<PAGE>
File No. 30-33
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-5-S
AMENDMENT NO. 1
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1995
Filed pursuant to the
Public Utility Holding Company Act of 1935 by
LOGO NEW ENGLAND ELECTRIC SYSTEM
25 Research Drive, Westborough, Massachusetts 01582
<PAGE>
The purpose of this Amendment No. 1 is to file electronically with the
Commission those exhibits to the Form U5S for the year ended December 31,
1995, previously supplied in paper format due to a continuing hardship
exemption granted on April 25, 1996. A new exhibit index is supplied.
<PAGE>
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.
SIGNATURE
New England Electric System, a registered holding company, has duly caused
this Amendment No. 1 to Annual Report, Form U-5-S, for the year ended December
31, 1995, Commission's File No. 30-33 to be signed on its behalf, by the
undersigned thereunto duly authorized, pursuant to the requirements of the
Public Utility Holding Company Act of 1935.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By:
Michael E. Jesanis, Treasurer
Date: June 27, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
Supplement NEES Consolidating Balance Sheet, Filed
A-1 Consolidating Income and Retained Earnings herewith
Statements and Consolidating Statement of
Changes in Financial Position for the
year ended December 31, 1995
Supplement NEES Form 10-K for the year ended Previously
A-2 December 31, 1995 filed
A.1.a Connecticut Yankee Atomic Power Company Previously
1995 Annual Report to Shareholders filed
A.1.b Connecticut Yankee Atomic Power Company Previously
1995 FERC Form 1 filed
A.2.a Maine Yankee Atomic Power Company Previously
1995 Annual Report filed
A.2.b Maine Yankee Atomic Power Company Previously
1995 FERC Form 1 filed
A.3 Massachusetts Electric Company Previously
Form 10-K for the year ended filed
December 31, 1995
A.4 The Narragansett Electric Company Previously
Form 10-K for the year ended filed
December 31, 1995
A.5 New England Electric System Previously
Form 10-K for the year ended filed
December 31, 1995
A.6 New England Power Company Previously
Form 10-K for the year ended filed
December 31, 1995
A.7.a Vermont Yankee Nuclear Power Corporation Previously
1995 Annual Report to Stockholders filed
A.7.b Vermont Yankee Nuclear Power Corporation Previously
1995 FERC Form 1 filed
A.8.a Yankee Atomic Electric Company Previously
1995 Annual Report to Stockholders filed
A.8.b Yankee Atomic Electric Company Previously
1995 FERC Form 1 filed
A.9 New England Electric Transmission Previously
Corporation 1995 Annual Report filed
B.1.a Granite State Electric Company Previously
Articles of Organization filed
B.1.b Granite State Electric Company Previously
By-laws filed
B.2.a Massachusetts Electric Company Previously
Amendment to Articles of Organization filed
B.2.b Massachusetts Electric Company Previously
By-laws filed
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
B.3.a The Narragansett Electric Company Previously
Amendment to Charter filed
B.3.b The Narragansett Electric Company Previously
By-laws filed
B.3.c The Narragansett Electric Company Previously
Stockholders Votes re Preference filed
Provisions
B.4.a Narragansett Energy Resources Company Previously
Articles of Incorporation filed
B.4.b Narragansett Energy Resources Company Previously
By-laws filed
B.5.a New England Electric Resources, Inc. Previously
Articles of Organization filed
B.5.b New England Electric Resources, Inc. Previously
By-laws filed
B.6.a New England Electric System Previously
Agreement and Declaration of Trust filed
B.7.a New England Electric Transmission Previously
Corporation Restated Articles of filed
Incorporation
B.7.b New England Electric Transmission Previously
Corporation By-laws filed
B.8.a New England Energy Incorporated Previously
Amendment to Articles of Organization filed
B.8.b New England Energy Incorporated Previously
By-laws filed
B.9.a New England Hydro Finance Company, Inc. Previously
Articles of Organization filed
B.9.b New England Hydro Finance Company, Inc. Previously
By-Laws filed
B.10.a New England Hydro-Transmission Previously
Corporation Amendment to Articles of filed
Incorporation
B.10.b New England Hydro-Transmission Previously
Corporation By-laws filed
By-laws
B.11.a New England Hydro-Transmission Previously
Electric Company Restated filed
Articles of Organization
B.11.b New England Hydro-Transmission Previously
Electric Company By-laws filed
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
B.12.a New England Power Company Previously
Amendment to Articles of Organization filed
B.12.b New England Power Company Previously
By-laws filed
B.13.a New England Power Service Company Previously
Articles of Organization filed
B.13.b New England Power Service Company Previously
By-laws filed
C.1 Granite State Electric Company Previously
Note Agreement with John Hancock filed
Granite State Electric Company Previously
Note Agreement with Teachers Insurance filed
Granite State Electric Company Previously
Note Agreement with Aid Association for filed
Lutherans
Granite State Electric Company Previously
Note Agreement with First Colony Life filed
Insurance Company
Granite State Electric Company Previously
Note Agreement with First Colony Life filed
Insurance Company
C.2 Massachusetts Electric Company Previously
First Mortgage Indenture and Deed of Trust filed
and twenty-one supplements thereto
C.3 The Narragansett Electric Company Previously
First Mortgage Indenture and Deed of Trust filed
and twenty-two supplements thereto
C.4 New England Electric Transmission Previously
Corporation Note Agreement with filed
PruCapital Mangement, Inc. et al.
C.5 New England Energy Incorporated Previously
Credit Agreement dated as of filed
April 13, 1995
C.6.a New England Power Company General and Previously
Refunding Mortgage Indenture and Deed filed
of Trust and twenty supplements thereto
C.6.b New England Power Company Previously
Loan Agreement with Massachusetts Industrial filed
Finance Agency and four supplements thereto
C.6.c New England Power Company Previously
Loan Agreement with Business Finance Authority filed
of the State of New Hampshire (formerly the
Industrial Development Authority of the State
of New Hampshire) and eight supplements thereto
Ninth supplement dated as of February 1, 1995 Previously
filed
C.6.d Loan Agreement with Connecticut Development Previously
Authority filed
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
C.7 Narragansett Energy Resources Company Previously
Note Agreements filed
D New England Electric System and Subsidiary Previously
Companies, Federal and State Income Tax filed
Allocation Agreement
E.1 Money Pool investments for 1995 Previously
filed
E.2 NEERI annual report on Modified Form U-13-60 Previously
filed
E.3 Ocean State Power Financial Statements as of Filed
December 31, 1995 herewith
E.4 Ocean State Power II Financial Statements Filed
as of December 31, 1995 herewith
E.5 OSP Finance Company Financial Statements Filed
as of December 31, 1995 herewith
E.6 New England Electric System Companies Previously
Incentive Thrift Plan Financial Statements filed
E.7 New England Electric System Companies Previously
Incentive Thrift Plan II Financial Statements filed
E.8 Yankee Atomic Electric Company Previously
Thrift Plan Financial Statements filed
F Schedules Previously
filed
G Financial Data Schedules Previously
filed
<PAGE>
SUPPLEMENT A-1
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AT DECEMBER 31, 1995
CONSOLIDATING INCOME AND RETAINED EARNINGS STATEMENTS
FOR YEAR ENDED DECEMBER 31, 1995
CONSLIDATING STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1995
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INDEX OF CONSOLIDATED WORKSHEETS
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
Pages
-----
<S> <C>
Consolidating Balance Sheet, Adjustments and Eliminations............................. 1 - 2
Consolidating Statement of Income, Adjustments and Eliminations....................... 3 - 4
Consolidating Statement of Retained Earnings, Adjustments and Eliminations............ 5 - 6
Consolidating Statement of Cash Flows, Adjustments and Eliminations................... 7 - 8
INDEX OF INDIVIDUAL COMPANY STATEMENTS
Balance Statement Retained Statement of
Sheet of Income Earnings Cash Flows
------- --------- -------- ------------
<S> <C> <C> <C> <C>
NEW ENGLAND ELECTRIC SYSTEM (NEES) 1 3 5 7
GRANITE STATE ELECTRIC COMPANY (GRANITE STATE) 1 3 5 7
MASSACHUSETTS ELECTRIC COMPANY (MASS. ELECTRIC) 1 3 5 7
THE NARRAGANSETT ELECTRIC COMPANY (NARRA. ELECTRIC) 1 3 5 7
NEW ENGLAND POWER COMPANY (NEP) 1 3 5 7
NEW ENGLAND ENERGY INCORPORATED (NEEI) 1 3 5 7
NEW ENGLAND POWER SERVICE COMPANY (NEPSCO) 1 3 5 7
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY,
INC. (NEHTECI) 1 3 5 7
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION (NEHTC) 1 3 5 7
NARRAGANSETT ENERGY RESOURCES COMPANY (NERC) 1 3 5 7
NEW ENGLAND ENERGY RESOURCES, INC. (NEERI) 1 3 5 7
NEW ENGLAND ELECTRIC SYSTEM - TRUST (PARENT) 1 3 5 7
</TABLE>
<PAGE>
<TABLE>
Page 1A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Utility plant,
at original cost $64,005$1,420,069 $699,906 $2,941,469 $18,037 $220,204 $176,267
Less accumulated
depreciation and
amortization 16,941 399,711 173,391 1,047,982 43,900 29,066
------------------ -------- ---------- ---------- ------- -------- --------
47,064 1,020,358 526,515 1,893,487 18,037 176,304 147,201
Net investment in
Seabrook 1 under
rate settlement 15,210
Construction work in
progress 259 21,118 8,733 41,566
------------------ -------- ---------- ---------- ------- -------- --------
Net utility plant 47,323 1,041,476 535,248 1,950,263 18,037 176,304 147,201
------------------ -------- ---------- ---------- ------- -------- --------
Oil and gas properties $1,266,290
Less accumulated
amortization 1,032,777
Work in progress
----------
Net oil and gas
properties 233,513
----------
Investments in
nuclear power
companies, at equity 47,055
Investments in other
subsidiaries, at
equity
Other investments
at cost 779 8,566 3,721 26,627 45,215 5 5
Current assets 7,266 236,534 104,205 351,123 44,926 26,535 6,283 1,493
Deferred charges and
other assets 1,550 56,524 56,447 273,275 342 3,033 8,969 7,235
------------------ -------- ---------- ---------- ------- -------- --------
$56,918$1,343,100 $699,621 $2,648,343 $278,781 $92,820 $191,561 $155,934
================== ======== ========== ========== ======= ======== ========
<PAGE>
Page 1B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
NERC NEERI PARENT & ELIMINATIONS CONSOLIDATED
---- ----- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Assets
Utility plant,
at original cost $59,955 $5,480,002
Less accumulated
depreciation and
amortization 1,710,991
-------- ------ ---------- ---------- ----------
59,955 3,769,011
Net investment in
Seabrook 1 under
rate settlement 15,210
Construction work in
progress (6) 71,682
-------- ------ ---------- ---------- ----------
Net utility plant 59,949 3,855,903
-------- ------ ---------- ---------- ----------
Oil and gas properties 1,266,290
Less accumulated
amortization 1,032,777
Work in progress
----------
Net oil and gas
properties 233,513
----------
Investments in
nuclear power
companies, at equity 47,055
Investments in other
subsidiaries, at
equity $36,491 $1,634,101 1,630,333 40,259
Other investments
at cost $1,000 3,626 1,552 87,992
Current assets 542 891 41,135 312,139 508,794
Deferred charges and
other assets (414) 125 (10,274) 417,360
-------- ------ ---------- ---------- ----------
$36,619 $2,016 $1,678,862 $1,993,699 $5,190,876
======== ====== ========== ========== ==========
<PAGE>
Page 1C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- --------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capitalization and
liabilities
Common share equity $19,038 $411,433$245,021 $889,136 ($2,826) $16,516 $59,284 $39,395
Minority interests in
consolidated
subsidiaries
Cumulative preferred
stock 50,000 36,500 60,516
Long-term debt 15,000 353,267 210,892 735,440 182,000 91,530 56,480
------------------------------------ ---------- ------- -------- --------
Total capitalization 34,038 814,700 492,413 1,685,092 179,174 16,516 150,814 95,875
------------------------------------ ---------- ------- -------- --------
Current liabilities
Long-term debt due
within 1 year 1,000 10,000 6,960 4,560
Short-term debt 3,550 55,450 22,675 125,150 1,000 2,000
Other current
liabilities 11,051 222,562 84,825 220,803 4,198 32,162 5,965 3,466
------------------------------------ ---------- ------- -------- --------
Total current
liabilities 15,601 278,012 107,500 355,953 4,198 32,162 13,925 10,026
------------------------------------ ---------- ------- -------- --------
Deferred federal and
state income taxes 4,274 184,575 76,017 390,197 91,663 (5,496) 21,894 18,627
Unamortized investment
tax credits 1,024 17,684 8,016 57,509 4,928 2,296
Other reserves and
deferred credits 1,981 48,129 15,675 159,592 3,746 49,638 29,110
------------------------------------ ---------- ------- -------- --------
$56,918$1,343,100$699,621$2,648,343 $278,781 $92,820 $191,561 $155,934
==================================== ========== ======= ======== ========
<PAGE>
Page 1D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
NERC NEERI PARENT & ELIMINATIONS CONSOLIDATED
---- ----- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Capitalization and
liabilities
Common share equity $818 $1,686 $1,633,065 $1,680,787 $1,631,779
Minority interests in
consolidated
subsidiaries (48,912) 48,912
Cumulative preferred
stock 147,016
Long-term debt 30,560 1,675,169
-------- ------- ---------- ---------- ----------
Total capitalization 31,378 1,686 1,633,065 1,631,875 3,502,876
-------- ------- ---------- ---------- ----------
Current liabilities
Long-term debt due
within 1 year 1,440 23,960
Short-term debt 6,575 203,250
Other current
liabilities 303 154 41,683 314,550 312,622
-------- ------- ---------- ---------- ----------
Total current
liabilities 1,743 154 41,683 321,125 539,832
-------- ------- ---------- ---------- ----------
Deferred federal and
state income taxes 1,546 176 (3,021) 780,452
Unamortized investment
tax credits 1,952 93,409
Other reserves and
deferred credits 7,135 40,699 274,307
-------- ------- ---------- ---------- ----------
$36,619 $2,016 $1,678,862 $1,993,699 $5,190,876
======== ======= ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 2A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS
DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debit
Common share equity $19,038 $411,538 $244,851 $888,945 ($2,826) $16,516 $59,284 $39,395
Short-term debt 3,550 1,000 1,000 1,025
Other current
liabilities 11,631 167,771 40,138 87,116 365 2,115 2,974 994
Other reserves and
deferred credits (66) (1,484) (592) 54,044 3,746
Construction work in
progress 6
Deferred charges and
other assets (4,088)
------- -------- -------- ---------- -------- ------- ------- -------
Total $34,153 $578,825 $285,397 $1,031,130 ($2,803) $18,631 $62,264 $40,389
======= ======== ======== ========== ======== ======= ======= =======
Credit
Minority interests in
consolidated
subsidiaries $29,385 $19,527
Utility plant, at
original cost $1,668 $58,281 6
Investments in other
subsidiaries, at
equity
Other investments at
cost $41 $146 134 74 $1,147 5 5
Current assets 824 1,776 1,463 204,264 $44,916 14,512 1,637 944
------- -------- -------- ---------- -------- ------- ------- -------
Total $865 $1,922 $3,265 $262,619 $44,916 $15,659 $31,033 $20,476
======= ======== ======== ========== ======== ======= ======= =======
<PAGE>
Page 2B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS
DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
NERC NEERI PARENT & ELIMINATIONS
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Debit
Common share equity $818 $1,686 $1,542 $1,680,787
Short-term debt 6,575
Other current
liabilities 80 513 853 314,550
Other reserves and
deferred credits (14,949) 40,699
Construction work in
progress 6
Deferred charges and
other assets 14,362 10,274
----- ------ ---------- ----------
Total $898 $2,199 $1,808 $2,052,891
===== ====== ========== ==========
Credit
Minority interests in
consolidated
subsidiaries $48,912
Utility plant, at
original cost 59,955
Investments in other
subsidiaries, at
equity $1,630,333 1,630,333
Other investments at
cost 1,552
Current assets $528 $502 40,773 312,139
----- ------ ---------- ----------
Total $528 $502 $1,671,106 $2,052,891
===== ====== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 3A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue $65,095 $1,505,676 $499,113 $1,570,539 $73,255 $46,157 $34,660
-------- ---------- -------- ------------------ ---------------- --------
Operating expenses
Fuel for generation 279,849
Purchased electric energy 46,548 1,113,673 293,272 547,926
Other operation 9,435 206,660 73,194 211,872 5,393 8,169 10,265
Maintenance 1,449 29,525 11,174 92,954 809 147
Depreciation and amortization 2,075 44,829 31,533 102,758 68,708 8,883 5,880
Taxes, other than income
taxes 1,741 30,022 36,627 58,716 2,579 2,895
Income taxes 657 19,297 10,888 91,051 (1,739) 6,475 3,636
-------- ---------- -------- ------------------ ---------------- --------
Total operating expenses 61,905 1,444,006 456,688 1,385,126 72,362 26,915 22,823
-------- ---------- -------- ------------------ ---------------- --------
Operating income 3,190 61,670 42,425 185,413 893 19,242 11,837
Other income:
Allowance for equity funds
used during construction 106 7,746
Equity in income of
generating companies 5,721
Other income (expense), net (45) (541) (192) (1,610) 2 $165 64 52
-------- ---------- -------- ------------------ ---------------- --------
Operating and other income 3,145 61,129 42,339 197,270 895 165 19,306 11,889
-------- ---------- -------- ------------------ ---------------- --------
Interest:
Interest on long-term debt 1,238 25,901 16,627 46,797 2,478 9,346 5,799
Other interest 514 6,784 3,663 10,525 36 67
Allowance for borrowed funds
used during construction (19) (657) (1,861) (11,479)
-------- ---------- -------- ------------------ ---------------- --------
Total interest 1,733 32,028 18,429 45,843 2,478 9,382 5,866
-------- ---------- -------- ------------------ ---------------- --------
Income after interest 1,412 29,101 23,910 151,427 (1,583) 165 9,924 6,023
Preferred dividends of
subsidiaries 3,114 2,143 3,433
Minority interests
-------- ---------- -------- ------------------ ---------------- --------
Net income $1,412 $25,987 $21,767 $147,994($1,583) $165 $9,924 $6,023
======== ========== ======== ================== ================ ========
<PAGE>
Page 3B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
NERC NEERI PARENT & ELIMINATIONS CONSOLIDATED
---- ----- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenue $1,522,783 $2,271,712
-------- ---------- -------- ---------- ----------
Operating expenses
Fuel for generation 42,351 237,498
Purchased electric energy 1,453,049 548,370
Other operation $130 $3,451 27,848 500,721
Maintenance 136,058
Depreciation and amortization 264,666
Taxes, other than income
taxes 15 37 132,632
Income taxes (555) 1,371 128,339
-------- ---------- -------- ---------- ----------
Total operating expenses 145 2,933 1,524,619 1,948,284
-------- ---------- -------- ---------- ----------
Operating income (145) (2,933) (1,836) 323,428
Other income:
Allowance for equity funds
used during construction 7,852
Equity in income of
generating companies 4,831 10,552
Other income (expense), net 88 ($1,072) 208,099 211,316 (6,306)
-------- ---------- -------- ---------- ----------
Operating and other income 4,774 (1,072) 205,166 209,480 335,526
-------- ---------- -------- ---------- ----------
Interest:
Interest on long-term debt 172 (7) 108,365
Other interest 329 2,092 19,826
Allowance for borrowed funds
used during construction (14,016)
-------- ---------- -------- ---------- ----------
Total interest 172 329 2,085 114,175
-------- ---------- -------- ---------- ----------
Income after interest 4,602 (1,072) 204,837 207,395 221,351
Preferred dividends of
subsidiaries 8,690
Minority interests (7,904) 7,904
-------- ---------- -------- ---------- ----------
Net income $4,602 ($1,072) $204,837 $215,299 $204,757
======== ========== ======== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 4A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Operating revenue $122 $4,626 $1,025 $1,458,304 $43,731 $8,552 $6,423
Other income/(expense), net 38 929 174 334 231 $1,278 117 81
Minority interests 4,919 2,985
------- ---------- -------- ---------- ------- ------ ------- ------
Total $160 $5,555 $1,199 $1,458,638 $43,962 $1,278 $13,588 $9,489
======= ========== ======== ========== ======= ====== ======= ======
Expenses:
Fuel for generation ($1,380) $43,731
Purchased electric energy $46,529 $1,113,443 293,077
Other operation 240 160 1,418 21,587 $229 $747 $3,467
Income taxes (130) 15 (55) 330 $1,218 (7)
Interest on long-term debt (5) (2)
Other interest 233 252 219 1,381 5 2
------- ---------- -------- ---------- ------- ------ ------- ------
Total $46,872 $1,113,870 $293,279 $67,029 $229 $1,218 $740 $3,467
======= ========== ======== ========== ======= ====== ======= ======
<PAGE>
Page 4B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
NERC NEERI PARENT & ELIMINATIONS
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Income:
Operating revenue $1,522,783
Other income/(expense), net $90 $208,044 211,316
Minority interests 7,904
------- ---------- -------- ----------
Total $90 $208,044 $1,742,003
======= ========== ======== ==========
Expenses:
Fuel for generation $42,351
Purchased electric energy 1,453,049
Other operation 27,848
Income taxes 1,371
Interest on long-term debt (7)
Other interest 2,092
------- ---------- -------- ----------
Total $1,526,704
======= ========== ======== ==========
</TABLE>
<PAGE>
<TABLE>
Page 5A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $7,949 $136,911 $91,556 $372,763($21,719) $158 $10,976 $1,784
Additions:
Net income after preferred
dividends of subsidiaries 1,412 25,987 21,767 147,994 (1,583) 165 9,924 6,023
Deductions:
Common dividends 363 12,590 5,096 135,448 158 18,000 7,610
Premium on redemption of
common stock 16
------- -------- -------- ----------------- ------ ------- -------
Retained earnings at end
of year $8,998 $150,308 $108,227 $385,309($23,302) $165 $2,900 $181
======= ======== ======== ================= ====== ======= =======
<PAGE>
Page 5B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
NERC NEERI PARENT & ELIMINATIONS CONSOLIDATED
---- ----- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $500 ($641) $781,092 $602,284 $779,045
Additions:
Net income after preferred
dividends of subsidiaries 4,602 (1,072) 204,837 215,299 204,757
Deductions:
Common dividends 5,000 152,353 184,345 152,273
Premium on redemption of
common stock 16
------- -------- -------- --------- --------
Retained earnings at end
of year $102 ($1,713) $833,576 $633,222 $831,529
======= ======== ======== ========= ========
</TABLE>
<PAGE>
<TABLE>
Page 6A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $7,949 $137,727 $91,917 $373,633($21,719) $158 $10,976 $1,784
Additions:
Net income after preferred
dividends of subsidiaries 1,412 25,987 21,767 147,994 (1,583) 165 9,924 6,023
Deductions:
Common dividends 363 12,590 5,096 135,448 158 18,000 7,610
Premium on redemption of
common stock 16
------- -------- -------- ----------------- ------ ------- -------
Retained earnings at end
of year $8,998 $151,124 $108,588 $386,179($23,302) $165 $2,900 $181
======= ======== ======== ================= ====== ======= =======
<PAGE>
Page 6B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
NERC NEERI PARENT & ELIMINATIONS
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Retained earnings at
beginning of year $500 ($641) $602,284
Additions:
Net income after preferred
dividends of subsidiaries 4,602 (1,072) $80 215,299
Deductions:
Common dividends 5,000 80 184,345
Premium on redemption of
common stock 16
------- -------- -------- ---------
Retained earnings at end
of year $102 ($1,713) $633,222
======= ======== ======== =========
</TABLE>
<PAGE>
<TABLE>
Page 7A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $1,412 $29,101 $23,910 $151,427 ($1,583) $165 $9,924 $6,023
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Undistributed earnings of
subsidiaries
Depreciation and
amortization 2,075 44,829 31,533 108,384 68,708 8,883 5,880
Deferred income taxes and
investment tax credits-net 789 6,666 3,009 25,683 (15,425) (1,174) 2,901 2,304
Allowance for funds used
during construction (19) (657) (1,967) (19,225)
Amortization of unbilled
revenues (8,209)
Minority interests
Decrease (increase) in other
current assets (688) 4,272 (5,184) 25,761 (2,899) 21,581 (1,197) (655)
Increase (decrease) in
payables and other current
liabilities (2,125) (2,485) (572) (18,120) 945 (12,183) (91) (1,502)
Other, net 413 (2,340) 5,931 (28,244) 4,576 752 960
-------- --------- ------------------- ------------------ ----------------
Net cash provided by (used
in) operating activities $1,857 $79,386 $48,451 $245,666 $49,746 $12,965 $21,172 $13,010
-------- --------- ------------------- ------------------ ----------------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction ($3,980) ($89,735) ($72,897)($162,766)
Oil and gas exploration
and development ($17,947)
Decrease (increase) in
other investments (68) (1,972) (251) (3,614) ($27,784)
-------- --------- ------------------- ------------------ ----------------
Net cash provided by (used
in) investing activities ($4,048) ($91,707) ($73,148)($166,380) ($17,947)($27,784)
-------- --------- ------------------- ------------------ ----------------
<PAGE>
Page 7B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
NERC NEERI PARENT & ELIMINATIONS CONSOLIDATED
---- ----- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $4,603 ($1,072) $204,837 $223,990 $204,757
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Undistributed earnings of
subsidiaries (36,052) (36,052)
Depreciation and
amortization 270,292
Deferred income taxes and
investment tax credits-net (75) 176 (848) (50) 24,056
Allowance for funds used
during construction (21,868)
Amortization of unbilled
revenues (8,209)
Minority interests (7,904) 7,904
Decrease (increase) in other
current assets (64) (219) (19,108) 654 20,946
Increase (decrease) in
payables and other current
liabilities 281 (114) 260 (19,471) (16,235)
Other, net (637) 325 952 (5,522) (11,790)
-------- --------- --------- ---------- ----------
Net cash provided by (used
in) operating activities $4,108 ($904) $150,041 $155,645 $469,853
-------- --------- --------- ---------- ----------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction $7 ($329,385)
Oil and gas exploration
and development (17,947)
Decrease (increase) in
other investments $1,384 ($1,000) ($19,647) (20,492) (32,460)
-------- --------- --------- ---------- ----------
Net cash provided by (used
in) investing activities $1,384 ($1,000) ($19,647) ($20,485) ($379,792)
-------- --------- --------- ---------- ----------
<PAGE>
Page 7C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to minority
interests
Dividends paid on common
shares ($363) ($24,580) ($4,813) ($103,198) ($158)($18,117) ($6,253)
Dividends paid on preferred
stock (3,114) (2,143) (3,433)
Preferred stock - retirements
Long-term debt - issues 5,000 88,000 38,000 60,000 $202,000
Long-term debt - retirements (3,400) (35,000) (16,000) (10,000) (236,000) (6,960) (4,560)
Premium on reacquisition of
long-term debt (67) (1,936)
Capital contribution from
parent 14,000 20,000 15,000
Subordinated notes payable
to parent (net) 1,928
Changes in short-term debt 1,025 (26,370) (7,125) (20,425) 1,000
Return of capital to minority
interests and related
premium (2,752)
Repurchase of common shares
------- --------- -------- --------- ---------- -------------------------
Net cash provided by (used
in) financing activities $2,195 $12,936 $25,983 ($77,056) ($32,072) $14,842($24,077)($13,565)
------- --------- -------- --------- ---------- -------------------------
Net increase (decrease) in
cash and cash equivalents $4 $615 $1,286 $2,230 ($273) $23 ($2,905) ($555)
Cash and cash equivalents at
beginning of year 94 1,225 713 377 1,406 436 3,879 792
------- --------- -------- --------- ---------- -------------------------
Cash and cash equivalents at
end of year $98 $1,840 $1,999 $2,607 $1,133 $459 $974 $237
======= ========= ======== ========= ========== =========================
<PAGE>
Page 7D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
NERC NEERI PARENT & ELIMINATIONS CONSOLIDATED
---- ----- ------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to minority
interests $12,159 ($12,159)
Dividends paid on common
shares ($6,250) ($151,415) (163,812) (151,335)
Dividends paid on preferred
stock (8,690)
Preferred stock - retirements
Long-term debt - issues 32,000 425,000
Long-term debt - retirements (311,920)
Premium on reacquisition of
long-term debt (2,003)
Capital contribution from
parent (32,450) $1,925 18,475
Subordinated notes payable
to parent (net) 1,928
Changes in short-term debt (21,175) (30,720)
Return of capital to minority
interests and related
premium (1,388) (1,364)
Repurchase of common shares 1,543 (1,543)
-------- ------------------- ---------- ----------
Net cash provided by (used
in) financing activities ($6,700) $1,925($151,415) ($160,960) ($86,044)
-------- ------------------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents ($1,208) $21 ($21,021) ($25,800) $4,017
Cash and cash equivalents at
beginning of year 1,619 49 24,822 32,365 3,047
-------- ------------------- ---------- ----------
Cash and cash equivalents at
end of year $411 $70 $3,801 $6,565 $7,064
======== =================== ========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 8A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss) $1,412 $29,101 $23,910 $151,427 ($1,583) $165 $9,924 $6,023
Undistributed earnings
of subsidiaries
Minority interests (4,919) (2,985)
Deferred income taxes and
investment tax credits-net (50)
Decrease (increase) in other
current assets (459) 4,812 5,125 (6,732) (3,972) 23,911 (716) (519)
Increase (decrease) in
payables and other current
liabilities 568 8,480 (6,636) (18,290) (251) (3,124) (136) (1,056)
Other, net (66) (1,484) (592) (2,882) 49 39
------- --------- -------- ---------- -------- -------- -------- --------
Net cash provided by (used
in) operating activities $1,405 $40,909 $21,807 $123,523 ($5,806) $20,952 $4,202 $1,502
------- --------- -------- ---------- -------- -------- -------- --------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction $7
Decrease (increase) in
other investments ($41) ($146) ($134) ($74) ($1,147)
------- --------- -------- ---------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities ($41) ($146) ($134) ($74) ($1,147) $7
------- --------- -------- ---------- -------- -------- -------- --------
<PAGE>
Page 8B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
NERC NEERI PARENT & ELIMINATIONS
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Operating Activities:
Net income (loss) $4,603 ($1,072) $80 $223,990
Undistributed earnings (36,052) (36,052)
of subsidiaries
Minority interests (7,904)
Deferred income taxes and
investment tax credits-net (50)
Decrease (increase) in other
current assets (122) (465) (20,209) 654
Increase (decrease) in
payables and other current
liabilities 72 278 624 (19,471)
Other, net (586) (5,522)
------- --------- --------- ----------
Net cash provided by (used
in) operating activities $4,553 ($1,259) ($56,143) $155,645
------- --------- --------- ----------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction $7
Decrease (increase) in
other investments ($18,950) (20,492)
------- --------- --------- ----------
Net cash provided by (used
in) investing activities ($18,950) ($20,485)
------- --------- --------- ----------
<PAGE>
Page 8C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to
minority interest $9,039 $3,120
Dividends paid on common
shares ($363) ($24,580) ($4,813) ($103,198) ($158)(18,117) (6,253)
Dividends paid on preferred
stock (3,114) (2,143) (3,433)
Capital contribution from
parent 14,000 20,000 15,000
Subordinated notes payable
to parent (net) $1,928
Changes in short-term debt 1,025 (7,650) 1,000 (15,550)
Return of capital to
minority interests and
related premium
Repurchase of common shares
------- --------- -------- ------------------ ---------------- --------
Net cash provided by (used
in) financing activities $662 ($21,344) $14,044 ($122,181) $1,928 $14,842($9,078) ($3,133)
------- --------- -------- ------------------ ---------------- --------
Net increase (decrease) in
cash and cash equivalents $2,026 $19,419 $35,717 $1,268($3,878) $34,647($4,869) ($1,631)
------- --------- -------- ------------------ ---------------- --------
Cash and cash equivalents
at beginning of year 1,350 3,845 770
Cash and cash equivalents
at end of year $1,100 $375 $945 $145
======= ========= ======== ================== ================ ========
<PAGE>
Page 8D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
NERC NEERI PARENT & ELIMINATIONS
---- ----- ------ --------------
<S> <C> <C> <C> <C>
Financing Activities:
Dividends paid to
minority interest $12,159
Dividends paid on common
shares ($6,250) ($80) (163,812)
Dividends paid on preferred
stock (8,690)
Capital contribution from
parent (32,450) $1,925 18,475
Subordinated notes payable
to parent (net) 1,928
Changes in short-term debt (21,175)
Return of capital to
minority interests and
related premium (1,388) (1,388)
Repurchase of common shares 1,543 1,543
--------- --------- --------- ----------
Net cash provided by (used
in) financing activities ($38,700) $1,925 $75 ($160,960)
--------- --------- --------- ----------
Net increase (decrease) in
cash and cash equivalents ($34,147) $666 ($75,018) ($25,800)
--------- --------- --------- ----------
Cash and cash equivalents
at beginning of year 1,600 24,800 32,365
Cash and cash equivalents
at end of year $400 $3,600 $6,565
========= ========= ========= ==========
</TABLE>
<PAGE>
ARTHUR ANDERSEN LLP
Ocean State Power
Financial Statements
as of December 31, 1995 and 1994
Together with Auditors' Report
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Management Committee of
Ocean State Power:
We have audited the accompanying balance sheets of Ocean State
Power (a Rhode Island partnership) as of December 31, 1995 and
1994, and the related statements of income, changes in partners'
capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described in Note 2, these financial statements were prepared in
accordance with the accounting requirements of the Federal Energy
Regulatory Commission as set forth in its applicable Uniform System
of Accounts and published accounting releases, which is a
comprehensive basis of accounting other than generally accepted
accounting principles.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ocean
State Power as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended, in
accordance with the accounting requirements of the Federal Energy
Regulatory Commission as set forth in its applicable Uniform System
of Accounts and published accounting releases.
s/Arthur Anderson LLP
Boston, Massachusetts
March 15, 1996
<PAGE>
<TABLE>
Ocean State Power
Balance Sheets - December 31, 1995 and 1994
(Dollars in Thousands)
Assets
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Electric Plant, at original cost $233,607 $231,419
Less-Accumulated depreciation and amortization (Note 2) 57,175 45,744
-------- --------
176,432 185,675
CONSTRUCTION WORK IN PROGRESS 6,929 1,935
-------- --------
Net electric plant 183,361 187,610
-------- --------
CURRENT ASSETS:
Cash and cash equivalents 1,461 780
Accounts receivable -
Affiliated companies (Notes 1, 3 and 6) 12,559 13,362
Other 4,197 4,476
Inventories -
Fuel 693 1,462
Materials and supplies 3,689 3,591
Prepayments 247 181
-------- --------
Total current assets 22,846 23,852
-------- --------
DEFERRED CHARGES AND OTHER ASSETS:
Unamortized debt expense (Note 2) 1,354 2,388
Site restoration fund (Note 2) 4,624 3,102
Other 292 615
-------- --------
Total deferred charges and other assets 6,270 6,105
-------- --------
Total assets $212,477 $217,567
======== ========
Partners' Capital and Liabilities
CAPITALIZATION:
Partners' capital (see accompanying statement) $82,214 $88,768
Long-term debt, net of current maturities (Note 4) 90,708 92,806
-------- --------
Total capitalization 172,922 181,574
-------- --------
CURRENT LIABILITIES:
Current maturities of long-term debt 5,998 5,998
Accounts payable and accrued expenses-
Affiliated companies 699 435
Other 6,488 7,340
Accrued interest on debt 296 331
-------- --------
Total current liabilities 13,481 14,104
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
RESERVES AND DEFERRED CREDITS:
Deferred federal income taxes payable
by partners (Notes 2 and 7) 9,986 9,303
Unamortized investment tax credits (Notes 2 and 7) 10,273 8,217
Site restoration reserve (Note 2) 4,624 3,102
Deferred rent revenue (Note 6) 1,191 1,267
-------- --------
Total reserves and deferred credits 26,074 21,889
-------- --------
Total partners' capital and liabilities $212,477 $217,567
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Ocean State Power
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
1995 1994
<S> <C> <C>
ELECTRIC OPERATING REVENUES (Notes 1 and 2) $96,422 $95,866
------- -------
OPERATING EXPENSES:
Fuel costs 40,455 40,162
Operating expense 9,320 8,872
Maintenance expense 5,337 4,862
Depreciation and site restoration (Note 2) 12,860 12,732
Income taxes payable by partners (Notes 2 and 7) 6,083 6,430
Property taxes and payments in lieu of taxes (Note 5) 1,638 1,479
------- -------
75,693 74,537
------- -------
Operating income 20,729 21,329
OTHER INCOME (EXPENSE):
Allowance for other funds used during
construction (Note 2) 223 20
Interest income 214 156
Other, net (350) (25)
------- -------
87 151
------- -------
Income before interest charges 20,816 21,480
------- -------
INTEREST CHARGES:
Long-term debt (Note 4) 8,434 8,681
Allowance for borrowed funds used
during construction (Note 2) (115) (10)
------- -------
8,319 8,671
------- -------
Net income $12,497 $12,809
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Ocean State Power
Statements of Changes in Partners' Capital
for the Years Ended December 31, 1995 and 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
EUA Narragansett
TCPL Ocean State Energy JMC Ocean
Power Ltd. Corp. Resources Co. State Corp. Total
<S> <C> <C> <C> <C> <C>
PARTNERSHIP INTEREST 40.0% 29.9% 40.0% 10.1% 100.0%
BALANCE, DECEMBER 31, 1993 $39,117 $29,240 $19,558 $9,877 $97,792
Net income 5,123 3,830 2,562 1,294 12,809
Current federal income
taxes payable by partners
(Note 2) 1,387 1,037 693 350 3,467
Distributions (10,120) (7,564) (5,060) (2,556) (25,300)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1994 35,507 26,543 17,753 8,965 88,768
Net income 4,999 3,737 2,499 1,262 12,497
Current federal income
taxes payable by partners
(Note 2) 1,340 1,000 671 338 3,349
Distributions (8,960) (6,698) (4,480) (2,262) (22,400)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1995 $32,886 $24,582 $16,443 $8,303 $82,214
======== ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Ocean State Power
Statements of Cash Flows
for the Years Ended December 31, 1995 and 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,497 $12,809
Adjustments to reconcile net income
to net cash provided by operating
activities -
Income taxes payable by partners 6,083 6,430
Depreciation 11,431 11,630
Provision for site restoration 1,522 1,127
Amortization of debt expense 1,034 847
Amortization of rent revenue (76) (78)
Allowance for other funds used
during construction (223) (20)
Changes in assets and liabilities -
Accounts receivable 1,082 (579)
Inventories 671 (299)
Prepayments (66) (25)
Accounts payable and accrued expenses (588) 2,170
Accrued interest (35) (17)
Other assets and liabilities 328 193
-------- --------
Net cash provided by operating
activities 33,660 34,188
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,959) (2,477)
Site restoration fund (1,522) (1,127)
-------- --------
Net cash used for investing
activities (8,481) (3,604)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 3,900 800
Distributions to partners (22,400) (25,300)
Repayment of long-term debt (5,998) (5,998)
-------- --------
Net cash used for financing
activities (24,498) (30,498)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 681 86
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 780 694
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,461 $ 780
========= ========
CASH PAID FOR INTEREST $ 7,402 $ 7,667
========= ========
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
Ocean State Power
Notes to Financial Statements
December 31, 1995
(1) ORGANIZATION AND BUSINESS
Organization and Management
Ocean State Power (OSP) is a Rhode Island general
partnership with four general partners (see Note 3). OSP is
managed by a committee of representatives from each of the
partners and has no employees. Plant operations and project
administration are performed under various contractual
arrangements as described below.
Business
OSP was formed to construct, own and operate a combined
cycle electric generating plant located in Burrillville,
Rhode Island, adjacent to a second generating plant that is
operated by an affiliate, Ocean State Power II (OSP II).
The plant's average net capacity is approximately 250
megawatts, and it is fired by natural gas purchased under a
firm, 20-year gas purchase contract. The plant commenced
commercial operations on December 31, 1990. The plant's
capacity and energy output are being sold under 20-year
take-or-pay unit power agreements to three investor-owned
utilities located in Massachusetts and Rhode Island. These
utilities are obligated to pay their portion of OSP's total
costs, including amounts for income taxes payable by
partners, and a return on invested capital. The price of
the energy sold is determined based on a Federal Energy
Regulatory Commission (FERC) filed cost of service contract
with an adjustment factor for unit availability. During
1994, Newport Electric Company assigned all of its rights
and obligations under its unit power agreement to an
affiliate, Montaup Electric Company. The following
utilities have agreed to purchase electricity generated in
the following proportions:
Power
Purchase
Power Purchaser Affiliate of Percentage
--------------- ------------ -----------
Boston Edison Company - 23.5%
New England Power Company Narragansett Energy Resources
Company 48.5
Montaup Electric Company EUA Ocean State Corporation 28.0
------
100.0%
======
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Regulation
OSP's rates, operations, accounting and other matters are
subject to the regulatory authority of the FERC and other
federal and state agencies. Certain gas transportation
agreements are also subject to regulation by Canadian
authorities.
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Regulation (Continued)
OSP is subject to the provisions of Statement of Financial
Accounting Standards (SFAS) No. 71, Accounting for the
Effects of Certain Types of Regulation, and therefore,
certain of the accounting principles followed may differ
from enterprises in general to reflect the economic effect
of rate actions of the FERC.
Allowance for Funds Used During Construction
OSP capitalizes an allowance for funds used during
construction (AFUDC), which represents the net cost of
borrowed funds used for construction purposes and a
reasonable rate of return on OSP's equity when used. These
costs will be recovered over the service life of the plant
in the form of revenue collected to recover depreciation
expense.
Electric Operating Revenues
OSP bills its customers monthly, based on estimates in
accordance with the agreements described in Note 1, with a
subsequent true-up to reflect actual costs. Amounts due
from (to) customers at year-end, but not yet reflected in
customers' bills, totaled $174,000 in 1995 and $(120,000) in
1994 and are included in accounts receivable.
The unit power agreements contain incentive provisions
related to the performance of the facility. These
incentives provide for bonuses payable to OSP based on the
extent to which the electrical capability of the plant
exceeds target performance levels. Alternatively, these
incentives provide for decreases in capacity charges payable
by power purchasers based on the extent to which the
electrical capability of the plant falls below target
levels. OSP has billed and recorded revenues related to
these performance incentives of $3.9 million in 1995 and
$4.1 million in 1994.
Unamortized Debt Expense
Unamortized debt expense represents the costs incurred
related to project financing and are amortized using the
effective interest rate method over the original life of the
debt.
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Site Restoration
Depreciation is provided to allocate the cost of OSP's
electric plant on a straight-line basis over the following
estimated useful lives:
Plant and equipment 20 years
Furniture and fixtures 5 years
Following termination of operations, OSP is obligated to
restore the site to its original preconstruction condition.
Based on a study conducted in 1991, the estimated cost, in
future dollars, for OSP and OSP II is approximately
$65 million. This estimate is based on a number of
assumptions. Changes in assumptions for such things as labor
and material costs, technology, inflation and the timing of
site restoration could cause this estimate to change in the
near term. OSP accrues for one half of the estimated site
restoration costs over the life of the plant; OSP II is
responsible for the remaining half of the estimated costs.
Funds are deposited into a trust pending their ultimate use.
In accordance with SFAS No. 115, Accounting for Debt and
Equity Investments, OSP and OSP II have classified their site
restoration funds as
available-for-sale securities and reflected them at fair
market value in the accompanying balance sheets. The
investment income is retained within the trust account. The
cost and fair market value of the site restoration funds at
December 31, 1995 were $4,337,000 and $4,624,000,
respectively, and at December 31, 1994 were $3,215,000 and
$3,102,000, respectively.
Cash and Cash Equivalents
OSP considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Income Taxes
Income taxes are the responsibility of the partners and are
not normally reflected in the financial statements of
partnerships under generally accepted accounting principles.
However, the billing calculation includes an allowance for
income taxes, and the FERC requires that OSP record this
provision on its records to reflect the income taxes
calculated as if OSP were a taxable corporation. The
provisions for current and deferred income taxes payable by
partners are recorded without regard to whether each partner
could utilize its share of the OSP tax deductions and
investment tax credits. Partners' capital and the net
investment base are reduced by the amount equivalent to
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
accumulated deferred federal income taxes payable by
partners and unamortized investment tax credit in
calculating the allowed return. Investment tax credits are
deferred to the extent they would be utilized on a separate
company basis and are amortized over the lives of the
related property. At December 31, 1995, OSP had
approximately $1.2 million of additional unrecorded
investment tax credits available to reduce future federal
income taxes otherwise currently payable.
OSP recognizes, in accordance with SFAS No. 109, Accounting
for Income Taxes, tax assets and liabilities for the
cumulative effect of all temporary differences between
financial statement carrying amounts and the tax bases of
assets and liabilities, including the impact of deferred
investment tax credits. The standard also requires the
adjustment of deferred tax liabilities or assets for an
enacted change in tax laws or rates, among other things.
Use of Estimates
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain amounts in the Company's prior year financial
statements have been reclassified to conform to the current
year's presentation.
(3) PARTNERS' CAPITAL
The general partners, along with their respective equity
interests, at December 31, 1995 are as follows:
<TABLE>
<CAPTION> Equity
Partner Affiliate of Interest
<S> <C> <C>
TCPL Power Ltd. TransCanada PipeLines Limited 40.0%
EUA Ocean State Corporation Eastern Utilities Associates 29.9
Narragansett Energy
Resources Company New England Electric System 20.0
JMC Ocean State Corporation J. Makowski Company, Inc. 10.1
-----
100.0%
=====
</TABLE>
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(4) DEBT
OSP Finance Company is a finance affiliate of OSP and OSP II
(the Partnerships) and each Partnership owns 50% of its
common stock. OSP Finance Company's single purpose is to
provide long-term financing for the Partnerships. In
October 1992, OSP Finance Company issued senior notes to
various institutional investors in three tranches with fixed
interest rates and varying maturity dates. Upon receipt of
the senior note proceeds, OSP Finance Company extended loans
to OSP and OSP II, with terms the same as the senior notes.
On July 20, 1994, the Partnerships entered into a revolving
secured credit agreement (the Revolver) with a commercial
bank for $15,000,000. The Partnerships must pay an annual
commitment fee of .15% on the unused portion of the
Revolver. Principal borrowings under the Revolver are
payable in full at maturity. The Revolver expires on
July 20, 2001 and bears interest at varying rates. The
interest rate at December 31, 1995 and 1994 was 6.125% and
6.375%, respectively.
Debt outstanding at December 31, 1995 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
OSP OSP II Total
<S> <C> <C> <C>
6.96% Series A senior notes due
June 15, 2002 $38,698 $33,170 $71,868
7.92% Series B senior notes due
February 15, 2006 22,077 18,923 41,000
8.21% Series C senior notes due
September 15, 2011 31,231 26,769 58,000
Revolving line of credit 4,700 700 5,400
------- ------- -------
Total long-term debt 96,706 79,562 176,268
Less Current maturities 5,998 5,141 11,139
------- ------- -------
Long-term debt,
excluding current maturities $90,708 $74,421 $165,129
======= ======= =======
</TABLE>
The Partnerships are guarantors of the senior note agreement
and the Revolver on a joint and several basis. The senior
notes and amounts outstanding under the Revolver are
collateralized by assignment of the rights and interest in all
of the Partnerships' unit power agreements and all resulting
proceeds, with the exception, however, of revenues under the
unit power agreements that are attributable to domestic gas
transportation, on which the domestic gas transporter has a
first lien.
The senior note agreement and the Revolver contain certain
covenants, including restrictions on the creation of liens,
sale of assets, amendment of agreements and the incurrence of
additional indebtedness.
OSP's share of the senior notes matures at $5,998,000 per year
over the life of the senior notes.
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(5) COMMITMENTS AND CONTINGENCIES
OSP has entered into various agreements in connection with the
operation of the power plant. OSP is obligated under the
following agreements/commitments.
Gas Supply and Transportation
OSP has a firm, 20-year gas purchase contract with a Canadian
supplier for the purchase of 50,000 Mcf per day or a minimum
of 12,318,750 Mcf per year to be delivered to the
U.S./Canadian border. OSP may also purchase additional
quantities of gas as available. The contract price is based
on an initial base price, subject to monthly adjustments based
on changes in the New England Power Pool's (NEPOOL) Fossil
Fuel Index price. This contract provides OSP with its primary
fuel supply while maintaining other gas supply options and oil
as backups.
OSP has a firm, 20-year fuel transportation agreement with
Tennessee Gas Pipeline Company for delivery of natural gas
from the U.S./Canadian border to the plant. The agreement may
be extended beyond 20 years on a year-by-year basis.
Tax Treaty
The Partnerships entered into a tax treaty with the Town of
Burrillville, Rhode Island, providing for annual payments to
the town in lieu of any taxes that would normally be assessed.
Payments are to be made quarterly over the
20-year period through 2011 and are to be shared equally by
the Partnerships. The total payments for OSP for each of the
five years subsequent to December 31, 1995 are as follows
(dollars in thousands):
1996 $ 1,525
1997 1,520
1998 1,671
1999 1,774
2000 1,774
Other Commitments
As part of the costs incurred to obtain the site on which the
power unit is constructed, OSP has entered into certain
agreements that provide for payments in lieu of taxes in
addition to the tax treaty above. OSP agreed to make annual
payments to the scholarship and community service foundations
in Burrillville, Rhode Island, and Uxbridge, Massachusetts, as
well as annual payments to the Harrisville, Rhode Island, fire
district in anticipation of any services to be rendered.
Payments are to be made annually over the 20-year life and are
to be shared equally by OSP and OSP II.
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(5) COMMITMENTS AND CONTINGENCIES (Continued)
Deferred Revenues
OSP filed its 1995 supplement to its rate schedules with the
FERC on February 1, 1995, setting forth its proposed Return
on Equity (ROE) of 12.90% for 1995. Three parties
challenged OSP's determination of the ROE and requested a
hearing to determine the appropriate ROE for 1995. After a
hearing was set, OSP submitted an offer to settle the
proceedings at an ROE of 12.33%, which the presiding
Administrative Law Judge certified to the FERC. The parties
are currently waiting for the FERC's decision on whether to
approve the settlement offer. At December 31, 1995, OSP has
deferred revenue recognition of $648,000 for the difference
between 12.90% and 12.33%, the most likely result of the
proceedings.
(6) RELATED PARTIES
Ground Lease
OSP entered into an agreement to lease certain property to
OSP II on which OSP II was constructed. The original lease
term expires on December 31, 2011 and is renewable in
five-year periods through September 2088. The lease may be
terminated by OSP II with the appropriate written notice to
OSP during the initial term. OSP may terminate the lease
only upon its purchase of OSP II's power unit.
Under the provisions of the lease, OSP II paid approximately
$1.1 million of initial rent upon receipt of its
construction financing. OSP has classified amounts under
this provision as deferred rent revenue to be amortized over
the life of the lease.
OSP has an option to acquire OSP II's unit at any time at a
price equal to the greater of its fair value or any amounts
due under any mortgage on the unit.
Common Facilities Lease
OSP entered into an agreement to lease to OSP II an
undivided interest in certain common facilities. The basic
term expires on September 30, 1997 and may be extended in
five-year increments through September 2088. Rent is
payable in an amount equal to OSP II's share of the monthly
investment cost of the common facilities for the basic term
of the lease and an amount equal to a fair market rental
value of the leased property thereafter. OSP II is
obligated to share in the costs of maintaining the facility
and has an option to purchase its undivided interest in the
common facilities for its appraised fair market value. The
lease may be terminated by OSP II upon written notice and
payment of certain rents based on the fair market value
during the canceled term.
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(6) RELATED PARTIES (Continued)
Project Administration Agent
J. Makowski Management Corp. (JMMC), an affiliate of one of
the general partners, has been appointed project
administration agent to manage the day-to-day affairs of
OSP. JMMC is compensated at agreed-upon billing rates that
are adjusted annually. JMMC was paid approximately
$1,174,000 in 1995 and $1,184,000 in 1994 for services
rendered.
Interconnection Facility
OSP and OSP II entered into an agreement to lease the
interconnection facility from Blackstone Valley Electric
Company (BVE), an affiliate of Eastern Utilities Associates.
Rent payments are to be paid monthly over the 20-year period
through 2011 and are to be shared equally by OSP and OSP II.
OSP paid BVE approximately $649,000 in 1995 and $825,000 in
1994 for use of the interconnection facility.
Gas Layoff Sales
During the years ended December 31, 1995 and 1994, OSP made
the following sales of available gas at market prices to the
following affiliate entities (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OSP II $ - $ 162
Selkirk Cogen Partners (an affiliate
of JMC Ocean State Corporation) 1,806 111
New England Power Company 94 16
Altresco Pittsfield, L.P.(an affiliate
of JMC Ocean State Corporation) 124 -
Masspower (an affiliate of JMC
Ocean State Corporation) 74 -
</TABLE>
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS
OSP provides an amount equal to income tax expense as if it
were a separate corporation, and this amount is a component
of cost of service. The partners are exempt from state
income tax in Rhode Island. Computed federal income taxes
payable by partners are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current $ 3,349 $ 3,467
Deferred 678 755
Investment tax credits, net 2,056 2,208
-------- --------
$ 6,083 $ 6,430
======== ========
</TABLE>
The tax effects of the temporary differences and tax
carryforwards that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December
31, 1995 and 1994, are presented below (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets
Site restoration reserve $ 1,617 $ 1,084
Deferred rent revenue 417 443
-------- --------
Total deferred tax assets 2,034 1,527
-------- --------
Deferred tax liabilities
Property, plant and equipment 11,935 10,300
Regulatory asset 85 201
Debt expense - 329
-------- --------
Total deferred tax liabilities 12,020 10,830
-------- --------
Net deferred tax liability $ 9,986 $ 9,303
======== ========
</TABLE>
A valuation allowance has not been recorded at December 31,
1995 and 1994, as OSP expects that all deferred income tax
assets will be utilized in the future.
(8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents
approximate fair value because of the short maturity of
these investments. The fair value of the site restoration
fund is based on the quoted market prices of the investments
of the fund. The fair value of long-term debt is estimated
based on currently quoted market prices for similar types of
borrowing arrangements.
<PAGE>
OCEAN STATE POWER
Notes to Financial Statements
December 31, 1995
(Continued)
(8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
(Continued)
The estimated fair value of OSP's financial instruments as
of December 31, 1995, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Carrying Value Fair Value
<S> <C> <C>
Cash and cash equivalents $ 1,461 $ 1,461
Site restoration fund 4,624 4,624
Long-term debt 96,706 104,476
</TABLE>
<PAGE>
ARTHUR ANDERSEN LLP
OCEAN STATE POWER II
Financial Statements
as of December 31, 1995 and 1994
Together with Auditors' Report
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Management Committee of
Ocean State Power II:
We have audited the accompanying balance sheets of Ocean State
Power II (a Rhode Island partnership) as of December 31, 1995 and
1994, and the related statements of income, changes in partners'
capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described in Note 2, these financial statements were prepared in
accordance with the accounting requirements of the Federal Energy
Regulatory Commission as set forth in its applicable Uniform System
of Accounts and published accounting releases, which is a
comprehensive basis of accounting other than generally accepted
accounting principles.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ocean
State Power II as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended, in
accordance with the accounting requirements of the Federal Energy
Regulatory Commission as set forth in its applicable Uniform System
of Accounts and published accounting releases.
s/Arthur Andersen LLP
Boston, Massachusetts
March 15, 1996
<PAGE>
<TABLE>
Ocean State Power II
Balance Sheets - December 31, 1995 and 1994
(Dollars in Thousands)
Assets
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Electric Plant, at original cost $175,622 $175,798
Less-Accumulated depreciation and amortization (Note 2) 36,430 28,408
-------- --------
139,192 147,390
CONSTRUCTION WORK IN PROGRESS 430 -
-------- --------
Net electric plant 139,622 147,390
-------- --------
CURRENT ASSETS:
Cash and cash equivalents 1,103 211
Accounts receivable -
Affiliated companies (Notes 1, 3 and 6) 13,751 14,091
Other 4,323 4,664
Inventories -
Fuel 693 1,461
Materials and supplies 3,683 3,578
Prepayments 209 165
-------- --------
Total current assets 23,762 24,170
-------- --------
DEFERRED CHARGES AND OTHER ASSETS:
Prepaid rent (Note 6) 1,191 1,267
Unamortized debt expense (Note 2) 1,767 2,645
Site restoration fund (Note 2) 4,043 2,576
Other 212 242
-------- --------
Total deferred charges and other assets 7,213 6,730
-------- --------
Total assets $170,597 $178,290
======== ========
Partners' Capital and Liabilities
CAPITALIZATION:
Partners' capital (see accompanying statement) $76,502 $79,684
Long-term debt, net of current maturities (Note 4) 74,421 78,962
-------- --------
Total capitalization 150,923 158,646
-------- --------
CURRENT LIABILITIES:
Current maturities of long-term debt 5,141 5,141
Accounts payable and accrued expenses-
Affiliated companies 2,164 2,188
Other 4,562 5,594
Accrued interest on debt 251 283
-------- --------
Total current liabilities 12,118 13,206
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
RESERVES AND DEFERRED CREDITS:
Deferred federal income taxes payable
by partners (Notes 2 and 7) 3,513 3,862
Site restoration reserve (Note 2) 4,043 2,576
-------- --------
Total reserves and deferred credits 7,556 6,438
-------- --------
Total partners' capital and liabilities $170,597 $178,290
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER II
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
1995 1994
<S> <C> <C>
ELECTRIC OPERATING REVENUES (Notes 1 and 2) $98,980 $101,566
------- -------
OPERATING EXPENSES:
Fuel costs 46,252 48,676
Operating expense 12,684 12,662
Maintenance expense 4,416 4,823
Depreciation and site restoration (Note 2) 9,863 9,849
Income taxes payable by partners (Notes 2 and 7) 6,042 5,842
Property taxes and payments in lieu of taxes (Note 5) 1,646 1,475
------- -------
80,903 83,327
------- -------
Operating income 18,077 18,239
OTHER INCOME (EXPENSE):
Allowance for other funds used during
construction (Note 2) 32 -
Interest income 224 184
Other, net (45) (15)
------- -------
211 169
------- -------
Income before interest charges 18,288 18,408
------- -------
INTEREST CHARGES:
Long-term debt (Note 4) 7,078 7,418
Allowance for borrowed funds used
during construction (Note 2) (16) -
------- -------
7,062 7,418
------- -------
Net income $11,226 $10,990
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Ocean State Power II
Statements of Changes in Partners' Capital
for the Years Ended December 31, 1995 and 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
EUA Narragansett
TCPL Ocean State Energy JMC Ocean
Power Ltd. Corp. Resources Co. State Corp. Total
<S> <C> <C> <C> <C> <C>
PARTNERSHIP INTEREST 40.0% 29.9% 20.0% 10.1% 100.0%
BALANCE, DECEMBER 31, 1993 $33,962 $25,386 $16,981 $8,574 $84,903
Net income 4,396 3,286 2,198 1,110 10,990
Current federal income
taxes payable by partners
(Note 2) 2,316 1,731 1,158 586 5,791
Distributions (8,800) (6,578) (4,400) (2,222) (22,000)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1994 31,874 23,825 15,937 8,048 79,684
Net income 4,490 3,357 2,245 1,134 11,226
Current federal income
taxes payable by partners
(Note 2) 2,557 1,911 1,278 646 6,392
Distributions (8,320) (6,219) (4,160) (2,101) (20,800)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1995 $30,601 $22,874 $15,300 $7,727 $76,502
======== ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Ocean State Power II
Statements of Cash Flows
for the Years Ended December 31, 1995 and 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,226 $10,990
Adjustments to reconcile net income
to net cash provided by operating
activities -
Income taxes payable by partners 6,042 5,842
Depreciation 8,022 8,715
Provision for site restoration 1,467 1,114
Amortization of debt expense 878 696
Allowance for other funds used
during construction (32) -
Changes in assets and liabilities -
Accounts receivable 681 (595)
Inventories 663 (282)
Prepayments (44) (30)
Prepaid rent 76 76
Accounts payable and accrued expenses (1,056) (356)
Accrued interest (32) (16)
Other assets and liabilities 31 -
-------- --------
Net cash provided by operating
activities 27,922 26,154
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (222) (6)
Site restoration fund (1,467) (1,114)
-------- --------
Net cash used for investing
activities (1,689) (1,120)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 600 100
Distributions to partners (28,800) (22,000)
Repayment of long-term debt (5,141) (5,141)
-------- --------
Net cash used for financing
activities (25,341) (27,041)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 892 (2,007)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 211 2,218
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,103 $ 211
========= ========
CASH PAID FOR INTEREST $ 6,230 $ 6,531
========= ========
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(1) ORGANIZATION AND BUSINESS
Organization and Management
Ocean State Power II (OSP II) is a Rhode Island general
partnership with four general partners (see Note 3). OSP II
is managed by a committee of representatives from each of
the partners and has no employees. Plant operations and
project administration are performed under various
contractual arrangements as described below.
Business
OSP II was formed to construct, own and operate a combined
cycle electric generating plant located in Burrillville,
Rhode Island, adjacent to a second generating plant that is
operated by an affiliate, Ocean State Power (OSP). The
plant's average net capacity is approximately 250 megawatts,
and it is fired by natural gas purchased under a firm,
20-year gas purchase contract. The plant commenced
commercial operations on October 1, 1991. The plant's
capacity and energy output are being sold under 20-year
take-or-pay unit power agreements to three investor-owned
utilities located in Massachusetts and Rhode Island. These
utilities are obligated to pay their portion of OSP II's
total costs, including amounts for income taxes payable by
partners, and a return on invested capital. The price of
the energy sold is determined based on a Federal Energy
Regulatory Commission (FERC) filed cost of service contract
with an adjustment factor for unit availability. During
1994, Newport Electric Company assigned all of its rights
and obligations under its unit power agreement to an
affiliate, Montaup Electric Power. The following utilities
have agreed to purchase electricity generated in the
following proportions:
Power
Purchase
Power Purchaser Affiliate of Percentage
--------------- ------------ -----------
Boston Edison Company - 23.5%
New England Power Company Narragansett Energy Resources
Company 48.5
Montaup Electric Company EUA Ocean State Corporation 28.0
-----
100.0%
======
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Regulation
OSP II's rates, operations, accounting and other matters are
subject to the regulatory authority of the FERC and other
federal and state agencies. Certain gas transportation
agreements are also subject to regulation by Canadian
authorities.
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Regulation (Continued)
OSP II is subject to the provisions of Statement of
Financial Accounting Standards (SFAS) No. 71, Accounting for
the Effects of Certain Types of Regulation, and therefore,
certain of the accounting principles followed may differ
from enterprises in general to reflect the economic effect
of rate actions of the FERC.
Allowance for Funds Used During Construction
OSP II capitalizes an allowance for funds used during
construction (AFUDC), which represents the net cost of
borrowed funds used for construction purposes and a
reasonable rate of return on OSP's equity when used. These
costs will be recovered over the service life of the plant
in the form of revenue collected to recover depreciation
expense.
Electric Operating Revenues
OSP II bills its customers monthly, based on estimates, in
accordance with the agreements described in Note 1, with a
subsequent true-up to reflect actual costs. Amounts due
from (to) customers at year-end, but not yet reflected in
customers' bills, totaled $100,000 in 1995 and $(290,000) in
1994 and are included in accounts receivable.
The unit power agreements contain incentive provisions
related to the performance of the facility. These
incentives provide for bonuses payable to OSP II based on
the extent to which the electrical capability of the plant
exceeds target performance levels. Alternatively, these
incentives provide for decreases in capacity charges payable
by power purchasers based on the extent to which the
electrical capability of the plant falls below target
levels. OSP II has billed and recorded revenues related to
these performance incentives of $3.4 million in 1995 and
1994.
Unamortized Debt Expense
Unamortized debt expense represents the costs incurred
related to project financing and are amortized using the
effective interest rate method over the original life of the
debt.
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Site Restoration
Depreciation is provided to allocate the cost of OSP II's
electric plant on a straight-line basis over the following
estimated useful lives:
Plant and equipment 20 years
Furniture and fixtures 5 years
Following termination of operations, OSP II is obligated to
restore the site to its original preconstruction condition.
Based on a study conducted in 1991, the estimated cost, in
future dollars, for OSP and OSP II is approximately
$65 million. This estimate is based on a number of
assumptions. Changes in assumptions for such things as labor
and material costs, technology, inflation and the timing of
site restoration could cause this estimate to change in the
near term. OSP II accrues for one half of the estimated site
restoration costs over the life of the plant; OSP is
responsible for the remaining half of the estimated costs.
Funds are deposited into a trust pending their ultimate use.
In accordance with SFAS No. 115, Accounting for Debt and
Equity Investments, OSP and OSP II have classified their site
restoration funds as available-for-sale securities and
reflected them at fair market value in the accompanying
balance sheets. The investment income is retained within the
trust account. The cost and fair market value of the site
restoration fund at December 31, 1995 were $3,798,000 and
$4,043,000, respectively, and at December 31, 1994 were
$2,676,000 and $2,576,000, respectively.
Cash and Cash Equivalents
OSP II considers all highly liquid investments with a maturity
of three months or less to be cash equivalents.
Income Taxes
Income taxes are the responsibility of the partners and are
not reflected in the financial statements of partnerships
under generally accepted accounting principles. However, the
billing calculation includes an allowance for income taxes,
and the FERC requires that OSP II record this provision on its
records to reflect the income taxes calculated as if OSP II
were a taxable corporation. The provisions for current and
deferred income taxes payable by partners are recorded without
regard to whether each partner could utilize its share of the
OSP II tax deductions. Partners' capital and the net
investment base are reduced by the amount equivalent to
accumulated deferred federal income taxes payable by partners
in calculating the allowed return.
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
OSP II recognizes, in accordance with SFAS No. 109,
Accounting for Income Taxes, tax assets and liabilities for
the cumulative effect of all temporary differences between
financial statement carrying amounts and the tax basis of
assets and liabilities. The standard also requires the
adjustment of deferred tax liabilities or assets for an
enacted change in tax laws or rates, among other things.
Use of Estimates
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain amounts in the Company's prior year financial
statements have been reclassified to conform to the current
year's presentation.
(3) PARTNERS' CAPITAL
The general partners, along with their respective equity
interests, at December 31, 1995 are as follows:
<TABLE>
<CAPTION> Equity
Partner Affiliate of Interest
<S> <C> <C>
TCPL Power Ltd. TransCanada PipeLines Limited 40.0%
EUA Ocean State Corporation Eastern Utilities Associates 29.9
Narragansett Energy
Resources Company New England Electric System 20.0
JMC Ocean State Corporation J. Makowski Company, Inc. 10.1
-----
100.0%
=====
</TABLE>
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(4) DEBT
OSP Finance Company is a finance affiliate of OSP and OSP II
(the Partnerships) and each Partnership owns 50% of its
common stock. OSP Finance Company's single purpose is to
provide long-term financing for the Partnerships. In
October 1992, OSP Finance Company issued senior notes to
various institutional investors in three tranches with fixed
interest rates and varying maturity dates. Upon receipt of
the senior note proceeds, OSP Finance Company extended loans
to Partnerships, with terms the same as the senior notes.
On July 20, 1994, the Partnerships entered into a revolving
secured credit agreement (the Revolver) with a commercial
bank for $15,000,000. The Partnerships must pay an annual
commitment fee of .15% on the unused portion of the
Revolver. Principal borrowings under the Revolver are
payable in full at maturity. The Revolver expires on
July 20, 2001 and bears interest at varying rates. The
interest rate at December 31, 1995 and 1994 was 6.125% and
6.375%, respectively.
Debt outstanding at December 31, 1995 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
OSP OSP II Total
<S> <C> <C> <C>
6.96% Series A senior notes due
June 15, 2002 $38,698 $33,170 $71,868
7.92% Series B senior notes due
February 15, 2006 22,077 18,923 41,000
8.21% Series C senior notes due
September 15, 2011 31,231 26,769 58,000
Revolving line of credit 4,700 700 5,400
------- ------- -------
Total long-term debt 96,706 79,562 176,268
Less Current maturities 5,998 5,141 11,139
------- ------- -------
Long-term debt,
excluding current maturities $90,708 $74,421 $165,129
======= ======= =======
</TABLE>
The Partnerships are guarantors of the senior note agreement
and the Revolver on a joint and several basis. The senior
notes and amounts outstanding under the Revolver are
collateralized by assignment of the rights and interest in
all of the Partnerships' unit power agreements and all
resulting proceeds with the exception, however, of revenues
under the unit power agreements that are attributable to
domestic gas transportation, on which the domestic gas
transporter has a first lien.
The senior note agreement and the Revolver contain certain
covenants, including restrictions on the creation of liens,
sale of assets, amendment of agreements and the incurrence
of additional indebtedness.
OSP II's share of the senior notes matures at $5,141,000 per
year over the life of the senior notes.
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(5) COMMITMENTS AND CONTINGENCIES
OSP II has entered into various agreements in connection
with the operation of the power plant. OSP II is obligated
under the following agreements/commitments.
Gas Supply and Transportation
OSP II has a firm, 20-year gas purchase contract with two
Canadian suppliers for the purchase of 25,000 Mcf from each
supplier per day or a total minimum of 12,318,750 Mcf per
year to be delivered to the U.S./Canadian border. One of
the gas purchase contracts was entered into with an
affiliate of TCPL Power Ltd., a general partner. OSP II may
also purchase additional quantities of gas as available.
The contract prices are based on an initial base price,
subject to monthly adjustments based on changes in the New
England Power Pool's (NEPOOL) Fossil Fuel Index price.
These contracts provide OSP II with its primary fuel supply
while maintaining other gas supply options and oil as
backups.
OSP II has a firm, 20-year fuel transportation agreement
with Tennessee Gas Pipeline Company for delivery of natural
gas from the U.S./Canadian border to the plant. The
agreement may be extended beyond 20 years on a year-by-year
basis.
Tax Treaty
The Partnerships entered into a tax treaty with the Town of
Burrillville, Rhode Island, providing for annual payments to
the town in lieu of any taxes that would normally be
assessed. Payments are to be made quarterly over the
20-year period through 2011 and are to be shared equally by
the Partnerships. The total payments for OSP II for each of
the five years subsequent to December 31, 1995 are as
follows (dollars in thousands):
1996 $ 1,525
1997 1,520
1998 1,671
1999 1,774
2000 1,774
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(5) COMMITMENTS AND CONTINGENCIES (Continued)
Other Commitments
As part of the costs incurred to obtain the site on which
the power unit is constructed, OSP II has entered into
certain agreements that provide for payments in lieu of
taxes in addition to the tax treaty above. OSP II agreed to
make annual payments to the scholarship and community
service foundations in Burrillville, Rhode Island, and
Uxbridge, Massachusetts, as well as annual payments to the
Harrisville, Rhode Island, fire district in anticipation of
any services to be rendered. Payments are to be made
annually over the 20-year life and are to be shared equally
by OSP and OSP II.
Deferred Revenues
OSP II filed its 1995 supplement to its rate schedules with
the FERC on February 1, 1995, setting forth its proposed
Return on Equity (ROE) of 12.90% for 1995. Three parties
challenged OSP II's determination of the ROE and requested a
hearing to determine the appropriate ROE for 1995. After a
hearing was set, OSP II submitted an offer to settle the
proceedings at an ROE of 12.33%, which the presiding
Administrative Law Judge certified to the FERC. The parties
are currently waiting for the FERC's decision on whether to
approve the settlement offer. At December 31, 1995, OSP II
has deferred revenue recognition of $602,000 for the
difference between 12.90% and 12.33%, the most likely result
of the proceedings.
(6) RELATED PARTIES
Ground Lease
OSP II entered into an agreement to lease certain property
from OSP on which OSP II was constructed. The original
lease term expires on December 31, 2011 and is renewable in
five-year periods through September 2088. The lease may be
terminated by OSP II with the appropriate written notice to
OSP during the initial term. OSP may terminate the lease
only upon its purchase of OSP II's power unit.
Under the provisions of the lease, OSP II paid approximately
$1.1 million of initial rent upon receipt of its
construction financing. OSP II has classified amounts under
this provision as prepaid rent to be amortized over the life
of the lease.
OSP has an option to acquire OSP II's power unit at any time
at a price equal to the greater of its fair value or any
amounts due under any mortgage on the unit.
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(6) RELATED PARTIES (Continued)
Common Facilities Lease
OSP II entered into an agreement to lease from OSP an
undivided interest in certain common facilities. The basic
term expires on September 30, 1997 and may be extended in
five-year increments through September 2088. Rent is
payable in an amount equal to OSP II's share of the monthly
investment cost of the common facilities for the basic term
of the lease and an amount equal to a fair market rental
value of the leased property thereafter. OSP II is
obligated to share in the costs of maintaining the facility
and has an option to purchase its undivided interest in the
common facilities for its appraised fair market values. The
lease may be terminated by OSP II upon written notice and
payment of certain rents based on the fair market value
during the canceled term.
Project Administration Agent
J. Makowski Management Corp. (JMMC), an affiliate of one of
the general partners, has been appointed project
administration agent to manage the day-to-day affairs of OSP
II. JMMC is compensated at agreed-upon billing rates that
are adjusted annually. JMMC was paid approximately
$1,076,000 in 1995 and $1,097,000 in 1994 for services
rendered.
Interconnection Facility
OSP and OSP II entered into an agreement to lease the
interconnection facility from Blackstone Valley Electric
Company (BVE), an affiliate of Eastern Utilities Associates.
Rent payments are to be paid monthly over the 20-year period
through 2011 and are to be shared equally by OSP and OSP II.
OSP II paid BVE approximately $649,000 in 1995 and $825,000
in 1994 for use of the interconnection facility.
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(6) RELATED PARTIES (Continued)
Gas Layoff Sales
During the years ended December 31, 1995 and 1994, OSP II
made the following sales of available gas at market prices
to the following affiliated entities (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OSP $ - $ 208
Selkirk Cogen Partners (an affiliate
of JMC Ocean State Corporation) 1,354 111
MASSPOWER (An affiliate of JMC Ocean
State Corporation) 74 35
Altresco Pittsfield, L.P.(an affiliate
of JMC Ocean State Corporation) 124 179
New England Power Company 94 446
</TABLE>
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS
OSP II provides an amount equal to income tax expense as if
it were a separate corporation, and this amount is a
component of cost of service. The partners are exempt from
state income tax in Rhode Island. Computed federal income
taxes payable by partners are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current $ 6,392 $ 5,791
Deferred (350) 51
-------- --------
$ 6,042 $ 5,842
======== ========
</TABLE>
<PAGE>
Ocean State Power II
Notes to Financial Statements
December 31, 1995
(Continued)
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS (Continued)
The tax effects of the temporary differences and tax
carryforwards that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December
31, 1995 and 1994, are presented below (dollars in
thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets
Site restoration reserve $ 1,403 $ 890
Other 189 162
-------- --------
Total deferred tax assets 1,592 1,052
-------- --------
Deferred tax liabilities
Property, plant and equipment 4,829 4,363
Regulatory asset 69 69
Debt expense 207 482
-------- --------
Total deferred tax liabilities 5,105 4,914
-------- --------
Net deferred tax liability $ 3,513 $ 3,862
======== ========
</TABLE>
A valuation allowance has not been recorded at December 31,
1995 and 1994, as OSP II expects that all deferred income
tax assets will be utilized in the future.
(8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents
approximate fair value because of the short maturity of
these investments. The fair value of the site restoration
fund is based on the quoted market prices of the investments
of the fund. The fair value of long-term debt is estimated
based on currently quoted market prices for similar types of
borrowing arrangements.
The estimated fair value of OSP II's financial instruments
as of December 31, 1995, are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Carrying Value Fair Value
<S> <C> <C>
Cash and cash equivalents $ 1,103 $ 1,103
Site restoration fund 4,043 4,043
Long-term debt 79,562 86,222
</TABLE>
<PAGE>
ARTHUR ANDERSEN LLP
OSP Finance Company
Financial Statements
as of December 31, 1995 and 1994
Together with Auditors' Report
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Stockholders and the Board of Directors of
OSP Finance Company:
We have audited the accompanying balance sheets of OSP Finance
Company (a Delaware corporation) as of December 31, 1995 and 1994,
and the related statements of operations, stockholders' equity and
cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of OSP
Finance Company as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
s/Arthur Andersen LLP
Boston, Massachusetts
March 15, 1996
<PAGE>
<TABLE>
OSP Finance Company
Balance Sheets - December 31, 1995 and 1994
(Dollars in Thousands)
Assets
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS:
Loans receivable from stockholders-
Ocean State Power $ 5,998 $ 5,998
Ocean State Power II 5,141 5,141
Interest receivable from stockholders-
Ocean State Power 292 330
Ocean State Power II 250 283
-------- --------
11,681 11,752
-------- --------
LOANS RECEIVABLE FROM STOCKHOLDERS-NONCURRENT (Note 2):
Ocean State Power 86,008 92,006
Ocean State Power II 73,721 78,862
-------- --------
Total loans receivable-noncurrent 159,729 170,868
-------- --------
$171,410 $182,620
======== ========
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Current maturities of senior notes (Note 2) $11,139 $11,139
Accrued interest 542 613
-------- --------
Total current liabilities 11,681 11,752
SENIOR NOTES, EXCLUDING CURRENT MATURITIES (Note 2) 159,729 170,868
-------- --------
Total liabilities 171,410 182,620
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value-
Authorized-1,000 shares
Issued and outstanding-20 shares - -
Additional paid-in capital 1 1
Accumulated deficit (1) (1)
-------- --------
Total stockholders' equity - -
-------- --------
$ 171,410 $182,620
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OSP Finance Company
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
1995 1994
<S> <C> <C>
INCOME:
Interest from Ocean State Power $ 7,194 $ 7,631
Interest from Ocean State Power II 6,166 6,541
------- -------
Total income 13,360 14,172
INTEREST EXPENSE:
Senior notes due 2002 5,374 6,163
Senior notes due 2006 3,238 3,247
Senior notes due 2011 4,748 4,762
------- -------
Total interest expense 13,360 14,172
------- -------
INCOME BEFORE AMORTIZATION OF ORGANIZATION EXPENSE - -
AMORTIZATION OF ORGANIZATION EXPENSE - 1
------- -------
Net income(loss) $ - $ (1)
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OSP Finance Company
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ - $ 1 $ - $ 1
Net income(loss) - - (1) (1)
------- ------- ------- -------
BALANCE, DECEMBER 31, 1994 - 1 (1) -
Net income(loss) - - - -
------- ------- ------- -------
BALANCE, DECEMBER 31, 1995 $ - $ 1 $ (1) $ -
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OSP Finance Company
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ - $ (1)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities -
Amortization of organization expense - 1
Changes in operating assets and
liabilities-
Interest receivable 71 34
Accrued interest (71) (34)
-------- --------
Net cash provided by operating
activities - -
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of loans by stockholders 11,139 11,139
-------- --------
Net cash provided by investing
activities 11,139 11,139
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior notes (11,139) (11,139)
-------- --------
Net cash used for financing
activities (11,139) (11,139)
-------- --------
NET INCREASE IN CASH - -
CASH, BEGINNING OF PERIOD - -
-------- --------
CASH, END OF PERIOD $ - $ -
========= ========
CASH PAID FOR INTEREST $ 13,431 $ 14,206
========= ========
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
OSP Finance Company
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) ORGANIZATION AND BUSINESS
OSP Finance Company (the Company) was incorporated in July
1992 as a finance affiliate of Ocean State Power (OSP) and
Ocean State Power II (OSP II). OSP and OSP II (the
Partnerships) each own 50% of the Company's common stock.
The Company's single purpose is to provide long-term debt
financing for the Partnerships. Upon receipt of the senior
note proceeds, as discussed in Note 2, the Company loaned
the proceeds to the Partnerships. The costs associated with
the refinancing were paid by the Partnerships. The interest
and repayment terms of the loans receivable are the same as
the senior notes. The Company does not expect to recognize
any significant income(loss) for financial reporting or
income tax purposes.
The Partnerships were formed to construct, own and operate
two combined cycle electric generating plants located in
Burrillville, Rhode Island. Each plant's average net
capacity is approximately 250 megawatts, and each is fired
by natural gas purchased under firm 20-year gas purchase
contracts. OSP commenced commercial operations on December
31, 1990, and OSP II commenced commercial operations on
October 1, 1991. Each plant's capacity and energy output is
being sold under 20-year take-or-pay unit power agreements
to three investor-owned utilities located in Massachusetts
and Rhode Island.
(2) SENIOR NOTES
On October 19, 1992, the Company issued senior notes in
three tranches with fixed interest rates and varying
maturity dates. The senior notes were purchased by various
institutional investors. A detail of the senior notes
outstanding at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
OSP OSP II Total
<S> <C> <C> <C>
6.96% Series A notes due
June 15, 2002 $38,698 $33,170 $71,868
7.92% Series B notes due
February 15, 2006 22,077 18,923 41,000
8.21% Series C notes due
September 15, 2011 31,231 26,769 58,000
------- ------- -------
Total senior notes payable 92,006 78,862 170,868
Less Current maturities 5,998 5,141 11,139
------- ------- -------
Senior notes payable, excluding
current maturities $86,008 $73,721 $159,729
======= ======= =======
</TABLE>
<PAGE>
OSP Finance Company
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
(Continued)
(2) SENIOR NOTES (Continued)
The fair value of the Company's senior notes at December 31,
1995, estimated based on currently quoted market prices for
similar types of borrowing arrangements, is $185,298,000.
The partnerships are guarantors of the senior note agreement
on a joint and several basis. The senior notes are
collateralized by assignment of the rights and interest in
all OSP and OSP II unit power agreements and all resulting
proceeds, with the exception, however, of revenues under the
unit power agreements that are attributable to domestic gas
transportation, on which the domestic gas transporter has a
first lien.
The senior note agreement contains certain covenants,
including restrictions on the creation of liens, sale of
assets, amendment of agreements and the incurrence of
additional indebtedness.
The senior notes mature at $11,139,000 per year, $5,998,000
for OSP and $5,141,000 for OSP II, over the life of the
senior notes.
