File No. 70-8507
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 8
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 Eight to their Application and Declaration
on Form U-1 (File No. 70-8507) under Sections 6(a), 7, 9(a), 10, 12(b), 12(c)
and 33 of the Public Utility Holding Company Act of 1935 (the "Act") and Rules
45, 46 and 53 thereunder, for the purpose of obtaining (i) an extension of
authority for NU, Charter Oak and COE Development to continue to engage in, and
finance, through December 31, 1998, if necessary, the power development
activities authorized in the Securities and Exchange Commission's (the
"Commission") order dated December 30, 1994 (HCAR No. 26213) (the "December 1994
Order"), as amended on August 7, 1995 (HCAR No. 26354) (the "August 1995
Order"), December 12, 1996 (HCAR No. 26623) (the "1996 Order) and March 25, 1997
(HCAR No. 26691) (the "1997 Order," together with the December 1994 Order, the
August 1995 Order and the 1996 Order, the "Prior Orders"), (ii) authorization
for Charter Oak and its subsidiaries to pay dividends directly or indirectly to
NU out of unearned capital or surplus in connection with the sale of the voting
stock of such entities to one or more unaffiliated parties, or in the case of a
subsidiary that is an Exempt Project or Intermediate Company (each as defined
below), to an affiliate, (iii) modification of existing authority for the
Applicants to continue to provide services to Exempt Projects and Intermediate
Companies after they have been sold to unaffiliated third parties and (iv)
authorization for NU to finance the acquisition of one or more of Charter Oak's
existing Exempt Projects or Intermediate Companies by another NU subsidiary.
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./1/, (ii) two non-utility
subsidiaries that own a 50% interest in a foreign utility company within the
meaning of Section 33 of the Act (a "FUCO") (Encoe Partners) located in the
United Kingdom;/2/ the remaining interests in Encoe Partners are held by
subsidiaries of Enron Europe Limited, (iii) an approximately 83% interest in a
FUCO located in Argentina (Ave Fenix Energia, S.A.), through its wholly-owned
subsidiary COE Ave Fenix Corporation, (iv) an approximately 100% direct and
indirect interest in a FUCO 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 FUCO located in Argentina (Central Termica San Miguel de
Tucuman, S.A.) through is wholly owned subsidiary COE Argentina II Corp.
- ----------
/1/ 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).
/2/ 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 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 FUCOs and exempt wholesale generations within the meaning
of Section 32 of the Act ("EWGs," and together with FUCOs, "Exempt Project")
(collectively, "Authorized Power Projects") that Charter Oak has undertaken
since that time has been through COE Development, including the investigation of
sites, preliminary engineering and licensing activities, acquiring options and
rights, contract drafting and negotiating and preparation of proposals.
Preliminary development activities relating to Authorized Power Projects have
been undertaken using NU system 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. 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. Other Investment Activities.
Pursuant to the terms of the Prior Orders, 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 1997 Order authorized Intermediate
Companies to pay dividends out of capital or unearned surplus to Charter Oak,
and for Charter Oak to pass these dividend payments on to NU.
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.
3. Services.
Pursuant to the terms of the Prior Orders, Charter Oak employees (also are
employees of Northeast Utilities Service Company) or other NU Service Company
employees (collectively, "Service Company Employees") may provide a limited
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. 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, 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 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 in any case in which one or more of the following
circumstances are present:
1. 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;
subject to the condition that the Applicants (i) acknowledge that such
authorization shall not be binding upon the FERC or any state public utility
commission having jurisdiction over the rates charged by any such associate, and
(ii) agree 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 agreed 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 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.
4. Financing Authorization.
Pursuant to the terms of the 1996 Order, NU and Charter Oak have been
authorized to invest up to an aggregate amount of $200 million for the period
from January 1, 1997 through December 31, 1997 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
and the financing is within Commission approved parameters./3/
- ----------
/3/ 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 or a term of 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./4/ 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, they must be within
Commission approved parameters./5/
- ----------
/4/ 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.
/5/ An Intermediate Company may not issue or sell an equity security having a
stated par value 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 must mature no later than 30 years from the date of
issuance thereof, and 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 funding authorization for Charter
Oak.
5. Potential Sale.
NU has announced its intention to sell its interest in Charter Oak and the
majority of its subsidiaries to an unaffiliated third party. Charter Oak may
sell the voting stock of some or all of its subsidiaries to third parties prior
to NU's sale of the voting securities of Charter Oak. NU may retain an indirect
interest in one or more of Charter Oak's Exempt Projects by transferring the
stock of that Exempt Project or its Intermediate Company parent to another NU
subsidiary.
B. Request for Extension of Authority.
NU and Charter Oak request that the Commission extend the authority for the
activities of Charter Oak. Accordingly, NU and Charter Oak seek authorization
for Charter Oak and its subsidiaries to continue financing their operations from
January 1, 1998 to December 31, 1998.
NU and Charter Oak are seeking this authority to preserve the value that is
inherent in the work that has already been undertaken by Charter Oak and its
subsidiaries in order to maximize value to the NU system in the event any or all
of these entities are sold, and to maintain shareholders' investment in the
event that any or all of these entities are retained. In order to preserve that
value, Charter Oak must have the ability to support its equity requirements in
its current projects, preserve its rights to make additional equity investments
in the projects it currently has under development when the opportunities arise
and to continue to participate in the funding of the preliminary development
budgets for the Authorized Power Projects in which it is now involved.
1. Financing by 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 $200 million through December 31, 1998. NU and
Charter Oak are seeking to maintain their investment and spending authorization
at that level based on Charter Oak's projection that its 1997-8 administrative,
pre-development, development and equity investment expenses will be
approximately $25 million. The remainder may be used for financial guarantees as
authorized. (A statement of estimated expenditures for 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/6/
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.
- ----------
/6/ 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 funding authorization for
Charter Oak.
At June 30, 1997, the NU system's consolidated total capitalization,
stockholders' equity and retained earnings were $6,186 million, $2,209 million
and $753 million, respectively. The funding authorization sought herein is for
$200 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 3.2, 9.1% and 26.6%, respectively. To date, NU has
invested approximately $115 million in Charter Oak and plans to invest an
additional approximately $5 million in Charter Oak through year end 1997. 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 through
December 31, 1998 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.7 The 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. It is proposed that the aggregate principal amount of debt securities issued
by Intermediate Companies to persons other than the Applicants will continue to
be limited to no more than $600 million at any one time outstanding. As
previously authorized 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.
- ----------
/7/ Although some securities issued by Intermediate Companies may qualify for
exemption from the prior approval requirements pursuant to Rule 52
promulgated under the Act, 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.
- ----------
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,/8/ 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.
- ----------
/8/ 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./9/ 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.
- ----------
/9/ 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.
3. Dividends from Capital or Unearned Surplus
In the 1997 Order, the Commission authorized Intermediate Companies to pay
dividends to their parent companies, and for Charter Oak to use such finds to
pay dividends to NU, in each case out of capital or unearned surplus, in a
manner consistent with applicable corporate law and the requirements of Rule 46.
At that time, the Applicants indicated that the need for such authorization
arose primarily from the need to transfer funds from the sale of interests in
Exempt Projects through the NU system. As the Commission noted, the Commission
has authorized a number of companies in registered holding company systems to
pay such dividends in connection with their ownership, and sale, of EWGs and
FUCOs,/10/ as well as liquidating dividends paid to registered holding companies
in other sale situations./11/ The potential sale of Charter Oak and its
subsidiaries presents similar issues as, in connection with the sale, NU wishes
to ensure that the NU system has access to the entire amount of money to which
it is entitled by paying dividends out of capital concurrent with its transfer
of its interest in Charter Oak and its subsidiaries and their assets. Because
Charter Oak and its subsidiaries are likely to have unrestricted cash available
for distribution in excess of current and retained earnings over period of this
authorization, the Applicants are requesting authorization for Charter Oak and
any of its subsidiaries to pay dividends to its parent company and, in turn, to
NU, in each case out of capital or unearned surplus. Any such dividends payments
will be made in accordance with applicable corporate law and the requirements of
Rule 46.
- --------
/10/ See, American Electric Power Company, Inc. v. HCAR No. 26760 (Sept. 18,
1997); Cinergy Corp., HCAR No. 26719 (May 22, 1997); GPU International,
HCAR No. 26678 (Feb. 28, 1997); The Southern Company, HCAR No. 26738 (July
2, 1997).
/11/ Northeast Utilities, HCAR No. 24908 (June 22, 1989) (authorizing special
dividend in connection with divestiture of gas system); In the Matter of
Empire Gas and Fuel Company, HCAR No. 14733 (Dec. 21, 1962) (authorizing
liquidating dividend incident to dissolution of nonutility subsidiary).
4. Authorization to Provide Services to Unaffiliated Entities
In order to ensure a smooth transition upon the sale of Charter Oak or any
of its subsidiaries, NU system personnel may need to continue to provide
services they are now providing or authorized to provide to Exempt Projects or
Intermediate Companies after the NU system interests in those entities have been
sold and they are no longer affiliated with the NU system. Thus, the Applicants
hereby request authorization for Service Company Employees to provide services
to unaffiliated EWGs, FUCOs and holding companies over EWGs and FUCOs that were
once part of the NU system, provided that the total number of Service Company
Employees engaged in rendering such services 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 services to be rendered
may include management, administrative, legal, tax, financing advice,
accounting, engineering, consulting, language skills and software, provided that
software will not involve proprietary software of NU service company.
5. NU Financing of Transfer Subsidiary
As noted above, as part of its strategy to maximize shareholder value, NU
may wish to retain am indirect interest in one or more of Charter Oak's Exempt
Project or Intermediate Company subsidiaries. The Applicants believe that the
acquisition of such interest by an existing NU subsidiary or the formation of a
new subsidiary to acquire such interest is exempt from the prior authorization
requirements of the Act under Sections 32 and 33 of the Act and the Commission's
staff interpretation thereof./12/ However, NU's ability to contribute capital to
such subsidiary for such acquisition does require Commission authorization and
the Applicants hereby request that NU be allowed to invest a maximum of $75
million to an existing or newly formed NU subsidiary for the sole purpose of
acquiring the securities of one or more Exempt Project or Intermediate Holding
Company that is currently a subsidiary of Charter Oak. Such investment may take
to 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 in the equity securities of
such subsidiary that have a stated par value will be in an amount equal or
greater to such value. To the extent NU forms a new subsidiary for this
transfer, NU requests authorization to retain such entity outside the Charter
Oak family. The NU subsidiary will not make any additional acquisitions, and NU
will not provide any additional funding, that require Commission authorization
without obtaining such authorization. Service Company Employees may continue to
provide services to such associated Exempt Projects and Intermediate Companies
at market rates under the same terms and conditions as set forth in the Prior
Orders.
- ----------
/12/ Entergy Corporation, SEC No-Action Letter (Oct. 24, 1995) (taking no action
position with respect to acquisition of interest in project parents for EWG
and FUCOs).
- ----------
A. Retained 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 $200 million, which is below fifty percent of the NU system's consolidated
retained earnings as of June 30, 1997. This level of investment meets the
criteria set forth in Sections 32 and 33 of the Act and Rule 53(a)(1). In
addition, although NU's average consolidated retained earnings ("CREs") for the
four most recent quarterly periods has decreased by 10 percent or more from the
average for the previous four quarterly periods (at 6/30/96, NU's CREs were $972
million, at 6/30/97, NU's CREs were $753 million), NU's aggregate investment in
EWGs/FUCOs at June 30, 1997 ($93 million) did not exceed two percent of NU's
consolidated capital invested in utility operations ($132 million).
B. 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.
C. Operating Loss Limitations of Rule 53(b)(3).
Although the companies in the United Kingdom, Costa Rica and one company in
Argentina in which Charter Oak invested had losses attributed to operations in
the fiscal year 1996, they did not exceed 5 percent of NU's consolidated
retained earnings. The Applicants presently do not have any other EWGs, FUCOs or
Intermediate Companies. Neither the second Argentine project nor the Paris,
Texas qualifying cogeneration facility, in which Charter Oak has interests,
reported losses attributable to operations during 1996. 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.
D. Compliance with Safe Harbor Provisions.
The Applicants will acquire an interest in, finance the acquisition and
hold the securities of an EWG, FUCO or an Intermediate Company as authorized by
an order pursuant to this request only if the following two conditions are met:
(i) the investment is within the $200 million authorization, and (ii) the
investment satisfies the criteria in Rule 53(a)(1)-(4) and (b)(1)-(3) or any
rules promulgated under Section 33 of the Act concerning the acquisition of
interests in FUCOs.
E. 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.
F. 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 containing information for the 12 months;
(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:
Legal fees and expenses ........................... $6,000
Miscellaneous related expenses
(such as telephone, courier and
travel) ........................... 2,000
Total ........................... $8,000
Item 3. APPLICABLE STATUTORY PROVISIONS
To the extent Rule 58 does not otherwise exempt proposed activities
referred to herein, Sections 6(a), 7, 9(a), 10, 12(b), 12(c) and 33 and Rules
45, 46 and 53 are applicable to the extension of authorized activities and
financing request as well as NU's financing of its transfer subsidiary and
Section 12(c) and Rule 46 are applicable to the request concerning the payment
of dividends.
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 October 24, 1997 the requisite notice under Rule 23 with respect to the
filing of this Application/ Declaration, such notice to specify a date not later
than November 19, 1997 by which comments may be entered and a date not later
than November 21, 1997 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)*
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. 1998-99 Estimated Expenditures
b) Financial Statements
1.1 Balance Sheet Per Book and Pro-Forma - NU (Parent), as of
June 30, 1997
1.2 Statement of Income and Capital Structure Per Book and Pro-Forma
- NU (Parent), as of June 30, 1997
2.1 Balance Sheet Per Book and Pro-Forma - Charter Oak Energy and
Subsidiaries (Consolidated), as of June 30, 1997
2.2 Statement of Income and Capital Structure Per Book and Pro-Forma
- Charter Oak Energy and Subsidiaries (Consolidated), as of
June 30, 1997
3.1 Balance Sheet Per Book and Pro-Forma - COE Development, as of
June 30, 1997
3.2 Statement of Income and Capital Structure Per Book and Pro-Forma
- COE Development, as of June 30, 1997
4.1 Balance Sheet Per Book and Pro-Forma - NU (Consolidated), as of
June 30, 1997
4.2 Statement of Income and Capital Structure Per Book and Pro-Forma
- NU (Consolidated), as of June 30, 1997
- ----------
* 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).
- ----------
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.L.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: October 15, 1997
Exhibit H-1
Estimate of Expenditures for Charter Oak Energy
and Subsidiaries for remainder of 1997 and 1998
in ($000)
Cash Needs
----------
Through June 1997 $115,000
Remainder of 1997 5,000
1998 20,000
--------
TOTAL $140,000
Amount Available for Guarantees = $60,000
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filing Under the Public Utility Holding Company Act of 1935
______________, 1997
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), 12(c), 32 and 33 of the Public Utility Holding Company Act
of 1935 (the "Act") and Rules 45, 46 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 No. 26213),
as amended on August 7, 1995 (HCAR No. 26345), December 12, 1996 (HCAR No.
26623), and March 25,1997 (HCAR No. 26691) (collectively, the "Prior Orders").
The Applicants are seeking to extend this authority through December 31, 1998
and to set the aggregate amount that NU is authorized to invest in Charter Oak,
Charter Oak is authorized to invest in COE Development and Charter Oak and COE
Development are authorized to spend on authorized power development activities
at $200 million as well as to modify the authority to allow Charter Oak and its
subsidiaries to pay dividends out of capital or unearned surplus in connection
with the sale or transfer of NU's interest in Charter Oak and its subsidiaries
and other related matters.
Pursuant to the Prior 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. Intermediate
Companies are also authorized to pay dividends to Charter Oak, and Charter Oak
is authorized to use such funds to pay dividends to NU, out of capital or
unearned surplus.
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 and Exempt Projects,
subject to certain limitations./1/ Moreover, such services may be provided at
fair market value in certain circumstances.
- ----------
/1/ 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, 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 current authorization permits NU to invest, and Charter Oak to spend,
up to an aggregate amount of $200 million through December 31, 1997 to finance
these activities, subject to certain restrictions. To date, NU has invested
approximately $115 million in Charter Oak and expects to invest an approximately
$5 million in addition through December 31, 1997.
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 $200 million through December 31, 1998. The
Applicants state that this authorization will enable them to preserve the value
inherent in the work that has been undertaken so they can maximize the value to
the NU system in the event some or all of Charter Oak and its subsidiaries are
sold to unaffiliated buyers, and maintain shareholder's investment with respect
to any entities that are retained by the NU system. 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 Prior Orders to
authorize, (i) Charter Oak and its subsidiaries to pay dividends to their parent
companies out of capital or unearned surplus, in compliance with Rule 46 and
relevant corporate law, to ensure that the NU system received the full amount of
funds available to it in connection with the sale or transfer of these entities,
(ii) Service Company Employees to continue to provide services to Exempt
Projects and Intermediate Companies after they have been sold to unaffiliated
buyers subject to the de minimis amount limitation currently in effect, and
(iii) NU to invest a maximum of $75 million to fund the acquisition by an NU
subsidiary of any Exempt Project or Intermediate Company currently owned by
Charter Oak. Service Company Employees may continue to provide services at
market rates to any Exempt Project or Intemediate Company retained by the system
subject to the terms and conditions set forth in the Prior Orders.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
NORTHEAST UTILITIES (PARENT)
BALANCE SHEET
AS OF JUNE 30, 1997
(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 $2,364,567 $2,364,567
INVESTMENTS IN TRANSMISSION
COMPANIES, AT EQUITY 21,114 21,114
OTHER, AT COST 409 409
---------- ---------- ----------
TOTAL OTHER PROPERTY & INVESTMENTS 2,386,090 0 2,386,090
CURRENT ASSETS:
CASH AND SPECIAL DEPOSITS 10 84,009 (a) 84,019
NOTES RECEIVABLE FROM AFFILIATED CO'S 29,400 29,400
NOTES AND ACCOUNTS RECEIVABLES 788 788
ACCOUNTS RECEIVABLE FROM AFFILIATED CO 8,277 8,277
PREPAYMENTS 587 587
---------- ---------- ----------
TOTAL CURRENT ASSETS 39,062 84,009 123,071
---------- ---------- ----------
DEFERRED CHARGES:
ACCUMULATED DEFERRED INCOME TAXES 4,808 4,808
UNAMORTIZED DEBT EXPENSE 288 288
OTHER 58 58
---------- ---------- ----------
TOTAL DEFERRED CHARGES 5,154 0 5,154
---------- ---------- ----------
TOTAL ASSETS $2,430,306 $84,009 $2,514,315
* EXPLANATION AT FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
NORTHEAST UTILITIES (PARENT)
BALANCE SHEET
AS OF JUNE 30, 1997
(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 $683,711 $683,711
CAPITAL SURPLUS, PAID IN 935,294 935,294
DEFERRED BENEFIT PLAN - ESOP (162,776) (162,776)
RETAINED EARNINGS 753,452 (4,641) 748,811
---------- ---------- ----------
TOTAL COMMON STOCKHOLDER'S EQUITY 2,209,681 (4,641) 2,205,040
LONG-TERM DEBT, NET 188,000 188,000
---------- ---------- ----------
TOTAL CAPITALIZATION 2,397,681 (4,641) 2,393,040
CURRENT LIABILITIES:
NOTES PAYABLE TO BANK 0 84,009 (a) 84,009
ACCOUNTS PAYABLE 2,276 2,276
ACCOUNTS PAYABLE TO AFFILIATED COMPANIES 0 0
CURRENT PORTION OF LONG-TERM DEBT 16,000 16,000
ACCRUED TAXES 11,275 (2,499)(c) 8,776
ACCRUED INTEREST 2,419 7,141 (b) 9,560
OTHER 172 172
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 32,142 88,650 120,792
DEFERRED CREDITS:
OTHER 483 483
---------- ---------- ----------
TOTAL DEFERRED CREDITS 483 0 483
---------- ---------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES $2,430,306 $84,009 $2,514,315
* EXPLANATION AT FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
NORTHEAST UTILITIES (PARENT)
INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1997
(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 9,125 9,125
FEDERAL AND STATE INCOME TAXES (11,383) (2,499)(c) (13,882)
TAXES OTHER THAN INCOME TAXES 71 71
---------- ---------- ----------
TOTAL OPERATING EXPENSES (2,187) (2,499) (4,686)
---------- ---------- ----------
OPERATING INCOME 2,187 2,499 4,686
---------- ---------- ----------
OTHER INCOME:
EQUITY IN EARNINGS OF SUBSIDIARIES (108,477) (108,477)
EQUITY IN EARNINGS OF TRANSMISSION
COMPANIES 3,120 3,120
OTHER, NET 1,523 1,523
---------- ---------- ----------
OTHER INCOME, NET (103,834) 0 (103,834)
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES (101,647) 2,499 (99,148)
---------- ---------- ----------
INTEREST CHARGES:
INTEREST ON LONG-TERM DEBT 18,173 18,173
OTHER INTEREST 2,451 7,141 (b) 9,592
---------- ---------- ----------
TOTAL INTEREST CHARGES 20,624 7,141 27,765
---------- ---------- ----------
NET INCOME (122,271) (4,641) (126,912)
---------- ---------- ----------
EARNINGS FOR COMMON SHARES (122,271) (4,641) (126,912)
EARNINGS PER COMMON SHARE -0.95 -0.99
COMMON SHARES OUTSTANDING (AVERAGE) 128,665,498 128,665,498
* EXPLANATION AT FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
<TABLE>
NORTHEAST UTILITIES (PARENT)
CAPITAL STRUCTURE AS OF JUNE 30, 1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.2 PAGE 2 OF 3
<CAPTION>
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
<S> <C> <C> <C> <C> <C>
DEBT:
LONG-TERM DEBT, NET $204,000 $204,000
---------- -------- ----------
TOTAL DEBT 8.5% 204,000 0 204,000 8.5%
COMMON EQUITY:
COMMON SHARES 683,711 683,711
CAPITAL SURPLUS, PAID IN 935,294 935,294
DEFERRED BENEFIT PLAN - ESOP (162,776) (162,776)
RETAINED EARNINGS 753,452 (4,641) 748,811
---------- -------- ----------
TOTAL COMMON STOCKHOLDER'S EQUITY 91.5% 2,209,681 (4,641) 2,205,040 91.5%
---------- -------- ----------
TOTAL CAPITAL 100.0% $2,413,681 (4,641) $2,409,040 100.0%
</TABLE>
NORTHEAST UTILITIES (PARENT)
EXPLANATION OF ADJUSTMENTS
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 1.2 PAGE 3 OF 3
DEBIT CREDIT
(a) CASH $84,009
NOTES PAYABLE $84,009
To record the additional proposed borrowing up to the full $84 million
requested. This is illustative only since short term debt authoritation would
not allow borowing of this amount.
(b) OTHER INTEREST EXPENSE 7,141
ACCRUED INTEREST 7,141
To record the interest expense on the additional proposed borrowing at Prime:
$84,009 x 8.50% = 7,141
(c) ACCRUED TAXES 2,499
FEDERAL AND STATE INCOME TAX EXPENSE 2,499
To record the reduction in Federal and State income taxes due to the higher
interest and fee expenses:
$7,141 x 35.00% = 2,499
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
BALANCE SHEET
AS OF JUNE 30, 1997
(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 51 51
---------- ---------- ----------
1 0 1
CONSTRUCTION WORK IN PROGRESS 0 0
---------- ---------- ----------
TOTAL NET UTILITY PLANT 1 0 1
OTHER INVESTMENTS, AT COST 87,431 87,431
CURRENT ASSETS:
CASH 480 84,009 (a) 84,489
TAX RECEIVABLES 2,228 2,228
ACCOUNTS RECEIVABLE 84 84
MATERIALS & SUPPLIES, AT AVERAGE COST 0 0
PREPAYMENTS AND OTHER 0 0
---------- ---------- ----------
TOTAL CURRENT ASSETS 2,792 84,009 86,801
---------- ---------- ----------
DEFERRED CHARGES 7,906 7,906
---------- ---------- ----------
TOTAL ASSETS $98,130 $84,009 182,139
* EXPLANATION AT FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
BALANCE SHEET
AS OF JUNE 30, 1997
(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 115,991 84,009 (a) 200,000
RETAINED EARNINGS (20,221) (20,221)
---------- ---------- ----------
TOTAL COMMON STOCKHOLDER'S EQUITY 95,770 84,009 179,779
DEBT, NET 0 0
---------- ---------- ----------
TOTAL CAPITALIZATION 95,770 84,009 179,779
MINORITY INTEREST IN COMMON EQUITY
OF SUBSIDIARIES (83) (83)
CURRENT LIABILITIES:
NOTES PAYABLE TO AFFILIATED COMPANY 0 0 0
ACCOUNTS PAYABLE 1,304 1,304
ACCOUNTS PAYABLE TO AFFILIATES 251 251
ACCRUED TAXES 574 574
ACCRUED INTEREST 0 0
OTHER 314 314
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 2,443 0 2,443
---------- ---------- ----------
ACCUMULATED DEFERRED INCOME TAXES 0 0
---------- ---------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES $98,130 $84,009 182,139
* EXPLANATION AT FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1997
(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 5,975 5,975
DEPRECIATION 450 450
FEDERAL AND STATE INCOME TAXES (1,759) (1,759)
TAXES OTHER THAN INCOME TAXES 40 40
---------- ---------- ----------
TOTAL OPERATING EXPENSES 4,706 0 4,706
---------- ---------- ----------
OPERATING INCOME: (4,706) 0 (4,706)
---------- ---------- ----------
OTHER INCOME:
INVESTMENT INCOME 2,060 2,060
OTHER INCOME, NET (89) (89)
INCOME TAXES - CREDIT 0 0
---------- ---------- ----------
OTHER INCOME, NET 1,971 0 1,971
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES (2,735) 0 (2,735)
---------- ---------- ----------
INTEREST CHARGES:
OTHER INTEREST, NET 21 21
---------- ---------- ----------
TOTAL INTEREST CHARGES 21 0 21
---------- ---------- ----------
MINORITY INTEREST IN EARNINGS
IN SUBSIDIARIES 0 0
NET INCOME (2,756) 0 (2,756)
* EXPLANATION AT FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
<TABLE>
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
CAPITAL STRUCTURE ON JUNE 30, 1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.2 PAGE 2 OF 3
<CAPTION>
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
<S> <C> <C> <C> <C> <C>
LONG-TERM DEBT 0.0% $0 $0 0.0%
COMMON SHARES 0 0
CAPITAL SURPLUS, PAID IN 115,991 84,009 200,000
RETAINED EARNINGS (20,221) 0 (20,221)
---------- -------- ----------
TOTAL COMMON STOCKHOLDER EQUITY 100.0% 95,770 84,009 179,779 100.0%
---------- -------- ----------
TOTAL CAPITAL 100.0% 95,770 84,009 179,779 100.0%
</TABLE>
CHARTER OAK ENERGY, INC AND SUBSIDIARIES
EXPLANATION OF ADJUSTMENTS
AS OF JUNE 30, 1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 2.2 PAGE 3 OF 3
DEBITS CREDITS
(a) CASH $84,009
CAPITAL SURPLUS, PAID IN $84,009
To reflect a $84 million investment by NU (parent) in Charter Oak Energy in the
remainder of 1997 and 1998.
COE DEVELOPMENT CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1997
(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 10 10
---------- ---------- ----------
1 0 1
CONSTRUCTION WORK IN PROGRESS 0 0
---------- ---------- ----------
TOTAL NET UTILITY PLANT 1 0 1
OTHER INVESTMENTS, AT COST 0 0
CURRENT ASSETS:
CASH 0 84,009 (a) 84,009
TAX RECEIVABLES 1,933 1,933
RECEIVABLES FROM AFFILIATES 1,233 1,233
MATERIALS & SUPPLIES, AT AVERAGE COST 0 0
PREPAYMENTS AND OTHER 0 0
---------- ---------- ----------
TOTAL CURRENT ASSETS 3,166 84,009 87,175
---------- ---------- ----------
DEFERRED CHARGES 779 779
---------- ---------- ----------
TOTAL ASSETS $3,946 $84,009 87,955
* EXPLANATION AT FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
COE DEVELOPMENT CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1997
(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 17,763 84,009 (a) 101,772
RETAINED EARNINGS (14,197) (14,197)
---------- ---------- ----------
TOTAL COMMON STOCKHOLDER'S EQUITY 3,566 84,009 87,575
DEBT, NET 0 0
---------- ---------- ----------
TOTAL CAPITALIZATION 3,566 84,009 87,575
MINORITY INTEREST IN COMMON EQUITY
OF SUBSIDIARIES 0 0
CURRENT LIABILITIES:
NOTES PAYABLE TO AFFILIATED COMPANY 0 0 0
ACCOUNTS PAYABLE 2 2
ACCOUNTS PAYABLE TO AFFILIATES 95 95
ACCRUED TAXES 0 0
ACCRUED INTEREST 0 0
OTHER 270 270
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 367 0 367
---------- ---------- ----------
OTHER DEFERRED CREDITS 13 13
---------- ---------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES $3,946 $84,009 87,955
* EXPLANATION AT FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
COE DEVELOPMENT CORPORATION
INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1997
(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 3,272 3,272
DEPRECIATION 2 2
FEDERAL AND STATE INCOME TAXES (1,265) (1,265)
TAXES OTHER THAN INCOME TAXES 0 0
---------- ---------- ----------
TOTAL OPERATING EXPENSES 2,009 0 2,009
---------- ---------- ----------
OPERATING INCOME: (2,009) 0 (2,009)
---------- ---------- ----------
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 (2,009) 0 (2,009)
---------- ---------- ----------
INTEREST CHARGES:
OTHER INTEREST, NET 0 0
---------- ---------- ----------
TOTAL INTEREST CHARGES 0 0 0
---------- ---------- ----------
MINORITY INTEREST IN EARNINGS
IN SUBSIDIARIES 0 0
NET INCOME (2,009) 0 (2,009)
* EXPLANATION AT FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
<TABLE>
COE DEVELOPMENT CORPORATION
CAPITAL STRUCTURE ON JUNE 30, 1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.2 PAGE 2 OF 3
<CAPTION>
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
<S> <C> <C> <C> <C> <C>
LONG-TERM DEBT 0.0% $0 $0 0.0%
COMMON SHARES 0 0
CAPITAL SURPLUS, PAID IN 17,763 84,009 101,772
RETAINED EARNINGS (14,197) 0 (14,197)
---------- -------- ----------
TOTAL COMMON STOCKHOLDER EQUITY 100.0% 3,566 84,009 87,575 100.0%
---------- -------- ----------
TOTAL CAPITAL 100.0% 3,566 84,009 87,575 100.0%
</TABLE>
COE DEVELOPMENT CORPORATION
EXPLANATION OF ADJUSTMENTS
AS OF JUNE 30, 1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 3.2 PAGE 3 OF 3
DEBITS CREDITS
(a) CASH $84,009
CAPITAL SURPLUS, PAID IN $84,009
To reflect a $84 million investment by Charter Oak Energy in COE Development
Corporation in the remainder of 1997 and 1998.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(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 $9,958,359 $9,958,359
LESS: ACCUMULATED PROVISION FOR
DEPRECIATION 4,146,199 4,146,199
---------- ---------- ----------
5,812,160 0 5,812,160
UNAMORTIZED PSNH ACQUISITION COST 446,997 446,997
CONSTRUCTION WORK IN PROGRESS 151,724 151,724
NUCLEAR FUEL, NET 199,343 199,343
---------- ---------- ----------
TOTAL NET UTILITY PLANT 6,610,224 0 6,610,224
---------- ---------- ----------
OTHER PROPERTY AND INVESTMENTS:
NUCLEAR DECOMMISSIONING TRUST,
AT MARKET 440,140 440,140
INVESTMENTS IN REGIONAL NUCLEAR
GENERATING COMPANIES, AT EQUITY 89,105 89,105
INVESTMENTS IN TRANSMISSION COMPANIES,
AT EQUITY 21,114 21,114
INVESTMENTS IN CHARTER OAK ENERGY PROJECT 87,431 87,431
OTHER, AT COST 68,621 68,621
---------- ---------- ----------
706,411 0 706,411
---------- ---------- ----------
CURRENT ASSETS:
CASH AND SPECIAL DEPOSITS 138,585 84,009 (a) 222,594
RECEIVABLES, NET 361,728 361,728
RECEIVABLES FROM AFFILIATED COMPANIES 0 0
ACCRUED UTILITY REVENUES 117,587 117,587
FUEL, MATERIAL AND SUPPLIES, AT
AVERAGE COST 223,396 223,396
RECOVERABLE ENERGY COSTS,
NET-CURRENT POSITION 50,306 50,306
PREPAYMENTS AND OTHER 66,334 66,334
---------- ---------- ----------
TOTAL CURRENT ASSETS 957,936 84,009 1,041,945
---------- ---------- ----------
DEFERRED CHARGES:
REGULATORY ASSET-INCOME TAXES, NET 969,040 969,040
UNAMORTIZED DEBT EXPENSE 39,931 39,931
RECOVERABLE ENERGY COSTS, NET 312,754 312,754
DEFERRED CONSERVATION AND LOAD-
MANAGEMENT COSTS 52,800 52,800
DEFERRED COSTS - NUCLEAR PLANTS 195,266 195,266
COGENERATION COSTS 49,817 49,817
REGULATORY ASSETS-OTHER 100,421 100,421
UNRECOVERED CONTRACT OBLIGATION 383,414 383,414
OTHER 76,307 76,307
---------- ---------- ----------
TOTAL DEFERRED CHARGES 2,179,750 0 2,179,750
---------- ---------- ----------
TOTAL ASSETS $10,454,321 $84,009 $10,538,330
* EXPLANATION AT FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.1 PAGE 2 OF 2
PRO FORMA
GIVING EFFECT
PRO FORMA TO PROPOSED
PER BOOK ADJUSTMENTS* TRANSACTION
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON SHARES $683,711 $683,711
CAPITAL SURPLUS, PAID IN 935,294 935,294
DEFERRED BENEFIT PLAN-EMPLOYEE STOCK
OWNERSHIP PLAN (162,776) (162,776)
RETAINED EARNINGS 753,452 (4,642) 748,810
---------- ---------- ----------
TOTAL COMMON STOCKHOLDER'S EQUITY 2,209,681 (4,642) 2,205,039
PREFERRED STOCK NOT SUBJECT TO
MANDATORY REDEMPTION 136,200 136,200
PREFERRED STOCK SUBJECT TO MANDATORY
REDEMPTION 249,500 249,500
LONG-TERM DEBT, NET 3,591,516 3,591,516
---------- ---------- ----------
TOTAL CAPITALIZATION 6,186,897 (4,642) 6,182,255
MINORITY INTEREST IN CONSOLIDATED
SUBSIDARY 99,917 99,917
OBLIGATIONS UNDER CAPITAL LEASES 188,666 188,666
CURRENT LIABILITIES:
NOTES PAYABLE TO BANKS 145,000 84,009 (a) 229,009
COMMERCIAL PAPER 0 0
LONG-TERM DEBT AND PREFERRED STOCK -
CURRENT PORTION 301,583 301,583
OBLIGATIONS UNDER CAPITAL LEASES -
CURRENT PORTION 19,893 19,893
ACCOUNTS PAYABLE 359,423 359,423
ACCOUNTS PAYABLE TO AFFILIATED
COMPANIES 0 0
ACCRUED TAXES 31,899 (2,499)(c) 29,400
ACCRUED INTEREST 49,229 7,141 (b) 56,370
ACCRUED PENSION BENEFITS 91,253 91,253
NUCLEAR COMPLIANCE 64,560 64,560
OTHER 92,328 92,328
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,155,168 88,651 1,243,819
DEFERRED CREDITS:
ACCUMULATED DEFERRED INCOME TAXES 1,997,304 1,997,304
ACCUMULATED DEFERRED INVESTMENT
TAX CREDITS 163,640 163,640
DEFERRED CONTRACT OBLIGATION-YAEC 390,912 390,912
OTHER 271,817 271,817
---------- ---------- ----------
TOTAL DEFERRED CREDITS 2,823,673 0 2,823,673
---------- ---------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES $10,454,321 $84,009 $10,538,330
* EXPLANATION AT FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
FOR 12 MONTHS ENDED JUNE 30, 1997
(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 $3,770,733 $0 $3,770,733
---------- ---------- ----------
OPERATING EXPENSES:
OPERATION -
FUEL PURCHASED AND INTERCHANGE
POWER 1,245,589 1,245,589
OTHER 1,150,306 1,150,306
MAINTENANCE 480,234 480,234
DEPRECIATION 355,697 355,697
AMORTIZATION/DEFERRALS OF REGULATORY
ASSETS, NET 145,728 145,728
FEDERAL AND STATE INCOME TAXES (8,093) (2,499)(c) (10,592)
TAXES OTHER THAN INCOME TAXES 252,488 252,488
---------- ---------- ----------
TOTAL OPERATING EXPENSES 3,621,949 (2,499) 3,619,450
---------- ---------- ----------
OPERATING INCOME: 148,784 2,499 151,283
---------- ---------- ----------
OTHER INCOME:
DEFERRED NUCLEAR PLANTS RETURN-OTHER
FUNDS 7,177 7,177
EQUITY IN EARNINGS OF REGIONAL NUCLEAR
GENERATING COMPANIES 12,021 12,021
MINORITY INTEREST IN INCOME OF SUB. (9,300) (9,300)
OTHER, NET 21,949 21,949
INCOME TAXES 1,252 1,252
---------- ---------- ----------
OTHER INCOME, NET 33,099 0 33,099
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 181,883 2,499 184,382
---------- ---------- ----------
INTEREST CHARGES:
INTEREST ON LONG-TERM DEBT 280,815 280,815
OTHER INTEREST 3,431 7,141 (b) 10,572
DEFERRED NUCLEAR PLANTS RETURN -
BORROWED FUNDS, NET OF INCOME TAX (13,013) (13,013)
---------- ---------- ----------
TOTAL INTEREST CHARGES 271,233 7,141 278,374
---------- ---------- ----------
INCOME BEFORE PREFERRED DIVIDENDS (89,350) (4,642) (93,992)
PREFERRED DIVIDENDS OF SUBSIDIARIES 32,921 32,921
---------- ---------- ----------
NET INCOME (122,271) (4,642) (126,913)
EARNINGS FOR COMMON SHARE (122,271) (4,642) (126,913)
EARNINGS PER COMMON SHARE (0.95) (0.99)
COMMON SHARES OUTSTANDING (AVERAGE) 128,665,498 128,665,498
* EXPLANATION AT FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
<TABLE>
NORTHEAST UTILITIES AND SUBSIDIARIES
CAPITAL STRUCTURE AS OF JUNE 30,1997
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.2 PAGE 2 OF 3
<CAPTION>
PER BOOK
ADJUSTED TO
PRO FORMA REFLECT
% PER BOOK ADJUSTMENT PRO FORMA %
<S> <C> <C> <C> <C> <C>
DEBT:
LONG-TERM DEBT, NET 60.0% $3,891,599 0 $3,891,599 60.0%
PREFERRED STOCK:
NOT SUBJECT TO REDEMPTION 137,700 137,700
SUBJECT TO REDEMPTION 249,500 249,500
---------- -------- ----------
TOTAL PREFERRED STOCK 6.0% 387,200 0 387,200 6.0%
COMMON EQUITY:
COMMON SHARES 683,711 683,711
CAPITAL SURPLUS, PAID IN 935,294 935,294
DEFERRED BENEFIT PLAN-EMPLOYEE STOCK
OWNERSHIP PLAN (162,776) (162,776)
RETAINED EARNINGS 753,452 (4,642) 748,810
---------- -------- ----------
TOTAL COMMON STOCKHOLDER'S EQUITY 34.1% 2,209,681 (4,642) 2,205,039 34.0%
---------- -------- ----------
TOTAL CAPITAL 100.0% $6,488,480 (4,642) $6,483,838 100.0%
</TABLE>
NORTHEAST UTILITIES AND SUBSIDIARIES
EXPLANATION OF ADJUSTMENTS
(THOUSANDS OF DOLLARS)
FINANCIAL STATEMENT 4.2 PAGE 3 OF 3
DEBIT CREDIT
(a) CASH $84,009
NOTES PAYABLE $84,009
To record the additional proposed borrowing up to the full $84 million requested
(b) OTHER INTEREST EXPENSE 7,141
ACCRUED INTEREST 7,141
To record the interest expense on the additional proposed borrowing at Prime:
$84,009 x 8.50% = 7,141
(c) ACCRUED TAXES 2,499
FEDERAL AND STATE INCOME TAX EXPENSE 2,499
To record the reduction in Federal and State income taxes due to the higher
interest and fee expenses:
$7,141 x 35.00% = 2,499
NOTE: The prime rate and tax rate reflected above represent the current rates in
effect as of the filing date.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000072741
<NAME> NORTHEAST UTILITIES (PARENT)
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 2,386,090 2,386,090
<TOTAL-CURRENT-ASSETS> 39,062 123,071
<TOTAL-DEFERRED-CHARGES> 5,154 5,154
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 2,430,306 2,514,315
<COMMON> 683,711 683,711
<CAPITAL-SURPLUS-PAID-IN> 935,294 935,294
<RETAINED-EARNINGS> 753,452 748,811
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,209,681 2,205,040
0 0
0 0
<LONG-TERM-DEBT-NET> 188,000 188,000
<SHORT-TERM-NOTES> 0 84,009
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 16,000 16,000
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 16,625 21,266
<TOT-CAPITALIZATION-AND-LIAB> 2,430,306 2,514,315
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (11,383) (13,882)
<OTHER-OPERATING-EXPENSES> 9,196 9,196
<TOTAL-OPERATING-EXPENSES> (2,187) (4,686)
<OPERATING-INCOME-LOSS> 2,187 4,686
<OTHER-INCOME-NET> (103,834) (103,834)
<INCOME-BEFORE-INTEREST-EXPEN> (101,647) (99,148)
<TOTAL-INTEREST-EXPENSE> 20,624 27,765
<NET-INCOME> (122,271) (126,912)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (122,271) (126,912)
<COMMON-STOCK-DIVIDENDS> 220,062 220,062
<TOTAL-INTEREST-ON-BONDS> 18,173 18,173
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> (0.95) (0.99)
<EPS-DILUTED> (0.95) (0.99)
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000888707
<NAME> CHARTER OAK ENERGY, INC
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1 1
<OTHER-PROPERTY-AND-INVEST> 87,431 87,431
<TOTAL-CURRENT-ASSETS> 2,792 86,801
<TOTAL-DEFERRED-CHARGES> 7,906 7,906
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 98,130 182,139
<COMMON> 0 0
<CAPITAL-SURPLUS-PAID-IN> 115,991 200,000
<RETAINED-EARNINGS> (20,221) (20,221)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 95,770 179,779
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,360 2,360
<TOT-CAPITALIZATION-AND-LIAB> 98,130 182,139
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (1,759) (1,759)
<OTHER-OPERATING-EXPENSES> 6,465 6,465
<TOTAL-OPERATING-EXPENSES> 4,706 4,706
<OPERATING-INCOME-LOSS> (4,706) (4,706)
<OTHER-INCOME-NET> 1,971 1,971
<INCOME-BEFORE-INTEREST-EXPEN> (2,735) (2,735)
<TOTAL-INTEREST-EXPENSE> 21 21
<NET-INCOME> (2,735) (2,735)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (2,735) (2,375)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000906614
<NAME> COE DEVELOPMENT CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1 1
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 3,166 87,175
<TOTAL-DEFERRED-CHARGES> 779 779
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 3,946 87,955
<COMMON> 0 0
<CAPITAL-SURPLUS-PAID-IN> 17,763 101,772
<RETAINED-EARNINGS> (14,197) (14,197)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,566 87,575
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 380 380
<TOT-CAPITALIZATION-AND-LIAB> 3,946 87,955
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (1,265) (1,265)
<OTHER-OPERATING-EXPENSES> 3,274 3,274
<TOTAL-OPERATING-EXPENSES> 2,009 2,009
<OPERATING-INCOME-LOSS> (2,009) (2,009)
<OTHER-INCOME-NET> 0 0
<INCOME-BEFORE-INTEREST-EXPEN> (2,009) (2,009)
<TOTAL-INTEREST-EXPENSE> 0 0
<NET-INCOME> (2,009) (2,009)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (2,009) (2,009)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000072741
<NAME> NORTHEAST UTILITIES AND SUBSIDIARIES
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,610,224 6,610,224
<OTHER-PROPERTY-AND-INVEST> 706,411 706,411
<TOTAL-CURRENT-ASSETS> 957,936 1,041,945
<TOTAL-DEFERRED-CHARGES> 2,179,750 2,179,750
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 10,454,321 10,538,330
<COMMON> 683,711 683,711
<CAPITAL-SURPLUS-PAID-IN> 935,294 935,294
<RETAINED-EARNINGS> (162,776) (162,776)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,209,681 2,205,039
136,200 136,200
249,500 249,500
<LONG-TERM-DEBT-NET> 3,591,516 3,591,516
<SHORT-TERM-NOTES> 145,000 229,009
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 275,083 275,083
26,500 26,500
<CAPITAL-LEASE-OBLIGATIONS> 188,666 188,666
<LEASES-CURRENT> 19,893 19,893
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,775,058 3,779,700
<TOT-CAPITALIZATION-AND-LIAB> 10,454,321 10,538,330
<GROSS-OPERATING-REVENUE> 3,770,733 3,770,733
<INCOME-TAX-EXPENSE> (8,093) (10,592)
<OTHER-OPERATING-EXPENSES> 3,630,042 3,630,042
<TOTAL-OPERATING-EXPENSES> 3,621,949 3,619,450
<OPERATING-INCOME-LOSS> 148,784 151,283
<OTHER-INCOME-NET> 33,099 33,099
<INCOME-BEFORE-INTEREST-EXPEN> 181,883 184,382
<TOTAL-INTEREST-EXPENSE> 271,233 278,374
<NET-INCOME> (89,350) (93,992)
32,921 32,921
<EARNINGS-AVAILABLE-FOR-COMM> (122,271) (126,913)
<COMMON-STOCK-DIVIDENDS> 223,603 223,603
<TOTAL-INTEREST-ON-BONDS> 280,815 280,815
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> (0.95) (0.99)
<EPS-DILUTED> (0.95) (0.99)
</TABLE>
