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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NARRAGANSETT ENERGY RESOURCES COMPANY
280 Melrose Street
Providence, Rhode Island 02901
(Name of company filing this statement and
address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Kirk L. Ramsauer
Treasurer Assistant General Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
(Name and address of agents for service)
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Item 1. Description of Proposed Transaction
____________________________________________
Narragansett Energy Resources Company (the Company), incorporated
under the laws of the State of Rhode Island, is a subsidiary of New
England Electric System (NEES), a holding company registered under the
Public Utility Holding Company Act of 1935 (the Act). The Company is a
general partner with a 20% interest in two partnerships owning the Ocean
State Power Project (OSP). OSP is a two-unit combined cycle electric
generating facility located in Burrillville, Rhode Island. Both units
are currently in commercial operation.
By prior orders, the Commission (i) approved the acquisition by the
Company of a 20% equity interest in OSP, (ii) authorized NEES to fund
the Company's obligation to contribute to the capital of OSP under the
OSP partnership agreement and guarantee such obligation, and (iii)
approved the construction financing of OSP. (HCAR No. 24727, dated
October 13, 1988, and HCAR No. 24790, dated December 23, 1988.) As of
December 31, 1993, total capitalization of the Company was approximately
$40 million, 100% of which was in the form of common equity.
By this Application/Declaration, the Company seeks authorization to
refinance a portion of its outstanding common equity, on or before
December 31, 1995, not in excess of an aggregate principal amount of $30
million, by issuing and selling one or more long-term notes (the Note).
Proposed Issue and Sale of the Note
___________________________________
The Company proposes to issue and sell, on or before December 31,
1995, the Note in an aggregate principal amount not to exceed $30
million. The Note will be issued pursuant to a note agreement (the Note
Agreement), the specific terms of which will be negotiated with a
purchaser. The Note will have a maturity of up to 17 years from the
time of issuance. The Note will bear interest at a fixed rate not to
exceed 12% per annum. The Note Agreement may provide for a sinking fund
and limitations on callability or refundability, depending upon market
conditions. The Company proposes that the Note will be redeemable at
any time at its option, upon reasonable notice, at the then outstanding
principal amount plus accrued interest and redemption premium, and may
include a yield to maturity premium.
The proceeds from the proposed issue and sale of the Note will be
applied by the Company to the retirement of subordinated notes issued by
NEES to the Company in order to fund the Company's equity contribution
obligation to both OSP units.
The Company will not be able to determine the specific terms and
conditions upon which it will issue and sell the Note until it has
undertaken preliminary negotiations with potential lenders. The Company
requests, pursuant to Rule 50(a) (5), that an exception
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from the competitive bidding requirements of Rule 50 under the Act be
granted.
The Company believes that an exception from competitive bidding
requirements is appropriate under Rule 50(a) (5) for the following
reasons:
(i) The Company has no publicly held securities outstanding and
is not generally known to potential investors. Its securities
are not currently rated by a national rating agency and are
not listed on any securities exchange. The Company believes
that an arm's length negotiated sale will permit the Company
to educate potential investors about the Company and its
creditworthiness in order to obtain a lower cost of money.
(ii) Because of its small size, the proposed issue does not lend
itself to competitive bidding and would more appropriately be
accomplished through a negotiated sale.
(iii) The market for the Note is believed to consist of a limited
number of institutional investors.
The Company may retain an experienced investment banking firm to
assist it in finding potential lenders and placing the Note.
Preliminary Negotiation
_______________________
In order for the Company to begin the process of its preliminary
negotiations, including retaining an experienced investment banking firm
and/or negotiating with potential lenders, the Company requests that
authorization to begin such preliminary negotiations for the issue and
sale of the Note be granted in the notice of the filing published by
your Commission (see Exhibit H).
EWG or FUCO Ownership Interest
______________________________
The Company does not have an ownership interest in an exempt
wholesale generator ("EWG") or foreign utility company ("FUCO") as
defined in Sections 32 and 33 of the Act. Additionally, the Company is
not a party, nor has any rights under, a service, sales, or construction
agreement with an EWG or FUCO, and does not have any current intention
to secure an ownership interest in an EWG or FUCO. We understand that
one or more of the other general partners in OSP has filed for and
obtained the status of an EWG.
None of the proceeds of the transaction proposed will be used by the
Company , New England Electric System, or any affiliated company for
acquisition of an interest in an EWG or FUCO without further approval
from the Commission.
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Item 2. Fees, Commissions and Expenses
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The estimated fees plus expenses in connection with the proposed
issue and sale of the Note, including the cost of services of an
investment banking firm, if retained for the Note issue, are set forth
in Exhibit G hereto. Certain services in connection with the proposed
transactions, including services in connection with negotiating the
terms of the Note with a potential investor, will be performed at the
actual cost thereof by New England Power Service Company, an affiliated
service company operating pursuant to Section 13 of the Act and the
Commission's rules thereunder. The services of such company will also
consist of services performed by the Executive and Administrative
Department, the Corporate Department (including attorneys), the Treasury
Department (including accountants), and the Office Services Department.
Item 3. Applicable Statutory Provisions
________________________________________
1. The proposed issue and sale of the Note is subject to
Sections 6(a), 7, and 12 of the Act and Rule 42(a).
2. The proposed exemption from competitive bidding is pursuant
to Rule 50(a) (5).
3. The payment of short-term indebtedness from the proceeds of
the proposed financing is exempted from Sections 9(a), 10 and
12, and Rule 42(a) by subparagraph (b)(2) of said Rule.
Item 4. Regulatory Approval
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No State or Federal Commission (other than the Securities and
Exchange Commission) has jurisdiction over the proposed transactions.
Item 5. Procedure
__________________
The Company requests that the Commission take action with respect to
this Application/Declaration without a hearing being held and that an
order or orders be issued allowing this Application/Declaration or
portion of it to become effective as soon as practicable. Specifically,
the Company requests that the Commission issue an order approving the
terms and conditions of the issue and sale of the Note.
The Company (i) does not request a recommended decision by an
administrative law judge, (ii) does not request a recommended decision
by any other responsible officer of the Commission, (iii) hereby
specifies that the Division of Investment Management may
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assist in the preparation of the Commission's decision, and (iv) hereby
requests that there be no 30-day waiting period between the date of
issuance of the Commission's order and the date it is to become
effective.
Item 6. Exhibits and Financial Statements
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(a) Exhibits
*A-1 Form of the proposed Note Agreement(the proposed Note
is Exhibit A thereto).
*F Opinion of Counsel
*G Schedule of Fees and Expenses
H Proposed Form of Notice
*To be supplied by amendment
(b) Financial Statements **
*1-a Balance sheet of Narragansett Energy Resources
Company as of December 31, 1993, actual and pro forma.
*1-b Balance sheet of NEES and subsidiaries consolidated as
of December 31, 1993, actual and pro forma.
*2-a Statement of Income and Retained Earnings of
Narragansett Energy Resources Company for the twelve
months ended December 31, 1993, actual and pro forma.
*2-b Statement of Income and Retained Earnings of NEES and
subsidiaries consolidated for the twelve months ended
December 31, 1993, actual and pro forma.
**Pro Forma effect of the issuance of a $30 million
Note has been shown.
Item 7. Statement of Effect on the Quality of the Human Environment
___________________________________________________________________
The transaction proposed by this Application/Declaration does not
involve any major Federal action significantly affecting the quality of
the human environment.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this statement to
be signed on its behalf, as indicated, by the undersigned officer
thereunto duly authorized.
NARRAGANSETT ENERGY RESOURCES COMPANY
s/ John G. Cochrane
By:_________________________________
John G. Cochrane
Treasurer
March 14, 1994
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EXHIBIT INDEX
EXHIBIT NO. Description Page
H Proposed Form of Notice Filed herewith
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Exhibit H
PROPOSED FORM OF NOTICE
________________________
Narragansett Energy Resources Company (the Company), 280 Melrose
Street, Providence, Rhode Island, a special purpose subsidiary of New
England Electric System (NEES), a registered holding company, has
filed an Application/Declaration with this Commission pursuant to
Sections 6(a), 7, 9(a), 10, and 12 of the Public Utility Holding
Company Act of 1935 (the Act) and Rules 42 and 50 thereunder.
The Company is a general partner with 20% interest in each of two
partnerships owning the Ocean State Power Project (OSP). OSP owns a
two-unit combined cycle electric generating facility located in
Burrillville, Rhode Island. These units are currently in commercial
operation.
The Company proposes to issue and sell, on or before
December 31, 1995, one or more long term notes in an aggregate
principal amount not to exceed $30 million (the Note). The Note will
be issued pursuant to a note agreement, the specific terms of which
will be negotiated with the purchaser (the Note Agreement). The Note
will have a maturity of 17 years, may provide for a sinking fund, and
may have limitations on callability or refundability depending upon
market conditions. The Company proposes that the Note will be
redeemable at any time at its option, upon reasonable notice, at the
then outstanding principal amount plus accrued interest and redemption
premium, and may include a yield to maturity premium. The interest
rate for the Note will not exceed 12% per annum.
The proceeds from the proposed transactions will be applied by
the Company to the retirement of subordinated notes issued by NEES to
the Company in order to fund the Company's equity contribution
obligation to both OSP units.
The Company will not be able to determine the specific terms and
conditions upon which it will issue and sell the Note until it has
undertaken preliminary negotiations with potential lenders, and is
therefore requesting an exception from the competitive bidding
requirements of the Act. In order to begin the process of its
preliminary negotiations, the Company is hereby authorized to enter
into such preliminary negotiations and, if it so elects, to retain an
experienced investment banking firm to assist in finding potential
lenders and placing the Note.
