<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1998
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number 0-1160
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THE PROVIDENCE GAS COMPANY
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Rhode Island 05-0203650
- ------------------------------------------------ -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
100 Weybosset Street, Providence, Rhode Island 02903
- ------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
401-272-5040
- ------------------------------------------------------------------------
Registrant's telephone number, including area code
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [_].
Common Stock, $1.00 par value; 1,243,598 shares outstanding at May 13, 1998.
- ----------------------------------------------------------------------------
<PAGE>
THE PROVIDENCE GAS COMPANY
FORM 10-Q
MARCH 31, 1998
PART I: FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Statements of Income for the
three, six and twelve months ended
March 31, 1998 and 1997 I-1
Consolidated Balance Sheets as of
March 31, 1998, March 31, 1997 and
September 30, 1997 I-2
Consolidated Statements of Cash Flows for the
six months ended March 31, 1998 and 1997 I-3
Consolidated Statements of Capitalization as of
March 31, 1998, March 31, 1997 and
September 30, 1997 I-4
Notes to Consolidated Financial Statements I-5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations I-9
PART II: OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security
Holders II-1
Item 6 Exhibits and Reports on Form 8-K II-1
Signature II-2
<PAGE>
PART I. FINANCIAL INFORMATION
- ------ ---------------------
ITEM 1. FINANCIAL STATEMENTS
- ------ --------------------
THE PROVIDENCE GAS COMPANY
---------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE PERIODS ENDED MARCH 31
---------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS TWELVE MONTHS
------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- --------
(thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 73,686 $ 76,590 $132,886 $138,263 $205,296 $212,333
Cost of gas sold 37,151 44,616 69,484 80,289 106,552 121,032
-------- -------- -------- -------- -------- --------
Operating margin 36,535 31,974 63,402 57,974 98,744 91,301
-------- -------- -------- -------- -------- --------
Operating expenses:
Operation and
maintenance 12,201 12,472 23,519 23,476 47,178 47,041
Depreciation and
amortization 3,457 3,146 6,911 6,165 13,151 12,155
Taxes-
State gross earnings 2,189 2,301 3,945 4,071 5,897 6,226
Local property and
other 2,095 2,026 3,974 3,715 7,692 7,137
Federal income 5,029 3,461 7,275 5,763 6,001 3,995
-------- -------- -------- -------- -------- --------
Total operating
expenses 24,971 23,406 45,624 43,190 79,919 76,554
-------- -------- -------- -------- -------- --------
Operating income 11,564 8,568 17,778 14,784 18,825 14,747
Other, net 147 179 304 251 424 469
-------- -------- -------- -------- -------- --------
Income before
interest expense 11,711 8,747 18,082 15,035 19,249 15,216
-------- -------- -------- -------- -------- --------
Interest expense:
Long-term debt 1,482 1,512 2,972 3,032 5,982 6,084
Other 467 477 993 826 1,776 1,352
Interest capitalized (72) (56) (154) (95) (279) (155)
-------- -------- -------- -------- -------- --------
1,877 1,933 3,811 3,763 7,479 7,281
-------- -------- -------- -------- -------- --------
Net income 9,834 6,814 14,271 11,272 11,770 7,935
Dividends on
preferred stock (139) (174) (278) (348) (556) (696)
-------- -------- -------- -------- -------- --------
Net income applicable
to common stock $ 9,695 $ 6,640 $ 13,993 $ 10,924 $ 11,214 $ 7,239
======== ======== ======== ======== ======== ========
Earnings per common
share $7.79 $5.34 $11.25 $8.78 $9.01 $5.82
======== ======== ======== ======== ======== ========
Dividends paid per
common share $.96 $.96 $1.92 $1.92 $3.84 $3.80
======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding 1,243.6 1,243.6 1,243.6 1,243.6 1,243.6 1,243.6
======== ======== ======== ======== ======== ========
</TABLE>
I-1
<PAGE>
THE PROVIDENCE GAS COMPANY
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------------
March 31, March 31, September 30,
1998 1997 1997
--------- --------- -------------
<S> <C> <C> <C>
ASSETS
- ------
Gas plant, at original cost $300,644 $278,727 $290,614
Less - Accumulated depreciation
and utility plant acquisition
adjustments 114,632 103,528 108,478
-------- -------- --------
186,012 175,199 182,136
-------- -------- --------
Current assets:
Cash and temporary cash investments 727 1,846 778
Accounts receivable, less allowance of
$2,845 at 3/31/98, $4,040 at 3/31/97
and $1,739 at 9/30/97 36,118 46,691 13,120
Unbilled revenues 6,182 8,151 2,658
Deferred gas costs - 3,973 7,151
Inventories, at average cost -
Liquefied natural gas, propane and
underground storage 8 7,631 18,001
Materials and supplies 959 1,095 1,166
Prepaid and refundable taxes 2,145 2,628 3,293
Prepayments 678 497 966
-------- -------- --------
46,817 72,512 47,133
-------- -------- --------
Deferred charges and other assets 12,262 12,800 12,874
-------- -------- --------
Total assets $245,091 $260,511 $242,143
======== ======== ========
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization $164,730 $162,061 $157,012
-------- -------- --------
(See accompanying statement)
Current liabilities:
Notes payable 15,600 30,250 20,410
Current portion of long-term debt 3,650 2,420 3,707
Accounts payable 11,083 17,855 16,114
Accrued taxes 8,102 7,369 2,529
Accrued vacation 1,801 1,878 1,658
Customer deposits 3,230 3,613 3,430
Other 3,928 3,832 4,639
-------- -------- --------
47,394 67,217 52,487
-------- -------- --------
Deferred credits and reserves:
Accumulated deferred Federal
income taxes 21,048 20,323 20,598
Unamortized investment tax credits 2,275 2,432 2,354
Other 9,644 8,478 9,692
-------- -------- --------
32,967 31,233 32,644
-------- -------- --------
Commitments and contingencies - - -
Total capitalization and liabilities $245,091 $260,511 $242,143
======== ======== ========
</TABLE>
I-2
<PAGE>
THE PROVIDENCE GAS COMPANY
-------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE SIX MONTHS ENDED MARCH 31
-------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
1998 1997
--------- --------
(Thousands of Dollars)
<S> <C> <C>
Cash provided by (used for)
Operating Activities:
- ---------------------
Net income $ 14,271 $ 11,272
Items not requiring cash:
Depreciation and amortization-plant 6,975 6,228
Changes as a result of regulatory
actions 1,500 -
Deferred Federal income taxes 450 420
Amortization of investment tax credits (79) (78)
Changes in assets and liabilities
which provided (used) cash:
Accounts receivable (5,082) (32,690)
Unbilled revenues (3,524) (5,818)
Deferred gas costs (2) 9,155
Inventories 199 8,219
Prepaid and refundable taxes 1,148 587
Prepayments 290 968
Accounts payable 469 1,375
Accrued taxes 5,573 5,502
Accrued vacation, customer deposits
and other (768) (1,304)
Deferred charges and other 525 1,179
-------- --------
Net cash provided by operations 21,945 5,015
-------- --------
Investing Activities:
- ---------------------
Expenditures for property, plant and
equipment, net (10,766) (8,752)
-------- --------
Financing Activities:
- ---------------------
Proceeds from other long-term debt - 1,345
Payments on long-term debt (2,153) (1,799)
Increase(decrease) in notes payable, net (4,810) 9,450
Redemption of preferred stock (1,600) (1,600)
Cash dividends on common shares (2,389) (2,388)
Cash dividends on preferred shares (278) (348)
-------- --------
Cash provided by (used for)
financing activities (11,230) 4,660
-------- --------
Increase (decrease) in cash and temporary
cash investments (51) 923
Cash and temporary cash investments at
beginning of period 778 923
-------- --------
Cash and temporary cash investments at
end of period $ 727 $ 1,846
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period -
Interest (net of amount
capitalized) $ 3,790 $ 3,682
Income taxes (net of refunds) $ 1,536 $ 966
Schedule of noncash investing and financing
activities:
Capital lease obligation for
equipment $ - $ 232
Other long-term debt for equipment $ - $ 495
</TABLE>
I-3
<PAGE>
THE PROVIDENCE GAS COMPANY
--------------------------
CONSOLIDATED STATEMENTS OF CAPITALIZATION
-----------------------------------------
(THOUSANDS)
-----------
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------------
March 31, March 31, September 30,
1998 1997 1997
--------- ----------- -----------
<S> <C> <C> <C>
Common stock equity:
Common stock, $1 par
Authorized - 2,500 shares
Outstanding -1,244 at 3/31/98,
3/31/97 and 9/30/97 $ 1,244 $ 1,244 $ 1,244
Amount paid in excess of par 37,495 37,607 37,685
Retained earnings 50,915 44,479 39,311
-------- -------- --------
Total common stock equity 89,654 83,330 78,240
-------- -------- --------
Cumulative preferred stock:
Redeemable 8.70% Series, $100 par
Authorized -80 shares
Outstanding -48 shares at 3/31/98 and
64 shares at 3/31/97 and 9/30/97 4,800 6,400 6,400
-------- -------- --------
Long-term debt:
First mortgage bonds 69,600 71,200 71,200
Other long-term debt 2,897 1,840 3,207
Capital leases 1,429 1,711 1,672
-------- -------- --------
Total long-term debt 73,926 74,751 76,079
Less current portion 3,650 2,420 3,707
-------- -------- --------
Long-term debt, net 70,276 72,331 72,372
-------- -------- --------
Total capitalization $164,730 $162,061 $157,012
======== ======== ========
</TABLE>
I-4
<PAGE>
THE PROVIDENCE GAS COMPANY
Notes to Consolidated Financial Statements
Accounting Policies
- -------------------
It is the Registrant's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to a fair
statement of the results for the periods reported; however, such results are not
necessarily indicative of results to be expected for the year, due to the
seasonal nature of the Registrant's operations. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted in this Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. However, the disclosures herein when read
with the annual report for 1997 filed on Form 10-K are adequate to make the
information presented not misleading.
Rates and Regulation
- --------------------
The Registrant is subject to the regulatory jurisdiction of the Rhode Island
Public Utilities Commission (RIPUC) with respect to rates and charges, standards
of service, accounting and other matters. In August 1997, the RIPUC approved
the Price Stabilization Plan Settlement Agreement, (the Plan or Energize RI)
among the Registrant, the Rhode Island Division of Public Utilities and Carriers
(the Division), The Energy Council of Rhode Island, and the George Wiley Center.
Effective October 1, 1997 through September 30, 2000, Energize RI provides
customers with an initial price decrease of approximately four percent and a
three-year price freeze. In connection with the price decrease, the Registrant
will write-off and not recover $1.5 million of previously deferred gas costs.
Under Energize RI, the Gas Charge Clause (GCC) will be suspended for the entire
three-year term of the Plan. Any excess or deficiency between amounts billed
and actual gas costs incurred will be retained or borne by the Registrant.
Energize RI also requires the Registrant to make significant capital investments
to improve its distribution system. Capital investments required by Energize RI
are estimated to total approximately $26 million over its three-year term. In
addition, the Registrant is required to fund the Demand Side Management Rebate
Assistance Program and the Low Income Weatherization Program at annual levels of
$.5 million and $.2 million, respectively. Energize RI also calls for the
Registrant to fund the Low Income Assistance Program at an annual level of $1.0
million. Finally, Energize RI continues the process of unbundling by requiring
the Registrant to provide unbundled service offerings for up to 10 percent per
year of firm system throughput.
As part of Energize RI, the Registrant will amortize over a ten year period
approximately $4.0 million of environmental costs previously charged to the
accumulated depreciation reserve. All environmental costs incurred during the
term of Energize RI will also be amortized over a ten year period.
Under Energize RI the Registrant may earn up to 10.9 percent annually on
its average common equity of up to $81.0 million, $86.2 million and $92.0
million in fiscal 1998, 1999, and 2000, respectively. In addition, the
Registrant may not earn less than a 7 percent return on average common equity
under the Plan. In the event that the Registrant earns in excess of 10.9 percent
or less than 7 percent, the Registrant will defer revenues or costs through a
deferred revenue account over the term of the Plan. Any balance in the deferred
revenue account at the end of the Plan will be refunded to or recovered from
customers in a manner determined by all parties and approved by the RIPUC.
I-5
<PAGE>
The Integrated Resource Plan (IRP) will be terminated as a result of Energize
RI. In addition to the funding for the demand side management program and low
income weatherization and assistance programs, the IRP provided for a
performance-based ratemaking mechanism. The Registrant was able to record its
annual share of the performance-based ratemaking mechanism in both 1997 and
1996, which resulted in a $1.5 million increase to operating margin in each of
those years. As part of the performance-based ratemaking mechanism, the
Registrant was allowed to record approximately $3.0 million in non-firm margin,
subject to the Registrant's ability to generate sufficient gas cost savings for
customers. In both fiscal 1997 and 1996, the Registrant achieved enough savings
to earn $3.0 million in non-firm margin in each of those years. As a result of
Energize RI, the Registrant will only retain the actual margin earned from non-
firm customers.
Gas Supply
- ----------
The Registrant has entered into a full requirements contract with Duke
Energy Trading and Marketing, LLC (DETM) to provide all of its gas supply needs
beginning October 1, 1997 and continuing through September 30, 2000. DETM will
provide all gas supplies required by the Registrant, while the Registrant is
committed to purchase all supplies exclusively from DETM. Supplies required by
the Registrant's firm sales customers will be purchased at a single, fixed
commodity price for the entire contract period. In order to provide this
service, DETM, for the contract period, will take responsibility for the
Registrant's pipeline capacity resources not previously released, all storage
contracts and all LNG capacity. Under the contract, DETM has purchased all
working gas in storage including both LNG and contract storage as of October 1,
1997. Gas inventories purchased were valued at approximately $18 million. All
supply resources assigned to DETM will revert back to the Registrant on October
1, 2000. The contract was entered into following a competitive bidding process.
As well as providing supply for firm customers at a fixed price, DETM will
provide gas at market prices to cover the Registrant's non-firm sales customer's
needs and to make up the supply imbalances of transportation customers. DETM
will also provide various other services to the Registrant's transportation
service customers including enhanced balancing, standby and the storage and
peaking services available under the Registrant's recently approved FT-2 storage
service effective December 1, 1997. DETM will receive the supply related
revenues from these services in exchange for providing the supply management
inherent in these services.
Included in the DETM contract are a number of other important features. The
Registrant has retained the right to continue to make portfolio changes to
reduce supply costs. To the extent the Registrant makes such changes the
Registrant must keep DETM whole for the value lost over the remainder of the
contract period. The contract relieves the Registrant of the need to perform
certain upstream supply management functions which will make it possible for the
Registrant to take on the additional supply management workload required by the
further unbundling of firm sales customers without major staffing additions.
Environmental Matters
- ---------------------
Federal, state and local laws and regulations establishing standards and
requirements for the protection of the environment have increased in number and
in scope within recent years. The Registrant cannot predict the future impact
of such standards and requirements which are subject to change and can take
effect retroactively. The Registrant continues to monitor the status of these
laws and regulations. Such monitoring involves the review of past activities
and current operations, and may include expending funds
I-6
<PAGE>
to investigate or clean-up certain sites. To the best of its knowledge, subject
to the following, the Registrant believes it is in substantial compliance with
such laws and regulations.
At March 31, 1998, the Registrant is aware of four sites at which future
costs may be incurred.
The Registrant has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 at two sites at Plympton, Massachusetts on which waste material is alleged
to have been deposited by disposal contractors employed in the past either
directly or indirectly by the Registrant and other PRP's. With respect to one
of the Plympton sites, the Registrant has joined with other PRP's in entering
into an Administrative Consent Order with the Massachusetts Department of
Environmental Protection. The costs to be borne by the Registrant, in
connection with both Plympton sites, are not anticipated to be material to the
financial condition of the Registrant.
During 1995, the Registrant voluntarily began a study at its primary gas
distribution facility located in Providence, Rhode Island. This site formerly
contained a manufactured gas plant operated by the Registrant. As of March 31,
1998, approximately $1.9 million has been spent primarily on studies at this
site. In accordance with state laws, such a voluntary study is monitored by the
Rhode Island Department of Environmental Management (DEM). The purpose of this
study was to determine the extent of environmental contamination at this site.
The Registrant has completed the study which indicated that remediation will be
required for two-thirds of the property. The remediation will begin in May of
1998 and will continue for a duration of three to six months. During the
remediation process the remaining one-third of the property will also be
investigated and remediated if necessary. At March 31, 1998, the Registrant has
compiled a preliminary range of costs based on remediation alternatives, ranging
from $1.7 million to in excess of $5.0 million. However, because of the
uncertainties associated with environmental assessment and remediation
activities, the future cost of remediation could be higher than the alternatives
noted above. Based on the proposals for remediation work, the Registrant has
accrued $1.7 million at March 31, 1998 for anticipated future remediation costs
at this site.
Tests conducted following the discovery in 1996 of an abandoned underground
oil storage tank at the Registrant's Westerly, Rhode Island operations center
confirmed the existence of contaminants at this site. The Registrant is
currently conducting tests at this site, the costs of which are being shared
equally with the prior owner, to determine the nature and extent of the
contamination. Due to the early stages of investigation, management cannot
offer any conclusions as to whether any remediation will be required at this
site. In addition, in the first quarter of 1997, contamination from scrapped
meters and regulators was discovered at this site. The Registrant has reported
this to the DEM and the Rhode Island Department of Health and is in the process
of remediation. It is anticipated that remediation will cost $50,000.
Accordingly, the Registrant has accrued $50,000 at March 31, 1998 for
anticipated future remediation costs.
In prior rate cases filed, the Registrant requested that environmental
investigation and remediation costs be recovered by inclusion in its
depreciation factors consistent with the rate recovery treatment for all types
of cost of removal. Accordingly, environmental investigation costs of
approximately $2.1 million and an estimated $1.7 million for environmental
remediation costs have been charged to the accumulated depreciation reserve at
March 31, 1998.
Due to the magnitude of the Registrant's environmental investigation and
remediation expenditures, the Registrant sought current recovery for these
I-7
<PAGE>
amounts. As a result, in accordance with the Price Stabilization Plan
Settlement Agreement described in "Rates and Regulation", which became effective
--------------------
October 1, 1997, all environmental investigation and remediation costs incurred
through September 30, 1997, as well as all costs incurred during the three-year
term of the Plan, will be amortized over a ten-year period. Additionally, it is
the Registrant's practice to consult with the RIPUC on a periodic basis when, in
management's opinion, significant amounts might be expended for environmental-
related costs.
Management has begun discussions with other parties who may assist the
Registrant in paying any future costs at the above sites. Management believes
that its program for managing environmental issues, combined with rate recovery
and financial contributions from others, will likely avoid any material adverse
effect on its results of operations or its financial condition as a result of
the ultimate resolution of the above sites.
New Accounting Pronouncements
- -----------------------------
In October 1997, the Registrant adopted the Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share", which is effective
for financial statements issued for periods ending after December 15, 1997. SFAS
No. 128 replaces the presentation of primary earnings per share with the
presentation of basic earnings per share on the face of the income statement.
Basic earnings per share excludes dilution and is calculated by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Basic earnings per share and diluted earnings per
share are the same for all periods presented. Earnings per share for the prior
periods presented have been unchanged when calculated under SFAS No. 128.
Effective October 1, 1997, the Registrant adopted the provisions of
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities". This
Statement provides authoritative guidance for recognition, measurement, display
and disclosure of environmental remediation liabilities in financial statements.
The Registrant has recorded environmental remediation liabilities of
approximately $1.7 million at March 31, 1998. SOP 96-1 did not have an impact on
the Registrant's financial position or results of operations upon adoption. Also
see "Environmental Matters".
---------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 130, which is effective for
fiscal years beginning after December 15, 1997, requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 131, which is effective
for fiscal years beginning after December 15, 1997, requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. These statements require additional disclosure
only and will not effect the financial position or results of operations of the
Registrant.
I-8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The Providence Gas Company (the Registrant) and its subsidiary and their
representatives may from time to time make written or oral statements, including
statements contained in the Registrant's filings with the Securities and
Exchange Commission (SEC), which constitute or contain "forward-looking"
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995 or by the SEC in its rules, regulations, and releases. All
statements other than statements of historical facts included in this quarterly
report regarding the Registrant's financial position and strategic initiatives
and addressing industry developments are forward-looking statements. Where, in
any forward looking statement, the Registrant, or its management, expresses an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis, but there can
be no assurance that the statement of expectation or belief will result or be
achieved or accomplished. Factors which could cause actual results to differ
materially from those anticipated include, but are not limited to: general
economic, financial and business conditions; changes in, or the failure to
comply with, government regulations; competition in the energy services sector;
regional weather conditions; the availability and cost of natural gas;
development and operating costs; the success and costs of advertising and
promotional efforts; the availability and terms of capital; the business
abilities and judgment of personnel; the ability of the Registrant to acquire
and implement computer software that will be Year 2000 compliant; unanticipated
environmental liabilities; the costs and effects of unanticipated legal
proceedings; the impacts of unusual items resulting from ongoing evaluations of
business strategies and asset valuations; and changes in business strategy.
RESULTS OF OPERATIONS
The Registrant's operating revenues, operating margin and net income
applicable to common stock for the three, six and twelve months ended March 31,
1998 and for comparable periods ended March 31, 1997 are as follows:
(thousands where applicable)
<TABLE>
<CAPTION>
Three Months Six Months Twelve Months
Ended March 31 Ended March 31 Ended March 31
1998 1997 1998 1997 1998 1997
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $73,686 $76,590 $132,886 $138,263 $205,296 $212,333
======= ======= ======== ======== ======== ========
Operating margin $36,535 $31,974 $ 63,402 $ 57,974 $ 98,744 $ 91,301
======= ======= ======== ======== ======== ========
Net income applicable
to common stock $ 9,695 $ 6,640 $ 13,993 $ 10,924 $ 11,214 $ 7,239
======= ======= ======== ======== ======== ========
</TABLE>
Operating Margin
- ----------------
During the latest quarter, the Registrant experienced weather that was 11.0
percent warmer than the same quarter last year. The warmer temperatures resulted
in decreased margin of approximately $3.6 million compared to the same quarter
last year. Offsetting the warmer than normal weather is $5.5 million of margin
generated by Energize RI, which became effective October 1, 1997. This
additional margin resulted from freezing the GCC mechanism used previously to
adjust for the over or underrecovery of gas costs was approximately $5.9 million
and was offset by the funding of the IRP programs
I-9
<PAGE>
of approximately $400,000. Also offsetting the warmer than normal weather is the
impact Energize RI has as a result of no longer recording revenues using
seasonal embedded gas cost factors. When compared to the same quarter last year
when seasonal gas cost factors were being used, operating margin has increased
approximately $2.7 million. The effect of this increase, however, will reverse
in subsequent quarters and will have no impact on annual earnings.
During the current year, weather has been 3.7 percent warmer than the same
period last year. The warmer temperatures resulted in decreased margin of
approximately $2.9 million compared to last year. Offsetting the warmer than
normal weather is $6.3 million of margin generated by Energize RI. The
additional margin which resulted from freezing the GCC mechanism used previously
to adjust for the over or underrecovery of gas costs was approximately $8.7
million and was offset by the write-off of $1.5 million of previously deferred
gas costs and funding of the IRP programs of approximately $900,000. When
compared to the same period last year when seasonal gas cost factors were being
used, operating margin has increased approximately $3.1 million. The effect of
this increase, however, will reverse in subsequent quarters and will have no
impact on annual earnings.
Additionally, non-firm margin decreased $1.0 million during the first half
of fiscal year 1998 when compared with the first half of fiscal 1997. Prior to
Energize RI, the Registrant was allowed to record approximately $3.0 million in
non-firm margin under the terms of the Integrated Resource Plan, subject to the
Registrant's ability to generate sufficient gas cost savings for customers. As a
result of Energize RI, the Registrant retains the actual non-firm margin earned.
Due to an unfavorable pricing difference between natural gas and alternate
fuels, the Registrant experienced a decrease in non-firm sales and
transportation margin. This decrease is expected to continue during the
remainder of the fiscal year.
The increase in operating margin for the twelve month periods presented is
primarily due to the reasons stated above.
Operating and Maintenance Expenses
- ----------------------------------
Overall, operating and maintenance expenses were stable for the periods
presented.
Depreciation and Amortization Expenses
- --------------------------------------
Depreciation and amortization expense increased approximately $300,000 or
9.9 percent for the three months ended March 31, 1998, approximately $700,000,
or 12.1 percent for the six months ended March 31, 1998 and approximately $1.0
million or 8.2 percent for the twelve months ended March 31, 1998, versus the
same periods last year. These increases are the result of capital spending and
the amortization of previously deferred environmental costs. Effective October
1, 1997 the Registrant began amortizing environmental costs over a ten-year
period in accordance with Energize RI.
Taxes
- -----
Taxes increased approximately $1.5 million or 19.6 percent for the three
months ended March 31, 1998, approximately $1.6 million or 12.1 percent for the
six months ended March 31, 1998 and approximately $2.2 million or 12.9 percent
for the twelve months ended March 31, 1998, versus the same periods last year.
The overall increase in taxes is primarily due to increases in Federal income
taxes as a result of higher pretax income this year compared to last year.
Additionally, local property and other taxes have increased as result of capital
spending during the last year.
I-10
<PAGE>
Interest Expense
- ----------------
Interest expense decreased approximately $56,000 or 2.9 percent for the
three months ended March 31, 1998, and increased approximately $48,000 or 1.3
percent for the six months ended March 31, 1998 and approximately $200,000 or
2.7 percent during the twelve months ended March 31, 1998, versus the same
periods last year. During the prior year, interest expense was impacted by
accrued interest on the over or under recovery of gas costs that was due to or
from ratepayers. Effective October 1, 1997, the Registrant froze the GCC
mechanism in connection with Energize RI. During the three-year term of the
Plan, the Registrant will no longer accrue interest on the over or under
collection of gas costs from ratepayers.
Future Outlook
- --------------
A) Regulatory
Under Energize RI, the Registrant may earn up to 10.9 percent annually on
its average common equity of up to $81.0 million, $86.2 million, and $92.0
million in fiscal 1998, 1999 and 2000, respectively. In addition, the Registrant
may not earn less than a seven percent return on average common equity. In the
event the Registrant earns in excess of 10.9 percent or less than seven percent,
the Registrant will defer revenues or costs through a deferred revenue account.
Any balance in the deferred revenue account at the end of the Plan will be
refunded to or recovered from customers in a manner to be approved by the RIPUC.
Despite the increase in earnings for the current quarter and year to date,
the Registrant expects earnings for the year to be significantly less than last
year as a result of extremely warmer temperatures in the region. It is important
to note that due to the Energize RI Plan, quarterly earnings and year to date
earnings for this year versus last year will not be comparable due to the
shifting of gas costs from the first half of this year to the second half and
timing of expenses associated with investments included in the plan. These
factors will result in higher earnings for the first half of the year and lower
earnings for the last half of the year.
In May 1996, the RIPUC approved a Rate Design Settlement Agreement among
the Registrant, the Division, TEC-RI, and a consortium of oil heat
organizations. The Agreement began a process of unbundling natural gas service
in Rhode Island, enabling customers to choose their gas suppliers. The Agreement
went into effect in June 1996. The initial step was available to approximately
120 of the largest commercial and industrial customers. In August 1997, the
RIPUC approved a plan, called "Business Choice", to further unbundle services to
an additional 3,400 medium and large commercial and industrial customers. The
Registrant commenced Business Choice in December 1997. At March 31, 1998, the
Registrant had approximately 1,000 firm transportation customers.
Energize RI continues the process of unbundling by requiring the Registrant
to provide unbundled service offerings for up to 10 percent per year of firm
system throughput.
Liquidity and Capital Resources
- -------------------------------
The Registrant meets seasonal cash requirements and finances its capital
expenditures program on an interim basis through short-term borrowings.
Management believes its available financings are sufficient to meet these
seasonal needs.
During the current six month period, the Registrant's cash flow from
operations increased approximately $16.9 compared to the same period last year.
This increase is primarily due to the sale of the Registrant's working
I-11
<PAGE>
gas in storage to Duke Energy Trading and Marketing as well as additional margin
generated by Energize RI. The additional cash flows resulting from Energize RI
have enabled the Registrant to avoid seasonal short-term borrowings during the
current fiscal year.
Capital expenditures for the year to date period of $10.8 million increased
$2.0 million or 23.0 percent when compared to the $8.8 million last year. As a
result of Energize RI, the Registrant is committed to making significant capital
improvements to its distribution system during the Plan's three-year term. These
improvements will expand the distribution system into economically developing
areas of Rhode Island as well as accelerate the replacement of mains and
services. Capital expenditures for the remainder of the fiscal year are expected
to be approximately $21.9 million. Anticipated capital expenditures during the
next three years are expected to total approximately $80 million.
To finance capital expenditures, the Registrant issued $15 million in First
Mortgage bonds in April 1998 at 6.82 percent. These bonds require semi-annual
interest payments and a lump sum repayment of principal in 20 years.
During the next two years, the Registrant plans to upgrade significant
portions of its computer software in connection with its decision to move
towards a client server environment. The replacement of the software will
provide the additional functionality necessary as the Registrant's business
environment continues to change. The new software will also be Year 2000
compliant. The Registrant is continuing to assess its remaining computer
applications for Year 2000 compliance and is currently unable to assess what
impact future modifications, if any, will have on the Registrant's results of
operations.
I-12
<PAGE>
PROVIDENCE GAS COMPANY
----------------------
PART II. OTHER INFORMATION
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The annual meeting of shareholders for the Registrant's parent company,
Providence Energy Corporation, was held on January 15, 1998 and the following
nominees to the Registrant's Board of Directors were elected as Directors for
terms expiring at the time of the 2001 annual meeting by the following vote:
<TABLE>
<CAPTION>
<S> <C> <C>
Mrs. M. Anne Szostak 4,517,895 FOR 68,693 WITHHELD
Mr. Gilbert R. Bodell, Jr. 4,512,760 FOR 73,828 WITHHELD
Mr. Paul F. Levy 4,521,998 FOR 64,590 WITHHELD
Mr. W. Edward Wood 4,515,826 FOR 70,762 WITHHELD
</TABLE>
Item 6 (a). Exhibits
- ---------------------
10. Management contract dated March 13, 1998 between James A. Grasso, Vice
President, Public and Government Affairs and the Registrant.
27. Financial Data Schedule
Item 6 (b). Reports on Form 8-K
- --------------------------------
No reports on Form 8-K were filed during the quarter for which this report is
filed.
II-1
<PAGE>
THE PROVIDENCE GAS COMPANY
--------------------------
It is the opinion of management that the financial information contained in
this report reflects all adjustments necessary for a fair statement of results
for the period reported, but such results are not necessarily indicative of
results to be expected for the year, due to the seasonal nature of the
Registrant's gas operations. All accounting policies and practices have been
applied in a manner consistent with prior periods.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Providence Gas Company
(Registrant)
BY:/s/Gary S. Gillheeney
--------------------------------
GARY S. GILLHEENEY
Senior Vice President,
Chief Financial Officer, Treasurer,
and Assistant Secretary
Date: May 13, 1998
------------
II-2
<PAGE>
EXHIBIT 10
PROVIDENCE ENERGY CORPORATION
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made, entered into, and is effective as of this
13th day of March, 1998 (hereinafter referred to as the "Effective Date"), by
and between Providence Energy Corporation, together with its subsidiaries and
affiliates (hereinafter referred to as the "Company"), a Rhode Island
corporation having its principal offices at Providence Rhode Island and JAMES
A. GRASSO (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
VICE PRESIDENT OF THE COMPANY;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's contribution has been
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of encouraging the full attention by the
Executive to his duties in his capacity aforesaid and wishes to make provisions
for certain protections of the Executive in the event of the termination of his
employment under specified conditions.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements of the parties set forth in this Agreement, and of other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1 TERMINATION FOR GOOD REASON. At any time during the six (6) full
calendar month period prior to the effective date of a Change in Control (as
defined in Section 2.2) or the twenty four (24) month period following the
effective date of a Change in Control (as defined in Section 2.2), the Executive
may terminate this Agreement for Good Reason (as defined below) by giving the
Board of Directors of the Company thirty (30) calendar days written notice of
intent to terminate, which
1
<PAGE>
notice sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
Upon the expiration of the thirty (30) day notice period, the Good Reason
termination shall become effective, and the Company shall pay and provide to the
Executive the benefits set forth in in Section 2.1 herein.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an officer
of the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect
during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is
at least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, which Base Salary is One Hundred Thirty Thousand
Dollars ($130,000.00) as of the Effective Date, or a reduction from any
subsequent increase to the Base Salary as of the Effective Date;
(d) A material reduction in the Executive's level of participation in any of
the Company's short- and/or long-term incentive compensation plans, or
employee benefit or retirement plans, policies, practices, or arrangements
in which the Executive participates as of the Effective Date; provided,
however, that reductions in the levels of participation in any such plans
shall not be deemed to be "Good Reason" if the Executive's reduced level
of participation in each such program remains substantially consistent
with the average level of participation of other executives who have
positions commensurate with the Executive's position; or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement,
2
<PAGE>
as contemplated in Section 5.1 herein.
Upon a termination for Good Reason within the six (6) full calendar month period
prior to the effective date of a Change in Control, or within the twenty-four
(24) months following the effective date of a Change in Control, the Executive
shall be entitled to receive the payments and benefits set forth in Section 2.1
herein.
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason herein.
SECTION 2
CHANGE IN CONTROL
2.1 EMPLOYMENT TERMINATIONS IN CONNECTION WITH A CHANGE IN CONTROL. In the
event of a Qualifying Termination (as defined below) within six (6) full
calendar months prior to the effective date of a Change in Control, or within
twenty-four (24) months following the effective date of a Change in Control,
then in lieu of all other benefits provided to the Executive under the
provisions of this Agreement, the Company shall pay to the Executive in a lump
sum payment and provide him with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount equal to two (2) times the highest rate of the Executive's
annualized Base Salary rate in effect at any time up to and including the
effective date of termination;
(b) An amount equal to two (2) times the Executive's target incentive award
(both cash and long-term) established for the fiscal year in which the
Executive's effective date of termination occurs;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, multiplied by a fraction, the numerator of which is
the number of completed days in the thenexisting fiscal year through the
effective date of termination, and the denominator of which is three
hundred sixtyfive (365);
3
<PAGE>
(e) A continuation of the welfare benefits of medical insurance, dental
insurance, and group term life insurance for two (2) full years after the
effective date of termination. These benefits shall be provided to the
Executive at the same premium cost, and at the same coverage level, as in
effect as of the Executive's effective date of termination. However, in
the event the premium cost and/or level of coverage shall change for all
employees of the Company, the cost and/or coverage level, likewise, shall
change for the Executive in a corresponding manner.
The continuation of these welfare benefits shall be discontinued prior to
the end of the two (2) year period in the event the Executive has
available substantially similar benefits from a subsequent employer, as
determined by the Company's Board of Directors or the Board's designee.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's actual pay history as of
the effective date of termination shall be used.
For purposes of this Section 2, a Qualifying Termination shall mean any
termination of the Executive's employment OTHER THAN: (1) by the Company for
Cause ; (2) by reason of death, Disability, or Retirement (as such term is then
defined in the Company's tax qualified defined benefit retirement plan;
[provided that a termination which qualifies as a Retirement and which would
otherwise qualify as a termination for Good Reason under Section 1 herein will
be deemed to be a Qualifying Termination)].
2.2 DEFINITION OF "CHANGE IN CONTROL." A Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more of the following
conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
4
<PAGE>
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
2.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive becomes
entitled to Severance Benefits or any other payment or benefit under this Plan,
or under any other agreement with or plan of the Company (in the aggregate, the
"Total Payments"), if any of the Total Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may
hereafter be imposed), the Company shall pay to the Executive in cash an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive after deduction of any Excise Tax upon the Total Payments and any
Federal, state and local income tax and Excise Tax upon the Gross-Up Payment
provided for by this Section 7.3 (including FICA and FUTA), shall be equal to
the Total Payments. Such payment shall be made by the Company to the Executive
as soon as practical following the effective date of termination, but in no
event beyond thirty (30) days from such date.
5
<PAGE>
2.4 TAX COMPUTATION. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or the Executive's
termination of employment (whether pursuant to the terms of this Plan or
any other plan, arrangement, or agreement with the Company, or with any
person (which shall have the meaning set forth in Section 3(a)(9) of the
Securities Exchange Act of 1934, including a "group" as defined in Section
13(d) therein) whose actions result in a Change in Control of the Company
or any person affiliated with the Company or such persons) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the meaning of
Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
in the opinion of tax counsel as supported by the Company's independent
auditors and acceptable to the Executive, such other payments or benefits
(in whole or in part) do not constitute parachute payments, or unless such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise
Tax;
(b) The amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the effective
date of termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
6
<PAGE>
2.5 SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service adjusts
the computation of the Company under Section 2.4 herein so that the Executive
did not receive the greatest net benefit, the Company shall reimburse the
Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Committee.
2.6 PAYMENT OF LEGAL FEES. To the extent permitted by law, the Company shall
pay all legal fees, costs of litigation, prejudgment interest, and other
expenses incurred in good faith by the Executive as a result of the Company's
refusal to provide the severance benefits under this Section 2 to which the
Executive becomes entitled under this Agreement, or as a result of the Company's
contesting the validity, enforceability, or interpretation of this Agreement, or
as a result of any conflict (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
SECTION 3. INDEMNIFICATION
The Company hereby covenants and agrees to indemnify and hold harmless the
Executive fully, completely, and absolutely against and in respect to any and
all actions, suits, proceedings, claims, demands, judgments, costs, expenses
(including attorney's fees), losses, and damages resulting from the Executive's
good faith performance of his duties and obligations under the terms of this
Agreement.
SECTION 4. OUTPLACEMENT ASSISTANCE
Following a termination of the Executive's employment as described in Sections 1
or 2 herein, the Executive shall be reimbursed by the Company for the costs of
all outplacement services obtained by the Executive within the and two (2) year
periods after the effective date of termination; provided, however, that the
total reimbursement shall be limited to an amount equal to fifteen percent (15%)
of the Executive's Base Salary as of the effective date of termination.
SECTION 5. ASSIGNMENT
5.1 Assignment by Company. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes of the "Company" under the terms of this Agreement. As used in this
Agreement, the term "successor" shall mean any person, firm, corporation, or
business entity which at any time, whether by merger, purchase, or otherwise,
acquires all or essentially all of the assets of business of the Company.
7
<PAGE>
Notwithstanding such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall immediately
entitle the Executive to compensation from the Company in the same amount and on
the same terms as the Executive would be entitled in the event of a termination
by the Company, as provided in Section 2.1 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
5.2 ASSIGNMENT BY EXECUTIVE. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives, executors,
and administrators, successors, heirs, distributees, devisees, and legatees. If
the Executive should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, in the absence of such designee, to the
Executive's estate.
SECTION 6. DISPUTE RESOLUTION AND NOTICE
6.1 ARBITRATION. Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration, conducted before a panel of
three (3) arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association then in
effect.
Judgment may be entered on the award of the arbitrator in any court having
proper jurisdiction. All expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by the Company.
6.2 NOTICE. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
8
<PAGE>
SECTION 7. MISCELLANEOUS
7.1 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
7.2 MODIFICATION. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
7.3 SEVERABILITY. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect.
7.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
7.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under
this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or govern-mental regulation or ruling.
7.6 BENEFICIARIES. The Executive may designate one or more persons or entities
as the primary and/or contingent beneficiaries of any amounts to be received
under this Agreement. Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive may make or
change such designation at any time.
SECTION 8. GOVERNING LAW
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the laws of the state of
Rhode Island.
9
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
Executive:
______________________________
ATTEST Providence Energy Corporation
By:______________________ By:___________________________
Corporate Secretary Chairman, President and CEO
10
<TABLE> <S> <C>
<PAGE>
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<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
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<TOTAL-NET-UTILITY-PLANT> 186,012
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<TOTAL-CURRENT-ASSETS> 46,817
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<CAPITAL-SURPLUS-PAID-IN> 37,495
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<TOTAL-COMMON-STOCKHOLDERS-EQ> 89,654
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<LONG-TERM-DEBT-NET> 70,276
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