File No. 70-8959
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
to
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO THE ORGANIZATION
OF A WHOLLY OWNED SUBSIDIARY RELATED TO AN ACCOUNTS RECEIVABLE PURCHASE
AND SALE PROGRAM AND RELATED TRANSACTIONS
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
WESTERN MASSACHUSETTS ELECTRIC COMPANY
174 Brush Hill Avenue
West Springfield, Massachusetts 01089
(Name of companies filing this statement and address of principal
executive office)
NORTHEAST UTILITIES
(Name of top registered holding company parent of declarant)
Robert P. Wax, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices, and communications to
David R. McHale Jeffrey C. Miller, Esq.
Assistant Treasurer - Finance Assistant General Counsel
Northeast Utilities Service Northeast Utilities Service
Company Company
P.O. Box 270 P.O. Box 270
Hartford, CT 06141-0270 Hartford, CT 06141-0270
Thomas R. Wildman, Esq.
Day, Berry & Howard
CityPlace
Hartford, CT 06103-3499
<PAGE>
The text of the Application/Declaration in this proceeding is amended and
restated in full (previously submitted exhibits and financial statements are
not resubmitted with the exception of Exhibit I which is restated and
resubmitted to reflect the changes to the text) as follows:
ITEM I
DESCRIPTION OF PROPOSED TRANSACTIONS
1. Western Massachusetts Electric Company ("WMECO" or the "Company"), a
wholly owned electric utility subsidiary of Northeast Utilities ("NU"), a
registered holding company, hereby submits this Application/Declaration
pursuant to the Public Utility Holding Company Act of 1935, as amended (the
"Act"), with respect to proposed transactions relating to the formation by the
Company of a wholly owned special purpose subsidiary related to an accounts
receivable purchase and sale program and related transactions. As set forth in
paragraphs 15 and 16 below, the Company will use the proposed transactions to
accelerate its receipt of anticipated cash collections from certain accounts
receivable.
2. WMECO proposes to organize a wholly owned special purpose corporation
to be called WMECO Receivables Corporation ("WRC") for the sole purpose of
acquiring certain categories of WMECO's accounts receivable and related assets,
as described below. A draft of WRC's Certificate of Incorporation will be
filed by amendment as Exhibit A.1, and a draft of the Bylaws of WRC will be
filed by amendment as Exhibit A.2. WMECO will subscribe to and purchase all of
WRC's Common Stock at a price yet to be determined which will be at least
sufficient to meet WRC's initial equity capital requirements, including the
organizational expenses of WRC. All or part of such purchase price may be paid
by the transfer by WMECO to WRC of accounts receivable of WMECO. A copy of
WMECO's authorizing resolution for this purchase is filed as Exhibit A.3.
3.The Company entered into a Receivables Purchase and Sale Agreement
dated as of September 11, 1996 (as amended, the "Existing Agreement") with
Monte Rosa Capital Corporation (the "Purchaser") and Union Bank of Switzerland,
New York Branch (the "Agent") under which the Company may sell (from time to
time in its discretion and subject to the satisfaction of certain conditions
precedent) fractional, undivided ownership interests expressed as a percentage
("Undivided Interests") in (i) billed and unbilled indebtedness of customers as
booked to Accounts 142.01 and 173 under the Federal Energy Regulatory
Commission Chart of Accounts ("Receivables") and (ii) certain related assets,
including any security or guaranty for any Receivables, all collections
thereon, and related records and software (the "Related Assets"). The
Purchaser is a special purpose Delaware corporation which acquires receivables
and other assets and issues commercial paper (and draws on its bank facilities)
to finance these acquisitions. The Agent will act as agent for the Purchaser
for transactions under the Existing Agreement. As of the date of this filing,
the Company has not made any sales under the Existing Agreement.
4. When originally executed, the Existing Agreement contemplated that any
sales made thereunder would be accounted for as sales under generally accepted
accounting principles, and WMECO desires to continue this accounting treatment
for its financial reporting. In order for such sales made after January 1,
1997 to be so treated, they must comply with the requirements of the Statement
of Financial Accounting Standards No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, No. 162-C,
issued in June 1996 by the Financial Accounting Standards Board ("FAS 125").
The formation of WRC is intended to satisfy one of the requirements of FAS 125:
the requirement that the transferred assets be isolated from the Company and
its creditors, even in bankruptcy or receivership of the Company. The Existing
Agreement contemplates that a restructured purchase and sale program involving
WRC will be in place by March 31, 1997, at which date the Existing Agreement
will terminate.
5. The restructured purchase and sale arrangements are on essentially the
same terms to WMECO as, and are intended to accomplish the ultimate sales to
the Purchaser in a manner substantially similar to, those under the Existing
Agreement; the addition of WRC serves merely as a vehicle to isolate the
Receivables as required by FAS 125 and as desired by the parties. Compared to
the costs and terms of the program under the Existing Agreement, when viewed on
an overall basis, the restructured arrangements add only relatively minor costs
of the formation and maintenance of WRC as a separate entity and do not
increase the liability of and risk to WMECO in any material respect.
6. The restructured accounts receivable purchase and sale program will
consist of two agreements which will replace the Existing Agreement. Under the
first agreement (the "Company Agreement"), the Company will sell or transfer as
equity contributions from time to time all of its Receivables and Related
Assets to WRC. The purchase price to be paid by WRC for any Receivables and
the Related Assets with respect thereto will take into account historical loss
statistics on the Company's receivables pool. Under the second agreement (the
"WRC Agreement"), WRC will sell Undivided Interests to the Purchaser from time
to time. Such Undivided Interests may be funded and repaid on a revolving
basis. The purchase price for an Undivided Interest will be calculated
according to a formula. Such formula will include reserves based on (among
other things) a multiple of historical losses, a multiple of historical
dilution (such as, e.g., adjustments due to billing errors), customer
concentrations that exceed specified levels and carrying costs and other costs
associated with the agreements. Such formula will also take into account the
cost of servicing, but this portion of the price will be returned to WMECO in
the form of a servicing fee.
7. The restructured accounts receivable program will be structured so as
to meet the specific requirements of FAS 125. The most significant of these
include the following: (i) the transfers of Receivables from the Company to WRC
will be in terms that the Company believes will result in such transfers being
labeled as "true sales" in the unlikely event of a bankruptcy proceeding
involving the Company; (ii) WRC, as the purchaser and transferee, will be a
"qualifying special purpose entity" within the meaning of FAS 125 (i.e. a
legally separate entity engaged only in activities related to the program);
(iii) WRC, together with subsequent purchasers, will have the right to pledge
or exchange the assets and/or interests in them; and (iv) the Company will not
maintain effective control over the Receivables and Related Assets it transfers
through a repurchase arrangement.
8. Primarily because of the reserves referred to in paragraph 6 above
that are included in the calculation of Undivided Interests sold to the
Purchaser, the purchase price paid by the Purchaser for Undivided Interests
will be lower than the purchase price paid by WRC to the Company for
Receivables and Related Assets. However, it is expected that WRC will have
available sufficient assets to pay to WMECO the full purchase price for
Receivables purchased from WMECO. One such asset is the collections allocable
to that portion of a Receivable which is not allocable to the Undivided
Interest in the Receivable sold to the Purchaser (i.e., if the Undivided
Interest is 90% at a given point in time, WRC is entitled to cash equal to 10%
of the collections). A second asset potentially available to WRC to pay the
purchase price for Receivables purchased from WMECO is that portion of the
Undivided Interests which represents loss reserves since that portion is only
retained by the Purchaser to the extent necessary to cover actual losses.
Since loss reserves are multiples of historical loss (as described in paragraph
6), it is expected that a significant portion of loss reserves will return to
WRC.
9. WMECO anticipates that the availability of Receivables and Related
Assets will vary from time to time in accordance with electric energy use by
its customers. As a result of this and the factors described in the preceding
paragraph, the funds WRC has available to make a purchase at any time{1} may
not match the cost of Receivables and Related Assets available. The proposed
program includes certain mechanisms to accommodate this mismatch. When the
amount of Receivables and Related Assets originated by WMECO exceeds the amount
of cash WRC has available, either WRC will make the purchase and owe the
balance of the purchase price to WMECO on a deferred basis (the unpaid portion
will accrue interest or the purchase price will involve a discount to reflect
the deferral), or WMECO will make a capital contribution to WRC in the form of
the Receivables and Related Assets for which WRC lacks purchase price funds at
that time. Conversely, if WRC develops a substantial cash balance (due to
collections of previously transferred Receivables exceeding the balance of
newly created Receivables available for purchase), WRC will likely dividend the
excess cash to WMECO. Such dividends may represent a return of previous
capital contributions by WMECO to WRC. Through these mechanisms, it is
expected that WRC will not itself retain substantial cash balances at any time
and that substantially all cash realized from the collection of the Receivables
(net of the costs of the program and any reductions in the outstanding purchase
price of Undivided Interests) will be made available to WMECO. Although the
actual funding cost will vary depending on, inter alia, the Purchaser's own
funding costs, it is expected that the all-in credit spread to WMECO of the
program will be approximately one-half of the all-in credit spread to WMECO for
the revolving credit facility described in the Commission's File No. 70-8875
(the "Revolving Credit Facility"). All fees, commissions and expenses expected
to be paid or incurred by WMECO in connection with the creation of WRC are
provided in Exhibit H.1; those by WRC in Exhibit H.2.
10. Under the WRC Agreement, purchases may be funded by the
Purchaser's issuance of commercial paper or drawing under its bank facilities.
Initially, the aggregate purchase price paid by the Purchaser for Undivided
Interests is not intended to exceed $50,000,000. The minimum purchase price
for an Undivided Interest which may be sold in a single transaction will be
$1,000,000.
11. The Agent will have the right to appoint a servicer on behalf of
the Purchaser and WRC, to administer and collect receivables and to notify the
obligors of the sale of their receivables, at the Agent's option. WMECO will
be appointed as the initial servicer, and only under certain adverse conditions
can the Agent appoint a successor servicer. WMECO will continue to utilize the
services of its affiliate, Northeast Utilities Service Company, in performing
WMECO's servicing obligations. Therefore, WMECO's customers are not expected
to experience any change in current servicing and collection procedures.
12. Certain obligations under the Company Agreement create limited
recourse against the Company. Such recourse claims include liability for (i)
failure to transfer to WRC a first priority ownership interest in the
Receivables and Related Assets; (ii) the Company's breach of its
representations, warranties and covenants; and (iii) certain indemnity
obligations. In order to secure these obligations, the Company will grant to
WRC a lien on, and security interest in, any rights which the Company may have
in respect of Receivables and Related Assets. The WRC Agreement creates
comparable recourse obligations against WRC, and WRC will grant a security
interest to the Purchaser in all rights in the Receivables retained by WRC, the
Related Assets and certain other rights and remedies (including its rights and
remedies under the Company Agreement) to secure such recourse obligations.
Neither WRC's nor the Purchaser's recourse to WMECO will include any rights
against WMECO should customer defaults on the Receivables result in collections
attributable to the Undivided Interests sold to the Purchaser being
insufficient to reimburse the Purchaser for the purchase price paid by it for
the Undivided Interests and its anticipated yield. The Purchaser will bear the
risk for any credit losses on the Receivables which exceed the reserves for
such losses included in the Undivided Interests.
13. The Company and WRC will be obligated to reimburse the Purchaser
and the Agent for various costs and expenses associated with the Company
Agreement and the WRC Agreement. WRC will also be required to pay to the Agent
certain fees for services in connection with such agreements. See Exhibits H.1
and H.2.
14. The arrangements under the Company Agreement and the WRC
Agreement are scheduled to terminate on September 4, 2001. WRC may, upon at
least five business days' notice to the Agent, terminate in whole or reduce in
part the unused portion of its purchase limit in accordance with the terms and
conditions of the WRC Agreement. The WRC Agreement allows the Purchaser to
assign all of its rights and obligations under the WRC Agreement (including its
Undivided Interests and the obligation to fund Undivided Interests) to other
persons, including the providers of its bank facilities. However, any such
assignment will not change the nature of the obligations of WMECO or WRC under
the Company Agreement and the WRC Agreement. All references herein to the
Purchaser include reference to its assignees.
15. WMECO intends that the above-described transactions will permit
it in effect, through this intermediary device, to accelerate its receipt of
cash collections from accounts receivable and thereby meet its short term cash
needs. WMECO believes that the planned purchase and sale transactions will
provide it with needed financial flexibility at a time when the Company expects
to incur substantial costs as a result of the outages of the Millstone nuclear
plants. As the Commission is aware, the NU companies are engaging in a series
of financial transactions to permit them to meet their financial needs in the
near future. See, e.g., Revolving Credit Facility (File No. 70-8875).
16. WMECO believes that, based on indicative pricing, funding under
the proposed transactions will be more advantageous than other sources of funds
that WMECO and other NU companies are seeking such as the Revolving Credit
Facility.
17. Except in accordance with the Act, neither NU nor any subsidiary
thereof (a) has acquired an ownership interest in an exempt wholesale generator
("EWG") or a foreign utility company ("FUCO") as defined in Sections 32 and 33
of the Act, or (b) now is or as a consequence of the transactions proposed
herein will become a party to, or has or will as a consequence of the
transactions proposed herein have a right under, a service, sales, or
construction contract with an exempt wholesale generator or a foreign utility
company. None of the proceeds from the transactions proposed herein will be
used by the Company to acquire any securities of, or any interest in, an exempt
wholesale generator or a foreign utility company.
The NU system is in compliance with Rule 53(a), (b) and (c), as
demonstrated by the following determinations:
(i) NU's aggregate investment in EWGs and FUCOs (i.e. amounts
invested in or committed to be invested in EWGs and FUCOs, for which
there is recourse to NU) does not exceed 50 percent of the NU system's
consolidated retained earnings as reported for the four most recent
quarterly periods on NU's Form 10-K and 10-Qs. At September 30, 1996,
the ratio of such investment ($41.1 million) to such consolidated
retained earnings ($941.3 million) was 4.36 percent.
(ii) Encoe Partners, Central Termica San Miguel de Tucuman, S.A., Ave
Fenix Energia S.A. and Plantas Eolicas, S.A. (N.U.'s only EWGs or FUCOs
at this time) (collectively, "EWGs/FUCOs") maintain books and records
and prepare financial statements in accordance with Rule 53(a)(2).
Furthermore, NU has undertaken to provide the Commission access to such
books and records and financial statements, as it may request.
(iii) No employees of the NU system's public utility companies
have rendered services to the EWGs/FUCOs.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24
certificates that have been filed with the Commission under Rule 53 and
(b) a copy of Item 9 of Form U5S and Exhibits G and H thereof to each
state regulator having jurisdiction over the retail rates of the NU
system public utility companies.
(v) Neither NU nor any NU subsidiary has been subject of a
bankruptcy or similar proceeding unless a plan of reorganization has
been confirmed in such proceeding. In addition, NU's average
consolidated retained earnings for the four most recent quarterly
periods has not decreased by 10 percent or more from the average for
the previous four quarterly periods.
(vi) In the previous fiscal year, NU's operating losses attributable
to its investment in the EWGs/FUCOs did not exceed 5 percent of NU's
consolidated retained earnings.
ITEM II
FEES, COMMISSIONS, AND EXPENDITURES
18. The estimated fees, commissions, and expenses paid or incurred,
or to be paid or incurred, directly or indirectly, in connection with the
proposed transactions by the Company or any associate company thereof are
specified in Exhibits H.1 and H.2.
19. None of such fees, commissions, or expenses are to be paid to
any associate company or affiliate of the Companies or any affiliate of any
such associate company except for financial, legal, and other services to be
performed at cost by NUSCO, an affiliated service company.
ITEM III
APPLICABLE STATUTORY PROVISIONS
20. The formation of WRC; the issuance of shares by WRC; the making,
directly and indirectly, of the initial equity contributions to WRC; the
acquisition by WMECO of shares of Common Stock of WRC; and the payment of
dividends by WRC to WMECO, to the extent such dividends may be considered to be
paid out of capital or unearned surplus, are subject to Sections 6(a), 7, 9(a),
10 and 12(c) of the Act and Rules 46 and 54 thereunder.
21. The Company believes that all other aspects of the transactions
described herein are not subject to the Commission's jurisdiction. The Company
believes that its sales of Receivables to WRC are not sales of a "security" as
defined in Section 2(a)(16) of the Act or "utility assets" as defined Section
2(a)(18). Furthermore, the Company believes that any capital contributions to
WRC in the form of Receivables and Related Assets subsequent to its initial
capitalization will be exempt from regulation under Rule 45(b)(4), and that
WRC's sales of Undivided Interests, to the extent such may be considered the
issuance of a debt security, are exempt from regulation under Rule 52(b).
ITEM IV
REGULATORY APPROVAL
22. In a petition filed with the Massachusetts Department of Public
Utilities ("DPU"), the Company seeks (a) approval for the formation of WRC, the
making of capital contributions to WRC and the acquisition of WRC's Common
Stock; and (b) a disclaimer of jurisdiction, or, in the alternative approval
of, the sales by the Company and WRC of Receivables, Related Assets and
Undivided Interests. A copy of this filing is filed as Exhibit D.1 hereto. A
copy of the order of the DPU will be filed by amendment as Exhibit D.2 hereto
upon issuance.
23. No other state commission has jurisdiction with respect to any
aspect of the proposed transaction, and no Federal commission other than the
Securities and Exchange Commission has jurisdiction with respect to any aspect
thereof.
ITEM V
PROCEDURE
24. The Company respectfully requests the Commission's approval,
pursuant to this Application/Declaration, of the formation of WRC, the issuance
of shares by WRC, the making of initial equity contributions to WRC and the
acquisition by WMECO of shares of Common Stock of WRC as described herein,
whether under the sections of the Act and rules thereunder enumerated in Item
III or otherwise. The Company also requests the Commission's approval as may
be necessary of any other aspect of the transactions described in this
Application/Declaration under the appropriate provisions of the Act or rules
thereunder.
25. The Company hereby waives any recommended decision by a hearing
officer or by any other responsible officer of the Commission and waives the
30-day waiting period between the 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. The Company
consents 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. It is requested that the Commission issue an order
authorizing the jurisdictional transactions proposed herein and disclaiming
jurisdiction over the sales and purchases of Receivables, Related Assets and
Undivided Interests at the earliest practicable date but in any event not later
than 40 days from filing date. It is further requested that (i) there not be a
recommended decision by an Administrative Law Judge or other responsible
officer of the Commission, (ii) the Office of Public Utility Regulation be
permitted to assist in the preparation of the Commission's decision, and (iii)
the Commission's order become effective forthwith upon issuance.
ITEM VI
EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
A.1 Draft of the Certificate of Incorporation of WRC. (To be filed
by amendment.)
A.2 Draft of the Bylaws of WRC. (To be filed by amendment.)
A.3 WMECO's authorizing resolution for purchase of WRC Common Stock.
B. Not applicable.
C. Not applicable.
D.1 Application to the DPU for approval of the creation of WRC and
request for disclaimer of jurisdiction over the purchase and sales
transactions.
D.2 Copy of the Order of the DPU with respect to WMECO's proposed
transactions. (To be filed by amendment.)
E. Not applicable.
F. Opinion of Counsel to WMECO. (To be filed by amendment.)
G.1 WMECO Financial Data Schedule. (Previously filed.)
G.2 NU Financial Data Schedule. (Previously filed.)
H.1 Estimated Expenses--WMECO. (Previously filed.)
H.2 Estimated Expenses--WRC. (Previously filed.)
I. Proposed notice of the proceeding initiated by the filing of
this Application/Declaration.
(b) Financial Statements (All previously filed.)
1. Western Massachusetts Electric Company
1.1 Balance Sheet, per books and pro forma, as of September
30, 1996.
1.2 Income Statement, per books and pro forma, twelve months
ended September 30, 1996.
1.3 Statement of Retained Earnings, per books and pro forma,
twelve months ended September 30, 1996 and Statement of
Capital Structure, per books and pro forma, as of
September 30, 1996.
1.4 Explanation of Pro Forma Adjustments.
2. Northeast Utilities and Subsidiaries
2.1 Consolidated Balance Sheet, per books and pro forma, as
of September 30, 1996.
2.2 Consolidated Income Statement, per books and pro forma,
twelve months ended September 30, 1996.
2.3 Consolidated Statement of Retained Earnings, per books
and pro forma, twelve months ended September 30, 1996,
and Consolidated Statement of Capital Structure, per
books and pro forma, as of September 30, 1996.
2.4 Explanation of Pro Forma Adjustments.
VII
INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) The issuance of an order with respect to this
Application/Declaration is not a major federal action significantly affecting
the quality of the human environment.
(b) No Federal agency has prepared or is preparing an environmental
impact statement with respect to the subject transactions.
**FOOTNOTES**
{1}The only funds available to WRC will be those
resulting from its participation in the program and WMECO's capital
contributions to it. WRC will have no source of funds or obligations
outside of the receivables purchase and sale program.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: February 20, 1997.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By_________________________/s/David R. McHale
David R. McHale
Assistant Treasurer
<PAGE>
File No. 70-8959
INDEX TO EXHIBITS FILED WITH
AMENDMENT NO. 2 to
FORM U-1
of
WESTERN MASSACHUSETTS ELECTRIC COMPANY
(a) Exhibits
A.3 WMECO's authorizing resolution for purchase of WRC Common Stock.
D.1 Application to the DPU for approval of the creation of WRC and
request for disclaimer of jurisdiction over the purchase and
sale transactions.
I. Proposed notice of the proceeding initiated by the filing of
this Application/Declaration.
EXHIBIT A.3
I, the undersigned, HEREBY CERTIFY that at a meeting of the Board of
Directors of THE WESTERN MASSACHUSETTS ELECTRIC COMPANY, duly called and held
on August 12, 1996 at which a quorum was present and acting throughout, the
following resolutions were duly adopted:
RESOLVED, that the Company, or a special purpose entity created by the
Company, is hereby authorized to enter into (i) a receivables purchase and sale
agreement (the "Agreement") with Union Bank of Switzerland, New York Branch, as
Agent (the "Agent") and Monte Rosa Capital Corporation (the "Purchaser") and
(ii) any and all necessary or appropriate related documentation under which the
Company and/or such special purpose entity may, in the Company's discretion and
subject to the satisfaction of certain conditions precedent, sell or otherwise
transfer (directly or indirectly) from time to time to the Purchaser an
interest in (x) certain billed and unbilled accounts receivable (the
"Receivables") originated by the Company and arising from the sale of
electricity and related services to its customers and (y) certain related
claims, rights and other assets.
RESOLVED, the purchase price to be paid by the Purchaser shall not
exceed $50 million at any time; provided that the interest acquired by the
Purchaser shall be calculated to include, in addition to such purchase price,
such reserves as are agreed upon by the Purchaser and the Company.
RESOLVED, that the Company may, if the officers of the Company
negotiating the Agreement shall deem the same to be advantageous in connection
with the transactions contemplated by the Agreement, take such steps as they
shall deem necessary or appropriate to form (and capitalize) a special purpose
corporation or other entity to be an intermediate transferee/transferor of the
Receivables.
RESOLVED, that the Chairman, the President, any Vice President, the
Treasurer, and any Assistant Treasurer are severally authorized in the name and
on behalf of the Company to execute and deliver the Agreement and any and all
related documentation, the execution and delivery thereof to be sufficient and
conclusive evidence that the same is within the authority conferred by these
resolutions.
RESOLVED, that the officers of the Company are authorized to prepare
and file with the Massachusetts Department of Public Utilities and/or
Securities and Exchange Commission, such application(s), if any, as they may
determine to be necessary to request approval or authorization for the Company
to engage in the transactions contemplated by these resolutions or to take any
actions necessary or appropriate in connection therewith; and the officers of
the Company are severally authorized to file such amendments to the foregoing
application(s) and to take such other actions in relation thereto as they may
deem necessary or desirable.
RESOLVED, that the officers of the Company are severally authorized to
execute and deliver all such other documents and take all such other actions to
effect the accounts receivable purchase and sale program (including, if
applicable, the formation of a special purpose entity) contemplated by these
resolutions in accordance with the Agreement and the other documents relating
thereto and the transactions contemplated by the foregoing resolutions as the
officer or officers so acting may deem necessary or advisable to carry out the
purposes of the foregoing resolutions, the execution and delivery thereof and
the taking of such actions to be sufficient and conclusive evidence that the
same is within the authority conferred by these resolutions.
I DO FURTHER CERTIFY that the foregoing resolutions are still in full
force and effect as of this date.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said Company on this 8th day of January, 1997.
/s/ Mark A. Joyse
Mark A. Joyse
Assistant Clerk
(Seal)
EXHIBIT D.1
COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF PUBLIC UTILITIES
PETITION OF
WESTERN MASSACHUSETTS ELECTRIC COMPANY ("WMECO")
WITH RESPECT TO THE ORGANIZATION OF A
WHOLLY OWNED SUBSIDIARY IN CONJUNCTION WITH AN ACCOUNTS
RECEIVABLE PURCHASE AND SALE PROGRAM AND RELATED TRANSACTIONS
D.P.U. _____
I. Introduction
This is a Petition by Western Massachusetts Electric Company ("WMECO"
or the "Company"), an electric company duly organized and existing under the
laws of the Commonwealth and subject to the jurisdiction of the Massachusetts
Department of Public Utilities (the "Department") under Massachusetts General
Laws Chapter 164 for approval by the Department under <section> 17A of such
Chapter of proposed transactions relating to an accounts receivable purchase
and sale program. The proposed transactions include the formation by WMECO of
a wholly owned special purpose subsidiary, the making of initial and future
capital contributions to the subsidiary and the acquisition by WMECO of the
capital stock of the subsidiary. As set forth in paragraphs 12 and 13 below,
WMECO may use the proposed transactions to accelerate its receipt of
anticipated cash collections from certain accounts receivable, thereby
assisting WMECO to meet its short term cash needs.{1}
As explained in greater detail below, the proposed purchase and sale
program will not have any effect on WMECO's provision of service to the public
nor will it cause an increase in the rates WMECO charges its customers.
Furthermore, WMECO does not expect its customers to experience any change in
the procedures to collect on outstanding accounts. Thus, the Company believes
that its implementation of the proposed program is in the public interest.
II. Description of Proposed Transactions
1. WMECO proposes to organize a wholly owned special purpose
corporation to be known as WMECO Receivables Corporation ("WRC") for the sole
purpose of purchasing certain categories of WMECO's accounts receivable and
related assets, as described below. A draft of WRC's Certificate of
Incorporation will be filed by amendment as Exhibit A, and a draft of the
Bylaws of WRC will be filed by amendment as Exhibit B. WMECO will subscribe to
and purchase all of WRC's Common Stock at a price yet to be determined which
will be at least sufficient to meet WRC's initial equity capital requirements,
including the organizational expenses of WRC. All or part of such purchase
price may be paid by the transfer by WMECO to WRC of accounts receivables of
WMECO. A copy of WMECO's authorizing resolution for these transactions is
attached hereto as Exhibit C. All fees, commissions and expenses expected to
be paid or incurred by WMECO in connection with the creation of WRC are listed
in Exhibit D.
2. The Company entered into a Receivables Purchase and Sale
Agreement (the "Existing Agreement") dated Septemer 11, 1996 with Monte Rosa
Capital Corporation (the "Purchaser") and Union Bank of Switzerland, New York
Branch (the "Agent") under which the Company may sell (from time to time in its
discretion and subject to the satisfaction of certain conditions precedent)
fractional, undivided ownership interests expressed as a percentage ("Undivided
Interests") in (i) certain billed and unbilled indebtedness of customers
("Receivables") and (ii) certain related assets, including any security or
guaranty for any Receivables, all collections thereon, and related records and
software (the "Related Assets"). The Purchaser is a special purpose Delaware
corporation which acquires receivables and other assets and issues commercial
paper (and draws on its bank facilities) to finance these acquisitions. The
Agent will act as agent for the Purchaser for transactions under the Existing
Agreement. As of the date of this filing, the Company has not made any sales
under the Existing Agreement.
3. When originally executed, the Existing Agreement contemplated
that any transfers of Receivables thereunder would be accounted for as sales
under generally accepted accounting principles, and WMECO desires to continue
this accounting treatment for its financial reporting. In order for such
transfers made on or after January 1, 1997 to be so treated, they must comply
with the requirements of Statement of Financial Accounting Standards No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, No. 162-C (June 1996), ("FAS 125") issued in June 1996 by the
Financial Accounting Standards Board, an organization which develops accounting
standards, including industry standards for U.S. corporations. FAS 125
establishes a standard that differentiates, for accounting purposes, transfers
of financial assets that should be considered sales from transfers that should
be considered secured borrowings. The formation of WRC is intended to satisfy
one of the requirements for sale treatment under FAS 125: the requirement that
the transferred assets be isolated from the Company and its creditors, even in
bankruptcy or receivership of the Company. The Existing Agreement contemplates
that a restructured sales arrangement involving WRC will be in place by
February 1, 1997, at which date the Existing Agreement will terminate, unless
extended by agreement of the parties. The parties are discussing an extension
to March 31, 1997.
4. As explained in more detail below, the restructured sales
arrangements are intended to accomplish the sales in a manner substantially
similar to those under the Existing Agreement; the addition of WRC to these
sales arrangements serves merely as a vehicle to comply with FAS 125. Compared
to costs of the program under the Existing Agreement, when viewed on an overall
basis, the restructured sales arrangements add only relatively minor costs of
the formation and maintenance of WRC as a separate entity.
5. The restructured accounts receivable sales arrangements will
consist of two agreements which will replace the Existing Agreement. Under the
first agreement (the "Company Agreement"), the Company will sell or transfer as
equity contributions from time to time all of its Receivables and Related
Assets to WRC. The purchase price for any Receivables and the Related Assets
so sold will take into account historical loss statistics on the Company's
receivables pool. Under the second agreement (the "WRC Agreement"), WRC will
sell Undivided Interests in the Receivables to the Purchaser from time to time.
Such Undivided Interests may be funded and repaid on a revolving basis. The
purchase price for an Undivided Interest will be calculated according to a
formula. Such formula will include reserves based on (among other things) a
multiple of historical losses, a multiple of historical dilution (such as,
e.g., adjustments due to billing errors), customer concentrations that exceed
specified levels and carrying costs and other costs associated with the
agreements.
6. WMECO anticipates that the availability of Receivables and
Related Assets will vary from time to time in accordance with electric energy
use by its customers. As a result of this and other factors important to the
overall structure of the program, the funds WRC has available to make a
purchase at any time{2} may not match the cost of Receivables and Related
Assets available. The proposed program includes certain mechanisms to
accommodate this mismatch. When the amount of Receivables and Related Assets
originated by WMECO exceeds the amount of cash WRC has available, either WRC
will make the purchase and owe the balance of the purchase price to WMECO on a
deferred basis (the unpaid portion will accrue interest or the purchase price
will involve a discount to reflect the deferral), or WMECO will make a capital
contribution to WRC in the form of the Receivables and Related Assets for which
WRC lacks purchase price funds at that time. Conversely, if WRC develops a
substantial cash balance (due to collections of previously transferred
Receivables exceeding the balance of newly created Receivables available for
purchase), WRC will likely dividend the excess cash to WMECO.
7. Under the WRC Agreement, purchases may be funded by the
Purchaser's issuance of commercial paper or drawing under its bank facilities.
Initially, the aggregate purchase price paid by the Purchaser for Undivided
Interests is not intended to exceed $50,000,000. The minimum purchase price
for an Undivided Interest which may be sold in a single transaction will be
$1,000,000.
8. The Agent will have the right to appoint a servicer on behalf of
the Purchaser and WRC, to administer and collect receivables and to notify the
obligors of the sale of their receivables, at the Agent's option. WMECO will
be appointed as the initial servicer, and only under certain adverse conditions
can the Agent appoint a successor servicer. Therefore, WMECO's customers are
not expected to experience any change in current servicing and collection
procedures.
9. Certain obligations under the Company Agreement create limited
recourse against the Company. Such recourse claims include liability for (i)
failure to transfer to WRC a first priority ownership interest in the
Receivables and Related Assets, (ii) the Company's breach of its
representations, warranties and covenants, and (iii) certain indemnity
obligations. In order to secure these obligations, the Company has granted to
the Agent a lien on, and security interest in, any rights which the Company may
have in respect of Receivables and Related Assets. The WRC Agreement creates
comparable recourse obligations against WRC, and WRC grants a security interest
in the Receivables, the Related Assets and certain other rights and remedies
(including its rights and remedies under the Company Agreement) to secure such
recourse obligations.
10. The Company and WRC will be obligated to reimburse the Purchaser
and the Agent for various costs and expenses associated with the Company
Agreement and the WRC Agreement. WRC will also be required to pay to the Agent
certain fees for services in connection with such agreements. WMECO as
collection agent will receive fees from the Purchaser. However, WMECO does not
anticipate paying any fees to WRC. See Exhibit D. While WRC may realize a
profit on these transactions, such profit will inure to the benefit of WMECO
since WMECO will wholly own WRC.
11. The arrangements under the Company Agreement and the WRC
Agreement are scheduled to terminate on September 4, 2001. WRC may, upon at
least five business days' notice to the Agent, terminate in whole or reduce in
part the unused portion of the purchase limit in accordance with the terms and
conditions of the WRC Agreement. The WRC Agreement allows the Purchaser to
assign all of its rights and obligations under the WRC Agreement (including its
Undivided Interests and the obligation to fund Undivided Interests) to other
persons, including the providers of its bank facilities. However, any such
assignment will not change the nature of the obligations of WMECO or WRC under
the Company Agreement and the WRC Agreement. All references herein to the
Purchaser include reference to its assignees.
12. WMECO intends that the above-described transactions will permit
it to accelerate its receipt of cash collections from accounts receivable and
thereby meet its short term cash needs. WMECO believes that the planned
purchase and sale transactions will provide it with needed financial
flexibility. This purchase and sale program is intended to be one of several
financing tools WMECO is pursuing in connection with its overall strategy to
meet its anticipated financing needs, including its capital and liquidity
requirements. See,e.g., Petition of WMECO for Approval of the Issuance and
Sale of First Mortgage Bonds and Preferred Stock, D.P.U. 96-96.
13. WMECO believes that, based on indicative pricing, funding under
the proposed transactions will be more advantageous than other sources of funds
available to WMECO.
14. In Boston Edison Company, D.P.U. 93-37 (1993), the Department
articulated three factors which it would consider prior to approving a
utility's proposed investment in a subsidiary under Chapter 164, <section> 17A:
"(1) the nexus between the proposed subsidiary and the company's core business;
(2) the company's proposed investment and its total investment in subsidiaries
as a percentage of the company's total equity; and (3) the methods employed in
the company's accounting system to protect the utility's ratepayers from cross-
subsidization of a proposed subsidiary by the utility." Due to the limited
purpose for which WRC is being created and the insignificant amount of WMECO's
proposed investment in WRC, both as described in Section II hereof, the Company
believes that its proposed investment meets these standards and is consistent
with the public interest.{3}
15. WRC's activities do not qualify it as an electric company
thereby subject to the Department's regulation. However, under Mass. Gen. Laws
ch. 164, <section><section> 76A and 85, the Department has the authority to
monitor the relationship between WRC and WMECO by requiring periodic reports
and examining WRC's records with respect to its relations to WMECO. If so
ordered, WMECO will allow the Department to examine at all reasonable times,
all books, records, contracts, documents, papers and memoranda of WRC as if WRC
were subject to Mass. Gen. Laws ch. 164, <section>80. In addition, while WMECO
and WRC have and must continue to have separate legal identities, WMECO
proposes that the Department treat it on a consolidated basis with WRC for
ratemaking purposes including the purpose of determining the loss allowance for
uncollected receivables.
16. Since these arrangements will not result in a rate increase,
affect WMECO's recovery of stranded costs or cause a change in collection
procedures for customers, the Company does not anticipate any negative impact
on ratepayers. However, the Company believes that the arrangements will
provide it with an important option for meeting its short term cash needs at
favorable rates over the term of the arrangements. Therefore, the Company
believes that the creation of WRC in order to implement the proposed purchase
and sale program meets the standard articulated by the Department in Boston
Edison that an investment proposal will be "consistent with the public interest
if, upon consideration of all its significant aspects viewed as a whole, the
public interest is at least as well served by approval of the proposal as by
its denial."
17. WMECO respectfully requests that the Department concur with its
determination that the sales of Receivables and Related Assets under the
Company Agreement and the WRC Agreement fall outside the Department's
jurisdiction. The Company believes that such sales do not involve the issue of
a security or the sale of a utility asset or the payment of any compensation by
WMECO to WRC. The sale of interests in accounts receivable merely accelerates
the receipt of anticipated collections through the conversion of accounts
receivable to cash, and such sales will not affect the operation of the Company
or the performance of its duty to the public. If the Department does not
concur with the Company's determination that the sale of Receivables and
Related Assets is not subject to prior approval by the Department, the Company
requests the Department's approval for such transactions.
18. The transactions proposed hereunder are subject to the approval
and/or disclaimer of the Securities and Exchange Commission (the "SEC") under
the Public Utility Holding Company Act of 1935, as amended. The SEC's approval
of WMECO's proposed transactions is subject to WMECO's receipt of all necessary
state regulatory approvals, including the approval and/or disclaimer of the
Department. WMECO is desirous of obtaining all necessary approvals as soon as
possible; accordingly, final approval of this Petition by the Department is
therefore respectfully requested on or before February 28, 1997.
19. Exhibits F (WMECO) and G (Northeast Utilities), which will be
filed by amendment, will include a balance sheet, income statement, statement
of retained earnings, capital structure and explanation of pro forma
adjustments which reflect the proposed transactions.
III. Additional Information
The following additional information is supplied as part of this
Petition:
A. The exact legal name of the petitioner and its principal place
of business:
Western Massachusetts Electric Company
174 Brush Hill Road
West Springfield, Massachusetts 01089
B. The name, title, address, and telephone number of the attorneys
and others to whom correspondence or communications in regard to this Petition
are to be addressed:
David R. McHale Stephen H. Klionsky, Esq.
Assistant Treasurer-Finance Western Massachusetts Electric Company
Northeast Utilities Service Company 260 Franklin Street
P.O. Box 270 Boston, MA 02110-3179
Hartford, Connecticut 06141-0270 Telephone: (617) 345-4778
Telephone: (860) 665-5601 Fax: (617) 345-4780
Fax: (860) 665-5457
Thomas R. Wildman, Esq.
Day, Berry & Howard
CityPlace
Hartford, Connecticut 06103-3499
Telephone: (860) 275-0114
Fax: (860) 275-0343
IV. Exhibits
WMECO is filing herewith (or, as indicated, will file by amendment) the
exhibits listed in Appendix 1 hereto. This Petition and Appendix 1 set forth
all information and exhibits required to be filed by WMECO and which WMECO
deems necessary or desirable to support the granting of this Petition. WMECO,
however, hereby reserves the right to file such additional testimony and
exhibits as it may consider to be necessary or desirable.
V. Requests for Approval
WHEREFORE WMECO respectfully requests that the Department determine
pursuant to Section 17A of Chapter 164 of the General Laws of Massachusetts:
A. That (i) the formation of WRC by WMECO, (ii) the making, directly or
indirectly, by WMECO of initial and future equity contributions in WRC, (iii)
the acquisition by WMECO of shares of the capital stock of WRC, and (iv) other
actions incident to or reasonably necessary for the consummation of the
foregoing are reasonably necessary for the purposes of enabling WMECO to meet
its short term cash needs through its participation in a proposed accounts
receivable purchase and sale program.
B. That WMECO may (i) cause the formation of WRC, (ii) make, directly or
indirectly, initial and future equity contributions in WRC, (iii) acquire
shares of the capital stock of WRC, (iv) enter into the Company Agreement with
WRC, and (v) take or cause to be taken such other actions incident to or
reasonably necessary for the consummation of the foregoing.
C. That consummation of the proposed transactions is consistent with the
public interest, and directly benefits ratepayers by assisting the Company to
meet its short term cash needs.
D. That the sales of Receivables and Related Assets under the Company
Agreement and the WRC Agreement will be exempt from regulation by the
Department and that the Department disclaims jurisdiction over such
transactions, or, in the alternative, that these transactions are reasonably
necessary to enable WMECO to meet its short term cash needs through an accounts
receivable program which complies with the sales treatment requirements of FAS
125 and that WMECO may take or cause to be taken any such actions reasonably
necessary to consummate the foregoing.
E. That the Department will make such other orders with respect to the
proposed transactions as it shall deem proper, including, as indicated in
paragraph 15 above, an order to treat WRC and WMECO on a consolidated basis for
WMECO's ratemaking purposes.
Dated this 9th day of January 1997.
Respectfully submitted,
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By:/s/David R. McHale
David R. McHale
Assistant Treasurer - Finance
**FOOTNOTES**
{1} As an indication of the potential to accelerate its
receipt of funds under the proposed program, WMECO notes that its net accounts
receivable comprise approximately 3.6% of its balance sheet as of September 30,
1996.
{2} The only funds available to WRC are those resulting
from its participation in the program and WMECO's capital contributions to it.
WRC will have no source of funds or obligations outside of the receivables
purchase and sale program.
{3} In response to the Department's guidance in Boston
Edison, WMECO's total investment in subsidiaries is provided in Exhibit E.
<PAGE>
APPENDIX 1
LIST OF EXHIBITS
A. Draft of the Certificate of Incorporation of WRC. (To be filed by
amendment.)
B. Draft of the Bylaws of WRC. (To be filed by amendment.)
C. WMECO's authorizing resolution for the creation of WRC.
D. Schedule of Fees, Commissions and Expenses.
E. WMECO's Investment in Subsidiaries.
F. Western Massachusetts Electric Company. (To be filed by amendment.)
F.1 Balance Sheet, per books and pro forma.
F.2 Income Statement, per books and pro forma.
F.3 Statement of Retained Earnings, per books and pro forma, and
Statement of Capital Structure per books and pro forma.
F.4 Explanation of Pro Forma Adjustments.
G. Northeast Utilities and Subsidiaries. (To be filed by amendment.)
G.1 Consolidated Balance Sheet, per books and pro forma.
G.2 Consolidated Income Statement, per books and pro forma.
G.3 Consolidated Statement of Retained Earnings, per books and pro forma,
and Consolidated Statement of Capital Structure, per books and pro
forma.
G.4 Explanation of Pro Forma Adjustments.
<PAGE>
Exhibit D to Exhibit D.1
SCHEDULE OF FEES, COMMISSIONS AND EXPENSES
WMECO
Securities and Exchange Commission Filing Fee $2,000
Restructuring Fee 50,000
Legal Fees
Counsel to the Purchaser and Agent 65,000
Counsel to the Applicants 50,000
Rating Agency Fees 15,000
Northeast Utilities Service Company 53,000
(Financial, Accounting, Legal and Other Fees
and Services)
Total Estimate of Fees, Commissions and Expenses $235,000
NEWCO
Independent Director Fees $10,000
Total Estimate of Fees, Commissions and Expenses $10,000
<PAGE>
Exhibit E to Exhibit D.1
WMECO'S INVESTMENT IN SUBSIDIARIES
at September 30, 1996
Connecticut Yankee Atomic Power Company $ 9,964
Maine Yankee Atomic Power Company 2,201
Vermont Yankee Nuclear Power Corporation 1,362
Yankee Atomic Electric Company 1,788
$15,315
EXHIBIT I
PROPOSED FORM OF NOTICE
(Release No. 35-____; 70-8959)
APPLICATION/DECLARATION WITH RESPECT TO THE ORGANIZATION
OF A WHOLLY OWNED SUBSIDIARY RELATED TO AN ACCOUNTS RECEIVABLE
PURCHASE AND SALE PROGRAM AND
RELATED TRANSACTIONS
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_____________, 1997
Western Massachusetts Electric Company ("WMECO" or the "Company"), a
wholly-owned electric utility subsidiary of Northeast Utilities ("NU"), a
public utility holding company, has filed an Application/Declaration pursuant
to Sections 6(a), 7, 9(a), 10 and 12(c) and Rules 46 and 54 of the Public
Utility Holding Company Act of 1935, as amended (the "Act"). WMECO is located
at 174 Brush Hill Avenue, West Springfield, Massachusetts 01089.
Authorization is requested for (i) WMECO to form a wholly owned special
purpose corporation ("WRC") for the sole purpose of purchasing certain of
WMECO's eligible accounts receivable; (ii) WRC to issue shares of Common Stock;
(iii) WMECO to make, directly and indirectly, initial equity contributions to
WRC; (iv) WMECO to acquire shares of Common Stock of WRC; (v) WRC to pay
dividends to WMECO; and (vi) any other aspect of the proposed transactions for
which approval may be necessary.
In the Application/Declaration the Company indicates its belief that
certain aspects of the transactions described therein do not require Commission
approval: Sales of Receivables (defined below) to WRC are not sales of a
"security" as defined in Section 2(a)(16) of the Act or "utility assets" as
defined Section 2(a)(18). Furthermore, anticipated capital contributions to
WRC subsequent to its initial capitalization will be exempt from regulation
under Rule 45(b)(4), and WRC's sales of undivided interests in Receivables, to
the extent such may be considered the issuance of a debt security, are exempt
from regulation under Rule 52(b).
The Company has entered into a Receivables Purchase and Sale Agreement
(as amended, the "Existing Agreement") under which the Company may sell (from
time to time in its discretion and subject to the satisfaction of certain
conditions precedent) fractional, undivided ownership interests expressed as a
percentage ("Undivided Interests") in (i) billed and unbilled indebtedness of
customers ("Receivables") and (ii) certain related assets, including any
security or guaranty for any Receivables, all collections thereon, and related
records and software (the "Related Assets"). The Purchaser is a special
purpose Delaware corporation which acquires receivables and other assets and
issues commercial paper to finance these acquisitions. The Agent will act as
agent for the Purchaser for transactions under the Existing Agreement.
The Company contemplated that any sales under the Existing Agreement
would be accounted for as sales. In order for such sales made after January 1,
1997 to be so treated, they must comply with the requirements of the Statement
of Financial Accounting Standards No. 125 ("FAS 125") issued in June 1996. The
formation of WRC is intended to satisfy one of the requirements of FAS 125: the
requirement that the transferred assets be isolated from the Company and its
creditors, even in bankruptcy or receivership of the Company. The Existing
Agreement contemplates that a restructured purchase and sale program involving
WRC will be in place by March 31, 1997, at which date the Existing Agreement
will terminate.
The restructured accounts receivable sales program will consist of two
agreements which will replace the Existing Agreement. Under the first
agreement (the "Company Agreement"), the Company will sell Receivables and
Related Assets to WRC. Under the second agreement (the "WRC Agreement"), WRC
will sell Undivided Interests to the Purchaser from time to time. The
restructured purchase and sale arrangements are intended to accomplish the
ultimate sales to the Purchaser in a manner substantially similar to those
under the Existing Agreement.
The Agent will have the right to appoint a servicer on behalf of it and
WRC, to administer and collect Receivables and to notify the obligors of the
sale of their Receivables, at the Agent's option. WMECO will be appointed as
the initial servicer. Thus, WMECO's customers are not expected to experience
any change in current servicing and collection procedures.
Certain obligations under the Company Agreement create limited recourse
against the Company. In order to secure these obligations, the Company will
grant to WRC a lien on, and security interest in, any rights which the Company
may have in respect of Receivables and Related Assets. The WRC Agreement
creates comparable recourse obligations against WRC, and WRC will grant a
security interest to the Purchaser in all rights in the Receivables retained by
WRC, the Related Assets and certain other rights and remedies (including its
rights and remedies under the Company Agreement) to secure such recourse
obligations.
The Company and WRC will be obligated to reimburse the Purchaser and
the Agent for various costs and expenses associated with the Company Agreement
and the WRC Agreement. They will also be required to pay to the Agent certain
fees for services in connection with such agreements.
The arrangements under the Company Agreement and the WRC Agreement are
scheduled to terminate on September 4, 2001. WRC may, upon at least five
business days' notice to the Agent, terminate in whole or reduce in part the
unused portion of its purchase limit in accordance with the terms and
conditions of the WRC Agreement. The WRC Agreement allows the Purchaser to
assign all of its rights and obligations under the WRC Agreement (including its
Undivided Interests and the obligation to fund Undivided Interests) to other
persons, including the providers of its bank facilities.
As described in the Application/Declaration, WMECO intends that the
above-described transactions will permit it to accelerate its receipt of cash
collections from accounts receivable and thereby meet its short term cash
needs.
The Application/Declaration and any amendments thereto are available
for public inspection through the Commission's Office of Public Reference. Any
interested persons wishing to comment or request a hearing on the Application
should submit their views in writing by ________, 1997, to the Secretary,
Securities and Exchange Commission, Washington, D.C. 20549, and serve a copy on
the Company at the address specified above. Proof of service (by affidavit or,
in the case of an attorney at law, by certificate) should be filed with the
request. Any request for hearing shall identify specifically the issues of
fact or law that are disputed. A person who so requests will be notified of
any hearing, if ordered, and will receive a copy of any notice or order issued
in this matter. After said date, the Application/Declaration, as filed or as
it may be further amended, may be granted.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
__________________________
Secretary
<PAGE>
