ENGAGING IN THE TRANSACTION
This transaction is immaterial to the interests of the Company. Please see
the NEC Documents for the reasons NEC is entering into this transaction.
5. DESCRIPTION OF COMMON SHARES
The Common Shares are the only outstanding class of shares of the Company.
The Transfer Agent and Registrar for the Common Shares is The First National
Bank of Boston, 100 Federal Street, Boston, Massachusetts 02110.
The outstanding Common Shares are listed on the New York Stock Exchange and
the Boston Stock Exchange. The additional Common Shares will be listed on those
exchanges when issued.
The following brief summary of certain provisions relating to the Common
Shares is merely an outline and does not purport to be complete. It uses terms
defined in the documents mentioned and is qualified in its entirety by
reference to said documents, which are filed as exhibits to the registration
statement.
Voting and Dividend Rights
The holders of Common Shares are entitled to one vote for each share held
and are entitled to dividends out of the net earnings or surplus fund of the
Company when such dividends have been declared by the Company's board of
directors, but shareholders must look only to the trust estate for the payment
thereof. The rights and powers of the Company's shareholders are set forth in
the Agreement and Declaration of Trust, as amended, of the Company (Declaration
of Trust).
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Limitations on Dividends
The Declaration of Trust provides that share capital representing the
Common Shares shall include (a) $94,544,131 for the Common Shares issued prior
to January 1, 1953, (b) the consideration received for such shares issued
thereafter, and (c) any balances remaining in capital surplus not included in
(a) or (b). The Declaration of Trust further provides that the share capital
shall not be available for the payment of dividends, and that the share capital
shall not be reduced below the sum of (a) and (b) without a vote of a majority
of the shares outstanding and entitled to vote at a meeting duly called.
The income of the Company is derived mainly from dividends paid by
subsidiaries. In addition to the many factors of specific application,
including accounting requirements, regulatory orders, indentures relating to
indebtedness, and preferred stock preferences, which may affect dividends or
the income of the subsidiaries available for dividends, the dividends payable
by subsidiaries may be affected by various Federal or state statutes, rules,
regulations, and decisions of general application to corporations of a similar
type. At December 31, 1995, the consolidated retained earnings of $832 million
included $227 million of retained earnings of the Company and $605 million of
undistributed retained earnings of subsidiaries. At December 31, 1995,
approximately $30 million of the Company's subsidiaries' retained earnings were
unavailable for dividends to the Company.
Liquidation Rights
After satisfaction of all liabilities, the holders of the Common Shares are
entitled to receive pro rata the remaining assets of the Company, in cash or in
kind.
Preemptive Rights
There are no preemptive rights.
General
The Company being an unincorporated voluntary association, the title to its
property is held by a trustee (currently The First National Bank of Boston)
which acts at the direction of the board of directors of the Company.
The board of directors of the Company is elected annually by the
shareholders. The Company has broad powers under the Declaration of Trust,
most of which can be exercised by the board of directors.
The outstanding Common Shares of the Company are, and when duly issued and
paid for the Common Shares covered by this Prospectus will be, full-paid and
nonassessable. Authorized but unissued shares of the Company may be issued
either for money, services, or property, or in exchange for other shares of the
Company at the time outstanding, and upon such terms as to valuation of shares,
services or property or other shares and otherwise, as the board of directors
of the Company may in its absolute discretion see fit.
The Declaration of Trust contains a provision designed to eliminate
liability of shareholders to the extent permitted by law. It specifies that
every person shall look only to the trust estate for payment or damages or
otherwise and that every written agreement and obligation shall refer to this
provision. Despite these provisions, the shareholders of a voluntary
association such as the Company might, with respect to the liabilities of
shareholders under Massachusetts law, be treated in legal contemplation as
partners and as such under some circumstances might be held personally liable
for certain obligations or liabilities of the Company. Counsel for the
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Company considers the possibility of any such personal liability to be remote
because, in his opinion, shareholders are protected under the laws of
Massachusetts from personal liability on contract obligations containing the
so-called limited liability clause which the Company inserts in all contract
obligations including debt securities, and because the Company is a holding
company and the possibility of substantial liabilities arising from torts or
statutory liabilities or penalties, other than tax liabilities, is not as great
as in the case of companies operating physical properties.
Notwithstanding the fact that the Company is a holding company, in suits
and claims against its subsidiaries, including environmental claims, courts and
agencies might attempt to assign liability to the Company despite traditional
principles of corporate law. Further, counsel for the Company understands that
unincorporated voluntary associations have been treated as general partnerships
under the laws of a few states, including Texas in which the Company's oil and
gas subsidiary has qualified to do business as a foreign corporation. Even so,
for the reasons cited above and because of the substantial capitalization of
the Company and its subsidiaries, counsel for the Company considers the
possibility of personal liability of the shareholders of the Company to be
remote.
6. ACCOUNTING TREATMENT
The merger will be accounted for under the Purchase Method (Purchase) of
accounting for business combinations. Under a Purchase, the surviving
corporation will record the fair value of the assets and liabilities of NEC, and
any difference between the net fair value of assets and liabilities and the
acquisition price will be recorded as either goodwill or an electric plant
acquisition adjustment.
7 TAX CONSEQUENCES
Please see the NEC Documents for a discussion of the tax consequences of
this transaction to NEC stockholders. NEC stockholders should consult their
own tax advisors with regard to individual tax treatment.
8 OFFERED SECURITIES
The securities of the Company available to be offered by this Prospectus
consist of not exceeding 160,000 Common Shares, which will consist of shares
issued in connection with the acquisition of NEC and/or treasury shares.
Underwriting discounts or commissions will generally not be paid by the
Company.
This Prospectus, as appropriately amended or supplemented, has also been
prepared for use by persons who receive shares issued by the Company in
connection with the merger of Nantucket Cable into NEC, and who wish to offer
and sell such shares, on terms then available, in transactions in which they may
be deemed affiliates or underwriters within the meaning of the Securities Act
of 1933 (such persons being referred to under this caption as "Selling
Shareholders"). Resales may be made pursuant to this Prospectus as amended or
supplemented, pursuant to Rule 145(d) under the Securities Act of 1933, or
pursuant to an exemption from such Act. Profits realized on resales by Selling
Shareholders under certain circumstances may be regarded as underwriting
compensation under the Securities Act of 1933.
Resales by Selling Shareholders may be made directly to investors or
through a securities firm acting as an underwriter, broker or dealer. When
resales are to be made through a securities firm, such securities firm may be
engaged to act as the Selling Shareholder's agent in the sale of shares by such
Selling Shareholder, or such securities firm may purchase shares from the
Selling Shareholder as principal and thereafter resell such shares from time
to time. The fees earned by or paid to such securities firm may be the normal
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stock exchange commission or negotiated commissions or underwriting discounts
to the extent permissible. In addition, such securities firm may affect
resales through other securities dealers, and customary commissions or
concessions to such other dealers may be allowed. Sales of shares may be at
negotiated prices, at fixed prices, at market prices or at prices related to
market prices then prevailing. Any such sales may be made on the New York Stock
Exchange, Boston Stock Exchange or other exchange on which such shares are
traded, in the over-the-counter market, by block trade, in special or other
offerings, directly to investors or through a securities firm acting as agent
or principal, or a combination of such methods. Any participating securities
firm may be indemnified against certain civil liabilities, including
liabilities under the Securities Act of 1933. Any participating securities
firm may be deemed to be an underwriter within the meaning of the Securities Act
of 1933, and any commissions earned by such firm may be deemed to be
underwriting discounts or commissions under such Act.
A Prospectus Supplement, if required, will be filed under Rule 424(b) under
the Securities Act of 1933, disclosing the name of the Selling Shareholder, the
participating securities firm, if any, the number of shares involved, and other
details of such resale, if appropriate.
MATERIAL CONTRACTS WITH NEC
As discussed above in "Terms of the Merger Agreement", the Company and NEC
have entered into a Merger Agreement. Please see the NEC Documents for a
description of NEC material contracts.
LEGAL MATTERS
Legal matters in connection with the issuance of the Common Shares offered
hereby will be passed upon for the Company by Robert King Wulff, Corporation
Counsel, and/or Kirk L. Ramsauer, Assistant General Counsel, 25 Research Drive,
Westborough, Massachusetts 01582. The opinion of Messrs. Wulff and Ramsauer
as to legal matters in connection with the securities offered hereby is filed
as an exhibit to the registration statement.
EXPERTS
The consolidated balance sheets and statements of capitalization of the
Company and its subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of income, retained earnings and cash flows for each
of the three years in the period ended December 31, 1994, all incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, incorporated by reference in this prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The statements of law and legal conclusions made in this prospectus, not
otherwise attributed, have been reviewed by Robert King Wulff, Corporation
Counsel, and/or Kirk L. Ramsauer, Assistant General Counsel, and are made upon
their authority as experts. As of May 15, 1995, Mr. Wulff was the owner of
approximately 7,865 common shares of the Company and Mr. Ramsauer was the owner
of approximately 5,675 common shares and deferred common share equivalents of
the Company.
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VOTING AND MANAGEMENT INFORMATION
Please see the NEC Documents for information on the vote required by NEC
stockholders for approval of the acquisition of NEC by the Company, and for
information on the revocability of the proxy, dissenter's rights of appraisal,
persons making the proxy solicitation, interest of persons in the merger and
voting rights.
On April 28, 1987, the Company's shareholders authorized additional common
shares for use in acquisitions or business combinations and it is not necessary
for the Company's shareholders to take any further action with respect to the
merger.
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TABLE OF CONTENTS
Prospectus
Available Information.............................. 2
Incorporation of Certain Documents by Reference.... 2
Summary Information................................ 4
Selected Consolidated Financial Information........ 6
Common Share Price Range and Dividends............. 7
Material Features of the Proposed Transaction...... 8
The Company...................................... 8
NEC.............................................. 8
Terms of the Merger Agreement.................... 8
Reasons for Engaging in the Transaction.......... 8
Description of Common Shares..................... 8
Accounting Treatment............................. 10
Tax Consequences................................. 10
Offered Securities............................... 11
Material Contracts with NEC........................ 11
Legal Matters...................................... 11
Experts............................................ 11
Voting and Management Information.................. 12
