FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 33-43508
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NORTH ATLANTIC ENERGY CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 06-1339460
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03105
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(Address of principal executive offices) (Zip Code)
(603) 669-4000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 28, 1995
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Common Shares, $1.00 par value 1,000 shares
NORTH ATLANTIC ENERGY CORPORATION
TABLE OF CONTENTS
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1995 and
December 31, 1994 2
Statements of Income - Three Months Ended
March 31, 1995 and 1994 4
Statements of Cash Flows - Three Months
Ended March 31, 1995 and 1994 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
PART I. FINANCIAL INFORMATION
NORTH ATLANTIC ENERGY CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
- ------
Utility Plant, at original cost:
Electric................................................ $ 770,256 $ 769,379
Less: Accumulated provision for depreciation......... 81,433 75,176
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688,823 694,203
Construction work in progress........................... 3,567 3,704
Nuclear fuel, net....................................... 18,906 19,797
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Total net utility plant............................. 711,296 717,704
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Other Property and Investments:
Nuclear decommissioning trusts, at market............... 11,535 10,342
Other, at cost.......................................... 222 222
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11,757 10,564
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Current Assets:
Cash and special deposits............................... 4,094 8,166
Notes receivable from affiliated companies.............. 30,000 28,750
Receivables from affiliated companies................... 12,385 13,983
Taxes receivable........................................ 4,029 -
Materials and supplies, at average cost................. 10,388 10,036
Prepayments and other................................... 2,058 2,149
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62,954 63,084
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Deferred Charges:
Regulatory assets:
Deferred costs--Seabrook............................... 142,734 131,513
Income taxes, net...................................... 37,290 30,461
Recoverable energy costs............................... 4,527 4,624
Unamortized debt expense................................ 4,667 4,834
Other................................................... 730 795
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189,948 172,227
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Total Assets........................................ $ 975,955 $ 963,579
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</TABLE>
See accompanying notes to financial statements.
2
NORTH ATLANTIC ENERGY CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock--$1 par value. Authorized
and outstanding 1,000 shares.......................... $ 1 $ 1
Capital surplus, paid in................................ 160,999 160,999
Retained earnings....................................... 60,738 59,236
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Total common stockholder's equity.............. 221,738 220,236
Long-term debt.......................................... 540,000 540,000
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Total capitalization........................... 761,738 760,236
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Current Liabilities:
Long-term debt--current portion......................... 20,000 20,000
Accounts payable........................................ 411 4,073
Accounts payable to affiliated companies................ 428 38
Accrued interest........................................ 18,515 18,288
Accrued taxes........................................... 835 1,439
Deferred DOE obligation--current portion................ 845 845
Other................................................... 151 329
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41,185 45,012
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Deferred Credits:
Accumulated deferred income taxes....................... 135,567 120,250
Deferred obligation to affiliated company............... 33,284 33,284
Deferred DOE obligation................................. 3,553 3,553
Deferred Seabrook tax settlement obligation............. 408 1,022
Other................................................... 220 222
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173,032 158,331
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Commitments and Contingencies (Note 2)<F2>
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Total Capitalization and Liabilities........... $ 975,955 $ 963,579
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</TABLE>
See accompanying notes to financial statements.
3
NORTH ATLANTIC ENERGY CORPORATION
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1995 1994
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(Thousands of Dollars)
<S> <C> <C>
Operating Revenues.................................... $ 33,984 $ 32,211
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Operating Expenses:
Operation --
Fuel............................................. 3,269 1,449
Other............................................ 7,706 8,819
Maintenance......................................... 1,638 2,895
Depreciation........................................ 5,905 5,810
Federal and state income taxes...................... 2,144 1,617
Taxes other than income taxes....................... 2,348 3,027
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Total operating expenses...................... 23,010 23,617
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Operating Income...................................... 10,974 8,594
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Other Income:
Deferred Seabrook return--other funds............... 3,380 3,243
Other, net.......................................... 330 356
Income taxes--credit................................ 881 856
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Other income, net............................. 4,591 4,455
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Income before interest charges................ 15,565 13,049
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Interest Charges:
Interest on long-term debt.......................... 16,005 16,005
Other interest...................................... (99) (61)
Deferred Seabrook return--borrowed funds............ (7,842) (9,538)
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Interest charges, net......................... 8,064 6,406
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Net Income............................................ $ 7,501 $ 6,643
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
NORTH ATLANTIC ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
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(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net Income................................................ $ 7,501 $ 6,643
Adjustments to reconcile to net cash
from operating activities:
Depreciation............................................ 5,905 5,810
Deferred income taxes and investment tax credits, net... 8,487 9,171
Deferred return - Seabrook.............................. (11,221) (12,782)
Other sources of cash................................... 2,766 1,324
Other uses of cash...................................... (616) (652)
Changes in working capital:
Receivables............................................. (2,431) (6,810)
Materials and supplies.................................. (352) (822)
Accounts payable........................................ (3,272) (4,603)
Accrued taxes........................................... (604) -
Other working capital (excludes cash)................... 140 2,320
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Net cash flows from (used for) operating activities......... 6,303 (401)
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Financing Activities:
Net increase in short-term debt........................... - 11,500
Cash dividends on common stock............................ (6,000) -
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Net cash flows (used for) from financing activities......... (6,000) 11,500
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Investment Activities:
Investment in plant:
Electric utility plant.................................. (824) (8,575)
Nuclear fuel............................................ (1,437) (521)
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Net cash flows used for investments in plant.............. (2,261) (9,096)
NU System Money Pool...................................... (1,250) -
Other investment activities, net.......................... (864) (930)
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Net cash flows used for investments......................... (4,375) (10,026)
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Net (Decrease) Increase In Cash For The Period.............. (4,072) 1,073
Cash and special deposits - beginning of period............. 8,166 8,404
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Cash and special deposits - end of period................... $ 4,094 $ 9,477
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
NORTH ATLANTIC ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
<F1>1. General
The accompanying unaudited financial statements should be read in conjunction
with the Annual Report of North Atlantic Energy Corporation (the company or
NAEC), a wholly-owned subsidiary of Northeast Utilities (NU), on Form 10-K for
the year ended December 31, 1994 (1994 Form 10-K). In the opinion of the
company, the accompanying financial statements contain all adjustments necessary
to present fairly the financial position as of March 31, 1995, the results of
operations for the three months ended March 31, 1995 and 1994, and the
statements of cash flows for the three months ended March 31, 1995 and 1994.
The results of operations for the three months ended March 31, 1995 and 1994 are
not necessarily indicative of the results expected for a full year.
Certain reclassifications of prior period data have been made to conform with
the current period presentation.
<F2>2. Commitments and Contingencies
Construction Program: For information regarding NAEC's construction program,
see the Notes to Financial Statements in NAEC's 1994 Form 10-K.
Environmental Matters: For information regarding environmental matters, see the
Notes to Financial Statements in NAEC's 1994 Form 10-K.
Nuclear Insurance Contingencies: For information regarding nuclear insurance
contingencies, see the Notes to Financial Statements in NAEC's 1994 Form 10-K.
North Atlantic Energy Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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This section contains management's assessment of NAEC's (the company) financial
condition and the principal factors having an impact on the results of opera-
tions. The company is a wholly-owned subsidiary of Northeast Utilities (NU).
This section should be read in conjunction with the company's financial
statements, footnotes and management's discussion and analysis in the 1994 Form
10-K.
FINANCIAL CONDITION
Overview
On June 5, 1992 (Acquisition Date), NU acquired Public Service Company of New
Hampshire (PSNH), and PSNH's 35.6 percent share of the Seabrook 1 nuclear power
plant (Seabrook 1) and other Seabrook-related assets were transferred to the
company. At the Acquisition Date, PSNH and the company entered into the
Seabrook Power Contract (Contract), under which PSNH is obligated to buy from
the company, and the company is obligated to sell to PSNH, all of the company's
capacity and output of Seabrook for a period equal to the length of the Nuclear
Regulatory Commission full-power operating license for Seabrook (through 2026).
Under the Contract, PSNH is unconditionally obligated to pay the company's "cost
of service" during the period whether or not Seabrook is operating and without
regard to the cost of alternative sources of power. In addition, PSNH will be
obligated to pay decommissioning and project cancellation costs after the
termination of the operating license.
The company's "cost of service" includes all of its prudently incurred Seabrook-
related costs, including operation and maintenance expense, fuel expense,
property tax expense, depreciation expense, certain overhead and other costs,
and a phased-in return on its Seabrook investment. The Contract established the
initial recoverable investment in Seabrook at $700 million (Initial Investment),
plus any capital additions, net of depreciation.
The company's only assets are Seabrook and other Seabrook-related assets and its
only source of revenue is the Contract. PSNH's obligations under the Contract
are solely its own and have not been guaranteed by NU. The Contract contains
no provisions entitling PSNH to terminate its obligations. If, however, PSNH
were to fail to perform its obligations under the Contract, the company would be
required to find other purchasers for Seabrook power.
Rate Matters
As of March 31, 1995, NAEC has included in rates $490 million of its initial
Seabrook investment. The remaining investment ($210 million) will be phased
into rates over the next two years, beginning in May 1995. As of March 31,
1995, the deferred return associated with the amount of investment that has not
been included in rates was approximately $194 million, including approximately
$51 million which is recorded as utility plant. This amount and the additional
deferred amounts associated with the remaining phase-in will be recovered under
the Contract over the period December 1997 through May 2001.
Seabrook Performance
In the first quarter of 1995 Seabrook operated at a capacity factor of 100
percent, as compared to 73.6 percent in 1994 The lower 1994 capacity factor was
primarily the result of an unplanned shutdown on January 25, 1994 for an
unplanned outage. The unit returned to service on February 18, 1994.
Liquidity and Capital Resources
Cash provided from operations increased approximately $7 million for the first
three months in 1995, as compared with the same period in 1994, primarily due
to an increase in working capital. Cash flows from financing activities were
approximately $18 million lower in 1995, as compared with 1994, primarily due
to lower short-term debt and the payment of cash dividends on common stock in
1995. Cash used for investments was approximately $6 million lower in 1995, as
compared with 1994, primarily due to lower investment in plant, partially offset
by higher short-term loans to other NU system companies under the NU system
Money Pool and higher nuclear fuel expenditures.
The company's construction program expenditures amounted to approximately $1
million for the first three months of 1995, as compared to approximately $9
million for 1994. The decrease is due to expenditures incurred as a result of
NAEC's purchase of Vermont Electric Generation and Transmission Company's 0.4
percent share of Seabrook in 1994.
The company has ongoing cash requirements for Seabrook-related capital
expenditures, nuclear fuel expenditures, interest and operating expenses. Such
cash requirements are expected to be met from payments under the Contract and
the Tax Allocation Agreement, except that to the extent some or all of the
capital expenditures and nuclear fuel expenditures may have to be financed, the
company expects to borrow under the Money Pool. As of March 31, 1995, there
were no borrowings outstanding under the Money Pool.
A substantial portion of the company's cash flow consists of payments made by NU
to the company under a Tax Allocation Agreement that the company entered into
with NU at the time of the acquisition. The amount of such payments will
decrease over time but is expected to remain substantial during the next few
years when the company is expected to incur losses for tax purposes due to
accelerated tax depreciation of Seabrook. The company received approximately $8
million from NU for the first three months of 1995 under this agreement. No
assurance can be given, however, as to the extent of the future benefits, if
any, that will actually accrue to the company under the Tax Allocation
Agreement.
RESULTS OF OPERATIONS
Comparison of First Quarter of 1995 with the First Quarter of 1994
- ------------------------------------------------------------------
Operating revenues represent amounts billed to PSNH under the terms of the
Contract and billings to PSNH for decommissioning expense. Operating revenues
increased approximately $2 million in the first quarter of 1995, as compared
with 1994, primarily due to the increased return associated with the phase-in of
additional Seabrook plant in May 1994.
Operation and maintenance expenses decreased approximately $2 million in the
first quarter of 1995, as compared with 1994, primarily due to the Seabrook
outage in early 1994.
Deferred Seabrook return - other and borrowed funds decreased approximately $2
million in the first quarter of 1995, as compared with 1994, primarily because
additional Seabrook investment was phased into rates in May 1994.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Listing of Exhibits:
Exhibit
Number Description
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27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during this reporting period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTH ATLANTIC ENERGY CORPORATION
---------------------------------
Registrant
Date May 11, 1995 By /s/ Bernard M. Fox
-------------------- -----------------------------
Bernard M. Fox
Vice Chairman and Chief
Executive Officer, and
Director
Date May 11, 1995 By /s/ John W. Noyes
-------------------- -----------------------------
John W. Noyes
Vice President and
Controller
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000880416
<NAME>NORTH ATLANTIC ENERGY CORPORATION
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 711,296
<OTHER-PROPERTY-AND-INVEST> 11,757
<TOTAL-CURRENT-ASSETS> 62,954
<TOTAL-DEFERRED-CHARGES> 189,948
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 975,955
<COMMON> 1
<CAPITAL-SURPLUS-PAID-IN> 160,999
<RETAINED-EARNINGS> 60,738
<TOTAL-COMMON-STOCKHOLDERS-EQ> 221,738
0
0
<LONG-TERM-DEBT-NET> 540,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 20,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 194,217
<TOT-CAPITALIZATION-AND-LIAB> 975,955
<GROSS-OPERATING-REVENUE> 33,984
<INCOME-TAX-EXPENSE> 1,263
<OTHER-OPERATING-EXPENSES> 20,866
<TOTAL-OPERATING-EXPENSES> 23,010
<OPERATING-INCOME-LOSS> 10,974
<OTHER-INCOME-NET> 3,710
<INCOME-BEFORE-INTEREST-EXPEN> 15,565
<TOTAL-INTEREST-EXPENSE> 8,064
<NET-INCOME> 7,501
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,501
<COMMON-STOCK-DIVIDENDS> 6,000
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 6,303
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
