File No. 70-8507
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-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
P.O. Box 270 L.L.P.
Berlin, CT 06141-0270 125 W. 55th Street
New York, New York 10019-4513
Item 1. DESCRIPTION OF THE PROPOSED TRANSACTION
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 Post-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, 1994 (HCAR. 26213; File No. 70-8507) (the
"December 1994 Order"), as amended on August 7, 1995 (HCAR.
26354; File No. 70-8507) (the "August 1995 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 a total of $400 million through
December 31, 1999. The Applicants also request authority for
Charter Oak, COE Development and Intermediate Companies (as
defined below) to provide services to 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", together with EWGs, "Exempt Projects"), at fair market
prices in certain circumstances.
A. Description of the Parties and Existing Authorization
1. Charter Oak and COE Development.
Charter Oak was organized by NU pursuant to the
Commission's order dated May 17, 1989 (HCAR 24893; File No. 70-
8062) and has participated and invested in independent power
projects worldwide for the NU system. Charter Oak currently has
(i) a 10% interest in a 220MW gas-fired cogeneration facility in
Paris, Texas through its subsidiary Charter Oak (Paris),
Inc.<F1>, (ii) two non-utility subsidiaries that own a 50%
interest in a foreign utility company (Encoe Partners) located in
the United Kingdom;<F2> the remaining interests in Encoe
Partners are held by subsidiaries of Enron Europe Limited, (iii)
an approximately 96% interest in a foreign utility company
located in Argentina (Ave Fenix Energia, S.A.), through its
wholly-owned subsidiary COE Ave Fenix Corporation, (iv) an
approximately 65% interest in a foreign utility company located
in Costa Rica (Plantas Eolicas S.A.) through its wholly owned
subsidiary COE Tejona Corporation and (v) an approximately 33.3%
interest in a foreign utility company located in Argentina
(Central Termica San Miguel de Tucuman, S.A.) through is wholly
owned subsidiary COE Argentina II Corp.
<F1> Charter Oak's investment in this project was specifically
authorized by the Commission in its order dated May 17, 1989
(HCAR 24839; File No. 70-8062).
<F2> Again, this investment by Charter Oak was specifically
authorized by the Commission in its order dated September
24, 1993 (HCAR 25891; File No. 70-8084).
COE Development was formed as a subsidiary of Charter
Oak pursuant to the Commission's order dated October 16, 1992
(HCAR 25655; File No. 70-7966). Most of the new preliminary
development work that Charter Oak has undertaken since that time
has been through COE Development. COE Development generally
transfers its interest in any project that goes beyond the
preliminary development stage to other subsidiaries of Charter
Oak. COE Development does not have any subsidiaries of its own.
2. Preliminary Investment and Development Activities.
Pursuant to the terms of the December 1994 Order and
the August 1995 Order, Charter Oak and COE Development have
engaged in preliminary development activities with regard to
Qualifying Facilities ("QFs") as defined under the Public Utility
Regulatory Act of 1978, 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 Exempt Project projects (collectively,
"Authorized Power Projects"), including the 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.
Charter Oak has undertaken preliminary development
activities relating to Authorized Power Projects using its own
personnel and resources as well as by participating 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. 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.
3. Other Investment Activities.
Pursuant to the terms of the December 1994 Order and
the August 1995 Order, Charter Oak and COE Development may invest
and hold interests in QFs throughout the United States, Qualified
IPPs and Exempt Projects and may provide consulting services to
such projects. Charter Oak and COE Development may invest in QF
and Qualified IPP projects after obtaining Commission approval
for such investment on a project-specific basis and may invest
in, and finance the acquisition of, Exempt Projects without
project-specific prior Commission approval, subject to certain
limitations. In addition, the Applicants 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, without
filing specific project applications with the Commission, to
acquire interests in, finance the acquisition, and hold the
securities of, one or more companies ("Intermediate Companies")
engaged directly or indirectly and exclusively in the businesses
of holding the securities and financing the acquisition of one or
more EWGs and/or FUCOs, participating in preliminary development
activities relating to such Exempt Projects, and issuing
guarantees and assuming liabilities subsequent to operation with
regard to those projects.
The Applicants are also presently authorized 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 may 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.
4. Services.
Pursuant to the terms of the December 1994 Order and
the August 1995 Order, Charter Oak employees (also are employees
of Northeast Utilities Service Company) or other NU Service
Company employees (collectively, "Service Company Employees") may
provide a de minimis amount of services to affiliated
Intermediate Companies and Exempt Projects subject to certain
limitations. System operating company employees may not render
services to affiliated Intermediate Companies, and Exempt
Projects without prior Commission approval unless expressly
permitted under the Act. Moreover, no diversion of NU system
personnel or resources that would adversely affect any operating
company's domestic ratepayers or NU's shareholders may occur.
Finally, unless otherwise authorized by the Commission or
expressly permitted under the Act, the total number of Service
Company Employees engaged in rendering such services may 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 and 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 have been granted an exemption from such
sections of the Act in order 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.
The services that may be rendered to affiliated
Intermediate Companies, and Exempt Projects by Service Company
Employees include the following: 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 NU Service Company.
5. Financing Authorization.
Pursuant to the terms of the December 1994 Order and
the August 1995 Order, NU and Charter Oak have been authorized to
invest up to an aggregate amount of $400 million for the period
from January 1, 1995 through December 31, 1996 to finance the
previously described 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, if they bear interest, do so 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 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 is limited to a term of 15
years and will have an interest rate not to exceed 6.5% over the
Applicable Prime Rate. Charter Oak may also pay commitment and
other fees not to exceed 50 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 guarantees and assumptions of liability with
regard to projects requiring prior Commission approval 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. The guarantees and assumptions of liability
relating to Exempt Projections are not, however, subject to any
other specific dollar limit except the overall authorized
development activities limit.
In addition, Intermediate Companies are authorized to
acquire interests in Exempt Projects through the issuance of
equity securities and debt securities, with or without recourse
to the Applicants, to third parties, subject to certain
limitations. The aggregate principal amount of debt securities
issued by Intermediate Companies to persons other than the
Applicants may not exceed $600 million at any one time
outstanding.<F3>
<F3> To the extent that Intermediate Companies issue guarantees
of financial obligations of any other company in connection
with their authorized activities, the full contingent amount
of any such guarantees would be considered as outstanding
indebtedness for purposes of this limitation.
Within the $600 million authorization, the aggregate principal
amount of recourse debt may 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 currencies other than U.S.
dollars, and the respective limitation for non-recourse debt
securities may 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, provided that in any case in which the
Applicants directly or indirectly own less than all of the equity
interest 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.
Although the amount and type of securities issued by
Intermediate Companies, 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, are negotiated on a case by case
basis, no equity security having a stated par value may be issued
or sold by an Intermediate Company for a consideration that is
less than such par value; and 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:
(1) 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 actively traded, non-callable, U.S. Treasury Note
having a maturity equal to the average life of such note, bond or
other indebtedness ("Applicable Treasury Rate"), or at a floating
rate not to exceed 6.5% over the Applicable Prime Rate; and (2)
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 United States 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, as
the case may be.
Charter Oak has also been granted authority for itself
and its subsidiaries to make loans (on either a recourse or non-
recourse basis), to unaffiliated developers of Exempt Projects,
or with specific authorization, of QFs and Qualified IPPs as part
of its financing of the acquisition of interests in such
projects. The developer of an Exempt Project or a QF or
Qualified IPP frequently receives a right to purchase an interest
at a reduced price in that project as part of its compensation
and these loans enable Charter Oak and its subsidiaries to
develop their business relationships with such developers and the
other participants in the projects, to become involved with the
project itself through the developer and, potentially, to acquire
an equity interest in the project from the developer. The term
of such loans may not exceed 15 years nor may such loans bear
interest at a rate in excess of the quarterly interest rate
equivalent to the prime rate at Citibank N.A. 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
two-year $400 million funding authorization for Charter Oak.
B. 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 1994 Order, as amended. Accordingly, NU and Charter Oak
seek authorization for Charter Oak and its subsidiaries to
continue operating from January 1, 1997 to December 31, 1999.
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 eight 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.
C. Request for Authorization Regarding Financings.
1. NU and Charter Oak
NU and Charter Oak request that the Commission continue
the present financing structure between NU and Charter Oak and
extend Charter Oak's funding authorization to a total of $400
million through December 31, 1999, which, net of existing
investment and planned investment through December 31, 1996,
amounts to approximately $270 million over the two year period
commencing January 1, 1997. By utilizing up to $400 million in
funding overall, 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 extend
their investment and spending limit based on Charter Oak's
projection that its 1997-98 administrative, pre-development,
development and equity investment expenses will be approximately
$70 million. The remainder may be used for financial guarantees
as authorized. (A statement of estimated expenditures for the
remainder of 1996 and 1997-98 is attached as Exhibit H-1.) 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 either bear no interest or 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
Applicable Prime Rate at a U.S. money center bank to be
designated by NU. Similarly, any Debt Financing backed by NU's
guarantee<F4> will be limited to a term of 15 years and will
be at an interest rate not to exceed 6.5% over the Applicable
Prime Rate.
<F4> 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.
Charter Oak also requests authority for itself and its
subsidiaries to continue 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. 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
$400 million funding authorization for Charter Oak.
At June 30, 1996, the NU system's consolidated total
capitalization, stockholders' equity and retained earnings were
$6,540,080,000, $2,408,113,000 and $972,293,000, respectively.
The funding authorization sought herein is for $400 million total
authorization, which as a percentage of the NU system's
consolidated total capitalization, stockholders' equity and
retained earnings at June 30, 1996 would be 6.1%, 16.6% and
41.1%, respectively. To date, NU has invested approximately $70
million in Charter Oak and plans to invest an additional
approximately $60 million in Charter Oak through year end 1996.
The Applicants should 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.
2. Intermediate Companies.
Approval is also requested for an extension of the
authorization 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.<F5> The
<F5> Although some securities issued by Intermediate Companies
may qualify for exemption from the prior approval requirements
pursuant to Rule 52 promulgated under the Act and as recently
amended, because the securities may be used to finance new
projects that might not qualify as pre-existing businesses, the
Applicants are seeking the authority of the Commission with
respect to issuances by Intermediate Companies.
Intermediate Companies' investments in Exempt Projects may
continue to 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 no interest or 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, 1999. 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 Applicable Treasury
Rate,<F6> or at a floating rate not to exceed 6.5% over the
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.
<F6> 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.
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.<F7> In some cases, however, it may be
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.
<F7> Such Exempt Project recourse financings would take the form
of assumptions of liability and guarantees which the
Applicants currently have authority to issue.
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 fundings under
Sections 6, 7 and 12 of the Act, provided that, at the time of
the issuance thereof, the Applicants are in compliance with Rule
53.
D. Request for Modification of Authorization for the
Provision of Services.
The Applicants request that the Commission extend their
authorization to provide services to Exempt Projects for the two
year period from January 1, 1997 to December 31, 1999, subject to
the same terms and conditions as before, with the following
exceptions. First, the Applicants request that, unless otherwise
authorized by the Commission or expressly permitted under the
Act, the total number of Service Company Employees engaged in
rendering services to affiliated Intermediate Companies and
Exempt Projects may not exceed, in the aggregate, 1% of the total
NU holding company system's employees and no more than 2% of the
total of Service Company Employees at any one time. Second, in
order to provide operational flexibility, Applicants request
authorization for Charter Oak and Intermediate Companies to
provide such services and to sell goods to other Intermediate
Companies and associated Exempt Projects at fair market prices,
and request an exemption pursuant to Section 13(b) from the
requirements of Rules 90 and 91 applicable to such transactions
in any case in which one or more of the following circumstances
are present:
1. As previously authorized, such associate is a
FUCO or an EWG which derives no part of its income,
directly or indirectly, from the generation,
transmission, or distribution of electric energy for
sale within the United States; or
2. Such associate is an EWG which sells
electricity at market-based rates which have been
approved by the FERC or the appropriate state public
utility commission, provided the purchaser of such
electricity is not an associate of NU within the NU
System; or
3. Such associate is a QF that sells electricity
to industrial or commercial customers, for their own
use, at negotiated rates or to electric utility
companies that are not associated with the NU system,
at the purchasers avoided cost; or
4. Such associate is an EWG that sells
electricity at rates based upon its cost of service, as
approved by the FERC or any state public utility
commission, provided that the purchaser of such
electricity is not an associate of NU within the NU
System; or
5. Such associate is an Intermediate Company,
the sole business of which is developing, owning and/or
operating FUCOs or EWGs described in clauses 1, 2 or 4
above.
The Applicants acknowledge that the Commission's
authorization for Intermediate Companies and Charter Oak to
provide services or sell goods at prices that are not based on
cost (as determined in accordance with Rules 90 and 91) to any
such associate shall not be binding upon the FERC or any state
public utility commission having jurisdiction over the rates
charged by any such associate, and agrees that neither the
Intermediate Companies nor Charter Oak will assert or take any
position to the contrary in any administrative or judicial
proceeding involving the determination of rates that may be
charged by any such associate. The Applicants also state that
neither the Intermediate Companies nor Charter Oak will provide
services or sell goods to any associate which, in turn, provides
such services or sells such goods, directly or indirectly, to any
other associate which does not fall within any of the preceding
enumerated categories, except pursuant to the requirements of the
Commission's rules and regulations under Section 13(b) or an
exemption therefrom obtained in a separate filing.
The authorization requested herein is consistent with
Commission policy as enunciated by the Division of Investment
Management's recommendation that "the [Commission] should also
issue exemptive orders under Section 13 allowing more non-utility
subsidiaries to charge market rates to non-utility
affiliates,"<F8> Commission precedent,<F9> and the
general policy of the Act. The Commissions principal concern
under Section 13 of the Act is to protect the utility companies
in a holding company system from abusive cross-subsidization
transactions with affiliates. Exemptions from Section 13 and
Rules 90 and 91 for purely non-utility transactions will not
interfere with this mandate as all services to utility
subsidiaries will be at cost in accordance with Rules 90 and 91
and the Applicants have undertaken not to divert any employees
whose services are needed for utility operations. The Applicants
believe that the authorization requested herein will benefit the
NU System by allowing it to offer competitively priced services
based on market considerations, and maintain operational
flexibility.
<F8> The Regulation of Public Utility Holding Companies (June
1995) at 102.
<F9> See e.g., General Public Utilities Corporation (HCAR 26451;
File No. 70-8593) (March 6, 1996) and Southern Company (HCAR
26468; File No. 70-8733) (February 2, 1996).
E. Returned Earnings Tests of Rule 53(a)(1) and 53(b)(2).
Pursuant to the Applicants request herein, the maximum
aggregate investment in EWGs, FUCOs and Intermediate Companies by
the NU system, would be no more than $400 million, which is below
fifty percent of the NU system's consolidated retained earnings
as of June 30, 1996. This level of investment meets the criteria
set forth in Sections 32 and 33 of the Act and Rule 53(a)(1). In
addition, because the average consolidated retained earnings of
the NU system have not decreased by 10 percent in the most recent
four quarterly periods as compared to the four previous quarterly
periods, the applicants are not excluded under Rule 53(b)(2) from
the safe harbor.
F. 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.
G. Operating Loss Limitations of Rule 53(b)(3).
Although the companies in the United Kingdom and one
company in Argentina in which Charter Oak invested had losses
attributed to operations in the fiscal year 1995, they did not
exceed 5 percent of NU's consolidated retained earnings. The
other company in Argentina and the company in Costa Rica were not
operational in 1995. 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
1995. 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.
H. 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 $400 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.
I. 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.
J. Reporting of Activities.
Charter Oak will continue to file a report with the
Commission within sixty days of the end of each of the first
three calendar quarters. Each report will include: (1) a
description of the Exempt Project including, but not limited to,
the type, location, size/capacity, amount of investment in, and
percentage and form of ownership; (2) a balance sheet as of the
relevant quarterly reporting date; (3) a quarterly income
statement; (4) a breakdown of the amounts of recourse and non-
recourse debt securities issued to third parties by Intermediate
Companies; (5) a statement of the applicable regulatory status of
any facility that is eligible for exemption as a public-utility
under the Act; and (6) information on intercompany service
transactions involving affiliated Intermediate Companies, EWGs
and FUCOs, including (a) the name of each associate company
providing services, (b) a listing of services provided, (c) the
total dollar amount of services provided, broken down by
associate company, and (d) the aggregate outstanding amount, as
of the relevant quarterly reporting date, of all guarantees
issued by or for the account of Charter Oak or any of its
subsidiary companies formed pursuant to this application-
declaration.
Such report will also provide in reasonable detail
(pursuant to a confidential exhibit, if so requested) terms
(including interest rate and maturity and the basis for inflation
adjustment in the case of non-recourse indebtedness denominated
in any currency other than U.S. dollars) of securities issued by
any Intermediate Company to third persons.
Furthermore, Charter Oak Energy, Inc. 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
using, where applicable, the Form U-13-60 reporting format as
defined in Rule 94.
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
The Commission is respectfully requested to issue and
publish not later than September 27, 1996 the requisite notice
under Rule 23 with respect to the filing of this
Application/Declaration, such notice to specify a date not later
than October 22, 1996 by which comments may be entered and a date
not later than October 24, 1996 as the date after which an order
of the Commission granting and permitting this
Application/Declaration to become effective may be entered by the
Commission.
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)<F1>
<F1> 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)*
A-3 Form of Certificate of shares of common stock of
Charter Oak (previously filed)*
F-1 Opinion of Counsel (to be filed by amendment)
G-1 Financial Data Schedule
G-2 Proposed Form of Notice
H-1 Charter Oak Energy, Inc. 1997-98 Estimated
Expenditures
b) Financial Statements
1.1 Balance Sheet Per Book and Pro-Forma - NU
(Parent), as of June 30, 1996
1.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - NU (Parent), as of June 30, 1996
2.1 Balance Sheet Per Book and Pro-Forma - Charter Oak
Energy and Subsidiaries (Consolidated), as of June
30, 1996
2.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - Charter Oak Energy and
Subsidiaries (Consolidated), as of June 30, 1996
3.1 Balance Sheet Per Book and Pro-Forma - COE
Development, as of June 30, 1996
3.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - COE Development, as of
June 30, 1996
4.1 Balance Sheet Per Book and Pro-Forma - NU
(Consolidated), as of June 30, 1996
4.2 Statement of Income and Capital Structure Per Book
and Pro-Forma - NU (Consolidated), as of June 30,
1996
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
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: September 18, 1996
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filing Under the Public Utility Holding Company Act of 1935
, 1996
Northeast Utilities, Charter Oak Energy, Inc. and COE Development
Corporation (70-8507)
Northeast Utilities ("NU"), 174 Brush Hill Avenue, West
Springfield, Massachusetts 01089, a registered holding company,
and its wholly owned subsidiaries, Charter Oak Energy, Inc.
("Charter Oak") and COE Development Corporation ("COE
Development"), both located at 107 Seldon Street, Berlin,
Connecticut 06037, (collectively, the "Applicants") have filed a
Post-Effective Amendment to their Application and Declaration on
Form U-1 under Sections 6(a), 7, 9(a), 10, 12(b), 32 and 33 of
the Public Utility Holding Company Act of 1935 (the "Act") and
Rules 45 and 53 thereunder, for the purpose of obtaining an
extension and modification of their authority to engage in power
development activities as previously authorized in the Securities
and Exchange Commission's (the "Commission") order dated December
30, 1994 (HCAR. 26213; File No. 70-8507), as amended on August 7,
1995 (HCAR. 26345, File No. 70-8507) (together the "Existing
Orders"). The Applicants are seeking 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 $400 million
through December 31, 1999.
Pursuant to the Existing Orders, 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 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 subject to certain limitations
("Exempt Projects"). In addition, the Applicants have authority
to issue guarantees and assume the liabilities of subsidiary
companies for pre-development activities, and for both pre-
development and contingent liabilities subsequent to operation
with regard to Exempt Projects, subject to certain restrictions.
The Applicants also have been authorized to acquire
interests in, 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 and in project
development activities relating to the acquisition of such
interests and securities in the underlying projects, without
filing specific project applications with the Commission, and to
issue guarantees and assume liabilities subsequent to operation
with regard to those projects. Intermediate Companies may effect
adjustments in their ownership interests in Exempt Projects.
Intermediate Companies as well as the Applicants are also
authorized to participate in joint ventures that are in the
business of owning and developing Exempt Projects. The
Applicants may 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.
In addition, Intermediate Companies are authorized to
acquire interests in Exempt Projects through the issuance of
equity securities and debt securities, with or without recourse
to the Applicants, to third parties, subject to certain
limitations and to issue guarantees and assume the liabilities in
connection with such activities, subject to certain terms and
conditions.
Charter Oak has also been granted 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 such projects. Such loans shall count against the overall
funding authorization of the Applicants.
Finally, authority has been given 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, EWGs (both foreign
and domestic) and FUCOs, subject to certain limitations.<F1>
Moreover, such services may be provided at fair market value if
the entity receiving the services does not derive any part of its
income from the generation, transmission or distribution of
electric energy for sale within the United States.
<F1> The Existing Orders provide that, unless otherwise
authorized by the Commission or expressly permitted under
the Act, the total number of Service Company Employees
engaged in rendering services to affiliated Intermediate
Companies and Exempt Projects may 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.
The current authorization permits NU to invest, and
Charter Oak to spend, up to an aggregate amount of $400 million
through December 31, 1996 to finance these activities, subject to
certain restrictions. To date, NU has invested approximately $70
million in Charter Oak and expects to invest an approximately $60
million in addition through December 31, 1996.
The Applicants are requesting authorization to extend
NU's authorized investment in Charter Oak and Charter Oak's
authorized investment in COE Development, and Charter Oak's and
COE Developments authorized expenditures for power development
activities to $400 million through December 31, 1999. By
utilizing up to $400 million in funding overall, the Applicants
state that they will be able to maintain their present level of
involvement in preliminary development, development and
administrative activities and make the necessary equity
investments. Both the debt financing and the guarantee by NU of
such debt financing authorized by an order pursuant to this
request will not exceed a term of 15 years or, if they bear
interest, will bear an interest rate in excess of 6.5% over the
then applicable prime rate at a U.S. money center bank designated
by NU. Charter Oak may also pay commitment and other fees in
connection with Debt Financing provided that such payments may
not exceed 50 basis points per annum on the total amount of the
Debt Financing.
The Applicants are also requesting modification of the
Existing Orders such that, unless otherwise authorized by the
Commission or expressly permitted under the Act, the total number
of Service Company Employees engaged in rendering services to
affiliated Intermediate Companies and Exempt Projects may not
exceed, in the aggregate, 1% of the total NU holding company
system's employees and no more than 2% of the total of Service
Company Employees at any one time. The Applicants request an
exemption pursuant to Section 13(b) from the requirements of
Rules 90 and 91 to allow Charter Oak and Intermediate Companies
to provide services at fair market prices to other Intermediate
Companies and associated Exempt Projects in any case in which one
or more of the following circumstances are present:
1. As currently authorized by the Existing Orders,
such associate is a FUCO or an EWG which derives no part of
its income, directly or indirectly, from the generation,
transmission, or distribution of electric energy for sale
within the United States; or
2. Such association is an EWG which sells electricity
at market-based rates which have been approved by the FERC
or the appropriate state public utility commission, provided
the purchaser of such electricity is not an associate of NU
within the NU System; or
3. Such associate is a QF that sells electricity to
industrial or commercial customers, for their own use, at
negotiated rates or to electric utility companies that are
not associated with the NU system, at the purchasers avoided
cost; or
4. Such associate is an EWG that sells electricity at
rates based upon its cost of service, as approved by the
FERC or any state public utility commission, provided that
the purchaser of such electricity is not an associate of NU
within the NU System; or
5. Such associate is an Intermediate Company, the
sole business of which is developing, owning and/or
operating FUCOs or EWGs described in clauses 1, 2 or 4
above.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Exhibit H-1
Estimate of Expenditures for Charter Oak Energy
and Subsidiaries for remainder of 1996, 1997 and 1998
in ($000)
Cash Needs
Through June 1996
$70,000
Remainder of 1996
60,000
1997
35,000
1998
35,000
_______
TOTAL
$200,000
Amount Available for Guaranties =
$200,000
NORTHEAST UTILITIES (PARENT)
BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.1 PAGE 1 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
ASSETS
OTHER PROPERTY AND INVESTMENTS:
INVESTMENTS IN SUBSIDIARY COMPANIES,
AT EQUITY $2,644,400 $2,644,400
INVESTMENTS IN TRANSMISSION
COMPANIES, AT EQUITY 22,753 22,753
OTHER, AT COST 946 946
-------------------------------------
TOTAL OTHER PROPERTY & INVESTMENTS 2,668,099 0 2,668,099
CURRENT ASSETS:
CASH AND SPECIAL DEPOSITS 16 329,937 (a) 329,953
NOTES RECEIVABLE FROM AFFILIATED CO'S 7,225 7,225
NOTES AND ACCOUNTS RECEIVABLES 0 0
ACCOUNTS RECEIVABLE FROM AFFILIATED CO 659 659
PREPAYMENTS 339 339
--------------------------------------
TOTAL CURRENT ASSETS 8,239 329,937 338,176
--------------------------------------
DEFERRED CHARGES:
ACCUMULATED DEFERRED INCOME TAXES 7,606 7,606
UNAMORTIZED DEBT EXPENSE 0 0
OTHER 49 49
--------------------------------------
TOTAL DEFERRED CHARGES 7,655 0 7,655
--------------------------------------
TOTAL ASSETS $2,683,993 $329,937 $3,013,930
*EXPLANATION AT FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
NORTHEAST UTILITIES (PARENT)
BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.1 PAGE 2 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON SHARES $680,260 $680,260
CAPITAL SURPLUS, PAID IN 943,266 943,266
DEFERRED BENEFIT PLAN - ESOP (187,706) (187,706)
RETAINED EARNINGS 972,293 (17,693) 954,600
-------------------------------------
TOTAL COMMON STOCKHOLDER'S EQUITY 2,408,113 (17,693) 2,390,420
LONG-TERM DEBT, NET 204,000 204,000
-------------------------------------
TOTAL CAPITALIZATION 2,612,113 (17,693) 2,594,420
370
CURRENT LIABILITIES:
NOTES PAYABLE TO BANK 40,000 329,937 (a) 369,937
ACCOUNTS PAYABLE 4,114 4,114
ACCOUNTS PAYABLE TO AFFILIATED COMPANI 871 871
CURRENT PORTION OF LONG-TERM DEBT 14,000 14,000
ACCRUED TAXES 9,457 (9,527)(c) (70)
ACCRUED INTEREST 2,898 27,220 (b) 30,118
OTHER 6 6
-------------------------- --------
TOTAL CURRENT LIABILITIES 71,346 347,630 418,976
DEFERRED CREDITS:
OTHER 534 534
-------------------------------------
TOTAL DEFERRED CREDITS 534 0 534
-------------------------------------
TOTAL CAPITALIZATION AND
LIABILITIES $2,683,993 $329,937 $3,013,930
*EXPLANATION AT FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
NORTHEAST UTILITIES (PARENT)
INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.2 PAGE 1 OF 3
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
OPERATING REVENUE $0 $0 $0
-------------------------------------
OPERATING EXPENSES:
OPERATION EXPENSE 11,349 11,349
FEDERAL AND STATE INCOME TAXES (9,254) (9,527)(c) (18,781)
TAXES OTHER THAN INCOME TAXES 30 30
--------------------------------------
TOTAL OPERATING EXPENSES 2,125 (9,527) (7,402)
--------------------------------------
OPERATING INCOME (2,125) 9,527 7,402
--------------------------------------
OTHER INCOME:
EQUITY IN EARNINGS OF SUBSIDIARIES 252,918 252,918
EQUITY IN EARNINGS OF TRANSMISSION
COMPANIES 3,515 3,515
OTHER, NET 269 269
--------------------------------------
OTHER INCOME, NET 256,702 0 256,702
--------------------------------------
INCOME BEFORE INTEREST CHARGES 254,577 9,527 264,104
--------------------------------------
INTEREST CHARGES:
INTEREST ON LONG-TERM DEBT 19,174 19,174
OTHER INTEREST 4,484 27,220 (b) 31,704
--------------------------------------
TOTAL INTEREST CHARGES 23,658 27,220 50,878
--------------------------------------
NET INCOME 230,919 (17,693) 213,226
--------------------------------------
EARNINGS FOR COMMON SHARES 230,919 (17,693) 213,226
EARNINGS PER COMMON SHARE 1.82 1.68
COMMON SHARES OUTSTANDING (AVERAGE) 127,212,419 127,212,419
*EXPLANATION AT FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
NORTHEAST UTILITIES (PARENT)
CAPITAL STRUCTURE AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.2 PAGE 2 OF 3
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
DEBT:
LONG-TERM DEBT, NET $218,000 $218,000
---------------------------------------
TOTAL DEBT 8.3% 218,000 0 218,000 8.4%
COMMON EQUITY:
COMMON SHARES 680,260 680,260
CAPITAL SURPLUS, PAID IN 943,266 943,266
DEFERRED BENEFIT PLAN - ESOP (187,706) (187,706)
RETAINED EARNINGS 972,293 (17,693) 954,600
---------------------------------------
TOTAL COMMON STOCKHOLDER'S EQUITY 91.7% 2,408,113 (17,693) 2,390,420 91.6%
---------------------------------------
TOTAL CAPITAL 100.0% $2,626,113 (17,693) $2,608,420 100.0%
NORTHEAST UTILITIES (PARENT)
EXPLANATION OF ADJUSTMENTS
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
DEBIT CREDIT
(a) CASH $329,937
NOTES PAYABLE $329,937
To record the additional proposed borrowing up to the full $330 million
requested. This is illustative only since short term debt authoritation would
not allow borowing of this amount.
(b) OTHER INTEREST EXPENSE 27,220
ACCRUED INTEREST 27,220
To record the interest expense on the additional proposed borrowing at Prime:
$329,937 x 8.25%= 27,220
(c) ACCRUED TAXES 9,527
FEDERAL AND STATE INCOME TAX EXPENSE 9,527
To record the reduction in Federal and State income taxes due to the higher
interest and fee expenses:
$27,220 x 35.00%= 9,527
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.1 PAGE 1 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
ASSETS
UTILITY PLANT, AT ORIGINAL COST:
ELECTRIC $52 $52
OTHER 0 0
--------------------------------------
52 0 52
LESS: ACCUMULATED PROVISION FOR
DEPRECIATION 48 48
--------------------------------------
4 0 4
CONSTRUCTION WORK IN PROGRESS 0 0
--------------------------------------
TOTAL NET UTILITY PLANT 4 0 4
OTHER INVESTMENTS, AT COST 41,964 41,964
CURRENT ASSETS:
CASH 1,048 329,937 (a) 330,985
TAX RECEIVABLES 0 0
RECEIVABLES FROM AFFILIATES 0 0
MATERIALS & SUPPLIES, AT AVERAGE COST 0 0
PREPAYMENTS AND OTHER 0 0
-------------------------------------
TOTAL CURRENT ASSETS 1,048 329,937 330,985
-------------------------------------
DEFERRED CHARGES 10,823 10,823
-------------------------------------
TOTAL ASSETS $53,839 $329,937 383,776
*EXPLANATION AT FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.1 PAGE 2 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMMON SHARES $0 $0
CAPITAL SURPLUS, PAID IN 70,063 329,937 (a) 400,000
RETAINED EARNINGS (17,464) (17,464)
---------------------------------------
TOTAL COMMON STOCKHOLDER'S EQUITY 52,599 329,937 382,536
DEBT, NET 0 0
--------------------------------------
TOTAL CAPITALIZATION 52,599 329,937 382,536
MINORITY INTEREST IN COMMON EQUITY
OF SUBSIDIARIES (75) (75)
CURRENT LIABILITIES:
NOTES PAYABLE TO AFFILIATED COMPANY 0 0 0
ACCOUNTS PAYABLE 519 519
ACCOUNTS PAYABLE TO AFFILIATES 224 224
ACCRUED TAXES 313 313
ACCRUED INTEREST 0 0
OTHER 259 259
-------------------------- --------
TOTAL CURRENT LIABILITIES 1,315 0 1,315
-------------------------------------
ACCUMULATED DEFERRED INCOME TAXES 0 0
-------------------------------------
TOTAL CAPITALIZATION AND
LIABILITIES $53,839 $329,937 383,776
*EXPLANATION AT FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.2 PAGE 1 OF 3
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
OPERATING REVENUE $0 $0 $0
-------------------------------------
OPERATING EXPENSES:
OPERATION AND MAINTENANCE 6,461 6,461
DEPRECIATION 653 653
FEDERAL AND STATE INCOME TAXES (1,723) (1,723)
TAXES OTHER THAN INCOME TAXES 18 18
-------------------------------------
TOTAL OPERATING EXPENSES 5,409 0 5,409
-------------------------------------
OPERATING INCOME: (5,409) 0 (5,409)
-------------------------------------
OTHER INCOME:
INVESTMENT INCOME 1,473 1,473
OTHER INCOME, NET 97 97
INCOME TAXES - CREDIT 0 0
-------------------------------------
OTHER INCOME, NET 1,570 0 1,570
-------------------------------------
INCOME BEFORE INTEREST CHARGES (3,839) 0 (3,839)
-------------------------------------
INTEREST CHARGES:
OTHER INTEREST, NET 21 21
-------------------------------------
TOTAL INTEREST CHARGES 21 0 21
-------------------------------------
MINORITY INTEREST IN EARNINGS IN SUBSIDIA 0 0
NET INCOME (3,860) 0 (3,860)
*EXPLANATION AT FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
CAPITAL STRUCTURE ON MARCH 31, 1995
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.2 PAGE 2 OF 3
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
LONG-TERM DEBT 0.0% $0 $0 0.0%
COMMON SHARES 0 0
CAPITAL SURPLUS, PAID IN 70,063 329,937 400,000
RETAINED EARNINGS (17,464) 0 (17,464)
--------------------------------------
TOTAL COMMON STOCKHOLDER EQUITY 100.0% 52,599 329,937 382,536 100.0%
---------------------------------------
TOTAL CAPITAL 100.0% 52,599 329,937 382,536 100.0%
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
EXPLANATION OF ADJUSTMENTS
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
DEBITS CREDITS
(a) CASH $329,937
CAPITAL SURPLUS, PAID IN $329,937
To reflect a $330 million investment by NU (parent) in Charter Oak Energy in the
remainder of1996, 1997 and 1998.
COE DEVELOPMENT CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.1 PAGE 1 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
ASSETS
UTILITY PLANT, AT ORIGINAL COST:
ELECTRIC $11 $11
OTHER 0 0
--------------------------------------
11 0 11
LESS: ACCUMULATED PROVISION FOR
DEPRECIATION 8 8
---------------------------------------
3 0 3
CONSTRUCTION WORK IN PROGRESS 0 0
---------------------------------------
TOTAL NET UTILITY PLANT 3 0 3
OTHER INVESTMENTS, AT COST 200 200
CURRENT ASSETS:
CASH 0 329,937 (a) 329,937
TAX RECEIVABLES 667 667
RECEIVABLES FROM AFFILIATES 1,173 1,173
MATERIALS & SUPPLIES, AT AVERAGE COST 0 0
PREPAYMENTS AND OTHER 0 0
---------------------------------------
TOTAL CURRENT ASSETS 1,840 329,937 331,777
---------------------------------------
DEFERRED CHARGES 8,818 8,818
---------------------------------------
TOTAL ASSETS $10,861 $329,937 340,798
*EXPLANATION AT FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
COE DEVELOPMENT CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.1 PAGE 2 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMMON SHARES $0 $0
CAPITAL SURPLUS, PAID IN 22,439 329,937 (a) 352,376
RETAINED EARNINGS (12,189) (12,189)
---------------------------------------
TOTAL COMMON STOCKHOLDER'S EQUITY 10,250 329,937 340,187
DEBT, NET 0 0
---------------------------------------
TOTAL CAPITALIZATION 10,250 329,937 340,187
MINORITY INTEREST IN COMMON EQUITY
OF SUBSIDIARIES 0 0
CURRENT LIABILITIES:
NOTES PAYABLE TO AFFILIATED COMPANY 0 0 0
ACCOUNTS PAYABLE 219 219
ACCOUNTS PAYABLE TO AFFILIATES 168 168
ACCRUED TAXES 0 0
ACCRUED INTEREST 0 0
OTHER 224 224
-------------------------- ----------
TOTAL CURRENT LIABILITIES 611 0 611
---------------------------------------
ACCUMULATED DEFERRED INCOME TAXES 0 0
---------------------------------------
TOTAL CAPITALIZATION AND
LIABILITIES $10,861 $329,937 340,798
*EXPLANATION AT FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
COE DEVELOPMENT CORPORATION
INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.2 PAGE 1 OF 3
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
OPERATING REVENUE $0 $0 $0
------------------------------------
OPERATING EXPENSES:
OPERATION AND MAINTENANCE 5,430 5,430
DEPRECIATION 2 2
FEDERAL AND STATE INCOME TAXES (2,293) (2,293)
TAXES OTHER THAN INCOME TAXES 0 0
-------------------------------------
TOTAL OPERATING EXPENSES 3,139 0 3,139
-------------------------------------
OPERATING INCOME: (3,139) 0 (3,139)
-------------------------------------
OTHER INCOME:
INVESTMENT INCOME 0 0
OTHER INCOME, NET 0 0
INCOME TAXES - CREDIT 0 0
--------------------------------------
OTHER INCOME, NET 0 0 0
--------------------------------------
INCOME BEFORE INTEREST CHARGES (3,139) 0 (3,139)
---------------------------------------
INTEREST CHARGES:
OTHER INTEREST, NET 0 0
--------------------------------------
TOTAL INTEREST CHARGES 0 0 0
--------------------------------------
MINORITY INTEREST IN EARNINGS IN SUBSIDIA 0 0
NET INCOME (3,139) 0 (3,139)
*EXPLANATION AT FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
COE DEVELOPMENT CORPORATION
CAPITAL STRUCTURE ON JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.2 PAGE 2 OF 3
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
LONG-TERM DEBT 0.0% $0 $0 0.0%
COMMON SHARES 0 0
CAPITAL SURPLUS, PAID IN 22,439 329,937 352,376
RETAINED EARNINGS (12,189) 0 (12,189)
--------------------------------------
TOTAL COMMON STOCKHOLDER EQUITY 100.0% 10,250 329,937 340,187 100.0%
--------------------------------------
TOTAL CAPITAL 100.0% 10,250 329,937 340,187 100.0%
COE DEVELOPMENT CORPORATION
EXPLANATION OF ADJUSTMENTS
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
DEBITS CREDITS
(a) CASH $329,937
CAPITAL SURPLUS, PAID IN $329,937
To reflect a $330 million investment by Charter Oak Energy in COE Development
Corporation in the remainder of 1996,1997 and 1998.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.1 PAGE 1 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
ASSETS
UTILITY PLANT, AT ORIGINAL COST:
ELECTRIC & OTHER $9,773,435 $9,773,435
LESS: ACCUMULATED PROVISION FOR
DEPRECIATION 3,792,602 3,792,602
-----------------------------
$5,980,833 0 $5,980,833
UNAMORTIZED PSNH ACQUISITION COST 536,421 536,421
CONSTRUCTION WORK IN PROGRESS 143,557 143,557
NUCLEAR FUEL, NET 186,612 186,612
-----------------------------
TOTAL NET UTILITY PLANT 6,847,423 0 6,847,423
-----------------------------
OTHER PROPERTY AND INVESTMENTS:
NUCLEAR DECOMMISSIONING TRUST, AT MARKET 345,464 345,464
INVESTMENTS IN REGIONAL NUCLEAR
GENERATING COMPANIES, AT EQUITY 82,752 82,752
INVESTMENTS IN TRANSMISSION COMPANIES,
AT EQUITY 22,753 22,753
INVESTMENTS IN CHARTER OAK ENERGY PROJECT 41,965 41,965
OTHER, AT COST 38,750 38,750
-----------------------------
531,684 0 531,684
-----------------------------
CURRENT ASSETS:
CASH AND SPECIAL DEPOSITS 275,808 329,937(a) 605,745
RECEIVABLES, NET 396,680 396,680
RECEIVABLES FROM AFFILIATED COMPANIES 0 0
ACCRUED UTILITY REVENUES 123,170 123,170
FUEL, MATERIAL AND SUPPLIES, AT
AVERAGE COST 210,645 210,645
RECOVERABLE ENERGY COSTS, NET-CURRENT POSITIO 0 0
PREPAYMENTS AND OTHER 59,170 59,170
------------------------------
TOTAL CURRENT ASSETS 1,065,473 329,937 1,395,410
------------------------------
DEFERRED CHARGES:
REGULATORY ASSET-INCOME TAXES, NET 1,109,926 1,109,926
UNAMORTIZED DEBT EXPENSE 37,296 37,296
RECOVERABLE ENERGY COSTS, NET 407,151 407,151
DEFERRED CONSERVATION AND LOAD-
MANAGEMENT COSTS 93,764 93,764
DEFERRED COSTS - NUCLEAR PLANTS 177,257 77,257
COGENERATION COSTS-CL&P 85,969 85,969
REGULATORY ASSETS-OTHER 43,802 43,802
UNRECOVERED CONTRACT OBLIGATION-YAEC 77,039 77,039
OTHER 67,713 67,713
------------------------------
TOTAL DEFERRED CHARGES 2,099,917 0 2,099,917
------------------------------
TOTAL ASSETS $10,544,497 $329,937$10,874,434
* EXPLANATION AT FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.1 PAGE 2 OF 2
PRO FORMA
GIVNG EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON SHARES $680,260 $680,260
CAPITAL SURPLUS, PAID IN 943,266 943,266
DEFERRED BENEFIT PLAN-EMPLOYEE STOCK
OWNERSHIP PLAN (187,706) (187,706)
RETAINED EARNINGS 972,293 (17,693) 954,600
-------------------------------------
TOTAL COMMON STOCKHOLDER'S EQUITY 2,408,113 (17,693) 2,390,420
PREFERRED STOCK NOT SUBJECT TO
MANDATORY REDEMPTION 169,700 169,700
PREFERRED STOCK SUBJECT TO MANDATORY
REDEMPTION 276,000 276,000
LONG-TERM DEBT, NET 3,686,267 3,686,267
---------------------------------------
TOTAL CAPITALIZATION 6,540,080 (17,693) 6,522,387
MINORITY INTEREST IN CONSOLIDATED SUBSIDARY 99,926 99,926
OBLIGATIONS UNDER CAPITAL LEASES 138,101 138,101
CURRENT LIABILITIES:
NOTES PAYABLE TO BANKS 90,000 329,937 (a) 419,937
COMMERCIAL PAPER 0 0
LONG-TERM DEBT AND PREFERRED STOCK -
CURRENT PORTION 280,948 280,948
OBLIGATIONS UNDER CAPITAL LEASES -
CURRENT PORTION 68,878 68,878
ACCOUNTS PAYABLE 321,118 321,118
ACCOUNTS PAYABLE TO AFFILIATED
COMPANIES 0 0
ACCRUED TAXES 66,513 (9,527) (c) 56,986
ACCRUED INTEREST 51,424 27,220 (b) 78,644
ACCRUED PENSION BENEFITS 91,279 91,279
REFUNDABLE ENERGY COSTS 42,752 42,752
OTHER 133,492 13,492
-----------------------------------
TOTAL CURRENT LIABILITIES 1,146,404 347,630 1,494,034
DEFERRED CREDITS:
ACCUMULATED DEFERRED INCOME TAXES 2,115,943 2,115,943
ACCUMULATED DEFERRED INVESTMENT
TAX CREDITS 173,251 173,251
DEFERRED CONTRACT OBLIGATION-YAEC 77,039 77,039
OTHER 252,753 252,753
-------------------------------------
TOTAL DEFERRED CREDITS 2,618,986 0 2,618,986
-------------------------------------
TOTAL CAPITALIZATION AND
LIABILITIES $10,543,497 $329,937 $10,873,434
* EXPLANATION AT FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.2 PAGE 1 OF 3
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
OPERATING REVENUE $3,865,627 $0 $3,865,627
-------------------------------------
OPERATING EXPENSES:
OPERATION -
FUEL PURCHASED AND INTERCHANGE
POWER 982,766 982,766
OTHER 1,076,308 1,076,308
MAINTENANCE 339,068 339,068
DEPRECIATION 361,196 361,196
AMORTIZATION/DEFERRALS OF REGULATORY
ASSETS, NET 107,500 107,500
FEDERAL AND STATE INCOME TAXES 219,972 (9,527)(c) 210,445
TAXES OTHER THAN INCOME TAXES 257,386 257,386
-------------------------------------
TOTAL OPERATING EXPENSES 3,344,19 (9,527) 3,334,669
-------------------------------------
OPERATING INCOME: 521,431 9,527 530,958
-------------------------------------
OTHER INCOME:
DEFERRED NUCLEAR PLANTS RETURN-OTHER
FUNDS 12,313 12,313
EQUITY IN EARNINGS OF REGIONAL NUCLEAR
GENERATING COMPANIES 15,507 15,507
WRITE OFF OF PLANT COSTS 0 0
OTHER, NET 15,507 15,507
INCOME TAXES - CREDIT (8,682) (8,682)
------------------------------------
OTHER INCOME, NET 33,440 0 33,440
------------------------------------
INCOME BEFORE INTEREST CHARGES 554,871 9,527 564,398
------------------------------------
INTEREST CHARGES:
INTEREST ON LONG-TERM DEBT 298,356 298,356
OTHER INTEREST 12,488 27,220 (b) 39,708
DEFERRED NUCLEAR PLANTS RETURN -
BORROWED FUNDS, NET OF INCOME TAX (20,496) (20,496)
------------------------------------
TOTAL INTEREST CHARGES 290,348 27,220 317,568
------------------------------------
INCOME BEFORE PREFERRED DIVIDENDS 264,523 (17,693) 246,830
PREFERRED DIVIDENDS OF SUBSIDIARIES 33,604 33,604
------------------------------------
NET INCOME 230,919 (17,693) 213,226
EARNINGS FOR COMMON SHARE 230,919 (17,693) 213,226
EARNINGS PER COMMON SHARE 1.82 1.68
COMMON SHARES OUTSTANDING (AVERAGE) 127,212,419 127,212,419
* EXPLANATION AT FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
NORTHEAST UTILITIES AND SUBSIDIARIES
CAPITAL STRUCTURE AS OF JUNE 30,1996
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.2 PAGE 2 OF 3
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
DEBT:
LONG-TERM DEBT, NET 58.1% $3,965,715 0 $3,965,715 58.3%
PREFERRED STOCK:
NOT SUBJECT TO REDEMPTION 171,200 171,200
SUBJECT TO REDEMPTION 276,000 276,000
-------------------------------------------
TOTAL PREFERRED STOCK 6.6% 447,200 0 447,200 6.6%
COMMON EQUITY:
COMMON SHARES 680,260 680,260
CAPITAL SURPLUS, PAID IN 943,266 943,266
DEFERRED BENEFIT PLAN-EMPLOYEE STOCK
OWNERSHIP PLAN (187,706) (187,706)
RETAINED EARNINGS 972,293 (17,693) 954,600
--------------------------------------------
TOTAL COMMON STOCKHOLDER'S EQUITY 35.3% 2,408,113 (17,693) 2,390,420 35.1%
--------------------------------------------
TOTAL CAPITAL 100.0% $6,821,028 (17,693) $6,803,335 100.0%
NORTHEAST UTILITIES AND SUBSIDIARIES
EXPLANATION OF ADJUSTMENTS
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
DEBIT CREDIT
(a) CASH $329,937
NOTES PAYABLE 329,937
To record the additional proposed borrowing up to the full $330 million
requested
(b) OTHER INTEREST EXPENSE 27,220
ACCRUED INTEREST 27,220
To record the interest expense on the additional proposed borrowing at Prime:
$329,937 x 8.25% = 27,220
(c) ACCRUED TAXES 9,527
FEDERAL AND STATE INCOME TAX EXPENSE 9,527
To record the reduction in Federal and State income taxes due to the higher
interest and fee expenses:
$27,220 x 35.00% = 9,527
NOTE: The prime rate and tax rate reflected above represent the current
rates in effect as of the filing date.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,847,423 6,847,423
<OTHER-PROPERTY-AND-INVEST> 531,684 531,684
<TOTAL-CURRENT-ASSETS> 1,065,473 1,395,410
<TOTAL-DEFERRED-CHARGES> 2,099,917 2,099,917
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 10,544,497 10,874,434
<COMMON> 680,260 680,260
<CAPITAL-SURPLUS-PAID-IN> 943,266 943,266
<RETAINED-EARNINGS> (187,706) (187,706)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,408,113 2,390,420
169,700 169,700
276,000 276,000
<LONG-TERM-DEBT-NET> 3,686,267 3,686,267
<SHORT-TERM-NOTES> 90,000 419,937
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 254,448 254,448
26,500 26,500
<CAPITAL-LEASE-OBLIGATIONS> 138,101 138,101
<LEASES-CURRENT> 68,878 68,878
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,613,196 3,630,889
<TOT-CAPITALIZATION-AND-LIAB> 10,543,497 10,873,434
<GROSS-OPERATING-REVENUE> 3,865,627 3,865,627
<INCOME-TAX-EXPENSE> 219,972 210,445
<OTHER-OPERATING-EXPENSES> 3,124,224 3,124,224
<TOTAL-OPERATING-EXPENSES> 3,344,196 3,334,669
<OPERATING-INCOME-LOSS> 521,431 530,958
<OTHER-INCOME-NET> 33,440 33,440
<INCOME-BEFORE-INTEREST-EXPEN> 554,871 564,398
<TOTAL-INTEREST-EXPENSE> 290,348 317,568
<NET-INCOME> 264,523 246,830
33,604 33,604
<EARNINGS-AVAILABLE-FOR-COMM> 230,919 213,226
<COMMON-STOCK-DIVIDENDS> 220,062 220,062
<TOTAL-INTEREST-ON-BONDS> 298,356 298,356
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 1.82 1.68
<EPS-DILUTED> 1.82 1.68
</TABLE>
