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File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC RESOURCES, INC.
NEW ENGLAND ELECTRIC SYSTEM
25 Research Drive
Westborough, Massachusetts 01582
(Names of companies filing this statement
and address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company in parent system)
John G. Cochrane Kirk L. Ramsauer
Treasurer Associate General Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
(Names and Addresses of agents for service)
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New England Electric Resources, Inc. (NEERI), a wholly-
owned, non-utility subsidiary of New England Electric System
(NEES), was organized for the purpose of pursuing new business
opportunities.
NEES is a registered holding company under the Public
Utility Holding Company Act of 1935 (the Act), whose subsidiary
companies include NEERI; New England Power Company, an electric
generation subsidiary (NEP); retail electric utility
subsidiaries; New England Power Service Company, a service
company subsidiary (NEPSCO), and NEES Energy, Inc. (NEES Energy),
a marketing subsidiary (collectively, the System).
1. Item 1: Description of Proposed Transaction
-------------------------------------------
NEERI seeks to invest in Underwater Unlimited Diving
Services, Inc. (UUDSI). UUDSI, a Florida corporation, is an
underwater diving company providing inspection, evaluation,
repair and remediation services to the hydroelectric industry.
In return for NEERI's equity investment of $1 million, UUDSI will
issue 200,000 shares of convertible nonvoting preferred stock to
NEERI.
UUDSI is a small company with less than 25 permanent
employees. Through a proposed joint venture (HydroServ) with
UUDSI, NEERI and UUDSI will market and sell services to the
hydroelectric industry. The size of the potential market is
significant with approximately 80,000 dams in the United States.
All hydro facilities are in need of regular inspection and some
level of maintenance and repairs. By jointly marketing with
UUDSI through HydroServ, NEERI believes that it will be able to
provide "one-stop" shopping for customers on many projects with
UUDSI contracting for the below-water work. This will provide a
customer with a single contact for a portfolio of goods and
services for the hydroelectric industry. NEERI believes that
joint marketing effort will provide market focus and should
reduce overall marketing and sales expenses for both NEERI and
UUDSI. Rule 58 covers the formation of the HydroServ joint
venture with UUDSI and joint marketing and sales efforts. NEERI
will not finalize this proposed arrangement with UUDSI until
after Rule 58 goes into effect, currently expected in late March.
A. Purchase of Equity in UUDSI
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As a result of working with UUDSI to explore the formation
of a joint marketing venture, UUDSI approached NEERI about
investing funds in UUDSI in order to provide UUDSI with
development funds to invest in its underwater business. UUDSI
has developed underwater maintenance and repair procedures that
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NEERI believes are unique in the industry and this investment by
NEERI will enable UUDSI to further refine and develop these
procedures.
Pursuant to a stock purchase agreement (the Stock Purchase
Agreement) negotiated with UUDSI, NEERI intends to purchase
200,000 shares of UUDSI's convertible nonvoting preferred stock
(the Shares) at a price of $5.00 per share, for a total equity
investment of $1 million. As provided in the shareholders'
agreement (the Shareholders' Agreement), the Shares may be
converted to shares of voting and/or nonvoting common stock upon
the closing of an initial public offering in which UUDSI's
proceeds from such offering are not less than $15 million and in
which the share offering price is $15 or more. The Shares will
have full ratchet anti-dilution protection. NEERI's investment
in the Shares will not result in NEERI's ownership of more than
5% of the voting securities of UUDSI.
B. Financing by NEES
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NEES proposes to provide financing for NEERI's investment in
UUDSI by making a capital contribution in NEERI of not exceeding
$1 million or acquiring not exceeding $1 million of non-interest
bearing subordinated notes of NEERI. This investment will be in
addition to previously authorized financings by NEES in NEERI.
C. Compliance with Rule 53
-----------------------
Neither NEES nor any subsidiary currently has an ownership
interest in an exempt wholesale generator ("EWG") as defined in
Section 32 of the Act or a foreign utility company ("FUCO") as
defined in Section 33 of the Act. Additionally, neither NEES nor
any subsidiary is a party to, or has any rights under, a service,
sales, or construction agreement with an EWG or FUCO. By its
Order dated April 15, 1996 (HCAR 35-26504), the Commission has
authorized financings by NEES for the purpose of acquiring EWGs
and FUCOs as set forth in their Application/Declaration in File
No. 70-8783. In the event that the total amount of authority
requested in the above-referenced Application/Declaration (File
No. 70-8783) is invested in connection with EWGs and FUCOs, NEES'
"aggregate investment" (determined in accordance with Rule
53(a)(1)(i)) in EWGs and FUCOs would not exceed 50% of NEES'
"consolidated retained earnings" (as defined in Rule 3(a)(1)(ii))
in compliance with the provisions set forth in Rule 53 under the
Act. NEERI and its affiliates shall comply with the requirements
of Rules 53 and 54 of the Act in connection with EWG and FUCO
acquisitions and financings. No funds or borrowings requested in
this filing will be used by NEERI, HydroServ, or any associated
company to invest in EWGs and/or FUCOs.
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2. Item 2: Fees, Commissions and Expenses
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Services incidental to the transactions described herein
will be performed by New England Power Service Company (NEPSCO)
and billed to NEERI at the actual cost thereof. NEPSCO is an
affiliated service company operating pursuant to Section 13 of
the Act and the Commission's rules thereunder. The cost of such
services to be paid by NEERI is not expected to exceed $5,000, to
be incurred primarily by the Corporate Department (including
attorneys) and the Treasury Department (including accountants).
These amounts include a $2,000.00 filing fee paid by wire
transfer to the Commission at the time of filing this
application/declaration.
3. Item 3: Applicable Statutory Provisions
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The sections of the Act and rules of exemptions thereunder
that are believed to be applicable to the transactions are:
Sections 6(a), 7, 9(a), 10, 12, 13, 22, 32, 33, and Rules
45, 53, and 54, all relating to the authority requested herein
and Rule 58 upon its effectiveness.
4. Item 4: Regulatory Approval
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No federal or state commission or regulatory body, other
than the Commission, has jurisdiction over the proposed
transactions.
5. Item 5: Procedure
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The applicants request that the Commission take action with
respect to this Application/Declaration without a hearing being
held, on or before May 15, 1997.
The applicants (i) do not request a recommended decision by
a hearing officer; (ii) do not request a recommended decision by
any other responsible officer of the Commission; (iii) hereby
specify that the Division of Investment Management may assist in
the preparation of the Commission's decision; and (iv) hereby
request that there be no 30-day waiting period between the date
of issuance of the Commission's Order and the date on which it is
to become effective.
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6. Item 6: Exhibits
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(a) Exhibits
*B-1 Form of Stock Purchase Agreement
*B-2 Form of Shareholders' Agreement
*F Opinion of Counsel
H Proposed Form of Notice
*To be filed by amendment.
(b) Financial Statements
1-A Balance Sheet of NEERI at December 31, 1996
1-B Statement of Income and Retained Deficit for
NEERI for twelve months ended December 31,
1996
*2-A Consolidated Balance Sheet of NEES at
December 31, 1996
*2-B Statement of Consolidated Income and Retained
Earnings for NEES for twelve months ended
December 31, 1996
*3-A Balance Sheet of UUDSI at December 31, 1996
*3-B Income Statement of UUDSI for twelve months
ended December 31, 1996
*3-C Financial Statements for UUDSI for fiscal
years 1992, 1993, 1994 and 1995.
*27 Financial Data Schedules for NEERI and NEES
* To be filed by amendment
7. Item 7: Environmental Effects
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The transactions proposed by this Application/Declaration do
not involve a 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 Companies have duly caused
this Application/Declaration on Form U-1 to be signed on their
behalf by the undersigned officers thereunto duly authorized by
the Companies.
NEW ENGLAND ELECTRIC RESOURCES, INC.
s/John G. Cochrane
By _____________________________
John G. Cochrane
Treasurer
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By _____________________________
Michael E. Jesanis
Vice President and Treasurer
Dated: March 20, 1997
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes
or shall be held to any liability therefor.
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EXHIBIT AND FINANCIAL STATEMENT INDEX
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EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
B-1 Form of Stock Purchase Agreement To be filed
by amendment
B-2 Form of Shareholders' Agreement To be filed
by amendment
F Opinion of Counsel To be filed
by amendment
H Proposed Form of Notice Filed
herewith
FINANCIAL
STATEMENT
NO.
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1-A Balance Sheet of NEERI at Filed
December 31, 1996 herewith
1-B Statement of Income and Retained Filed
Deficit for NEERI for twelve herewith
months ended December 31, 1996
2-A Consolidated Balance Sheet To be filed
of NEES at December 31,1996 by amendment
2-B Statement of Consolidated Income To be filed
and Retained Earnings for NEES by amendment
for twelve months ended
December 31, 1996
3-A Balance Sheet of UUDSI at To be filed
December 31, 1996 by amendment
3-B Income Statement of UUDSI for To be filed
twelve months ended by amendment
December 31, 1996
3-C Financial Statements for UUDSI To be filed
for fiscal years 1992, 1993, by amendment
1994 and 1995
27 Financial Data Schedules To be filed
for NEES and NEERI by amendment
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EXHIBIT H
PROPOSED FORM OF NOTICE
New England Electric Resources, Inc. (NEERI), a wholly-owned,
non-utility subsidiary of New England Electric System (NEES), and
NEES have filed Form U-1 Application/Declaration File No.
70-______ under Sections 9(a), 10, 12, 32, and 33 of the Public
Utility Holding Company Act of 1935 (the Act) and Rules 45,53,
and 54 thereunder.
NEERI seeks to make an equity investment of $1 million in
Underwater Unlimited Diving Services, Inc. (UUDSI). UUDSI, a
Florida corporation, is an underwater diving company providing
inspection, evaluation, repair and remediation services to the
hydroelectric industry.
Pursuant to a stock purchase agreement negotiated with UUDSI,
NEERI intends to purchase 200,000 shares of UUDSI's convertible
nonvoting preferred stock (the Shares) at a price of $5.00 per
share, for a total equity investment of $1 million. The Shares
may be converted to shares of voting and/or nonvoting common
stock upon the closing of an initial public offering in which
UUDSI's proceeds from such offering are not less than $15 million
and in which the share offering price is $15 or more. The Shares
will have full ratchet anti-dilution protection. NEERI's
investment in the Shares will not result in NEERI's ownership of
more than 5% of the voting securities of UUDSI.
NEES proposes to provide financing for NEERI's investment in
UUDSI by making a capital contribution in NEERI of not exceeding
$1 million or acquiring not exceeding $1 million of non-interest
bearing subordinated notes of NEERI. This investment will be in
addition to previously authorized financings by NEES in NEERI.
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Financial Statement 1-A
NEW ENGLAND ELECTRIC RESOURCES, INC.
Balance Sheet
December 31, 1996
(Unaudited, Subject to Adjustment)
ASSETS
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Current assets:
Cash $ 180,836
Accounts receivable 1,359,932
Accounts receivable from associated companies 2,746
Tax benefit receivable 866,287
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Total current assets 2,409,801
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Investment in Separation Technologies, Inc.,
at cost 999,999
Investment in Monitoring Technologies, Inc.,
at cost 475,001
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Total other assets 1,475,000
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Total assets $ 3,884,801
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LIABILITIES AND PARENT COMPANY'S INVESTMENT
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Current liabilities:
Accounts payable to associated companies $ 465,891
Accounts payable 238,342
Tax collections payable 382
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Total current liabilities 704,615
Accumulated deferred income taxes 51,600
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Total liabilities 756,215
Parent company's investment:
Common stock, par value $1 per share 1,000
Subordinated notes payable to parent 8,448,999
Retained deficit (5,321,413)
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Total parent company's investment 3,128,586
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Total liabilities and parent company's
investment $ 3,884,801
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Financial Statement 1-B
NEW ENGLAND ELECTRIC RESOURCES, INC.
Statement of Income and Retained Deficit
For the Twelve Months Ended December 31, 1996
(Unaudited, Subject to Adjustment)
INCOME
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Services rendered to nonassociated companies $ 1,379,230
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Total Income $ 1,379,230
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EXPENSE
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Administrative and General Expenses $ 7,339,530
Income taxes (2,352,400)
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Total Expenses 4,987,130
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Net Income/(Loss) $(3,607,900)
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Retained earnings/(deficit) at beginning of period (1,713,513)
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Retained earnings/(deficit) at end of period $(5,321,413)
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