File No. 70-8507
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
PRE-EFFECTIVE AMENDMENT NO. 2
TO FORM U-1
APPLICATION AND DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________________
NORTHEAST UTILITIES
174 Brush Hill Avenue
West Springfield, Massachusetts 01089
CHARTER OAK ENERGY, INC.
COE DEVELOPMENT CORPORATION
107 Selden Street
Berlin, CT 06037-1616
_____________________________________________________
(Name of company filing this statement and
address of principal executive offices)
NORTHEAST UTILITIES
_____________________________________
(Name of top registered holding
company parent of each applicant or declarant)
Jeffrey C. Miller, Esq.
Assistant General Counsel
NORTHEAST UTILITIES SERVICE COMPANY
P.O. Box 270
Hartford, Connecticut 06141-0270
________________________________________
(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
Mark Malaspina, Esq. William S. Lamb, Esq.
Charter Oak Energy, Inc. LeBoeuf, Lamb, Greene & MacRae
107 Seldon Street L.L.P.
P.O. Box 270 125 W. 55th Street
Hartford, CT 06141-0270 New York, New York 10019-4513
Northeast Utilities ("NU"), West Springfield,
Massachusetts, a registered holding company, and its wholly owned
subsidiaries, Charter Oak Energy, Inc. ("Charter Oak") and COE
Development Corporation ("COE Development"), both located in
Berlin, Connecticut, (collectively, the "Applicants") hereby file
this Pre-Effective Amendment Number Two to their Application and
Declaration on Form U-1 (File No. 70-8507) under Sections 6(a),
7, 9(a), 10, 12(b) and 33 of the Public Utility Holding Company
Act of 1935 (the "Act") and Rules 45 and 53 thereunder, for the
purpose of obtaining a two year extension, and modification, of
authority for Charter Oak and COE Development to continue to
engage in the power development activities authorized in the
Securities and Exchange Commission's (the "Commission") order
dated December 30, 1992 (HCAR. 25726; File No. 70-8062) (the
"December 1992 Order"), as amended on January 24, 1994 (HCAR.
25977; File No. 70-8062) (the "January 1994 Order"), September 2,
1994 (HCAR. 26116; File No. 70-8062) (the "September 2, 1994
Order"), and September 30, 1994 (HCAR 26134; File No. 70-8062)
(the "September 30, 1994 Order"). The Applicants seek to modify
this authority to set the aggregate amount that NU is authorized
to invest in Charter Oak, Charter Oak is authorized to invest in
COE Development and Charter Oak and COE Development are
authorized to spend on authorized power development activities,
at $200 million for the period from January 1, 1995 through
December 31, 1996. The Applicants also request authority (1) for
Intermediate Companies (as defined below) to acquire interests
in, finance the acquisition and hold the securities of exempt
wholesale generators, as defined by Section 32 of the Act
("EWGs"), and foreign utility companies, as defined by Section 33
of the Act ("FUCOs"), through the issuance of equity securities
and debt securities to third parties; (2) for the Applicants to
participate in joint ventures engaged exclusively in Exempt Project
activities (as defined below) and to dissolve Intermediate
Companies under specified circumstances; and (3) for
Charter Oak's employees and employees of other NU service
companies to provide a de minimis amount of services to
affiliated EWGs (both foreign and domestic) and FUCOs.
Item 1. DESCRIPTION OF PROPOSED TRANSACTIONS
A. Description of Charter Oak
Charter Oak was organized by NU pursuant to the
Commission's order dated May 17, 1989 (HCAR. 24893; File No. 70-
7545) to invest and participate in qualifying cogeneration and
small power production facilities as defined in the Public
Utility Regulatory Policies Act of 1978 ("QFs") for the four year
period through December 31, 1992. By order dated January 28,
1992 (HCAR. 7545; File No. 70-8062), the Commission expanded
Charter Oak's authorized activities to include preliminary
development and pre-investment activities related to independent
power production facilities. Pursuant to the December 1992 Order
as amended by the January 1994 Order, the September 2, 1994 Order
and the September 30, 1994 Order, as well as an order issued on
December 29, 1992 (HCAR. 25721; File No. 70-8064), Charter Oak
and COE Development are presently authorized to pursue
preliminary development activities with regard to investment and
participation in QFs throughout the United States, EWGs, FUCOs
and independent power production facilities that would constitute
a part of NU's "integrated public utility system" within the
meaning of Section 2(a)(29)(A) of the Act ("Qualified IPPs") and
to provide consulting services to such projects. Charter Oak and
COE Development may invest in QFs and Qualified IPPs after
obtaining Commission approval and may invest in, and finance the
acquisition of, EWGs and FUCOs without prior Commission approval
subject to certain limitations ("Exempt Projects"). In addition,
the Applicants also have authority to issue guarantees and assume
the liabilities of subsidiary companies for pre-development
activities, and contingent liabilities subsequent to operation
with regard to Exempt Projects.
The Applicants also have been authorized to acquire
interests in, and finance the acquisition, and hold the
securities of, one or more companies ("Intermediate Companies")
engaged directly or indirectly and exclusively in the business of
holding the securities of one or more EWGs and/or FUCOs without
filing specific project applications with the Commission, and to
issue guarantees and assume liabilities subsequent to operation
with regard to those projects.
The current authorization permits NU to invest, and
Charter Oak to spend, up to an aggregate amount of $100 million
through December 31, 1994 to finance these activities, subject to
certain restrictions. Specifically, NU's investment in Charter
Oak, and Charter Oak's investment in COE Development, Exempt
Projects or Intermediate Companies may take the form of
acquisitions of common stock, capital contributions, open account
advances, and/or subordinated loans (collectively,
"Investments"). Open account advances or subordinated loans bear
interest at a rate based on NU's cost of funds in effect on the
date of issue, but in no case in excess of the prime rate at a
bank designated by NU.
Charter Oak may also obtain debt financing from
unaffiliated third parties, anticipated to be banks, insurance
companies, and other institutional investors ("Debt Financing"),
as long as the total of all Investments together with any Debt
Financing does not exceed the total funding authorization of
Charter Oak. The Debt Financing may not exceed a term of 15
years or bear a floating interest rate in excess of 125% of the
prime rate in effect at the time of issuance or a fixed interest
rate more than 350 basis points above that borne by U.S. Treasury
securities of comparable maturities.
The Debt Financing may require a guarantee by
NU.<F1> Any Debt Financing backed by NU's guarantee is
____________________
<F1> Since the Debt Financing is included within the total
funding authorization for Charter Oak, any guarantee by NU is not
counted towards the total funding authorization limitation.
limited to a term of 15 years and is at an interest rate not in
excess of the prime rate in effect on the date of the issue at a
bank designated by NU from among the major lenders to the
companies in the NU system. Charter Oak may also pay commitment
and other fees not to exceed 25 basis point per annum on the
total amount of the Debt Financing.
The Applicants' authority with regard to the issuance
of guarantees and assumptions of liability is also subject to
limitations. Guarantees and assumptions of liability made for
projects requiring prior Commission approval are presently
limited to preliminary development activities and, absent
additional Commission approval, may not involve guarantees
relating to construction financing or permanent financing. The
total value of such guarantees and assumptions of liability
issued pursuant to existing authority and outstanding at any time
may not presently exceed $20 million. The term of any such
guarantee or assumption of liability may not exceed five years.
Until such time as there is no possibility of a claim against
Charter Oak or NU, the full contingent amount of any guarantees
or assumptions of liabilities count as part of the authorized
development activities limit.
The full contingent amount of guarantees and
assumptions of liability made for preliminary development
activities as well as development activities for Exempt Projects
also count as part of the authorized development activities limit
requested herein.
B. Charter Oak's Preliminary Investment and Development
Activities
As authorized by the December 1992 Order, the January
1994 Order, the September 2, 1994 Order and the September 30,
1994 Order, Charter Oak's preliminary development activities with
regard to QF, Qualified IPP and Exempt Project projects
(collectively, "Authorized Power Projects") have included
investigation of sites, preliminary engineering and licensing
activities, acquiring options and rights, contract drafting and
negotiating and preparation of proposals. Authorized
administrative activities have included ongoing personnel,
accounting, engineering, legal, financial and other support
activities necessary for Charter Oak to manage its development
activities relating to Authorized Power Projects.
Pursuant to Commission authorization in the December
1992 Order, the January 1994 Order, the September 2, 1994 Order
and the September 30, 1994 Order, Charter Oak has undertaken
preliminary development activities relating to Authorized Power
Projects on its own and in conjunction with third parties
unaffiliated with Charter Oak and its affiliates.
1. Independent Activities
Charter Oak has analyzed and evaluated a variety of
potential Authorized Power Projects using its own personnel and
resources. One example of the independent activities undertaken
by Charter Oak is its investment, made through a special purpose
subsidiary Charter Oak (Paris) Inc., in a 220MW gas-fired
cogeneration facility in Paris, Texas. Charter Oak's investment
in this project was authorized by the Commission in an order
dated May 17, 1989 (HCAR. 24839) To date, the Paris, Texas
project is Charter Oak's only independently-pursued project which
has commenced commercial operations. However, Charter Oak is
involved in several project development opportunities in various
stages of development and anticipates that during the next two
years it may make equity investments, and where necessary seek
Commission authorization for such investments, in one or more of
such projects.
2. Cooperative Efforts
In addition to its own independent development efforts,
Charter Oak participates in several informal and unincorporated
consortia that attempt to identify, analyze and make available
for development by participants who so elect, development
opportunities in the independent power business. Typical
consortia include as principal potential investors one or more
affiliated IPP development subsidiaries of investor-owned
electric utilities, such as Charter Oak, and as the initiator and
lead participant one or more consultants or developers with
skills and experience in one or more niches in the independent
power business. The consultants or developers are typically
selected for specific development skills or experience, such as
knowledge of a particular fuel source, possession of advantageous
relationships in a particular geographic region or specialized
skills in a particular phase of development (such as "greenfield"
developers or operator developers), or a particular power
generation technology. By its participation in these informal
and unincorporated consortia, Charter Oak intends to diversify
its risk, access skills and relationships that it cannot expect
to have on its own, and access more of a diversity of projects
than it could if it concentrated on developing projects by
itself.
Typically, the utility affiliates that participate in
these consortia commit a specified level of funds to support the
exploratory and preliminary development activities of the active
developer(s) participating in the consortium. Their
participation entitles (but does not obligate) the utility
affiliates to participate further in additional development
activities for development opportunities that are identified by
the active developer and evaluated as favorable by the utility
affiliates like Charter Oak. While these rights and obligations
are exclusive within the scope specified in the contracts for
each consortium, the utility affiliates and the developers retain
the right to independently pursue other development opportunities
outside the consortium's scope.
While the active developer generally has the lead
responsibility for identifying and analyzing potential
development opportunities, each such developer also looks to the
utility affiliates, such as Charter Oak, for their talent and
expertise in certain aspects of the development process.
Consequently, the expectation is that each participant will be
actively involved in development activities, particularly once
specific attractive development opportunities have been
identified and a utility affiliate has elected to participate in
the further development of that opportunity.
To date, the consortia in which Charter Oak
participates have identified several development opportunities in
which Charter Oak has elected to participate further in the
preliminary development phase and NU and Charter Oak have made
further investments in one such project. Pursuant to the
Commission's order dated September 24, 1993 (HCAR 25891; File No.
70-8084), Charter Oak has purchased an interest in two non-
utility subsidiaries that own an interest in a foreign utility
company (Encoe Partners) in the United Kingdom. The remaining
interests in Encoe Partners are held by subsidiaries of Enron
Europe Limited.
3. COE Development Corporation
Pursuant to the Commission's order dated October 16,
1992 (HCAR. 25655; File No. 70-7966), Charter Oak formed COE
Development Corporation and assigned its interests in all then-
pending preliminary development work associated with QF and
Qualified IPP projects to COE Development. Since that time, most
of the new preliminary development work that Charter Oak has
undertaken has been through COE Development. As some of the
Authorized Power Project preliminary development activities
funded by COE Development result in Authorized Power Projects
that merit further active development, Charter Oak and COE
Development may form and finance, and to the extent necessary
request Commission authorization to so form and finance, new
first tier subsidiaries of Charter Oak, (i.e., Intermediate
Companies) to participate in subsequent stages of development and
ownership of such Authorized Power Projects. Following the
formation of such a subsidiary, COE Development will transfer its
interests in the maturing Authorized Power Project to the new
first tier subsidiary of Charter Oak, which would carry forward
the development of such maturing Authorized Power Project. NU
and Charter Oak do not currently contemplate that COE Development
would have any subsidiaries of its own.
C. Request for Extension of Authority
NU and Charter Oak request that the Commission extend
the authority for the activities of Charter Oak for a period of
two years from the expiration of its present authorization in the
December 1992 Order, as amended. Accordingly, NU and Charter Oak
seek authorization for Charter Oak and its subsidiaries to
continue operating from January 1, 1995 to December 31, 1996.
NU and Charter Oak are seeking this extension to
preserve the value that is inherent in the preliminary
development work that has been undertaken by Charter Oak and its
subsidiaries over the past six years. In order to preserve that
value, Charter Oak must preserve its rights to make equity
investments in the projects it currently has under development
when the opportunities arise. It can preserve those rights only
by continuing to participate in the funding of the preliminary
development budgets for the Authorized Power Projects in which it
is now involved.
The two year authorization request is based on the
assessment by NU and Charter Oak that a number of projects
presently under preliminary development are likely to come to
fruition in the next two years. The prospect that several
Authorized Power Projects now under preliminary development are
likely to proceed to full-scale development on such investments
by Charter Oak, have brought Charter Oak and NU to the conclusion
that the continued operation of Charter Oak, and continued
funding by NU, are likely to produce a satisfactory financial
return in the power development business with a diversified group
of power generation investments.
D. Request for Authorization Regarding Investments
and Expenditures
NU and Charter Oak would like the Commission to modify
the present financing structure between NU and Charter Oak to
increase Charter Oak's funding authorization to $200 million for
the two year period from January 1, 1995 through December 31,
1996. By utilizing up to $200 million in funding over the next
two years, NU and Charter Oak will be able to maintain their
present level of involvement in preliminary development,
development and administrative activities and make the necessary
equity investments. NU and Charter Oak are seeking to increase
the investment and spending limit to $200 million, based on
Charter Oak's projection that its 1995-96 administrative, pre-
development, development and equity investment expenses will be
approximately $92 million. The remainder may be used for
financial guarantees as authorized. (A statement of estimated
expenditures for 1995-96 is attached as Exhibit H-1.)
Accordingly, NU and Charter Oak request authorization to increase
the limitation on NU's investment in Charter Oak and Charter
Oak's authorized investment in COE Development, and Charter Oak's
and COE Development's expenditures over the two year period, to
$200 million from the $100 million presently authorized. As in
the previous authorization, NU's investment in Charter Oak, and
Charter Oak's investment in COE Development, Exempt Projects or
Intermediate Companies may take the form of acquisitions of
common stock, capital contributions, open account advances,
and/or subordinated loans. Open account advances or subordinated
loans will bear interest at a rate based on NU's cost of funds in
effect on the date of issue, but in no case in excess of the
prime rate at a bank designated by NU. Any investment by NU or
Charter Oak in the equity securities of Charter Oak, COE
Development, Intermediate Companies or Exempt Projects that have
a stated par value will be in an amount equal or greater to such
value.
The Debt Financing which Charter Oak may obtain
pursuant to this authorization may not exceed a term of 15 years
or bear a floating interest rate in excess of 6.5% over the then
applicable prime rate (the "Applicable Prime Rate") at a U.S.
money center bank to be designated by NU. Similarly, any Debt
Financing backed by NU's guarantee<F2> will be limited to a
____________________
<F2> Since the Debt Financing is included within the total
funding authorization for Charter Oak, any guarantee by NU is not
counted towards the total funding authorization limitation.
term of 15 years and will be at an interest rate not to exceed
6.5% over the Applicable Prime Rate.
Charter Oak also requests authority for itself and its
subsidiaries to make loans (on either a recourse or non-recourse
basis) to unaffiliated developers of Authorized Power Projects as
part of its financing of the acquisition of interests in
Authorized Power Projects. The developer of an Authorized Power
Project frequently receives an interest in the Authorized Power
Project at issue as part of its compensation. Charter Oak
believes it will benefit from the opportunity to become involved
in Authorized Power Projects through loans to such developers
which are used to purchase the developer's interest in the
Authorized Power Project. If Charter Oak (or its subsidiaries)
makes any loan to such a developer, the full outstanding amount
of such loans shall count against the overall $200 million
funding authorization for Charter Oak.
At June 30, 1994, the NU system's consolidated total
capitalization, stockholders' equity and retained earnings were
$6,809,531,000, $2,280,170,000 and $927,032,000, respectively.
The funding authorization sought herein is for up to $200 million
total authorization for the two years, which as a percentage of
the NU system's consolidated total capitalization, stockholders'
equity and retained earnings at June 30, 1994 would be 2.9%, 8.8%
and 21.6%, respectively. NU has invested approximately $25
million in Charter Oak to date and expects to invest
approximately an additional $5 million by year end. Charter Oak
currently has $2.3 million invested in one qualifying
cogeneration facility in Texas and approximately $6.6 million
invested in a foreign utility company in the United Kingdom. The
balance of NU's investment is largely represented by capitalized
or written down development costs. Accordingly, the Applicants
have adequate assets to make the potential investment and
expenditures without endangering the financial health of the
registered holding company system or the system's operating
public utility companies. Furthermore, only investments in and
financings related to Exempt Projects and Intermediate Companies
would be made pursuant to the requested general authority and all
other investments and financings would be submitted to the
Commission for prior approval.
E. Request for Authorization for Financing by Intermediate
Companies
Approval is also requested for any Intermediate Company
to issue equity securities and debt securities, with or without
recourse to the Applicants, to persons other than the Applicants
including banks, insurance companies, and other financial
institutions, exclusively for the purpose of financing (including
any refinancing of) investments in Exempt Projects. The
Intermediate Companies' investments in Exempt Projects may take
the form of acquisitions of common stock, capital contributions,
open account advances, and/or subordinated loans, provided that
such open account advances or subordinated loans will bear
interest at a rate based on NU's cost of funds in effect on the
date of issue, but in no case in excess of the prime rate at bank
designated by NU. Securities issued by Intermediate Companies
pursuant to an order resulting from this request may be issued in
one or more transactions from time to time through December 31,
1996. It is proposed that the aggregate principal amount of debt
securities issued by Intermediate Companies to persons other than
the Applicants will not exceed $600 million at any one time
outstanding. Within the $600 million authorization, the
aggregate principal amount of recourse debt securities will not
exceed $150 million at any one time outstanding, provided that no
more than $100 million principal amount of such debt securities
at any time outstanding may be denominated in (i.e., evidence
borrowings in) currencies other than U.S. dollars, and the
respective limitations for non-recourse debt securities will be
not more than $600 million outstanding at any one time and not
more than $400 million denominated in currencies other than U.S.
dollars. The recourse to the Applicants will be in the form of
the guarantees and assumptions of liability and will be included
within the Applicants overall investment authorization limit. In
any case in which the Applicants directly or indirectly own less
than all of the equity interests of an Intermediate Company, only
that portion of the recourse or non-recourse indebtedness of such
Intermediate Company equal to the Applicants' equity ownership
percentage shall be included for purposes of the foregoing
limitations.
Equity securities issued by any Intermediate Company to
a person other than the Applicants may include capital shares,
partnership interests, trust certificates, or the equivalent of
any of the foregoing under applicable foreign law. Debt
securities issued to persons other than the Applicants may
include secured and unsecured promissory notes, subordinated
notes, bonds, or other evidence of indebtedness. Securities
issued by Intermediate Companies may be denominated in either
U.S. dollars or foreign currencies.
The Applicants state that the amount and type of such
securities, and the terms thereof, including (in the case of any
indebtedness) interest rate, maturity, prepayment or redemption
privileges, and the forms of any collateral security granted with
respect thereto, would be negotiated on a case by case basis,
taking into account differences from project to project in
optimum debt-equity ratios, projections of earnings and cash
flow, depreciation lives, and other similar financial and
performance characteristics of each project. Accordingly, the
Applicants propose that they have the flexibility to negotiate
the terms and conditions of such securities without further
approval by the Commission.
Notwithstanding the foregoing, the Applicants state
that no equity security having a stated par value would be issued
or sold by an Intermediate Company for a consideration that is
less than such par value; and that any note, bond or other
evidence of indebtedness issued or sold by any Intermediate
Company will mature not later than 30 years from the date of
issuance thereof, and will bear interest at a rate not to exceed
the following: (i) if such note, bond or other indebtedness is
U.S. dollar denominated, at a fixed rate not to exceed 6.5% over
the yield to maturity on an activity traded, non-callable, U.S.
Treasury note having a maturity equal to the average life of such
note, bond or other indebtedness (the "Applicable Treasury
Rate"),<F3> or at a floating rate not to exceed 6.5% over the
____________________
<F3> If there is no actively traded Treasury note with a maturity
equal to the average life of such note, bond or other
evidence of indebtedness, then the Applicable Treasury Rate
would be determined by interpolating linearly with reference
to the yields to maturity on actively traded, non-callable,
Treasury notes having maturities near (i.e., both shorter
and longer than) such average life.
Applicable Prime Rate; and (ii) if such note, bond or other
indebtedness is denominated in the currency of a country other
than the United States, at a fixed or floating rate which, when
adjusted (i.e., reduced) for the excess, if any, of the
prevailing rate of inflation in such country over the then
prevailing rate of inflation in the United States, as reported in
official indices published by such country and the U.S.
government, would be equivalent to a rate on a U.S. dollar
denominated borrowing of identical average life that does not
exceed 10% over the Applicable Treasury Rate (interpolated if
necessary) or Applicable Prime Rate, as the case may be.
In connection with the issuance of any debt securities
by any Intermediate Company, it is anticipated that such
Intermediate Company may grant security in its assets. Such
security interest may take the form of a pledge of the shares or
other equity securities of an Exempt Project that it owns,
including a security interest in any distributions from any such
Exempt Project, and/or a collateral assignment of its rights
under and interests in other property, including rights under
contracts. It is also anticipated that fees in the form of
placement or commitment fees, or other similar fees, would be
paid to lenders, placement agents, or others in connection with
the issuance of any such debt securities. The Applicants request
authority for any Intermediate Company to agree in any case to
pay placement or commitment fees and other similar fees, in
connection with any borrowing, provided that the effective annual
interest charge on any indebtedness evidencing such borrowing is
not greater than 115% of the stated interest rate thereon.
In connection with investments in Exempt Projects, it
is typical that a portion of the capital requirements of any such
Exempt Project would be obtained through recourse or non-recourse
financing involving borrowings from banks and other financial
institutions.<F4> In some cases, however, it may be
____________________
<F4> Such Exempt Project recourse financings would take the form
of assumptions of liability and guarantees which the
Applicants currently have authority to issue.
necessary or desirable to structure an investment in an Exempt
Project such that the obligations created are not those of the
Exempt Project, but instead those of its parent companies. For
example, in a consortium of non-affiliated companies bidding to
purchase the securities or assets of an EWG or FUCO, each of the
consortium members would be obligated to fund its respective
share of the proposed purchase price. If external sources of
funds are needed for this purpose, a participant in the
consortium may choose to engage in recourse or non-recourse
financing through one or more single-purpose subsidiaries that
would then utilize the proceeds of the financing to acquire an
ownership interest in the Exempt Project.
The Applicants believe that external financing by any
Intermediate Company involves the same issues that are involved
when the financing is carried out by an Exempt Project, in terms
of the potential adverse impacts upon the financial integrity of
a registered holding company system. Accordingly, where the
proceeds of any such financing (including any refinancing) are
utilized to make an investment in any Exempt Project, and there
is either no recourse directly or indirectly to the Applicants
with respect to the securities issued or sold, or the amount for
which there is recourse constitutes a part of the Applicants
overall investment authorization limit as would a guarantee
issued in connection with financings carried out directly by an
Exempt Project, there is no basis for any adverse findings under
Section 6, 7 and 12 of the Act, provided that, at the time of the
issuance thereof, the Applicants are in compliance with Rule 53.
F. Request Regarding Activities Related to Intermediate
Companies
In order to maintain flexibility with regard to
Intermediate Company and Exempt Project activities, the Applicants
request authority to participate directly or through Intermediate
Companies in joint ventures with non-associates which joint
ventures are in the business of researching investment
opportunities in, and owning and developing Exempt Projects.
The Applicants may acquire interests in Intermediate Companies
prior to such Intermediate Companies acquiring their interests
in Exempt Projects as long as such Intermediate Companies engage
and will engage in the business of holding the securities of
Exempt Projects.
In addition, the Applicants request authority to
liquidate, dissolve or sell any Intermediate Company within 45
days after the Applicants determine that the purpose for owning
such Intermediate Company no longer exists unless the Applicants
determine that such Intermediate Company may be used in
connection with a proposal or plan to develop or acquire an
interest in a different Exempt Project.
G. Request for Authorization for the Provisions of
Services
The Applicants request authorization for Charter Oak
employees (who are employees of Northeast Utilities Service
Company) or other NU Service Company employees (collectively,
"Service Company Employees") to provide a de minimis amount of
services to affiliated Intermediate Companies and EWGs (both
foreign and domestic) as well as FUCOs, subject to the
limitations set forth herein. The Applicants are not requesting
approval for the use of system operating company employees for
the rendering of services to affiliated Intermediate Companies,
EWGs and FUCOs, and no such use of employees will occur without
prior Commission approval unless expressly permitted under the
Act. Moreover, there will be no diversion of NU system personnel
or resources that would adversely affect any operating company's
domestic ratepayers or NU's shareholders.
The services to be rendered to affiliated Intermediate
Companies, EWGs and FUCOs by Service Company Employees pursuant
to this request include: management, administrative, legal, tax,
and financing advice, accounting, engineering consulting,
language skills and software development, provided that, such
software development will not involve proprietary software owned
by the NU Service Company. The provision of these services are
desirable because the Applicants believe that the provision of
such necessary services by Service Company Employees is a more
practical and economically efficient alternative to having
Charter Oak and COE Development retain the required expertise on
a full-time basis. It is also an opportunity for Service Company
Employees to increase and expand their expertise for the benefit
of all system companies.
Unless otherwise authorized by the Commission or
expressly permitted under the Act, the total number of Service
Company Employees engaged in rendering such services will not
exceed, in the aggregate, 0.5% of the total NU holding company
system's employees and no more than 1% of the total of Service
Company Employees at any one time. In addition, unless otherwise
authorized by the Commission or expressly permitted under the
Act, the provision of services to affiliated domestic EWGs and
Intermediate Companies will be made on an at cost basis pursuant
to the requirements of Section 13(b) and Rules 90 and 91 of the
Act.
The Applicants hereby request authority in accordance
with Section 13 and Rule 83 of the Act to provide such services
at market rates to affiliated foreign EWGs, Foreign Intermediate
Companies and FUCOs, which are companies that do not derive,
directly or indirectly, any material part of their income from
sources within the United States and are not public utility
companies operating in the United States.
Charter Oak will include information on the type, cost
and income earned in connection with any services authorized by
an order pursuant to this request in the annual report it
currently files with the Commission.
H. Retained Earnings Tests of Rule 53(a)(1) and 53(b)(2)
As described above, this Application requests approval
for up to $200 million in investments by the NU system in
Intermediate Companies, Exempt Projects and certain other
independent power projects. Pursuant to the request the maximum
aggregate investment in EWGs, FUCOs and Intermediate Companies by
the NU system, would be no more than $230 million, which is well
below fifty percent of the NU system's consolidated retained
earnings as of June 30, 1994. Accordingly, this level of
investment does not present a risk of substantial adverse impact
as described in Sections 32 and 33 of the Act and Rule 53(a)(1).
In addition, because the Applicants' total authorized investment
in EWGs, FUCOs, Intermediate Companies and other power projects
does not exceed more than two percent of the total capital
invested in utility operations, there cannot be an exclusion
under Rule 53(b)(2) from the safe harbor.
I. Bankruptcy Exclusion of Rule 53(b)(1)
Neither the Applicants nor any other members of the NU
registered holding company system have been the subject of a
bankruptcy or similar proceeding while a part of the NU system.
Public Service Company of New Hampshire entered into bankruptcy
proceedings before it was acquired by Northeast Utilities in
June, 1992. Public Service Company of New Hampshire's plan of
reorganization was confirmed by the bankruptcy court on April 20,
1990.
J. Operating Loss Limitations of Rule 53(b)(3)
The companies in the U.K. in which Charter Oak invested
do not have any losses attributable to operations. The
applicants presently do not have any other EWGs, FUCOs or
Intermediate Companies. The Paris, Texas qualifying cogeneration
facility, in which Charter Oak has an interest, did not report
losses attributable to operations during 1993. Accordingly, the
present investments of the Applicants in EWGs, FUCOs and
Intermediate Companies as well as other power projects do not
present a risk of substantial adverse impact as described in
Sections 32 and 33 of the Act and Rule 53.
K. Compliance with Safe Harbor Provisions
The Applicants will acquire an interest in, finance the
acquisition and hold the securities of an EWG, FUCO or an
Intermediate Company as authorized by an order pursuant to this
request only if the following two conditions are met: (i) the
investment is within the $200 million authorization, and (ii) the
investment satisfies the criteria in Rule 53(a)(1)-(4) and
(b)(1)-(3) or any rules promulgated under Section 33 of the Act
concerning the acquisition of interests in FUCOs.
L. Maintenance of Books and Records
Charter Oak will continue to comply with Rule 53(a)(2)
and any future rules concerning the acquisition of interests in
FUCOs with regard to the maintenance of books and records in
connection with investments in EWGs, FUCOs or Intermediate
Companies authorized by this Application.
M. Reporting of Activities
Charter Oak will continue to file a report with the
Commission within sixty days of the end of each calendar quarter.
Each report will include (i) a balance sheet as of the quarterly
reporting date; (ii) an income statement for the quarterly
reporting period; (iii) a breakdown of the amounts of recourse
and non-recourse debt securities issued to third parties by
Intermediate Companies and (iv) information on intercompany
service transactions with affiliated Intermediate Companies, EWGs
and FUCOs, including (a) the name of each associate company
providing services, (b) a listing of the services provided and
(c) the total dollar amount of services provided, broken down by
associate company. In addition, Charter Oak will continue to
file with the Commission, on or before May 1 of each year, an
annual report of its activities for the preceding calendar year
in substantially the form of Form U-13-60.
Item 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of NU and Charter
Oak expected to be paid or incurred, directly or indirectly, in
connection with this Amendment are estimated as follows:
Commission filing fee
relating to Application
on Form U-1 . . . . . . . . . . . . $ 2,000
Legal fees and expenses . . . . . . . 6,000
Miscellaneous related expenses
(such as telephone, courier and
travel) . . . . . . . . . . . . 2,000
Total . . . . . . . . . . . . $10,000
Item 3. APPLICABLE STATUTORY PROVISIONS
Sections 6(a), 7, 9(a), 10, 12(b) and 33 and Rules 45
and 53 are applicable to the extension of authorized activities
and to the financing request and additional activities request
for Intermediate Companies. Section 12(b) and Rule 45 apply to
the financial arrangements between NU and Charter Oak and between
Charter Oak and COE Development. Section 13(b) and Rules 87(b),
90 and 91 are applicable to the request regarding services.
Item 4. REGULATORY APPROVAL
No commission, other than this Commission, has
jurisdiction over any of the proposed transactions described in
this Application. Pursuant to Rule 53(a)(4), the Applicants will
file this Application with the Connecticut Department of Public
Utility Control, the Massachusetts Department of Public Utilities
and the New Hampshire Public Utilities Commission.
Item 5. PROCEDURE
On November 23, 1994, the Commission issued and
published the requisite notice under Rule 23 with respect to the
filing of this request for authority and no intervention occurred
within the specified time period. Consequently, we hereby
request that the Commission enter not later than December 29,
1994 an appropriate order granting and permitting this Amendment
to become effective.
Applicants respectfully request that appropriate and
timely action be taken by the Commission in this matter.
Applicants hereby waive any recommended decision by a hearing
officer or by any other responsible officer of the Commission and
waive the 30-day waiting period between issuance of the
Commission's order and the date on which it is to become
effective, since it is desired that the Commission's order, when
issued, become effective forthwith. Applicants hereby consent
that the Office of Public Utility Regulation within the Division
of Investment Management may assist in the preparation of the
Commission's decision and/or order unless the Office opposes the
transactions covered by this Application.
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
a) Exhibits
A-1 Copy of Certificate of Charter Oak (previously
filed)<F5>
____________________
<F5> Pursuant to Rule 22(b), this Application/Declaration
incorporates by reference certain exhibits previously filed in a
1988 Form U-1 Application/Declaration (File No. 70-7545).
A-2 Copy of By-laws of Charter Oak (previously filed)5
A-3 Form of Certificate of shares of common stock of
Charter Oak (previously filed)5
F-1 Opinion of Counsel (previously filed)
G-1 Proposed Form of Notice (previously filed)
H-1 Charter Oak Energy, Inc. 1995-96 Estimated
Expenditures (previously filed)
b) Financial Statements
1.1 Balance Sheet Per Book and Pro-Forma - NU
(Parent), as of June 30, 1994 (previously filed)
1.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - NU (Parent), as of June 30, 1994
(previously filed)
2.1 Balance Sheet Per Book and Pro-Forma - Charter Oak
Energy and Subsidiaries (Consolidated), as of June
30, 1994 (previously filed)
2.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - Charter Oak Energy and
Subsidiaries (Consolidated), as of June 30, 1994
(previously filed)
3.1 Balance Sheet Per Book and Pro-Forma - COE
Development, as of June 30, 1994 (previously
filed)
3.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - COE Development, as of
June 30, 1994 (previously filed)
4.1 Balance Sheet Per Book and Pro-Forma - NU
(Consolidated), as of June 30, 1994 (previously
filed)
4.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - NU (Consolidated), as of June 30,
1994 (previously filed)
Item 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this
Application involve a "major federal action" nor do they
"significantly affect the quality of the human environment" as
those terms are used in section 102(2)(C) of the National
Environmental Policy Act. None of the transactions that are the
subject of this Application will result in changes in the
operation of the Applicants that will have an impact on the
environment. The Applicants are not aware of any federal agency
which has prepared or is preparing an environmental impact
statement with respect to the transactions which are the subject
of this Application.
SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned companies have duly
caused this Amendment to be signed on their behalf by the
undersigned thereunto duly authorized.
NORTHEAST UTILITIES
CHARTER OAK ENERGY, INC.
COE DEVELOPMENT CORPORATION
By: /s/
___________________________________
William S. Lamb
LeBoeuf, Lamb, Greene & MacRae
L.P.P.
A Limited Liability Partnership
Including Professional Corporations
125 W. 55th Street
New York, NY 10019-4513
Attorney for Northeast Utilities,
Charter Oak Energy, Inc. and COE
Development Corporation
Date: December 28, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> NORTHEAST UTILITIES (PARENT)
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0 0
<EARNINGS-AVAILABLE-FOR-COMM> 279,780,000 269,705,000
<COMMON-STOCK-DIVIDENDS> 218,822,000 218,822,000
<TOTAL-INTEREST-ON-BONDS> 20,740,000 20,740,000
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 2.25 2.17
<EPS-DILUTED> 2.25 2.17
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
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<NAME> CHARTER OAK ENERGY, INC.
<S> <C> <C>
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<COMMON> 0 0
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<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (3,331,000) (3,331,000)
<OTHER-OPERATING-EXPENSES> 7,985,000 7,985,000
<TOTAL-OPERATING-EXPENSES> 4,654,000 4,654,000
<OPERATING-INCOME-LOSS> (4,654,000) (4,654,000)
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<NET-INCOME> (3,263,000) (3,263,000)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
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<NAME> CHARTER OAK DEVELOPMENT CORPORATION
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<LONG-TERM-DEBT-NET> 0 0
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<CAPITAL-LEASE-OBLIGATIONS> 0 0
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<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (2,743,000) (2,743,000)
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<EPS-DILUTED> 0.00 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> FINANCIAL DATA SCHEDULE (CONSOLIDATED)
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<PERIOD-END> JUN-30-1994 JUN-30-1994
<BOOK-VALUE> PER-BOOK PRO-FORMA
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<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 10,577,716,000 10,777,716,000
<COMMON> 671,048,000 671,048,000
<CAPITAL-SURPLUS-PAID-IN> 903,137,000 903,137,000
<RETAINED-EARNINGS> 927,032,000 916,957,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,280,170,000 2,270,095,000
379,000,000 379,000,000
239,700,000 239,700,000
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<LONG-TERM-NOTES-PAYABLE> 0 0
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<LONG-TERM-DEBT-CURRENT-PORT> 282,527,000 282,527,000
1,500,000 1,500,000
<CAPITAL-LEASE-OBLIGATIONS> 179,224,000 179,224,000
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<GROSS-OPERATING-REVENUE> 3,637,933,000 3,637,933,000
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<OTHER-OPERATING-EXPENSES> 2,830,932,000 2,830,932,000
<TOTAL-OPERATING-EXPENSES> 3,117,723,000 3,112,298,000
<OPERATING-INCOME-LOSS> 520,210,000 525,635,000
<OTHER-INCOME-NET> 84,061,000 84,061,000
<INCOME-BEFORE-INTEREST-EXPEN> 604,271,000 609,696,000
<TOTAL-INTEREST-EXPENSE> 279,573,000 295,073,000
<NET-INCOME> 324,698,000 314,623,000
44,918,000 44,918,000
<EARNINGS-AVAILABLE-FOR-COMM> 279,780,000 269,705,000
<COMMON-STOCK-DIVIDENDS> 218,822,000 218,822,000
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<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 2.25 2.17
<EPS-DILUTED> 2.25 2.17
</TABLE>
