<PAGE>
PROSPECTUS
782,500 Shares
Bangor Hydro-Electric Company
Common Stock
---------------
The Common Stock of Bangor Hydro-Electric Company (the "Company") is listed
on the New York Stock Exchange ("NYSE") under the symbol "BGR." The last
reported sale price of the Company's Common Stock on March 16, 1994 on the
NYSE was $17 per share.
- ---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions<F1> Company<F2>
<S> <C> <C> <C>
Per Share $ 17.00 $ .765 $ 16.235
Total<F3> $13,302,500 $598,612.50 $12,703,887.50
- ------------------------------
<FN>
<F1> The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
<F2> Before deducting expenses payable by the Company estimated at $95,000
including certain legal expenses of the Underwriter.
<F3> The Underwriter has been granted an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to 117,375 additional
shares of Common Stock from the Company on the same terms per share
solely for the purpose of covering over-allotments, if any. If all of
such additional shares are purchased, the total Price to Public will be
$15,297,875, the total Underwriting Discounts and Commissions will be
$688,404.38, and the total Proceeds to Company will be $14,609,470.63.
See "Underwriting."
</TABLE>
----------------
The shares of Common Stock are offered by the Underwriter named
below, subject to prior sale, when, as and if accepted by it, and subject
to certain conditions. It is expected that certificates for the shares of
Common Stock offered hereby will be available for delivery on or about
March 23, 1994 at the offices of Smith Barney Shearson Inc., 388 Greenwich
Street, New York, New York 10013.
----------------
Smith Barney Shearson Inc.
March 16, 1994
1
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). All such
reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: Chicago Regional Office, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661-2511; and New York
Regional Office, Seven World Trade Center, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. In addition, material filed by the Company can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), the Company has filed with the Commission a
registration statement on Form S-3 (herein, together with all amendments and
exhibits, referred to as the "Registration Statement") with respect to the
securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information, reference is hereby made to the Registration
Statement.
_________________________________
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1992;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993 (as amended by Form 10-Q/A filed August 17, 1993),
June 30, 1993 and September 30, 1993; and
(iii) the Company's Current Reports on Form 8-K dated August 12,
1993, December 15, 1993 and March 2, 1994 (which contains the Company's
1993 audited financial statements and related information).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Such documents, and the documents described above, are
hereinafter referred to as "Incorporated Documents."
Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Certain information contained in this Prospectus summarizes, is based
upon, or refers to, information and financial statements contained in one or
more Incorporated Documents; accordingly, such information contained herein
is qualified in its entirety by reference to such documents and should be
read in conjunction therewith.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the documents referred to above which
have been incorporated in this Prospectus by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be
addressed to: Bangor Hydro-Electric Company, 33 State Street, Bangor, Maine
04401, Attention: General Counsel; telephone (207) 945-5621.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
2
<PAGE>
SUMMARY INFORMATION
The following summary information is qualified in its entirety by
reference to information appearing elsewhere in this Prospectus and by the
more detailed information and consolidated financial statements which are
incorporated by reference herein. Except as otherwise indicated herein, all
share and per share data in this Prospectus assume that the Underwriter's
over-allotment option is not exercised.
THE COMPANY
The Company is a public utility engaged in the generation, purchase,
transmission, distribution and sale of electric energy in eastern and east
coastal Maine. The Company's franchised service area covers about 4,900
square miles in and around Bangor, Maine, including the resort area of east
coastal Maine, and includes the counties of Penobscot, Hancock and Washington
and portions of Waldo, Piscataquis and Aroostook, Maine, having a population
of approximately 195,000. In 1993, 31.2% of the Company's kilowatt-hour
("KWH") sales were to residential customers, 30.3% were to commercial
customers, 37.3% were to industrial customers, and 1.2% were to other
customers. The Company enjoys a diversified power supply profile, with
ownership interests in hydroelectric facilities, Maine Yankee Atomic Power
Company ("Maine Yankee"), which entitles the Company to purchase a share of
the output at Maine Yankee's nuclear generating facility, and fossil fuel
generating stations. The Company supplements this generation with
substantial purchases of power from the New England Power Pool ("NEPOOL"),
independent non-utility power producers using renewable resources in the
Company's service area and Canadian sources.
THE OFFERING
Common Stock Offered . . . . . . 782,500 Shares
Common Stock Outstanding After the
Offering (as of March 16, 1994) . 7,027,674 Shares
Latest 12-Month Closing Price
Range (through March 16, 1994) . . $24 1/8 to $16 3/4
Closing Price on March 16, 1994 . $17
NYSE Symbol . . . . . . . . . . . BGR
Indicated Annual Dividend per $1.32; paid quarterly
Common Share . . . . . . . . . . To reduce outstanding short-term
Use of Proceeds . . . . . . . . debt incurred primarily to finance
construction expenditures, and for
other working capital needs. See
"Use of Proceeds."
Voting Rights . . . . . . . . . Holders of Common Stock currently
have general voting rights of one-
twelfth of one vote per share,
while holders of Preferred Stock
have one vote per share, except for
holders of the 8.76% Preferred
Stock which does not carry voting
rights except as discussed herein.
See "Description of Common Stock."
- --------------------------
* Management currently intends to recommend to theB oard of Directors that
the Company declare a regular quarterly dividend on March 21, 1994 of
$.33 per share on the Company's Common Stock, payable on April 20, 1994
to shareholders of record on March 31 , 1994. Holders, as of the record
date, of the Common Stock offered hereby will be entitled to receive
this dividend, if declared.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1993 <F1> 1992 1991
------------- ---------- -------------
<S> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Total operating revenue . . . . . . $ 177,972 $ 176,789 $ 162,243
Operating income . . . . . . . . . 16,799 18,516 16,445
Net income . . . . . . . . . . . . 5,336 10,255 8,199
Earnings applicable to Common Stock 3,691 8,641 6,585
Earnings per common share . . . . . $ .63 $ 1.60 $ 1.33
Dividends declared per common share 1.32 1.32 1.29
Shares outstanding (average) . . . 5,862 5,393 4,947
As of December 31, 1993
-----------------------------------------------------------
Actual Ratio As Adjusted<F3> Ratio
------------ ------- --------------- -------------
<S> <C> <C> <C> <C>
CAPITALIZATION:
Common Stock . . . . . . $ 93,944 40.3% $106,553 43.4%
Redeemable preferred
stock . . . . . . . . 15,168 6.6 15,168 6.2
Non-redeemable
preferred stock . . . 4,734 2.0 4,734 1.9
Long-term debt<F2> . . . 119,126 51.1 119,126 48.5
_________ _______ __________ ________
Total capitalization . $ 232,972 100.0% $ 245,581 100.0%
========= ======= ========== =========
Short-term debt . . . . . $ 36,000 $ 23,458
As of December 31, 1993
_______________________
<S> <C>
SELECTED BALANCE SHEET
DATA:
Net utility plant . . . . $ 210,422
Total assets . . . . . . 373,521
Book value per common 15.09
share . . . . . . . .
- -----------------------------
<FN>
<F1> 1993 results of operations were negatively impacted by the establishment
of a $5.6 million (after taxes) reserve against investments in certain
proposed hydroelectric facilities. The reserve reduced 1993 earnings
per share by $.95. See "Recent Developments and Certain Investment
Considerations."
<F2> Less sinking fund requirements of $1.3 million due within one year.
<F3> Adjusted to reflect the use of the proceeds from the sale of the Common
Stock offered hereby (estimated to be $12.6 million) to repay short-term
debt. See "Use of Proceeds."
</TABLE>
4
<PAGE>
Page 5 is a map entitled "Bangor Hydro-Electric Company
Service Area." Inset in the upper right hand corner of the page is a map of
the State of Maine with the service area of the Company shaded. The
remainder of the page is a larger map depicting the counties in and around
the Company's service area. In the larger map, the service area is shaded
and sites of facilities, waterways and certain municipalities are labeled.
5
<PAGE>
THE COMPANY
The Company was incorporated under the laws of the State of Maine in
1924 as a public utility engaged in the generation, purchase, transmission,
distribution and sale of electric energy for residential, commercial,
industrial and governmental uses in eastern and east coastal Maine. The
Company has two material wholly owned subsidiaries, Penobscot Hydro Co., Inc.
("PHC") and Bangor Var. Co., Inc. ("Bangor Var Co."). PHC was incorporated
in 1986 to own the Company's 50% interest in a joint venture, Bangor-Pacific
Hydro Associates, which redeveloped the West Enfield hydroelectric project.
Bangor Var Co. was incorporated in 1990 to hold the Company's 50% interest in
a partnership that owns certain facilities used in the Hydro-Quebec Phase II
transmission project in which the Company is a participant.
In 1993, 31.2% of the Company's kilowatt-hour sales were to residential
customers, 30.3% were to commercial customers, 37.3% were to industrial
customers, and 1.2% were to other customers. The Company enjoys a
diversified power supply profile, with ownership interests in hydroelectric
facilities, nuclear generation and fossil fuel generating stations. The
Company supplements this generation with substantial purchases of power from
NEPOOL, independent non-utility power producers using renewable resources in
the Company's service area and Canadian sources.
The Company holds a 7% ownership share in Maine Yankee, which entitles
the Company to purchase an approximately equal amount of the output of that
company's 880 megawatt ("MW") nuclear generating facility, an entitlement of
approximately 62 MW. Other New England utilities hold the remaining
ownership shares of Maine Yankee. The Maine Yankee facility, which commenced
commercial operation on January 1, 1973, is the only nuclear facility in
which the Company has an ownership interest. Pursuant to a power purchase
contract with Maine Yankee, the Company is obligated to pay its pro rata
share of Maine Yankee's operating expenses, including fuel costs and
decommissioning costs. In addition, under a Capital Funds Agreement entered
into by the Company and the other sponsor utilities, the Company may be
required to make its pro rata share of future capital contributions to Maine
Yankee if needed to finance capital expenditures.
In 1993, 48.4% of the megawatt hours of electricity sold by the Company
was purchased from NEPOOL and other utilities, 20.4% was purchased from Maine
Yankee, 16.7% was generated by the Company's power stations and 14.5% was
purchased from independent non-utility power producers. The Company, along
with the major investor-owned utilities of New England, has been a party to
NEPOOL since 1971. NEPOOL contractual arrangements provide for joint
planning and operation of generating and transmission facilities in New
England, and govern generating capacity reserve obligations and provisions
regarding the use of major transmission lines.
The Company is subject to the regulatory authority of the Maine Public
Utilities Commission ("MPUC") as to retail rates, accounting, service
standards, territory served, the issuance of securities and various other
matters. The Company is also subject to the jurisdiction of the Federal
Energy Regulatory Commission as to certain matters, including licensing of
its hydroelectric stations and rates for wholesale purchases and sales of
energy and capacity and transmission services. Maine Yankee is subject to
extensive regulation by the Nuclear Regulatory Commission.
The principal executive offices of the Company are located at 33 State
Street, Bangor, Maine 04401; telephone (207) 945-5621.
RECENT DEVELOPMENTS AND
CERTAIN INVESTMENT CONSIDERATIONS
Recent Rate Case Results
- ------------------------
On May 18, 1993, the Company filed with the MPUC a general base rate
case proposing a $22.8 million, or 32.9%, increase in base revenues.
Subsequently, the Company reduced its revenue request to $17.6 million. On
February 17, 1994, the MPUC issued an order allowing the Company to increase
its base rates by $11.1 million effective March 1, 1994. This represents a
15.9% increase in base rates; however, when recent reductions in fuel and
energy costs (which are billed to customers through the Company's fuel
adjustment clause) are taken into
6
<PAGE>
account, the base rate increase results in an average rate increase of .6%
over rates that were in place a year ago. The reductions in fuel and energy
costs are primarily due to a buy-out in June 1993 of an expensive purchased
power contract with an independent non-utility power producer and to the
substantial completion of amortization of deferred costs accrued in the
period 1987-1990 under contracts with such producers. The authorized rate of
return on common equity in the new rate order is 10.6%. However, the Company
may not earn its authorized return on equity in 1994 since the revenue
allowance in the MPUC order is based on a more optimistic view of sales
growth during 1994 than is anticipated by the Company, and the decision does
not include the impact of the reduction in annual revenue associated with a
recently authorized industrial customer contract or the costs to be
recognized in 1994 relating to the Company's early retirement program, both
of which are discussed below.
Establishment of a Reserve for Certain Proposed Hydroelectric Investments
- -------------------------------------------------------------------------
The Company established a reserve in December 1993 against amounts
invested through 1993 in licensing activities for proposed additional
hydroelectric facilities at two sites on the Penobscot River. The reserve
amounted to $5.6 million after taxes and had an after-tax negative impact on
1993 earnings of $.95 per common share. The reserve was established
primarily because of concern over the effect of capital-intensive projects
such as new hydroelectric facilities on the level of the Company's electric
rates and because of the Company's inability to predict the outcome of
further required licensing and permitting activities. The projects in
question would require a total investment of about $140 million.
Expenditures for ongoing licensing activities for these proposed facilities
are expected to be minimal in 1994, and will be expensed as incurred.
The Effect of Competition on Future Sales, Earnings and Dividend Policy
- -----------------------------------------------------------------------
An important factor which will impact the Company's future profitability
is the infusion of competition into the electric utility business in the
United States. As utilities adjust to competition their ability to compete
on price becomes increasingly important. Maine utilities, including the
Company, have been experiencing increases in their costs as a result of legal
obligations to purchase power from independent non-utility power producers,
policies regarding utility-financed conservation and demand-side management,
expenditures for low income assistance subsidies, and various other mandates.
These costs have translated into higher rates to customers. Over the last
six years, Maine's electric rates, on average, have increased faster than the
average electric rates in New England, exclusive of Maine. Maine's rates had
been substantially lower, on average, than elsewhere in New England, but with
the rate of increase experienced recently, the average rate in Maine is now
just below the New England average. The Company's average rates are about
equal to the New England average.
As a result of the impact of the foregoing, competition for the electric
customers' business in Maine is keen. Other utilities that purchase
electricity from Maine utilities have access to the competitive power supply
markets, which is causing Maine's utilities to reduce prices to those
customers or lose the business altogether. Although retail electric
customers in Maine are generally unable to purchase directly from other
electricity suppliers under current law, customers are increasingly turning
to alternative methods of providing the desired end-use, or are otherwise
curtailing their purchases of electric energy. In order to meet the
competition for existing business, the Company is having to negotiate prices
for customers that have competitive alternatives for their energy needs, or
that would otherwise leave the system.
In the near term, the necessity to reduce prices to retain sales causes
a shortfall in revenues needed to satisfy the Company's overall revenue
requirement. In order to avoid an adverse impact on earnings, this
revenue shortfall must be made up by adjusting rates to other customers, or
by increasing sales, or some combination thereof. The Company believes the
MPUC will allow rate adjustments to account for this impact as necessary as
long as the Company has prudently managed this competitive factor, although
public resistance to rate increases and the possibility of municipalization
of electric service (a practice that is not widespread in Maine) are likely
to act as a constraint in making these adjustments. In the longer term, the
Company believes it could perform successfully in a competitive market,
because despite the Company's current high cost structure the marginal cost
of providing electric service is relatively low. The Company expects that,
if public and regulatory policies were adjusted to permit the active pursuit
of greater sales, the price that could be charged in a competitive
environment, while lower than many of the Company's current rates, would
recover more than the marginal cost of providing the service. The Company
also believes a strategy of greater electrification would, in addition,
produce desirable
7
<PAGE>
environmental quality improvement. If the Company is successful in expanding
its market share with competitive rates, the increased revenue in excess of
marginal cost will enhance earnings and offset the need for other rate
increases. In addition, alternative regulatory methods, which are in the
early stages of exploration at the MPUC, could mitigate the impact on
earnings and accommodate greater pricing flexibility on the part of
utilities.
Under current regulatory policies, the Company has only limited
authority to adjust its prices to meet the competition as described above.
However, the Company is pressing for changes in those policies to expand its
pricing flexibility. The Company has negotiated and put into effect a number
of competitive energy rate arrangements, and more negotiations are under way.
Two of those arrangements have provided for the sale of interruptible energy
to major customers of the Company. For the largest customer, LCP Chemicals,
a chemical manufacturer served largely on an interruptible basis, the Company
implemented a contract whereby the price was reduced substantially. This
lost revenue has been incorporated into the rates of other customers. A
second contract was entered into to secure new revenues from a large pulp and
paper company. This customer has historically generated its own power, and
the new contract provides for the capability for the Company to sell or buy
up to 20 MW of interruptible energy and provides benefits to both the
customer and the Company.
More recently, the Company has been negotiating on a case-by-case basis
with customers that have demonstrated that, without rate relief, they will
curtail their purchases from the Company. The MPUC has recently authorized
the Company to enter into a five-year contract (terminable by the customer
with two years' notice) for the supply of power to one of the Company's
largest firm industrial customers at reduced rates. At the same time, the
MPUC issued an accounting order that would mitigate the negative impact on
earnings of a reduced base rate contribution from this customer.
Nevertheless, since these reduced rates were not considered in the Company's
most recent base rate proceeding, the Company expects that the new contract
will reduce the base rate contribution from that customer by about $1 million
annually from historical levels and will negatively affect earnings unless
the Company can reduce its costs or increase its revenues from other sources.
However, the Company believes that without the contract, its earnings would
have been affected to a significantly greater degree had the customer opted
for its lower cost energy alternatives. In authorizing the contract, the
MPUC specifically reserved for a future proceeding any determination of the
Company's prudence in entering into the arrangement. The Company believes it
can demonstrate this transaction is prudent and in the best interest of all
of its customers.
Another of the Company's largest firm industrial customers recently
contacted the Company seeking rate concessions in order to maintain current
levels of electric purchases. The Company cannot yet assess the likelihood
of rate reductions for that customer.
More generally, the impact of competition poses the challenge of
minimizing rates to the extent possible. This includes aggressive cost-
cutting in all areas, while continuing to improve the quality of service to
customers. Strategies to compete might also include the acceptance of lower
stockholder returns, forbearance from seeking rate increases, and
reconsideration of recovery of various embedded costs. Two priorities being
pursued in 1994 to cut costs and improve efficiency and effectiveness in
providing service to customers are moving toward a centralized telephone
customer service system and implementing bi-monthly meter reading.
Management is also pursuing other cost-containment measures including
implementing an early retirement program in early 1994, reengineering
business processes to provide greater efficiencies, and identifying new areas
of revenue enhancement in an effort to enhance earnings.
Some initiatives to reduce costs and increase competitiveness will have
a short-term cost that must be recognized in order to achieve long-term
savings. One such initiative is the early retirement program, which will
produce long-term savings by reason of a reduction in the workforce, but
which will cause the Company to recognize a cost in the year of
implementation. In connection with the 1994 early retirement program, the
Company expects to record a cost of approximately $2.45 million (before
taxes) in the first quarter of 1994, which will reduce reported earnings for
the quarter by about $.15 per common share after taxes. Some of this impact
will be made up by reduced payroll costs and reduced active employee health
cost for the remainder of 1994.
The competitive factors discussed above may affect the level and
consistency of common dividend payout for the Company and other electric
utilities. Historically, a secure, geographically protected market and a
reasonably assured ability to adjust rates to cover increases in costs has,
in general, permitted electric utilities to
8
<PAGE>
establish a pattern of common dividend payment continuity at relatively high
payout ratios, reasonably free of volatility, and with an expectation of
consistent growth over time. This, in turn, has facilitated utilities'
efforts to attract, at reasonable cost, the capital to invest in the plant
and equipment necessary to provide utility service at prices explicitly
capped by a return on investment limited by regulation. With the infusion of
competition into the electric utility business, however, the continuity of
dividend payments will be less certain. As electric utilities lose the
ability to increase prices to cover increased costs, dividend policies will
have to depend more heavily on shorter term expectations for sales and
earnings. Additionally, a perception of greater investment risk in the
industry may require an increase in equity ratios and higher retention of
earnings. Therefore, it is likely that more competition in the electric
utility industry will introduce more volatility in dividend payouts than has
historically been the case. Offsetting these uncertainties, however, is the
possibility of growth in electric sales and earnings which may result from
greater pricing flexibility (depending upon MPUC actions) and an increased
emphasis on marketing and cost-control by the Company. However, there can be
no assurance that such growth in electric sales will in fact occur in amounts
sufficient to offset completely the effects of competition or provide the
ability to maintain consistent dividend levels.
Although the Company faces near-term challenges as a result of having
relatively high rates in an increasingly competitive market, and the factors
described above will play a larger role in dividend payment considerations,
the Company does not presently anticipate the need to reduce the level of the
common dividend. This judgment is based on assumptions of at least a modest
increase in sales, the ability of the Company to control operation and
maintenance expenses and capital expenditures, and the feasibility of
relatively modest rate increases in future years. While the Company believes
these assumptions to be reasonable at this time, no assurance can be given
that these assumptions will be accurate or that developments will not change
the prospects for dividend payments. The Company expects that future growth
in earnings and dividends will be derived primarily from the growth in the
business necessary to serve an expanding economy, success in achieving a
larger share of the energy market in a competitive environment, and
management's continued commitment to improving the efficiency and
effectiveness of the Company's operations.
USE OF PROCEEDS
The net proceeds of the shares of Common Stock offered hereby (estimated
to be $12.6 million) will be applied to reduce outstanding short-term debt
incurred primarily to finance construction expenditures, and for other
working capital needs. The Company's short-term debt totalled $37 million at
February 28, 1994 and bore interest at that date at a weighted average annual
rate of 3.6%.
CONSTRUCTION PROGRAM AND FUTURE FINANCING
The Company's construction program consists primarily of extensions and
improvements to its transmission and distribution facilities, capital
improvements to existing generating stations and licensing and relicensing
costs of hydroelectric projects. Construction expenditures amounted to $33.6
million in 1993. Construction expenditures, including allowance for funds
used during construction, are expected to aggregate about $66 million for the
1994-1996 period. It is expected that the Company's net cash flow provided
from operations (after deducting preferred and common stock dividends paid)
will be approximately 60% of construction expenditures over this three-year
period. The balance of funds required are expected to be obtained from bank
borrowings (on an interim basis) and issuances of first mortgage bonds,
preferred stock and additional shares of Common Stock.
Long-term debt and preferred stock sinking fund requirements for 1994
through 1996 total approximately $4.4 million and $3 million, respectively.
An additional $9.3 million is anticipated to be retired as a result of
optional redemption and sinking fund payments during that period.
9
<PAGE>
COMMON STOCK DIVIDENDS AND PRICE RANGE
Future dividends will be dependent upon the Company's earnings,
financial condition, capital requirements and other factors as the Board of
Directors of the Company may deem relevant. See "Recent Developments and
Certain Investment Considerations."
The following table sets forth the high and low sales prices of the
Common Stock as reported by the NYSE
and dividends per share on the Common Stock for the periods indicated.
<TABLE>
<CAPTION>
Dividends
Declared
Fiscal Period High Low Per Share
_____________ ________ _________ _________
<S> <C> <C> <C>
1992
First Quarter $18 1/8 $17 1/4 $ .33
Second Quarter 18 1/4 17 1/4 .33
Third Quarter 19 7/8 16 3/4 .33
Fourth Quarter 20 1/4 18 1/4 .33
1993
First Quarter $24 1/8 $17 7/8 $ .33
Second Quarter 23 5/8 19 5/8 .33
Third Quarter 23 1/8 20 7/8 .33
Fourth Quarter 21 3/8 18 1/8 .33
1994
First Quarter $19 $16 3/4 *
(through
March 16, 1994)
</TABLE>
- -----------------------------
* Management currently intends to recommend to the Board of Directors that
the Company declare a regular quarterly dividend on March 21, 1994 of
$.33 per share on the Company's Common Stock, payable on April 20, 1994
to shareholders of record on March 31, 1994. Holders, as of the record
date, of the Common Stock offered hereby will be entitled to receive
this dividend, if declared.
On March 16, 1994, the last reported sale price of the Common Stock as
reported on the NYSE was $ 17per share. The number of record holders of
the Company's Common Stock was 7,504 as of February 25, 1994.
The Company maintains a Dividend Reinvestment and Common Stock Purchase
Plan ("Plan"), the terms of which are set forth in a separate prospectus.
The Plan provides holders of record of the Company's Common Stock and holders
of the Company's cumulative preferred stock, $100 par value, with a
convenient method of purchasing Common Stock by having their cash dividends
automatically reinvested and/or by making additional cash payments. No
brokerage commissions or service charges are charged to participants for
purchases made under the Plan. The price per share of Common Stock purchased
pursuant to the Plan will be 100% of the average of the high and low sale
prices for the Company's Common Stock as reported by the NYSE on the date
that dividends are paid.
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DESCRIPTION OF COMMON STOCK
The following description is a summary of certain provisions with
respect to the Company's Common Stock contained in the Company's Certificate
of Organization and By-Laws. Such summary is qualified in its entirety to
the more detailed provisions of such documents, which have been incorporated
by reference as exhibits to Incorporated Documents described under
"Incorporation of Certain Documents By Reference."
General
The Company's authorized capital stock consists of 7,500,000 shares of
Common Stock, $5 par value, and 400,000 shares of Preferred Stock, $100 par
value. At December 31, 1993, 6,225,394 shares of Common Stock were
outstanding and 197,340 shares of Preferred Stock (in 4 separate series) were
outstanding.
The Common Stock has no conversion rights nor is it subject to any
redemption or sinking fund provisions. The issued and outstanding Common
Stock is, and the additional shares of Common Stock issued hereby will be,
after issuance, fully paid and nonassessable. No Common Stock may be
purchased by the Company when there is an arrearage of dividends on Preferred
Stock.
Dividend Rights
Holders of Common Stock are entitled to participate in dividends as and
when declared by the Company's Board of Directors, provided that all
dividends on the Company's Preferred Stock (which are fully cumulative) have
been paid or provided for to the date of payment of a proposed dividend on
Common Stock. Cash dividends have been declared and paid on Common Stock on
a quarterly basis.
Voting Rights
Holders of Common Stock currently have general voting rights of one-
twelfth of one vote per share. Holders of Preferred Stock have general
voting rights of one vote per share, except for holders of the Company's
8.76% Preferred Stock, which does not carry voting rights except as discussed
below. On issues determined by general voting rights, it would be possible
for votes represented by Preferred Stock to combine with votes represented by
less than a majority of Common Stock to affect the rights of holders of all
Common Stock.
Neither the Common Stock nor the Preferred Stock has cumulative voting
rights.
Holders of Preferred Stock, including holders of the 8.76% Preferred
Stock, voting as a single class, also have the power to elect at any annual
meeting the smallest number of directors necessary to constitute a majority
of the full Board of Directors in the event of a default in the payment of an
amount equal to or exceeding four quarterly dividend payments or in the event
of a failure to make any required sinking fund payment with respect to the
Preferred Stock, in such case which is in existence at the time of such
annual meeting. This special voting right expires when any such default or
failure is cured.
The Company's Certificate of Organization contains provisions stating
that: (i) the Board of Directors shall be divided into three classes, as
nearly equal in number as possible, each of which will serve for three years,
with one class being elected each year, (ii) directors may be removed without
cause only with the approval of the holders of at least 80% of the votes
entitled to be cast by the holders of all the then outstanding shares of
Voting Stock of the Company, (iii) any vacancy on the Board of Directors
shall be filled by a majority vote of the Continuing Directors, though less
than a quorum, and (iv) unless recommended by a majority of Continuing
Directors, the foregoing provisions may be amended only by approval of the
holders of at least 80% of the votes entitled to be cast by the holders of
all of the then outstanding shares of voting stock, voting together as a
single class. These provisions also apply in the event of the exercise by
holders of Preferred Stock of the right to elect a majority of the Board of
Directors upon a default or failure to pay dividends or make sinking fund
payments, as described above. If such an election occurs, the Continuing
Directors shall have the right to designate which of the existing directors
will be temporarily displaced by the new directors so elected.
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Liquidation Rights
Subject to the rights of senior securities, holders of Common Stock are
entitled to a distribution of assets upon liquidation, according to their
respective shares.
Preemptive Rights
The Company's By-Laws provide that prior to the issuance of any stock
having voting rights, the Company's Board of Directors shall determine
whether such stock will be subject to preemptive rights of the holders of
outstanding stock. No holders of the Company's outstanding Common Stock or
Preferred Stock will be given any such preemptive rights with respect to
shares of Common Stock offered hereby. Except to the extent that the Board
of Directors shall determine as above provided, no preemptive rights shall
apply to any of the stock of the Company.
Provisions Concerning Business Combinations
The Company's Certificate of Organization requires that certain
"Business Combinations," including mergers, consolidations, share exchanges
and sales of a substantial amount of assets, between the Company and a
"Related Person" be approved by the affirmative vote of the holders of at
least 80% of the outstanding Voting Stock unless the transaction is approved
by a majority of the "Continuing Directors" of the Company. A "Related
Person" is defined as any person who is the beneficial owner of (i) 10% or
more of the then outstanding shares of any class of "Voting Stock" (as
hereinafter defined) of the Company or (ii) Voting Stock representing 10% or
more of the votes entitled to be cast by the holders of all the then
outstanding shares of Voting Stock of the Company. "Continuing Directors"
are defined as members of the Board as constituted prior to the time such
Related Person became a Related Person with such additional persons as such
members shall appoint or nominate for election by the stockholders. In
addition to the voting requirements set forth above, the Certificate of
Organization requires that as a result of such business combination,
stockholders of every class or series of outstanding securities of the
Company receive at least a certain minimum price for their shares and that
certain other conditions are satisfied. The Company's "Voting Stock"
consists of all outstanding shares of Capital Stock of the Company having
general voting rights including preferred stock. These provisions along with
the other provisions discussed above under "Voting Rights," may deter
attempts to change control of the Company (by proxy contest, tender offer or
otherwise) and may make more difficult a change in control of the Company
that is opposed by the Company's Board of Directors.
Registrar and Transfer Agent
Chemical Bank and Mellon Securities Trust Company are the Co-Registrars
and Chemical Bank is the Transfer Agent for the Common Stock of the Company.
UNDERWRITING
Subject to the terms and conditions set fouth in the Underwriting
Agreement, the Company has agreed to sell to Smith Barney Shearson Inc. (the
"Underwriter"), and the Underwriter has agreed to purchase from the Company
an aggregate of 782,500 shares of Common Stock. The nature of the
Underwriter's obligations is such that it is committed to take and pay for
all the shares of Common Stock offered hereby if any are taken.
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The Company has been advised by the Underwriter that it proposes to
offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers
at a price which represents a concession not in excess of $.45 per share
below the price to the public. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $.10 per share to certain other
dealers.
The Company has granted an option to the Underwriter, exercisable
within 30 days after the date of the Underwriting Agreement, to purchase up
to a maximum of 117,375 additional shares of Common Stock at the same price
per share that the Company will receive for shares being purchased by the
Underwriter as described above. The Underwriter may purchase such shares
only to cover over-allotments made in connection with the sale of the 782,500
shares.
The Company has agreed to indemnify the Underwriter against certain
liabilities under the Securities Act of 1933. The Company has also agreed to
pay up to $25,000 of the legal expenses of the Underwriter.
The Company has agreed (with certain exceptions) not to sell any Common
Stock for a period of 90 days after the date of this Prospectus without the
prior written consent of the Underwriter.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby
will be passed upon for the Company by Frederick S. Samp, Esq., General
Counsel of the Company. Certain legal matters will be passed upon for the
Underwriter by Winthrop, Stimson, Putnam & Roberts, New York, New York.
From time to time, Winthrop, Stimson, Putnam & Roberts provides legal
services to the Company.
EXPERTS
The consolidated balance sheets and statements of capitalization as of
December 31, 1993 and 1992 and the consolidated statements of income,
retained earnings and cash flows for each of the three years in the period
ended December 31, 1993, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the report of Coopers & Lybrand,
independent accountants, given on the authority of that Firm as experts in
accounting and auditing.
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No dealer, salesperson or
other person has been
authorized to give any
information or to make any
representations not contained
in this Prospectus and, if
given or made, such
information or representations
must not be relied upon as
having been authorized by the
Company or any of the
Underwriters or by any other
person. This Prospectus does
not constitute an offer to
sell or a solicitation of an
offer to buy a security other
than the shares of Common
Stock offered hereby, nor does
it constitute an offer to sell
or a solicitation of an offer
to buy any of the securities
offered hereby to any person
in any jurisdiction in which
it is unlawful to make such an
offer or solicitation to such
person. Neither the delivery
of this Prospectus nor any
sale made hereunder shall
under any circumstances create
any implication that the
information contained herein
is correct as of any date
subsequent to the date hereof.
__________________
TABLE OF CONTENTS
Page
----
Available Information 2
Incorporation of Certain
Documents by Reference 2
Summary Information 3
Bangor Hydro-Electric Company
Service Area 5
The Company 6
Recent Developments and Certain
Investment Considerations 6
Use of Proceeds 9
Construction Program and Future
Financing 9
Common Stock Dividends and
Price Range 10
Description of Common Stock 11
Underwriting 12
Legal Matters 13
Experts 13
782,500 Shares
Bangor
Hydro-Electric
Company
Common Stock
__________________
PROSPECTUS
March 16, 1994
__________________
Smith Barney Shearson Inc.
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