UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Application of Northeast )
) CERTIFICATE PURSUANT TO
Utilities, Charter Oak Energy ) RULE 24 UNDER THE PUBLIC
) UTILITY HOLDING COMPANY ACT
Inc. and COE Development ) OF 1935
)
Corp. on Form U-1 )
)
(File No. 70-8507) )
Pursuant to the requirements of Rule 24 under the Public Utility Holding
Company Act of 1935, Charter Oak Energy, Inc. ("Charter Oak"), a wholly-owned
subsidiary of Northeast Utilities ("NU"), a registered holding company,
hereby files this quarterly report as required by the Securities and Exchange
Commission's supplemental order authorizing preliminary development
activities and financing related to such activities and to acquisitions of
interests in exempt wholesale generators ("EWGs") and foreign utility
companies ("FUCOs") by Charter Oak (HCAR. No. 26134, September 30, 1994, File
No. 70-8062, HCAR. No. 26213, December 30, 1994, File No. 70-8507, and HCAR.
No. 26354, August 7, 1995, File No. 70-8507, HCAR, No. 26623, December 12,
1996, File No. 70-8507).
(1) BALANCE SHEET AS OF DECEMBER 31, 1997:
Attached as Exhibit A.
(2) TWELVE MONTH INCOME STATEMENT ENDING DECEMBER 31, 1997:
Attached as Exhibit B.
(3) GENERAL DESCRIPTION OF THE ACTIVITIES OF CHARTER OAK FOR THE QUARTER
ENDED DECEMBER 31, 1997, AND OF THE PROJECTS IN WHICH CHARTER OAK OR ITS
SUBSIDIARIES HAVE AN INTEREST:
During the fourth quarter of 1997, pursuant to the permission granted by
the Commission in the September 30, 1994 (HCAR. No. 26134), December 30, 1994
(HCAR. No. 26213), August 7, 1995 (HCAR. No. 26354) and December 12, 1996
(HCAR. No. 26623) orders, Charter Oak, through its wholly-owned subsidiary
COE Development Corporation ("COE Development"), has participated in
preliminary development activities for EWGs and FUCOs. These activities have
been performed by COE Development both on its own and with unaffiliated third
parties.
On August 7, 1995 the Commission authorized NU to make investments in
Charter Oak, and Charter Oak to make investments in COE Development, in the
amount of up to $400 million, through December 31, 1996, for preliminary
development activities and for acquisitions of interests in EWGs and FUCOs.
This authorization includes preliminary development of domestic projects as
well as investments in EWGs and FUCOs. On December 12, 1996, this authority
was extended to December 31, 1997 with the authorized amount of investment
reduced to $200 million. The Commission extended the authority to December
31, 1998 on December 30, 1997.
On December 5, 1995, Charter Oak filed a Form U-57 notifying the
Commission of foreign utility company status for Ave Fenix Energia S.A. ("Ave
Fenix"), the 168 MW natural gas project in the Republic of Argentina.
Charter Oak through its wholly-owned subsidiary COE Ave Fenix Corporation,
will own approximately 83% of the issued and outstanding common stock of Ave
Fenix. On January 27, 1997, Ave Fenix closed on a $44 million term loan.
Charter Oak is in the process of selling its interest in this project.
On December 8, 1995, the 114 MW natural gas-fired project (Central
Termica San Miguel de Tucuman, S.A., "C.T.S.M.T.") located in the Republic of
Argentina commenced commercial operation. Charter Oak, through its wholly-
owned subsidiary COE Argentina II Corp. owns 33.33% of the issued and
outstanding common stock of C.T.S.M.T. In the fourth quarter of 1997,
Charter Oak sold its interest in the project and filed Form U-57/A notifying
the Commission that Foreign Utility Company status was no longer required
with respect to NU and its subsidiaries' interest in the project.
On June 24, 1996, the Plantas Eolicas S.A., the 20 MW wind project in
Costa Rica, synchronized with the grid. Charter Oak, through its
wholly-owned subsidiary COE Tejona Corporation, will own approximately 65% of
the issued and outstanding common stock of Plantas Eolicas. It is
anticipated that a Costa Rican company will hold the remaining 35% of the
common stock of Plantas Eolicas. Charter Oak is trying to sell its interest
in this project.
Charter Oak, through its wholly-owned subsidiary Charter Oak (Paris),
Inc., pursuant to the permission granted by the Commission (HCAR. No. 24893),
has an approximately 10% beneficial equity ownership interest in a 223 MW
gas-fired operational qualifying cogeneration facility in Paris, Texas. In
the fourth quarter of 1997, Charter Oak sold its interest in the project.
On September 24, 1993, NU was granted permission (HCAR. No. 70-8084) to
invest up to $7 million in Charter Oak for the purchase of an interest in two
non-utility subsidiaries to own an interest in a foreign utility company,
Encoe Partners. Encoe Partners is a general partnership formed for the sole
purpose of building, owning and operating a power generating facility in the
United Kingdom ("Power Plant") and acquiring a one-third interest in certain
rights and obligations under a power contract. The Power Plant is 2.176 MW
and will produce power by harnessing the pressure in the natural gas pipeline
feeding the 1,875 MW Teesside Project in Teesside, Wilton, Cleveland,
England. This transaction was completed by Charter Oak on the close of
business on September 30, 1993 by acquiring interests in two non-utility
subsidiary companies, COE (UK) Corp. and COE (GENCOE) Corp. In the fourth
quarter of 1997, Charter Oak sold its interest in the project and filed Form
U-57/A notifying the Commission that Foreign Utility Company status was no
longer required with respect to NU and its subsidiaries' interest in the
project.
At this time, none of the other projects Charter Oak is currently
pursuing are sufficiently defined to move beyond the preliminary development
stage and therefore are not contained in this report.
(4) THE AMOUNTS OF RECOURSE AND NON-RECOURSE DEBT SECURITIES ISSUED TO THIRD
PARTIES BY INTERMEDIATE COMPANIES:
N.A.
(5) REGULATORY STATUS OF FACILITIES ELIGIBLE FOR EXEMPTION AS A PUBLIC
UTILITY UNDER THE ACT.
N.A.
(6) INFORMATION ON INTERCOMPANY SERVICE TRANSACTIONS INVOLVING AFFILIATED
INTERMEDIATE COMPANIES, EWGs AND FUCOs FOR THE QUARTER ENDING DECEMBER
31, 1997.
Attached as Exhibit C.
The aggregate amount of all guarantees issued by or for Charter Oak or
any of its subsidiary companies for the quarter ending December 31, 1997 is
approximately $20 million.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Certificate to be
signed on its behalf by the undersigned thereunto duly authorized.
Charter Oak Energy, Inc.
/s/ Eugene G. Vertefeuille
Principal
Charter Oak Energy, Inc.
P.O. Box 270
Hartford, CT 06141-0270
February 28, 1998
EXHIBIT A
CHARTER OAK ENERGY, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
---------------------------------------
December 31,
---------------------------
1997 1996
------------ ------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at original cost:
Electric $ 52 $ 52
Less: Accumulated provision for
depreciation 52 49
------------ ------------
Total net utility plant - 3
------------ ------------
Current Assets:
Cash 1,637 2,843
Accounts receivable 14 84
Taxes receivable 4,364 1,522
Investments held for sale 33,391 57,188
------------ ------------
39,406 61,637
------------ ------------
Deferred Charges:
Accumulated deferred income taxes 1,028 130
Deferred development costs 4,335 9,348
Other 296 595
------------ ------------
5,659 10,073
------------ ------------
Total Assets $ 45,065 $ 71,713
============ ============
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock $ - $ -
Capital surplus, paid in 102,344 87,651
Retained earnings (58,129) (18,126)
------------ ------------
Total capitalization 44,215 69,525
------------ ------------
Minority interest in common equity
of subsidiaries - (28)
------------ ------------
Current Liabilities:
Accounts payable 205 459
Accounts payable to affiliated companies 400 235
Taxes accrued 25 1,229
Other 220 293
------------ ------------
850 2,216
------------ ------------
Total Capitalization and Liabilities $ 45,065 $ 71,713
============ ============
EXHIBIT B
CHARTER OAK ENERGY, INC. AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
---------------------------------------------
Twelve Months Ended
December 31,
---------------------------
1997 1996
------------ ------------
(Thousands of Dollars)
Operating Revenues $ - $ -
------------ ------------
Operating Expenses:
Operation and maintenance 8,199 4,511
Depreciation 896 435
Federal and state income taxes (3,678) (1,108)
Taxes other than income taxes 247 21
------------ ------------
Total operating expenses 5,664 3,859
------------ ------------
Operating Loss (5,664) (3,859)
------------ ------------
Other (Loss)/Income:
Investment (loss)income (4,642) 2,488
Other, net (1,328) (36)
Loss on sale of investments (3,344) -
Reserve for the loss on sale of COE Ave
Fenix Corp.'s investment in Ave Fenix
Energia, S.A. (25,000) -
------------ ------------
Total other (loss)/income (34,314) 2,452
------------ ------------
Loss before interest charges (39,978) (1,407)
------------ ------------
Interest Charges 25 15
------------ ------------
Net Loss $ (40,003) $ (1,422)
============ ============
<PAGE>
EXHIBIT C
Charter Oak Energy and Subsidiaries
Detail of Intercompany Services
Twelve Months Ended December 31, 1997
Charter Oak Energy
------------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- -----------------------------------------------------------------------------
NUSCO Charter Oak staff 3,617,240 146,590 3,763,830
Accounting and financial services 37,941 12,928 50,869
Legal services 6,394 38,112 44,506
Miscellaneous 29,658 5,961 35,619
------------------------------
Total NUSCO Services 3,691,233 203,591 3,894,824
------------------------------
NU PARENT Retainer Fee 0 200,000 200,000
------------------------------
Total NU PARENT Services 0 200,000 200,000
CL&P Miscellaneous 0 2,522 2,522
Reallocate Refund of CCBT Audit 0 (75,518) (75,518)
------------------------------
Total CL&P Services 0 (72,996) (72,996)
------------------------------
COE TEJONA Outside Services 0 428 428
------------------------------
Total COE Tejona Services 0 428 428
------------------------------
CHARTER OAK
DEVELOPMENT CORP
Legal services 0 634,288 634,288
CT Use Tax Recoupment 0 (107,816) (107,816)
Outside Services 0 1,164 1,164
Miscellaneous 0 42,437 42,437
------------------------------
Total COD Services 0 570,073 570,073
------------------------------
Total Services Provided 3,691,233 901,096 4,592,329
==============================
Charter Oak Paris, Inc.
-----------------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- ----------------------------------------------------------------------------
CL&P Miscellaneous 0 (7,628) (7,628)
------------------------------
Total CL&P Services 0 (7,628) (7,628)
------------------------------
Total Services Provided 0 (7,628) (7,628)
==============================
COE Development Corp.
---------------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- -----------------------------------------------------------------------------
NUSCO Charter Oak staff 634,478 378,697 1,013,175
Legal services 0 21,210 21,210
Miscellaneous 2,427 0 2,427
------------------------------
Total NUSCO Services 636,905 399,907 1,036,812
------------------------------
CL&P Employee Expenses 1,502 288 1,790
Reallocate CCB Tax Paid 1994,5,6 0 589,758 589,758
Outside Services 0 18 18
------------------------------
Total CL&P Services 1,502 590,064 591,566
------------------------------
PSNH Engineering Services 0 329 329
------------------------------
Total PSNH Services 0 329 329
CHARTER OAK
ENERGY Miscellaneous 0 650 650
CT Use Tax Adjustment 0 (5,310) (5,310)
Outside Services 0 11 11
Legal Services 0 1,747 1,747
------------------------------
Total COE Services 0 (2,902) (2,902)
------------------------------
COE TEJONA
CORP. Outside Services 0 13,000 13,000
------------------------------
Total COE Services 0 13,000 13,000
------------------------------
Total Services Provided 638,407 1,000,398 1,638,805
===============================
COE (UK) Corp.
--------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- ---------------------------------------------------------------------------
NUSCO Charter Oak staff 4,503 3,589 8,092
Accounting and Financial Services 103 0 103
------------------------------
Total NUSCO services 4,606 3,589 8,195
------------------------------
CHARTER OAK DEVELOPMENT
CORP. Miscellaneous 0 4,532 4,532
Outside Services 0 (23) (23)
------------------------------
Total COD services 0 4,509 4,509
------------------------------
Total Services Provided 4,606 8,098 12,704
==============================
COE Argentina I Corp.
----------------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- --------------------------------------------------------------------------
NUSCO Charter Oak Staff 0 75 75
Accounting Staff 71 0 71
-----------------------------
Total NUSCO services 71 75 146
CL&P Reallocate CCB Tax Paid 1996 0 242 242
------------------------------
Total CL&P Services 0 242 242
Total Services Provided 71 317 388
=============================
COE (GENCOE) Corp.
----------------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- ----------------------------------------------------------------------------
NUSCO Miscellaneous 141 0 141
-----------------------------
Total Services Provided 141 0 141
==============================
COE Argentina II Corp.
----------------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- --------------------------------------------------------------------------
NUSCO Miscellaneous 0 11,083 11,083
Charter Oak Staff 25,243 659 25,902
-----------------------------
Total NUSCO Services 25,243 11,742 36,985
CL&P Reallocate CCB Tax Paid 1996 0 (6,248) (6,248)
-----------------------------
Total CL&P Services 0 (6,248) (6,248)
COE Development
Outside Services 0 42,276 42,276
Legal Services 0 771 771
------------------------------
Total COE Development Services 0 43,047 43,047
CHARTER OAK
ENERGY Outside Services 0 1,032 1,032
------------------------------
Total COE Services 0 1,032 1,032
------------------------------
Total Services Provided 25,243 49,573 74,816
==============================
COE Tejona Corp.
----------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- ---------------------------------------------------------------------------
NUSCO Miscellaneous 4,345 0 4,345
Internal Audit 1,085 0 1,085
Accounting Services 106 0 106
Wholesale Marketing 3,461 0 3,461
Charter Oak Staff 142,010 53,167 195,177
Legal Services 0 2,170 2,170
------------------------------
Total NUSCO Services 151,007 55,337 206,344
CL&P Reallocate CCB Tax Paid 1996 0 302 302
Employee Expense 4,322 1,166 5,488
-------------------------------
Total CL&P Services 4,322 1,468 5,790
COE Development
Charter Oak Staff 0 81,473 81,473
Outside Services 0 294 294
CT Use Tax Recoupment 0 (88,256) (88,256)
Legal Services 0 3,107 3,107
------------------------------
Total COE Development Services 0 (3,382) (3,382)
CHARTER OAK
ENERGY Charter Oak Staff 0 1,925 1,925
Legal Services 0 115 115
Outside Services 0 543 543
------------------------------
Total COE Services 0 2,583 2,583
------------------------------
Total Services Provided 155,329 56,006 211,335
==============================
COE AVE FENIX Corp.
----------------
NON-
Service Provided By- Type of Services Provided- PAYROLL PAYROLL TOTAL
- ---------------------------------------------------------------------------
NUSCO Miscellaneous 36,300 6,077 42,377
Outside Services 0 63 63
------------------------------
Total NUSCO Services 36,300 6,140 42,440
CL&P Reallocate CCB Tax Paid 1996 0 242 242
-------------------------------
Total CL&P Services 0 242 242
COE Development
Charter Oak Staff 0 9,229 9,229
Outside Services 0 7,315 7,315
CT Use Tax Recoupment 0 (51,832) (51,832)
Miscellaneous 0 120 120
-------------------------------
Total COE Development Services 0 (35,168) (35,168)
Total Services Provided 36,300 (28,786) (7,514)
==============================