<PAGE>
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC SYSTEM
(Name of company filing this statement)
25 Research Drive
Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Kirk L. Ramsauer
Treasurer Associate General Counsel
25 Research Drive 25 Research Drive
Westborough, Massachusetts 01582 Westborough, Massachusetts 01582
(Names and addresses of agents for service)
<PAGE>
Item 1. Description of Proposed Transactions
- ---------------------------------------------
New England Electric System (NEES) was created under the laws of The
Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
January 1, 1926, as amended, and is registered as a holding company under the
Public Utility Holding Company Act of 1935 (the Act).
As a result of the changes in the nature of the electric utility
industry through the spread of wholesale and retail competition and the
passage of legislation at the state level, the subsidiaries of NEES have
contracted to sell their non-nuclear generating business. After completion of
these transactions, the NEES Companies will consist primarily of transmission
and distribution assets. In order to permit the System to grow and prosper by
building on existing skills, the companies are exploring possible investments
in "energy related companies" as defined in Rule 58(b) under the Act. In
order to allow for "tax-deferred" or "tax-free" transactions for the current
owners of the acquired companies, NEES is willing to consider the use of
common shares in lieu of cash to make such investments.
NEES, accordingly, seeks authorization hereunder to issue, in one or
more separate transactions, from time to time, but not later than December 31,
2002, not exceeding 1,000,000 common shares to be used to acquire stock or
assets of one or more energy-related companies (the Additional Common Shares).
The acquisitions may be made either directly by NEES or indirectly through a
direct or indirect non-utility subsidiary (the Acquiring Subsidiary). If the
latter course is adopted for a particular acquisition, the shares will be
contributed by NEES to the Acquiring Subsidiary and then used to acquire the
stock or assets of the energy related company.
NEES currently has issued and outstanding 64,537,777 shares. NEES also
has 431,875 treasury shares, including 283,000 shares which were acquired as
part of a share buyback plan announced in August 1997, and 85,030,348
authorized but unissued shares. The Additional Common Shares may be treasury
shares or shares purchased on the open market.
It is anticipated that contracts with the parties selling their stock or
assets will provide for registration of the Additional Common Shares under the
Securities Act of 1933.
In the event that the total amount of authority requested in this
Application/Declaration is invested in connection with the acquisition of
"energy-related companies," NEES" and its subsidiaries' aggregate investment
in energy-related companies would not exceed the greater of (i) $50 million,
or (ii) 15% of NEES' "consolidated capitalization" (as defined in Rule
58(a)(1)(ii)) in compliance with the provisions set forth in Rule 58. NEES
and its affiliates will fully comply with the requirements of Rule 58 in
connection with acquisitions of energy-related companies.
Neither NEES nor any subsidiary thereof has any ownership interest in an
exempt wholesale generator (EWG) or a foreign utility company (FUCO) as
defined in Sections 32 and 33 of the 1935 Act. Additionally, neither NEES nor
any subsidiary thereof is a party to, nor has any rights under, a service,
sales, or construction agreement with an EWG or FUCO. NEES and its
subsidiaries shall comply with the requirements of Rule 53 of the Act in
connection with EWG and FUCO acquisitions and financings.
Item 2. Fees, Commissions and Expenses
- ---------------------------------------
The estimated fees and expenses in connection with the proposed issuance
and sale will be set out in an exhibit to the Registration Statement. These
include incidental services in connection herewith to be performed by New
<PAGE>
England Power Service Company (a wholly owned subsidiary of NEES) (the Service
Company) at the actual cost thereof. The Service Company is an affiliated
service company operating pursuant to Section 13 of the Act and the
Commission's rules thereunder.
Item 3. Applicable Statutory Provisions
- ----------------------------------------
The proposed additional issuance and sale of the shares is subject to
Sections 6(a) and 7 of the Act.
Any contribution of the shares by NEES or its subsidiary to the
Acquiring Subsidiary is exempted by Rule 45(b)(4) of the Act.
The acquisition of the securities of the energy related company is
exempted from the requirements of Section 9(a) of the Act by Rule 58.
For the purposes of Rule 54, NEES satisfies the requirements of Rule
53(a) and Rule 53(b). Therefore, Rule 53(c) is not applicable.
Item 4. Regulatory Approval
- ----------------------------
No action by any state commission or Federal commission (other than the
Securities and Exchange Commission) is necessary to carry out the proposed
transaction.
Item 5. Procedure
- ------------------
It is requested that the Commission take action with respect to this
Application/Declaration without a hearing being held and that this statement
become effective and be granted on or before March 23, 1998, or as soon
thereafter as possible.
The Company (1) does not request a recommended decision by a hearing
officer, (2) does not request a recommended decision by any other responsible
officer of the Commission, (3) hereby specifies that the Division of Corporate
Regulation may assist in the preparation of the Commission's decision, and (4)
hereby requests that there be no 30-day waiting period between the date of
issuance of the Commission's order and the date on which it is to become
effective.
Item 6. Exhibits and Financial Statements
- ------------------------------------------
(a) Exhibits
A Agreement and Declaration of Trust dated January 2, 1926, as
amended through April 23, 1992, incorporated herein by
reference to Exhibit 3 to the 1996 Form 10-K filed on March
28, 1997.
* C Registration Statement (Form S-3), including all financial
statements and exhibits thereto, which will be filed under
the Securities Act of 1933 with reference to the additional
shares
* F Opinion of Counsel
H Proposed Form of Notice
* To be filed by amendment
<PAGE>
(b) Financial Statements
1-A Balance Sheet of NEES (Parent Company only) at September 30,
1997, Actual
** 1-B Statement of Income and Retained Earnings for NEES (Parent
Company only) for twelve months ended September 30, 1997,
Actual
2-A Consolidated Balance Sheet of NEES at September 30, 1997,
Actual
** 2-B Statement of Consolidated Income for NEES for twelve months
ended September 30, 1997, Actual
27 Financial Data Schedule for NEES and NEES Consolidated
**The proposed transactions will have no material, instant effect
on the statements of income and retained earnings. Pro forma
statements, therefore, are omitted.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
- -------------------------------------------------
The proposed transactions do not involve a major Federal action
significantly affecting the quality of the human environment.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Application/ Declaration
on Form U-1 to be signed on its behalf, as indicated by the undersigned
officer thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By
Michael E. Jesanis, Treasurer
Date: January 28, 1998
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ------------ ------
A Agreement and Declaration of Trust Incorporated
dated January 2, 1926, as amended by reference
through April 23, 1992, incorporated
herein by reference to Exhibit 3 to
the 1996 Form 10-K filed on
March 28, 1997.
*C Registration Statement (Form S-3), To be filed
including all financial statements by amendment
and exhibits thereto, which will be
filed under the Securities Act of
1933 with reference to the additional
shares
*F Opinion of Counsel To be filed
by amendment
H Proposed Form of Notice Filed herewith
*To be filed by amendment
Financial Statements
--------------------
1-A Balance Sheet of NEES (Parent Company Filed herewith
only) at September 30, 1997, Actual
1-B Statement of Income and Retained Filed herewith
Earnings for NEES (Parent Company
only) for twelve months ended
September 30, 1997, Actual
2-A Consolidated Balance Sheet of NEES Filed herewith
at September 30, 1997, Actual
2-B Statement of Consolidated Income for Filed herewith
NEES for twelve months ended
September 30, 1997, Actual
27 Financial Data Schedule for NEES and Filed herewith
NEES Consolidated
<PAGE>
EXHIBIT H
Proposed Form of Notice
-----------------------
Notice of Proposal to Issue Additional Common Shares
- ----------------------------------------------------
New England Electric System (NEES), a registered holding company, has filed
an Application/Declaration under Sections 6(a) and 7 of the 1935 Act and Rules
25, 45, 53, and 58 thereunder. NEES currently has issued and outstanding
64,537,777 shares. NEES also has 431,875 treasury shares, including 283,000
shares which were acquired as part of a share buyback plan announced in August
1997, and 85,030,348 authorized but unissued shares. NEES seeks authority
hereunder to issue, in one or more separate transactions, from time to time,
but not later than December 31, 2002, not exceeding 1,000,000 common shares to
be used to acquire stock or assets of one or more "energy-related companies"
as defined in Rule 58(b) under the Act. The Additional Common Shares may be
treasury shares or shares purchased on the open market.
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Balance Sheet
At September 30, 1997
(Unaudited)
<CAPTION>
ASSETS
------
(In Thousands)
<S> <C>
Investments:
Common stocks of subsidiaries, at equity $1,673,459
Notes of subsidiaries 48,129
Other investments 4,234
----------
Total investments 1,725,822
----------
Current assets:
Cash 517
Temporary cash investments - subsidiary company 6,600
Accounts receivable from subsidiaries 11
Interest and dividends receivable of subsidiaries 42,125
Other current assets 87
----------
Total current assets 49,340
----------
Deferred federal income taxes 2,838
----------
$1,778,000
==========
CAPITALIZATION AND LIABILITIES
------------------------------
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Issued - 64,969,652 shares $ 64,969
Paid-in capital 736,567
Retained earnings (including $669,538,000 of
undistributed subsidiary earnings) 934,357
Treasury stock - 92,602 shares (3,556)
Unrealized gain on securities, net 281
----------
Total common share equity 1,732,618
----------
Current liabilities:
Accounts payable 2,268
Other accrued expenses 1,357
Dividends payable 34,284
----------
Total current liabilities 37,909
----------
Other reserves and deferred credits 7,473
----------
$1,778,000
==========
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Statement of Income
Twelve Months Ended September 30, 1997
(Unaudited)
<CAPTION>
(In Thousands)
<S> <C>
Equity in earnings of subsidiaries $215,972
Interest income - subsidiaries 863
--------
Total income from subsidiaries 216,835
Other income 133
---------
Total income 216,968
Corporate and fiscal expenses (includes $1,766,000 for cost
of services billed by an affiliated company) 7,061
Federal income taxes (546)
---------
Income before interest 210,453
Interest 312
---------
Net income $ 210,141
=========
Statement of Retained Earnings
Retained earnings at beginning of period $ 877,515
Net income 210,141
Dividends declared on common shares (153,299)
---------
Retained earnings at end of period $ 934,357
=========
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
<CAPTION>
September 30,
ASSETS 1997
------ ----
(In Thousands)
<S> <C>
Utility plant, at original cost $5,821,619
Less accumulated provisions for depreciation
and amortization 1,956,522
----------
3,865,097
Construction work in progress 50,979
----------
Net utility plant 3,916,076
----------
Oil and gas properties, at full cost 1,296,337
Less accumulated provision for amortization 1,129,948
----------
Net oil and gas properties 166,389
----------
Investments:
Nuclear power companies, at equity 50,370
Other subsidiaries, at equity 43,875
Other investments 109,191
----------
Total investments 203,436
----------
Current assets:
Cash 6,542
Accounts receivable, less reserves of $20,395,000 219,411
Unbilled revenues 61,828
Fuel, materials and supplies, at average cost 72,907
Prepaid and other current assets 71,423
----------
Total current assets 432,111
----------
Deferred charges and other assets 572,052
----------
$5,290,064
==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Issued - 64,969,652 shares
Outstanding - 64,735,089 shares $ 64,970
Paid-in capital 736,773
Retained earnings 934,357
Treasury stock - 234,563 shares (8,707)
Unrealized gain on securities, net 3,770
----------
Total common share equity 1,731,163
Minority interests in consolidated subsidiaries 46,259
Cumulative preferred stock of subsidiaries 126,166
Long-term debt 1,481,878
----------
Total capitalization 3,385,466
----------
Current liabilities:
Long-term debt due within one year 82,910
Short-term debt 139,700
Accounts payable 132,950
Accrued taxes 25,139
Accrued interest 21,487
Dividends payable 37,046
Other current liabilities 135,272
----------
Total current liabilities 574,504
----------
Deferred federal and state income taxes 723,576
Unamortized investment tax credits 90,122
Other reserves and deferred credits 516,396
----------
$5,290,064
==========
</TABLE>
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statement of Consolidated Income
Twelve Months Ended September 30, 1997
(Unaudited)
<CAPTION>
(In Thousands)
<S> <C>
Operating revenue $2,440,888
----------
Operating expenses:
Fuel for generation 366,559
Purchased electric energy 539,043
Other operation 526,289
Maintenance 132,833
Depreciation and amortization 239,160
Taxes, other than income taxes 145,831
Income taxes 138,458
----------
Total operating expenses 2,088,173
----------
Operating income 352,715
Other income:
Equity in income of generating companies 9,897
Other income (expense), net (16,768)
----------
Operating and other income 345,844
----------
Interest:
Interest on long-term debt 108,242
Other interest 17,329
Allowance for borrowed funds used during construction (2,195)
----------
Total interest 123,376
----------
Income after interest 222,468
Preferred dividends and net gain on reacquisiton
of preferred stock 5,964
Minority interests 6,642
----------
Net income $ 209,862
==========
Average common shares 64,952,560
Net income per average common share $3.23
Dividends declared per share $2.36
Statement of Consolidated Retained Earnings
Retained earnings at beginning of period $ 877,065
Net income 209,862
Dividends declared on common shares (153,020)
Premium on redemption of preferred stock 450
---------
Retained earnings at end of period $ 934,357
=========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, AND
RETAINED EARNINGS OF THE NEW ENGLAND ELECTRIC SYSTEM (PARENT
COMPANY), AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000071297
<NAME> NEW ENGLAND ELECTRIC SYSTEM (PARENT COMPANY)
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 1,725,822
<TOTAL-CURRENT-ASSETS> 49,340
<TOTAL-DEFERRED-CHARGES> 2,838
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,778,000
<COMMON> 64,969
<CAPITAL-SURPLUS-PAID-IN> 736,567
<RETAINED-EARNINGS> 934,357
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,732,618 <F1>
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 45,382
<TOT-CAPITALIZATION-AND-LIAB> 1,778,000
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> (546)
<OTHER-OPERATING-EXPENSES> 7,061
<TOTAL-OPERATING-EXPENSES> 6,515
<OPERATING-INCOME-LOSS> (6,515)
<OTHER-INCOME-NET> 216,968
<INCOME-BEFORE-INTEREST-EXPEN> 210,453
<TOTAL-INTEREST-EXPENSE> 312
<NET-INCOME> 210,141
0
<EARNINGS-AVAILABLE-FOR-COMM> 210,141
<COMMON-STOCK-DIVIDENDS> 153,299
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 176,083
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Total common stockholders equity is reflected net of treasury stock at
cost and unrealized gain on securities.
</FN>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED
STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW
ENGLAND ELECTRIC SYSTEM, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000071297
<NAME> NEW ENGLAND ELECTRIC SYSTEM - CONSOLIDATED
<SUBSIDIARY>
<NUMBER> 1
<NAME> NEES CONSOLIDATED
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,916,076
<OTHER-PROPERTY-AND-INVEST> 369,825
<TOTAL-CURRENT-ASSETS> 432,111
<TOTAL-DEFERRED-CHARGES> 572,052 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,290,064
<COMMON> 64,970
<CAPITAL-SURPLUS-PAID-IN> 736,773
<RETAINED-EARNINGS> 934,357
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,731,163 <F3>
0
126,166 <F2>
<LONG-TERM-DEBT-NET> 1,481,878
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 139,700
<LONG-TERM-DEBT-CURRENT-PORT> 82,910
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,728,247
<TOT-CAPITALIZATION-AND-LIAB> 5,290,064
<GROSS-OPERATING-REVENUE> 2,440,888
<INCOME-TAX-EXPENSE> 138,458
<OTHER-OPERATING-EXPENSES> 1,949,715
<TOTAL-OPERATING-EXPENSES> 2,088,173
<OPERATING-INCOME-LOSS> 352,715
<OTHER-INCOME-NET> (6,871)
<INCOME-BEFORE-INTEREST-EXPEN> 345,844
<TOTAL-INTEREST-EXPENSE> 123,376
<NET-INCOME> 222,468
7,332 <F2>
<EARNINGS-AVAILABLE-FOR-COMM> 215,136
<COMMON-STOCK-DIVIDENDS> 153,020
<TOTAL-INTEREST-ON-BONDS> 108,242
<CASH-FLOW-OPERATIONS> 546,857
<EPS-PRIMARY> $3.23
<EPS-DILUTED> $3.23
<FN>
<F1> Total deferred charges includes other assets.
<F2> Preferred stock reflects preferred stock of subsidiaries. Preferred
stock dividends reflect preferred stock dividends of subsidiaries.
<F3> Total common stockholders equity is reflected net of treasury stock at
cost and unrealized gain on securities.
</FN>
