<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 1999
------------------
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
------
THE PROVIDENCE GAS COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Rhode Island 05-0203650
------------------------------ -----------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
100 Weybosset Street, Providence, Rhode Island 02903
- ---------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 401-272-5040
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
NONE NONE
- ------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
NONE
- ------------------------------------------------------------------------
(Title of class)
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 ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant, as of December 21, 1999: $0
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
Common Stock, $1.00 Par Value: 1,243,598 shares outstanding at December 21,
- --------------------------------------------------------------------------
1999.
- ----
DOCUMENTS INCORPORATED BY REFERENCE
- -----------------------------------
NONE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C>
Item 1 - Business
General I-1
Gas Supply I-2
Rates and Regulations I-3
Competition and Marketing I-4
Employees I-5
Special Factors Affecting the
Natural Gas Industry I-5
General I-5
FERC Regulations I-6
Environmental Regulations I-6
Other Standards I-8
Item 2 - Properties I-8
Item 3 - Legal Proceedings I-8
Item 4 - Submission of Matters to a Vote of Security Holders I-8
PART II
Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters II-1
Item 6 - Selected Financial Data II-2
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations II-3
Item 8 - Financial Statements and Supplementary Data II-10
Report of Independent Public Accountants II-33
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure II-34
PART III
Item 10 - Directors and Executive Officers of the Registrant III-1
Item 11 - Executive Compensation III-4
Item 12 - Security Ownership of Certain Beneficial Owners
and Management III-4
Item 13 - Certain Relationships and Related Transactions III-4
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K IV-1
Supplemental Schedule IV-3
Signatures IV-6
</TABLE>
For defined terms, acronyms, and abbreviations, see the List of Defined Terms,
which is included in Part II, Item 8, as pages II-31 and II-32.
<PAGE>
PART I
- ------
ITEM 1. BUSINESS
- ----------------
The Providence Gas Company 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, 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
Form 10-K including without limitation statements regarding the Registrant's
financial position, strategic initiatives, the effect of ProvEnergy's proposed
merger with Southern Union Company, and statements 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.
The following are some of the factors which could cause actual results to differ
materially from those anticipated: general economic, financial, and business
conditions; changes in government regulations, the actions taken or decisions
rendered by any regulatory body, and the impact such changes, actions, or
decisions might have on the Registrant, including the regulatory approvals or
the timeliness of such approvals on ProvEnergy's proposed merger with Southern
Union Company; competition in the energy services sector; regional weather
conditions; the availability and cost of natural gas and oil; 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 and its suppliers and customers to
modify or redesign their computer systems to work properly in the Year 2000;
unanticipated environmental liabilities; the Registrant's ability to grow its
business through acquisitions and/or significant customer growth; 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.
General
- -------
The Registrant, a Rhode Island corporation, was organized in 1847 and
became a wholly-owned subsidiary of Providence Energy Corporation (Providence
Energy) through a reorganization on February 1, 1981. The outstanding shares of
common stock of Providence Energy are presently listed on the New York Stock
Exchange.
The executive offices of the Registrant are located at 100 Weybosset
Street, Providence, Rhode Island 02903, telephone (401) 272-5040.
The Registrant is engaged in natural gas distribution, serving
approximately 168,000 customers in Providence and Newport, Rhode Island, and 23
other cities and towns in Rhode Island. The service territory encompasses
approximately 730 square miles and has a population of approximately 818,000.
For the year ended September 30, 1999, residential sales accounted for
approximately 57% of total firm deliveries, with commercial and industrial sales
representing, in the aggregate, approximately 43%. For the years ended September
30, 1998 and 1997, residential sales represented approximately 57% and 58%,
respectively, with commercial and industrial sales representing, in the
aggregate, approximately 43% and 42%, respectively, of firm deliveries.
The Registrant's gas distribution system consists of approximately 2,300
miles of gas mains ranging in size from 2 to 36 inches in diameter,
approximately 143,000 services (a service is a pipe connecting a gas main with
piping on a customer's premises), approximately 169,000 gas meters, and the
necessary pressure regulators. The Registrant has regulating and metering
facilities at eight points of delivery from Algonquin Gas Transmission Company
and one from Tennessee Gas Pipeline Company, which the Registrant believes to be
adequate for receiving gas into its distribution system.
I-1
<PAGE>
The natural gas industry is subject to numerous challenges, many of which
affect the Registrant in varying degrees. Significant industry challenges
affecting the Registrant include: the ability to adapt to the regulatory changes
occurring at the national level under the framework of the FERC Order 636 and
the ability to gain local approval through the RIPUC for new rates tailored to
customers' specific needs and market conditions.
Gas Supply
- ----------
The Registrant has entered into a full requirements gas supply contract
with DETM, a joint venture of Duke Energy Corporation and Mobil Corporation, for
a term of three years commencing October 1, 1997. Under the contract, DETM
guarantees to meet the Registrant's supply requirements; however, the Registrant
must purchase all of its gas supply exclusively from DETM. In addition, under
the contract, the Registrant transferred responsibility for its pipeline
capacity resources, storage contracts, and LNG capacity to DETM. As a result,
the Registrant' gas inventories of approximately $18 million at September 30,
1997 were sold at book value to DETM on October 1, 1997.
In addition to providing supply for firm customers at a fixed price, DETM
will provide gas at market prices to cover the Registrant's non-firm sales
customers' 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 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 gas supply 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 outsourcing of day-to-day supply management relieves the
Registrant of the need to perform certain upstream supply management functions.
This 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.
The Registrant has entered into an agreement replacing its existing service
contract with Algonquin, a subsidiary of Duke Energy Corporation. Algonquin is
the owner and operator of a LNG tank located in Providence, Rhode Island. The
Registrant relies upon this service to provide gas supply into its distribution
system during the winter period. The service provided for in the agreement,
subject to the successful completion of construction, is expected to begin in
the first quarter of fiscal 2000. Under the terms of the agreement, Algonquin
replaced and expanded the vaporization capability at the tank. The Registrant
will receive approximately $2.6 million from Algonquin. Of the $2.6 million,
approximately $.9 million represents reimbursement received by the Registrant in
1999 for costs incurred related to the project including labor, engineering, and
legal expenses. The remaining portion of the payment, or approximately $1.7
million, will be paid to DETM under the Registrant's contract with DETM as
reimbursement for the additional costs that DETM will incur when the Algonquin
storage capacity is released to DETM as provided for in the gas supply contract
described above. This payment is expected 60 days after the in-service date of
the project.
In June 1999, the FERC issued an order in Docket Number CP99-113 approving
Algonquin's project described above. In that order FERC also approved the new
10-year contract between Algonquin and the Registrant for service from the tank.
Also approved was the Registrant's parallel filing, PR99-8, requesting
regulatory authorization to charge Algonquin for transportation of gas vaporized
for other Algonquin customers and transported by the Registrant to the Algonquin
pipeline on behalf of those customers.
I-2
<PAGE>
As a result of FERC Order 636 and other related orders, pipeline
transportation companies have incurred significant costs, collectively known as
transition costs. The majority of these costs will be reimbursed by the
pipeline's customers, including the Registrant. The Registrant estimates its
transition costs to be approximately $21.7 million, of which $16.2 million has
been included in the GCC and collected from customers through September 30,
1997. As part of the above supply contract, DETM assumed liability for these
transition costs during the contract's three-year term. At the end of the three-
year term of the contract, the Registrant will assume any remaining liability,
which is not expected to be material.
Rates and Regulation
- --------------------
The Registrant is subject to the regulatory jurisdiction of the RIPUC with
respect to rates and charges, standards of service, accounting and other
matters. In August 1997, the RIPUC approved a rate stabilization plan called
Energize RI. The parties to the plan were the Registrant, the Division, the
Energy Council of Rhode Island, and the George Wiley Center. Effective October
1, 1997 through September 30, 2000, Energize RI provides firm customers with a
three-year price freeze and an initial price decrease of approximately 4.0
percent. Under Energize RI, the GCC mechanism has been suspended for the entire
term. Also, in connection with the Plan, the Registrant wrote off approximately
$1.5 million of previously deferred gas costs in October 1997. Energize RI also
provides funds which allow the Registrant to make significant capital
investments to improve its distribution system and support economic development.
It is anticipated that Energize RI will provide approximately $26 million over
its three-year term to fund specific capital improvements. In addition, under
Energize RI, the Registrant provides funding for the Low-Income Assistance
Program at an annual level of $1.0 million, the Demand Side Management Rebate
Program at an annual level of $.5 million and the Low-Income Weatherization
Program at an annual level of $.2 million. Energize RI also continues the
process of unbundling by allowing the Registrant to provide unbundled service
offerings for up to 10 percent per year of firm deliveries.
As part of Energize RI, the Registrant has reclassified and is amortizing
approximately $4.0 million of prior environmental costs. These costs and all
environmental costs incurred during the term of the Plan will be amortized over
a 10-year period, in accordance with the levels authorized in Energize RI.
Under Energize RI, the Registrant may earn up to 10.9 percent, but not less
than 7.0 percent, annually on its average common equity, which is capped at
$81.0 million, $86.2 million, and $92.0 million in fiscal 1998, 1999, and 2000,
respectively. In the event that the Registrant earns in excess of 10.9 percent
or less than 7.0 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 to be determined by all parties to the Plan and approved
by the RIPUC.
As part of Energize RI, the Registrant is permitted to file annually with
the Division for the recovery of exogenous changes which may occur during the
three-year term of the Plan. Exogenous changes are defined as "...significant
increases or decreases in the Registrant's costs or revenues which are beyond
the Registrant's reasonable control." Any disputes between the Registrant and
the Division regarding either the nature or quantification of the exogenous
changes are to be resolved by the RIPUC. The impact of any such exogenous
changes will be debited or credited to a regulatory asset or liability account
throughout the term of Energize RI and will be recovered or refunded at the
expiration of the Plan through a method to be determined.
In fiscal 1998, the Registrant did not earn its allowed rate of return
primarily as a result of the extremely warm winter weather and the loss of non-
firm margin. The Registrant believed the causes of these two events were beyond
its reasonable control and thus deemed them to be exogenous changes. In March
1999, the Registrant reached an agreement with the Division, which allowed it to
recover $2.45 million in revenue losses attributable to exogenous changes
I-3
<PAGE>
experienced by the Registrant in fiscal 1998. The RIPUC reviewed the exogenous
changes agreement to ensure consistency with the terms of Energize RI and
affirmed the agreement at its May 28, 1999 open meeting.
During fiscal 1999, the Registrant recognized into revenue $2.45 million
for the exogenous changes recovery, and at year-end has deferred approximately
$.5 million of revenue under the provisions of the earnings cap of Energize RI.
The Registrant intends to file for recovery of exogenous changes
experienced in 1999 which resulted from factors similar to 1998. Absent further
exogenous recovery and/or other factors such as colder than normal weather, the
Registrant's ability to earn a 10.9 percent return on average common equity in
the final year of Energize RI is substantially impaired.
In a decision issued September 1, 1998, the Division rejected allegations
made in a complaint brought by Aurora Natural Gas that the Registrant provided
advance information and undue preference in pricing to its marketing affiliate,
ProvEnergy Services in violation of the Division's regulations. As part of its
investigation, the Division ordered marketer refunds of approximately $.3
million. The Division ordered this refund based on its belief that an unfair
rate was charged to customers who did not have operational telemeters in place
when they began service under the transportation tariff. The Registrant filed a
Request for Reconsideration and Rehearing, and on December 15, 1998 the Division
issued a Reconsideration Order that rescinded the fines stemming from five of
the original 23 violations of the Regulations for Utility Interaction with Gas
Marketers. The Division further offered the Registrant an opportunity to
demonstrate its claim that the ordered refunds would place FT-2 marketers in a
better position than marketers who served FT-1 customers.
On May 6, 1999, the Registrant and Aurora jointly submitted a Stipulation
and Settlement to the Division that: (i) Aurora's complaint in this proceeding
is dismissed; (ii) the prior orders of the Division in the proceeding are
dismissed; (iii) no refunds by the Registrant are required or appropriate in
connection with the proceeding; and (iv) the Registrant does not contest the
payment of $18,000 to the Division in connection with this proceeding. Following
a June 16, 1999 hearing on the Stipulation, the Division issued an order on
September 23, 1999 approving the Stipulation and Settlement provided that the
Registrant's ratepayers are held harmless from the financial transactions
stemming from the settlement, that the Registrant withdraw its appeal in
Providence County Superior Court, and that the Division's prior orders be
vacated as described in the order. The Registrant and Aurora accepted the
Division's order. This decision resulted in the reversal of the reserve
established under the original order.
Competition and Marketing
- -------------------------
The Registrant experienced modest customer growth in both the residential
and commercial/industrial markets. In all, the average annual number of
customers rose one percent to approximately 168,000. This increase was achieved
in a local economy which is just now beginning to improve. Seasonally adjusted
unemployment stood at 3.8 percent in September 1999, down from 4.8 percent
twelve months earlier, and slightly below the national average of 4.2 percent.
Also, there has been considerable new construction throughout the state in 1999.
New construction contracts in Rhode Island through September 1999 have increased
by 17% on an annual basis compared to the 1998 annual average. Recent economic
forecasts by the New England Economic Project predict economic stability in the
state for the immediate future.
Energize RI provides opportunities for the Registrant to expand sales. For
example, high pressure service to Quonset/Davisville Industrial Port & Commerce
Park, a key area for State economic development, provides tremendous
opportunities for sales growth as commercial and industrial businesses locate
within the park. In addition, the DSM program, an equipment rebate program,
provides opportunities to expand sales to nontraditional applications, such as
air conditioning and fuel cells. The Registrant has redirected its sales and
marketing efforts to leverage Energize RI, as well as other opportunities to
promote sales growth within its service territory.
I-4
<PAGE>
In response to the large increase of both state-owned and private fleet
vehicles powered by natural gas, the Registrant invested approximately $.3
million to renovate its Providence "quick-fill" station for natural gas
vehicles-one of three stations the Registrant operates in the state. Fleet
operators throughout the region are expressing greater interest in alternative-
fuel vehicles. One of these operators is the Rhode Island Public Transit
Authority, which recently launched a major program to replace a large number of
its 200 diesel buses with buses that operate solely on natural gas. A new Rhode
Island law provides substantial tax incentives which, along with the Federal
Department of Energy's designation of Providence as a "clean city", should
increase use and awareness of the benefits of natural gas vehicles.
On August 31, 1999, the Registrant's settlement agreement for enhancements
to its Business Choice program was approved in Docket 2902 and became effective
September 1, 1999. Specifically, there will now be rolling enrollment for
transportation service, which will allow customers to execute transportation
agreements throughout the year, rather than during limited enrollment periods.
The program now has approximately 1,700 firm transportation customers with
annual deliveries of over 5 billion cubic feet per year, which is approximately
25 percent of the Registrant's total annual firm deliveries. There are 14
marketers serving the Registrant's customers and transporting on the system.
Additional enhancements to the Business Choice program were filed with the RIPUC
under a supplemental settlement agreement in Docket 2902 on October 8, 1999 and
were approved on October 27, 1999. These enhancements do not generate additional
revenue.
In 1996, the Registrant implemented a DSM Program, which furnishes rebates
to customers installing new technologies, such as gas fired air conditioning,
cogeneration and gas motors. These technologies use proportionately more natural
gas during the summer months, when the natural gas distribution system has
available capacity. The DSM program also allows for the utilization of existing
resources, such as mains, services and year-round supply contracts. This DSM
Program will continue to be funded under Energize RI.
Employees
- ---------
As of September 30, 1999, the Registrant had 517 full-time employees.
Approximately 274 production, distribution and customer service employees are
covered by a five-year collective bargaining agreement with Local 12431-01 of
the United Steelworkers of America, which became effective in January 1996.
The bargaining agreement was developed by a labor-management negotiations
committee and can be reopened for any reason at any time in order to allow for
the committee to deal with new issues as they arise, which results in increased
flexibility in the use of employees. The original agreement called for a general
wage increase of 3.25 percent each year from 1997 to 2000.
In April 1998 the contract with Local 12431-01 was renegotiated and
extended to January 2002. This negotiation provides for a 3.5% wage increase in
January 1999, January 2000, and January 2001.
Additionally, in March 1996, a 38 month Labor Agreement was ratified by
Local 12431-02 of the United Steelworkers of America, which represents
approximately 83 office and clerical employees. The agreement called for an
average increase of 2.9 percent for 1998.
In April 1998 the contract with Local 12431-02 was renegotiated and
extended to May 2002. This negotiation provides for a 3.5% wage increase in June
1999, June 2000, and June 2001.
Special Factors Affecting the Natural Gas Industry
- --------------------------------------------------
General
- -------
The natural gas industry is subject to numerous legislative and regulatory
requirements, standards and restrictions that are subject to change and that
affect the Registrant to varying degrees. Significant industry factors that have
I-5
<PAGE>
affected or may affect the Registrant from time to time include the lack of
assurance that rate increases can be obtained from regulatory authorities in
adequate amounts on a timely basis; changes in the regulations governing the
Registrant's operations; reductions in the prices of oil and propane, which can
make those fuels less costly than natural gas in some markets; and increases in
the price of natural gas.
FERC Regulations
- ----------------
In recent years the FERC has been attempting to increase competition with
regard to the transportation and sale of natural gas in interstate commerce.
Beginning in late 1985, FERC began promulgating orders allowing all industry
participants access to pipeline transportation on an open, nondiscriminatory
basis to the extent of available capacity.
Recent FERC orders are in furtherance of its policy to make gas
transportation and alternate supply sources more accessible to all parties,
including local distribution companies and their customers. Such open access
allows the Registrant to obtain its supply through a more competitive national
gas pipeline system, where and when capacity is available.
FERC Order 636 and other related orders have significantly changed the
structure and types of services offered by pipeline transportation companies.
The most significant components of the restructuring occurred in November 1993.
In response to these changes, the Registrant successfully negotiated new
pipeline transportation and gas storage contracts.
At the same time, a number of contracts with gas suppliers have been
negotiated to complement the transportation and storage contracts. The portfolio
of supply contracts was designed to be market responsive and diversified with
respect to contract lengths, source location, and other contract terms.
To meet the requirements of the orders, pipeline transportation companies
have incurred significant costs, collectively known as transition costs. The
majority of these costs will be reimbursed by the pipelines' customers,
including the Registrant as described in the "Gas Supply" section.
----------
Environmental Regulations
- -------------------------
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 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 September 30, 1999, the Registrant was aware of five sites at which
future costs may be incurred.
Plympton Sites (2)
The Registrant has been designated as a PRP under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 at two sites in
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 PRPs. With respect to one of the Plympton
sites, the Registrant has joined with other PRPs 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.
I-6
<PAGE>
Providence Site
During 1995, the Registrant 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 September 30, 1999,
approximately $3.0 million had been spent primarily on studies and the
formulation of remediation work plans at this site. In accordance with state
laws, such a study is monitored by the DEM. The purpose of this study was to
determine the extent of environmental contamination at the site. The Registrant
has completed the study which indicated that remediation will be required for
two-thirds of the property. The remediation began in June 1999 and is
anticipated to be completed during the next fiscal year. During this remediation
period, the remaining one-third of the property will also be investigated and
remediated if necessary.
The Registrant has compiled a preliminary range of costs, based on removal
and off-site disposal of contaminated soil, ranging from $7.0 million to in
excess of $9.0 million. However, because of the uncertainties associated with
environmental assessment and remediation activities, the future cost of
remediation could be higher than the range noted. Based on the proposals for
remediation work, the Registrant has a net accrual of $6.1 million at September
30, 1999 for anticipated future remediation costs at this site.
Westerly Site
Tests conducted following the discovery of an abandoned underground oil
storage tank at the Registrant's Westerly, Rhode Island operations center in
1996 confirmed the existence of coal tar waste at this site. As a result, the
Registrant completed a site characterization test. Based on the findings of that
test, the Registrant concluded that remediation would be required. As of
September 30, 1999, the Registrant had removed an underground oil storage tank
and regulators containing mercury disposed of on the site, as well as some
localized contamination. The costs associated with the site characterization
test and partial removal of soil contaminants were shared equally with the
former owner of the property. The Registrant is currently engaged in
negotiations to transfer the property back to the previous owner, who would
continue to remediate the site. The purchase and sale agreement is anticipated
to be signed during fiscal 2000, at which time the previous owner will assume
responsibility for removal of coal tar waste on the site. The Registrant remains
responsible for cleanup of any mercury released into adjacent water.
Contamination from scrapped meters and regulators, which was discovered in 1997,
was reported to the DEM and the Rhode Island Department of Health and the
Registrant has completed the necessary remediation. Costs incurred by the
Registrant to remediate this site were approximately $.1 million.
Allens Avenue Site
In November 1998, the Registrant received a letter of responsibility from
DEM relating to possible contamination on previously-owned property on Allens
Avenue in Providence. The current operator of the property has been similarly
notified. Both parties have been designated as PRPs. A work plan has been
created and approved by DEM. An investigation has begun in order to determine
the extent of the problem and the Registrant's responsibility. The Registrant
has entered into a cost sharing agreement with the current operator of the
property, under which the Registrant will be held responsible for approximately
20 percent of the costs related to the investigation. Total estimated costs of
testing at this site are anticipated to be approximately $.2 million. Until the
results of the investigation are known, the Registrant cannot offer any
conclusions as to its responsibility.
General
In prior rate cases filed with the RIPUC, 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. Due to the magnitude of the Registrant's environmental
I-7
<PAGE>
investigation and remediation expenditures, the Registrant sought current
recovery for these amounts. As a result, in accordance with the Price
Stabilization Plan Settlement Agreement described in Note 10, 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 10-year period, in accordance with the levels
authorized in Energize RI. 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. As of
September 30, 1999, the Registrant has incurred environmental assessment and
remediation costs of $4.7 million and has a net accrual of $6.1 million for
future costs.
Management has begun discussions with other parties who may assist the
Registrant in paying the costs associated with the remediation of 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.
Other Standards
- ---------------
The Registrant is also subject to standards prescribed by the Secretary of
Transportation under the Natural Gas Pipeline Safety Act of 1968 with respect to
the design, installation, testing, construction and maintenance of pipeline
facilities. The enforcement of these standards has been delegated to the RIPUC
and management believes that the Registrant is in substantial compliance with
all present requirements imposed by such agency.
ITEM 2. PROPERTIES
- ------------------
In addition to the Registrant's gas distribution system and storage
facilities, which constitute the principal properties of the Registrant, the
Registrant owns several buildings and other facilities in Newport, Providence
and Westerly that house its offices and provide floor space for its distribution
and maintenance facilities.
Substantially all the foregoing properties are mortgaged as collateral for
the outstanding First Mortgage Bonds of the Registrant.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Registrant is involved in legal and administrative proceedings in the
normal course of business, including certain proceedings involving material
amounts in which claims have been or may be made. However, management believes,
after review of insurance coverage and consultation with legal counsel, that the
ultimate resolution of the legal proceedings to which it is or can at the
present time be reasonably expected to be a party, will not have a materially
adverse effect on the Registrant's results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
Not applicable.
I-8
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ---------------------------------------------------------------------
MATTERS
-------
Not applicable. The Registrant is a wholly-owned subsidiary of Providence
Energy Corporation.
II-1
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
THE PROVIDENCE GAS COMPANY
SELECTED FINANCIAL DATA
SUMMARY OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
(Thousands, except per share amounts)
1999 1998 1997 1996 1995
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 179,339 $ 184,326 $ 210,673 $ 210,601 $ 180,043
Cost of gas sold 82,586 91,648 117,357 118,051 98,985
---------- ---------- ---------- --------- ---------
Operating margin 96,753 92,678 93,316 92,550 81,058
---------- ---------- ---------- --------- ---------
Operating expenses, excluding taxes 62,048 59,296 59,540 59,673 53,536
Taxes, other than income 13,561 13,092 13,456 12,831 11,597
Federal income taxes 4,728 4,342 4,489 4,418 3,027
---------- ---------- ---------- --------- ---------
Total operating expenses 80,337 76,730 77,485 76,922 68,160
---------- ---------- ---------- --------- ---------
Operating income 16,416 15,948 15,831 15,628 12,898
Other, net 935 284 371 976 798
---------- ---------- ---------- --------- ---------
Income before interest expense 17,351 16,232 16,202 16,604 13,696
Interest expense 7,556 7,473 7,431 7,294 7,181
---------- ---------- ---------- --------- ---------
Net income 9,795 8,759 8,771 9,310 6,515
Dividends on preferred stock 348 487 626 696 696
---------- ---------- ---------- --------- ---------
Net income applicable to common stock 9,447 8,272 8,145 8,614 5,819
Common dividends 4,775 4,776 4,777 4,627 4,577
---------- ---------- ---------- --------- ---------
Earnings reinvested in the corporation $ 4,672 $ 3,496 $ 3,368 $ 3,987 $ 1,242
========== ========== ========== ========= =========
Weighted average common shares outstanding 1,243.6 1,243.6 1,243.6 1,243.6 1,243.6
========== ========== ========== ========= =========
Earnings per common share $ 7.60 $ 6.65 $ 6.55 $ 6.93 $ 4.68
========== ========== ========== ========= =========
Common dividends $ 3.84 $ 3.84 $ 3.84 $ 3.72 $ 3.68
========== ========== ========== ========= =========
</TABLE>
OTHER FINANCIAL DATA
SEPTEMBER 30
<TABLE>
<CAPTION>
(Thousands, except per share amounts)
1999 1998 1997 1996 1995
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Gas plant-at original cost $ 334,310 $ 313,549 $ 290,614 $ 270,149 $ 253,438
Gas plant-net of depreciation 218,717 193,451 181,979 171,453 161,956
Total assets 261,205 228,614 242,143 237,515 214,727
Capitalization:
Long-term debt 88,976 78,021 72,372 72,455 74,482
Redeemable cumulative preferred stock 3,200 4,800 6,400 8,000 8,000
Common Stockholder's investment 91,177 81,641 78,240 74,844 71,020
Shares of common stock at year-end 1,243.61 1,243.61 1,243.61 1,243.61 1,243.61
Book value per share $ 73.32 $ 65.65 $ 62.91 $ 60.18 $ 57.11
========== ========== ========== ========= ===========
</TABLE>
II-2
<PAGE>
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Summary
- -------
The Registrant's operating revenues, operating margin and net income for
the twelve months ended September 30 are as follows:
(000's)
Percent
1999 1998 Change Change
-------- -------- --------- -------
Operating revenues $179,339 $184,326 $(4,987) (2.7)
Operating margin 96,753 92,678 4,075 4.4
Net income 9,795 8,759 1,036 11.8
Results of operations - 1999 VS 1998
Operating Margin
During the current year, weather was 1.3 percent warmer than last year. The
warmer temperatures served to decrease margin by approximately $.3 million
compared to last year. Despite warmer than normal weather for the year, margin
earned increased as a result of a one-time write-off of $1.5 million in 1998 of
previously deferred gas costs in connection with Energize RI, which became
effective October 1, 1997. Offsetting the warmer weather for the year was $2.0
million of the $2.45 million 1998 exogenous changes recovery, as discussed in
Note 10 in the accompanying Consolidated Financial Statements. Also, the
Registrant's customer growth has resulted in approximately $.6 million of
additional margin, and non-firm margin increased $.4 million when compared with
last year.
During April and May 1999, the Algonquin LNG, Inc. tank in Providence was
completely emptied in order to allow access for internal inspection and repairs,
which were completed in September 1999. As a result, 335 million cubic feet of
LNG was vaporized from the tank into the Registrant's distribution system. Since
the vaporized gas had a heat energy content approximately 30 percent higher than
the pipeline supplies normally used, the Registrant's customers' metered volumes
were lower because a smaller volume of gas produced the same quantity of energy.
This in turn adversely impacted margin.
Operating and Maintenance Expenses
The Registrant's operating and maintenance expenses decreased by
approximately $.3 million or .7 percent versus last year. This decrease was
partially attributable to cost control measures which were implemented in
response to warmer weather. These cost control measures were able to offset a
substantial portion of the cost of living and negotiated union contract salary
increases of approximately $.9 million, as well as inflationary increases in
general expenses of approximately $.5 million. Also contributing to the decrease
was a one-time reimbursement of approximately $.9 million for costs incurred
under a FERC-approved contract with Algonquin.
The Registrant continually reviews its operating expenses in order to keep
expenses as low as possible; however, expenses can vary from year to year.
Depreciation and Amortization
Depreciation and amortization expense increased approximately $3.1 million
or 22.9 percent versus last year. This increase is the result of increased
capital spending for Energize RI commitments; technology projects; Year 2000
costs, which were capitalized as authorized under the provisions of Energize RI;
and the amortization of environmental costs. Effective October 1, 1997, the
Registrant began amortizing environmental and Year 2000 costs over 10-year
and 5-year periods, respectively, in accordance with the levels authorized in
II-3
<PAGE>
Energize RI. The Registrant will have increased environmental amortization
expense in future years as its planned environmental remediation program
continues. Also, amortization expense for Year 2000 costs will increase in the
future as higher levels of costs have been incurred from those originally
anticipated.
Taxes
Taxes increased approximately $.9 million or 4.9 percent versus last year.
The increase in taxes is primarily due to local property taxes which have
increased as a result of capital spending and Federal income taxes which have
increased as a result of increased pretax income.
Other, Net
Other, net has increased approximately $.7 million versus last year.
Since February 1999, the Registrant has provided monitoring and
communication services to the PNGTS. Under its contract, the Registrant hosts
PNGTS' Supervisory Control and Data Acquisition System, continually monitoring
system operations and receiving and forwarding emergency phone calls. The
Registrant has recognized as other, net approximately $.2 million in fees for
the performance of these services. The contract is a one year renewable
contract, subject to termination by either party upon six months prior written
notice. PNGTS has notified the Registrant that they will put the contract to bid
for the contract year beginning February 17, 2000.
In a decision issued September 1, 1998, the Division rejected allegations
made in a complaint brought by Aurora Natural Gas that the Registrant provided
advance information and undue preference in pricing to its marketing affiliate,
ProvEnergy Services, in violation of the Division's regulations. As part of its
investigation, the Division ordered marketer refunds of approximately $.3
million. The Division ordered this refund based on its belief that an unfair
rate was charged to customers who did not have operational telemeters in place
when they began service under the transportation tariff. The Registrant filed a
Request for Reconsideration and Rehearing, and on December 15, 1998 the Division
issued a Reconsideration Order that rescinded the fines stemming from five of
the original 23 violations of the Regulations for Utility Interaction with Gas
Marketers. The Division further offered the Registrant an opportunity to
demonstrate its claim that the ordered refunds would place FT-2 marketers in a
better position than marketers who served FT-1 customers.
On May 6, 1999, the Registrant and Aurora jointly submitted a Stipulation
and Settlement to the Division that: (i) Aurora's complaint in this proceeding
is dismissed; (ii) the prior orders of the Division in the proceeding are
dismissed; (iii) no refunds by the Registrant are required or appropriate in
connection with the proceeding; and (iv) the Registrant does not contest the
payment of $18,000 to the Division in connection with this proceeding. Following
a June 16, 1999 hearing on the Stipulation, the Division issued an order on
September 23, 1999 approving the Stipulation and Settlement provided that the
Registrant's ratepayers are held harmless from the financial transactions
stemming from the settlement, that the Registrant withdraw its appeal in
Providence County Superior Court, and that the Division's prior orders are
vacated as described in the order. The Registrant and Aurora accepted the
Division's order. This decision resulted in the reversal of the reserve
established under the original order, which contributed to the increase in
other, net this year.
Interest Expense
Interest expense increased approximately $.1 million or 1.1 percent over
last year. Long-term interest expense increased as a result of the Registrant's
Series T First Mortgage Bond issuance in February 1999, which refinanced short-
term borrowings. The Series T issuance enabled the Registrant to secure a
favorable long-term financing rate. However, this increase was partially offset
by the Series S First Mortgage Bond issuance in April 1998, which refinanced
higher cost long-term debt.
II-4
<PAGE>
Future Outlook
A) Regulatory
Under Energize RI, the Registrant may earn up to 10.9 percent, but not less
than 7.0 percent, annually on its average common equity, which is capped at
$81.0 million, $86.2 million, and $92.0 million in fiscal 1998, 1999, and 2000,
respectively. In the event that the Registrant earns in excess of 10.9 percent
or less than 7.0 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 to be determined by all parties to the Plan and approved
by the RIPUC.
As part of Energize RI, the Registrant is permitted to file annually with
the Division for the recovery of exogenous changes which may occur during the
three-year term of the Plan. Exogenous changes are defined as "...significant
increases or decreases in the Registrant's costs or revenues which are beyond
the Registrant's reasonable control." Any disputes between the Registrant and
the Division regarding either the nature or quantification of the exogenous
changes are to be resolved by the RIPUC. The impact of any exogenous changes
will be debited or credited to a regulatory asset or liability account
throughout the term of Energize RI and will be recovered or refunded at the
expiration of the Plan through a method to be determined.
In fiscal 1998, the Registrant did not earn its allowed rate of return
primarily as a result of the extremely warm winter weather and the loss of non-
firm margin resulting from the competitive price of oil in the industrial
market. The Registrant believed the causes of these two events were beyond its
reasonable control and thus deemed them to be exogenous changes. In March 1999,
the Registrant reached an agreement with the Division which allowed it to
recover $2.45 million in revenue losses attributable to exogenous changes
experienced by the Registrant in fiscal 1998. The RIPUC reviewed the exogenous
changes agreement to ensure consistency with the terms of Energize RI and
affirmed the agreement at its May 28, 1999 open meeting.
During fiscal 1999, the Registrant recognized into revenue $2.45 million
for the exogenous changes recovery, and at year-end has deferred approximately
$.5 million of revenue under the provisions of the earnings cap of Energize RI.
The Registrant intends to file for recovery of exogenous changes
experienced in 1999 which resulted from factors similar to 1998. Absent further
exogenous recovery and/or other factors such as colder than normal weather, the
Registrant's ability to earn a 10.9 percent return on average common equity in
the final year of Energize RI is substantially impaired.
On August 31, 1999, the Registrant's settlement agreement for enhancements
to its Business Choice program was approved by the RIPUC in Docket 2902 and
became effective September 1, 1999. Specifically, there will now be rolling
enrollment for transportation service, which will allow customers to execute
transportation agreements throughout the year, rather than during limited
enrollment periods. The program now has approximately 1,700 firm transportation
customers with annual deliveries of over 5 billion cubic feet per year, which is
approximately 25 percent of the Registrant's total annual firm deliveries. There
are 14 marketers serving the Registrant's customers and transporting on the
system. Additional enhancements to the Business Choice program were filed with
the RIPUC under a supplemental settlement agreement in Docket 2902 on October 8,
1999 and were approved on October 27, 1999. These enhancements do not generate
additional revenue.
II-5
<PAGE>
B) Business Opportunities
Energize RI provides opportunities for the Registrant to expand sales. For
example, high pressure service to Quonset/Davisville Industrial Port & Commerce
Park, a key area for State economic development, provides opportunities for
sales growth as commercial and industrial businesses locate within the park. In
addition, Demand Side Management, an equipment rebate program, provides
opportunities to expand sales to non-traditional applications, such as air
conditioning and fuel cells. The Registrant has redirected its sales and
marketing efforts to leverage Energize RI, as well as other opportunities to
promote sales growth within its service territory.
C) Merger Agreement
On November 15, 1999, ProvEnergy, the Registrant's parent company, and
Southern Union announced that their Boards of Directors had unanimously approved
a definitive merger agreement. See Note 2 in the accompanying Consolidated
Financial Statements for additional information.
D) New Accounting Pronouncements
Please refer to Note 11 of the accompanying Consolidated Financial
Statements.
Results of operations - 1998 VS 1997
Operating Margin
- ----------------
During 1998, the Registrant experienced weather that was 8.0 percent warmer
than 1997. The warmer temperatures resulted in decreased margin of approximately
$4.0 million compared to 1997. Offsetting the warmer than normal weather was
$7.2 million of margin generated under Energize RI. The components of this
additional margin included $10.4 million associated with adjusting the GCC
offset by the funding of the Low-Income and Demand Side Management programs of
$1.7 million and the write-off of $1.5 million of previously deferred gas costs.
In 1997, the Registrant funded the Demand Side Management and Low-Income
Weatherization programs under the IRP for $.7 million. Additionally, non-firm
margin decreased $2.2 million when compared with 1997 due to an unfavorable
pricing difference between natural gas and alternate fuels.
As part of Energize RI, the Mechanism under the IRP was terminated in
September 1997. In 1997, the Registrant recorded $1.5 million in additional
margin as a result of this Mechanism. Thus, a decrease in margin from 1997 to
1998 occurred because this Mechanism was no longer available in 1998.
Operating and Maintenance Expenses
- ----------------------------------
Overall, operating and maintenance expenses decreased approximately $1.3
million or 2.8 percent versus 1997. This decrease was primarily attributable to
a decrease in the Registrant's bad debts. The decrease in bad debts was
attributable to improved collection experience and the implementation of new
credit policies, as well as decreased operating revenues from warmer than normal
weather. The Registrant's other operating and maintenance expenses were
essentially flat as a result of additional cost management due to the warmer
weather.
Depreciation and Amortization Expense
- -------------------------------------
Depreciation and amortization expense increased approximately $1.1 million
or 8.7 percent versus 1997. This increase was the result of increased capital
spending for Energize RI commitments as well as the amortization of previously
deferred environmental costs. Effective October 1, 1997, the Registrant began
amortizing environmental costs over a 10-year period in accordance with the
levels approved in Energize RI.
II-6
<PAGE>
Taxes
- -----
Taxes decreased approximately $.5 million or 2.8 percent versus 1997. The
overall change in taxes was primarily due to a decrease in gross earnings tax as
a result of the warmer weather experienced in 1998 as compared to 1997. The
decrease was partially offset by an increase in local property taxes as a result
of capital spending.
Other, net
- ----------
Other, net was essentially flat versus 1997.
Interest Expense
- ----------------
Interest expense for 1998 was flat when compared to 1997. The Registrant's
long-term interest expense increased by approximately $.3 million as a result of
the Series S First Mortgage Bond issuance in April 1998. Offsetting the increase
was a decrease in weighted average short-term borrowings as a result of the
Series S First Mortgage Bond issuance, which caused short-term interest expense
to decrease.
Liquidity and Capital Resources
The Registrant's cash flow from operating activities decreased
approximately $16 million for the fiscal year ended September 30, 1999 compared
to 1998. The current year cash flow decreased as a result of the prior year
reflecting receipt of funds in the first quarter of fiscal 1998 from the sale of
the Registrant's working gas in storage to Duke Energy Trading and Marketing,
L.L.C. under the terms of the parties' gas supply agreement. This decrease in
operating cash flow was offset by a temporary increase in accounts payable this
year related to the timing of such gas supply payments.
Capital expenditures for the fiscal year ended September 30, 1999 of $39.1
million reflect an increase of $9.1 million or 30.5 percent when compared to $30
million last year. This spending increase was due primarily to the Registrant's
technology expenditures related to Year 2000, system enhancements and
environmental remediation expenditures. Capital expenditures for fiscal years
2000 and 2001 are expected to be approximately $53.1 million in total.
During the current fiscal year, the Registrant's cash provided by financing
activities increased $25.3 million. The Registrant issued $15 million in Series
T First Mortgage Bonds on February 8, 1999. The Series T bonds are for a 30 year
term at an interest rate of 6.5 percent. The Registrant has received an order
from the Division which permits the amortization of the Series M bond repurchase
premium over the life of the Series T bonds. The proceeds were used to reduce
borrowings under its lines of credit as well as for general corporate purposes.
In September 1999, the Registrant received a capital contribution of $4.8
million from Providence Energy Corporation in order to fund working capital
requirements.
Year 2000 Update
The Registrant's Year 2000 Project is substantially complete. The Project
addresses the problem arising from the use in software programs and computing
infrastructures of two-digit years to define the applicable year, rather than
four-digit years, and from time-sensitive software that may recognize a date
using "00" as the last two digits of the year 1900, rather than the year 2000.
Readiness
The Registrant recognizes that the products and services that the
Registrant provides to its customers are essential, and senior management has
made Year 2000 readiness a top priority. The Registrant's Year 2000 Project
Office has been working with two international consulting firms to ensure the
continuity of mission critical business systems and processes before and beyond
the Year 2000. The Registrant has organized the Project around the following
four major areas:
II-7
<PAGE>
1. Information Technology Systems
The Registrant continues to implement its technology plan, which includes
the migration from a mainframe centric to a client server centric environment.
The migration includes the replacement of CIS which supports the business
functions of customer inquiry, service orders, and billing. The migration also
includes the replacement of business applications such as financial, human
resources, and procurement with a new client server based financial system.
These new business applications have been represented to be Year 2000 ready by
their respective vendors. Validation testing of these systems for Year 2000
readiness has been completed. Both the CIS and client server based financial
system have been successfully placed into operation.
The Registrant completed an inventory and assessment of its existing IT
systems and IT infrastructure in March 1999. All mission critical and important
systems have been remediated and tested for Year 2000 readiness.
The Registrant has implemented procurement policies as part of its efforts
to ensure Year 2000 readiness. These policies address any future changes to the
Registrant's IT systems environment and its future acquisitions of IT systems.
2. Embedded Systems
Embedded microprocessors are found in equipment deployed in the
Registrant's distribution and facility operations. The distribution area
includes, but is not limited to, the monitoring, storage, measurement, and
control of the flow of natural gas. The facility area includes, but is not
limited to, back-up power supply, HVAC, and security at the Registrant's
offices.
The Registrant has successfully completed the assessment, remediation, and
testing of all mission critical and important embedded systems including their
Supervisory Control and Data Acquisition gas distribution system.
3. Upstream/Downstream
The Registrant has contacted all of its major suppliers, and none have
indicated concern for potential business disruption.
The Registrant's major suppliers critical to the delivery of natural gas to
its system include interstate pipelines, Duke Energy Trading and Marketing, New
England Electric System, and Bell Atlantic, which have indicated that they are
following comprehensive programs on a timely schedule designed to achieve Year
2000 readiness. While the Registrant cannot guarantee Year 2000 readiness of
these and other suppliers, the information received from them indicates that
they expect to fulfill their obligations to the Registrant on and after January
1, 2000. The Registrant will continue to monitor the status of all critical
suppliers throughout 1999. Any risk areas that surface as a result of these
assessments are being addressed in contingency planning.
The Registrant is actively participating with the Rhode Island Y2K
Association which acts as a communication forum for key customers as well as the
other essential suppliers of services such as telecommunications, water, and
electric. The Registrant is also communicating its Year 2000 readiness to
customers in bill stuffers, on its website and in state-sponsored "town
meetings" throughout its service territory. On February 17, 1999, the Registrant
provided testimony to the RIPUC regarding the Registrant's Year 2000 readiness
and since then has filed quarterly updates with the RIPUC.
4. Contingency Planning
The Registrant has contingency plans in place for response to certain
emergency operational situations. In addition, the Registrant has completed over
50 workshops to develop actionable contingency plans which will specifically
address risks to the top 72 business processes related to the Year
II-8
<PAGE>
2000 computer problem. Such contingency plans include using manual procedures
and arranging for alternative suppliers. The Registrant has developed Year 2000
contingency plans for all mission critical and important business processes. The
Registrant participated in a Year 2000 communications drill with other New
England Gas Association local distribution companies and its pipeline supplier,
Tennessee Pipeline Company. This planning will help provide mutual aid and
assistance if necessary.
Year 2000 Costs
The Registrant is capitalizing Year 2000 costs and will amortize these
costs over a five-year period consistent with the regulatory levels as
authorized by the RIPUC under the Energize RI program. As of September 30, 1999,
the Registrant has deferred Year 2000 costs of approximately $7.6 million and
has amortized $.3 million of these costs. Total costs for Year 2000 are expected
to range from $7.6 million to $8.0 million. These estimated costs include
external contractors and service providers and the balance of the unrecovered
legacy CIS system that has been replaced, as well as other costs associated with
the discontinuance of the operation of the mainframe. These estimates do not
include Year 2000 costs for implementing the new CIS and client server based
financial system pursuant to the Registrant's ongoing technology plan.
Additionally, the Registrant does not separately track the internal costs
incurred for the Year 2000 project. Such costs are principally the related
payroll costs for the information systems group. Internal costs, except for the
Year 2000 project manager, have been expensed as incurred.
These cost estimates are based on management's best current estimates which
were derived utilizing numerous assumptions of future events, including the
continued availability of technological and certain other resources, the
accuracy of third party assurances and other factors. There can be no guarantee
that these estimates will be achieved, and actual results may differ from those
discussed above.
Risk Assessment
No amount of preparation and testing can guarantee Year 2000 readiness.
However, the Registrant believes that it has taken and will take appropriate
preventative measures designed to minimize disruption before, during, and after
January 1, 2000.
A disruption in the extraction or processing, transmission or storage of
gas, or its distribution due to Year 2000 problems experienced by the
Registrant's gas suppliers could prevent those suppliers from delivering a
sufficient amount of gas to enable the Registrant to serve certain customer
segments. Even if the flow of gas is not disrupted, customers may not be able to
receive gas if electrical service is disrupted.
Because of the difficulty of assessing Year 2000 readiness of these
suppliers and others outside the control of the Registrant, the Registrant
considers potential disruptions by these third parties to present the
"reasonably likely worst case scenario". The Registrant's inability to serve its
customers could result in increased costs, loss of revenue, and potential
claims.
This Year 2000 update contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These forward-
looking statements are subject to risks and uncertainties and actual results may
differ materially from those described herein.
II-9
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
THE PROVIDENCE GAS COMPANY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30
<TABLE>
<CAPTION>
(Thousands of Dollars) 1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Gas plant, at original cost (notes 1, 5, 8, and 10) $334,310 $313,549
Less - accumulated depreciation and
plant acquisition adjustments (notes 1 and 10) 125,144 123,885
-------- --------
209,166 189,664
-------- --------
Current assets:
Cash and temporary cash investments (notes 1 and 9) 982 798
Accounts receivable, less allowance of
$1,999 in 1999 and $2,137 in 1998 (notes 1 and 4) 9,030 9,938
Unbilled revenues (note 1) 2,707 1,610
Inventories, at average cost -
Materials, supplies, and fuels 994 1,177
Prepaid and refundable taxes (note 3) 3,250 4,417
Prepayments 1,897 1,663
-------- --------
18,860 19,603
-------- --------
Deferred charges and other assets (notes 1, 4, 7 and 10) 23,460 15,378
-------- --------
Deferred environmental costs (notes 8 and 10) 9,719 3,969
-------- --------
Total assets $261,205 $228,614
======== ========
CAPITALIZATION AND LIABILITIES
Capitalization (see accompanying statement) $183,353 $164,462
-------- --------
Current liabilities:
Notes payable (notes 6 and 9) 11,800 9,720
Current portion of long-term debt (note 5) 3,393 3,050
Accounts payable (notes 7 and 9) 9,586 7,332
Accrued compensation (note 8) 1,542 1,225
Accrued environmental expense (notes 8 and 10) 6,145 -
Accrued interest 1,630 1,457
Accrued taxes 2,874 2,537
Accrued vacation 1,724 1,597
Accrued workers compensation 595 530
Customer deposits 2,923 2,998
Deferred revenue (note 1) 315 -
Other 2,838 2,247
-------- --------
45,365 32,693
-------- --------
Deferred credits, reserves, and other liabilities:
Accumulated deferred Federal income taxes (note 3) 23,128 21,351
Unamortized investment tax credits (note 3) 2,040 2,197
Accrued environmental expense (note 8) - 1,750
Accrued pension (note 7) 6,825 5,681
Other (note 6) 494 480
-------- --------
32,487 31,459
-------- --------
Commitments and contingencies (notes 8 and 10)
Total capitalization and liabilities $261,205 $228,614
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-10
<PAGE>
THE PROVIDENCE GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED
SEPTEMBER 30
<TABLE>
<CAPTION>
(Thousands, except per share amounts) 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 179,339 $ 184,326 $ 210,673
Cost of gas sold 82,586 91,648 117,357
------------ ------------ ------------
Operating margin 96,753 92,678 93,316
------------ ------------ ------------
Operating expenses:
Operation and maintenance 45,483 45,813 47,135
Depreciation and amortization 16,565 13,483 12,405
Taxes -
State gross earnings 5,316 5,363 6,023
Local property and other 8,245 7,729 7,433
Federal income (note 3) 4,728 4,342 4,489
------------ ------------ ------------
Total operating expenses 80,337 76,730 77,485
------------ ------------ ------------
Operating income 16,416 15,948 15,831
Other, net (notes 1 and 3) 935 284 371
------------ ------------ ------------
Income before interest expense 17,351 16,232 16,202
------------ ------------ ------------
Interest expense:
Long-term debt 6,806 6,362 6,042
Other 1,138 1,365 1,609
Interest capitalized (388) (254) (220)
------------ ------------ ------------
7,556 7,473 7,431
------------ ------------ ------------
Net income 9,795 8,759 8,771
Dividends on preferred stock (note 5) 348 487 626
------------ ------------ ------------
Net income applicable to common stock $ 9,447 $ 8,272 $ 8,145
============ ============ ============
Net income per common share - basic (note 12) $ 7.60 $ 6.65 $ 6.55
============ ============ ============
Net income per common share - diluted (note 12) $ 7.60 $ 6.65 $ 6.55
============ ============ ============
Weighted average number of shares outstanding:
Basic 1,243.6 1,243.6 1,243.6
============ ============ ============
Diluted 1,243.6 1,243.6 1,243.6
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-11
<PAGE>
THE PROVIDENCE GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
(Thousands of Dollars) 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used for)
Operating Activities:
Net income $ 9,795 $ 8,759 $ 8,771
Items not requiring cash:
Depreciation and amortization 16,565 13,483 12,405
Charges as a result of regulatory action (2,357) 1,500 -
Deferred Federal income taxes 829 1,063 622
Amortization of investment tax credits (158) (157) (156)
Changes in assets and liabilities
which provided (used) cash:
Accounts receivable 908 21,010 881
Unbilled revenues (1,097) 1,048 (325)
Deferred gas costs - (2) 5,977
Materials, supplies, and fuels 183 (11) (2,222)
Prepaid and refundable taxes 1,758 (1,434) (186)
Prepayments (234) (697) 499
Accounts payable 934 (3,282) (366)
Accrued compensation 317 (547) 150
Accrued interest 173 264 (83)
Accrued taxes 577 8 662
Accrued vacation, accrued workers
compensation, customer deposits, and other 930 (54) (1,181)
Accrued pension 1,144 (952) 1,060
Deferred charges and other (2,303) 3,945 1,323
----------- ----------- -----------
Net cash provided by operations 27,964 43,944 27,831
----------- ----------- -----------
Investment activities:
Expenditures for property, plant, and
equipment, net (39,104) (29,971) (19,764)
----------- ----------- -----------
Financing activities:
Issuance of mortgage bonds 15,000 15,000 -
Redemption of preferred stock (1,600) (1,600) (1,600)
Issuance of long-term debt - - 1,345
Payments on long-term debt (3,833) (3,645) (2,164)
Premium payment on bonds - (1,392) -
Repurchase of mortgage bonds - (6,363) -
Increase (decrease) in notes payable, net 2,080 (10,690) (390)
Cash dividends on preferred shares (note 5) (348) (487) (626)
Cash dividends on common shares (4,775) (4,776) (4,777)
Capital contribution received from parent 4,800 - -
----------- ----------- -----------
Net cash provided (used) by financing
activities 11,324 (13,953) (8,212)
----------- ----------- -----------
Increase (decrease) in cash and
cash equivalents 184 20 (145)
Cash and cash equivalents at beginning
of year 798 778 923
----------- ----------- -----------
Cash and cash equivalents at end of year $ 982 $ 798 $ 778
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for -
Interest (net of amount capitalized) $ 7,069 $ 6,998 $ 7,305
Income taxes (net of refunds) $ 3,400 $ 4,198 $ 2,215
Schedule of noncash investing activities
Equipment financed through capital leases $ 131 $ - $ 437
Equipment financed through other
long-term debt $ - $ - $ 1,983
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-12
<PAGE>
THE PROVIDENCE GAS COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
SEPTEMBER 30
<TABLE>
<CAPTION>
(Thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common equity (notes 5 and 7):
Common stock, $1 Par, Authorized - 2,500 shares
Outstanding - 1,244 shares in 1999 and 1998 $ 1,244 $ 1,244
Amount paid in excess of par 42,454 37,590
Retained earnings 47,479 42,807
------------ ------------
91,177 81,641
------------ ------------
Cumulative preferred stock (notes 5 and 9):
Redeemable 8.7% series, $100 Par
Authorized - 80 shares
Outstanding - 32 shares in 1999 and
48 shares in 1998 3,200 4,800
------------ ------------
Long-term debt (notes 5, 8 and 9):
First Mortgage Bonds, secured by property -
Series M, 10.25%, due July 31, 2008 1,819 2,728
Series N, 9.63%, due May 30, 2020 10,000 10,000
Series O, 8.46%, due September 30, 2022 12,500 12,500
Series P, 8.09%, due September 30, 2022 12,500 12,500
Series Q, 5.62%, due November 30, 2003 8,000 9,600
Series R, 7.50%, due December 15, 2025 15,000 15,000
Series S, 6.82%, due April 20, 2018 15,000 15,000
Series T, 6.50%, due February 1, 2029 15,000 -
Other long-term debt 1,994 2,573
Capital leases 556 1,170
------------ ------------
92,369 81,071
Less-current portion 3,393 3,050
------------ ------------
Long-term debt, net 88,976 78,021
------------ ------------
Total capitalization $ 183,353 $ 164,462
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-13
<PAGE>
THE PROVIDENCE GAS COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON STOCKHOLDER'S INVESTMENT
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Amount
Shares Paid in
------
Issued and Outstanding Excess Retained
----------------------
(Thousands) Number Amount of Par Earnings
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 30, 1996 1,244 $ 1,244 $ 37,657 $ 35,943
Add (deduct):
Net income - - - 8,771
Cash dividends on common shares
($3.84 per share) - - - (4,777)
Cash dividends on preferred
shares ($8.70 per share) - - - (626)
Accrual for stock
compensation plans - - (110) -
Amortization of deferred
compensation - - 138 -
----------- ----------- ----------- -----------
Balance, September 30, 1997 1,244 1,244 37,685 39,311
Add (deduct):
Net income - - - 8,759
Cash dividends on common shares
($3.84 per share) - - - (4,776)
Cash dividends on preferred
shares ($8.70 per share) - - - (487)
Accrual for stock
compensation plans - - (266) -
Amortization of deferred
compensation - - 171 -
----------- ----------- ----------- -----------
Balance, September 30, 1998 1,244 1,244 37,590 42,807
Add (deduct):
Net income - - - 9,795
Cash dividends on common shares
($3.84 per share) - - - (4,775)
Cash dividends on preferred
shares ($8.70 per share) - - - (348)
Accrual for stock
compensation plans - - (117) -
Amortization of deferred
compensation - - 181 -
Capital contribution received
from parent - - 4,800 -
----------- ----------- ----------- -----------
Balance, September 30, 1999 1,244 $ 1,244 $ 42,454 $ 47,479
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
II-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of The
Providence Gas Company and its wholly-owned subsidiary. Revenues from the
natural gas distribution business are reflected in the accompanying Consolidated
Statements of Income to arrive at operating income. Results of operations which
are not regulated are presented after operating income in the accompanying
Consolidated Statements of Income. All significant intercompany transactions
have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Regulation
The Registrant is subject to regulation by the RIPUC. The accounting
policies of the Registrant conform to GAAP as applied in the case of regulated
public utilities and are in accordance with the regulator's accounting
requirements and rate-making practices.
Operating Revenues
Operating revenues are generated principally from natural gas activities.
The Registrant records accrued natural gas distribution revenues based on
estimates of gas volumes delivered and not billed at the end of an accounting
period in order to match revenues with related costs.
Lease Accounting
Previously, the Registrant leased water heaters and other appliances to
customers under finance leases. These leases are recorded on the accompanying
Consolidated Balance Sheets at the gross investment in the leases less unearned
income. Unearned income is recognized in such a manner as to produce a constant
periodic rate of return on the net investment in the finance leases.
Gas Plant
Gas plant is stated at the original cost of construction. In accordance
with the uniform system of accounts prescribed by the RIPUC, the difference
between the original cost of gas plant acquired and the cost to the Registrant
is recorded as a Plant Acquisition Adjustment and is being amortized over
periods ranging from 1 to 24 years.
The Registrant capitalizes the costs of all technology investments with the
exception of system maintenance costs, which are expensed unless deferral is
approved by its regulator.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which became effective for the Registrant in 1997, established accounting
standards for the impairment of long-lived assets. SFAS No. 121 also required
that regulatory assets which are no longer probable of recovery through future
revenues be charged to earnings. SFAS No. 121 has not impacted the Registrant's
financial position or results of operations for the years presented.
Depreciation
Depreciation is provided on the straight-line basis at rates approved by
the RIPUC which are designed to amortize the cost of depreciable plant over its
estimated useful life. The composite depreciation rate expressed as a
II-15
<PAGE>
percentage of the average depreciable gas plant in service was approximately
3.85 percent for 1999, 1998 and 1997.
The Registrant retires property units by charging original cost, cost of
removal, including environmental investigation and remediation costs, and
salvage value to accumulated depreciation. Due to the magnitude of
environmental investigation and remediation costs, these amounts have been
separately stated in the accompanying Consolidated Balance Sheets.
Gas Charge Clauses
In May 1996, the RIPUC approved a Rate Design Settlement Agreement. The
Agreement included changes to the Registrant's gas cost recovery mechanism.
Specifically, the Agreement replaced the previous CGA with the GCC effective
June 2, 1996. In addition to the commodity and related pipeline transportation
costs historically included in the CGA, the GCC provided for the recovery of:
(1) inventory financing costs; (2) working capital associated with gas supply
purchases; (3) bad debt expenses associated with the gas revenue portion of
customer bills; and (4) a substantial portion of liquefied natural gas operating
and maintenance expenses, all of which were previously recovered in base rates.
Similar to the former CGA, the GCC provided for reconciliation of total gas
costs billed with the actual cost of gas incurred. Any excess or deficiency in
amounts billed as compared to costs incurred was deferred and either refunded
to, or recovered from, customers over a subsequent period. As a result of the
Price Stabilization Plan Settlement Agreement described in Note 10, the GCC will
be suspended for the period from October 1, 1997 through September 30, 2000. Any
excess or deficiency in amounts billed as compared to costs incurred will be
retained or borne by the Registrant during this period.
Allowance for Funds Used During Construction
The Registrant capitalizes interest and an allowance for equity funds in
accordance with established policies of the RIPUC. The rates used are based on
the actual cost of debt and the allowed equity return. Interest capitalized is
shown as a reduction of interest expense and the equity allowance is included in
other, net in the accompanying Consolidated Statements of Income.
Deferred Charges and Other Assets
The Registrant defers and amortizes certain costs in a manner consistent
with authorized or probable rate-making treatment.
Deferred financing costs are amortized over the life of the related
security while the remaining deferred regulatory charges and other assets are
amortized over a recovery period specified by the RIPUC.
Deferred Charges and Other Assets include the following:
(thousands of dollars) 1999 1998
- ----------------------------------------------------
Year 2000 costs $ 7,315 $ 2,518
Pension costs 7,020 6,270
Unamortized debt expense 3,888 3,204
Exogenous recovery 2,450 -
Cost of fuel assistance program 817 895
Other deferred charges 1,970 2,491
------- -------
Total $23,460 $15,378
======= =======
Temporary Cash Investments
Temporary cash investments are short-term, highly liquid investments with
original maturities to the Registrant of not more than 90 days.
Reclassifications
Certain prior year amounts have been reclassified for consistent
presentation with the current year.
II-16
<PAGE>
2. SUBSEQUENT EVENT - MERGER
On November 15, 1999, ProvGas' parent, Providence Energy Corporation, and
Southern Union announced that their Boards of Directors unanimously approved a
definitive merger agreement. ProvEnergy will serve as Southern Union's
headquarters for its New England operations. The agreement calls for Southern
Union to merge with ProvEnergy in a transaction valued at approximately $400
million, including assumption of debt. Under the terms of the agreement,
ProvEnergy's shareholders will receive $42.50 per share of ProvEnergy stock in
cash.
Upon completion of the merger, Southern Union will serve approximately 1.5
million gas, electric, oil, and propane customers in Rhode Island,
Massachusetts, Pennsylvania, Texas, Missouri, Florida, Connecticut, and Mexico.
ProvEnergy will operate as an autonomous division of Southern Union with
the headquarters remaining in Rhode Island, and pursuant to terms of the merger
agreement, there will be no material changes to the operations of ProvEnergy.
Southern Union will honor all of ProvEnergy's union contracts and no layoffs are
anticipated as a result of the transaction. ProvEnergy's Chairman and Chief
Executive Officer, James H. Dodge, will also become a member of Southern Union's
Board of Directors.
The transaction may require certain legal approvals, including the approval
of the holders of a majority of the outstanding ProvEnergy shares, the Division,
the RIPUC, the MDTE, the SEC, and FERC, as well as regulators in Texas,
Missouri, Pennsylvania, and Florida, where Southern Union currently has
operations.
3. FEDERAL INCOME TAXES
The Registrant records income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes", which requires deferred taxes to be provided for
all temporary differences.
The following is a summary of the provision for Federal income taxes for the
three years ended September 30:
(thousands of dollars) 1999 1998 1997
- ---------------------------------------------------------
Current $4,031 $3,336 $3,898
Deferred 829 1,063 622
------ ------ ------
Total Federal income tax
provision $4,860 $4,399 $4,520
====== ====== ======
Income tax is charged to the
following:
Operating expenses $4,728 $4,342 $4,489
Other, net 132 57 31
------ ------ ------
Total Federal income tax
provision $4,860 $4,399 $4,520
====== ====== ======
II-17
<PAGE>
The effective Federal income tax rates and the reasons for their
differences from the statutory Federal income tax rates are as follows:
1999 1998 1997
---- ---- ----
Statutory Federal income tax
rates 34.0% 34.0% 34.0%
Reversing temporary differences (.7) (.3) (.2)
Amortization of investment
tax credits (.4) (.4) (.4)
Other
.3 .1 .6
---- ---- ----
Effective Federal income tax
rate 33.2% 33.4% 34.0%
==== ==== ====
The Registrant's deferred tax assets and liabilities for each of the two
years in the period ended September 30 are the result of the following temporary
differences:
(thousands of dollars) 1999 1998
- --------------------------------------------------------------
Long-term deferred taxes
- ------------------------
Tax assets
Unamortized ITC $ 719 $ 774
Other 241 424
Tax liabilities
Property related (21,571) (21,801)
Pension costs (125) (237)
Deferred charges ( 2,392) (511)
------- -------
Net deferred tax liability included in
accompanying Consolidated Balance
Sheets $(23,128) $(21,351)
======== ========
Prepaid taxes
- -------------
Tax assets
Accounts receivable reserves $ 1,287 $ 921
Property tax reserves 61 (136)
Other 615 540
Tax liabilities
Employee severance 56 56
Other (139) (108)
-------- --------
Net prepaid taxes 1,880 1,273
Prepaid gross earnings tax and other 1,370 3,144
-------- --------
Net prepaid and refundable taxes
included in accompanying
Consolidated Balance Sheets $ 3,250 $ 4,417
======== ========
Investment tax credits are amortized through credits to other, net over the
estimated lives of related property.
II-18
<PAGE>
4. LEASE RECEIVABLES
Previously, the Registrant financed the installation of water heaters and
other appliances for its customers under one to three-year finance agreements.
Additionally, the Registrant leased water heaters and appliances to customers
under 10-year sales-type leases.
Future minimum lease payments to be received are:
(thousands of dollars)
- ----------------------
2000 $ 389
2001 295
------
684
Amount representing interest (99)
------
Amount representing principal $ 585
======
5. CAPITALIZATION
A. First Mortgage Bonds
In April 1998, the Registrant issued $15 million of Series S First Mortgage
Bonds. These First Mortgage Bonds bear interest at the rate of 6.82 percent and
mature in April 2018. The net proceeds provided by this indebtedness were used
to finance capital expenditures and pay down short-term debt.
In September 1998, the Registrant repurchased $6.4 million of Series M
First Mortgage Bonds. The cost of repurchase was comprised of $6.4 million in
principal and $1.4 million in premium. The premium will be amortized over 30
years, which is the life of the Series T First Mortgage Bonds, which the
Registrant issued in February 1999. The Registrant has received an order from
the Division which permits the amortization of the bond premium over the life of
this new debt.
The $15 million Series T First Mortgage Bonds bear interest at the rate of
6.5 percent and mature in February 2029. The proceeds received were used to
reduce borrowings under lines of credit as well as for general corporate
purposes.
The Registrant's First Mortgage Bonds are secured by a lien on substantially
all of the Registrant's tangible and real property.
As of September 30, 1999, the annual sinking fund requirements and
maturities for First Mortgage Bonds are as follows:
(thousands of dollars)
- ---------------------
2000 $ 2,509
2001 2,509
2002 1,601
2003 1,600
2004 and thereafter 81,600
-------
$89,819
=======
The terms of the various supplemental indentures, as supplemented, under
which the First Mortgage Bonds were issued, contain restrictions which provide
that dividends may not be paid on common stock of the Registrant under certain
conditions. Approximately $20 million of the Registrant's retained earnings were
available for dividends under the most restrictive terms of the Registrant's
First Mortgage Bond indenture.
B. Other Long-term Debt
During 1997, the Registrant financed equipment purchases of approximately
$3,328,000 through the issuance of long-term notes to IBM Credit Corporation.
The notes have five-year terms and interest rates ranging from 4.9 to 7.5
percent.
II-19
<PAGE>
As of September 30, 1999, the maturities of these long-term notes over the next
five years are $663,000 in 2000, $704,000 in 2001, $480,000 in 2002, $69,000 in
2003, and $78,000 in 2004 and thereafter.
C. Redeemable Preferred Stock
The Registrant's preferred stock, which consists of 80,000 shares of $100
par value, has an 8.7 percent cumulative annual dividend rate payable on a
quarterly basis, and has no voting power or privileges. The stock is subject to
a cumulative annual sinking fund requirement of 16,000 shares per year at par
($1,600,000) plus accrued or unpaid dividends, which commenced in February 1997.
Accordingly, 16,000 shares were redeemed by the Registrant at par value in
February 1999 and February 1998. Under the agreement, in addition to the sinking
fund redemptions required, the Registrant has the option to redeem the final
16,000 shares of preferred stock on March 1, 2000. The Registrant intends to
exercise this option.
6. NOTES PAYABLE
The Registrant meets seasonal cash requirements and finances capital
expenditures on an interim basis through short-term bank borrowings. As of
September 30, 1999, the Registrant had lines of credit totaling $53,000,000 with
borrowings outstanding of $11,800,000. The Registrant pays a fee for its lines
of credit rather than maintaining compensating balances. The weighted average
short-term interest rate for borrowings outstanding at the end of the year was
5.50 percent in 1999, 5.48 percent in 1998, and 5.79 percent in 1997.
7. EMPLOYEE BENEFITS
A. Retirement Plans
The Registrant has two pension plans providing retirement benefits for
substantially all of its employees. The benefits under the plans are based on
years of service and the employee's final average compensation. It is the
Registrant's policy to fund at least the minimum required contribution.
The following table sets forth the funding status of the pension plans and
amounts recognized in the Registrant's Consolidated Balance Sheets at September
30, 1999 and 1998:
(thousands of dollars) 1999 1998
- ----------------------------------------------------------------------
Accumulated benefit obligation, including
vested benefit obligation of $(47,613) as of
September 30, 1999 and $(45,865) as
of September 30, 1998 $(56,747) $(54,675)
======== ========
Projected benefit obligation for service
rendered to date $(72,064) (71,194)
Plan assets at fair value (primarily listed
stocks, corporate bonds and U.S. bonds) 83,022 74,752
-------- --------
Excess of plan assets over projected
benefit obligation 10,958 3,558
Unrecognized (gain) (19,763) (9,958)
Unrecognized prior service cost 4,040 2,540
Unrecognized net transition asset
being recognized over 15 years
from October 1, 1985 (136) (272)
-------- --------
Net accrued pension cost included in
accrued pension and accounts payable at
September 30, 1999 and 1998 $ (4,901) $ (4,132)
======== ========
II-20
<PAGE>
Net pension cost for fiscal years 1999, 1998, and 1997 included the following
components:
(thousands of dollars) 1999 1998 1997
- ---------------------------------------------------------------------
Service cost $ 2,277 $ 1,980 $ 1,818
Interest cost on benefit obligations 4,971 4,881 4,569
Actual return on plan assets (11,588) (1,334) (16,428)
Net amortization and deferral 5,109 (6,510) 10,506
-------- ------- --------
Net periodic pension cost 769 (983) 465
Adjustment due to regulatory
action (769) 983 (465)
-------- ------- --------
Net periodic pension cost recognized
in earnings $ - $ - $ -
======== ======= ========
In 1999, the discount rate and rate of increase in future compensation levels
used in determining the projected benefit obligation were 7.25 percent and 5
percent, respectively. The expected long-term rate of return on assets was 9
percent in 1999.
In 1998, the discount rate and rate of increase in future compensation levels
used in determining the projected benefit obligation were 6.75 percent and 5
percent, respectively. In 1997 the discount rate and rate of increase in future
compensation levels used in determining the projected benefit obligation were 8
percent and 6 percent, respectively. The expected long-term rate of return on
assets was 9 percent in 1998 and 1997.
The Registrant recovers pension costs in rates when such costs are funded.
Therefore, the amount by which funding differs from pension expense, determined
in accordance with GAAP, is deferred and recorded as a regulatory asset or
liability.
B. Post-retirement Benefits Other Than Pensions
The Registrant currently offers retirees who have attained age 55 and worked
five years for the Registrant, healthcare and life insurance benefits during
retirement. These benefits are similar to the benefits offered to active
employees. Although retirees are not required to make contributions for
healthcare and life insurance benefits currently, future contributions may be
required if the cost of healthcare and life insurance benefits during retirement
exceed certain limits.
Since 1993, the post-retirement benefit costs for active employees are
recorded on an accrual basis, ratably over their service periods. Benefits of
$10,526,000 earned prior to 1993 have been deferred as an unrecognized
transition obligation, which the Registrant is amortizing over a 20-year period.
The Registrant funds its post-retirement benefit obligations to a Voluntary
Employee Benefit Association Trust. Total contributions of $1,177,000 in 1999,
$1,308,000 in 1998, and $1,372,000 in 1997 were made to the VEBA Trust.
The Registrant recovers its post-retirement benefit obligation in rates to the
extent allowed by the RIPUC. The RIPUC generally allows such costs to be
recovered if amounts are funded into tax favored investment funds, such as the
VEBA Trust. Accordingly, the Registrant fully recovered its 1999, 1998, and 1997
post-retirement benefit obligations because such obligations were funded into
the VEBA Trust. In addition, in September 1996, the RIPUC approved a ratable
recovery of the cumulative unrecovered difference of $1,041,000 during 1997,
1998, and 1999. Of the total post-retirement benefit obligations, $1,523,000,
$1,654,000, and $1,718,000 were included in rates during 1999, 1998, and 1997,
respectively.
The healthcare and life insurance benefits' costs and accumulated post-
retirement benefit obligation for 1999, 1998, and 1997 are calculated by the
Registrant's actuaries using assumptions and estimates which include:
II-21
<PAGE>
1999 1998 1997
-------------------
Healthcare cost annual growth rate 7.55% 9.0% 10.2%
Healthcare cost annual growth rate - long-term 4.75 6.0 6.0
Expected long-term rate of return (union) 8.5 8.5 8.5
Expected long-term rate of return (non-union) 5.5 5.5 5.5
Discount rate 7.25 6.75 8.0
The healthcare cost annual growth rate significantly impacts the estimated
benefit obligation and annual expense. For example, in 1999, a one percent
increase in the above rates would increase the obligation by $745,000 and the
annual expense by $77,000. Decreasing the assumed health care cost annual
growth rate by one percent would decrease the obligation by $596,000 and the
annual expense by $62,000.
The obligations and assets of the healthcare and life insurance benefits at
September 30, 1999 and 1998 are:
(thousands of dollars) 1999 1998
- ------------------------------------------------------------------
Accumulated post-retirement benefit
obligation as of the end of the
prior fiscal year $(12,886) $(11,748)
Service cost (273) (243)
Interest cost (848) (945)
Actuarial loss/(gain) and
assumption change 872 (660)
Expected benefits paid 724 710
-------- --------
Accumulated post-retirement benefit
obligation as of the end
of the fiscal year (12,411) (12,886)
-------- --------
Fair value of plan assets as of
the beginning of the year 5,684 4,704
Return on plan assets 627 377
Employer contributions 1,177 1,308
Expenses paid (13) (18)
Benefits paid (590) (687)
-------- --------
Fair value of plan assets
as of the end of the year 6,885 5,684
-------- --------
Unfunded post-retirement benefit
obligation (5,526) (7,202)
Unrecognized transition obligation 7,368 7,895
Unrecognized net (gain) or loss (1,842) (693)
-------- --------
Prepaid post-retirement
benefit obligation included
in the accompanying Consolidated
Balance Sheets $ - $ -
======== ========
The Registrant's actuarially determined healthcare and life insurance
benefits' costs for 1999, 1998, and 1997 include the following:
(thousands of dollars) 1999 1998 1997
- --------------------------------------------------------
Service cost $ 273 $ 243 $ 228
Interest cost 849 945 896
Actual return on plan assets (471) (406) (278)
Amortization and deferral 526 526 526
------ ------ ------
Total annual plan costs $1,177 $1,308 $1,372
====== ====== ======
II-22
<PAGE>
C. Supplemental Retirement Plans
The Registrant provides certain supplemental retirement plans for key
employees. The projected benefit obligation is approximately $2,111,000 which
is being accrued over the service period of these key employees. The
supplemental retirement plans are unfunded. The Registrant accrued and expensed
$407,000, $61,000, and $612,000 related to these benefits in 1999, 1998, and
1997, respectively.
D. Performance and Equity Incentive Plan
During 1992, the Board of Directors of Providence Energy, with subsequent
approval of Providence Energy's common shareholders, adopted the Providence
Energy Corporation Performance and Equity Incentive Plan. This plan provides
that up to 225,000 shares of common stock, as well as cash awards, can be
granted to key employees, including employees of the Registrant, at no cost to
the employees. Key employees who receive common shares are entitled to receive
dividends, but full beneficial ownership vests on the fifth anniversary of the
date of grant provided the participant is still employed by Providence Energy or
one of its subsidiaries. Vesting may be accelerated under certain circumstances,
including a change in control. This plan also provides for cash compensation to
key employees.
The executive compensation incentive awards paid by the Registrant under this
Plan totaled approximately $715,000 for 1999, $459,000 for 1998, and $439,000
for 1997. Amounts paid in cash are charged to expense when earned. However,
amounts paid in restricted stock are deferred and amortized to expense over the
five-year vesting period.
Of the $715,000 1999 award, $483,000 will be paid in cash during 2000. Of the
$459,000 1998 award, $310,000 was paid in cash during 1999. Of the $439,000
1997 award, $297,000 was paid in cash during 1998. Grant shares totaling 7,566,
7,230, and 5,989 were purchased by the Registrant and reissued to key employees
during 1999, 1998, and 1997, respectively.
E. Restricted Stock Incentive Plan
The Restricted Stock Incentive Plan, which was discontinued in 1998, provided
that up to 60,000 shares of Providence Energy common stock may be granted to
employees of the Registrant with at least three months of service, who are not
officers or covered by a collective bargaining agreement, at no cost to the
employee. All participants were entitled to receive dividends; however, full
beneficial ownership vests on the third anniversary of the date of the grant
provided that the participant is still employed by the Registrant. Vesting may
be accelerated under certain circumstances.
The purchase of 4,230 shares for the Restricted Stock Incentive Plan for the
1997 award occurred in 1998 at a cost of approximately $90,000. All amounts
awarded under the Restricted Stock Incentive Plan are deferred and amortized to
expense over a three-year period.
F. 1998 Performance Share Plan
Effective October 1, 1998, the Board of Directors of ProvEnergy adopted a
Performance Share Plan to encourage executives' interest in longer-term
performance by keying incentive payouts to the total return performance of
Providence Energy Corporation's (Providence Energy) common stock in relation to
that of other companies in the Edward Jones and Company gas distribution group
of approximately 30 companies and to the change in Providence Energy's Stock
price over three-year performance periods. The number of shares earned will
range from 50 percent to 150 percent of awarded shares, if based on the relative
total shareholder return method, and 50 percent to 100 percent, if based on the
increase in the stock price of Providence Energy's common stock during the
three-year period. These levels were developed to bring total compensation
levels for the Registrant and its parent company, Providence Energy Corporation,
more in line with survey data for the relevant labor market. No shares will be
earned unless Providence Energy shareholders have earned a minimum annual return
over the three-year period equal to the total annual return for 30-year Treasury
notes during
II-23
<PAGE>
such period. Upon the occurrence of a change in control, unless otherwise
prohibited, the opportunities under all outstanding awards shall be deemed to
have been fully earned for the entire performance period as of the effective
date of the change in control. Dividends will not be paid on the shares until
they are earned. Awards will be paid half in cash and half in Providence Energy
common stock. During 1999, 38,000 shares were granted under this plan.
8. COMMITMENTS AND CONTINGENCIES
A. Legal Proceedings
The Registrant is involved in legal and administrative proceedings in the
normal course of business, including certain proceedings involving material
amounts in which claims have been or may be made. However, management believes,
after review of insurance coverage and consultation with legal counsel, that the
ultimate resolution of the legal proceedings to which it is or can at the
present time be reasonably expected to be a party, will not have a materially
adverse effect on the Registrant's results of operations or financial condition.
B. Capital Leases
The Registrant has a capital lease with Algonquin for storage space in a
LNG tank. The capital lease arrangement also provides that Algonquin lease from
the Registrant, for a corresponding term at an annual amount of $150,000, the
land on which the tank is situated. The Registrant also leases certain
information systems and other equipment under capital leases.
Property under Capital Leases:
- ------------------------------
<TABLE>
<CAPTION>
(thousands of dollars) 1999 1998
- -------------------------------------------------------
<S> <C> <C>
Gas plant $ 6,116 $ 6,116
Computer and other equipment 568 1,988
Accumulated depreciation (6,067) (6,937)
------- -------
$ 617 $ 1,167
======= =======
</TABLE>
Commitments for Capital Leases:
- ------------------------------
<TABLE>
<CAPTION>
*LNG Computer
(thousands of dollars) Storage Equipment Total
- ----------------------------------------------------------------
<S> <C> <C> <C>
2000 $ 136 $ 144 $ 280
2001 136 144 280
2002 - 69 69
2003 - 34 34
2004 - 2 2
------ ------- ------
$ 272 $ 393 665
------ -------
Amount representing interest (109)
------
Amount representing principal $ 556
======
</TABLE>
* This capital lease will be terminated once the terms of the contract with
Algonquin, which is described below, are met.
C. Operating Leases
The Registrant also leases facilities and equipment under operating leases
with total future payments as of September 30, 1999 as follows:
(thousands of dollars)
- ----------------------
2000 $205
2001 145
2002 61
----
$411
====
II-24
<PAGE>
D. Gas Supply
As part of the Price Stabilization Plan Settlement Agreement described in
Note 10, the Registrant entered into a full requirements gas supply contract
with DETM, a joint venture of Duke Energy Corporation and Mobil Corporation, for
a term of three years commencing October 1, 1997. Under the contract, DETM
guarantees to meet the Registrant's supply requirements; however, the Registrant
must purchase all of its gas supply exclusively from DETM. In addition, under
the contract, the Registrant transferred responsibility for its pipeline
capacity resources, storage contracts, and LNG capacity to DETM. As a result,
the Registrant's gas inventories of approximately $18 million at September 30,
1997 were sold at book value to DETM on October 1, 1997.
In addition to providing supply for firm customers at a fixed price, DETM
will provide gas at market prices to cover the Registrant's non-firm sales
customers' 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 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 gas supply 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 outsourcing of day-to-day supply management relieves the
Registrant of the need to perform certain upstream supply management functions.
This 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.
The Registrant has entered into an agreement replacing its existing service
contract with Algonquin, a subsidiary of Duke Energy Corporation. Algonquin is
the owner and operator of a LNG tank located in Providence, Rhode Island. The
Registrant relies upon this service to provide gas supply into its distribution
system during the winter period. The service provided for in the agreement,
subject to the successful completion of construction, is expected to begin in
the first quarter of fiscal 2000. Under the terms of the agreement, Algonquin
replaced and expanded the vaporization capability at the tank. The Registrant
will receive approximately $2.6 million from Algonquin. Of the $2.6 million,
approximately $.9 million represents reimbursement received by the Registrant in
1999 for costs incurred related to the project including labor, engineering, and
legal expenses. The remaining portion of the payment, or approximately $1.7
million, will be paid to DETM under the Registrant's contract with DETM as
reimbursement for the additional costs that DETM will incur when the Algonquin
storage capacity is released to DETM as provided for in the gas supply contract
described above. This payment is expected 60 days after the in-service date of
the project.
In June 1999, the FERC issued an order in Docket Number CP99-113 approving
Algonquin's project described above. In that order FERC also approved the new
10-year contract between Algonquin and the Registrant for service from the tank.
Also approved was the Registrant's parallel filing, PR99-8, requesting
regulatory authorization to charge Algonquin for transportation of gas vaporized
for other Algonquin customers and transported by the Registrant to the Algonquin
pipeline on behalf of those customers.
As a result of FERC Order 636 and other related orders, pipeline
transportation companies have incurred significant costs, collectively known as
transition costs. The majority of these costs will be reimbursed by the
pipeline's customers, including the Registrant. The Registrant estimates its
transition costs to be approximately $21.7 million, of which $16.2 million has
been included in the GCC and collected from customers through September 30,
1997.
II-25
<PAGE>
As part of the above supply contract, DETM assumed liability for these
transition costs during the contract's three-year term. At the end of the
three-year term of the contract, the Registrant will assume any remaining
liability, which is not expected to be material.
E. 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 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 September 30, 1999, the Registrant was aware of five sites at which
future costs may be incurred.
Plympton Sites (2)
The Registrant has been designated as a PRP under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 at two sites in
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 PRPs. With respect to one of the
Plympton sites, the Registrant has joined with other PRPs 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.
Providence Site
During 1995, the Registrant 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 September 30, 1999,
approximately $3.0 million had been spent primarily on studies and the
formulation of remediation work plans at this site. In accordance with state
laws, such a study is monitored by the DEM. The purpose of this study was to
determine the extent of environmental contamination at the site. The Registrant
has completed the study which indicated that remediation will be required for
two-thirds of the property. The remediation began in June 1999 and is
anticipated to be completed during the next fiscal year. During this
remediation period, the remaining one-third of the property will also be
investigated and remediated if necessary.
The Registrant has compiled a preliminary range of costs, based on removal
and off-site disposal of contaminated soil, ranging from $7.0 million to in
excess of $9.0 million. However, because of the uncertainties associated with
environmental assessment and remediation activities, the future cost of
remediation could be higher than the range noted. Based on the proposals for
remediation work, the Registrant has a net accrual of $6.1 million at September
30, 1999 for anticipated future remediation costs at this site.
Westerly Site
Tests conducted following the discovery of an abandoned underground oil
storage tank at the Registrant's Westerly, Rhode Island operations center in
1996 confirmed the existence of coal tar waste at this site. As a result, the
Registrant completed a site characterization test. Based on the findings of that
test, the Registrant concluded that remediation would be required. As of
September 30, 1999, the Registrant had removed an underground oil storage tank
and regulators containing mercury disposed of on the site, as well as some
localized contamination. The costs associated with the site characterization
test and partial removal of soil contaminants were shared equally with the
former owner of the property. The Registrant is currently engaged in
II-26
<PAGE>
negotiations to transfer the property back to the previous owner, who would
continue to remediate the site. The purchase and sale agreement is anticipated
to be signed during fiscal 2000, at which time the previous owner will assume
responsibility for removal of coal tar waste on the site. The Registrant
remains responsible for cleanup of any mercury released into adjacent water.
Contamination from scrapped meters and regulators, which was discovered in 1997,
was reported to the DEM and the Rhode Island Department of Health and the
Registrant has completed the necessary remediation. Costs incurred by the
Registrant to remediate this site were approximately $.1 million.
Allens Avenue Site
In November 1998, the Registrant received a letter of responsibility from
DEM relating to possible contamination on previously-owned property on Allens
Avenue in Providence. The current operator of the property has been similarly
notified. Both parties have been designated as PRPs. A work plan has been
created and approved by DEM. An investigation has begun in order to determine
the extent of the problem and the Registrant's responsibility. The Registrant
has entered into a cost sharing agreement with the current operator of the
property, under which the Registrant will be held responsible for approximately
20 percent of the costs related to the investigation. Total estimated costs of
testing at this site are anticipated to be approximately $.2 million. Until the
results of the investigation are known, the Registrant cannot offer any
conclusions as to its responsibility.
General
In prior rate cases filed with the RIPUC, 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. Due to the magnitude of the Registrant's
environmental investigation and remediation expenditures, the Registrant sought
current recovery for these amounts. As a result, in accordance with the Price
Stabilization Plan Settlement Agreement described in Note 10, 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 10-year period, in accordance with the levels
authorized in Energize RI. 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. As of
September 30, 1999, the Registrant has incurred environmental assessment and
remediation costs of $4.7 million and has a net accrual of $6.1 million for
future costs.
Management has begun discussions with other parties who may assist the
Registrant in paying the costs associated with the remediation of 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.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
disclosures for the following financial instruments:
Cash, Cash Equivalents, Accounts Payable, and Short-term Debt
- -------------------------------------------------------------
The carrying amount approximates fair value due to the short-term maturity of
these instruments.
Long-term Debt and Preferred Stock
- ----------------------------------
The fair value of long-term debt and preferred stock is estimated based on
currently quoted market prices for similar types of issues.
II-27
<PAGE>
The carrying amounts and estimated fair values of the Registrant's financial
instruments at September 30 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Carrying Fair Carrying Fair
(thousands of dollars) Amount Value Amount Value
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 982 $ 982 $ 798 $ 798
Accounts payable 9,586 9,586 7,332 7,332
Short-term debt 11,800 11,800 9,720 9,720
Long-term debt 92,369 74,403 81,071 93,707
Preferred stock 3,200 3,223 4,800 5,040
</TABLE>
The difference between the carrying amount and the fair value of the
Registrant's preferred stock and 1998 long-term debt, if they were settled at
amounts reflected above, would likely be recovered in the Registrant's rates
over a prescribed amortization period. Accordingly, any settlement should not
result in a material impact on the Registrant's financial position or results of
operations.
10. RATE CHANGES
In August 1997, the RIPUC approved Energize RI among the Registrant, the
Division, the Energy Council of Rhode Island, and the George Wiley Center.
Effective October 1, 1997 through September 30, 2000, Energize RI provides firm
customers with a price decrease of approximately 4.0 percent in addition to a
three-year price freeze. Under Energize RI, the GCC mechanism has been suspended
for the entire term. Also, in connection with the Plan, the Registrant wrote off
approximately $1.5 million of previously deferred gas costs in October 1997.
Energize RI also provides for the Registrant to make significant capital
investments to improve its distribution system and support economic development.
Specific capital improvement projects funded under Energize RI are estimated to
total approximately $26 million over its three-year term. In addition, under
Energize RI, the Registrant provides funding for the Low-Income Assistance
Program at an annual level of $1.0 million, the Demand Side Management Rebate
Program at an annual level of $.5 million and the Low-Income Weatherization
Program at an annual level of $.2 million. Energize RI also continues the
process of unbundling by allowing the Registrant to provide unbundled service
offerings for up to 10 percent per year of firm deliveries.
As part of Energize RI, the Registrant has reclassified and is amortizing
approximately $4.0 million of prior environmental costs. These costs and all
environmental costs incurred during the term of the Plan will be amortized over
a 10-year period, in accordance with the levels authorized in Energize RI.
Under Energize RI, the Registrant may earn up to 10.9 percent, but not less
than 7.0 percent, annually on its average common equity, which is capped at
$81.0 million, $86.2 million, and $92.0 million in fiscal 1998, 1999, and 2000,
respectively. In the event that the Registrant earns in excess of 10.9 percent
or less than 7.0 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 to be determined by all parties to the Plan and approved
by the RIPUC.
As part of Energize RI, the Registrant is permitted to file annually with
the Division for the recovery of exogenous changes which may occur during the
three-year term of the Plan. Exogenous changes are defined as "...significant
increases or decreases in the Registrant's costs or revenues which are beyond
the Registrant's reasonable control." Any disputes between the Registrant and
the Division regarding either the nature or quantification of the exogenous
II-28
<PAGE>
changes are to be resolved by the RIPUC. The impact of any such exogenous
changes will be debited or credited to a regulatory asset or liability account
throughout the term of Energize RI and will be recovered or refunded at the
expiration of the Plan through a method to be determined.
In fiscal 1998, the Registrant did not earn its allowed rate of return
primarily as a result of the extremely warm winter weather and the loss of non-
firm margin. The Registrant believed the causes of these two events were beyond
its reasonable control and thus deemed them to be exogenous changes. In March
1999, the Registrant reached an agreement with the Division, which allowed it to
recover $2.45 million in revenue losses attributable to exogenous changes
experienced by the Registrant in fiscal 1998. The RIPUC reviewed the exogenous
changes agreement to ensure consistency with the terms of Energize RI and
affirmed the agreement at its May 28, 1999 open meeting.
During fiscal 1999, the Registrant recognized into revenue $2.45 million
for the exogenous changes recovery, and at year-end has deferred approximately
$.5 million of revenue under the provisions of the earnings cap of Energize RI.
The Registrant intends to file for recovery of exogenous changes
experienced in 1999 which resulted from factors similar to 1998. Absent further
exogenous recovery and/or other factors such as colder than normal weather, the
Registrant's ability to earn a 10.9 percent return on average common equity in
the final year of Energize RI is substantially impaired.
11. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective in the first fiscal quarter for the Registrant's
fiscal year ending September 30, 2001. A company may also implement the
Statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1998 and thereafter). SFAS No. 133 cannot be
applied retroactively. SFAS No. 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid contracts
that were issued, acquired, or substantively modified after December 31, 1997
(and, at a company's election, before January 1, 1998).
The Registrant has not yet quantified the impact of adopting SFAS No. 133
on the financial statements and has not determined the timing of or method of
adoption of SFAS No. 133.
In March 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use". It applies to all non-governmental entities and is
effective for the Registrant's financial statements for the fiscal year ending
September 30, 2000. The provisions of this SOP should be applied to internal-use
software costs incurred in fiscal years subsequent to December 15, 1998 for all
projects, including those projects in progress upon initial application of the
SOP.
II-29
<PAGE>
The SOP establishes accounting standards for the determination of capital
or expense treatment of expenditures for computer software developed or obtained
for internal use based upon the stage of development. The SOP defines three
stages as (1) Preliminary Project, (2) Application Development, and (3) Post-
Implementation/Operation. As a general rule, the Preliminary Project and Post-
Implementation/Operation phase expenditures are expensed and Application
Development expenditures are capitalized.
The Registrant will adopt the SOP in fiscal 2000 and does not expect it to
have a material impact on the financial statements.
12. UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is unaudited quarterly financial information for the two
years ended September 30, 1999 and 1998. Quarterly variations between periods
are caused primarily by the seasonal nature of gas sales.
<TABLE>
<CAPTION>
(thousands, except per share amounts)
Quarter Ended
---------------------------------------
Dec. 31 Mar. 31 June 30 Sept. 30
---------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1999
- ----------------------------------------------------------------------
Operating revenues $53,301 $77,908 $29,515 $18,615
Operating income (loss) 6,172 11,941 1,272 (2,969)
Net income (loss)
applicable to common
stock 4,464 10,037 (197) (4,857)
Net income (loss) per share
applicable to
common stock* 3.59 8.07 (.16) (3.91)
Fiscal 1998
- ----------------------------------------------------------------------
Operating revenues $59,200 $73,686 $31,155 $20,285
Operating income (loss) 6,214 11,564 644 (2,474)
Net income (loss)
applicable to
common stock 4,298 9,695 (1,106) (4,615)
Net income (loss) per
share applicable to
common stock* 3.46 7.79 (.89) (3.71)
</TABLE>
* Calculated on the basis of weighted average shares outstanding during the
quarter.
II-30
<PAGE>
LIST OF DEFINED TERMS
---------------------
ABBREVIATIONS, ACRONYMS and OTHER DEFINED TERMS:
AFUDC: Allowance for Funds Used During Construction
ALGONQUIN: Algonquin Gas Transmission Company
CGA: Cost of Gas Adjustment Clause
CIS: Customer Information System
DEM: Rhode Island Department of Environmental Management
DETM: Duke Energy Trading and Marketing, L.L.C.
DIVISION: Rhode Island Division of Public Utilities and Carriers
DSM: Demand Side Management
ENERGIZE RI OR THE PLAN: Price Stabilization Plan Settlement Agreement
FASB: Financial Accounting Standards Board
FERC: Federal Energy Regulatory Commission
GAAP: Generally Accepted Accounting Principles
GCC: Gas Charge Clause
HVAC: Heating, Ventilating and Air Conditioning systems
IRP: Integrated Resource Plan
IT: Information Technology
LDC: Local Distribution Company
LNG: Liquefied Natural Gas
MDTE: Massachusetts Department of Telecommunications and Energy
MECHANISM: Performanced-Based Ratemaking Mechanism
NORTH ATTLEBORO GAS: North Attleboro Gas Company
PBR: Performance Based Regulation
PNGTS: Portland Natural Gas Transmission System
PROVENERGY: Providence Energy Corporation
PROVENERGY SERVICES: Providence Energy Services, Inc.
PRP: Potentially Responsible Party
RIPUC: Rhode Island Public Utilities Commission
SCADA: Supervisory Control and Data Acquisition system
SEC: Securities and Exchange Commission
II-31
<PAGE>
SFAS: Statement of Financial Accounting Standards
SOP: Statement of Position
SOUTHERN UNION: Southern Union Company
THE REGISTRANT: The Providence Gas Company
VEBA: Voluntary Employee Benefit Association
II-32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of The Providence Gas Company:
We have audited the accompanying consolidated balance sheets and the
consolidated statements of capitalization of The Providence Gas Company (a Rhode
Island corporation and a wholly-owned subsidiary of Providence Energy
Corporation) as of September 30, 1999 and 1998, and the related consolidated
statements of income, changes in common stockholder's investment and cash flows
for each of the three years in the period ended September 30, 1999. These
financial statements and the schedule referred to below are the responsibility
of the Registrant's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Providence Gas Company as of September 30, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index to the financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein, in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
/s/ Arthur Andersen LLP
- -----------------------
Boston, Massachusetts
November 2, 1999 (except for the information discussed in Note 2, as to which
the date is November 16, 1999)
II-33
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Not applicable.
II-34
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The following information is furnished with respect to the
executive officers of the Registrant:
Year Office
Name and Age Office First Held
- ------------ ------ -----------
James H. Dodge (59) Chairman, President, and Chief
Executive Officer 1992
James DeMetro (51) Executive Vice President 1999
Robert W. Owens (51) Senior Vice President, Gas
Distribution 1996
Kenneth W. Hogan (54) Vice President, Chief
Financial Officer, and
Treasurer 1999
Peter J. Gill (40) Vice President, Information
Technology 1998
Susann G. Mark (52) Vice President, General Counsel,
and Secretary 1999
James A. Grasso (45) Vice President, Public and Government
Affairs, and Assistant Secretary 1998
Timothy S. Lyons (38) Vice President, Marketing, and
Regulatory Affairs 1998
Gary L. Beland (49) Assistant Vice President, 1996
Gas Supply
Sharon A. Dufour (34) Controller 1998
Mr. Dodge was elected President and Chief Executive Officer in August 1990
and subsequently became Chairman of the Board in January 1992. Mr. Dodge
currently serves as a member of the Board of Capital Properties, Inc., a
non-affiliated real estate leasing company.
Mr. DeMetro was elected Executive Vice President in February 1999. For
three years prior thereto Mr. DeMetro served as Senior Vice President, Energy
Services. For four years prior thereto, Mr. DeMetro served the Registrant as
Vice President, Energy Services.
Mr. Owens was elected Senior Vice President, Gas Distribution in February
1996. For more than two years prior thereto, Mr. Owens served the Registrant as
Vice President, Operations. For more than five years prior thereto, Mr. Owens
served the Registrant in various management positions, with his last position as
Vice President, Treasurer and Chief Financial Officer.
Mr. Hogan was elected Vice President, Chief Financial Officer, and
Treasurer in April 1999. For more than five years prior thereto, Mr. Hogan
served as Senior Vice President, Chief Financial Officer, and Secretary of
Valley Resources, Inc., a diversified energy company.
Mr. Gill was elected Vice President, Information Technology in September
1998, effective October 1, 1998. For more than two years prior thereto, Mr. Gill
served as Controller and Assistant Treasurer. For two years prior thereto, Mr.
Gill served the Registrant as Director of Planning.
III-1
<PAGE>
Ms. Mark was elected Vice President, General Counsel, and Secretary of the
Registrant in May 1999. For one year prior thereto, Ms. Mark served as Vice
President, General Counsel, and Secretary of ProvEnergy. For one year prior to
that, Ms. Mark was a partner in the Business Law Group at Brown, Rudnick, Freed
& Gesmer and for eight years prior to that was a partner in the Corporate Law
Practice Group at Licht and Seminoff.
Mr. Grasso was elected Vice President, Public and Government Affairs and
Assistant Secretary in September 1998, effective October 1, 1998. For one year
prior thereto, Mr. Grasso served as Vice President, Public and Government
Affairs. For three years prior thereto, Mr. Grasso served as Director of Public
and Government Relations of PanEnergy Corporation and Algonquin Gas Transmission
Company.
Mr. Lyons was elected Vice President, Marketing and Regulatory Affairs in
April 1998. For more than two years prior thereto, Mr. Lyons served as Assistant
Vice President, Pricing and Regulation. For two years prior thereto, Mr. Lyons
served the Registrant as Director of Pricing. For two years prior thereto, Mr.
Lyons served the Registrant as Director of Rates.
Mr. Beland was elected Assistant Vice President, Gas Supply in February
1996. For two years prior thereto, Mr. Beland served as Director of Gas and
Transportation Services.
Ms. Dufour was elected Controller in September 1998, effective October 1,
1998. For two years prior thereto, Ms. Dufour served as Director of Financial
Information and Budgeting Services. For two years prior thereto, Ms. Dufour
served as Director of Financial Information.
III-2
<PAGE>
DIRECTORS OF THE REGISTRANT
- ---------------------------
For information called for by this item, reference is made to pages 2
through 6 of Providence Energy Corporation's proxy statement filed December 21,
1999 with the Securities and Exchange Commission for the annual meeting of
shareholders to be held January 20, 2000.
III-3
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
For the information called for by this item, reference is made to pages 7 to 18
of Providence Energy Corporation's proxy statement filed December 21, 1999 with
the Securities and Exchange Commission for the annual meeting of shareholders to
be held January 20, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Not applicable. All of the Registrant's voting securities are held by
Providence Energy Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
For information called for by this item, reference is made to pages 6 through 7
of Providence Energy Corporation's proxy statement filed December 21, 1999 with
the Securities and Exchange Commission for the annual meeting of shareholders to
be held January 20, 2000.
III-4
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
THE PROVIDENCE GAS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(a) Financial Statements and Schedules
----------------------------------
Consolidated Balance Sheets--September 30, 1999 and 1998
Consolidated Statements of Income for the years ended September 30, 1999, 1998,
and 1997
Consolidated Statements of Cash Flows for the years ended September 30, 1999,
1998, and 1997
Consolidated Statements of Capitalization--September 30, 1999 and 1998
Consolidated Statements of Changes in Common Stockholder's Investment for the
years ended September 30, 1999, 1998, and 1997
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Schedule II. Reserves for the years ended September 30, 1999, 1998, and 1997.
Schedules I to XIII not listed above are omitted as not applicable
or not required under Regulation S-X.
(b) Reports on Form 8-K
-------------------
Although no reports were filed on Form 8-K during the latest quarter of the
Registrant's fiscal year ended September 30, 1999, the Registrant's parent
company, ProvEnergy, filed a report on Form 8-K on November 15, 1999 regarding
ProvEnergy's Agreement and Plan of Merger with Southern Union.
(c) Exhibits
--------
The following exhibits are filed as part of this report:
3.1 Charter (incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (Registration No. 2-72726)).
3.2 Bylaws. (Filed as Exhibit 3.2 to the Report on Form 10-K of the Registrant
in Form 10-K for the year ended September 30, 1993, incorporated herein by
this reference.)
4.1 First Mortgage Indenture dated as of January 1, 1922, as supplemented by
First through Twelfth Supplemental Indentures, (incorporated by reference
to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1
(Registration No. 2-72726)).
4.2 Fourteenth, Fifteenth and Sixteenth Supplemental Indentures dated as of
August 1, 1988, June 1, 1990 and November 1, 1992, respectively
(incorporated by reference to Exhibit 4 to the report of Providence Energy
Corporation (Commission File No. 1-10032) to the Securities and Exchange
Commission on Form 10-Q for the quarter ended March 31, 1993).
4.3 Seventeenth Supplemental Indenture dated as of November 1, 1993.(Filed as
Exhibit 4.5 to the report of the Registrant in Form 10-K for the year ended
September 30, 1993, incorporated herein by this reference.)
4.4 Eighteenth Supplemental Indenture dated as of December 1, 1995. (Filed as
Exhibit 4.6 to the report of the Registrant in Form 10-K for the year ended
September 30, 1995, incorporated herein by this reference.)
4.5 Nineteenth Supplemental Indenture dated as of April 1, 1998. (Filed as
Exhibit 4.6 to the report of the Registrant in Form 10-K for the year ended
September 30, 1998, incorporated herein by this reference.)
IV-1
<PAGE>
4.6 Twentieth Supplemental Indenture dated as of February 1, 1999.
4.7 Twenty-first Supplemental Indenture dated as of October 12, 1999.
10.1 Redacted gas supply contract dated October 1, 1997 between Duke Energy
Trading and Marketing, L.L.C. and the Registrant. (Filed as Exhibit 10 to
Form 10-Q of the Registrant for the quarter ended June 30, 1998,
incorporated herein by this reference.)
10.2 Liquefied Natural Gas Service Precedent Agreement dated December 11, 1998
between Algonquin LNG, Inc. and the Registrant. (Filed as Exhibit 10a to
Form 10-Q of the Registrant for the quarter ended December 31, 1998,
incorporated herein by this reference.)
10.3 Employment Agreement dated October 1, 1998 between Peter J. Gill, Vice
President, Information Technology and the Registrant. (Filed as Exhibit
10a to Form 10-Q of the Registrant for the quarter ended June 30, 1999,
incorporated herein by this reference.)
21 Subsidiary of the Registrant.
IV-2
<PAGE>
Supplemental Schedule
Schedule II
PROVIDENCE GAS COMPANY
----------------------
RESERVES FOR THE YEARS ENDED
----------------------------
SEPTEMBER 30, 1999, SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
-------------------------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Charges
for
Which
Additions Reserves
Balance Charged Other Were Balance
9/30/98 to Operations Add (Deduct) Created 9/30/99
-------- ------------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Accounts receivable
Allowance for
doubtful accounts $ 2,048 $ 4,308 $ 127 (D) $ 4,485 $ 1,998
Allowance for lease
receivables -
current 89 4 (90)(D) 2 1
-------- ------------- ------------ ------- -------
Total $ 2,137 $ 4,312 $ 37 $ 4,487 $ 1,999
======== ============= ============ ======= =======
Allowance for lease
receivables - long-term $ 372 $ 72 $ (183)(D) $ 75 $ 186
======== ============= ============ ======= =======
DEFERRED CREDITS AND
RESERVES:
Accumulated deferred
income taxes $ 21,351 $ 829 $ 948 (F) $ - $23,128
-------- ------------- ------------ ------- -------
Unamortized investment
tax credit 2,197 - - 157 2,040
-------- ------------- ------------ ------- -------
Accrued pension 5,681 427 769 (A) 52 6,825
-------- ------------- ------------ ------- -------
Accrued environmental 1,750 - (1,750)(C) - -
-------- ------------- ------------ ------- -------
Liability and
damage reserve 480 126 73 (E) 185 494
-------- ------------- ------------ ------- -------
Total deferred
credits and
reserves $ 31,459 $ 1,382 $ 40 $ 394 $32,487
======== ============= ============ ======= =======
</TABLE>
IV-3
<PAGE>
SCHEDULE II (cont'd)
<TABLE>
<CAPTION>
Charges
for
Which
Additions Reserves
Balance Charged Other Were Balance
9/30/97 to Operations Add (Deduct) Created 9/30/98
-------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Accounts receivable
Allowance for
doubtful accounts $ 1,690 $ 4,618 $ - $ 4,260 $ 2,048
Allowance for lease
receivables -
current 49 40 - - 89
-------- -------- ------- -------- --------
Total $ 1,739 $ 4,658 $ - $ 4,260 $ 2,137
======== ======== ======= ======== ========
Allowance for lease
receivables -
long-term $ 401 $ 72 $ - $ 101 $ 372
======== ======== ======= ======== ========
DEFERRED CREDITS AND
RESERVES:
Accumulated deferred
income taxes $ 20,598 $ 1,063 $ (310)(F) $ - $ 21,351
-------- -------- ------- --------- --------
Unamortized investment
tax credit 2,354 - - 157 2,197
-------- -------- ------- --------- --------
Accrued pension 6,633 83 (984)(A) 51 5,681
-------- -------- ------- --------- --------
Accrued environmental 1,750 - - - 1,750
-------- -------- ------- --------- --------
Liability and
damage reserve 622 (22) - 120 480
-------- -------- ------- --------- --------
Total deferred
credits and
reserves $ 31,957 $ 1,124 $(1,294) $ 328 $ 31,459
======== ======== ======= ========= ========
</TABLE>
IV-4
<PAGE>
SCHEDULE II (cont'd)
<TABLE>
<CAPTION>
Charges
for
Which
Additions Reserves
Balance Charged Other Were Balance
9/30/96 to Operations Add (Deduct) Created 9/30/97
------- ------------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
RESERVES DEDUCTED FROM
ASSETS:
Accounts receivable
Allowance for
doubtful accounts $ 2,974 $ 4,872 $ - $ 6,156 $ 1,690
Allowance for lease
receivables -
current 9 94 - 54 49
------- ----------- ---------- ------- -------
Total $ 2,983 $ 4,966 $ - $ 6,210 $ 1,739
======= =========== ========== ======= =======
Allowance for lease
receivables -
long-term $ 403 $ 138 $ - $ 140 $ 401
======= =========== ========== ======= =======
DEFERRED CREDITS AND
RESERVES:
Accumulated deferred
income taxes $19,903 $ 622 $ 73 (F) $ - $20,598
------- ----------- ---------- ------- -------
Unamortized investment
tax credit 2,510 - - 156 2,354
------- ----------- ---------- ------- -------
Accrued pension 5,573 634 465 (A) 39 6,633
------- ----------- ---------- ------- -------
Accrued environmental 1,300 - 450 (B) - 1,750
------- ----------- ---------- ------- -------
Liability and
damage reserve 562 281 - 221 622
------- ----------- ---------- ------- -------
Total deferred
credits and
reserves $29,848 $ 1,537 $ 988 $ 416 $31,957
======= =========== ========== ======= =======
</TABLE>
(A) Adjustment due to the regulatory pension liability.
(B) Accrual for environmental investigation and remediation costs.
(C) A reclassification of environmental liabilities from long-term to short-
term.
(D) Account reclassifications during system conversion.
(E) Reclassify amounts due to the Registrant to a receivable account.
(F) Represents offset for certain SFAS No. 109 activity in the regulatory asset
and liability accounts, as well as reclassifications among tax accounts
based on tax return as filed and estimated current year tax activity.
IV-5
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ JAMES H. DODGE
-----------------------------------------------
James H. Dodge, Chairman, President, and CEO
Date December 21, 1999
------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/JAMES H. DODGE Chairman, President, and CEO
- ------------------------
James H. Dodge (Principal Executive Officer) 12/21/99
--------
/s/KENNETH W. HOGAN Vice President, Chief Financial 12/21/99
- ------------------------ --------
Kenneth W. Hogan Officer, and Treasurer
/s/GILBERT R. BODELL, JR. Director 12/21/99
- ------------------------ --------
Gilbert R. Bodell, Jr.
/s/JOHN H. HOWLAND Director 12/21/99
- ------------------------ --------
John H. Howland
/s/DOUGLAS H. JOHNSON Director 12/21/99
- ------------------------ --------
Douglas H. Johnson
/s/WILLIAM KREYKES Director 12/21/99
- ------------------------ --------
William Kreykes
/s/PAUL F. LEVY Director 12/21/99
- ------------------------ --------
Paul F. Levy
/s/M. ANNE SZOSTAK Director 12/21/99
- ------------------------ --------
M. Anne Szostak
/s/KENNETH W. WASHBURN Director 12/21/99
- ------------------------ --------
Kenneth W. Washburn
/s/W. EDWARD WOOD Director 12/21/99
- ------------------------ --------
W. Edward Wood
</TABLE>
IV-6
<PAGE>
Exhibit 4.6
===============================================================
THE PROVIDENCE GAS COMPANY
To
STATE STREET BANK AND TRUST COMPANY,
as Successor to
RHODE ISLAND HOSPITAL TRUST COMPANY,
Trustee
_________________________
TWENTIETH SUPPLEMENTAL INDENTURE
________________________
Dated as of February 1, 1999
=====================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
Parties.................................................................. 1
FORM OF SERIES T BOND.................................................... 2
ARTICLE FIRST. DEFINITIONS.............................................. 9
Section 1.01. General.............................................. 9
Section 1.02. Trust Indenture Act.................................. 9
Section 1.03. Definitions.......................................... 9
ARTICLE SECOND. DESIGNATION AND TERMS OF SERIES T BONDS.................. 11
Section 2.01. Establishment Of Series.............................. 11
Section 2.02. Exchangeability Of Series T Bonds.................... 12
Section 2.03. Special Record Date.................................. 12
ARTICLE THIRD. ISSUANCE OF $15,000,000 OF SERIES TO BONDS AND
CLOSING OF SUCH SERIES AT THAT AMOUNT.................... 12
Section 3.01. Issuance Of Series T Bonds........................... 12
Section 3.02. Limitation On Aggregate Principal Amount............. 12
Section 3.03. Cancellation Of Series T Bonds Paid, Etc............. 13
Section 3.04. Bonds Issuance In The Form Of a Global Note.......... 13
ARTICLE FOURTH. REDEMPTION............................................... 14
Section 4.01. General.............................................. 14
Section 4.02. Optional Redemption of Series T Bonds................ 15
Section 4.03. Redemption Procedures................................ 15
Section 4.04. Redemption at the Holder's Option.................... 15
ARTICLE FIFTH. SPECIAL INSURANCE PROVISIONS............................. 17
Section 5.01. Insurer as Third Party Beneficiary................... 17
Section 5.02. Notices and Information.............................. 17
Section 5.03. Concerning the Special Insurance Provisions.......... 17
Section 5.04. Amendments........................................... 18
Section 5.05. Limitation on Defeasance............................. 18
Section 5.06. Payments Under the Policy............................ 18
Section 5.07. Insurer's Rights Concerning the Trustee.............. 19
Section 5.08. Insurer's Right to Accelerate, etc................... 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE SIXTH: PARTICULAR PROVISIONS RELATED TO THE TRUST INDENTURE ACT.......................... 20
Section 6.01. Deposited Moneys To Be Held In Trust By Trustee............................... 20
Section 6.02. Paying Agent to Repay Moneys Held............................................. 20
Section 6.03. Return of Unclaimed Moneys Held............................................... 20
Section 6.04. Provisions as to Paying Agent................................................. 20
Section 6.05. Certificates and Notice to Trustee............................................ 21
Section 6.06. Company to Furnish Registered Owner Lists..................................... 21
Section 6.07. Preservation and Disclosure of Registered Owner Lists......................... 22
Section 6.08. Reports by the Company........................................................ 23
Section 6.09. Reports by the Trustee........................................................ 23
Section 6.10. Prohibition of Impairment of Registered Owner's Right to Payment.............. 24
Section 6.11. Notice of Default............................................................. 24
Section 6.12. Undertaking to Pay Costs...................................................... 24
Section 6.13. Conflict Interest of Trustee.................................................. 25
Section 6.14. Existence and Eligibility of Trustee.......................................... 25
Section 6.15. Resignation or Removal of Trustee............................................. 25
Section 6.16. Appointment of Successor Trustee.............................................. 26
Section 6.17. Acceptance by Successor Trustee............................................... 26
Section 6.18. Limitations on Rights of Trustee as a Creditor................................ 27
Section 6.19. Company-Owned Series T Bonds Disregarded...................................... 27
Section 6.20. Business Days................................................................. 27
Section 6.21. Trust Indenture Act to Control................................................ 27
Section 6.22. Manner of Mailing Notice to Registered Owner.................................. 28
ARTICLE SEVENTH. ADDITIONAL PROVISIONS........................................................... 28
Section 7.01. Title......................................................................... 28
Section 7.02. Released Property............................................................. 28
Section 7.03. Bonds Held by the Company..................................................... 28
Section 7.04. Payment of Series T Bonds..................................................... 28
Section 7.05. Events of Default............................................................. 29
Section 7.06. Expiration.................................................................... 30
Section 7.07. Dates for Identification...................................................... 30
Section 7.08. Section References............................................................ 30
Section 7.09. Recordation................................................................... 30
Section 7.10. Replacement on Loss, Etc...................................................... 30
Section 7.11. Counterparts.................................................................. 31
Section 7.12. Rights and Remedies on Default................................................ 31
Signatures........................................................................................ 31
</TABLE>
ATTACHMENTS TO TWENTIETH SUPPLEMENTAL INDENTURE:
SCHEDULE I - Schedule of Property and Interests Therein
SCHEDULE II - Schedule of Released Property
SCHEDULE III - Form of Request for Redemption
<PAGE>
THIS TWENTIETH SUPPLEMENTAL INDENTURE, dated as of February 1, 1999,
between THE PROVIDENCE GAS COMPANY, a corporation created by Special Act of the
General Assembly of the State of Rhode Island ( herein after sometimes called
the "Company"), party of the first part, and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company (successor to Rhode Island Hospital Trust
National Bank, which succeeded Rhode Island Hospital Trust Company), as trustee
under the Company's First Mortgage herein below mentioned (hereinafter sometimes
called the "Trustee"), party of the second part:
WHEREAS the Company by an Indenture, dated as of January 1, 1922, as
supplemented by a First Supplemental Indenture, dated as of February 6, 1933, a
Second Supplemental Indenture, dated as of June 1, 1944, a Third Supplemental
Indenture, dated as of April 1, 1948, a Fourth Supplemental Indenture, dated as
of January 1, 1958, a Fifth Supplemental Indenture, dated as of July 1, 1960, a
Sixth Supplemental Indenture, dated as of September 1, 1963, a Seventh
Supplemental Indenture, dated as of November 1, 1971, an Eighth Supplemental
Indenture, dated as of July 1, 1972, a Ninth Supplemental Indenture, dated as of
October 1, 1975, a Tenth Supplemental Indenture, dated as of April 1, 1976, an
Eleventh Supplemental Indenture, dated as of September 1, 1978, a Twelfth
Supplemental Indenture, dated as of September 1, 1983, a Thirteenth Supplemental
Indenture, dated as of May 1, 1986, a Fourteenth Supplemental Indenture, dated
as of August 1, 1988, a Fifteenth Supplemental Indenture, dated as of June 1,
1990, a Sixteenth Supplemental Indenture, dated as of September 1, 1992, a
Seventeenth Supplemental Indenture, dated as of November 1, 1993, an Eighteenth
Supplemental Indenture, dated as of December 1, 1995, and a Nineteenth
Supplemental Indenture dated as of April 1, 1998 (said instruments being herein
after sometimes called, respectively, the "Original Indenture", the "First
Supplemental Indenture", the "Second Supplemental Indenture", the "Third
Supplemental Indenture", the "Fourth Supplemental Indenture", the "Fifth
Supplemental Indenture", the "Sixth Supplemental Indenture", the "Seventh
Supplemental Indenture", the "Eighth Supplemental Indenture", the "Ninth
Supplemental Indenture", the "Tenth Supplemental Indenture", the "Eleventh
Supplemental Indenture", the "Twelfth Supplemental Indenture", the "Thirteenth
Supplemental Indenture", the "Fourteenth Supplemental Indenture", the "Fifteenth
Supplemental Indenture", the "Sixteenth Supplemental Indenture", the
"Seventeenth Supplemental Indenture", the "Eighteenth Supplemental Indenture",
and the "Nineteenth Supplemental Indenture" and the Original Indenture as
supplemented by whatsoever supplements, including, if apt, this Twentieth
Supplemental Indenture, as have been or shall have been executed and delivered
at the pertinent time, being herein after sometimes called, collectively, the
"Indenture"), mortgaged its property and franchises, including after-acquired
property and franchises, to the Trustee to secure its First Mortgage Bonds
issued and to be issued thereunder in accordance with the provisions of said
Indenture, and there are now outstanding thereunder $2,728,000 principal amount
of First Mortgage Bonds, Series M, 10.25% due July
1
<PAGE>
31, 2008, being all of an original issue of $10,000,000 principal amount of
bonds of said Series M, $10,000,000 principal amount of First Mortgage Bonds,
Series N, 9.63% due May 30, 2020, being all of an original issue of $10,000,000
principal amount of bonds of said Series N, $12,500,000 principal amount of
First Mortgage Bonds, Series O, 8.46% due September 30, 2022, being all of an
original issue of $12,500,000 principal amount of bonds of said Series O,
$12,500,000 principal amount of First Mortgage Bonds, Series P, 8.09% due
September 30, 2022, being all of an original issue of $12,500,000 principal
amount of bonds of said Series P, $8,000,000 principal amount of First Mortgage
Bonds, Series Q, 5.62% due November 30, 2003, being a portion of an original
issue of $16,000,000 principal amount of bonds of said Series Q, $15,000,000
principal amount of First Mortgage Bonds, Series R, 7.50% due December 15, 2025,
being all of an original issue of $15,000,000 principal amount of bonds of said
Series R; and $15,000,000 principal amount of First Mortgage Bonds, Series S,
6.82% due April 1, 2018; and
WHEREAS the Company has determined, by due corporate action, to provide for
the immediate issuance, execution, authentication and delivery of $15,000,000 in
aggregate principal amount of its fully registered First Mortgage Bonds in the
principal amount of $15,000,000 to be known as the Company's First Mortgage
Bonds, Series T, 6.50% or, alternatively, as 6.50% Senior Secured Insured
Quarterly Notes (hereinafter sometimes called "bonds of Series T" or "Series T
bonds" or "Notes") due February 1, 2029; and
WHEREAS each of the bonds to be issued hereunder and the certificate of the
Trustee to be endorsed on the bonds of such series are to be substantially in
the following forms, respectively, to wit:
[FORM OF SERIES T BOND - GLOBAL NOTE]
THIS SECURITY IS A GLOBAL NOTE REGISTERED IN THE NAME OF THE DEPOSITARY
(REFERRED TO HEREIN) OR A NOMINEE THEREOF AND, UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR THE INDIVIDUAL BONDS REPRESENTED HEREBY, THIS GLOBAL
NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK), TO THE TRUSTEE FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
2
<PAGE>
================================================================================
No. R-1 $15,000,000
CUSIP 743753AC9
THE PROVIDENCE GAS COMPANY
FIRST MORTGAGE BOND, SERIES T, 6.50%
Due February 1, 2029
THE PROVIDENCE GAS COMPANY, a corporation created by Special Act of the
General Assembly of the State of Rhode Island (herein after called the
"Company"), for value received, hereby promises to pay CEDE & CO., or registered
assigns, on the first day of February, 2029, the principal sum of Fifteen
Million Dollars ($15,000,000), and to pay interest thereon (unless this bond
shall have been called for previous redemption and payment duly provided
therefor) at the rate of six and one-half per cent (6.50%) per annum, from
February 8, 1999, payable quarterly in arrears on the first day of February,
May, August and November in each year (each such date, an "Interest Payment
Date"), commencing the first day of May, 1999, until said principal sum shall
have become due. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture (as defined below), be
paid to the holder (the "Holder") of this bond (or one or more predecessor
bonds) of record at the close of business on the regular record date (the
"Regular Record Date") for such Interest Payment Date, which except in the case
of interest payable at the Stated Maturity (as defined in the Twentieth
Supplemental Indenture), shall be the fifteenth calendar day (whether or not a
Business Day) of the month preceding the month in which the respective Interest
Payment Date occurs, and, in the case of interest payable at the Stated
Maturity, shall be the date such that interest payable at the Stated Maturity is
payable to the same Person to whom principal on this bond is payable.
Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date by
virtue of his having been such Holder, and may be paid to the Holder of this
bond (or one or more predecessor bonds) of record at the close of business on a
special record date (the "Special Record Date") fixed by the Trustee for the
payment of such defaulted interest, notice whereof shall be given to Holders not
less than 10 days prior to such Special Record Date, all as more fully provided
in the Twentieth Supplemental Indenture.
3
<PAGE>
The principal of and interest on this bond shall, subject to the provisions
of Section 7.04 of the Twentieth Supplemental Indenture hereinafter described,
be payable at the office of State Street Bank and Trust Company, in Boston,
Massachusetts (or at the office of its successor trustee in the trust to which
reference is herein after made), in such coin or currency of the United States
of America as shall be legal tender for the payment of public and private debts
at the time of payment.
This bond is one of a duly authorized issue of First Mortgage Bonds of the
Company, unlimited as to aggregate principal amount except as set forth in the
Indenture hereinafter mentioned, issuable in series and is one of a series known
as First Mortgage Bonds, Series T, 6.50% (or alternatively, as 6.50% Senior
Secured Insured Quarterly Notes), all bonds of all series being issued and to be
issued under and pursuant to and all equally secured (except as any sinking or
other analogous fund, established in accordance with the provisions of the
Indenture hereinafter mentioned, may afford additional security for the bonds of
any particular series) by an Indenture, dated as of January 1, 1922, as
supplemented by a First Supplemental Indenture, dated as of February 6, 1933, a
Second Supplemental Indenture, dated as of June 1, 1944, a Third Supplemental
Indenture, dated as of April 1, 1948, a Fourth Supplemental Indenture, dated as
of January 1, 1958, a Fifth Supplemental Indenture, dated as of July 1, 1960, a
Sixth Supplemental Indenture, dated as of September 1, 1963, a Seventh
Supplemental Indenture, dated as of November 1, 1971, an Eighth Supplemental
Indenture, dated as of July 1, 1972, a Ninth Supplemental Indenture, dated as
of October 1, 1975, a Tenth Supplemental Indenture, dated as of April 1, 1976,
an Eleventh Supplemental Indenture, dated as of September 1, 1978, a Twelfth
Supplemental Indenture, dated as of September 1, 1983, a Thirteenth Supplemental
Indenture, dated as of May 1, 1986, a Fourteenth Supplemental Indenture, dated
as of August 1, 1988, a Fifteenth Supplemental Indenture, dated as of June 1,
1990, a Sixteenth Supplemental Indenture, dated as of September 1, 1992, a
Seventeenth Supplemental Indenture, dated as of November 1, 1993, an Eighteenth
Supplemental Indenture, dated as of December 1, 1995, a Nineteenth Supplemental
Indenture, dated as of April 1, 1998 and a Twentieth Supplemental Indenture
dated as of February 1, 1999 (said twenty-one instruments being hereinafter
called, collectively, the "Indenture"), all duly executed and delivered by the
Company to State Street Bank and Trust Company, in Boston Massachusetts, as
successor to Rhode Island Hospital Trust National Bank, which succeeded Rhode
Island Hospital Trust Company (hereinafter called the "Trustee"), as trustee, to
which Indenture and to all indentures supplemental thereto reference is hereby
made for a description of the property transferred, assigned and mortgaged
thereunder, the nature and extent of the security, the terms and conditions upon
which the bonds are secured and additional bonds may be issued and secured, and
the rights of the holders or registered owners of said bonds, of the Trustee and
of the Company in respect of such security. Subsequent series of said
4
<PAGE>
bonds may vary as to date, date of maturity, rate of interest and in other ways
as in the Indenture provided or permitted.
Notwithstanding any provisions of the Indenture (including, without
limitation, Section 41 of the Original Indenture), the bonds of Series T shall
be subject to redemption only in the manner and to the extent provided in the
Twentieth Supplemental Indenture.
As long as this bond is represented in global form (the "Global Note")
registered in the name of the Depository or its nominee, except as provided in
the Twentieth Supplemental Indenture and subject to certain limitations therein
set forth, no Global Note shall be exchangeable or transferable.
If an Event of Default (as defined in the Indenture, including the
Twentieth Supplemental Indenture) with respect to the bonds shall occur and be
continuing, the principal plus any accrued interest may be declared due and
payable in the manner and with the effect and subject to the conditions provided
in the Indenture.
In case of default by the Company, as set forth in the Indenture, the
principal of all the bonds of each and every series issued and outstanding
thereunder may be declared or may become due and payable in the manner and with
the effect provided in the Indenture.
No recourse shall be had for the payment of any part of either the
principal of or interest on this bond, or for any claim based hereon, or
otherwise in any manner in respect hereof or in respect of the Indenture, to or
against any stockholder, officer or director, past, present or future, of the
Company, by virtue of any statute or provision or rule of law, or by the
enforcement of any assessment or penalty, all such liability being expressly
waived and released by the acceptance of this bond.
This bond shall not become obligatory for any purpose until authenticated
by the execution by the Trustee of the certificate endorsed hereon.
STATEMENT OF INSURANCE
The MBIA Insurance Corporation (the "Insurer") has issued a financial
guaranty insurance policy (the "Policy") containing the following provisions,
such Policy being on file at State Street Bank and Trust Company.
The Insurer, in consideration of the payment of the premium and subject to
the terms of the Policy, hereby unconditionally and irrevocably guarantees to
any owner, as hereinafter defined, of the following described obligations, the
full and complete payment required to be made by or on behalf of the Company to
State Street Bank and Trust Company or its successor (the "Paying Agent") of an
amount equal to (i) the principal of (at the stated maturity) and
5
<PAGE>
interest on, the Obligations (as that term is defined below) as such payments
shall become due but shall not be so paid (except that in the event of any
acceleration of the due date of such principal by reason of mandatory or
optional redemption or acceleration resulting from default or otherwise, the
payments guaranteed hereby shall be made in such amounts and at such times as
such payments of principal would have been due had there not been any such
acceleration); and (ii) the reimbursement of any such payment which is
subsequently recovered from any owner pursuant to a final judgment by a court of
competent jurisdiction that such payment constitutes an avoidable preference to
such owner within the meaning of any applicable bankruptcy law. The amounts
referred to in clauses (i) and (ii) of the preceding sentence shall be referred
to herein collectively as the "Insured Amounts." "Obligations" shall mean:
$15,000,000
The Providence Gas Company
Senior Secured Insured Quarterly Notes
Due February 1, 2029 (IQ Notes/SM/)
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of written
notice by registered or certified mail, by the Insurer from the Paying Agent or
any owner of an Obligation the payment of an Insured Amount for which is then
due, that such required payment has not been made, the Insurer on the due date
of such payment or within one Business Day after receipt of notice of such
nonpayment, whichever is later, will make a deposit of funds, in an account with
State Street Bank and Trust Company, N.A., in New York, New York, or its
successor, sufficient for the payment of any such Insured Amounts which are then
due. Upon presentment and surrender of such Obligations or presentment of such
other proof of ownership of the Obligations, together with any appropriate
instruments of assignment to evidence the assignment of the Insured Amounts due
on the Obligations as are paid by the Insurer, and appropriate instruments to
effect the appointment of the Insurer as agent for such owners of the
Obligations in any legal proceeding related to payment of Insured Amounts on the
Obligations, such instrument being in a form satisfactory to State Street Bank
and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall
disburse to such owners or the Paying Agent payment of the Insured Amounts due
on such Obligations, less any amount held by the Paying Agent for the payment of
such Insured Amounts and legally available therefor. The Policy does not insure
against loss of any prepayment premium which may at any time be payable with
respect to any Obligation.
As used herein, the term "owner" shall mean the registered owner of any
Obligation as indicated in the books maintained by the Paying Agent, the
Company, or any designee of the Company for such purpose. The term owner shall
not include the Company or any party whose agreement with the Company
constitutes the underlying security for the Obligations.
6
<PAGE>
Any service of process on the Insurer may be made to the Insurer at its
offices located at 113 King Street, Armonk, New York 10504 and such service of
process shall be valid and binding.
The Policy is non-cancelable for any reason. The premium on the Policy is
not refundable for any reason including the payment prior to maturity of the
Obligations.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
Any provision of the Indenture may not be amended in any manner which
materially adversely affects the rights of the Insurer hereunder without the
prior written consent of the Insurer, which may not be unreasonably withheld,
conditioned or delayed.
IN WITNESS WHEREOF, THE PROVIDENCE GAS COMPANY has caused its corporate
seal to be hereto affixed and this bond to be signed by its President or Vice
President and its Treasurer or Assistant Treasurer, the 8th day of February,
1999.
THE PROVIDENCE GAS COMPANY
By______________________________________
President
[CORPORATE SEAL]
and
By____________________________________
Treasurer
[FORM OF TRUSTEE'S CERTIFICATE]
This is one of the bonds of Series T of the issue described in the
Indenture within mentioned.
STATE STREET BANK AND TRUST COMPANY,
as Successor to Rhode Island Hospital Trust
Company, Trustee
By________________________________________
Authorized Signature
WHEREAS the Company also desires to confirm the lien of the Indenture upon
property (intended to be thereby mortgaged) acquired by
7
<PAGE>
the Company since the execution of the Nineteenth Supplemental Indenture;
NOW, THEREFORE, THIS TWENTIETH SUPPLEMENTAL INDENTURE WITNESSETH: That The
Providence Gas Company, pursuant to and in execution of the powers, authorities
and obligations conferred, imposed and reserved in the Original Indenture, as
heretofore supplemented by the First, Second, Third, Fourth, Fifth, Sixth,
Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth,
Fifteenth, Sixteenth, Seventeenth, Eighteenth and Nineteenth Supplemental
Indentures, and every other power, authority and obligation thereto appertaining
or enabling, in consideration of the premises and of the authentication,
purchase and acceptance of the Series T bonds, of $10 duly paid to the Company
by the Trustee and of other good and valuable consideration, receipt whereof is
hereby acknowledged, and for the purpose of confirming the Original Indenture
and said First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth,
Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth,
Seventeenth, Eighteenth and Nineteenth Supplemental Indentures, as hereby
supplemented, and in order to secure, equally and ratably, the payment of the
principal of and the interest on all of the bonds at any time outstanding under
the Indenture according to their tenor, purport and effect and in order to
secure the faithful performance and observance of all of the covenants and
conditions set forth herein and in the Original Indenture, as heretofore
supplemented by the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth,
Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth,
Seventeenth, Eighteenth and Nineteenth Supplemental Indentures, by these
presents hereby confirms (except for property hereinafter expressly reserved and
excluded from the lien of the Indenture) the mortgage, conveyance, pledge,
assignment and transfer of the properties, franchises, rights and privileges set
forth and described in the Original Indenture and said Second, Third, Fourth,
Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth,
Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth and Nineteenth
Supplemental Indentures, and does hereby grant, bargain, sell, release, convey,
mortgage, confirm, assign, transfer, pledge and set over unto the Trustee, and
its successors in the trust, and its and their assigns, upon the trusts
established by the Indenture, all and singular:
A. The "Schedule of Property and Interests Therein" hereto attached as
Schedule I and made a part hereof.
B. The Company's gasworks, plant and machinery, purifiers, generators,
service and other pipes, holders, mains, meters, shops, tools, implements,
fixtures, appurtenances, and (except for property hereinafter expressly reserved
and excluded from the lien of the Indenture) all other real and tangible
personal property now owned or which shall hereafter be acquired by the Company,
or its successor or successors, and used or useful in connection with its
business of making, distributing, purchasing and selling gas, and with any other
business authorized or permitted by the Company's charter, and all of
8
<PAGE>
the Company's leasehold interests in any of such property now or hereafter
leased by the Company as a lessee and all corporate and other franchises of the
Company, and all permits, ordinances, easements, privileges, immunities and
licenses, all rights to lay, construct, maintain and operate systems for the
distribution and transmission of gas and other agencies for the supply to itself
or others of light, heat and power, and all rights of way, grants and consents
which the Company now owns or which it may hereafter acquire, being intended to
include, among other things covered by the Indenture, the entire existing and
future light, heat and power business of the Company and all of its existing and
all of its future rights, franchises, permits, ordinances and licenses to
transact and conduct the same, and each and every part thereof (except as
hereinafter noted) as provided in the Original Indenture and said Second, Third,
Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth,
Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth and
Nineteenth Supplemental Indentures, which are hereby made a part hereof, to the
same extent as if set forth herein at length, excepting, however, and there is
expressly reserved and excluded from the lien of the Indenture:
(1) Such of said properties or interests therein heretofore conveyed
to the Trustee as may have been released by the Trustee or sold or
otherwise disposed of as permitted by the provisions of the Indenture; and
(2) All right, title and interest of the Company now owned or
hereafter acquired in and to
(a) all cash, bonds, shares of stock, obligations and other
securities not deposited with the Trustee under the provisions of the
Indenture;
(b) all accounts and bills receivable (other than for the recovery of
real property or establishing a lien or charge thereon or right
therein) and choses in action not specifically assigned to the Trustee
and pledged with the Trustee hereunder;
(c) all goods, wares, merchandise, products and by-products held for
sale in the ordinary course of business;
(d) all materials and supplies held for consumption in operation;
(e) all conversion burners, water heaters, stoves and refrigerators
rented to customers or held for rental;
(f) all motor vehicles; and
(3) The last day of each of the demised terms created by any lease of
property now leased to the Company and the last day
9
<PAGE>
of any demised term under each and every lease hereafter made or acquired
by the Company and, under each and every renewal of any lease the last day
of each and every such demised term being hereby expressly reserved to and
by the Company;
until and unless a default shall be made in one or more obligations of the
Company under the Indenture and such default shall have continued beyond the
period of grace, if any, applicable in respect thereof, and the Trustee or any
receiver or other official shall take control of the mortgaged properties, in
which event the Indenture shall (to the extent permitted by law) become and be a
lien upon all of the classes of property set forth in 2 above (subject to any
liens or encumbrances then existing thereon), and the Trustee, receiver or other
official shall (to the extent permitted by law) be entitled to possess, use and
dispose of the same in carrying on the operation of the Company's enterprise and
to include the same in any sale under power of sale conferred by the Indenture
or by law.
TO HAVE AND TO HOLD all of said property, real, personal and mixed, now
owned or hereafter acquired, mortgaged and conveyed by the Company as aforesaid,
or intended so to be, unto the Trustee, and its successors in said trust, and to
them and to their assigns forever.
IN TRUST, NEVERTHELESS, for the purposes, with the powers and subject to
the agreements, covenants and conditions set forth and expressed in the Original
Indenture, as supplemented and modified by the First Supplemental Indenture, the
Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth
Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental
Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental
Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture,
the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the
Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the
Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the
Seventeenth Supplemental Indenture, Eighteenth Supplemental Indenture, the
Nineteenth Supplemental Indenture and this instrument, it being agreed as
follows, to wit:
ARTICLE FIRST
DEFINITIONS
Section 1.01. General. The terms defined in this Article (whether or not
capitalized and except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Twentieth Supplemental
Indenture shall have the respective meanings specified in this Article FIRST.
Section 1.02. Trust Indenture Act. (a) Whenever this Indenture refers to
a provision of the Trust Indenture Act of 1939, as amended
10
<PAGE>
(the "TIA"), such provision is incorporated by reference in and made a part of
this Indenture.
(b) Unless otherwise indicated, all terms used in this Twentieth
Supplemental Indenture that are defined by the TIA, defined by the TIA by
reference to another statute or defined by a rule of the Commission under the
TIA shall have the meanings assigned to them in the TIA or such statute or rule
as in force on the date of execution of this Twentieth Supplemental Indenture.
Section 1.03. Definitions. For purposes of this Twentieth Supplemental
Indenture, the following terms shall have the following meanings:
"Authorized Agent" shall mean any agent of the Company designated as such
by an Officers' Certificate delivered to the Trustee.
"Board of Directors" shall mean the Board of Directors of the Company or
the Executive Committee of such Board or any other duly authorized committee of
such Board.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions or trust companies in the
City of Boston, Commonwealth of Massachusetts, or in the city where the
corporate trust office of the Trustee is located, are obligated or authorized by
law or executive order to close or on which the office of the Insurer in the
Burrough of Manhattan, City of New York, State of New York, is closed.
"Commission" shall mean the United States Securities and Exchange
Commission, or if at any time hereafter the Commission is not existing or
performing the duties now assigned to it under the TIA, then the body performing
such duties.
"Company Order" shall mean a written order signed in the name of the
Company by one of the Chairman, the President, any Vice President (whether or
not designated by a number or numbers or a word or words added before or after
the title "Vice President"), the Treasurer or an Assistant Treasurer, of the
Company, and delivered to the Trustee.
"Corporate Trust Office of the Trustee", or other similar term, shall mean
the corporate trust office of the Trustee, at which at any particular time its
corporate trust business shall be principally administered, which office is at
the date of the execution of this Indenture located at Two International Place,
4/th/ Floor, Boston,
11
<PAGE>
Massachusetts 02110, Attention: Corporate Trust Administration (The Providence
Gas Company Twentieth Supplemental Indenture).
"Depository" shall mean, unless otherwise specified in a Company Order, The
Depository Trust Company, New York, New York, or any successor thereto
registered and qualified as a clearing agency under the Securities Exchange Act
of 1934, or other applicable statute or regulation.
"Event of Default" shall mean any event specified in Section 7.05 hereof,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Global Note" shall mean a Series T bond that, pursuant to Section 3.04
hereof, is issued to evidence the Series T bonds, that is delivered to the
Depository or pursuant to the instructions of the Depository and that shall be
registered in the name of the Depository or its nominee.
"Holder" shall mean (a) with respect to Series T bonds issued in the form
of a Global Note as provided in Section 3.04 hereof, any Person in whose name a
Series T bond is registered on the records of the Depository and (b) with
respect to Series T bonds issued in the form of individual Notes, the Registered
Owner thereof.
"Insurance Paying Agent" shall have the meaning ascribed thereto in Section
5.06 hereof.
"Insurer" shall mean MBIA Insurance Corporation, a New York domiciled stock
insurance company.
"Interest Payment Date" shall mean (a) each date designated as such for the
payment of interest on the Series T bonds specified in this Twentieth
Supplemental Indenture, (b) a date of maturity of the Series T bonds and (c)
only with respect to defaulted interest on the Series T bonds, the date
established by the Trustee for the payment of such defaulted interest pursuant
to Section 2.03 hereof.
"Note" or "Notes" shall mean the First Mortgage Bond(s), Series T, also
known as 6.50% Senior Secured Insured Quarterly Note(s).
"Officers' Certificate" when used with respect to the Company, shall mean a
certificate signed by one of the Chairman, the President, any Vice President
(whether or not designated by a number or numbers or a word or words added
before or after the title "Vice President"), and by the Chief Financial Officer,
Treasurer, any Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company; provided, that no individual shall be entitled to sign in more than
one capacity.
"Original Issue Date" shall mean February 8, 1999.
12
<PAGE>
"Participant" shall mean one of the participating organizations for which
the Depository holds the Global Note.
"Paying Agent" shall mean any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of or interest on
the Series T bonds on behalf of the Company.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, limited liability partnership or other
juridical entity, association, joint-stock company, trust, unincorporated
organization or government or any agent or political subdivision thereof.
"Policy" shall mean the financial guaranty insurance policy issued by the
Insurer insuring the payment when due of the principal of and interest on the
Series T bonds as provided therein.
"Redemption Date" shall mean with respect to any Series T bond to be
redeemed, in whole or in part, the date fixed for such redemption by or pursuant
to this Twentieth Supplemental Indenture.
"Registered Owner" shall mean any Person in whose name a particular First
Mortgage Bond (including a Note) is registered on the books of the Trustee kept
for that purpose in accordance with the terms of the Indenture (including this
Twentieth Supplemental Indenture).
"Regular Record Date" means the fifteenth (15/th/) calendar day (whether or
not a Business Day) of the month preceding the month in which the respective
Interest Payment Date occurs.
"Principal Executive Offices of the Company" shall mean 100 Weybosset
Street, Providence, Rhode Island 02903, or such other place where the main
corporate offices of the Company are located as designated in writing to the
Trustee by an Authorized Agent.
"Responsible Officer" or "Responsible Officers" when used with respect to
the Trustee shall mean any officer in the Corporate Trust Office of the Trustee
or any other officer to whom any corporate trust matter is referred because of
his or her knowledge of and familiarity with the particular subject.
"Special Record Date" shall mean, with respect to any Series T bond, the
date established by the Trustee in connection with the payment of defaulted
interest on such Series T bond pursuant to Section 2.03 hereof.
"Stated Maturity" means February 1, 2029.
ARTICLE SECOND
DESIGNATION AND TERMS OF SERIES T BONDS
13
<PAGE>
Section 2.01. Establishment of Series. There shall be and is hereby
created a new series of bonds entitled "First Mortgage Bonds, Series T, 6.50%"
also known as "6.50% Senior Secured Insured Quarterly Notes" (herein sometimes
called the "Series T bonds" or "bonds of Series T" or "Notes"), limited in
aggregate principal amount, except as noted in Section 3.02 hereof, to Fifteen
Million Dollars ($15,000,000), and to be issued as prescribed in Section 3.01
hereof. Series T bonds shall be fully registered bonds in denominations of One
Thousand Dollars ($1,000) and multiples thereof. All Series T bonds shall
mature February 1, 2029 and shall bear interest at the rate and payable at the
times specified in the form of Series T bond set forth herein.
Interest shall be paid quarterly in arrears on each Interest Payment Date
to the Person in whose name the Series T bonds are registered on the Regular
Record Date for such Interest Payment Date. Any such interest that is not so
punctually paid or duly provided for will forthwith cease to be payable to the
Registered Owners on such Regular Record Date and may either be paid to the
Person or Persons in whose name the Series T bonds are registered at the close
of business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to Registered Owners
of the Series T bonds not less than ten (10) days prior to such Special Record
Date.
Payments of interest on the Series T bonds will include interest accrued to
but excluding the respective Interest Payment Dates. Interest payments for the
Series T bonds shall be computed and paid on the basis of a 360-day year of
twelve 30 day months.
The principal of and interest on bonds of Series T shall, subject to the
provisions of Section 7.04 be payable at the office of the Trustee in such coin
or currency of the United States of America as shall be legal tender for the
payment of public and private debts.
Bonds of Series T shall be numbered "R-1" and consecutively upwards.
Section 2.02. Exchangeability of Series T Bonds. Bonds of Series T shall
be exchangeable for a like aggregate principal amount of Series T bonds of
another authorized denomination or other authorized denominations.
Section 2.03. Special Record Date. If and to the extent that the Company
fails to make timely payment or provision for timely payment of interest on any
Series T bond (other than on an Interest Payment Date that is a maturity date),
that interest shall cease to be payable to the Persons who were the Registered
Owners of such Series T bonds at the applicable Regular Record Date. In that
event, when moneys become available for payment of the interest, the Trustee
shall (a) establish a date of payment of such interest and a Special Record
14
<PAGE>
Date for the payment of that interest, which Special Record Date shall be not
more than fifteen (15) or fewer than ten (10) days prior to the date of the
proposed payment and (b) mail notice of the date of payment and of the Special
Record Date not fewer than ten (10) days preceding the Special Record Date to
each Registered Owner of such Series T bonds at the close of business on the
15/th/ day preceding the mailing at the address of such Registered Owner, as it
appeared on the register for the Series T bonds. On the day so established by
the Trustee the interest shall be payable to the Registered Owners of the Series
T bonds at the close of business on the Special Record Date.
ARTICLE THIRD
ISSUANCE OF $15,000,000 OF SERIES T BONDS AND
CLOSING OF SUCH SERIES AT THAT AMOUNT
Section 3.01. Issuance of Series T Bonds. Upon the execution and delivery
hereof, the Company will execute and deliver to the Trustee and the Trustee will
authenticate and deliver to the Company Fifteen Million Dollars ($15,000,000) in
aggregate principal amount of Series T bonds.
Section 3.02. Limitation on Aggregate Principal Amount. The issue of
Series T bonds hereunder is hereby limited to the Fifteen Million Dollars
($15,000,000) in aggregate principal amount of bonds of such series to be
initially issued as provided in Section 3.01 hereof and to Series T bonds issued
in exchange or substitution for outstanding Series T bonds under the provisions
of the Indenture, permitting the exchange of bonds for other Series T bonds
(under the provisions of Section 2.02 hereof), or permitting the issuance of
bonds in lieu of lost, stolen, destroyed or mutilated bonds, or permitting the
exchange of definitive bonds for temporary bonds.
Section 3.03. Cancellation of Series T Bonds Paid, Etc. All Series T
bonds surrendered for the purpose of payment, redemption, exchange or
registration of transfer shall be surrendered to the Trustee for cancellation
and promptly canceled by it and no Series T bonds shall be issued in lieu
thereof except as expressly permitted by this Twentieth Supplemental Indenture.
The Company shall surrender to the Trustee any Series T bonds so acquired by it
and such Series T bonds shall be canceled by the Trustee. No Series T bonds
shall be authenticated in lieu of or in exchange for any Series T bonds so
canceled.
Section 3.04. Bonds Issuable in the Form of a Global Note.
(a) The Company shall execute and the Trustee shall, in accordance with
Section 3.01 hereof, authenticate and deliver the Series T bonds issuable
hereunder in the form of a Global Note or Global Notes, which (i) shall
represent, shall be denominated in an amount equal to the aggregate principal
amount of and shall have the same terms as the outstanding Series T bonds, (ii)
shall be registered
15
<PAGE>
in the name of the Depository or its nominee, (iii) shall be delivered by the
Trustee to the Depository or pursuant to the Depository's instruction and (iv)
shall bear a legend substantially to the following effect: "This Security is a
Global Note registered in the name of the Depository (referred to herein) or a
nominee thereof and, unless and until it is exchanged in whole or in part for
the individual Notes represented hereby, this Global Note may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the Depository
or by the Depository or any such nominee to a successor Depository or a nominee
of such successor Depository or a nominee of such successor Depository. Unless
this Global Note is presented by an authorized representative of The Depository
Trust Company (55 Water Street, New York, New York) to the Trustee for
registration of transfer, exchange or payment and any certificate issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment is
made to Cede & Co., any transfer, pledge or other use hereof for value or
otherwise by or to any person is wrongful since the registered owner hereof,
Cede & Co., has an interest herein" or such other legend as may be required by
the rules and regulations of the Depository.
(b) Notwithstanding any other provision of the Indenture, a Global Note
may be transferred, in whole but not in part, only as described in the legend
thereto.
(c) (i) If at any time the Depository for a Global Note notifies the
Company that it is unwilling or unable to continue as Depository for such
Global Note or if at any time the Depository for the Global Note shall no
longer be eligible or in good standing under the Securities Exchange Act of
1934 or other applicable statute or regulation, the Company shall appoint a
successor Depository with respect to such Global Note. If a successor
Depository for such Global Note is not appointed by the Company within
ninety (90) days after the Company receives such notice or becomes aware of
such ineligibility, the Company shall execute, and the Trustee, upon
receipt of a Company Order for the authentication and delivery of
individual Notes of such series in exchange for such Global Note, shall
authenticate and deliver, individual Notes of such series of like tenor and
terms in definitive form in an aggregate principal amount equal to the
principal amount of the Global Note in exchange for such Global Note. The
Trustee shall not be charged with knowledge or notice of the ineligibility
of a Depository unless a Responsible Officer of the Trustee shall have
actual knowledge thereof.
(ii) (A) The Company may at any time and in its sole discretion
determine that all outstanding (but not less than all) Notes evidencing the
Series T bonds issued or issuable in the form of one or more Global Notes
shall no longer be represented by such Global Note or Notes. In such event
the Company shall
16
<PAGE>
execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of individual Notes in exchange for such Global
Note, shall authenticate and deliver individual Notes of like tenor and
terms in definitive form in an aggregate principal amount equal to the
principal amount of such Global Note or Notes in exchange for such Global
Note or Notes.
(B) Within seven (7) days after the occurrence of an Event of
Default with respect to any Global Notes, the Company shall execute, and
the Trustee shall authenticate and deliver, Notes evidencing such Series T
bonds in definitive registered form in any authorized denominations and in
aggregate principal amount equal to the principal amount of the Global
Notes in exchange for such Global Notes.
(iii) In any exchange provided for in either of the preceding two
paragraphs, the Company will execute and the Trustee will authenticate and
deliver individual Notes in definitive registered form in authorized
denominations. Upon the exchange of a Global Note for individual Notes,
such Global Note shall be canceled by the Trustee. Notes issued in exchange
for a Global Note pursuant to this Section shall be registered in such
names and in such authorized denominations as the Depository for such
Global Note, pursuant to instructions from its direct or indirect
Participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Notes to the Depository for delivery to the Persons in whose
names such Notes are so registered, or if the Depository shall refuse or be
unable to deliver such Notes, the Trustee shall deliver such Notes to the
Persons in whose names such Notes are registered, unless otherwise agreed
upon between the Trustee and the Company, in which event the Company shall
cause the Notes to be delivered to the Persons in whose names such Notes
are registered.
(d) None of the Company, the Trustee, any authenticating agent or any
Paying Agent shall have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests of a Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
(e) If the principal amount of part, but not all of a Global Note is paid,
then upon surrender to the Trustee of such Global Note, the Company shall
execute, and the Trustee shall authenticate, deliver and register, a Global Note
in an authorized denomination in aggregate principal amount equal to, and having
the same terms, Original Issue Date and series as, the unpaid portion of such
Global Note.
ARTICLE FOURTH
REDEMPTION
17
<PAGE>
Section 4.01. General. Notwithstanding any provisions of the Indenture
(including, without limitation, Section 41 thereof) the bonds of Series T shall
be subject to redemption only in the manner and to the extent provided in this
Article FOURTH.
Section 4.02. Optional Redemption of Series T Bonds. The Company shall
have the option, at any time and from time to time on or after February 1, 2004,
of redeeming the outstanding Series T bonds, either in whole or in part, upon
not less than thirty (30) days' nor more than sixty (60) days' prior written
notice to each Registered Owner, by payment of the principal amount of the
Series T bonds to be redeemed (the "Redemption Price"), and accrued interest
thereon to, but not including, the Redemption Date.
If notice of redemption is given as aforesaid, the Series T bonds so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price together with any accrued interest thereon, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) the Series T bonds shall cease to bear interest. If any
Series T bond called for redemption shall not be paid upon surrender thereof for
redemption, the principal shall, until paid, bear interest from the Redemption
Date at 6.50%. Subject to the foregoing and applicable law (including without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding Series T
bonds by tender, in the open market or by private agreement.
Section 4.03. Redemption Procedures. Except as herein otherwise set
forth, the provisions of Article Fourth of the Original Indenture, with respect
to the procedures for call and redemption, prior to maturity, of Series A and
Series B bonds, shall apply to the call and redemption, prior to maturity, of
all bonds of Series T so to be called and redeemed pursuant to Section 4.02.
All Series T bonds redeemed pursuant to the provisions hereof shall be canceled
by the Trustee and shall be delivered to or upon the order of the Company, and
shall not be reissued.
Whenever any Series T bonds are to be redeemed pursuant to Section 4.02,
the Trustee shall allocate to each Registered Owner a proportion of the Series T
bonds to be redeemed, equal, as nearly as practicable, to the proportion that
the principal amount of the Series T bonds then outstanding hereunder,
registered in the name of such Registered Owner, bears to the principal amount
of all Series T bonds then outstanding under the Indenture.
Redemption notices for Series T bonds shall be given to each Registered
Owner by registered mail and not by publication. The redemption notice given to
each Registered Owner shall comply with the provisions of Article Fourth of the
Original Indenture and shall also specify (i) the principal amount of such
Registered Owner's Series T
18
<PAGE>
bonds to be redeemed, and (ii) the accrued interest payable in connection with
such redemption.
Section 4.04. Redemption at the Holder's Option. For purposes of this
Section 4.04 a "Beneficial Owner" means the person who has the right to sell,
transfer or otherwise dispose of an interest in Series T bonds and the right to
receive the proceeds therefrom, as well as the interest and principal payable to
the Holder thereof. In general, a determination of beneficial ownership in the
Series T bonds will be determined by the Company, in its sole discretion, which
determinations shall be final and binding on all parties.
Unless the Series T bonds have been declared due and payable prior to their
maturity by reason of an Event of Default, the personal representative or other
Person authorized to represent the estate of the deceased Beneficial Owner or
from a surviving joint tenant(s) or tenant(s) by the entirety (each, a
"Representative") of a deceased Beneficial Owner has the right to request
redemption prior to February 1, 2029 of all or part of such interest, expressed
in integral multiples of $1,000 principal amount, in the Series T bonds, and the
Company will redeem the same subject to the limitations that the Company will
not be obligated to redeem, during the period from the Original Issue Date
through and including February 1, 2000 (the "Initial Period"), and during any
twelve-month period which ends on and includes each February 1 thereafter (each
such twelve-month period being hereinafter referred to as a "Subsequent
Period"), (i) on behalf of a deceased Beneficial Owner any interest in the
Series T bonds which exceeds an aggregate principal amount of $25,000 or (ii)
interests in the Series T bonds in an aggregate principal amount exceeding
$375,000. A request for redemption in the form attached as Schedule III hereto
may be initiated by the Representative of a deceased Beneficial Owner at any
time and in any principal amount in integral multiples of $1,000.
Representatives of deceased Beneficial Owners must make arrangements with the
Participant through whom such interest is owned in order that timely
presentation of redemption requests can be made by the Participant to the
Trustee. If the Company, although not obligated to do so, chooses to redeem
interests of any deceased Beneficial Owner in the Series T bonds in the Initial
Period or any Subsequent Period in excess of the $25,000 limitation, such
redemption, to the extent that it exceeds the $25,000 limitation for any
deceased Beneficial Owner, shall not be included in the computation of the
$375,000 limitation for such Initial Period or such Subsequent Period, as the
case may be, or for any succeeding Subsequent Period. Any Series T bonds (or
portion thereof) tendered pursuant to a redemption request may be withdrawn by a
written request by the Representative received by the Trustee at least ten (10)
days prior to its repayment.
Subject to the $25,000 and $375,000 limitations, the Company will, after
the death of any Beneficial Owner, redeem the interest of such Beneficial Owner
in the Series T bonds on the next Interest Payment Date following receipt by the
Trustee of a redemption request
19
<PAGE>
received at least twenty (20) days in advance of the next Interest Payment Date.
The Trustee will notify the Company promptly after receipt of any redemption
request and the Company will provide all funds necessary for such redemption
prior to the date of redemption to the Paying Agent. If redemption requests
exceed the aggregate principal amount of interests in Series T bonds required to
be redeemed during the Initial Period or during any Subsequent Period, then such
excess redemption requests will be applied in the order received by the Trustee
to successive Subsequent Periods, regardless of the number of Subsequent Periods
required to redeem such interests. All redemption requests will be redeemed in
the order in which the trustee receives the redemption request. To obtain
repayment pursuant to a redemption request, the Representative must provide to
the Participant (i) a written request for repayment signed by the
Representative, and such signature must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. ("NASD") or a commercial bank or trust company having
an office or correspondent in the United States, (ii) appropriate evidence
satisfactory to the Company and the Trustee that (A) the Representative has
authority to act on behalf of the deceased Beneficial Owner, (B) the death of
such Beneficial Owner has occurred and (C) the deceased was the owner of a
beneficial interest in such Series T bond at the time of death, (iii) if
applicable, a properly executed assignment or endorsement, and (iv) if the
beneficial interest in such Series T bond is held by a nominee of the deceased
Beneficial Owner, a certificate satisfactory to the Trustee from such nominee
attesting to the deceased's ownership of a beneficial interest in such Series T
bond. The Participant will provide these documents to the Trustee. All questions
as to the eligibility or validity of any exercise of redemption on behalf of a
deceased Beneficial Owner will be determined by the Company, in its sole
discretion, which determinations will be final and binding on all parties.
For purposes of this Section 4.04, an interest in Series T bonds held in
tenancy by the entirety, joint tenancy or by tenants in common will be deemed to
be held by a single Beneficial Owner and the death of a tenant by the entirety,
joint tenant or tenant in common will be deemed the death of a Beneficial Owner.
The death of a Person who, during his lifetime, was entitled to substantially
all of the rights of a Beneficial Owner of an interest in the Series T bonds
will be deemed the death of the Beneficial Owner, regardless of the recordation
of such interest on the records of the Participant, if such rights can be
established to the satisfaction of the Participant, if any, and the Company.
In the case of any redemption request which is presented pursuant to this
Section 4.04 and which has not been fulfilled at the time the Company gives
notice of its election to partially redeem Series T bonds pursuant to Section
4.02 hereof, such interest or portion thereof shall not be subject to redemption
pursuant to such Section
20
<PAGE>
4.02, but shall remain subject to redemption pursuant to this Section 4.04.
ARTICLE FIFTH
SPECIAL INSURANCE PROVISIONS
Section 5.01. Insurer as Third Party Beneficiary. To the extent that the
Indenture confers upon or gives or grants to the Insurer any right, remedy or
claim, the Insurer is hereby explicitly recognized as being a third-party
beneficiary hereunder and may enforce any such right remedy or claim conferred,
given or granted hereunder.
Section 5.02. Notices and Information.
(a) The Company shall furnish to the Insurer:
(i) Any notice that is required to be given to a Holder of the Series
T bonds or to the Trustee pursuant to the Indenture.
(ii) As soon as practicable after the filing thereof, a copy of any
financial statement of the Company and a copy of any audit and annual
report of the Company; a copy of any notice to be given to the
Registered Owners of the Series T bonds including, without limitation,
notice of any redemption of or defeasance of the Series T bonds; and
such additional information as it may reasonably request.
(b) The Company will permit the Insurer to have access to and to make
copies of all books and records relating to the Series T bonds at any reasonable
time.
(c) Notwithstanding any other provision of the Indenture, the Trustee
and the Company shall immediately notify the Insurer in accordance with Section
5.06 if at any time after such amounts are due to be paid to the Trustee or
Paying Agent there are insufficient moneys to make any payments of principal
and/or interest as required and promptly upon the occurrence of any Event of
Default hereunder.
All notices and information required to be given to the Insurer shall be in
writing and shall be sent by overnight delivery to MBIA Insurance Corporation,
113 King Street, Armonk, New York 10504.
Section 5.03. Concerning the Special Insurance Provisions. The provisions
of this Article V shall apply notwithstanding anything in the Indenture to the
contrary, but only so long as the Policy shall be in full force and effect and
the Insurer is not in default thereunder.
Section 5.04. Amendments. Any provision of the Indenture may not be
amended in any manner which materially adversely affects the rights of the
Insurer hereunder without the prior written consent of the
21
<PAGE>
Insurer, which shall not be unreasonably withheld, conditioned or delayed.
Section 5.05. Limitation on Defeasance. Notwithstanding anything
herein to the contrary, in the event that the principal and/or interest due on
the Series T bonds shall be paid by the Insurer pursuant to the Policy, the
Series T bonds shall remain outstanding for all purposes, not be defeased or
otherwise satisfied and not be considered paid by the Company, and the
assignment and pledge of moneys held in trust by the Trustee and all covenants,
agreements and other obligations of the Company to the Registered Owners shall
continue to exist and shall run to the benefit of the Insurer, and the Insurer
shall be subrogated to the rights of such Registered Owners.
Section 5.06. Payments Under the Policy.
(a) If, as of the second day next preceding any date on which payment
of principal of or interest on the Series T bonds is due, there are insufficient
moneys available under the Indenture to pay all principal and interest coming
due on the Series T bonds on the next succeeding payment date, the Trustee shall
immediately notify the Insurer or its designee by telephone or telegraph,
confirmed in writing by registered or certified mail, of the amount of the
deficiency.
(b) If the deficiency is made up in whole or in part prior to or on
the Interest Payment Date or the date designated for the payment of principal of
the Series T bonds, the Trustee shall so notify the Insurer or its designee.
(c) In addition, if the Trustee has notice that any of the Registered
Owners have been required to disgorge payments of principal or interest on
Series T bonds to the Company or to the trustee in bankruptcy for creditors or
others pursuant to a final judgment by a court of competent jurisdiction that
such payment constitutes a voidable preference to such Registered Owners within
the meaning of any applicable bankruptcy laws, then the Trustee shall notify the
Insurer or its designee of such fact by telephone or telegraphic notice,
confirmed in writing by registered or certified mail.
(d) The Trustee is hereby irrevocably designated, appointed, directed
and authorized to act as attorney-in-fact for Registered Owners of the Series T
bonds as follows:
(i) if and to the extent there is a deficiency in amounts
required to pay interest on the Series T bonds, the Trustee shall (A)
execute and deliver to State Street Bank and Trust Company, N.A., or
its successors under the Policy (the "Insurance Paying Agent"), in
form satisfactory to the Insurance Paying Agent, an instrument
appointing the Insurer as agent for such Registered Owners in any
legal proceeding related to the payment of such interest and an
assignment to the Insurer of the claims for
22
<PAGE>
interest to which such deficiency relates and which are paid by the
Insurer, (B) receive as designee of the respective Registered Owners
(and not as Trustee) in accordance with the tenor of the Policy
payment from the Insurance Paying Agent with respect to the claims for
interest so assigned and (C) disburse the same to such respective
Registered Owners; and
(ii) if and to the extent of a deficiency in amounts required to
pay principal of the Series T bonds, the Trustee shall (A) execute and
deliver to the Insurance Paying Agent an instrument appointing the
Insurer as agent for such Registered Owner in any legal proceeding
relating to the payment of such principal and an assignment to the
Insurer of any of the Series T bonds surrendered to the Insurance
Paying Agent of so much of the principal amount thereof as has not
previously been paid or for which moneys are not held by the Trustee
and available for such payment (but such assignment shall be delivered
only if payment from the Insurance Paying Agent is received), (B)
receive as designee of the respective Registered Owners (and not as
Trustee) in accordance with the tenor of the Policy payment therefor
from the Insurance Paying Agent and (C) disburse the same to such
Registered Owners.
(e) Payments with respect to claims for interest on and principal of
Series T bonds disbursed by the Trustee from proceeds of the Policy shall not be
considered to discharge the obligation of the Company with respect to such
Series T bonds as set forth in Section 2.01 hereof, and the Insurer shall become
the owner of such unpaid Series T bond and claims for interest in accordance
with the tenor of the assignment made to it under the provisions of this
subsection or otherwise.
(f) Irrespective of whether any such assignment is executed and
delivered, the Company and the Trustee hereby agree for the benefit of the
Insurer that:
(i) they recognize that to the extent the Insurer makes
payments, directly or indirectly (as by paying through the Trustee),
on account of principal of or interest on the Series T bonds, the
Insurer will be subrogated to the rights of such Registered Owners to
receive the amount of such principal and interest from the Company,
with interest thereon as provided and solely from the sources stated
in the Indenture and the Series T bonds; and
(ii) they will accordingly pay to the Insurer the amount of such
principal and interest (including principal and interest recovered
under subparagraph (ii) of the first paragraph of the Policy, which
principal and interest shall be deemed past due and not to have been
paid), with interest thereon as provided in the Indenture and the
Series T bond, but only from the sources and in the manner provided
herein for the payment of principal of and
23
<PAGE>
interest on the Series T bonds to Registered Owners and will otherwise
treat the Insurer as the owner of such rights to the amount of such
principal and interest.
Section 5.07. Insurer's Rights Concerning the Trustee.
(a) The Insurer shall receive prompt written notice of any Trustee or
Paying Agent resignation.
(b) Notwithstanding any other provision of the Indenture, in
determining whether the rights of the Holders of Series T bonds will be
adversely affected in any material respect by any action taken pursuant to the
terms and provisions of the Indenture, the Trustee or Paying Agent shall
consider the effect on the Holders of Series T bonds as if there were no Policy.
Section 5.08. Insurer's Right to Accelerate, etc. Anything in the
Indenture to the contrary notwithstanding, upon the occurrence and continuance
of an Event of Default, so long as the Policy shall be in full force and effect
and the Insurer is not in default under the terms of the Policy, the Insurer
shall be entitled to control and direct the enforcement of all rights and
remedies granted to the Holders of Series T bonds.
ARTICLE SIXTH
PARTICULAR PROVISIONS RELATED TO THE TRUST INDENTURE ACT
Anything contained elsewhere in the Indenture notwithstanding, so long
as any of the Series T bonds shall remain outstanding, the following provisions,
which are intended to clarify certain matters, including compliance with the
TIA, shall apply, in addition to all other provisions of the Indenture, as
supplemented, and in the case of any conflict with any other provision of the
Indenture, the following provisions shall control.
Section 6.01. Deposited Moneys to be Held in Trust by Trustee.
Subject to Section 6.03, all moneys deposited with the Trustee pursuant to
Section 66 of the Original Indenture, shall be held in trust and applied by it
to the payment, either directly or through any Paying Agent (including the
Company if acting as its own Paying Agent), to the Registered Owners of the
particular Series T bonds for the payment or redemption of which such moneys
have been deposited with the Trustee of all sums due and to be come due thereon
for principal and interest.
Section 6.02. Paying Agent to Repay Moneys Held. Upon the
satisfaction and discharge of the Indenture, all moneys then held by any Paying
Agent for the Series T bonds (other than the Trustee) shall, upon written demand
by the Company, be repaid to the Company or paid to the Trustee, and thereupon
such Paying Agent shall be released from all further obligations with respect to
such moneys.
24
<PAGE>
Section 6.03. Return of Unclaimed Moneys. Any moneys deposited with or
paid to the Trustee for payment of the principal of or any interest on any
Series T bonds and not applied but remaining unclaimed by the Registered Owners
of such Series T bonds for two years after the date upon which the principal of
or any interest on such Series T bonds, as the case may be, shall have become
due and payable, shall be repaid to the Company, subject to applicable abandoned
property laws, by the Trustee on written demand by the Company; and any
Registered Owner of any of such Series T bonds shall thereafter look only to the
Company for any payment which such Registered Owner may be entitled to collect.
Section 6.04. Provisions as to Paying Agent. The Trustee shall be the
Paying Agent for the Series T bonds and, at the option of the Company, the
Company may appoint additional Paying Agents (including without limitation
itself). Whenever the Company shall appoint a Paying Agent other than the
Trustee with respect to the Series T bonds, it will cause such Paying Agent to
execute and deliver to the Trustee an instrument in which such agent shall agree
with the Trustee, subject to the provisions of this Section:
(a) that such Paying Agent will hold all sums received by it as such agent
for the payment of the principal of or interest, if any, on the Series T bonds
(whether such sums have been paid to it by the Company or by any other obligor
on the Series T bonds) in trust for the benefit of the Registered Owners of the
Series T bonds, or of the Trustee until such sums shall be paid to such
Registered Owners or otherwise disposed of as herein provided;
(b) that such Paying Agent will give the Trustee notice of any failure by
the Company (or by any other obligor on the Series T bonds) to make any payment
of the principal of, premium if any, or interest on the Series T bonds when the
same shall be due and payable; and
(c) that such Paying Agent will at any time during the continuance of any
such failure, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company will, on or prior to each due date of the principal of and any
interest on the Series T bonds, deposit with the Paying Agent a sum sufficient
to pay such principal and any interest so becoming due, such sum to be held in
trust for the benefit of the Registered Owners of the Series T bonds entitled to
such principal of and any interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of any failure to take
such action.
If the Company shall act as its own Paying Agent with respect to the Series
T bonds, it will, on or before each due date of the principal of or interest, if
any, on the Series T bonds, set aside,
25
<PAGE>
segregate and hold in trust for the benefit of the Registered Owners of the
Series T bonds, a sum sufficient to pay such principal or interest, if any, so
becoming due until such sums shall be paid to such Registered Owners or
otherwise disposed of as herein provided. The Company will promptly notify the
Trustee of any failure to take such action.
The Company may at any time pay or cause to be paid to the Trustee all sums
held in trust by it or any Paying Agent hereunder, as required by this Section,
such sums to be held by the Trustee upon the trusts herein contained, and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Anything in this Section to the contrary notwithstanding, the agreement to
hold sums in trust as provided in this section is subject to the provisions of
Sections 6.02 and 6.03.
Section 6.05. Certificates and Notice to Trustee. The Company shall, on
or before the expiration of ninety (90) days after the end of each calendar year
ending on or after December 31, 1999, deliver to the Trustee a certificate from
its principal executive officer, principal financial officer or principal
accounting officer covering the preceding calendar year and stating whether or
not, to the knowledge of such Person, the Company has complied with all
conditions and covenants under the Indenture, and, if not, describing in
reasonable detail any failure by the Company to comply with any such conditions
or covenants. For purposes of this Section, compliance shall be determined
without regard to any period of grace or requirement of notice provided under
the Indenture. Upon the occurrence of a default, the Company shall promptly
notify the Trustee of such event.
Section 6.06. Company to Furnish Registered Owner Lists. The Company and
any other obligor on the Series T bonds shall furnish or cause to be furnished
to the Trustee a list in such form as the Trustee may reasonably require of the
names and addresses of the Registered Owners of the Series T bonds:
(a) semi-annually and not more than fifteen (15) days after each Regular
Record Date for each Interest Payment Date that is not a maturity date, as of
such Regular Record Date, and such list need not include information received
after such date; and
(b) at such other times as the Trustee may request in writing, within
thirty (30) days after receipt by the Company of any such request, as of a date
not more than fifteen (15) days prior to the time such information is furnished,
and such list need not include information received after such date; provided
that if and so long as the Trustee shall be the registrar for the Series T
bonds, such list shall not be required to be furnished.
26
<PAGE>
Section 6.07. Preservation and Disclosure of Registered Owner Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Registered
Owners of the Series T bonds (i) contained in the most recent lists furnished to
it as provided in Section 6.06, (ii) received by it in the capacity of registrar
for the Series T bonds, if so acting, and (iii) filed with it within the two
preceding years pursuant to Section 6.09(d)(ii). The Trustee may destroy any
list furnished to it as provided in Section 6.06 upon receipt of a new list so
furnished.
(b) In case three or more Registered Owners of Series T bonds (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Series T bond for
a period of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other
Registered Owners of Series T bonds with respect to their rights under this
Indenture or under the Series T bonds and such application is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within five Business Days after the receipt
of such application, at its election, either
(i) afford to such applicants access to the information
preserved at the time by the Trustee in accordance with the provisions
of subsection (a) of this Section; or
(ii) inform such applicants as to the approximate number of
Registered Owners whose names and addresses appear in the information
preserved at the time by the Trustee, in accordance with the
provisions of such subsection (a) and as to the approximate cost of
mailing to such Registered Owners the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Registered Owner of Series T bonds, whose name and address appears
in the information preserved at the time by the Trustee in accordance with the
provisions of such subsection (a) a copy of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five (5) days after such tender the Trustee shall mail to such applicants and
file with the Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the
27
<PAGE>
best interests of the Registered Owners or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met, and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such Registered
Owners with reasonable promptness after the entry of such order and the renewal
of such tender; otherwise the Trustee shall be relieved of any obligation or
duty to such applicants respecting their application.
(c) Each and every Registered Owner of a Series T bond, by receiving and
holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor the agent of the Company or the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Registered Owners of Series T bonds in accordance
with the provisions of subsection (b) of this Section, regardless of the source
from which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
such subsection (b).
Section 6.08. Reports by the Company. The Company shall:
(a) file with the Trustee, within fifteen (15) days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934; or, if the Company is not required to file information, documents
or reports pursuant to either of said Sections, then it will file with the
Trustee and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Securities Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed from time to
time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
28
<PAGE>
(c) transmit by mail to all Registered Owners of Series T bonds, within
thirty (30) days after the filing thereof with the Trustee in the manner and to
the extent provided in Section 6.09(d), such summaries of any information,
documents and reports required to be filed by the Company pursuant to paragraphs
(a) and (b) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
Section 6.09. Reports by the Trustee.
(a) Annually, not later than August 15 of each year, the Trustee shall
transmit by mail in the manner provided in Section 6.22 a brief report dated as
of such date that complies with Section 313(a) of the TIA (to the extent
required by such Section).
(b) The Trustee shall from time to time transmit by mail brief reports
that comply, both in content and date of delivery, with Section 313(b) of the
TIA (to the extent required by such Section).
(c) A copy of each such report mailed pursuant to this section shall, at
the time of such transmission to such Registered Owners, be filed by the Trustee
with each stock exchange upon which any Series T bonds are listed and also with
the Commission. The Company will notify the Trustee promptly in writing upon
the listing of such Series T bonds on any stock exchange.
(d) Reports pursuant to this Section shall be transmitted:
(i) by mail to all Registered Owners of Series T bonds, as their
names and addresses appear in the register for the Series T bonds;
(ii) by mail to such Registered Owners of Series T bonds as have
within the two years preceding such transmission, filed their names
and addresses with the Trustee for such purpose;
(iii) by mail, except in the case of reports pursuant to Section
6.09(b) and (c) hereof, to all Registered Owners of Series T bonds
whose names and addresses have been furnished to or received by the
Trustee pursuant to Section 6.06 and 6.07(a) (ii) hereof; and
(iv) at the time such report is transmitted to the Registered Owners
of the Series T bonds, to each exchange on which Series T bonds are
listed and also with the Commission.
Section 6.10. Prohibition of Impairment of Registered Owner's Right to
Payment. Notwithstanding any other provision in the Indenture, the rights of
any Registered Owner of any Series T bond to receive payment of the principal of
and any interest on a Series T bond, on or after the respective due dates
expressed in a Series T
29
<PAGE>
bond or on the applicable Redemption Date, or to institute suit for the
enforcement of any such payment on or after such respective dates are absolute
and unconditional, and shall not be impaired or affected without the consent of
such Registered Owner.
Section 6.11. Notice of Default. The Trustee shall, within ninety (90)
days after the occurrence of a default with respect to the Series T bonds, give
to all Registered Owners of the Series T bonds, in the manner provided in
Section 6.22, notice of such default known to the Trustee, unless such default
shall have been cured or waived before the giving of such notice, the term
"default" for the purpose of this Section 6.11 being hereby defined to be any
event which is or after notice or lapse of time or both would become an Event of
Default; provided that, except in the case of default in the payment of the
principal of or any premium or interest on any of the Series T bonds, or in the
payment of any sinking or purchase fund installments, the Trustee shall be
protected in withholding such notice if and so long as its board of directors or
trustees, executive committee, or a trust committee of directors or trustees or
Responsible Officers in good faith determines that the withholding of such
notice is in the interests of the Registered Owners of the Series T bonds.
Section 6.12. Undertaking to Pay Costs. All parties to this Twentieth
Supplemental Indenture agree, and each Registered Owner of any Series T bond by
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
the Indenture (including this Twentieth Supplemental Indenture) or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but this Section 6.12 shall not apply to any suit
instituted by the Trustee, or to any suit instituted by any Registered Owner, or
group of Registered Owners, holding in the aggregate more than 10% in principal
amount of the Series T bonds outstanding, or to any suit instituted by any
Registered Owner for the enforcement of the payment of the principal of or any
interest on any Series T bond on or after the due date expressed in such Series
T bond or the applicable Redemption Date.
Section 6.13. Conflicting Interest of Trustee. The Trustee shall be
subject to and shall comply with the provisions of Section 310(b) of the TIA.
Nothing in this Twentieth Supplemental Indenture shall be deemed to prohibit the
Trustee or the Company from making any application permitted pursuant to such
section.
Section 6.14. Existence and Eligibility of Trustee. There shall at all
times be a Trustee hereunder which Trustee shall at all times be a corporation
organized and doing business under the laws of the
30
<PAGE>
United States or any State thereof or of the District of Columbia having (or in
the case of a subsidiary of a bank holding company, its parent shall have) a
combined capital and surplus of at least $50,000,000 and which is authorized
under such laws to exercise corporate trust powers and is subject to supervision
or examination by Federal or State authorities. Such corporation shall have its
principal place of business in the Borough of Manhattan, The City of New York,
State of New York or the City of Boston, Commonwealth of Massachusetts, if there
be such a corporation in such location willing to act upon reasonable and
customary terms and conditions. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid authority, then for the purposes of this Section 6.14, the combined
capital and surplus shall be deemed to be as set forth in its most recent report
of condition so published. No obligor upon the Series T bonds or Person directly
or indirectly controlling, controlled by, or under common control with such
obligor shall serve as Trustee. If at any time the Trustee shall cease to be
eligible in accordance with this Section 6.14, the Trustee shall resign
immediately in the manner and with the effect specified herein.
Section 6.15. Resignation or Removal of Trustee.
(a) Pursuant to the provisions of this Twentieth Supplemental Indenture,
the Trustee may at any time resign and be discharged of the trusts created by
the Indenture by giving written notice to the Company specifying the day upon
which such resignation shall take effect, and such resignation shall take effect
immediately upon the later of the appointment of a successor trustee and such
day.
(b) Any Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with such Trustee and signed and acknowledged by
the Registered Owners of a majority in principal amount of the then outstanding
First Mortgage Bonds or by their attorneys in fact duly authorized.
(c) So long as no default has occurred and is continuing, and no event has
occurred and is continuing that, with the giving of notice or the lapse of time
or both, would become a default, the Company may remove any Trustee upon written
notice to the Registered Owner of each Series T bond outstanding and the Trustee
and appoint a successor Trustee meeting the requirements of Section 6.14. The
Company or the successor Trustee shall give notice to the Registered Owners, in
the manner provided in Section 6.22, of such removal and appointment within
thirty (30) days of such removal and appointment.
(d) If at any time (i) the Trustee shall cease to be eligible in
accordance with Section 6.14 hereof and shall fail to resign after a written
request therefor by the Company or by any Registered Owner who has been a bona
fide Registered Owner for at least six months, (ii) the Trustee shall fail to
comply with Section 6.13 hereof after written request therefor by the Company or
any such Registered Owner,
31
<PAGE>
or (iii) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Trustee may be removed forthwith by an instrument or
concurrent instruments in writing filed with the Trustee and either:
(i) signed by the President or any Vice President of the Company
and attested by the Secretary or an Assistant Secretary of the
Company; or
(ii) signed and acknowledged by the Registered Owners of a
majority in principal amount of outstanding Series T bonds or by their
attorneys in fact duly authorized.
(e) Any resignation or removal of the Trustee shall not become effective
until acceptance of appointment by the successor Trustee as provided in Section
6.16 hereof.
Section 6.16. Appointment of Successor Trustee.
(a) If at any time the Trustee shall resign or be removed, the
Company, by a resolution of its Board of Directors, shall promptly appoint a
successor Trustee.
(b) The Company shall provide written notice of its appointment of a
successor Trustee to the Registered Owner of each Series T bond outstanding
following any such appointment.
(c) If no appointment of a successor Trustee shall be made pursuant
to Section 6.16(a) hereof within sixty (60) days after appointment shall be
required, any Registered Owner or the resigning Trustee may apply to any court
of competent jurisdiction to appoint a successor Trustee. Said court may
thereupon after such notice, if any, as such court may deem proper and
prescribe, appoint a successor Trustee.
(d) Any Trustee appointed under this Section 6.16 as a successor
Trustee shall be a bank or trust company eligible under Section 6.14 hereof and
qualified under Section 6.13 hereof.
Section 6.17. Acceptance by Successor Trustee.
(a) Any successor Trustee appointed as provided in Section 6.16
hereof shall execute, acknowledge and deliver to the Company and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein; but
32
<PAGE>
nevertheless, on the written request of the Company or of the successor Trustee,
the Trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to Section 77 of the Original Indenture, execute and deliver an
instrument transferring to such successor Trustee all the rights and powers of
the Trustee so ceasing to act, including all right, title, and interest in the
First Mortgage Bonds. Upon request of any such successor Trustee, the Company
shall execute any and all instruments in writing in order more fully and
certainly to vest in and confirm to such successor Trustee all such rights and
powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all
property or funds held or collected by such Trustee to secure any amounts then
due it pursuant to Section 77 of the Original Indenture.
(b) No successor Trustee shall accept appointment as provided in this
Section 6.17 unless at the time of such acceptance such successor Trustee shall
be qualified under Section 6.13 hereof and eligible under Section 6.14 hereof
and the Insurer shall have consented in writing to such appointment, which
consent shall not be unreasonably withheld, conditioned or delayed.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this Section 6.17, the successor Trustee shall mail notice of its succession
hereunder to all Registered Owners of Series T bonds as the names and addresses
of such Registered Owners appear on the books of the Trustee kept for that
purpose.
Section 6.18. Limitations on Rights of Trustee as a Creditor. The Trustee
shall be subject to, and shall comply with, the provisions of Section 311 of the
TIA.
Section 6.19. Company-Owned Series T Bonds Disregarded. In determining
whether the Registered Owners of the requisite aggregate principal amount of
outstanding Series T bonds have concurred in any direction, consent or waiver
under the Indenture, Series T bonds which are owned by the Company or any other
obligor on the Series T bonds or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Series T bonds shall be disregarded and
deemed not to be outstanding for the purpose of any such determination; provided
that, for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver, only Series T bonds which the
Trustee knows are so owned shall be so disregarded. Series T bonds so owned
which have been pledged in good faith to third parties may be regarded as
outstanding for the purposes of this Section 6.19 if the pledgee shall establish
the pledgee's right to take action with respect to such Series T bonds and that
the pledgee is not a person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In the case of a dispute as to such right, the Trustee may rely upon
an opinion of counsel (which may
33
<PAGE>
be counsel to the Company) and Officers' Certificate to establish the foregoing.
Section 6.20. Business Days. Unless otherwise provided, in any case
where the date of maturity of the principal of or any interest on any Series T
bond or the date fixed for redemption of any Series T bond is not a Business
Day, then payment of such principal or any interest need not be made on such
date but may be made on the next succeeding Business Day with the same force and
effect as if made on the date of maturity or the date fixed for redemption, and,
in the case of timely payment thereof, no interest shall accrue for the period
from and after such Interest Payment Date or the date on which the principal of
the Series T bond is required to be paid.
Section 6.21. Trust Indenture Act to Control. If and to the extent that
any provision of the Indenture limits, qualifies or conflicts with the duties
imposed by the TIA, such required provision of the TIA shall govern.
34
<PAGE>
Section 6.22. Manner of Mailing Notice to Registered Owner.
(a) Any notice or demand which by any provision of the Indenture is
required or permitted to be given or served by the Trustee or the Company to or
on the Registered Owners of Series T bonds as the case may be, shall be given or
served by first-class mail, postage prepaid, addressed to the Registered Owners
of such Series T bonds in the register of Registered Owners, and any such notice
shall be deemed to be given or served by being deposited in a post office letter
box in the form and manner provided in this Section 6.22. In case by reason of
the suspension of regular mail service or by reason of any other cause it shall
be impracticable to give notice to any Registered Owner by mail, then such
notification to such Registered Owner as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
(b) The Company shall also provide any notices required under the
Indenture by publication, but only to the extent that such publication is
required by the TIA, the rules and regulations of the Commission or any
securities exchange upon which any Series T bonds are listed.
ARTICLE SEVENTH
ADDITIONAL PROVISIONS
Section 7.01. Title. The Company covenants and agrees that it has good
right and lawful authority to mortgage the properties described in the granting
clauses hereof and after-acquired property as provided herein and that it is
lawfully seized and possessed of the same (except with respect to after-acquired
property).
Section 7.02. Released Property. The Company covenants and agrees that
since the date of the Nineteenth Supplemental Indenture no real estate or
interest therein has been taken by exercise of the right of eminent domain or
released from the Indenture or subjected to any easement which has not been
terminated of record except as listed on the "Schedule of Released Property"
attached hereto as Schedule II.
Section 7.03. Bonds Held by the Company. No bonds owned or held by, for
the account of or for the benefit of the Company or any other obligor on the
bonds (other than bonds pledged to secure an obligation) shall be deemed
entitled to share in any payment or distribution provided in Article Sixth of
the Original Indenture or under the Policy, provided that the Trustee shall be
protected in making any such payment or distribution unless it shall have actual
knowledge that the bonds in respect of which such payment or distribution is
made are so owned or held.
Section 7.04. Payment of Series T Bonds. Payment of the principal and
interest on all Series T bonds shall be payable as follows:
35
<PAGE>
(a) On or before 9:30 a.m., Boston, Massachusetts time, or such other time
as shall be agreed upon between the Trustee and the Company, of the day on which
payment of principal or interest is due on any Global Note pursuant to the terms
thereof, the Company shall deliver to the Trustee funds available on such date
sufficient to make such payment, by wire transfer of immediately available funds
or by instructing the Trustee to withdraw sufficient funds from an account
maintained by the Company with the Trustee or such other method as is acceptable
to the Trustee. On or before 12:00 noon, Boston, Massachusetts time, or such
other time as shall be agreed upon between the Trustee and the Depository, of
the day on which any payment of interest is due on any Global Note (other than
at maturity), the Trustee shall pay to the Depository such interest in same day
funds. On or before 1:00 p.m., Boston, Massachusetts time or such other time as
shall be agreed upon between the Trustee and the Depository, of the day on which
principal and interest payable at maturity, if any, is due on any Global Note,
the Trustee shall deposit with the Depository the amount equal to the principal
and interest payable at maturity by wire transfer into the account specified by
the Depository. As a condition to the payment, at maturity or upon redemption,
of any part of the principal of and interest on any Global Note, the Depository
shall surrender, or cause to be surrendered, such Global Note to the Trustee,
whereupon a new Global Note shall be issued to the Depository pursuant to
Section 3.04(e) hereof.
(b) With respect to any Note that is not a Global Note, principal and
interest due at the maturity of the Note shall be payable in immediately
available funds when due upon presentation and surrender of such Note at the
Corporate Trust Office of the Trustee or at the authorized office of any Paying
Agent. Interest on any Note that is not a Global Note (other than interest
payable at maturity) shall be paid by check mailed to the Registered Owner
thereof at such Registered Owner's address as it appears on the register by
check payable in clearinghouse funds; provided that if the Trustee receives a
written request from any Registered Owner of Notes, the aggregate principal
amount of which having the same Interest Payment Date equals or exceeds
$10,000,000, on or before the applicable Regular Record Date for such Interest
Payment Date, interest shall be paid by wire transfer of immediately available
funds to a bank within the continental United States designated by such
Registered Owner in its request or by direct deposit into the account of such
Registered Owner designated by such Registered Owner in its request if such
account is maintained with the Trustee or any paying agent.
Section 7.05. Events of Default. Anything contained elsewhere in the
Indenture notwithstanding, and without limiting the effect of Section 7.12 of
this Twentieth Supplemental Indenture, so long as any of the Series T bonds
shall remain outstanding, the Trustee shall be entitled to exercise any of the
remedies provided in the Indenture (including, without limitation, the remedies
provided in Sections 33, 46, 47, 48 and 49 of the Original Indenture):
36
<PAGE>
(a) if the Company shall default in the payment of any interest payable on
any Series T bonds and such default shall have continued for a period of ninety
(90) days, or the Company shall default in the payment of principal on any
Series T bonds at final maturity or at any date fixed for the optional
redemption thereof pursuant to the provisions of Section 4.02 or Section 4.03 of
this Twentieth Supplemental Indenture;
(b) if the Company shall fail in the observance or performance of any
other covenant, condition or agreement not enumerated in this Section herein
above, contained in the Indenture (including this Twentieth Supplemental
Indenture), and such failure shall continue for a period of ninety (90) days
after the date on which written notice specifying such failure, stating that
such notice is a "Notice of Default" hereunder and demanding that the Company
remedy the same, shall have been given to the Company by the Trustee by
registered or certified mail, or to the Company and the Trustee by the
Registered Owners of not less than 10% in aggregate principal amount of the
Series T bonds; or
(c) in the event of the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of, or in respect of, the Company under applicable
Federal bankruptcy law or any other applicable Federal or State law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) or the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of sixty (60)
consecutive days; or
(d) in the event of the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under applicable
Federal bankruptcy law or any other similar applicable Federal or State law, or
the consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due.
Section 7.06. Expiration. This Twentieth Supplemental Indenture shall
become void when the Original Indenture shall be void and the Insurer has been
repaid in full any amounts paid by the Insurer under the Policy.
37
<PAGE>
Section 7.07. Dates for Identification. Dates of supplemental indentures
and of bonds are intended as and for dates for the identification of such bonds
and such instruments, respectively, and are not intended to indicate that any
such instrument or any bond was and no such instrument or bond has been or is to
be executed on a Sunday or a legal holiday, the respective dates when
supplemental indentures were executed being the dates or respective dates of the
acknowledgments of the parties thereto.
Section 7.08. Section References. Whenever reference is made in this
Twentieth Supplemental Indenture to a Section or an Article of the Original
Indenture and such Section or Article has been amended by this instrument or any
of the indentures supplemental to the Original Indenture enumerated herein
above, or two or more of them, then such reference shall be to such Section or
Article as so amended, whether or not herein expressly so stated.
Section 7.09. Recordation. The Company, at its own cost and expense,
will forthwith, upon the execution and delivery by the parties hereto of this
Twentieth Supplemental Indenture, cause the same to be recorded pursuant to law
in all offices for the recording of mortgages of real or personal property in
which such recordation is necessary in order to perfect and protect the lien
hereof, and, in any event, in all such offices in which it has caused or may
cause the Original Indenture to be recorded.
Section 7.10. Replacement on Loss, Etc. Anything in the Series T bonds
or in the Indenture to the contrary notwithstanding, upon receipt by the Company
or the Trustee of evidence reasonably satisfactory to the Company or the Trustee
of the ownership of and loss, theft, destruction or mutilation of any Series T
bond and (a) in the case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (provided, however, that if the holder of such
Series T bond is an institution having a minimum net worth of $10,000,000 or
more, its own affidavit and undertaking of indemnity shall be deemed to be
satisfactory evidence, indemnity and security) or (b) in the case of mutilation,
upon surrender and cancellation thereof, the Company at its expense will
execute, and thereupon the Trustee will authenticate and deliver in lieu
thereof, a new bond, executed and authenticated in the same manner as the bond
being replaced, in an aggregate principal amount equal to the unpaid portion of
the principal amount of the bond being replaced.
Section 7.11. Counterparts. This Twentieth Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed an
original; and such counterparts shall constitute but one and the same
instrument, which shall for all purposes be sufficiently evidenced by any such
original counterpart.
Section 7.12. Rights and Remedies on Default. For any default by the
Company in the covenants, stipulations, promises and agreements herein contained
or contained in the bonds of Series T, the Trustee
38
<PAGE>
and the bondholders, subject to the rights of the Insurer, shall have the same
rights and remedies, subject to the same limitations, as are provided in the
Original Indenture.
IN WITNESS WHEREOF, The Providence Gas Company has caused its corporate
seal to be hereto affixed and these presents to be executed, acknowledged and
delivered in its name and on its behalf by its President and Treasurer, and said
State Street Bank and Trust Company, as successor as Trustee to Rhode Island
Hospital Trust National Bank, which succeeded Rhode Island Hospital Trust
Company, has caused its corporate seal to be hereto affixed and these presents
to be executed and delivered by one of its officers, all hereunto duly
authorized, as of the day and year first above written.
THE PROVIDENCE GAS COMPANY
(CORPORATE SEAL) By_____________________________
James H. Dodge
Its President
By_____________________________
Gary S. Gillheeney
Its Treasurer
Signed, sealed and delivered in the presence of:
_________________________________
as to The Providence Gas Company
STATE STREET BANK AND TRUST COMPANY, Trustee
[CORPORATE SEAL] By_____________________________
Authorized Officer
Signed, sealed and delivered in the presence of:
_________________________________
as to State Street Bank and Trust Company
39
<PAGE>
STATE OF RHODE ISLAND )
) : SS.:
COUNTY OF PROVIDENCE )
In Providence, this 1/st/ day of February A.D. 1999, personally appeared
before me James H. Dodge, to me known and known by me to be the President of THE
PROVIDENCE GAS COMPANY, one of the parties that executed the foregoing
instrument, and acknowledged said instrument to be his free act and deed in his
capacity, and the free act and deed of said corporation; and on oath stated that
he was duly authorized to execute said instrument and that the seal affixed
thereto is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
______________________________________
Notary Public
My Commission Expires: ___________________
[Notarial Seal]
STATE OF RHODE ISLAND )
):SS.:
COUNTY OF PROVIDENCE )
In Providence, this 1/st/ day of February A.D. 1999, personally appeared
before me Gary S. Gillheeney, to me known and known by me to be the Treasurer of
THE PROVIDENCE GAS COMPANY, one of the parties that executed the foregoing
instrument, and acknowledged said instrument to be his free act and deed in his
said capacity; and the free act and deed of said corporation; and on oath stated
that he was duly authorized to execute said instrument and that the seal affixed
thereto is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
______________________________________
Notary Public
My Commission Expires: ___________________
[Notarial Seal]
40
<PAGE>
STATE OF RHODE ISLAND )
): SS.:
COUNTY OF PROVIDENCE )
In Providence, this 1st day of February A. D. 1999, personally appeared
before me, Christopher J. Lembo to me known and known by me to be Assistant Vice
President of STATE STREET BANK AND TRUST COMPANY, one of the parties that
executed the foregoing instrument, and acknowledged said instrument to be his
free act and deed in his said capacity, and the free act and deed of said
corporation; and on oath stated that he was duly authorized to execute said
instrument and that the seal affixed thereto is the corporate seal of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
_____________________________________
Notary Public
Print Name: Eleanore F. Gaines
My Commission Expires: July 14, 2001
[Notarial Seal]
41
<PAGE>
SCHEDULE OF PROPERTY AND INTEREST THEREIN
None
SCHEDULE I
(to Twentieth Supplemental Indenture)
<PAGE>
SCHEDULE OF RELEASED PROPERTY
None
SCHEDULE II
(to Twentieth Supplemental Indenture)
<PAGE>
FORM OF REQUEST FOR REDEMPTION
PROVIDENCE GAS COMPANY
First Mortgage Bond, Series T, 6.50%
(6.50% Senior Secured Insured Quarterly Notes)
due February 1, 2029
CUSIP No. 743753AC9
The undersigned Participant does hereby certify, pursuant to Section 4.05
of the Twentieth Supplemental Indenture dated as of February 1, 1999 to the
Indenture dated as of January 1, 1922 between THE PROVIDENCE GAS COMPANY (the
"Company") and STATE STREET BANK AND TRUST COMPANY, as trustee (the "Trustee"),
to the Company and the Trustee that:
1. [Name of deceased Beneficial Owner] is deceased.
2. [Name of deceased Beneficial Owner] had an interest in $______ in face
principal amount of the Company's First Mortgage Bond, Series T, 6.50% (also
known as 6.50% Senior Secured Insured Quarterly Notes) due February 1, 2029 (the
"Notes").
3. [Name of Representative] is [Beneficial Owner's personal
representative/other person authorized to represent the estate of the Beneficial
Owner/surviving joint tenant/surviving tenant by the entirety] of [Name of
deceased Beneficial Owner] and has delivered to the undersigned a request for
redemption in form satisfactory to the undersigned, requesting that $__________
[$1,000 or an integral multiple thereof] be redeemed pursuant to said Section
4.05. Such request and the documents accompanying such request, all of which are
satisfactory to the undersigned, are delivered herewith.
4. [Name of Participant] holds the interest in the Notes with respect to
which this Request for Redemption is being made on behalf of [Name of deceased
Beneficial Owner].
IN WITNESS WHEREOF, the undersigned has executed this Request for
Redemption as of __________, ____.
[Name of Participant]
By:__________________________
Name:________________________
Title:_______________________
SCHEDULE III
<PAGE>
(to Twentieth Supplemental Indenture)
<PAGE>
Exhibit 4.7
________________________________________________________________________________
BY AND BETWEEN
THE PROVIDENCE GAS COMPANY
AND
STATE STREET BANK AND TRUST COMPANY,
as Successor to Rhode Island Hospital Trust National Bank,
as Successor to Rhode Island Hospital Trust Company,
Trustee
Twenty-First Supplemental Indenture
________________________________________________________________________________
<PAGE>
THIS TWENTY-FIRST SUPPLEMENTAL INDENTURE, dated as of September 1, 1999, is
between The Providence Gas Company, a corporation created by Special Act of the
General Assembly of the State of Rhode Island (together with its successors and
assigns, the "Company" or "Providence"), and State Street Bank and Trust
Company, a national banking association having offices in Providence, Rhode
Island, as successor to Rhode Island Hospital Trust National Bank as Successor
to Rhode Island Hospital Trust Company, as Trustee under the Company's First
Mortgage described below (together with its successors and assigns, the
"Trustee").
WHEREAS the Company, by an Indenture of First Mortgage, dated as of January
1, 1922 (the "Original Indenture"), as supplemented by a First Supplemental
Indenture dated as of February 6, 1933, a Second Supplemental Indenture dated as
of June 1, 1944, a Third Supplemental Indenture dated as of April 1, 1948, a
Fourth Supplemental Indenture dated as of January 1, 1958, a Fifth Supplemental
Indenture dated as of July 1, 1960, a Sixth Supplemental Indenture dated as of
September 1, 1963, a Seventh Supplemental Indenture dated as of December 1,
1971, the Eighth Supplemental Indenture dated as of July 1, 1972, the Ninth
Supplemental Indenture dated as of October 1, 1975, the Tenth Supplemental
Indenture dated as of April 1, 1976, the Eleventh Supplemental Indenture dated
as of September 1, 1978, the Twelfth Supplemental Indenture dated as of
September 1, 1983, the Thirteenth Supplemental Indenture dated as of May 1,
1986, the Fourteenth Supplemental Indenture dated as of August 1, 1988, the
Fifteenth Supplemental Indenture dated as of June 1, 1990, the Sixteenth
Supplemental Indenture dated as of September 1, 1992, the Seventeenth
Supplemental Indenture dated as of November 1, 1993, the Eighteenth Supplemental
Indenture dated as of December 1, 1995, the Nineteenth Supplemental Indenture
dated as of April 1, 1998, and the Twentieth Supplemental Indenture dated as of
February 1, 1999 (the Original Indenture as supplemented by each such
supplement, including, if appropriate, this Twenty-First Supplemental Indenture,
and by any additional supplements as shall have been executed and delivered at
the pertinent time, the "Indenture"), mortgaged its property and franchises,
including after-acquired property and franchises, to the Trustee to secure the
First Mortgage Bonds issued and to be issued thereunder in accordance with the
provisions of said Indenture or First Mortgage Bonds, as heretofore
supplemented, and there are now outstanding thereunder $1,819,000 principal
amount of First Mortgage bonds, Series M, 10.25% due July 31, 2008 (being part
of an original issue of $10,000,000 in principal amount of such Series M bonds);
$10,000,000 principal amount of First
<PAGE>
Mortgage bonds, Series N, 9.63% due May 30, 2020 (being the entire original
issue of $10,000,000 in principal amount of such Series N bonds); $12,500,000
principal amount of First Mortgage bonds, Series O, 8.46% due September 30, 2022
(being the entire original issue of $12,500,000 in principal amount of such
Series O bonds); $12,500,000 principal amount of First Mortgage bonds, Series P,
8.09% due September 30, 2022 (being the entire original issue of $12,500,000 in
principal amount of such Series P bonds); $8,000,000 principal amount of First
Mortgage bonds, Series Q, 5.62% due November 30, 2003 (being part of an original
issue of $16,000,000 in principal amount of such Series Q bonds); $15,000,000
principal amount of First Mortgage bonds, Series R, 7.50% due December 15, 2025
(being the entire original issue of $15,000,000 in principal amount of such
Series R bonds); $15,000,000 principal amount of First Mortgage bonds, Series S,
6.82% due April 1, 2018 (being the entire original issue of $15,000,000 in
principal amount of such Series S bonds); and $15,000,000 principal amount of
First Mortgage bonds, Series T, 6.50% due February 1, 2029 (being the entire
original issue of $15,000,000 in principal amount of such Series T bonds); and
WHEREAS, the Company and Algonquin Gas Transmission Company, a corporation
organized and existing under the laws of the State of Delaware ("Algonquin"),
entered into a Lease with Reservation of Storage Rights dated as of October 1,
1971 (the "Initial Lease"), which Initial Lease provided for, among other
things, the letting by the Company to Algonquin of a parcel of the Company's
land located in the City and County of Providence, Rhode Island, which Initial
Lease was terminated by the Company and Algonquin by that certain Termination of
Lease and Reservation of Storage Rights and Consent Agreement by and among the
Company, Algonquin and Algonquin LNG, Inc., a corporation organized and existing
under the laws of the State of Delaware ("ALNG"), dated as of March 31, 1999;
and
WHEREAS, the Company and ALNG have entered into a new Lease dated as of
March 31, 1999 (the "Lease"), which Lease provides for, among other things, the
letting by the Company to ALNG of a parcel of the Company's land located in the
City and County of Providence, Rhode Island, that being the same parcel of land
(including the Optioned Premises (as such term is defined in the Initial Lease)
leased by the Company to Algonquin under the Initial Lease (the "Leased
Premises"), and described as follows:
That portion of Providence's land designated as Parcel A as laid out
and delineated on that plat
<PAGE>
entitled "N/F Algonquin LNG, Inc. Lease Areas and Proposed
Modifications at the ALNG Plant, City of Providence, Rhode Island"
dated February 18, 1999 prepared by Coler & Colantonio, Inc., 101
Accord Park Drive, Norwell, Massachusetts 02061, a copy of which is
annexed hereto, marked Exhibit "A" and made a part hereof. Being a
portion of land described in a deed from Charles Morris Smith, as
Trustee and Individually, to Providence recorded in the Office of the
City Clerk of the City of Providence in Book 470, Pages 224-227. The
leased premises is also Parcel 316 as shown on Plat 56 of the
Assessor's Map of the City of Providence dated December 31, 1991 and
affects portions of Parcel 5 as shown thereon.
Together with:
(a) the right and easement to pass and repass on foot or in
vehicles (including railroad cars) over any existing ways or currently
serviceable railroad tracks, if any, designated on Exhibit "A" and to
refurbish and rehabilitate at its own expense currently unused
railroad tracks and railroad rights of way through and across that
portion of Providence's land designated as Parcel B in said Exhibit
"A";
(b) the right and easement to construct and maintain at its own
expense one or more additional access roads and one or more additional
railroad spur tracks necessary for the use of the leased premises as
contemplated herein, said roads and tracks to be at such locations on
said Parcels C and D and upon such terms as may be mutually agreed
upon by the parties hereto in writing or which may be incorporated in
a new Exhibit "A" hereto;
(c) the right and easement to construct on said Parcels C and D
and maintain above or below grade fiber optical, telephone, telegram,
power, telecommunication and/or electric lines, conduit, poles and/or
other equipment, water mains and sewer pipes, natural gas transmission
lines and/or any other facilities necessary for the use of the leased
premises as contemplated herein, at such locations as shown on Exhibit
"A" or as may be mutually agreed upon by the parties hereto in
writing;
(d) the right and easement to construct, maintain, operate,
alter, replace, repair and
<PAGE>
remove one or more pipelines with valves, tie-overs, and other
appurtenant facilities necessary for the transmission of liquefied
natural gas ("LNG"), natural gas and all by-products thereof or any
liquids, gases, materials or substances which can be transported
through a pipeline or pipelines, from the dock located on Parcel C, as
set forth in said Exhibit "A", to the leased premises, at the location
shown on Exhibit "A" or otherwise to be mutually agreed upon by the
parties in writing. Providence will grant ALNG said easement by
separate recordable instrument, upon the written request of ALNG. The
pipelines across Parcel C shall have a minimum vertical clearance of
fourteen (14) feet and shall permit the free passage of vehicles
beneath such pipelines on Parcel C;
(e) the right and easement to construct and maintain all
reasonably necessary facilities on the dock located on Parcel C to
unload LNG and the other products and substances referred to in the
foregoing sub-paragraph (d);
(f) the right and easement to pass and re-pass on foot or in
vehicles over all portions of Parcel C, including the dock located
thereon and to control access for and use of Parcel C in accordance
with applicable laws, rules, regulations or orders of governmental
authorities having competent jurisdiction thereover;
(g) the easement to use the dock facilities forming a portion of
Parcel C for the purposes of loading and unloading ships or barges in
connection with the uses contemplated herein and in connection with
the construction, operation and maintenance of the facilities
contemplated herein; and
(h) the right and easement to construct, maintain, operate,
alter, replace, repair and remove one or more pipelines with valves,
tieovers and other related facilities for the transmission of natural
gas and all by-products thereof, or any liquids, gases or substances
which can be transported through a pipeline, from the vaporizers
constructed or to be constructed by ALNG on the leased premises across
Parcels C and D, and from Parcel C to Parcel B the locations of such
pipelines and other facilities as shown on Exhibit "A" or as may be
mutually agreed upon by the parties hereto in writing. Providence will
grant ALNG said easement by separate recordable
<PAGE>
instrument, upon the written request of ALNG. Said rights and
easements granted by sub-paragraphs (a) through (c) and (e) through
(g) above, shall be in common with the rights of Providence, its
tenants and each of their respective licensees, invitees, employees,
successors and assigns and shall be exercisable by ALNG's licensees,
invitees and employees in the course of the conduct of activities
permitted hereunder. The rights and easements granted by subparagraphs
(d) and (h) shall be exclusive to ALNG; and
WHEREAS, the Lease further provides for the granting of an option by the
Company to ALNG to include as leased premises under the Lease, the property (the
"St. Lawrence Leased Premises") leased to St. Lawrence Cement, Inc. ("St.
Lawrence") by the Company under that certain Agreement of Lease dated May 23,
1988 between the Company and St. Lawrence recorded in the Providence Land
Records Book 125, Page 312, and Amendment of Lease dated April 3, 1995 between
the Company and St. Lawrence recorded in the Providence Land Records Book 123,
Page 818, in each case modifying a prior Indenture of Lease dated August 1,
1961, recorded in the Providence Land Records Book 1105, Page 239 (the term
"Leased Premises" as used hereinafter being deemed to include the St. Lawrence
Leased Premises to the extent the same is included as leased premises under the
Lease); and
WHEREAS, the Lease further provides for certain rights and easements in
favor of ALNG with respect to the use of other lands of the Company adjacent to
the Leased Premises; and
WHEREAS, a memorandum of the Lease, dated as of March 31, 1999, has been
executed by the Company and by ALNG and is to be recorded in the Records of Land
Evidence in the City of Providence immediately prior to the recording of this
Twenty-First Supplemental Indenture; and
WHEREAS, the Company and the Trustee wish to amend the Indenture to provide
for, among other things, the subordination of the rights of the Trustee under
the Indenture to certain rights of ALNG under said Lease; and
WHEREAS, the registered holders of more than 80% in aggregate principal
amount of said First Mortgage Bonds outstanding under the Indenture on the date
hereof, by instruments in writing signed by such holders and filed with the
Trustee, have assented to and have authorized the
<PAGE>
Trustee to enter into this Twenty-First Supplemental Indenture and have assented
to and have authorized the modification or alteration of the Indenture as
provided herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to permit the
consummation of the Lease:
ARTICLE FIRST
Subordination of Lien
Section 1.01 The Trustee agrees that each and all of the remedies of the
Trustee provided in the Indenture for any default by the Company in the
covenants, stipulations, promises and agreements contained therein, or contained
in any of the bonds issued thereunder, shall be and they hereby are made
subordinate to and subject to each and all of the rights of ALNG under the
Lease, excepting only the right of ALNG to indemnification by the Company under
Section 7 of the Lease and to the covenant of the Company provided in Section
13(3) of the Lease. Without limiting the foregoing, the Trustee will not for
any reason whatsoever interfere with the use by ALNG of the Leased Premises as
permitted by the terms of the Lease, or the enjoyment by ALNG of the license,
rights and easements granted by the Lease, during the term of the Lease or any
extension thereof, except as otherwise permitted by the terms of this Twenty-
First Supplemental Indenture.
ARTICLE SECOND
Assignment of Rentals
Section 2.01 The Company does hereby assign, transfer and set over to the
Trustee, in addition to the mortgage of the Indenture and to any and all other
security or collateral at any time held by it or them, all of the rentals and
other payments that are now due or that hereafter may become due or payable to
the Company or to any subsequent owner of the Leased Premises from all of the
occupants, tenants, lessees, subtenants and sublessees now and from time to time
hereafter occupying said Leased Premises or any portion thereof under and on
account of the Lease and any renewals or extensions thereof, to be held, in
addition to the mortgage and any and all other security at any time held by the
Trustee, as security for the payment and performance of the provisions of the
Company's First
<PAGE>
Mortgage Bonds and of the said mortgage securing the same, and for the payment
and performance of all indebtedness, liabilities and obligations of the Company
to the Trustee, whether now existing or hereafter incurred or acquired, all upon
the terms, conditions, covenants and agreements on the part of the Company and
the Trustee hereinafter set forth.
Section 2.02 The term "rentals and other payments", as used herein, shall
include all rents, issues and profits from said premises and all other sums now
or hereafter paid or payable to the Company by any occupant, tenant, lessee,
subtenant or sublessee now and from time to time hereafter occupying the Leased
Premises or any portion thereof under or by reason of the Lease, including,
without limitation, proceeds of rent insurance and business interruption
insurance, so-called, awards of damage or other sums paid or payable to the
Company by reason of the taking of all or any portion of the Leased Premises by
condemnation or other similar proceedings, and all sums paid or payable to the
Company in addition to rental for such items as taxes, utilities and water
charges.
Section 2.03
(a) The Company hereby is authorized to execute and perform any and all
amendments, supplements, restatements, extensions, terminations (partial or
otherwise) or other modifications to the Lease (each a "Modification"), so long
as no default by the Company under the Indenture exists before or after giving
effect to such Modification. Notwithstanding the foregoing, the Company,
without the prior written consent of the Trustee, will not permit any
Modification of the Lease that would amend the provisions of the Lease so as to
change those events which would constitute a default by either party thereunder,
or change either party's remedies upon a default by the other party, in either
case, in a manner that is materially adverse to the Company. The Company shall
deliver a copy of any Modification of the Lease to the Trustee within 15 days
following the execution thereof, together with a certificate signed and verified
by the President or a Vice President stating that no default by the Company
under the Indenture exists before or after giving effect to such Modification.
(b) The Company covenants and agrees that upon and after any event of
default which gives rise to the right of exercise by the Trustee and the
bondholders of their remedies under Article Sixth of the Original Indenture:
<PAGE>
(i) the Company will not permit any Modifications of the Lease, nor
will the Company enter into new leases or agreements affecting the Leased
Premises or any portion thereof, nor exercise any of the rights, options or
elections which the Company may now or hereafter be entitled to exercise
under the provisions of the Lease without the written consent of the
Trustee first had and received, and does hereby constitute and appoint the
Trustee as the Company's attorney or attorneys in fact, irrevocable (with
full power of substitution), for the Company and in the Company's name,
place and stead, or in the name of the Trustee, to demand, sue for, receive
and give effectual discharges for all said rentals and other payments, with
power also to endorse in the name of the Company checks given in payment
thereof, to institute in the name of the Company or in the name of the
Trustee such proceedings at law or in equity as the Trustee may deem
advisable for the purpose of collecting such rentals and other payments or
for recovery of possession of said Leased Premises or any part thereof in
the event of any default on the part of any tenant, lessee or occupant
thereof under the Lease; to give and receive all notices and consents and
to exercise all rights, options and elections which the Company may be
entitled to give, receive or exercise under the Lease; in the Trustee's
discretion to perform on the Company's behalf, if the Trustee deems the
same advisable (but nothing herein contained and no action taken hereunder
shall impose upon the Trustee any obligation to do or continue to do so)
any or all of the obligations of the Company under the provisions of the
Lease, and to take any action or perform any function in connection with
the Lease which the Trustee deems necessary or advisable; hereby giving and
granting unto said attorney or attorneys in fact full power and authority
to do and perform every act or thing whatsoever requisite, necessary or
proper to be done under the Lease as fully to all intents and purposes as
the Company might or could do if personally present, with full power of
substitution.
(ii) The rentals and other payments under the Lease so collected by
the Trustee may, in the sole and uncontrolled discretion of the Trustee,
after payment of all costs of collection, be received and applied by it
from time to time, in such order as it may determine, to the payment of
taxes and assessments assessed upon or with respect to the said Leased
Premises or any part thereof, or constituting in whole
<PAGE>
or in part a lien thereof, or to the payment of any other lien or
encumbrance upon said Leased Premises or any part thereof, whether prior or
subsequent to the Indenture, or of premiums on such policies insuring the
Leased Premises, the Company or the Trustee against fire and such other
hazards or liability as the Trustee may deem advisable, or for the
reimbursement of any sums expended by the Trustee in performing the
obligations imposed upon the Company under the provisions of the Lease, or
upon the Company under the Indenture or any other mortgage covering said
Leased Premises or any part thereof, or to payments required by the
provisions of any agreement between the Company and the Trustee covering
the budgeting or escrow of funds for the payment of taxes, insurance, water
rates or other charges in connection with the Leased Premises, or the
Trustee may, in its sole and uncontrolled discretion, but without being
required so to do, apply any portion of the money so received by it to the
payment of any expenses (including, without limitation, attorneys' fees)
incurred or to be incurred by it in the exercise of powers upon it hereby
conferred or incurred or to be incurred by it or the Company for repairs or
improvements to or for the maintenance or operation of the Leased Premises
(the order of such application to be likewise in the sole discretion of the
Trustee), and the balance of the moneys so received by the Trustee, after
payment of such and so much of the above-mentioned items as the Trustee
shall deem proper, if any, may in the like discretion of the Trustee be
applied to the payment in whole or in part of the interest and principal,
due or to become due, of any liability, obligation, or indebtedness hereby
secured, whether matured or unmatured, liquidated or unliquidated, and any
balance then remaining, likewise in the sole discretion of the Trustee, it
may continue to hold as collateral or pay over to the Company.
Section 2.04 The execution and delivery of this Twenty-First Supplemental
Indenture shall not constitute a satisfaction of the obligations, or any part
thereof, which are secured by mortgage granted under the Indenture, except to
the extent of amounts actually received and applied by the Trustee on account of
the same. Nothing herein contained shall be deemed to obligate the Trustee to
undertake or continue collection of said rentals and other payments hereby
assigned or the management of the Leased Premises at any time it does not choose
to do so, or to take any measure, legal or otherwise, to enforce collection of
<PAGE>
any of said rents or other payments. Notwithstanding the collection of rentals
and other payments hereunder, the Trustee, subject to the provisions of Article
-------
FIRST hereof, may institute foreclosure proceedings, sell, realize upon, or
- -----
otherwise deal with any security or collateral at any time held by it, and
otherwise exercise any of its rights and powers under the Indenture or
otherwise, in such manner as it may deem advisable, at any time it shall see fit
to do so, and for any cause for which the same might have been instituted or
done had the assignment of rentals herein contained not been made, and no waiver
or acceptance of any breach or default and no waiver of any right of the Trustee
hereunder shall be deemed to constitute a waiver of any other or subsequent
breach or default, or to prevent subsequent exercise of any such right or any
other similar right.
Section 2.05 The Trustee hereby covenants and agrees as follows:
(a) that upon payment in full of all of the indebtedness, liabilities, and
obligations of the Company secured by the assignment of rentals herein contained
whether by application or the rentals and other payments hereby assigned or
otherwise, the Trustee will, upon request, execute and deliver to the Company
all instruments necessary to terminate said assignment and to notify all tenants
and lessees of said Leased Premises of such termination;
(b) that notwithstanding anything to the contrary hereinbefore contained,
so long as no default occurs in the payment and performance of all of the
provisions of the Indenture and of the First Mortgage Bonds on the Company's
part to be paid, performed, and observed, the Company shall have the right to
receive, collect, and enjoy the rentals and other payments assigned hereunder,
provided, however, that the foregoing provisions of this subparagraph (b) shall
- -------- ------- ----------------
immediately upon the occurrence of any such default, become and remain null and
void, inoperative and of no force or effect whatsoever unless and until such
default shall be cured within the grace period, if any, provided for the cure
thereof.
ARTICLE THIRD
Additional Provisions
Section 3.01 The Company, at its own cost and expense, will forthwith,
upon the execution and delivery by
<PAGE>
the parties hereto of this Twenty-First Supplemental Indenture, cause the same
to be recorded, pursuant to law, in the Records of Land Evidence of the City of
Providence, in the State of Rhode Island.
Section 3.02 This Twenty-First Supplemental Indenture may be executed in
any number of counterparts, each of which shall be deemed an original, and such
counterparts shall constitute but one and the same instrument which shall, for
all purposes, be sufficiently evidenced by any such original counterpart.
IN WITNESS WHEREOF, the Company has caused its corporate seal to be hereto
affixed and these presents to be executed, acknowledged and delivered in its
name and on its behalf by its President and its Treasurer, and the Trustee has
caused its corporate seal to be hereto affixed and these presents to be
executed, acknowledged and delivered by one of its officers, all hereunto duly
authorized, as of the day and year first above written.
THE PROVIDENCE GAS COMPANY
By:______________________________
James H. Dodge,
President
and
By:______________________________
Kenneth W. Hogan,
Treasurer
(Corporate Seal)
Signed, sealed and delivered in the presence of:
______________________________
Name:_______________________________
As to The Providence Gas Company
<PAGE>
STATE STREET BANK & TRUST
COMPANY, Trustee
By:______________________________
Authorized Officer
(Corporate Seal)
Signed, sealed and delivered in the presence of:
__________________________
Name:_____________________
as to State Street Bank & Trust Company
State of Rhode Island
County of Providence
In the City of Providence, this ____ day of _________________, 1999,
personally appeared before me James H. Dodge and Kenneth W. Hogan, to me known
and known by me to be the President and Treasurer, respectively, of The
Providence Gas Company, one of the parties that executed the foregoing
instrument, and acknowledged said instrument to be their free act and deed in
their said capacities, and the free act and deed of said corporation, and on
oath stated that they were duly authorized to execute said instrument and that
the seal affixed thereto is the corporate seal of said corporation.
In witness whereof, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
_________________________________
Name: __________________________
Notary Public
My Commission Expires: __________
______
SEAL
State of Rhode Island
County of Providence
In the City of Providence, this ____ day of ___________________, 1999,
personally appeared before me
<PAGE>
_______________________________, to me known and known by me to be an Authorized
Officer of State Street Bank and Trust Company, one of the parties that executed
the foregoing instrument, and acknowledged said instrument to be such person's
free act and deed in such person's said capacities, and the free act and deed of
said corporation, and on oath stated that such person was duly authorized to
execute said instrument and that the seal affixed thereto is the corporate seal
of said corporation.
In witness whereof, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
_____________________________
Name: ______________________
Notary Public
My Commission Expires: ______
____
SEAL
<PAGE>
Exhibit 21
Exhibit 21. SUBSIDIARY OF THE REGISTRANT
- ----------------------------------------
ProvEnergy Investments, Ltd. - Incorporated under the Laws of Rhode Island.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 209,166
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 18,860
<TOTAL-DEFERRED-CHARGES> 33,179
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 261,205
<COMMON> 1,244
<CAPITAL-SURPLUS-PAID-IN> 42,454
<RETAINED-EARNINGS> 47,479
<TOTAL-COMMON-STOCKHOLDERS-EQ> 91,177
0
3,200
<LONG-TERM-DEBT-NET> 88,976
<SHORT-TERM-NOTES> 11,800
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,393
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 62,659
<TOT-CAPITALIZATION-AND-LIAB> 261,205
<GROSS-OPERATING-REVENUE> 179,339
<INCOME-TAX-EXPENSE> 4,728
<OTHER-OPERATING-EXPENSES> 158,195
<TOTAL-OPERATING-EXPENSES> 162,923
<OPERATING-INCOME-LOSS> 16,416
<OTHER-INCOME-NET> 935
<INCOME-BEFORE-INTEREST-EXPEN> 17,351
<TOTAL-INTEREST-EXPENSE> 7,556
<NET-INCOME> 9,795
348
<EARNINGS-AVAILABLE-FOR-COMM> 9,447
<COMMON-STOCK-DIVIDENDS> 4,775
<TOTAL-INTEREST-ON-BONDS> 6,806
<CASH-FLOW-OPERATIONS> 27,964
<EPS-BASIC> 7.60
<EPS-DILUTED> 7.60
</TABLE>
