FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended DECEMBER 31, 1994 Commission File No. 0-505
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BANGOR HYDRO-ELECTRIC COMPANY
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(Exact Name of Registrant as specified in its charter)
MAINE 01-0024370
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(State of Incorporation) (I.R.S. Employer ID No.)
33 STATE STREET, BANGOR, MAINE 04401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 207-945-5621
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
COMMON STOCK, $5 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5 Par value
(7,229,344 SHARES OUTSTANDING AT MARCH 20, 1995)
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7% PREFERRED STOCK, $100 PAR VALUE
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4 1/4% PREFERRED STOCK, $100 PAR VALUE
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4% PREFERRED STOCK SERIES A, $100 PAR VALUE
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value on March 20, 1995 of the voting stock held by
non-affiliates of the registrant was $79.7 million.
The information required by Part III Items 10, 11, 12 and 13 is
incorporated by reference from the registrant's proxy statement which will be
filed with the Securities and Exchange Commission within 120 days of the
close of the registrant's fiscal year ended December 31, 1994.
PART I
ITEMS 1 THROUGH 2 BUSINESS; PROPERTIES
GENERAL
The Company is a public utility engaged in the generation, purchase,
transmission, distribution and sale of electric energy, with a service area
of approximately 4,900 square miles having a population of approximately
195,000 people. The Company serves approximately 97,000 customers in
portions of the counties of Penobscot, Hancock, Washington, Waldo,
Piscataquis and Aroostook. The Company also sells energy to other utilities
for resale. The Company has two material wholly-owned subsidiaries. Penobscot
Hydro Co., Inc. ("PHC") was incorporated in 1986 to own the Company's 50%
interest in a joint venture, Bangor-Pacific Hydro Associates
("Bangor-Pacific"), which redeveloped the West Enfield hydroelectric project
(the "West Enfield Project"). Bangor Var Co., Inc. ("Bangor Var Co.") was
incorporated in 1990 to hold the Company's 50% interest in a partnership
which owns certain facilities used in the Hydro-Quebec Phase II transmission
project ("HQ-II") in which the Company is a participant. See "Joint
Ventures."
In 1994, 31.2% of the Company's kilowatt hour ("KWH") sales were to
residential customers, 30.5% were to commercial customers, 37.1% were to
industrial customers and 1.2% were to other customers. For additional
information concerning the Company's sales, see Item 6, "Selected Financial
Data", below.
The Company's KWH sales are generally higher during the winter months,
with the winter peak electric demand usually 15% higher than the summer peak.
The maximum peak electric demand that the Company's system experienced during
the 1994-1995 winter, as of March 8, 1995, was approximately 267 megawatts
("MW") on January 11, 1995. At that time the Company had approximately 375
MW of generating capacity and firm purchased power, comprised of 106 MW from
Company-owned generating units, 61 MW from Maine Yankee Atomic Power
Company's nuclear generating facility ("Maine Yankee"), 18 MW from Hydro
Quebec, 85 MW from non-utility power producers, and 105 MW from short term
economy purchases.
The Company holds a 7% ownership interest in Maine Yankee which entitles
the Company to purchase an approximately equal
amount of the output of Maine Yankee, an entitlement of approximately 61 MW.
Maine Yankee, 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. See
"Maine Yankee."
The Company, along with the major investor-owned utilities of New England,
has been a party to the New England Power Pool Agreement ("NEPOOL") since
1971. NEPOOL provides for joint planning and operation of generating and
transmission facilities in New England, and governs generating capacity
reserve obligations and provisions regarding the use of major transmission
lines. The Company, as a member of NEPOOL, has a capability responsibility
which involves carrying an allocated share of a New England capacity
requirement which is determined for each period based on certain regional
reliability criteria.
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 ("FERC") as to certain matters, including
licensing of its hydroelectric stations, 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 ("NRC").
See "Rates and Regulation."
The principal executive offices of the Company are located at 33 State
Street, Bangor, Maine 04401; telephone (207) 945-5621.
CERTAIN ISSUES FACING THE COMPANY
CHANGES IN THE ELECTRIC UTILITY INDUSTRY AND IN REGULATION - See Item 7,
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - Recent Developments for the Company and in the Electric Utility
Industry and Potential Effects on Future Sales, Earnings and Dividend Policy"
for a discussion of the effect of competition and other events on future
sales, earnings and dividend policy. That discussion includes a description
of a February 14, 1995 Order by the MPUC approving substantial changes in the
way the Company's prices are established. Also included in Item 7 is a
report on the terms of a buyback agreement reached between the Company and
the owners of two high cost non-utility generation plants that provide power
to the Company pursuant to contracts entered into in the mid-1980's.
Finally, see Item 7 for an analysis the implications of those developments on
the Company's future dividend policy.
MAINE YANKEE - Energy from Maine Yankee provided approximately 25% of the
Company's total generation in 1994. The Company's total payments in 1994
under its power purchase contract with Maine Yankee were approximately $12.0
million, and its investment in the unit at December 31, 1994 was $4.7
million. Maine Yankee's operating license expires in 2008. The Company is
required to fund its pro rata share (approximately 7%) of Maine Yankee's
decommissioning costs, costs of storage and disposal of spent fuel and
low-level radioactive wastes. Provision for these items, based on current
estimates of the eventual costs, is made as Maine Yankee's rates are
established, and are included in the Company's rates to customers. To the
extent Maine Yankee cannot obtain its own financing, the Company would be
required to pay its pro rata share of additional capital expenditures to
maintain the unit in commercial operation. The magnitude of these various
costs is dependent in part upon the future resolution of several political
and technological uncertainties, and may be substantial. Maine voters have
rejected three referendum proposals to force the premature shutdown of Maine
Yankee, the most recent being in 1987; and the State of Maine has enacted
several restrictive statutes purporting to govern aspects of Maine Yankee's
operations. The Company would expect that its share of the costs of the
operation and decommissioning of Maine Yankee will continue to be reflected
in its rates, but cannot predict whether future voter and other necessary
approvals will be obtained in a timely fashion or whether all technological
uncertainties can be adequately resolved. See "Maine Yankee" for a
discussion of detection of steam generator tube cracking and the possible
impact on the Company's earnings.
CONSTRUCTION PROGRAM
The Company's construction program consists of extensions and
improvements of its transmission and distribution facilities, capital
improvements to existing generating stations, the cost of developing new
information systems, costs associated with the licensing of new and the
relicensing of existing hydroelectric projects and other general projects
within the Company's service area. The Company projects that capital
expenditures will aggregate about $55 million in the period 1995 through
1997.
RATES AND REGULATION
RATE MATTERS - See Item 7, "Management's Discussion and Analysis of Results
of Operations and Financial Condition - Recent Developments for the Company
and in the Electric Utility Industry and Potential Effects on Future Sales,
Earnings and Dividend Policy - Changes in the Industry and in Regulation",
incorporated herein by reference, for a discussion of recent changes in the
way the Company's prices will be established in the future and for a
description of the ongoing involvement by the MPUC in rate matters. Those
changes include the elimination of the fuel cost adjustment through which the
Company has been allowed historically to adjust rates retroactively to
reflect changes in the cost of fuel for generation and certain purchased
power costs.
OTHER REGULATION - The MPUC regulates numerous other matters affecting the
Company, including financing, construction of generation and transmission
facilities, credit, collection, conservation and demand side management
programs, low income rate subsidies and purchases from non-utility power
producers.
Maine Yankee is subject to extensive regulation by the NRC. Under its
continuing jurisdiction, the NRC may, after appropriate proceedings, require
modification of nuclear power generating units for which operating licenses
have already been issued, or impose new conditions on such permits or
licenses, and may require that the operation of nuclear power generating
units be temporarily or permanently reduced.
The FERC regulates rates for sales of electricity to other utilities.
In addition, all the Company's hydroelectric projects are licensed by the
FERC. Under the Federal Power Act, upon not less than two years' notice the
United States is empowered to take over and thereafter to maintain and
operate a licensed hydroelectric project at or following the time a license
expires. If the United States elects this option, it must pay the licensee
its net investment in the project, not to exceed fair market value. If the
United States does not elect this option, the FERC may issue a new license to
the existing licensee upon such terms and conditions as are authorized or
required under the then-existing laws and regulations. It may also,
alternatively, issue a new license to a new licensee that has filed a
competing license application. In choosing between competing license
applications, the FERC must issue a license to the applicant whose proposal
is best adapted to serve the public interest.
The following table sets forth certain information with regard to such
licenses.
LICENSED ISSUE DATE OF CURRENT EXPIRATION
PROJECT CAPACITY ORIGINAL LICENSE DATE
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Ellsworth 8,900 KW April 12, 1977 December 31, 2018
Howland 1,875 KW September 12, 1980 September 30, 2000
Medway 3,400 KW March 29, 1979 March 31, 1999
Milford 6,400 KW December 31, 1969 Original license
expired
December 31, 1990
currently operating
on year-to-year
license.
Orono 2,332 KW November 10, 1977 Original license
expired
September 25, 1985
currently operating
on year-to-year
license.
Stillwater 1,950 KW August 10, 1978 December 31, 1993
Veazie 8,400 KW February 18, 1965 Original license
expired
September 25, 1985
currently operating
on year-to-year
license.
West Enfield* 13,000 KW February 3, 1970 June 26, 2024
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* Through PHC, the Company has a 50% ownership interest in Bangor-Pacific,
which owns and operates the West Enfield Project.
The Company is actively pursuing the relicensing of the projects listed
above which are operating on year-to-year licenses. Some of those
relicensing proceedings have been delayed pending completion by the FERC of
an Environmental Impact Statement of sections of the Penobscot River being
prepared in connection with the Company's licensing of the Basin Mills
project. See Note 7 to the Company's Consolidated Financial Statements,
incorporated herein by reference. The Company has not received notice that
the United States will exercise its rights to take over any of the Company's
hydroelectric projects, nor have any competing applications been filed.
Under a Federal statute enacted by Congress in 1986, participation in
relicensing proceedings by governmental agencies and other parties was
allowed to increase significantly. That increased participation may result
in more burdensome and costly conditions imposed upon licensees of
hydroelectric projects. The Company is unable to predict what terms and
conditions, if any, might be included in new licenses or license renewals
granted pursuant to the Company's licensing applications, or what impact any
such terms and conditions might have on the Company's ability to operate and
maintain the projects economically.
SEABROOK
GENERAL - The Company was a participant in Seabrook from 1978 to 1986, with
an ownership interest of 2.17%, or 25 MW, in each of the two 1150 MW units.
Unit 2 was effectively canceled in 1984. In late 1984, following a lengthy
MPUC investigation, the conclusion of which cast doubt on the wisdom of the
Maine utilities' continued participation in Seabrook, the Company began
efforts to sell its interest in the project. An agreement for the sale of
Seabrook to EUA Power Corp. was reached in mid-1985 and was consummated in
November 1986.
In 1985, the MPUC approved an agreement among the Company, the MPUC Staff
and the Public Advocate addressing the recovery through rates of the
Company's investment in Seabrook ("Seabrook Stipulation"). Although
implementation of the Seabrook Stipulation significantly improved the
Company's financial condition, substantial write-offs were required.
In August 1989, a comprehensive settlement agreement entered into by
current and former joint owners of Seabrook became effective. Under the
agreement, the signatories, representing virtually all of the ownership
interests in Seabrook, relinquished claims against the lead owner, Public
Service Company of New Hampshire, arising out of Seabrook. As a part of the
settlement, former joint owners, including the Company, were relieved of
certain contingent liabilities.
JOINT VENTURES
WEST ENFIELD - In 1986, the Company formed PHC, a wholly-owned subsidiary,
which owns the Company's 50% ownership interest in Bangor-Pacific, a joint
venture with a development subsidiary of Pacific Lighting Corporation.
Bangor-Pacific undertook the redevelopment of an old 3.8 MW hydroelectric
plant which the Company owned on the Penobscot River in Enfield and Howland,
Maine, into a 13 MW facility, the West Enfield Project, and now operates the
facility. Construction costs were shared equally by the Company and the
other joint venturer until Bangor-Pacific completed its financing and took
over ownership of the project, which occurred in January 1987. Commercial
operation of the redeveloped West Enfield Project began in April 1988.
Bangor-Pacific financed the $45 million cost of the redevelopment
through the private placement of $40 million of 9.45% and 10.26% fixed rate
amortizing term notes due 1996 and 2008, respectively, and $5 million of
floating rate amortizing term notes due 1996 (collectively, the "Notes").
The Notes are secured by a mortgage on the West Enfield Project and a
security interest in a 50-year power contract between the Company and
Bangor-Pacific. The holders of the Notes are without recourse to the joint
venture partners or their parent companies except that each partner has
agreed to make payments in an amount equal to 50% of any amounts due and
unpaid on the Notes but not exceeding distributions received from
Bangor-Pacific in the preceding twelve-month period.
Under the power contract between the Company and Bangor-Pacific, if the
West Enfield Project operates as anticipated, payments by the Company to
Bangor-Pacific are estimated at $7.5 million annually (without consideration
of any distributions by the joint venture to the partners). In 1994, the
Company paid approximately $6.9 million to Bangor-Pacific under this power
contract. The Company would be required to make payments under the contract,
regardless of whether any power were delivered, of approximately $4 million
per year. However, the Company has the right to terminate the contract upon
thirty-days' written notice if the failure to deliver power continues for a
period of 112 consecutive months.
NEPOOL/HYDRO-QUEBEC - The NEPOOL member utilities and Hydro-Quebec, a utility
operating within the province of Quebec, Canada ("Hydro-Quebec"), have
constructed facilities required to interconnect the electric systems in New
England with the electric system of Hydro-Quebec. The initial stage of the
interconnection consists of a completed and operational 450 KV transmission
line from the Hydro-Quebec system to a terminal having an approximate rating
of 690 MW at the Comerford Generating Station ("Comerford") on the
Connecticut River in New Hampshire. The subsequent stage, HQ-II, completed
in 1990, increased the interconnection transfer capability to approximately
2000 MW by means of a transmission line from Comerford to a terminal facility
at the Sandy Pond Substation in Massachusetts.
In 1990, the Company formed Bangor Var Co., a wholly owned corporate
subsidiary, the sole function of which is to own a 50% interest in Chester
SVC Partnership ("Chester"), a general partnership which owns the static var
compensator ("SVC"), electrical equipment which supports the HQ-II
transmission line. A wholly-owned subsidiary of Central Maine Power Company
("CMP") owns the other 50% interest in Chester. Chester has financed the
acquisition and construction of the SVC through the issuance of $33 million
in principal amount of 10.48% senior notes due 2020, and up to $3.2 million
principal amount of additional notes due 2020 (collectively, the "SVC
Notes"). The holders of the SVC Notes are without recourse to the partners
or their parent companies and may only look to Chester and to the collateral
for payment. Bangor Var Co. accounts for its investment in Chester under the
equity method. Bangor Var Co.'s financial results are included in the
Company's consolidated financial statements.
The New England utilities which participate in HQ-II have agreed under a
FERC-approved contract to bear the cost of Chester, on a cost-of-service
basis, which includes a return on and of all capital costs.
EMPLOYEES
At December 31, 1994, the Company had 475 full time employees
approximately 42% of whom were represented by a local union affiliated with
the International Brotherhood of Electrical Workers (AFL-CIO). The present
contract expires December 31, 1995. The Company believes that its relations
with its employees are satisfactory.
POWER SUPPLY SOURCES
GENERAL - In order to meet its load growth and reserve obligations under
NEPOOL, the Company, in addition to utilizing its own generating capacity,
acquires capacity and energy through contracts with other utilities and
independent generation facilities and through joint ownership of generating
facilities. The Company estimates that it has, or can acquire, sufficient
generating capacity, through a combination of wholly-owned and jointly-owned
generating facilities and purchased power contracts, to meet its anticipated
load growth through the 1990's.
The Company's sources of generation for electric sales to its customers
(net of off-system sales to other utilities) for 1994, 1993 and 1992 by type
of fuel is shown below.
Source 1994 1993 1992
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Hydroelectric (Company*)....... 15% 14% 18%
Nuclear Generation (Maine Yankee) 25% 20% 23%
Oil (Company)................... 2% 3% 4%
Biomass/Refuse (purchased)...... 8% 15% 14%
NEPOOL/other purchases.......... 50% 48% 41%
---- ---- ----
Total....................... 100% 100% 100%
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* Includes purchases from the West Enfield Project, in which the Company has
a 50% ownership interest.
COMPANY-OWNED GENERATION
The Company, as a tenant in common with other utilities, owns 8.33%, or
approximately 50 MW, of William F. Wyman Unit No. 4 ("Wyman 4"), a 600 MW
oil-fired generating unit in Yarmouth, Maine, constructed and operated by CMP
as the lead owner. The Company is entitled to 8.33% of the energy produced
by Wyman 4 and pays the same percentage of the unit's operating expenses.
The Company owns two oil-fired generating units located at its Graham
Station in Veazie, Maine ("Graham"), currently in deactivated reserve status,
having a total capacity of 47 MW, as well as eleven internal combustion
generation units located at three stations having a total capacity of 21 MW.
The Company also owns seven hydroelectric stations having a total capacity of
about 30 MW (excluding PHC's ownership interest in the West Enfield Project).
All of the Company's hydroelectric stations are licensed under the Federal
Power Act. See "Rates and Regulation."
In addition, the Company owns more than 600 miles of transmission lines
and 3,400 miles of distribution lines to serve its customers. Other
properties consist of office, garage and warehouse facilities at various
locations in its service area.
POWER PURCHASE CONTRACTS
The following chart sets forth information concerning the Company's
major power purchase contracts exclusive of Maine Yankee.
Contracted Quantity of
Seller Term of Contract Capacity or Energy
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Bangor-Pacific* August 21, 1986 through Total output of energy
(Hydroelectric) May 31, 2024, at which from facility with name
time Company can either plate rating of not more
purchase the facility than 16 MW.
at its fair market value
or extend the contract
for an additional 15
years (if the West
Enfield Project's FERC
license is also
extended).
Penobscot Energy January 21, 1984 through Total output of firm
Recovery Company February 28, 2018. energy; minimum annual
("PERC") (Refuse) delivery of 105,000,000
KWH up to a maximum of
166,440,000 KWH per
calendar year.
Babcock- ** August 13, 1984 through Estimated total output of
Ultrapower West October 31, 2017. 24.5 MW of energy at
Enfield (Biomass) contract rate; excess
output, if any, is
purchased at short-term
avoided cost rate
determined by the MPUC.
Babcock- ** August 13, 1984 through Estimated total output of
Ultrapower October 31, 2017. 24.5 MW of energy at
Jonesboro contract rate; excess
(Biomass) output, if any, is
purchased at short-term
avoided cost rate
determined by the MPUC.
Great Northern September 21, 1989 Approximately 20 MW.
Paper Co. through October 31,
(Cogeneration) 1996.
New England November 1, 1994 through 30 MW and associated energy
Power Company October 31, 1999. Final from two designated nuclear
2 years contingent on units
approval by MPUC
United Illumi- November 1, 1994 through 30 MW and associated energy
nating Company October 31, 1997 from a designated oil unit
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* Through PHC, the Company has a 50% ownership interest in Bangor-Pacific,
which owns and operates the West Enfield Project.
** The Company has reached agreement with Babcock-Ultrapower West Enfield and
Babcock-Ultrapower Jonesboro to buy back the power contracts. If the
transactions are fully consummated, the Company's obligations to purchase
power under them would terminate. See Item 7, "Management's Discussion and
Analysis of Results of Operations and Financial Condition - Recent
Developments for the Company and in the Electric Utility Industry and
Potential Effects on Future Sales, Earnings and Dividend Policy - Buyback of
Purchased Power Contracts" and Note 15 to the Consolidated Financial
Statements.
For further details with respect to certain of these contracts, see Note
7 of the Notes to Consolidated Financial Statements.
The Company purchases energy from, and sells energy to, New Brunswick
Electric Power Commission utilizing the transmission facilities of Maine
Electric Power Company, Inc. ("MEPCO"), in which the Company owns a 14.2%
equity interest. MEPCO owns and operates a 345 KV transmission line running
from Wiscasset, Maine to the Maine/New Brunswick border. The Company
interconnects with this line in Orrington, Maine. Several New England
utilities, including the Company and MEPCO's other stockholders (two other
Maine utilities), are parties to a transmission support agreement pursuant to
which such utilities have agreed to pay MEPCO's costs, based on their
relative system peaks, if MEPCO's revenues from transmission services are not
sufficient to meet its expenses. The Company anticipates that any liability
resulting therefrom will be immaterial.
The Company also purchases energy on a short-term basis from time to time
when it is economical to do so to displace higher cost energy from other
sources.
MAINE YANKEE
GENERAL - The Company holds a 7% equity ownership interest in Maine Yankee
which entitles the Company to purchase an approximately equal amount of the
output of Maine Yankee, an entitlement of approximately 61 MW. Maine Yankee,
which commenced commercial operation on January 1, 1973, is the only nuclear
facility in which the Company has an ownership interest. 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,
each sponsor has agreed to provide a like percentage of Maine Yankee's
capital requirements not obtained from other sources, subject to obtaining
any necessary regulatory approvals. In 1994, Maine Yankee produced 6.6
billion KWH of electric power at an average cost of 2.6 cents per KWH.
STEAM GENERATOR TUBE CRACKING - The Maine Yankee unit, like other pressurized
water reactors, has been experiencing degradation of its steam generator
tubes, principally in the form of circumferential cracking, which, until
early 1995, was believed to be limited to a relatively small number of steam
generator tubes. In the past the detection of defects has resulted in the
plugging of those tubes to prevent their subsequent use. During the
refueling and maintenance shutdown that commenced in early February of 1995,
Maine Yankee has detected increased degradation of the plant's steam
generator tubes, in excess of the number expected, and is currently
evaluating several courses of action to address the matter. This detection
of a significantly larger number of degraded tubes is likely to adversely
affect the operation of the plant and may result in substantial cost to the
Company. The Company cannot now predict what course of action will be chosen
or to what extent the operation of the plant will be affected. The Company
believes, however, that Maine Yankee will not resume generation as originally
scheduled in April, 1995 and that an extended outage lasting at least several
months is likely.
In connection with the approval by the MPUC of the Company's alternative
marketing plan, effective January 1, 1995, the separate fuel cost adjustment
rates were eliminated. The fuel cost adjustment was a rate mechanism under
which the Company was permitted to adjust retroactively for changes in the
cost of fuel for generation and in certain purchased power costs. Under the
former fuel cost adjustment mechanism, the cost of power purchased from
another source to replace that which had been expected from Maine Yankee
would have had no impact on earnings. See Item 7, "Management's Discussion
and Analysis of Results of Operations and Financial Condition - Recent
Developments for the Company and in the Electric Utility Industry and
Potential Effects on Future Sales, Earnings and Dividend Policy - Changes in
the Industry and in Regulation".
The Company estimates that, under current conditions in the bulk power
market, its power costs will be increased by $700,000 to $900,000 per month
during the Maine Yankee outage, which will increase pressure on the Company's
earnings. In addition, the Company would be responsible for its pro rata
share of any costs associated with repairing or mitigating the impact of the
degraded tubes. The Company believes that it is too early to provide
reliable estimates of such costs but that they could be substantial.
NUCLEAR FUEL STORAGE. Federal legislation enacted in 1987 directed the U.S.
Department of Energy ("DOE") to proceed with the studies necessary to develop
and operate a permanent high-level waste (spent fuel) disposal site at Yucca
Mountain, Nevada. The legislation also provides for the possible development
of a Monitored Retrievable Storage ("MRS") facility and abandons plans to
identify and select a second permanent disposal site. An MRS facility would
provide temporary storage for high-level waste prior to eventual permanent
disposal. In late 1989 the DOE announced that the permanent disposal site
was not expected to open before 2010, although originally scheduled to open
in 1998. Additional delays due to political and technical problems are
probable.
On June 20, 1994, fourteen nuclear utilities filed suit against the DOE.
The utilities are seeking a declaration from the United States Court of
Appeals for the District of Columbia that the Nuclear Waste Policy Act
requires the DOE to take responsibility for spent nuclear fuel in 1998.
Maine Yankee is not a participant in the lawsuit.
Under the terms of a license amendment approved by the NRC in 1984, the
present storage capacity of the spent fuel pool at the Plant will be reached
in 1999 and after 1996 the available capacity of the pool will not
accommodate a full-core removal. After consideration of available
technologies, Maine Yankee elected to provide additional capacity by
replacing the fuel racks in the spent fuel pool at the Plant and, on January
25, 1993, filed with the NRC seeking authorization to implement the plan. On
March 15, 1994, the NRC granted the authorization and installation of the new
racks is scheduled for 1995. Maine Yankee believes that the replacement of
the fuel racks will provide adequate storage capacity through the Plant's
licensed operating life, but cannot predict with certainty whether or to what
extent the new level of storage capacity at the Plant will affect the
operation of the Plant or the future cost of disposal.
DECOMMISSIONING. The NRC currently recognizes three decommissioning methods
- prompt removal and dismantlement, entombment with delayed dismantlement,
and mothballing with delayed dismantlement. Maine Yankee currently proposes
to use, consistent with its understanding of NRC and FERC staff policy, the
prompt removal and dismantlement method. Maine Yankee's most recent study,
conducted in 1993 by an external engineering consultant, estimated
decommissioning costs to be $273.1 million, plus a contingency of $43.5
million for a total of $316.6 million (in mid-1993 dollars).
On January 18, 1994, Maine Yankee, after reaching agreement with FERC
Staff and other intervenors on major issues, filed a rate case with the FERC.
In the filing, Maine Yankee sought to increase the annual amount collected to
fund decommissioning costs for the plant from $9.1 million to the agreed
amount of $14.9 million commencing April 1, 1994. This amount reflects the
first step increase in the estimated cost to fully decommission the plant
from the $167.0 million (in mid-1987 dollars) allowed by the FERC in Maine
Yankee's 1988 rate case to $316.6 million, in mid-1993 dollars, based upon
Maine Yankee's 1993 decommissioning cost study. Maine Yankee plans to
continue to evaluate the cost of decommissioning periodically and seek
additional step increases as necessary. On March 31, 1994, the FERC issued
an order accepting the proposed rates and prefiling agreement effective April
1, 1994.
INSURANCE - In accordance with the Price-Anderson Act, the limit of liability
for a nuclear-related accident is approximately $8.9 billion, effective
November 18, 1994. The primary layer of insurance for the liability is $200
million of coverage provided by the commercial insurance market. The
secondary coverage, provided through an industry-wide mutual insurance
program, is approximately $8.7 billion, based on 110 licensed reactors. The
secondary layer is based on a retrospective premium assessment of $79.275
million per nuclear accident per licensed reactor, payable at a rate not
exceeding $10 million per year per accident. In addition, the retrospective
premium is subject to inflation-based indexing at five-year intervals and, if
the sum of all public liability claims and legal costs arising from any
nuclear accident exceeds the maximum amount of financial protection, each
licensee can be assessed an additional 5% ($3.775 million) of the maximum
retrospective assessment.
In addition to the insurance required by the Price-Anderson Act, Maine
Yankee carries all-risk nuclear property damage insurance in the amount of
$500 million plus additional excess nuclear property insurance in the amount
of $2.25 billion effective January 1, 1994. This excess insurance is provided
by a nuclear electric utility industry insurance company through a
combination of current premiums, retrospective premium assessments and
reinsurance. If the insurance company experiences losses in excess of its
capacity to pay them, each participating utility may be assessed a
retrospective premium of up to 7.5 times its premium with respect to industry
losses in any policy year, which could range up to approximately $22.7
million for Maine Yankee. This excess coverage amount is the maximum offered
by the industry mutual company.
LOW-LEVEL WASTE DISPOSAL. The federal Low-Level Radioactive Waste Policy
Amendments Act (the "Waste Act"), enacted in 1986, required operating
disposal facilities to accept low-level nuclear waste from other states only
until December 31, 1992. The Waste Act also set limits on the volume of
waste each disposal facility must accept from each state, established
milestones for the non-sited states to establish facilities within their
states or regions (pursuant to regional compacts) and authorized increasing
surcharges on waste disposal until 1992. After 1992 the states in which
there are operating disposal facilities are permitted to refuse to accept
waste generated outside their states or compact regions. In 1987 the Maine
Legislature created the Maine Low-Level Radioactive Waste Authority (the
"Maine Authority") to provide for such a facility if Maine is unable to
secure continued access to out-of-state facilities after 1992, and the Maine
Authority is engaged in a search for a qualified disposal site in Maine.
Maine Yankee volunteered its site at the Plant for that purpose, but progress
toward establishing a definite site in Maine, as in other states, was
difficult because of the complex technical nature of the search process and
the political sensitivities associated with it. As a result, Maine did not
satisfy its milestone obligation under the Waste Act requiring submission of
a site license application by the end of 1991, and is therefore subject to
surcharges on its waste disposal and has not had access to regulated disposal
facilities since the end of 1992. Thus, Maine Yankee now stores all waste
generated at an on-site storage facility.
At the same time, the State of Maine was pursuing discussions with the
State of Texas concerning participation in a compact with that state and
Vermont. In May 1993, the Texas Legislature approved a compact with the
states of Maine and Vermont. The Maine Legislature in June 1993 ratified the
compact and submitted it to ratification by Maine voters in a referendum held
on November 2, 1993, in which the compact was ratified by a margin of
approximately 73% to 27%. In April 1994 it was ratified by the Vermont
Legislature and must now be ratified by the United States Congress. The
ratification bill is before Congress for consideration at its 1995 session.
The compact provides for Texas to take Maine's low-level waste over a
30-year period for disposal at a planned facility in west Texas. In return
Maine would be required to pay $25 million, assessed to Maine Yankee by the
State of Maine, payable in two equal installments, the first after
ratification by Congress and the second upon commencement of operation of the
Texas facility. In addition, Maine Yankee would be assessed a total of $2.5
million for the benefit of the Texas county in which the facility would be
located and would also be responsible for its pro-rata share of the Texas
governing commission's operating expenses. The Maine Authority suspended its
search for a suitable disposal site in Maine and, as of June 30, 1994, ceased
operations.
In the event the required ratification by Congress is not obtained,
subject to continued NRC approval, Maine Yankee can continue to utilize its
capacity to store approximately ten to twelve years' production of low-level
waste in its facility at the Plant site, which it started in January 1993.
Subject to obtaining necessary regulatory approval, Maine Yankee could also
build a second facility on the Plant site. Maine Yankee believes it is
probable that it will have adequate storage capacity for such low-level waste
available on-site, if needed, through the licensed operating life of the
Plant.
The Company cannot predict whether the final required ratification of
the Texas compact or other regulatory approvals required for on-site storage
will be obtained, but Maine Yankee intends to utilize its on-site storage
facility in the interim and continue to cooperate with the State of Maine in
pursuing all appropriate options.
ENVIRONMENTAL MATTERS
The Company is regulated by the Federal Environmental Protection Agency
("EPA") as to compliance with the Federal Water Pollution Control Act, the
Clean Air Act of 1970 (the "Clean Air Act"), and certain federal statutes
governing the treatment and disposal of hazardous wastes, as well as by the
Maine Department of Environmental Protection under Maine's hazardous waste
statutes. Although the Company is actively engaged in complying with such
acts and statutes, the costs of which are significant, it has not, to date,
encountered material difficulties in connection with such compliance.
The Clean Air Act was amended by Congress in 1990 which will result in
new regulatory requirements to install more advanced pollution control
equipment and to make other changes to reduce the emission of air pollutants.
The amendment includes new initiatives to deal with the problem of acid rain
which will impact the air emissions of fossil-fueled power plants. Under
Phase I implementation, specific plants will be required to reduce their
sulphur dioxide emissions in 1995. The Company does not own or operate any
Phase I plants. Under Phase II implementation, essentially all fossil-fueled
power plants must reduce their sulphur dioxide emission. The Company has not
completed its evaluation of the concomitant capital and operating costs
needed to comply with the amendment, including the provisions relating to
nitrogen oxide emissions and monitoring. Wyman Unit No. 4 is located in a
non-attainment area for nitrogen oxide and may be subject to additional
regulations for the control of nitrogen oxide emissions.
The Company estimates that during 1995 it will spend approximately
$517,000 in operations expenses and $507,000 in capital expenditures to
comply with environmental standards for air, water and hazardous materials.
EXECUTIVE OFFICERS OF THE COMPANY
The following are the present executive officers of the Company with all
positions and offices held. There are no family relationships between any of
them nor are there any arrangements pursuant to which any were selected as
officers.
NAME AGE OFFICE AND YEAR FIRST ELECTED
---- --- -----------------------------
Robert S. Briggs 51 President & Chief Executive
Officer since January 1991
Carroll R. Lee 45 Vice President-Operations
since 1990
Robert C. Weiser 48 Treasurer since 1987; Chief
Financial Officer since 1994
Each of the executive officers has for more than the last five years
been an officer or employee of the Company. Mr. Briggs was Vice President
and General Counsel from 1979 until 1987, Vice President-Law and Public
Affairs from 1987 until 1988, Executive Vice President & Chief Operating
Officer from 1988 until 1989 and President and Chief Operating Officer from
1989 until 1991. From 1983 through 1984, Mr. Lee was Vice President-Power
Supply and Planning and he served as Vice President-Engineering and
Operations from 1985 until 1987 and Vice President-Planning & Development
from 1987 until 1990. Mr. Weiser was Assistant Vice President-Rates and
Information Systems from 1985 until 1987.
Item 3 LEGAL PROCEEDINGS
See Note 9 to the Company's Financial Statements for a discussion of
potential liabilities under the Comprehensive Environmental Response,
Compensation, and Liability Act.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of December 31, 1994, there were 7,705 holders of record of the
Company's common stock.
The Company's common stock is traded on the New York Stock Exchange
("NYSE") under the symbol "BGR".
The following table sets forth the high and low prices for the Common
Stock as reported by the NYSE. The prices shown do not include commissions.
Dividends are declared quarterly.
DIVIDENDS
DECLARED
FISCAL PERIOD HIGH LOW PER SHARE
------------- ---- --- ---------
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 3/8 $.33
Second Quarter............... 17 13 .33
Third Quarter................ 13 1/2 11 1/4 .33
Fourth Quarter............... 12 1/4 9 3/8 .33
1994
----
First Quarter
(through March 20, 1995)... $12 7/8 $ 9 1/4 $.33
<TABLE>
ITEM 6
SELECTED FINANCIAL DATA
Bangor Hydro-Electric Company
SIX-YEAR STATISTICAL SUMMARY
<CAPTION>
1994 1993 1992 1991 1990 1989
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MEGAWATT HOURS (MWH) GENERATED AND PURCHASED
Hydro Generation (Company) 271,616 275,694 305,011 313,629 350,898 298,222
Nuclear Generation (Maine Yankee) 456,871 395,665 368,641 430,879 334,343 477,575
Oil (Company) 35,759 47,115 80,770 70,681 150,074 216,402
Biomass/Refuse 190,218 281,260 307,451 338,376 435,050 459,954
NEPOOL/Other Purchases 958,363 937,431 767,306 702,818 674,738 557,953
--------------------------------------------------------------------------------------------------------------------------------
Total Generated & Purchased 1,912,827 1,937,165 1,829,179 1,856,383 1,945,103 2,010,106
Less Line Losses and Company Use 136,908 135,561 131,764 122,370 125,265 143,048
--------------------------------------------------------------------------------------------------------------------------------
Remainder - MWH sold 1,775,919 1,801,604 1,697,415 1,734,013 1,819,838 1,867,058
================================================================================================================================
CLASSIFICATION OF SALES - MWH
Residential 516,470 515,242 521,889 517,259 517,946 517,363
Commercial 507,285 500,488 490,861 483,376 481,301 468,123
Industrial 611,876 615,314 563,734 539,565 567,595 590,495
Lighting 9,416 9,590 9,876 10,615 11,104 11,184
Wholesale 11,705 10,311 10,462 10,880 16,930 21,790
--------------------------------------------------------------------------------------------------------------------------------
Total MWH Billed to Customers 1,656,752 1,650,945 1,596,822 1,561,695 1,594,876 1,608,955
Unbilled Sales - Net Increase (Decrease) 6,366 2,001 (11,832) 4,175 1,451 278
--------------------------------------------------------------------------------------------------------------------------------
Total Delivered Sales (MWH) 1,663,118 1,652,946 1,584,990 1,565,870 1,596,327 1,609,233
(Less) Non-Firm Sales 231,128 254,359 208,066 203,108 236,834 258,989
--------------------------------------------------------------------------------------------------------------------------------
Total Firm Delivered Sales (MWH) 1,431,990 1,398,587 1,376,924 1,362,762 1,359,493 1,350,244
Off-System Sales 112,801 148,658 112,425 168,143 223,511 257,825
--------------------------------------------------------------------------------------------------------------------------------
Total Energy Sales (MWH) 1,775,919 1,801,604 1,697,415 1,734,013 1,819,838 1,867,058
================================================================================================================================
ELECTRIC OPERATING REVENUES AND EXPENSES (000'S)
OPERATING REVENUES
Residential $ 64,008 $ 64,244 $ 66,429 $ 58,510 $ 53,090 $ 47,560
Commercial 53,410 53,599 53,806 46,859 41,820 36,580
Industrial 37,040 39,508 39,340 34,047 35,059 31,467
Lighting 2,010 1,915 1,933 1,755 1,621 1,489
Wholesale 937 903 895 898 1,431 1,728
--------------------------------------------------------------------------------------------------------------------------------
Total Revenue From Customers $ 157,405 $ 160,169 $ 162,403 $ 142,069 $ 133,021 $ 118,824
Unbilled Sales-Net Increase (Decrease) 1,450 (237) (964) 2,642 (277) (70)
--------------------------------------------------------------------------------------------------------------------------------
Total Revenue $ 158,855 $ 159,932 $ 161,439 $ 144,711 $ 132,744 $ 118,754
(Less) Non-Firm Revenue 8,450 8,876 8,331 8,040 11,959 11,344
--------------------------------------------------------------------------------------------------------------------------------
Total Firm Revenue $ 150,405 $ 151,056 $ 153,108 $ 136,671 $ 120,785 $ 107,410
Off-System Revenue 12,750 15,326 13,857 15,736 17,746 20,048
--------------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $ 171,605 $ 175,258 $ 175,296 $ 160,447 $ 150,490 $ 138,802
================================================================================================================================
OPERATING EXPENSES
Fuel Used in Generation $ 90,339 $ 102,670 $ 101,465 $ 93,687 $ 83,904 $ 78,571
Purchased Power 13,793 13,716 13,478 13,387 11,607 8,232
Operating and Maintenance Expense 33,498 29,474 27,042 25,253 23,898 22,421
Depreciation and Amortization 10,333 6,447 6,789 6,615 7,004 7,103
Taxes 8,803 8,866 9,499 6,856 7,735 7,356
--------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses $ 156,766 $ 161,173 $ 158,273 $ 145,798 $ 134,148 $ 123,683
================================================================================================================================
SUMMARY OF OPERATIONS (000'S)
Operating Revenue $ 174,098 $ 177,972 $ 176,789 $ 162,243 $ 151,673 $ 140,679
Operating Expenses 156,766 161,173 158,273 145,798 134,148 123,683
Other Income (including equity AFDC) 1,308 (2,657)* 1,690 2,367 1,738 1,830
Interest Expense (net of borrowed AFDC) 11,183 8,805 9,952 10,614 10,894 10,049
--------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 7,457 $ 5,337 * $ 10,254 $ 8,198 $ 8,369 $ 8,777
Less Preferred Dividends 1,652 1,646 1,613 1,613 1,613 284
--------------------------------------------------------------------------------------------------------------------------------
Earnings on Common Stock $ 5,805 $ 3,691 * $ 8,641 $ 6,585 $ 6,756 $ 8,493
================================================================================================================================
SELECTED FINANCIAL DATA
Total Assets (000's) $ 381,250 $ 373,521 $ 288,867 $ 279,483 $ 269,735 $ 234,334
ELECTRIC PLANT (000'S)
Total Electric Plant $ 303,637 $ 281,606 $ 255,601 $ 232,079 $ 209,757 $ 187,747
Depreciation Reserve 75,667 71,184 67,645 66,111 63,330 61,243
--------------------------------------------------------------------------------------------------------------------------------
Net Electric Plant $ 227,970 $ 210,422 $ 187,956 $ 165,968 $ 146,427 $ 126,504
================================================================================================================================
CAPITALIZATION (000'S)
Short-Term Debt $ 27,000 $ 36,000 $ 15,000 $ 28,500 $ 23,000 $ 17,500
Long-Term Debt 116,367 119,126 100,685 81,515 89,565 66,615
Redeemable Preferred Stock 13,740 15,168 15,102 15,068 15,034 15,000
Preferred Stock 4,734 4,734 4,734 4,734 4,734 4,734
Common Equity 105,658 93,944 82,230 79,797 67,473 66,283
--------------------------------------------------------------------------------------------------------------------------------
Total $ 267,499 $ 268,972 $ 217,751 $ 209,614 $ 199,806 $ 170,132
--------------------------------------------------------------------------------------------------------------------------------
CAPITAL STRUCTURE RATIOS (%)
Short-Term Debt 10.1% 13.4% 6.9% 13.6% 11.5% 10.3%
Long-Term Debt 43.5% 44.3% 46.2% 38.9% 44.8% 39.2%
Preferred Stock 6.9% 7.4% 9.1% 9.4% 9.9% 11.6%
Common Stock 39.5% 34.9% 37.8% 38.1% 33.8% 38.9%
--------------------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
================================================================================================================================
MISCELLANEOUS STATISTICS
Shares Outstanding (Average) 6,947,746 5,862,411 5,393,306 4,947,232 4,450,684 4,450,684
Shares Outstanding (Year End) 7,185,143 6,225,394 5,420,955 5,370,684 4,450,684 4,450,684
Number of Stockholders (Year End) 7,705 7,511 7,325 7,116 6,839 7,399
Earnings per Common Share $ 0.84 $ 0.63 * $ 1.60 $ 1.33 $ 1.52 $ 1.91
Dividends Declared per Common Share $ 1.32 $ 1.32 $ 1.32 $ 1.29 $ 1.25 $ 1.18
Book Value per Common Share $ 14.71 $ 15.09 $ 15.17 $ 14.86 $ 15.16 $ 14.89
Return on Common Equity 5.55% 3.99%* 10.60% 8.81% 10.11% 13.05%
Ratio of AFDC to Common Stock Earnings 45% 143%* 28% 29% 21% 9%
Ratio of Earnings to Fixed Charges 1.37 1.04 * 1.96 1.65 1.76 2.15
Payout Ratio 157% 210%* 82.5 % 97.0 % 82.2 % 61.8 %
Percentage of Construction Expenditures
Funded Internally 82% 72% 70 % 37 % 8 % - %
================================================================================================================================
RESIDENTIAL CUSTOMER DATA
Average Number of Customers 85,041 84,211 83,305 82,568 81,151 79,431
Kilowatt-Hours per Customer 6,073 6,118 6,265 6,265 6,382 6,513
Revenue per Customer $ 752.67 $ 762.89 $ 797.42 $ 708.63 $ 654.21 $ 598.76
Revenue per Kilowatt-Hour in cents 12.39 12.47 12.73 11.31 10.25 9.19
================================================================================================================================
MISCELLANEOUS SYSTEM DATA
Net System Capability at Time of Peak (MW) Firm 340.45 341.17 342.39 337.29 323.06 323.06
System Peak Demand (MW) (Winter Peak) 275.84 267.42 253.27 264.17 251.62 264.32
Reserve Margin at Time of Peak 23.4% 27.6% 35.2% 27.7% 28.4% 18.2%
System Load Factor 73.5% 76.4% 77.2% 73.0% 79.5% 75.7%
================================================================================================================================
* Includes the reserve established on certain licensing activites in 1993 ($5.7 million after taxes or $.95 per common share)
(See note 7).
</TABLE>
Bangor Hydro-Electric Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RECENT DEVELOPMENTS FOR THE COMPANY AND IN THE ELECTIC UTILITY INDUSTRY AND
POTENTIAL EFFECTS ON FUTURE SALES, EARNINGS AND DIVIDEND POLICY
Changes in the Industry and in Regulation
Historically, the electric utility industry has been viewed as relatively
stable for common equity investors, providing a consistent level of dividends
with moderate growth and presenting a comparatively low risk to equity
investments. This stability developed because of public policies that treated
electric utilities as natural monopolies, requiring regulation of rates and
service and the protection of defined service territories. The industry has
been substantially free of competition while its profits have been limited by
traditional rate of return regulation.
In recent years, several factors have worked together to increase competitive
pressures on electric utilities in the United States and particularly in
Maine. Prices charged by electric utilities have increased rapidly to cover
the costs of implementing various public policy mandates including the
purchase of power from high cost non-utility power producers, the
subsidization of energy conservation and demand-side management ("DSM")
measures, financial assistance for low income customers, environmental
mitigation and improvement measures, and various other requirements. In
addition, public and regulatory policies implemented in Maine in the 1970's
and 1980's overtly discouraged the growth of electric sales, thereby tending
to increase unit costs. As a consequence of these factors, electric rates in
Maine have, on average, increased faster than the electric rates in New
England, exclusive of Maine. In the past, Maine's rates were 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 slightly higher than
the Maine statewide average, and are about equal to the New England average.
On an industry-wide scale, high embedded costs for many utilities have
combined with certain fundamental changes in the regulation of the electric
utility industry and in the economics of power generation to threaten the
ability of many traditional utilities to retain existing customers and to
attract new load. The Energy Policy Act of 1992 requires that the owner of
transmission facilities must, under certain specified conditions, transmit
power for third parties to "wholesale customers" meaning other retail
distribution utilities that are purchasing power for resale in their utility
business. This access to the transmission system allows existing municipal
and other distribution utilities that have traditionally purchased power from
neighboring utilities to purchase power in the competitive generation
markets. It also provides an incentive for the existing retail customers of a
utility to seek to lower their electric rates by forming a municipal utility
or utility district solely to qualify for the transmission access. Although
the 1992 Act does not require transmission access for retail customers,
individual states may authorize such access. California and other states are
currently exploring the terms under which retail transmission access might be
allowed.
In addition to relaxed access to transmission services, technological
improvements and increasing competition in the generation of electricity have
in recent years lowered the cost of generation. The cost of new generation
facilities today is significantly lower than the cost of facilities built
only a few years ago that are now embedded in the existing cost structure of
electric utilities. In addition, the cost for a large retail customer to
install its own generation facilities at the point of consumption has dropped
to a level that can be competitive with the prices charged by electric
utilities.
Finally, competition for the business of individual consumers and retail
customers has increased as the price of electricity has risen and the
availability of alternative methods of providing the services desired by
customers has increased. This has lead to discussions of the concept of
utilities having "core" and "non-core" customers, with the former being
thought to have no real alternative to electricity for the particular service
they need, and the latter considered as being "at risk" of loss depending on
price.
Although these are industry-wide trends, their effect on individual utilities
varies depending on the facts in each situation. In Maine, these competitive
factors are relatively challenging for Maine's utilities and for the Company,
given the high cost and restrictive usage factors described above.
In order to meet these competitive pressures and achieve profitability over
the long term, the Company believes that it must control its costs and
increase sales in order to minimize the rates it charges for electricity, and
achieve greater revenue through increased sales. Although under traditional,
"cost-plus", rate-of-return regulation the Company could reasonably expect to
be allowed by the Maine Public Utilities Commission ("MPUC") to increase its
retail rates in an effort to enhance its profitability, the Company believes
that this approach, taken by itself, would risk further erosion in sales.
While it is difficult to forecast the precise relationship among rates,
energy sales and total revenues over the short term, the Company believes
that significant rate increases at this time would have a negative long-term
impact on the Company's competitive position and its long-term financial
success. Accordingly, although the Company has not ruled out seeking modest
rate relief from the MPUC in the future, it does not believe that the present
challenge of relatively low earnings can be solved solely by rate increases.
Despite the challenges of meeting increasing competition, the Company
believes that it can succeed in the long run because it has the experience
and breadth of knowledge to meet the needs of its customers in the part of
Maine it serves and because 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 believes that, at such lower
prices, there is substantial potential for increased business. Moreover, the
Company believes that a strategy of greater electrification would produce
desirable environmental quality improvement, and the realization of this
beneficial impact will tend to enhance the favorable outlook for increased
sales. To the extent 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.
Under traditional regulatory policies, the Company has had only limited
authority to adjust its prices to meet the competition. Competitive price
initiatives have been evaluated and approved by the MPUC on a case-by-case
basis. For example, for several years the Company has been allowed to sell
interruptible energy to two major customers at significantly reduced rates,
thereby retaining load that otherwise would have been lost and providing an
incentive to add new load.
More recently, the Company has been negotiating on an individual basis with
customers that have demonstrated that, without rate relief, they will curtail
their purchases from the Company. In early 1994, the MPUC 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. The Company also has on file with
the MPUC an approved tariff that establishes procedures on a limited basis
for the negotiation and implementation of individual rate discounts necessary
to retain or attract load. Several smaller rate contracts have been approved
pursuant to that procedure. The impact of these efforts to date has been that
sales have been retained that could have otherwise been lost and, to some
extent, sales have increased to some customers. However, to date the sales
increases resulting from these pricing strategies have not offset the revenue
reduction that results from the lower prices. Moreover, the operation of the
fuel cost adjustment mechanism and the mandated accounting for fuel expense
and revenue has caused the benefits from these strategies to be more weighted
in favor of the Company's customers than its shareholders.
Therefore, even though the Company has had some success in retaining
customers with the limited pricing flexibility that had been afforded by the
MPUC, the Company believed that more flexibility was necessary in order to
more effectively meet the demands of competition in a timely manner.
Procedural obstacles and the lack of clear standards for evaluating proposed
rate reductions have hindered the Company's ability to react quickly and
flexibly to competitive threats. Because of this need for greater
flexibility, the Company proposed to the MPUC a new Alternative Marketing
Plan (or "AMP") in July of 1994. The AMP proposal included a plan for
allowing increased flexibility to offer reduced prices and develop related
marketing programs, a commitment to attempt to cap electric rates at current
levels for an extended period, the elimination of fuel cost accounting and
the fuel adjustment clause, the elimination of seasonal rate differentials
and an understanding about the method of amortizing the cost of any future
buyout of high-cost purchased power contracts.
On February 14, 1995, the MPUC issued an order approving many aspects of the
Company's AMP proposal. The plan, as approved, while imposing greater
restrictions on pricing flexibility than the Company would have preferred,
should permit greater opportunities for the Company to meet the challenges of
competition over the long term. Specifically, the MPUC established the
following guidelines for the reduction of rates with limited regulatory
oversight:
1. For existing customer classes, the Company may offer reduced
rates with a price floor at the Company's long-term marginal
cost plus 10% as long as the rate structure of the class is
maintained within specified limits. Rates that meet the
criteria will take effect automatically after a 30-day
notice period. If a proposed reduction does not meet the
criteria, the MPUC may suspend its effectiveness but will
make a decision within four months of the initial filing
date.
2. The Company may develop rates for new targeted customer
classes with a price floor that depends upon whether the new
load is "temporary" (not expected to continue for an
extended period and sensitive to rate changes that occur
after the initial discount) or "permanent" (expected to
continue indefinitely regardless of later rate adjustments).
For temporary load, the floor is short-term marginal cost
plus 1.5 cents/KWH or, under certain circumstances,
short-term marginal cost plus 10%. For permanent load, the
floor is long-term marginal cost plus 10%. Rates that meet
the criteria will take effect automatically after a 30-day
notice period.
3. The Company may negotiate special rate contracts with
individual customers, the criteria for which depend upon the
length of the contract and whether the load is temporary or
permanent.
a. For short-term contracts (up to three years) to supply
temporary load, the floor is short-term marginal cost
plus 1.5 cents/KWH. For short-term contracts to supply
permanent load, the floor is long-term marginal cost plus
10%. Short-term contracts that meet all criteria will
take effect automatically after a 30-day notice period.
b. For contracts with terms of three to five years, the
floor is long-term marginal cost plus 10%. For contracts
with terms of five to ten years, the floor is long-term
marginal cost plus 25%. Contracts that meet all criteria
will take effect automatically after a 30-day notice
period.
c. Contracts with terms over ten years may not be approved
automatically, but the MPUC will review any such proposal
within four months of filing.
4. Any rate reduction that results in permanent load will also
be subjected to certain cost tests, the results of which
must be presented by the Company at the time of filing. If
the proposal fails any of the tests, the Commission may
suspend its effectiveness and the MPUC will review it within
four months of filing.
5. The Company may eliminate seasonal rate differentials
(requiring higher charges during winter months than during
the remainder of the year) for certain classes of customers.
6. The total amount of price reductions (the "revenue delta")
offered by the Company under the AMP will be capped at 10%
of the Company's revenues. If the revenue delta approaches
the cap, the Company would have to request authority from
the MPUC to offer further discounts.
As proposed by the Company in its AMP proposal, effective January 1, 1995 the
MPUC also ordered the elimination of the Fuel Cost Adjustment ("FCA"), a rate
mechanism under which the Company has historically been permitted to adjust
retroactively for changes in the cost of fuel for generation and in certain
purchased power costs. The Company proposed the change because, under
traditional regulation, the operation of the FCA has imposed the burden of
rate discounting on utility shareholders while the benefits have been enjoyed
by other utility customers. The Company believed, therefore, that a business
strategy dependent on pricing flexibility would be effective only if the FCA
were eliminated. However, the FCA has allowed the Company to respond quickly
to changes in fuel and purchased power costs (both increases and decreases)
and has reduced the volatility of earnings. Its elimination may result in
increased or decreased earnings solely from changes in costs over which the
Company has limited control.
As of January 1, 1995, the Company's collections under the FCA had exceeded
its costs by approximately $3.03 million. With the elimination of the FCA,
the MPUC recognized that there would no longer be a mechanism for the return
of that sum to customers. The MPUC allowed the Company to retain that
overcollection and ordered that the amount be amortized over a period of
three years. That retention and amortization will have a short-term positive
impact on the Company's earnings.
Also as requested by the Company, the MPUC established the recovery and
accounting procedures to be followed in the event the Company negotiates a
buyout of one or more of its contracts for the purchase of power from
high-cost non-utility independent power producers. In the event of a buyout,
the Company may amortize for accounting purposes the costs over the shorter
of the remaining contract life, not considering extension options, or ten
years. With the elimination of the FCA, reduced fuel cost benefits of any
buyout will inure to the benefit of the Company and may be used to recover
the amortization of the buyout cost. The Company believes that the fuel and
energy cost savings achieved by such a buyout, previously subject to the FCA,
would exceed any costs of such a buyout, including carrying costs on the
unamortized balance.
Finally, the MPUC acknowledged with approval the Company's commitment to
attempt to cap existing electric rates at current levels for an extended
period and expressed a desire to formalize the details of such a commitment
by the end of the summer of 1995.
Buyback of Purchased Power Contracts
The Company has reached an agreement in principle to buy back two contracts
for the purchase of power from operators of biomass-fueled generating plants
located in West Enfield and Jonesboro, Maine. Both power vendors are
high-cost non-utility independent power producers with whom the Company was
required to contract in the 1980's. The power contracts, identical in their
terms and conditions, provide for the purchase of the entire generation
output of each of the facilities. Each plant has a rated capacity of 24.5
megawatts. Power purchases began in 1986 and are scheduled under the
contracts to continue for a period of approximately 30 years from the date of
the initial purchases.
The power contracts provide for the purchase of power at prices consisting of
the sum of a fixed component and a variable component. The Company has the
option of requesting that the plants curtail or interrupt production, in
which event payment is limited to the fixed component to the extent of
curtailment or interruption. Because of the availability of less expensive
power from other sources at prices less than the variable component of the
contract rates, the Company has not taken delivery of significant amounts of
electricity under these contracts in recent years and has limited its
payments to the fixed component.
The buyback agreement calls for a cash payment by the Company of $83 million
($41.5 million per plant) and for the Company to assume responsibility for
the remaining debt on the plants in a manner that relieves the owners of any
further obligations on such debt. The balance of the outstanding debt is
expected to be about $79 million in total at the time of the closing. If the
lenders are unwilling to permit the assumption by the Company of such debt on
terms acceptable to the Company and the owners, the Company would be required
to increase the cash portion of the buyback by an amount sufficient to
discharge the owners' debt in order for the buyback to be accomplished. In
addition, the Company will be responsible for costs of preparing for a
closing of the transaction and may incur significant costs in obtaining the
necessary financing. The Company will be obliged to pay some portion of such
costs whether or not a closing occurs.
Financing this transaction will be a significant challenge for the Company in
view of the Company's relatively small size and its existing capital
structure. The Company expects the financing to be accomplished through a
combination of bank borrowings, the possibility of the assumption of the
owners' debt, and the issuance of other debt securities. Such a financing
would increase the Company's leverage substantially and could temporarily
reduce the Company's ability to obtain external financing for other purposes,
although the Company does not believe its external financing needs will be
significant in the next several years.
The buyback agreement is contingent upon a number of conditions including
negotiation of definitive documentation, the ability of the Company to obtain
satisfactory financing arrangements, the securing of necessary governmental
approvals (including approvals from the MPUC and the Federal Energy
Regulatory Commission) and a satisfactory agreement between the Company and
another utility to which the Company is currently reselling a portion of the
electrical output from the plants. The anticipated closing date is June 1,
1995. After the closing, the Company will have no further obligation to
purchase power from the plants and will not acquire any ownership interest in
them.
Implications for Dividend Policy
As indicated in prior reports, the Company has recognized that the infusion
of increased competition into the electric utility industry and the decreased
reliance on traditional, rate-of-return regulation will likely cause changes
in policies with respect to the payment of common stock dividends. The
continuity of dividend payments that has been enjoyed in the past may be less
certain, and dividend payment decisions are more likely to depend to a
greater degree upon current profitability and the shorter-term prospects for
growth in earnings.
During 1994, the Company maintained its common dividend payment even though
it became apparent early on that the payout ratio would be high. This action
was consistent with the Company's view that, to the extent possible, electric
utilities in the transition to a more competitive business environment should
attempt to maintain dividend levels and utilize future earnings growth to
evolve to more conservative payout ratios. While the Company continues to
believe that to be an appropriate policy, it also believes that factors have
combined that could likely result in a reduction of the Company's common
dividend in 1995.
As discussed above, the MPUC's decision to allow the Company more pricing
flexibility acknowledged the Company's commitment to attempt to avoid general
rate increases. The MPUC's support for the Company's efforts adds to the
Company's resolve to avoid such rate increases for the near-term future.
Taking this factor in conjunction with generally lower-than-expected growth
in sales and revenues in 1994 and so far in 1995 and the fact that it will
take some time for the newly-granted pricing flexibility to have an impact,
the Company does not believe that its current prospects for earnings can
support a common dividend at the same level as that paid in 1994.
Moreover, the financing of the contract buyback transaction discussed above
may independently affect the Company's ability to maintain common dividends
at the level paid in 1994. Although the Company believes the buyback
transaction is in the best interests of the Company and its shareholders, and
should enhance the Company's prospects for improved earnings sooner than if
the transaction did not occur, the incurrence of the levels of additional
debt necessary in order to accomplish the transaction could result in the
imposition of conditions or covenants in the associated debt instruments that
will be likely to restrict the Company's ability to pay common dividends at
current levels while such debt is outstanding.
The Board of Directors has made no determination as to the timing or amount
of any adjustment of the Company's common dividends.
CAPITAL REQUIREMENTS, CAPITAL RESOURCES AND LIQUIDITY
In order to meet future operational and service requirements, the Company has
continuing needs for additional capital improvements. Over the last three
years, capital expenditures have been $21.5 million in 1994, $33.6 million in
1993 and $24.3 million in 1992 (including overhead costs allocated to the
capital program and an Allowance for Funds used During Construction ("AFDC")
to recognize the costs of financing the program). In 1994, $2.0 million of
the capital expenditures was related to the Company's power production
facilities, $8.4 million was for its distribution system, and $6.4 million
was for its transmission system with the remainder related to other general
property and equipment, the cost of developing new information systems and
costs associated with the licensing of new and the relicensing of existing
hydroelectric projects. The 1992 and 1994 levels of capital expenditures are
representative of the levels normally required to maintain the electrical
system and meet other needs of the Company's customers. The 1993 expenditures
included about $11.4 million for two major rehabilitation projects for the
Company's hydroelectric system. The Company expects its capital expenditures
to total about $55 million over the next three years, although it may be
necessary to adjust the budget for capital expenditures on a year-to-year
basis in view of the impact of the challenges described above upon the
Company's ability to obtain financing.
In addition to requiring funds for capital improvements, the Company has from
time to time required funds to finance "regulatory assets". Accounting rules
applicable to regulated utilities allow the establishment of regulatory
assets for costs accumulated for certain items other than the usual and
customary capital assets, and allow the deferral of the income statement
impact of those costs if they are expected to be recovered in future rates.
As of December 31, 1994, the Company has regulatory assets of approximately
$97.4 million. The Company believes that the cost of the proposed power
contract buyback described above will also be recorded as a regulatory asset
if the buyback transaction is consummated. The effects of competition could
ultimately cause the operations of the Company, or a portion thereof, to
cease meeting the criteria for application of the accounting rules for
regulatory assets. If this were to occur, accounting standards of enterprises
in general would apply and unamortized balances of regulatory assets would be
charged to operations in the year in which those criteria were no longer
applicable.
In addition to funds generated internally, the Company has met its capital
needs through a combination of equity and debt securities and short-term
credit facilities. In 1994 the Company raised approximately $14.1 million
with the issuance and sale of 867,500 shares of common stock and
approximately $1.3 million through the issue of 92,249 shares under the
Dividend Reinvestment Plan. Also during 1994 the Company made $2.6 million in
required and optional sinking fund payments on its 12.25% first mortgage
bonds. External capital in 1993 and 1992 were provided by the issuance of
745,000 shares of common stock with proceeds of $14.8 million, the issuance
of 109,710 common shares raising approximately $2.2 million under the
Dividend Reinvestment Plan, and the issuance of three series of first
mortgage bonds: a $15 million, 7.3% series maturing in 2003, a $20 million,
7.38% series maturing in 2002 and a $20 million, 8.98% series maturing in
2022. The bonds contain no provisions for sinking fund payments.
The Company's bank borrowings, which are provided through a $25 million
revolving credit facility as well as $30 million in lines of credit, are
discussed in more detail in Note 5 to the Financial Statements. These
short-term credit arrangements are being used in part as interim financing
for the Company's long-term capital needs. Effective May 26, 1994 the Company
renegotiated its revolving credit agreement with the participating banks for
a period of one year, with an option to renew for one additional year. The
Company is presently engaged in discussions with its short-term lenders in
connection with renewing the Company's short-term borrowing facilities and
accommodating the proposed financing of the power contract buyback described
earlier.
In 1995 the Company has $1.5 million in sinking fund payment requirements
related to its 8.76% mandatory redeemable preferred stock. The Company's
first mortgage bond indenture limits the issuance of first mortgage bonds to
75% of bondable property and requires earnings coverage of at least two-times
pro forma annual first mortgage bond interest charges at the time the bonds
are issued. Under these tests, at December 31, 1994, the Company could have
issued approximately $53 million of additional first mortgage bonds at an
assumed interest rate of 10%. The Company has $10.9 million of first mortgage
bond sinking fund requirements and maturities in the period 1995-1999. The
issuance of authorized but unissued common and preferred stock is not subject
to any issuance tests contained in any of the Company's governing documents
or agreements.
RESULTS OF OPERATIONS
Earnings per common share were $.84, $.63 and $1.60, and the earned return on
average common equity was 5.5%, 4.0% and 10.6% for the years ended 1994, 1993
and 1992, respectively. In both 1994 and 1993, reported earnings reflected
significant one-time charges. The Company charged approximately $2.8 million
($.24 per common share after taxes) to operations in the first quarter of
1994 as the cost of an early retirement program that is now providing savings
in the form of reduced labor costs. In 1993 the Company established a reserve
for the full amount of licensing costs spent through 1993 on the Basin Mills
and Veazie hydroelectric projects. This reserve, which amounted to $8.7
million ($5.6 million after taxes), resulted in a $.95 reduction in earnings
per common share after taxes for the year ended December 31, 1993.
The Company's total revenues and consequently its earnings are influenced to
a large extent by the regulation of retail rates by the MPUC. Under Maine
law, the Company has historically collected revenue from its customers
separately through "base rates" and through a "fuel cost adjustment" (the
"FCA" see the discussion above of the Company's Alternative Marketing Plan
approved by the MPUC). Base rates are established from time to time in order
to permit the Company an opportunity to recover its costs of providing
electric service that are not included in the FCA, and to recover the
investment, and earn a reasonable return thereon, in plant and equipment to
provide that service. The FCA has also included the cost of the contracts
with the non-utility independent power producers. The FCA was a positive or
negative adjustment that was reconciled after the fact to reflect changes in
the cost of fuel for generation and certain costs of purchased power. With
the AMP order issued by the MPUC on February 14, 1995, the FCA was eliminated
effective January 1, 1995.
On February 17, 1994, the MPUC issued an order allowing the Company,
effective March 1, 1994, to increase its base rates by $11.1 million. This
represented a 15.9% increase in base rates and an increase in average overall
rates of 7.9%. More than half of the rate increase was designed to allow
recovery of the costs associated with the buyout of the Beaver Wood purchased
power contract, and it was offset to a large extent by a reduction in the
fuel cost adjustment attributable directly to the buyout. The MPUC order
provided an authorized return on common equity of 10.6%. However, the Company
failed to earn that authorized return in 1994 primarily because the MPUC
order was based upon an overly optimistic projection of energy sales, because
the Company made certain pricing concessions to its customers as discussed
above, and because of the one-time charge to reflect the cost of the early
retirement program.
In conjunction with the FCA, the Company's regulators authorized the Company
to use a deferred fuel accounting methodology under which fuel revenue
essentially matched fuel expense. With the elimination of the FCA effective
January 1, 1995, deferred fuel accounting has been eliminated and the Company
has maintained its rates at existing levels. This change will require the
Company to record, as expense, actual fuel costs incurred. The deferred fuel
balance at December 31, 1994 appears on the balance sheet as a liability of
$3.03 million. Based on the order from the MPUC, that liability will be
amortized over a three-year period beginning January 1, 1995 as a reduction
in fuel expense and will be a benefit to earnings.
The Company has experienced steadily increasing purchased power expenses from
1992 through 1994, due primarily to greater capacity and transmission costs
associated with the Maine Yankee nuclear plant.
Other major increases in 1994 expenses included a $1.4 million increase in
medical costs (including the full amount of expense for postretirement
benefits in accordance with Financial Accounting Standards Board Statement
No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" which was implemented on January 1, 1993 and included in rates
beginning March 1, 1994) and $745,000 in amortization of certain deferred
costs for which recovery was allowed in the most recent base rate order.
In 1993, O&M labor costs increased by $1.1 million over 1992 primarily
because of an average wage increase of 3.5% effective January 1, 1993 and a
higher allocation of labor costs to O&M activities than in 1992. Non-labor
expense increased by $1.3 million, with major contributing factors including
higher pension expenses, increased tree trimming activities, and accounting,
legal and consulting expenses.
The Company's expenses over the period 1992-1994 have been significantly
affected by amortizations authorized by the MPUC and charged annually against
earnings. The MPUC has specifically authorized the inclusion of these
expenses in the Company's base rates. Although there are a number of such
authorized amortizations, the major ones are the allowable recovery of the
Company's loss from its investment in the Seabrook nuclear power units (which
it sold in 1986) and the costs associated with the 1993 termination of a
purchased power contract with the Beaver Wood plant in Chester, Maine. The
seven-year amortization of the Company's recoverable loss from its investment
in the Seabrook Unit No. 2 nuclear plant was completed in 1992 and no longer
affects income. In 1992 that amortization amounted to $968,000. The Company's
recoverable loss from its investment in Seabrook Unit 1 is being amortized at
a rate of $1.7 million per year beginning in 1986 for a period of 30 years.
Effective March 1, 1994, as authorized in the base rate order from the MPUC,
the Company began amortizing the deferred costs associated with the Beaver
Wood contract termination at a rate of $3.9 million annually over a nine-year
period.
AFDC decreased in 1994 relative to 1993 primarily because the Company ceased
accruing carrying costs associated with the Beaver Wood purchased power
contract termination when recovery was authorized by the MPUC on March 1,
1994, ceased accruing AFDC on costs related to the Basin Mills project, and
experienced lower levels of construction activity. The 1993 AFDC was higher
than 1992 principally because of the accruals for the Beaver Wood
termination.
CONTINGENCIES
The Company has received notice from the Maine Department of Environmental
Protection that it is investigating the cleanup of several sites in Maine
that were used in the past for the disposal of hazardous substances and that
the Company, as a generator of some of the hazardous substances that were
disposed of on those sites, may be liable for certain cleanup costs. With
respect to at least one of those sites, the Company is aware that the United
States Environmental Protection Agency is considering designation under the
Comprehensive Environmental Response, Compensation, and Liability Act in
order to pursue potentially responsible parties. The Company was only one of
a number of waste generators at each of the sites under investigation, and it
is too early in the process to speculate on the extent of the Company's
potential liability.
NEW ACCOUNTING STANDARDS
Effective January 1, 1994 the Company adopted Financial Accounting Standards
Board Statement No. 112, "Employers' Accounting for Postemployment Benefits"
("FAS 112"). The effect of FAS 112 on the Company's results of operations and
financial position was not material.
<TABLE>
ITEM 8
FINANCIAL STATEMENTS & SUPPLEMENTARY DATA
<CAPTION>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUE (Note 1):
Base rate revenue $ 83,785,022 $ 75,008,082 $ 74,009,543
Fuel charge revenue 90,312,838 102,963,688 102,779,462
----------------------------------------------
$ 174,097,860 $177,971,770 $ 176,789,005
----------------------------------------------
OPERATING EXPENSES:
Fuel for generation (Note 1) $ 90,339,056 $102,670,217 $ 101,465,555
Purchased power capacity (Notes 1 and 7) 13,793,383 13,716,436 13,477,717
Other operation and maintenance (Notes 1, 6 and 10) 33,497,912 29,474,327 27,041,625
Depreciation and amortization (Note 1) 5,395,045 4,747,491 4,122,446
Amortization of Seabrook Nuclear Project (Note 8) 1,699,050 1,699,050 2,667,086
Amortization of contract buyout (Note 7) 3,238,630 - -
Taxes -
Local property and other 5,189,324 4,102,097 3,897,290
Income (Note 2) 3,613,598 4,762,945 5,601,772
----------------------------------------------
$ 156,765,998 $161,172,563 $ 158,273,491
----------------------------------------------
OPERATING INCOME $ 17,331,862 $ 16,799,207 $ 18,515,514
OTHER INCOME AND (DEDUCTIONS):
Provision for Basin Mills (Note 7) - (8,695,539) -
Income tax benefits related to
provision for Basin Mills (Note 7) - 3,137,895 -
Allowance for equity funds used during
construction (Note 1) 1,256,307 2,464,934 1,294,958
Other, net of applicable income taxes (Notes 1 and 2) 51,850 435,316 396,329
----------------------------------------------
INCOME BEFORE INTEREST EXPENSE $ 18,640,019 $ 14,141,813 $ 20,206,801
----------------------------------------------
INTEREST EXPENSE:
Long-term debt (Note 4) 10,767,934 $ 10,438,828 $ 9,617,574
Other (Note 5) 1,754,391 1,164,795 1,418,618
Allowance for borrowed funds used during
construction (Note 1) (1,339,379) (2,798,241) (1,084,173)
----------------------------------------------
$ 11,182,946 $ 8,805,382 $ 9,952,019
----------------------------------------------
NET INCOME $ 7,457,073 $ 5,336,431 $ 10,254,782
DIVIDENDS ON PREFERRED STOCK (Note 3) 1,652,432 1,645,663 1,613,415
----------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 5,804,641 $ 3,690,768 $ 8,641,367
==============================================
EARNINGS PER COMMON SHARE, based on the weighted
average number of shares outstanding of
6,947,746 in 1994, 5,862,411 in 1993 and
5,393,306 in 1992 $ 0.84 $ 0.63 $ 1.60
==============================================
DIVIDENDS DECLARED PER COMMON SHARE $ 1.32 $ 1.32 $ 1.32
==============================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
1994 1993
ASSETS
<S> <C> <C>
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original
cost (Note 7) $ 274,829,540 $ 250,122,521
Less - Accumulated depreciation and
amortization (Notes 1 and 7) 75,666,792 71,183,586
----------------------------------
$ 199,162,748 $ 178,938,935
Construction in progress (Note 1) 23,928,702 26,601,995
----------------------------------
$ 223,091,450 $ 205,540,930
Investments in corporate joint ventures (Notes 1 and 7) -
Maine Yankee Atomic Power Company $ 4,753,548 $ 4,755,848
Maine Electric Power Company, Inc. 124,900 124,900
----------------------------------
$ 227,969,898 $ 210,421,678
----------------------------------
OTHER INVESTMENTS, principally at cost $ 3,481,703 $ 4,474,167
----------------------------------
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 1,956,159 $ 2,387,156
Accounts receivable, net of reserve ($730,000 in 1994
and $1,450,000 in 1993) 19,129,910 18,763,183
Unbilled revenue receivable (Note 1) 8,611,479 7,161,747
Inventories, at average cost:
Materials and supplies 2,992,496 3,220,482
Fuel oil 435,001 635,072
Prepaid expenses 1,680,753 1,573,707
Deferred fuel and interest costs (Note 1) - 2,568,539
Deferred purchased power costs 235,544 1,795,544
Current deferred income taxes (Note 2) 1,094,355 -
----------------------------------
Total current assets $ 36,135,697 $ 38,105,430
----------------------------------
DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net of
accumulated amortization of $23,376,996 in 1994
and $21,677,946 in 1993 (Notes 8 and 13) $ 35,465,079 $ 37,164,129
Costs to terminate purchased power contract (Notes 7 and 13) 36,738,549 40,301,603
Deferred regulatory asset (Notes 2,6 and 13) 33,536,787 33,068,241
Prepaid pension costs (Note 6) 2,082,047 2,398,498
Demand-side management costs (Note 13) 2,684,107 3,691,248
Other (Note 13) 3,156,178 3,896,178
----------------------------------
Total deferred charges $ 113,662,747 $ 120,519,897
----------------------------------
Total Assets $ 381,250,045 $ 373,521,172
==================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEET
December 31,
1994 1993
STOCKHOLDERS' INVESTMENT AND LIABILITIES
<S> <C> <C>
CAPITALIZATION (see accompanying statement):
Common stock investment (Note 3) $105,657,684 $ 93,944,148
Preferred stock (Note 3) 4,734,000 4,734,000
Preferred stock subject to mandatory redemption, exclusive of a
sinking fund requirement in 1994. (Notes 3 and 11) 13,740,491 15,167,629
Long-term debt, exclusive of sinking fund requirements (Notes 4
and 11) 116,367,155 119,125,856
------------------------------
Total capitalization $240,499,330 $232,971,633
------------------------------
CURRENT LIABILITIES:
Notes payable - banks (Note 5) $ 27,000,000 $ 36,000,000
------------------------------
Other current liabilities -
Sinking fund requirements on preferred stock and long term debt
(Notes 4 and 11) $ 2,961,253 $ 1,297,448
Accounts payable 14,668,512 15,960,900
Dividends payable 2,766,026 2,449,309
Accrued interest 3,650,195 3,705,527
Deferred fuel and interest costs (Notes 1 and 13) 3,025,194 -
Customers' deposits 287,699 498,332
Current income taxes payable 965,614 -
------------------------------
Total other current liabilities $ 28,324,493 $ 23,911,516
------------------------------
Total current liabilities $ 55,324,493 $ 59,911,516
------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9)
DEFERRED CREDITS AND RESERVES (Note 2):
Deferred income taxes - Seabrook $ 18,434,070 $ 19,176,232
Other accumulated deferred income taxes 50,083,738 47,000,779
Deferred regulatory liability (Note 13) 9,221,892 9,347,049
Unamortized investment tax credits 2,415,245 2,271,550
Other (Note 6) 5,271,277 2,842,413
------------------------------
Total deferred credits and reserves $ 85,426,222 $ 80,638,023
------------------------------
Total Stockholders' Investment and Liabilities $381,250,045 $373,521,172
==============================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1994 1993
<S> <C> <C>
COMMON STOCK INVESTMENT (Note 3):
Common stock, par value $5 per share -
Authorized - 10,000,000 shares in 1994 and 7,500,000 shares in 1993
Outstanding - 7,185,143 shares in 1994 and 6,225,394 shares in 1993 $ 35,925,715 $ 31,126,970
Amounts paid in excess of par value 55,974,218 45,430,734
Retained earnings (Note 1) 13,757,751 17,386,444
------------------------------
Total Common Stock $ 105,657,684 $ 93,944,148
------------------------------
PREFERRED STOCK, non-participating, cumulative, par value
$100 per share, authorized 600,000 shares in 1994 and
400,000 shares in 1993 (Note 3):
Not redeemable or redeemable solely at the option of the issuer -
7%, Noncallable, 25,000 shares authorized and outstanding $ 2,500,000 $ 2,500,000
4 1/4% Callable at $100, 4,840 shares authorized and outstanding 484,000 484,000
4%, Series A, Callable at $110, 17,500 shares authorized and
outstanding 1,750,000 1,750,000
------------------------------
$ 4,734,000 $ 4,734,000
Subject to mandatory redemption requirements - ------------------------------
8.76%, Callable at 105.63% if called on or prior to
December 27, 1995, 150,000 shares authorized and
outstanding (Note 11) $ 15,240,491 $ 15,167,629
Less - Sinking fund requirements 1,500,000 -
------------------------------
$ 13,740,491 $ 15,167,629
------------------------------
LONG-TERM DEBT:
First Mortgage Bonds (Notes 4 and 11) -
6.75% Series due 1998 $ 2,500,000 $ 2,500,000
10.25% Series due 2019 15,000,000 15,000,000
10.25% Series due 2020 30,000,000 30,000,000
8.98% Series due 2022 20,000,000 20,000,000
7.38% Series due 2002 20,000,000 20,000,000
7.30% Series due 2003 15,000,000 15,000,000
12.25% Series due 2001 11,128,408 13,723,304
------------------------------
$ 113,628,408 $ 116,223,304
Less - Sinking fund requirements 1,461,253 1,297,448
------------------------------
$ 112,167,155 $ 114,925,856
Variable rate demand pollution control revenue bonds
Series 1983 due 2009 4,200,000 4,200,000
------------------------------
Total long-term debt $ 116,367,155 $ 119,125,856
------------------------------
Total Capitalization $ 240,499,330 $ 232,971,633
==============================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<CAPTION>
1994 1993 1992
---- ---- ----
CASH FLOWS FROM OPERATIONS:
<S> <C> <C> <C>
Net Income $ 7,457,073 $ 5,336,431 $ 10,254,782
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization (Note 1) 5,395,045 4,747,491 4,122,446
Amortization of Seabrook Nuclear Project (Note 8) 1,699,050 1,699,050 2,667,086
Amortization of costs to terminate purchased
power contract 3,238,630 - -
Allowance for equity funds used during
construction (Note 1) (1,256,307) (2,464,934) (1,294,958)
Deferred income tax provision (Note 2) 2,662,598 2,673,409 (3,003,698)
Deferred income taxes on Seabrook Nuclear Project (Note 2) (411,747) (414,647) (792,396)
Deferred investment tax credits (Note 2) 143,695 (178,176) 672,798
Provision for Basin Mills Project (Note 7) - 8,695,539 -
Changes in assets and liabilities:
Deferred fuel, purchased power and interest
costs (Note 1) 7,153,733 9,039,409 10,826,632
Receivables, net and unbilled revenue (1,816,459) 3,023,611 (3,166,120)
Early retirement plan costs 2,738,376 - -
Accounts payable (1,292,388) (1,081,505) 2,518,005
Accrued interest (55,332) 1,109,433 241,976
Current and deferred income taxes (517,084) 2,566,443 5,214,381
Accrued postretirement benefit costs 591,123 - -
Other current assets and current liabilities, net 36,945 139,055 (212,929)
Other, net 2,494,572 (1,513,238) (2,441,478)
------------------------------------------
Net Cash Provided By Operations $ 28,261,523 $ 33,377,371 $ 25,606,527
------------------------------------------
CASH FLOWS FROM INVESTING:
Construction expenditures $ (21,482,132)$ (33,611,031)$ (24,270,884)
Cost to terminate purchased power contract (Notes 7 and 12) - (23,711,733) -
Payment received related to terminated purchased power contract 1,000,000 - -
Allowance for borrowed funds used during
construction (Note 1) (1,339,379) (2,798,241) (1,084,173)
------------------------------------------
Net Cash Used in Investing $ (21,821,511)$ (60,121,005)$ (25,355,057)
------------------------------------------
CASH FLOWS FROM FINANCING:
Dividends on preferred stock $ (1,579,570)$ (1,579,570)$ (1,579,570)
Dividends on common stock (9,116,617) (7,678,229) (7,105,895)
Redemptions, maturities and sinking fund payments of
long-term debt (2,594,896) (15,148,118) (19,860,000)
Issuances:
Common stock (Note 3)
Public offering (867,500 shares in 1994 and
745,000 shares in 1993) 14,083,863 14,803,150 -
Dividend reinvestment plan (92,249 in 1994,
59,439 in 1993 and 50,271 in 1992) 1,336,211 1,245,519 914,477
Long-term debt (Note 4) - 15,000,000 40,000,000
Short-term debt, net (Note 5) (9,000,000) 21,000,000 (13,500,000)
------------------------------------------
Net Cash (Used in) Provided By Financing $ (6,871,009)$ 27,642,752 $ (1,130,988)
------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ (430,997)$ 899,118 $ (879,518)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,387,156 1,488,038 2,367,556
------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,956,159 $ 2,387,156 $ 1,488,038
==========================================
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR-
Interest (Net of Amount Capitalized) $ 9,677,372 $ 4,549,462 $ 8,757,236
Income Taxes 2,226,290 - 4,850,574
==========================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 17,386,444 $ 21,639,369 $ 20,120,486
ADD - Net income 7,457,073 5,336,431 10,254,782
---------------------------------------
$ 24,843,517 $ 26,975,800 $ 30,375,268
---------------------------------------
DEDUCT:
Cash dividends declared on -
Preferred stock $ 1,579,570 $ 1,579,570 $ 1,579,570
Common stock - $1.32 per share in 1994,1993 and 1992 9,433,334 7,943,693 7,122,484
Other (Note 3) 72,862 66,093 33,845
---------------------------------------
$ 11,085,766 $ 9,589,356 $ 8,735,899
---------------------------------------
BALANCE AT END OF YEAR $ 13,757,751 $ 17,386,444 $ 21,639,369
=======================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
NOTE 1 - Summary of Significant Accounting Policies
Basis of Consolidation-The Consolidated Financial Statements of Bangor
Hydro-Electric Company (the "Company") include its wholly owned subsidiaries,
Penobscot Hydro Co., Inc. ("PHC"), and Bangor Var Co., Inc. ("BVC"). The
operations of PHC consist solely of a 50% interest in Bangor-Pacific Hydro
Associates ("BPHA"), the owner and operator of the redeveloped West Enfield
hydroelectric station. PHC accounts for its investment in BPHA under the
equity method. BVC was incorporated in 1990 to own the Company's 50% interest
in a partnership which owns certain facilities used in the Hydro-Quebec Phase
II transmission project in which the Company is a participant. BVC accounts
for its investment in the partnership under the equity method. All
significant intercompany balances and transactions have been eliminated. The
accounts of the Company are maintained in accordance with the Uniform System
of Accounts prescribed by the regulatory bodies having jurisdiction.
Equity Method of Accounting-The Company accounts for its investments in the
common stock of Maine Yankee Atomic Power Company ("Maine Yankee") and Maine
Electric Power Company, Inc. ("MEPCO") under the equity method of accounting,
and records its proportionate share of the net earnings of these companies
(substantially all of these earnings are paid out in dividends) as a
reduction of purchased power capacity costs. See Note 7 for additional
information with respect to these investments.
Electric Operating Revenue-Electric Operating Revenue consists primarily of
amounts charged for electricity delivered to customers during the period. The
Company records unbilled revenue, based on estimates of electric service
rendered and not billed at the end of an accounting period, in order to match
revenue with related costs.
Deferred Fuel and Purchased Power Capacity Accounting-The Company utilizes
deferred fuel accounting. Under this accounting method, retail fuel costs are
expensed when recovered through rates and recognized as revenue. Retail fuel
costs not yet expensed are classified on the Consolidated Balance Sheets
("Balance Sheets") as deferred fuel costs. The fuel cost adjustment rate
includes a factor calculated to reimburse the Company or its customers, as
appropriate, for the carrying cost of funds used to finance under- or
over-collected fuel costs, respectively.
Under the Maine Public Utilities Commission ("MPUC") fuel cost adjustment
regulations effective through December 31, 1994, the Company is allowed to
recover its fuel costs on a current basis. The fuel charge is based on the
Company's projected cost of fuel for a twelve-month period. Under- or
over-collections resulting from differences between estimated and actual fuel
costs for a period are included in the computation of the estimated fuel
costs of the succeeding fuel adjustment period.
As of January 1, 1995, the Company's collections under the Fuel Cost
Adjustment ("FCA") had exceeded its costs by approximately $3.03 million.
With the elimination of the FCA, the MPUC recognized that there would no
longer be a mechanism for the return of that sum to customers. The MPUC
allowed the Company to retain that overcollection and ordered that the amount
be amortized over a period of three years.
Depreciation of Electric Plant and Maintenance Policy-Depreciation of
electric plant is provided using the straight-line method at rates designed
to allocate the original cost of the properties over their estimated service
lives. The composite depreciation rate, expressed as a percentage of average
depreciable plant in service, and considering the amortization of the
over-accrued depreciation which is discussed below, was approximately 2.2% in
1994 and 2.1% in 1993 and 1992.
A study conducted in 1989 by an independent firm determined that, as a group,
the actual lives of the Company's property, plant and equipment were longer
than the lives represented by the depreciation rates that the Company had
been using to compute its depreciation expense for accounting purposes. In
addition, the study also determined that the reserve for depreciation was
over-accumulated. The agreement on base rates which became effective on
October 1, 1990, contained a provision to amortize the remaining balance of
the over-accumulated reserve for depreciation account ($11.4 million at
October 1, 1990) over a six-year period and adopted the longer depreciable
lives as determined by the aforementioned study.
The Company follows the practice of charging to maintenance the cost of
repairs, replacements and renewals of minor items considered to be less than
a unit of property. Costs of additions, replacements and renewals of items
considered to be units of property are charged to the utility plant accounts,
and any items retired are removed from such accounts. The original costs of
units of property retired and removal costs, less salvage, are charged to the
reserve for depreciation.
Depreciation, local property taxes and other taxes not based on income, which
were charged to operating expenses, are stated separately in the Statements
of Income. Rents, advertising and research and development expenses are not
significant. No royalty expenses were incurred.
Maintenance expense was $6.2 million in 1994, $6.5 million in 1993 and $5.6
million in 1992.
Equity Reserve for Licensed Hydro Projects-The Federal Energy Regulatory
Commission ("FERC") requires that a reserve be maintained equal to one-half
of the earnings in excess of a prescribed rate of return on the Company's
investment in licensed hydro property, beginning with the twenty-first year
of the project operation under license.
The required reserve for licensed hydro projects is classified in retained
earnings and has a balance of $584,942 at December 31, 1994.
Allowance for Funds Used During Construction ("AFDC")-In accordance with
regulatory requirements of the MPUC, the Company capitalizes as AFDC
financing costs related to portions of its construction work in progress, at
a rate equal to its weighted cost of capital, into utility plant with
offsetting credits to other income and interest. This cost is not an item of
current cash income, but is recovered over the service life of plant in the
form of increased revenue collected as a result of higher depreciation
expense. In addition, carrying costs on certain regulatory assets are also
capitalized and included in AFDC in the Statements of Income. The average
AFDC (and carrying cost) rates computed by the Company were 9.2% in 1994,
10.0% for 1993 and 10.6% in 1992.
Cash and Cash Equivalents-The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
Note 2 - Income Taxes
The Company adopted Financial Accounting Standard Board Statement No. 109
"Accounting for Income Taxes" ("FAS 109") effective January 1, 1993. FAS 109
required a change in the accounting for income taxes from the deferred method
to an asset and liability approach, which requires the recognition of
deferred tax liabilities and assets for the future tax effects of temporary
differences between the tax basis and carrying amounts of assets and
liabilities. In accordance with FAS 109, the Company recorded net additional
deferred income tax liabilities of approximately $23.7 million as of December
31, 1994 and $23.1 million as of December 31, 1993. These additional deferred
income tax liabilities have resulted from the accrual of deferred taxes on
temporary differences on which deferred taxes had not been previously accrued
($32.9 million and $32.5 million as of December 31, 1994 and 1993,
respectively), offset by the effect of the 1987 change to lower income tax
rates (reduced by the 1% increase in the federal income tax rate in 1993)
that will be refunded to customers over time ($7.8 million and $8.1 million
as of December 31, 1994 and 1993, respectively) and the establishment of
deferred tax assets on unamortized investment tax credits ($1.4 million and
$1.3 million as of December 31, 1994 and 1993, respectively). These latter
amounts have been recorded as deferred regulatory liabilities at December 31,
1994 and 1993. The accrual of the additional amount of deferred tax
liabilities have been offset by regulatory assets which represent the
customers' future payment of these income taxes when the taxes are, in fact,
expensed. As a result of this accounting, the Consolidated Statements of
Income for the year ended December 31, 1994 and 1993 are not affected by the
implementation of FAS 109.
The rate-making practices followed by the MPUC permit the Company to recover
federal and state income taxes payable currently, and to recover some, but
not all, deferred taxes that would otherwise be recorded in accordance with
FAS 109 in the absence of regulatory accounting.
The individual components of other accumulated deferred income taxes are as
follows at December 31, 1994 and 1993:
1994 1993
----------- -----------
Deferred income tax liabilities:
Excess book over tax basis of electric
plant in service $42,117,768 $43,023,222
Costs to terminate purchased power contract 13,643,442 4,553,166
Deferred FERC licensing costs 3,158,378 3,431,075
Deferred fuel, purchased power and interest
costs - 1,616,491
Deferred demand-side management program costs 16,677 1,055,030
Prepaid pension costs 593,290 1,028,179
Investment in jointly-owned companies 787,908 790,881
Other 1,534,435 2,434,532
----------- -----------
$61,851,898 $57,932,576
----------- -----------
Deferred income tax assets:
Deferred taxes provided on alternative
minimum tax $(4,463,203) $(3,175,718)
Provision for Basin Mills investment (3,141,395) (3,137,895)
Deferred state income tax benefit - (1,561,137)
Unamortized investment tax credit (1,387,251) (1,286,156)
Deferred fuel, purchased power and interest
costs (1,365,750) -
Reserve for bad debts (649,675) (797,696)
Other (760,886) (973,195)
------------- -------------
$(11,768,160) $(10,931,797)
------------- -------------
Total other accumulated deferred income
taxes $50,083,738 $ 47,000,779
============= ============
The individual components of federal and state income taxes reflected in the
Consolidated Statements of Income for 1994, 1993 and 1992 are stated in the
table below:
Year Ended December 31,
--------------------------------------
1994 1993 1992
--------------------------------------
Current:
Federal $ 1,287,485 - $6,274,554
State - - 2,739,089
--------------------------------------
$ 1,287,485 - $9,013,643
--------------------------------------
Deferred - Short-Term:
Federal $ (797,919) $ 114,674 $4,330,124
State (296,436) 68,216 213,745
--------------------------------------
$(1,094,355) $ 182,890 4,543,869
--------------------------------------
Deferred - Long-Term:
Federal - Other $ 3,003,171 $ 2,512,026 $(5,741,329)
State - Other 753,782 (21,507) (1,806,238)
Federal - Seabrook (339,620) (341,917) (653,060)
State - Seabrook (72,127) (72,730) (139,336)
--------------------------------------
$ 3,345,206 $ 2,075,872 $(8,339,963)
--------------------------------------
Investment Tax Credits, Net $ 143,695 $ (178,176) $ 672,798
--------------------------------------
Total Provision $ 3,682,031 $ 2,080,586 $ 5,890,347
Allocated to Other Income (68,433) 2,682,359 (288,575)
--------------------------------------
Charged to Operating Expense $ 3,613,598 $ 4,762,945 $ 5,601,772
======================================
The table below reconciles an income tax provision, calculated by multiplying
income before federal income taxes (as reported on the Statements of Income)
by the statutory federal income tax rate to the federal income tax expense
reported on the Statements of Income. The difference is represented by the
temporary differences for which deferred taxes are not provided.
1994 1993 1992
----------- ----------- ----------
Amount % Amount % Amount %
------------------------------------
(Dollars in Thousands)
-----------------------------------
Federal income tax provision
at statutory rate $3,786 34% $2,522 34% $5,489 34%
Less (Plus) temporary reductions in
tax expense resulting from statutory
exclusions from taxable income:
Dividend received deduction
related to earnings of
associated companies 131 1 133 2 142 1
Equity component of AFDC 427 4 496 6 306 2
Amortization of equity component
of AFDC on recoverable Seabrook
investment (155) (1) (155) (2) (187) (2)
Other 8 - (24) - 4 -
------ --- ------ ---- ----- ----
Federal income tax provision before
effect of temporary differences $3,375 30% $2,072 28% $5,224 33%
Less (Plus) timing differences that
are flowed through for ratemaking
and accounting purposes:
Amortization of debt component of
AFDC and capitalized overheads
on recoverable Seabrook
investment (146) (1) (146) (2) (193) (2)
Book depreciation greater than tax
depreciation on assets acquired
before 1971 (292) (3) (292) (4) (293) (2)
State income tax liability
deducted for federal income
tax purposes 131 1 116 2 467 4
Reversal of excess deferred
income taxes 35 - 34 - 221 2
Other 350 3 253 4 139 1
------- --- ------ --- ------ ---
Federal income tax provision 3,297 30% $2,107 28% $4,883 30%
======= === ====== ==== ====== ===
The differences between the federal and state income tax expense reported on
the Consolidated Statements of Income, and the federal and state income tax
liability as reflected on the Company's tax returns, are caused by temporary
differences on which deferred taxes are provided and recovered through rates.
The table below shows the components of deferred tax expense as reported in
the Statements of Income.
1994 1993 1992
-------------------------------------
Costs to terminate purchased
power contract $7,206,794 $4,553,166 $ -
Provision for Basin Mills - (3,137,895) -
Seabrook Nuclear Project (411,747) (414,647) (792,396)
Tax depreciation in excess of
book depreciation 2,766,236 852,187 3,787,047
Deferred fuel and purchased
power costs (2,834,587) 163,665 (8,443,906)
State taxes provided for rate-
making purposes but not paid 241,714 (124,217) 146,702
Deferred taxes provided on the AMT (1,287,485) - 268,254
Deferred interest costs 25,644 59,214 (209,149)
Costs of removal 255,093 84,203 227,649
Deferred demand-side management costs (423,174) 97,672 284,297
FERC licensing costs (1,813,648) 277,574 835,487
Other (1,473,989) (152,160) 99,921
------------ ----------- -----------
Total deferred income tax
expense (benefit) $2,250,851 $2,258,762 $(3,796,094)
============ =========== ============
Under the federal income tax laws, the Company received investment tax
credits on qualified property additions through 1986. Investment tax credits
utilized were deferred and are being amortized over the life of the related
property. Investment tax credits available of about $4.5 million ($2.5
million of which is attributable to PHC and $900,000 to BVC) have not been
utilized or recorded and, subject to review by the Internal Revenue Service
("IRS"), may be used prior to their expiration, which occurs between 1996 and
2005.
At December 31, 1994, the Company had, for income tax purposes, alternative
minimum tax credits of approximately $4.5 million for the reduction of future
tax liabilities. At December 31, 1994, the Company had, for income tax
reporting purposes, approximately $3.2 million of net operating loss
carryforwards that expire in 2008. In 1994 the Company utilized $15.6 million
of tax net operating loss carryforwards and $322,000 of investment tax
credits to reduce the alternative minimum tax liability for 1994.
Note 3 - Common and Preferred Stock
Common Stock-In June of 1994 the shareholders approved a proposal to increase
the number of shares the Company is authorized to issue from 7,500,000 to
10,000,000 of which 7,185,143 were outstanding at December 31, 1994. Prior to
1992, stockholders had been able to invest their dividends and optional cash
payments in common stock of the Company acquired by an independent agent in
the open market through the Company's Dividend Reinvestment and Common Stock
Purchase Plan ("the Plan"). In 1992 the Company amended the Plan to enable it
to issue original shares in return for the reinvested dividends and optional
cash payments. The common stock has general voting rights of one vote per
twelve shares owned.
Preferred Stock-In June of 1994 the shareholders approved a proposal to
increase the number of shares the Company is authorized to issue from 400,000
to 600,000 shares of which there are 197,340 shares outstanding. The
remaining 402,660 authorized but unissued shares (plus additional shares
equal in number to such presently outstanding shares as may be retired) may
be issued with such preferences, restrictions or qualifications as the Board
of Directors may determine. Any new shares so issued will be required to be
issued with per share voting rights no greater than that of the common stock.
The callable preferred stock may be called in whole or in part upon any
dividend date by appropriate resolution of the Board of Directors. Except for
the holders of the 8.76% issue, which does not carry general voting rights,
the currently outstanding preferred stock has general voting rights of one
vote per share. With regard to payment of dividends or assets available in
the event of liquidation, preferred stock ranks prior to common stock.
Redeemable Preferred Shares-On December 27, 1989, the Company issued to an
institutional investor $15 million of non-voting preferred stock carrying a
dividend rate of 8.76%. These shares have a maturity of fifteen years with a
mandatory sinking fund of $1.5 million per year starting in 1995. The
agreement to issue this series of preferred stock contains a provision
whereby, if the Company pays a dividend that is considered a return of
capital for federal income tax purposes, the Company is required to make a
payment to the stockholder in order to restore the stockholder's after-tax
yield to the level it would have been had the dividend not been considered a
return of capital. Since 100% of the dividends paid in 1990 and 1993, pending
any review by the IRS, were to be considered a return of capital, the Company
became obligated to pay this stockholder approximately $969,000 at the time
the stock is either sold or redeemed. This obligation is being recognized
over the remaining life of the issue through a direct charge to retained
earnings of $72,862 per year.
Note 4 - Long-Term Debt
Under the provisions of the first mortgage bond indenture, substantially all
of the Company's plant and property has been mortgaged to secure the
Company's first mortgage bonds. Sinking fund requirements and current
maturities of the first mortgage bonds for the five years subsequent to
December 31, 1994 aggregate $10,914,264 as follows:
SINKING FUNDS CURRENT
REQUIREMENTS MATURITIES TOTAL
------------- ------------- -------------
1995 $1,461,253 $ - $ 1,461,253
1996 1,645,737 - 1,645,737
1997 1,853,515 - 1,853,515
1998 1,778,554 2,500,000 4,278,554
1999 1,675,205 - 1,675,205
------------ ------------- -------------
$8,414,264 $2,500,000 $10,914,264
============ ============= =============
Note 5 - Short-Term Borrowings
The Company has an unsecured revolving credit agreement ("Credit Agreement")
with a group of four banks providing for loans of up to $25 million. The
Credit Agreement expires on May 26, 1995 but may be extended to May 26, 1996
with unanimous consent of the participating banks. The Credit Agreement has a
term loan arrangement whereby the loan balance at the date of termination can
be paid in equal quarterly installments over a two-year period. The Company
may borrow at rates, as defined within the amended Credit Agreement, based on
certificate of deposit loan rates, Eurodollar loan rates or the agent bank's
reference rate. A fourth borrowing option under the Credit Agreement is in
the form of "bid loans" whereby the Company can borrow at "money market"
rates independently set by each of the four banks participating in the Credit
Agreement. A commitment fee based on the entire $25 million and ranging from
1/5 to 5/8 of 1% per annum, depending on the Company's long-term senior
secured debt rating, is required.
The Credit Agreement allows the Company to incur an additional $30 million in
unsecured debt outside of the agreement. The Company maintains lines of
credit with banks which it utilizes when the borrowing costs under the lines
of credit are more favorable than those under the Credit Agreement. Certain
of these lines of credit have commitment fees ranging from 1/8 to 3/8 of 1%
of the line while others have no commitment fees.
Certain information related to total short-term borrowings under the Credit
Agreement and the lines of credit is as follows:
1994 1993 1992
----------- ----------- -----------
Total credit available at end
of period $55,000,000 $55,000,000 $55,000,000
Unused credit at end of period $28,000,000 $19,000,000 $40,000,000
Borrowings outstanding at end
of period $27,000,000 $36,000,000 $15,000,000
Effective interest rate (exclusive
of fees) on borrowings out-
standing at end of period 6.0% 3.5% 4.3%
Average daily outstanding bor-
rowings for the period $26,035,616 $22,754,205 $22,448,087
Weighted daily average annual
interest rate 4.6% 3.7% 4.5%
Highest level of borrowings
outstanding at any month-
end during the period $38,000,000 $36,000,000 $31,000,000
=========== =========== ===========
The average daily borrowings outstanding for the period represent the sum of
daily borrowings outstanding, divided by the number of days in the period.
The weighted daily average annual interest rate is determined by dividing the
annual interest expense by the average daily borrowings outstanding for the
period.
Note 6 - Postretirement and Other Postemployment Benefits
Postretirement Benefits-The Company has noncontributory pension plans
covering substantially all of its employees. On July 17, 1987, the Company
created separate union and nonunion plans from an original plan. Benefits
under the plans are generally based on the employee's years of service and
compensation during the years preceding retirement. The Company's general
policy is to contribute to the funds the amounts deductible for federal
income tax purposes.
The tables below detail the components of pension income for 1994, 1993 and
1992, the funded status of the plans, the amounts recognized in the Company's
Financial Statements and the major assumptions used to determine these
amounts. Employer contributions to the plans amounted to $1,174,019 in 1994.
In 1994 and 1992 the Company implemented early retirement programs which
resulted in additional pension expense of $1,608,267 and $786,000,
respectively.
The plan's assets are composed of fixed income securities, equity securities
and cash equivalents.
Total pension income included the following components:
1994 1993 1992
----------- ----------- -----------
Service cost - benefits earned
during the period $ 1,060,134 $ 1,085,419 $ 1,037,419
Interest cost on projected
benefit obligation 2,310,455 2,244,706 1,996,491
Actual return on plan assets 377,447 (4,633,435) (2,366,341)
Total of amortized obligations and
the net gain (loss) deferred $(3,865,833) $ 1,291,310 $(1,015,783)
------------- ------------ ------------
Total pension (income) $ (117,797) $ (12,000) $ (348,214)
============= ============ ============
1994 1993 1992
------------- ------------ -----------
Significant assumptions used were -
Discount rate 8.25% 7.0% 8.0%
Rate of increase in future
compensation levels 5.0% 5.0% 6.0%
Expected long-term rate of
return on plan assets 9.0% 9.0% 9.0%
The following table sets forth the plans' funded status at December
31, 1994 and 1993:
1994 1993
------------- ------------
Actuarial present value of accumulated
benefit obligation
Vested $ 21,668,455 $ 22,730,655
Non-vested 2,091,333 2,669,955
------------- ------------
Total $ 23,759,788 $ 25,400,610
------------- ------------
Projected benefit obligation $(31,179,979) $(32,484,893)
Plan assets at fair value 36,397,435 37,810,748
------------- ------------
Excess of plan assets over projected
benefit obligation $ 5,217,456 $ 5,325,855
Items not yet recognized in earnings -
Net (asset) at transition (5,984,125) (6,916,450)
Prior service cost 5,653,162 4,597,483
Unrecognized net gain from past
experience and changes in assumptions (2,804,366) (608,390)
------------- -------------
Net pension asset recognized $ 2,082,127 $ 2,398,498
============= =============
In addition to pension benefits, the Company provides certain health care and
life insurance benefits to its retired employees. Substantially all of the
Company's employees may become eligible for retiree benefits if they reach
normal retirement age while working for the Company.
The Company adopted Financial Accounting Standards Board Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS
106") as of January 1, 1993. This standard required the accrual of
postretirement benefits, including medical and life insurance coverage,
during the years an employee provides services to the Company. Prior to 1993,
the cost of health care benefits were expensed as benefits were paid.
The MPUC in 1993 issued a final accounting rule in connection with FAS 106
which adopted this pronouncement for ratemaking purposes and provided the
Company with the accounting and regulatory framework required to defer the
excess of the net periodic postretirement benefit cost recognized under FAS
106 over the pay-as-you-go amount in 1993 through February 28, 1994, and to
include such excess as a regulatory asset pending inclusion in the new base
rates, effective March 1, 1994. This regulatory asset, which amounted to
$705,283 at February 28, 1994, is being recovered, beginning March 1, 1994,
over a ten-year period. The Company, also in accordance with the final
accounting ruling, is amortizing the unrecognized transition obligation of
$10,023,200 over a 20-year period. In 1994 the Company implemented an early
retirement program which resulted in $750,000 of expense related to
additional medical and life insurance benefits provided to the early
retirees.
In 1994 the Company established an irrevocable external Voluntary Employee
Benefit Association Trust Fund ("VEBA") to fund the payment of postretirement
medical and life insurance benefits. Company contributions to the VEBA, which
commenced in July 1994, amounted to $755,000 in 1994.
The actuarially determined net periodic postretirement benefit cost for 1994
and 1993 and the major assumptions used to determine these amounts are shown
below:
1994 1993
---------- -----------
Service cost of benefits earned $379,400 $ 359,600
Interest cost on accumulated post-
retirement benefit obligation 724,000 683,200
Actual return on plan assets (7,800) -
Amortization of unrecognized transition
obligation 501,200 501,200
Other deferrals, net (1,800) -
Early retirement plan benefits 750,000 -
----------- -----------
Net periodic postretirement benefit cost $2,345,000 $1,544,000
=========== ===========
1994 1993
----------- -----------
Significant assumptions used were -
Discount rate 8.25% 7.0%
Health care cost trend rate,
employees less than age 65-
Near-term 9.0% 12.4%
Long-term 4.5% 6.0%
Health care cost trend rate,
employees greater than age 65-
Near-term 7.0% 9.7%
Long-term 4.5% 5.8%
Rate of return on plan assets 2.0% N/A
The following table sets forth the benefit plan's funded status at December
31, 1994 and 1993:
1994 1993
---------- ---------
Accumulated postretirement benefit obligation:
Retirees $7,746,800 $ 5,640,000
Fully eligible active plan participants 446,400 773,000
Other active participants 3,020,900 4,196,000
---------- -----------
$11,214,100 $10,609,000
Fair value of plan assets (409,500) -
Unrecognized net transition obligation (9,020,800) (9,522,000)
Unrecognized gain (loss) 566,423 (77,900)
------------ ------------
Accrued postretirement benefit cost
(included in Other Reserves) $2,350,223 $ 1,009,100
============ ============
If the health care cost trend rate was increased one percent, the accumulated
postretirement benefit obligation as of January 1, 1994 would have increased
by 11.7%. The effect of such change on the aggregate of service and interest
cost for 1994 would be an increase of 13.3%.
Postemployment Benefits-Effective January 1, 1994 the Company adopted
Financial Accounting Standards Board Statement No. 112 "Employers' Accounting
for Postemployment Benefits" (FAS 112). The effect of FAS 112 on the
Company's results of operations and financial position was not material.
Note 7 - Jointly Owned Facilities and Power Supply Commitments
Maine Yankee-The Company owns 7% of the common stock of Maine Yankee which
owns and operates a nuclear power plant in Wiscasset, Maine. Under purchased
power arrangements, the Company is entitled to purchase an amount
approximately equal to its ownership share of the output of Maine Yankee, an
entitlement of approximately 62 MW. The Company is obligated to pay its pro
rata share of Maine Yankee's operating expenses, fuel costs, capital costs
and decommissioning costs. Estimated costs of decommissioning the Maine
Yankee plant assuming dismantlement and removal is $317 million (in 1993
dollars) of which the Company's share is approximately $22.2 million.
The estimated cost of decommissioning is subject to change due to evolving
technology and the possibility of new legal requirements. Accumulated
decommissioning funds at December 31, 1994 were $108.7 million of which the
Company's share was approximately $7.6 million.
MEPCO-The Company owns 14.2% of the common stock of MEPCO. MEPCO owns and
operates electric transmission facilities from Wiscasset, Maine to the Maine-
New Brunswick border. Several New England utilities, including the Company
and MEPCO's other stockholders (two other Maine utilities), are parties to a
transmission support agreement pursuant to which such utilities have agreed
to pay MEPCO's costs, based on their relative system peaks, if MEPCO's
revenues from transmission services are not sufficient to meet its expenses.
Information relating to the operations and financial position of Maine Yankee
and MEPCO appears below.
MAINE YANKEE
(Dollars in Thousands)
------------------------------------
1994 1993 1992
-------- --------- ---------
OPERATIONS:
As reported by investee -
Operating Revenue $173,857 $193,102 $187,259
------------------------------------
Depreciation $30,823 $ 25,458 $ 24,462
Interest and Preferred Dividends 14,583 14,407 14,092
Other expenses, net 121,437 145,861 140,311
------------------------------------
Operating expenses $166,843 $185,726 $178,865
------------------------------------
Earnings Applicable
to Common Stock $ 7,014 $ 7,376 $ 8,394
====================================
Amounts Reported by the Company -
Purchased power costs $ 11,771 $ 11,265 $ 10,830
Equity in net income (480) (542) (592)
------------------------------------
Net purchased power expense $ 11,291 $ 10,723 $ 10,238
====================================
FINANCIAL POSITION:
As reported by investee -
Plant in service $401,092 $396,133 $ 384,664
Accumulated depreciation (192,293) (175,996) (163,887)
Other assets 341,111 314,680 300,416
------------------------------------
Total assets $549,910 $534,817 $ 521,193
Less -
Preferred stock 19,200 19,800 20,400
Long-term debt 118,666 115,333 110,390
Other liabilities and
deferred credits 344,550 332,030 322,900
------------------------------------
Net assets $ 67,494 $ 67,654 $ 67,503
====================================
Company's reported equity -
Equity in net assets $ 4,725 $ 4,736 $ 4,725
Adjust Company's
estimate to actual 29 20 11
------------------------------------
Equity in net assets as reported $ 4,754 $ 4,756 $ 4,736
====================================
MEPCO
(Dollars in Thousands)
-----------------------------------
1994 1993 1992
-------- -------- --------
OPERATIONS:
As reported by investee -
Operating Revenue $ 24,746 $ 12,809 $ 11,608
-----------------------------------
Depreciation $ 1,383 $ 1,395 $ 1,250
Interest and Preferred Dividends 106 124 186
Other expenses, net 23,152 11,185 10,067
-----------------------------------
Operating expenses $ 24,641 $ 12,704 $ 11,503
-----------------------------------
Earnings Applicable to Common Stock $ 105 $ 105 $ 105
===================================
Amounts Reported by the Company -
Purchased power costs $ - $ - $ -
Equity in net income (15) (15) (15)
------------------------------------
Net purchased power expense $ (15) $ (15) $ ( 15)
====================================
FINANCIAL POSITION:
As reported by investee -
Plant in service $ 23,099 $ 23,123 $ 22,915
Accumulated depreciation (20,463) (19,174) (17,891)
Other assets 3,927 2,414 1,815
----------------------------------
Total assets $ 6,563 $ 6,363 $ 6,839
Less -
Preferred stock - - -
Long-term debt 1,730 2,590 3,450
Other liabilities and
deferred credits 3,955 2,895 2,511
----------------------------------
Net assets $ 878 $ 878 $ 878
==================================
Company's reported equity -
Equity in net assets $ 125 $ 125 $ 125
Adjust Company's
estimate to actual - - -
----------------------------------
Equity in net assets
as reported $ 125 $ 125 $ 125
==================================
Wyman 4-The Company owns 8.33% (50 MW) of the oil-fired 600 MW Wyman Unit No.
4 in Yarmouth, Maine. The Company's proportionate share of the direct
expenses of this unit is included in the corresponding operating expenses in
the Statements of Income. Included in the Company's utility plant are the
following amounts with respect to this unit:
1994 1993 1992
------------ ------------ ------------
Electric plant in service $16,771,430 $16,767,909 $16,760,816
Accumulated depreciation (7,996,737) (7,539,591) (7,025,278)
------------ ------------ ------------
$ 8,774,693 $ 9,228,318 $ 9,735,538
============ ============ =============
NEPOOL/Hydro-Quebec Project-The Company is a 1.6% participant in the
NEPOOL/Hydro-Quebec Phase 1 project ("Phase 1"), a 690 MW DC intertie between
the New England utilities and Hydro-Quebec constructed by a subsidiary of
another New England utility at a cost of about $140 million. The participants
receive their respective share of savings from energy transactions with
Hydro-Quebec, and are obliged to pay for their respective shares of the costs
of ownership and operation whether or not any savings are realized.
The Company is also a 1.5% participant in the NEPOOL/Hydro-Quebec Phase 2
project ("Phase 2"), which involves an increase to the capacity of the Phase
1 intertie to 2,000 MW. As in the Phase 1 project, the Company receives a
share of the anticipated energy cost savings derived from purchases from
Hydro-Quebec and capacity benefits provided by the intertie and is required
to pay its share of the costs of ownership and operation whether or not any
savings are obtained.
In 1990, the Company formed Bangor Var Co., Inc. whose sole function is to be
a 50% general partner in the Chester SVC Partnership ("Chester"), a
partnership which owns a static var compensator ("SVC"), which is electrical
equipment that supports the Phase 2 transmission line. A wholly-owned
subsidiary of Central Maine Power Company owns the other 50% interest in
Chester. Chester has financed the acquisition and construction of the SVC
through the issuance of $33 million in principal amount of 10.48% senior
notes due 2020, and up to $3.25 million principal amount of additional notes
due 2020 (collectively, the "SVC Notes"). The holders of the SVC Notes are
without recourse against the partners or their parent companies and may only
look to Chester and to the collateral for payment.
The New England utilities which participate in Phase 2 have agreed under a
FERC-approved contract to bear the cost of Chester, on a cost of service
basis, which includes a return on and of all capital costs.
Small Power Production Facilities-As of the beginning of 1993, the Company
had contracts with ten independent, non-utility power producers known as
"small power production facilities." The West Enfield Project, described
below, is one such facility. There are five other relatively small
hydroelectric facilities. The remainder are larger (15 25 MW) facilities,
three fueled by biomass (primarily wood chips) and one by municipal solid
waste. The cost of power from the small power production facilities is more
than the Company would incur if it were not obligated under these contracts,
and, in the case of the biomass and solid waste plants, substantially more.
The prices were negotiated at a time when oil prices were much higher than at
present, and when forecasts for the costs of the Company's long-term power
supply were higher than current forecasts. In the Company's 1987 rate
proceeding, the MPUC investigated the events surrounding the contract
negotiations but reached no conclusion about the Company's prudence in
entering into these contracts. The fuel cost adjustment approved by the MPUC
effective November 1, 1993 includes projected costs for small power
production facilities.
In order to lower the overall cost of power to its customers, the Company
negotiated an agreement to cancel its long-term purchased power agreement
with one of the biomass plants, the Beaver Wood Joint Venture ("Beaver
Wood"), in June 1993. In connection with the cancellation the Company paid
Beaver Wood $24 million in cash and issued a new series of 12.25% First
Mortgage Bonds due July 15, 2001 to the holders of Beaver Wood's debt in the
amount of $14.3 million in substitution for Beaver Wood's previously
outstanding 12.25% Secured Notes. Also, in connection with the cancellation
agreement, a reconstituted Beaver Wood partnership paid the Company $1
million at the time of settling the transaction and has agreed to pay the
Company $1 million annually for the next six years in return for retaining
the ownership and the option of operating the plant. The payments are secured
by a mortgage on the property of the Beaver Wood facility. The Company
believes this contract buyout transaction will result in significant savings
to its customers compared to the continuation of payments under the purchased
power contract.
In May 1993 the Company received an accounting order from the MPUC related to
the purchased power contract buyout. The order stipulated that the Company
may seek recovery of the costs associated with the buyout in a future base
rate case, and could also record carrying costs on the deferred balance.
Consequently, a regulatory asset of $40.3 million had been recorded as of
December 31, 1993. Effective with the implementation of new base rates on
March 1, 1994, the Company began recovering over a nine-year period the
deferred balance, net of the additional $6 million anticipated from Beaver
Wood. In July 1994 Beaver Wood made its second $1 million payment.
The agreements with the other two biomass plants, located in the Company's
service territory in West Enfield and Jonesboro, are also long-term (30-year)
contracts. The West Enfield and Jonesboro facilities, plants of 24.5 MW each
constructed by the same developer, commenced operation in November 1987. The
Company has contracted to resell a portion of the capacity from these two
projects to another utility. The cost to the Company of these contracts (net
of revenues from the foregoing resale) is approximately $26 million annually.
The Company has entered into an agreement with the owners of these facilities
to buy out these contracts for approximately $163 million. See Note 14 to the
Financial Statements. The Company also has a 30-year contract with the
municipal solid waste facility, a 20 MW waste-to-energy plant in the
Company's service territory in Orrington, completed in 1988. The Company has
also contracted to resell a portion of the capacity for fifteen years from
this facility to the other utility referred to earlier. The cost to the
Company of the power delivered by this facility (net of revenues from the
foregoing resale) is projected to be $14 million annally.
West Enfield Project-In 1986, the Company entered into a joint venture with a
development subsidiary of Pacific Lighting Corporation for the purpose of
financing and constructing the redevelopment of an old 3.8 MW hydroelectric
plant which the Company owned on the Penobscot River in Enfield and Howland,
Maine, into a 13 MW facility for the purpose of operating the facility once
it was completed. Commercial operation of the redeveloped project began in
April 1988. A wholly-owned corporate subsidiary, Penobscot Hydro Co., Inc.
("PHC") was formed to own the Company's 50% interest in the joint venture,
Bangor-Pacific Hydro Associates ("Bangor Pacific").
Bangor-Pacific financed the $45 million estimated cost of the redevelopment
through the issuance in a privately placed transaction of $40 million of
fixed rate term notes and a commitment for up to $5 million of floating rate
notes. The notes are secured by a mortgage on the project and a security
interest in a 50-year purchased power contract, and the revenues expected
thereunder, between the Company and Bangor-Pacific. Except as described
below, the holders of the notes issued by Bangor-Pacific are without recourse
to the joint venture partners or their parent companies.
In the event Bangor-Pacific fails to pay when due amounts payable pursuant to
the loan agreement, each partner has agreed to make capital contributions to
Bangor-Pacific in an amount equal to 50% of such amounts due and payable, but
not exceeding an amount equal to distributions from Bangor-Pacific received
by such partner in the preceding twelve-month period. The Company is obliged
to provide funds necessary to support the foregoing limited financial
commitment to the project undertaken by PHC as the partner.
Under the purchased power contract, if the project operates as anticipated,
payments by the Company to Bangor-Pacific are estimated to be about $7.5
million annually (without consideration of any distributions by the joint
venture to the partners). It is possible that the Company would be required
to make payments under the contract regardless of whether any power is
delivered, in an amount of approximately $4 million per year. However, the
Company has the right to terminate the contract if the failure to deliver
power continues for a period of 12 consecutive months.
Basin Mills and Veazie Projects-As a result of increased uncertainty about
the recoverability of amounts invested through 1993 in licensing activities
for proposed additional hydroelectric facilities, the Company established a
reserve against those investments in the amount of $8.7 million as of
December 31, 1993. Further, the Company has charged to non-operating expenses
all amounts related to these licensing activities in 1994. The projects for
which the reserve was established are a proposed 38 megawatt generating
facility located at the so-called Basin Mills site on the Penobscot River at
Orono and Bradley, Maine and an 8 megawatt addition to the Company's existing
dam and power station on the Penobscot River in Veazie and Eddington, Maine.
The projects would require a total investment of $140 million. The Company
has been pursuing the permitting of these facilities since the early 1980's.
Note 8 - Recovery of Seabrook Investment and Sale of Seabrook Interest
The Company was a participant in the Seabrook nuclear project in Seabrook,
New Hampshire. On December 31, 1984, the Company had almost $87 million
invested in Seabrook, but because the uncertainties arising out of the
Seabrook Project were having an adverse impact on the Company's financial
condition, an agreement for the sale of Seabrook was reached in mid-1985 and
was finally consummated in November 1986.
During 1985, a comprehensive agreement was negotiated among the Company, the
MPUC staff, and the Maine Public Advocate addressing the recovery through
rates of the Company's investment in Seabrook (the "Seabrook Stipulation").
This negotiated agreement was approved by the MPUC in late 1985. Although the
implementation of the Seabrook Stipulation significantly improved the
Company's financial condition, substantial write-offs were required as a
result of the determination that a portion of the Company's investment in
Seabrook would not be recovered. In addition to the disallowance of certain
Seabrook costs, the Seabrook Stipulation also provided for the recovery
through customer rates of 70% of the Company's year-end 1984 investment in
Seabrook Unit 1 over 30 years, and 60% of the Company's investment in Unit 2
over seven years, with base rate treatment of the unamortized balances. As of
December 31, 1992, the Company's investment in Seabrook Unit 2 was fully
amortized.
Note 9 - Contingencies
Environmental Matters-The Company has received notice from the Maine
Department of Environmental Protection that it is investigating the cleanup
of several sites in Maine that were used in the past for the disposal of
hazardous substances and that the Company, as a generator of some of the
hazardous substances that were disposed of on those sites, may be liable for
certain cleanup costs. With respect to at least one of those sites, the
Company is aware that the United States Environmental Protection Agency is
considering designation under the Comprehensive Environmental Response,
Compensation, and Liability Act in order to pursue potentially responsible
parties. The Company was only one of a number of waste generators at each of
the sites under investigation, and it is too early in the process to
speculate on the extent of the Company's potential liability.
Note 10. Unaudited Quarterly Financial Data
Unaudited quarterly financial data pertaining to the results of operations
are shown below:
Quarter Ended
--------- --------- --------- --------
Mar. 31 June 30 Sept. 30 Dec.31
--------- --------- --------- --------
(Dollars in thousands except per share amounts)
1994
----
Electric Operating Revenue $46,375 $39,664 $42,575 $45,484
Operating Income 3,037 4,550 5,589 4,157
Net Income 1,095 2,008 3,073 1,282
Earnings Per Share of Common Stock $ .11 $ .22 $ .37 $ .12
======= ======= ======= =======
1993
----
Electric Operating Revenue $49,679 $40,548 $43,476 $44,269
Operating Income 4,779 4,486 4,396 3,168
Net Income (Loss) 2,908 2,766 3,244 (3,582)*
Earnings (Loss) Per Share
of Common Stock $ .46 $ .42 $ .46 $ (.64)*
======= ======= ======= ========
1992
----
Electric Operating Revenue $48,013 $39,722 $41,877 $47,177
Operating Income 4,472 4,370 5,050 4,624
Net Income 2,555 2,224 2,885 2,591
Earnings Per Share of Common Stock $ .40 $ .34 $ .46 $ .40
======= ======= ======= =======
* Includes the provision for Basin Mills of $5.6 million after-tax or $.95
per common share.
Note 11. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value at
December 31, 1994 of each class of financial instruments for which it is
practical to estimate the value:
Cash and cash equivalents:
The carrying amount of $1,956,159 approximates fair value.
The fair values of mandatory redeemable cumulative preferred stock, first
mortgage bonds and pollution control revenue bonds at December 31, 1994 based
upon similar issues of comparable companies are as follows:
In Thousands
-------------------
Carrying Fair
Amount Value
-------------------
Mandatory redeemable cumulative preferred stock $ 15,240 $ 15,857
First Mortgage Bonds 113,628 116,678
Pollution Control Revenue Bonds 4,200 4,200
===================
Note 12 - Significant Non-Cash Investing and Financing Activity
In connection with the termination of the purchased power agreement in 1993
with the Beaver Wood Joint Venture, the Company issued $14.3 million of
12.25% First Mortgage Bonds in substitution for Beaver Wood's previously
outstanding secured notes which is not reflected in the Statements of Cash
Flows.
Note 13 - Regulatory Assets
Accounting rules applicable to regulated utilities allow the establishment of
regulatory assets for costs accumulated for certain items other than the
usual and customary capital assets, and allow the deferral of the income
statement impact of those costs if they are expected to be recovered in
future rates. As of December 31, 1994, the Company has regulatory assets of
approximately $97.4 million. The effects of competition could ultimately
cause the operations of the Company, or a portion thereof, to cease meeting
the criteria for application of the accounting rules for regulatory assets.
If this were to occur, accounting standards of enterprises in general would
apply and unamortized balances of regulatory assets would be charged to
operations in the year in which those criteria were no longer applicable.
Note 14 - Alternative Marketing Plan
On February 14, 1995, the MPUC issued an order approving many aspects of the
Company's Alternative Marketing Plan ("AMP") proposal. The AMP proposal
included a plan for allowing increased flexibility to offer reduced prices
and develop related marketing programs, a commitment to attempt to cap
electric rates at current levels for an extended period, the elimination of
fuel cost accounting and the fuel adjustment clause, the elimination of
seasonal rate differentials and an understanding about the method of
amortizing the cost of any future buyout of high-cost purchased power
contracts.
Note 15 - Buyback of Purchased Power Contracts
The Company has reached an agreement in principle to buy back two contracts
for the purchase of power from operators of biomass-fueled generating plants
located in West Enfield and Jonesboro, Maine. Both power vendors are
high-cost non-utility independent power producers with whom the Company was
required to contract in the 1980's. The power contracts, identical in their
terms and conditions, provide for the purchase of the entire generation
output of each of the facilities. Each plant has a rated capacity of 24.5 MW.
Power purchases began in 1986 and are scheduled under the contracts to
continue for a period of approximately 30 years from the date of the initial
purchases.
The buyback agreement calls for a cash payment by the Company of $83 million
($41.5 million per plant) and for the Company to assume responsibility for
the remaining debt on the plants in a manner that relieves the owners of any
further obligations on such debt. The balance of the outstanding debt is
expected to be about $79 million in total at the time of the closing. If the
lenders are unwilling to permit the assumption by the Company of such debt on
terms acceptable to the Company and the owners, the Company would be required
to increase the cash portion of the buyback by an amount sufficient to
discharge the owners' debt in order for the buyback to be accomplished. In
addition, the Company will be responsible for costs of preparing for a
closing of the transaction and may incur significant costs in obtaining the
necessary financing. The Company will be obliged to pay some portion of such
costs whether or not a closing occurs. Financing this transaction will be a
significant challenge for the Company in view of the Company's relatively
small size and its existing capital structure. The Company expects the
financing to be accomplished through a combination of bank borrowings, the
possibility of the assumption of the owners' debt, and the issuance of other
debt securities.
With the elimination of the FCA, reduced fuel cost benefits of any buyout
will inure to the benefit of the Company and may be used to recover the
amortization of the buyout cost. The Company believes that the fuel and
energy cost savings achieved by such a buyout, previously subject to the FCA,
would exceed any costs of such a buyout, including carrying costs on the
unamortized balance.
Bangor Hydro-Electric Company
Notes To Consolidated Financials Statements
16. Subsequent Event - Maine Yankee
Steam Generator Tube Cracking - The Maine Yankee unit, like other pressurized
water reactors, has been experiencing degradation of its steam generator
tubes, principally in the form of circumferential cracking, which, until
early 1995, was believed to be limited to a relatively small number of steam
generator tubes. In the past the detection of defects has resulted in the
plugging of those tubes to prevent their subsequent use. During the
refueling and maintenance shutdown that commenced in early February of 1995,
Maine Yankee has detected increased degradation of the plant's steam
generator tubes, in excess of the number expected, and is currently
evaluating several courses of action to address the matter. This detection
of a significantly larger number of degraded tubes is likely to adversely
affect the operation of the plant and may result in substantial cost to the
Company. The Company cannot now predict what course of action will be chosen
or to what extent the operation of the plant will be affected. The Company
believes, however, that Maine Yankee will not resume generation as originally
scheduled in April, 1995 and that an extended outage lasting at least several
months is likely.
In connection with the approval by the MPUC of the Company's alternative
marketing plan, effective January 1, 1995, the separate fuel cost adjustment
rates were eliminated. The fuel cost adjustment was a rate mechanism under
which the Company was permitted to adjust retroactively for changes in the
cost of fuel for generation and in certain purchased power costs.
Accordingly, with the fuel cost adjustment mechanism in place, the cost of
power purchased from another source to replace that which had been expected
from Maine Yankee would have had no impact on earnings.
The Company estimates that, under current conditions in the bulk power
market, its power costs will be increased by $700,000 to $900,000 per month
during the Maine Yankee outage, which will increase pressure on the Company's
earnings. In addition, the Company would be responsible for its pro rata
share of any costs associated with repairing or mitigating the impact of the
degraded tubes. The Company believes that it is too early to provide
reliable estimates of such costs but that they could be substantial.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Bangor Hydro-Electric Company:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Bangor Hydro-Electric Company and subsidiaries (the
"Company") as of December 31, 1994 and 1993, and the related consolidated
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as
of December 31, 1994 and 1993, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for income taxes.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 2, 1995, except as to the
information presented in Note 16
for which the date is March 29, 1995.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH AUDIT FIRMS ON
------ ------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
There have been no changes in or disagreements with audit firms on
financial disclosure.
PART III
--------
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------- --------------------------------------------------
See Part I above, and see the information under "Election of Directors"
in the Company's definitive proxy statement for the annual meeting of
stockholders to be held on May 17, 1995, which information is incorporated
herein by reference.
ITEM 11 EXECUTIVE COMPENSATION
------- ----------------------
See the information under "Executive Compensation" in the Company's
definitive proxy statement for the annual meeting of stockholders to be held
on May 17, 1995, which information is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
------- -----------------------------------------------
AND MANAGEMENT
--------------
(a) Security Ownership of Certain Beneficial Owners
See the Company's definitive proxy statement for the
annual meeting of stockholders to be held on May 17, 1995,
which information is incorporated herein by reference.
(b) Security Ownership of Management
See the Company's definitive proxy statement for the
annual meeting of stockholders to be held on May 17, 1995, which
information is incorporated herein by reference.
(c) Changes in Control
Not applicable.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------- ----------------------------------------------
See the information under "Compensation Committee Interlocks and Insider
Participation" in the Company's definitive proxy statement for the annual
meeting of stockholders to be held on May 17, 1995, which information is
incorporated herein by reference.
PART IV
-------
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
------- ----------------------------------------------------
ON FORM 8-K
-----------
(a) Consolidated Financial Statements of the Company (See
Item 8)
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets - December 31, 1994 and
1993
Consolidated Statements of Retained Earnings for the
Years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Capitalization - December
31, 1994 and 1993
Consolidated Statements of Cash Flows
for the Years Ended December 31,
1994, 1993 and 1992
Notes to Consolidated Financial Statements
Report of Independent Accountants
(b) Schedules
Report of Independent Accountants
Schedule VIII - Reserves for Doubtful Accounts
and Insurance
All other schedules are omitted as the required information is
inapplicable or the information is presented in the Company's
consolidated financial statements or related notes.
(c) Exhibits
See Exhibit Index, page
(d) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the Fourth
Quarter of 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Bangor Hydro-Electric Company
/s/ Robert S. Briggs
---------------------
By: Robert S. Briggs
President and
Chairman of the Board
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert S. Briggs /s/ Helen Sloane Dudman
--------------------------- --------------------------
Robert S. Briggs Helen Sloane Dudman
President and Director
Chairman of the Board
/s/ William C. Bullock, Jr. /s/ G. Clifton Eames
--------------------------- --------------------------
William C. Bullock, Jr. G. Clifton Eames
Director Director
/s/ Robert H. Foster
--------------------------- --------------------------
Jane J. Bush Robert H. Foster
Director Director
/s/ Carroll R. Lee
--------------------------- --------------------------
David M. Carlisle Carroll R. Lee
Director Director, Vice President-
Operations
/s/ Alton E. Cianchette /s/ Robert C. Weiser
--------------------------- --------------------------
Alton E. Cianchette Robert C. Weiser
Director Chief Financial Officer
/s/ David R. Black
---------------------
David R. Black
Controller
(Chief Accounting Officer)
Each of the above signatures is affixed as of March 20, 1995.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders and Board of Directors
Bangor Hydro-Electric Company:
Our report on the financial statements of Bangor Hydro-Electric Company
is included in Item 8 of this Form 10-K. In connection with our audits of
such financial statements, we have also audited the related financial
statement schedules listed in the index in Item 14(b) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 2, 1995, except as to the
information presented in Note 16
for which the date is March 29, 1995
<TABLE>
SCHEDULE VIII
<CAPTION>
RESERVES FOR DOUBTFUL ACCOUNTS AND INSURANCE
----------------------------------------------
Additions
-----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Of Period Expenses Accounts Deductions of Period
------- ------- ------- ------- -------
1994
<S> <C> <C> <C> <C> <C>
Reserve for Doubtful Accounts $ 1,450,000 $ 913,841 $ - $ 1,633,841 (A) $ 730,000
----------- ----------- ---------- ----------- -----------
Reserve for Retirees' Life Insurance $ 700,000 $ 164,000 $ - $ 16,000 $ 848,000
----------- ----------- ---------- ----------- -----------
<CAPTION>
1993
<S> <C> <C> <C> <C> <C>
Reserve for Doubtful Accounts $ 1,450,000 $ 1,090,813 $ - $ 1,090,813 (A) $ 1,450,000
----------- ----------- ---------- ----------- -----------
Reserve for Retirees' Life Insurance $ 612,000 $ 92,000 $ - $ 4,000 $ 700,000
----------- ----------- ---------- ----------- -----------
<CAPTION>
1992
<S> <C> <C> <C> <C> <C>
Reserve for Doubtful Accounts $ 950,000 $ 1,214,568 $ - $ 714,568 (A) $ 1,450,000
----------- ----------- ---------- ----------- -----------
Reserve for Retirees' Life Insurance $ 532,000 $ 112,000 $ - $ 32,000 $ 612,000
----------- ----------- ---------- ----------- -----------
NOTE:
(A) Accounts written off, less recoveries.
</TABLE>
EXHIBIT INDEX
EXHIBITS INCORPORATED HEREIN BY REFERENCE
-----------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT INCORPORATED BY REFERENCE TO:
----------- ----------------------- -----------------------------
3. ARTICLES OF INCORPORATION & BY-LAWS
3.1 Company's Certificate Form S-2, Reg. No. 33-39181,
of Organization,together Exhibit 3.1
with all amendments thereto
3.2 Articles of Amendment Form S-2, Reg. No. 33-63500,
increasing Company's Exhibit 4.3
authorized capital stock
3.2 By-Laws of the Company Form S-2, Reg. No. 33-63500,
Exhibit 4.4
4. Instruments Defining the Rights of Security Holders
---------------------------------------------------
4.1 Mortgage and Deed of Form S-1, Reg. No. 2-54452,
Trust dated as of Exhibit 4(b)(1)
July 1, 1936, re
First Mortgage Bonds
4.2 Supplemental Indenture Form S-1, Reg. No. 2-54452,
dated as of December 1, Exhibit 4(b)(2)
1945, amending the
Mortgage
4.3 Supplemental Indenture Form S-1, Reg. No. 2-54452
dated as of September 1, Exhibit 4(b)(4)
1969, re 8 1/4% Series
Bonds, together with form
of purchase agreement.
(Supplemental indentures
and purchase agreements
with respect to prior
issues are substantially
identical in substantive
content to the 8 1/4%
Series documents).
4.4 Supplemental Indenture Form 10-K, 1975, Exhibit B
dated as of November 1,
1975, re 10 1/2% Series
Bonds, together with form
of purchase agreement
4.5 Supplemental Indenture Form 8-K, 6/28/76, Exhibit A
dated as of June 1, 1976,
re 9 1/4% Series Bonds
4.6 Form of Purchase Form 10-K, 1976, Exhibit C
Agreement re 9 1/4%
Series Bonds
4.7 Supplemental Indenture Form S-7, Reg. No. 2-61589,
dated as of January 1, Exhibit 5(a)(7)
1978, re 8.6% Series
Bonds, together with form
of purchase agreement
4.8 Supplemental Indenture Form 10-Q, 3rd Quarter 1979,
dated as of August 1, Exhibit A
1979, re 10.25% Series
Bonds, together with form
of purchase agreement
Common Stock Purchase Plan
4.9 Supplemental Indenture Form 10-Q, 1st Quarter, 1981,
dated as of April 1, Exhibit A
1981 re 15.25% Series
Bonds, together with form
of purchase agreement
4.10 Supplemental Indenture Form 10-Q, 2nd Quarter 1981,
dated as of July 30, Exhibit (4)
1981 re 16.50% Series
Bonds, together with form
of purchase agreement
4.11 Bond Purchase Agreement, Form 10-K, 1983, Exhibit 4(a)
including form of
supplemental indenture,
with respect to First
Mortgage Bonds, 12.50%
Series due 1998
4.12 Loan Agreement, Indenture Form 10-K, 1983, Exhibit 4(b)
of Trust and Letter of
Credit Reimbursement
Agreement with respect to
Variable Rate Demand
Pollution Control Revenue
Bonds (Bangor Hydro-
Electric Company Project)
Series 1983
4.13 Bond Purchase Agreement, Form 10-K, 1984, Exhibit 4(a)
including form of
supplemental indenture,
with respect to First
Mortgage Bonds, 17.35%
Series due 1994
4.14 Bond Purchase Agreement Form 10-Q, First Quarter,
dated as of March 1, 1989 1989, Exhibit 4.1
including form of
supplemental indenture,
with respect to First
Mortgage Bonds, 10.25%
Series due 2019
4.15 Preferred Stock Purchase Form 10-K, 1990, Exhibit 4(a)
Agreement, 8.76% Series
dated as of December 19,
1989
4.16 Bond Purchase Agreement Form 10-K, 1990, Exhibit 4(b)
dated as of June 15, 1990
including form of
supplemental indenture,
with respect to First
Mortgage Bonds, 10.25%
Series due 2020
10. Material Contracts
------------------
10.1 New England Power Pool Form S-7, Reg. No. 2-69904,
Agreement dated as of Exhibit 10(a)(3)
September 1, 1971, with
all amendments through
December 1980
10.2 Copy of Twelfth Amendment Form S-7, Reg. No. 2-69904,
dated as of June 16, 1980 Exhibit 10(a)(4)
to the Agreement for Joint
Ownership, Construction and
Operation of New Hampshire
Nuclear Units
10.3 Participation Agreement Form S-1, Reg. No. 2-54452,
dated June 20, 1969 Exhibit 13(a)(2)(a)-1
between Maine Electric
Power Company, Inc.
("MEPCO") and the Company
10.4 Agreement dated June Form S-1, Reg. No. 2-54452,
29, 1969 among Maine Exhibit 13(a)(2)(a)-2
participants in MEPCO
Participation Agreement
10.5 Power Contract dated Form S-1, Reg. No. 2-54452,
May 20, 1968 between Exhibit 13(a)(3)(a)
Maine Yankee Atomic
Power Company ("Maine
Yankee") and the
Company and other
utilities
10.6 Stockholder Agreement Form S-1, Reg. No. 2-54452,
dated May 20, 1968 Exhibit 13(a)(3)(b)
among stockholders of
Maine Yankee, (including
the Company).
10.7 Capital Funds Agreement Form S-1, Reg. No. 2-54452,
dated May 29,1968 Exhibit 13(a)(3)(c)
between Maine Yankee
and sponsors, including
the Company
10.8 Maine Yankee Transmission Form S-1, Reg. No. 2-54452,
Agreement dated April 1, Exhibit 13(a)(3)(d)
1971 among the Company
and other utilities
10.9 Modification of Maine Form S-1, Reg. No. 2-54452,
Yankee Transmission Exhibit 13(a)(3)(f)
Agreement of December
1, 1972
10.10 Agreement for Joint Form S-1, Reg. No. 2-54452,
Ownership, Construction Exhibit 13(a)(4)(a)
and Operation dated
November 1, 1974 of
Wyman Unit No. 4 among
Central Maine Power
Company, the Company
and other utilities
10.11 Amendment No. 1 dated Form S-1, Reg. No. 2-54452,
June 30, 1975 to Wyman 4 Exhibit 13(a)(4)(b)
Agreement of November 1,
1974
10.12 Transmission Agreement Form S-1, Reg. No. 2-54452,
dated November 1, 1974 Exhibit 13(a)(4)(c)
re Wyman Unit No. 4
among Central Maine
Power Company and other
utilities
10.13 Form of Federal Power Form S-1, Reg. No. 2-54452,
Commission license Exhibit 13(b)(4)
for hydro-electric
dam facility
10.14 Employee Stock Ownership Form S-7, Reg. No. 2-59747,
Plan, including related Exhibit 5(a)(2)
trust agreements, dated
June 1, 1977
10.15 Sample of binder relating Form S-7, Reg. No. 2-59747,
to contingent liability Exhibit 5(a)(4)
for nuclear incidents
10.16 Agreements relating to Form S-7, Reg. No. 2-61589,
Seabrook 1 and 2 Exhibit 5(a)(3)
including offering
letter dated September
7, 1977 and the Company's
response thereto dated
October 6, 1977, the
Agreement to Transfer
Ownership Share between
the Company and The
Connecticut Light and
Power Co., dated November
1, 1977 and a letter
amendment thereto dated
January 31, 1978, and the
Joint Ownership Agreement
with Public Service
Company of New Hampshire
and other utilities as
amended through January
31, 1975
10.17 Amendment No. 2 dated Form 10-K, 1976, Exhibit H(2)
August 16, 1976 to Joint
Ownership Agreement
dated November 1, 1974
with Central Maine Power
Company and others re
Wyman Unit No. 4
10.18 Copies of Tenth and Form 10-K, 1979, Exhibit D
Eleventh Amendments
dated October 11, 1979
and December 15, 1979,
respectively, to the
Agreement for Joint
Ownership Construction
and Operation of New
Hampshire Nuclear Units
10.19 Copies of Forms of Form 10-Q, 2nd Qtr. 1979,
documents related to Exhibit A
the Company's proposed
purchase of an additional
1.80142% interest in the
Seabrook Nuclear Units,
consisting of PSNH's
offer to sell ownership
shares dated March 8,
1979, the Company's
letter response thereto
dated March 19, 1979,
and the Sixth, Seventh,
Eighth and Ninth Amendment
to the Agreement for Joint
Ownership, Construction
and Operation of New
Hampshire Nuclear Units,
dated April 18, 1979,
April 18, 1979, April 25,
1979, and June 8, 1979,
respectively
10.20 Copy of Thirteenth Form 10-K, 1981, Exhibit
Amendment dated as of 10(a)
December 31, 1980 to
the Agreement for Joint
Ownership, Construction
and Operation of New
Hampshire Nuclear Units
10.21 Forms of contracts Form 10-Q, 2nd Qtr. 1982,
concerning the Company's Exhibit 10
participation with
other New England
utilities in the
proposed Quebec
interconnection
10.22 Fourteenth Amendment Form 10-K, 1983, Exhibit 10.1
dated as of June 1, 1982
to the Agreement for
Joint Ownership,
Construction and
Operation of New
Hampshire Nuclear
Units
10.23 Third Amendment dated Form 10-K, 1983, Exhibit 10.2
as of November 1, 1982
to Preliminary Quebec
Interconnection Support
Agreement
10.24 Second Amendment dated Form 10-K, 1983, Exhibit 10.3
as of November 1, 1982
to Agreement With
Respect to Use of
Quebec Interconnection
10.25 Amendment No. 2 dated Form 10-K, 1983, Exhibit 10.4
as of November 1, 1982,
to Phase 1 Terminal
Facility Support
Agreement (Quebec
Interconnection)
10.26 Amendment No. 2 dated Form 10-K, 1983, Exhibit 10.5
as of November 1, 1982
to Phase 1 Vermont
Transmission Line
Support Agreement
(Quebec Interconnection)
10.27 Fourth Amendment Form 10-Q, 1st Quarter 1983,
dated as of March 1, Exhibit 10.1
1983, to Preliminary
Quebec Interconnection
Support Agreement
10.28 Fourteenth Amendment to Form 10-Q, 2nd Quarter 1983,
Agreement for Joint Exhibit 10.2
Ownership, Construction
and Operation of New
Hampshire Nuclear Units
10.29 Fifth Amendment to Form 10-Q, 2nd Quarter 1983,
Preliminary Quebec Exhibit 10.2
Interconnection
Support Agreement
10.30 Amendment dated as of Form 10-Q, 2nd Quarter 1983,
September 1, 1981 Exhibit 10.3
to New England Power
Pool Agreement
10.31 Amendment dated as of Form 10-Q, 2nd Quarter 1983,
June 1, 1982 to New Exhibit 10.4
England Power Pool
Agreement
10.32 Amendment dated as of Form 10-Q, 2nd Quarter 1983,
June 15, 1983 to New Exhibit 10.5
England Power Pool
Agreement
10.33 Amendment dated as of Form 10-Q, 3rd Quarter 1983,
October 1, 1983 to Exhibit 10.1
New England Power Pool
Agreement
10.34 Amendment No. 1 to the Form 10-K, 1983, Exhibit 10(b)
Maine Yankee Power
Contract
10.35 Amendment No. 2 to the Form 10-K, 1983, Exhibit 10(c)
Maine Yankee Power
Contract
10.36 Additional Power Con- Form 10-K, 1983, Exhibit 10(d)
tract between Maine
Yankee and its sponsors,
including the Company
10.37 Interim Protection Agree- Form 10-Q, 1st Quarter 1984,
ment dated as of April Exhibit 10.1
27, 1984 relating to
the Seabrook project
10.38 Fifteenth Amendment Form 10-Q, 1st Quarter 1984,
to the Seabrook Joint Exhibit 10.2
Ownership Agreement
10.39 Sixteenth Amendment Form 10-Q, 2nd Quarter 1984,
to the Seabrook Joint Exhibit 10.1
Ownership Agreement
10.40 Agreement for Seabrook Form 10-Q, 2nd Quarter 1984,
Project Disbursing Agent Exhibit 10.2
10.41 Seventeenth Amendment to Form 10-K, 1984, Exhibit 10(a)
Seabrook Joint Ownership
Agreement and corresponding
First Amendment to Seabrook
Project Disbursing Agent
Agreement (neither of which
were executed by the Company)
10.42 Preliminary Support Form 10-K, 1984, Exhibit 10(b)
Agreement - Phase 2 of
Hydro-Quebec Inter-
connection
10.43 Letter of Intent between Form 10-Q, 2nd Quarter 1985,
the Company and Eastern Exhibit 10.1
Utilities Associates
re: possible sale of
Seabrook interest
10.44 First, Second and Third Form 10-K, 1985, Exhibit 10(a)
Amendments to agreement for
Seabrook Project Disbursing
Agent (none of which were
executed by the Company)
10.45 Amendment dated September 1, Form 10-K, 1985, Exhibit 10(b)
1985 to Agreement with
respect to Use of Quebec
Interconnection
10.46 Energy Contract dated Form 10-K, 1985, Exhibit 10(c)
March 1983 between NEPOOL
and Hydro-Quebec re:
Hydro-Quebec Phase I
interconnection project
10.47 Energy Banking Agreement Form 10-K, 1985, Exhibit 10(d)
dated March 1983 between
NEPOOL and Hydro-Quebec re
Hydro-Quebec Phase I
interconnection project
10.48 Interconnection Agreement Form 10-K, 1985, Exhibit 10(e)
dated March 1983 between
NEPOOL and Hydro-Quebec re:
Hydro-Quebec Phase I
interconnection project
10.49 Amendment dated September 1 Form 10-K, 1985, Exhibit 10(f)
1985 to NEPOOL Agreement
re: Hydro-Quebec Phase II
interconnection project
10.50 Firm Energy Contract dated Form 10-K, 1985, Exhibit 10(g)
October 14, 1985 between
New England utilities and
Hydro-Quebec re: Hydro-
Quebec Phase II
interconnection project
10.51 Boston Edison AC Facilities Form 10-K, 1985, Exhibit 10(h)
Support Agreement dated June
1, 1985 re: Hydro-Quebec
Phase II interconnection
project
10.52 Phase II New England Form 10-K, 1985, Exhibit 10(i)
Power AC Facilities
Support Agreement dated
June 1, 1985 re: Hydro-
Quebec Phase II
interconnection project
10.53 Phase II Massachusetts Form 10-K, 1985, Exhibit 10(j)
Transmission Facilities
Support Agreement dated
June 1, 1985 re: Hydro-
Quebec Phase II
interconnection project
10.54 Phase II New Hampshire Form 10-K, 1985, Exhibit 10(k)
Facilities Support
Agreement dated June 1,
1985 re: Hydro-Quebec
Phase II interconnection
project
10.55 First Amendment dated Form 10-K, 1985, Exhibit 10(l)
March 1, 1985 and Second
Amendment dated January 1,
1986 to Preliminary Quebec
Interconnection Support
Agreement - Phase II
10.56 Amendment No. 3 dated Form 10-K, 1985, Exhibit 10(m)
October 1, 1984 to Maine
Yankee Power Contract
10.57 Amendment No. 1 dated Form 10-K, 1985, Exhibit 10(n)
August 1, 1985 to Maine
Yankee Capital Funds
Agreement
10.58 Amendments dated August 1, Form 10-K, 1985, Exhibit 10(o)
1985, August 15, 1985, and
January 1, 1986 to
NEPOOL Agreement
10.59 Fourth Amendment to Form 10-Q, 1st Quarter 1986,
Seabrook Project Exhibit 10.1
Disbursing Agent Agreement
10.60 Third Amendment to Vermont Form 10-Q, 1st Quarter 1986,
Transmission Line Support Exhibit 10.2
Agreement
10.61 First Amendment to Hydro- Form 10-Q, 1st Quarter 1986,
Quebec Phase I Intercon- Exhibit 10.3
nection Agreement
10.62 First Amendment to Hydro- Form 10-Q, 2nd Quarter 1986,
Quebec Phase II Exhibit 10.1
Massachusetts Trans-
mission Facilities
Support Agreement
10.63 First Amendment to Hydro- Form 10-Q, 2nd Quarter 1986,
Quebec Phase II New Exhibit 10.2
Hampshire Transmission
Facilities Support
Agreement
10.64 First Amendment to Hydro- Form 10-Q, 2nd Quarter 1986,
Quebec Phase II New England Exhibit 10.3
Power AC Facilities
Support Agreement
10.65 First Amendment to Form 10-Q, 2nd Quarter 1986,
Hydro-Quebec Phase II Exhibit 10.4
Boston Edison Company AC
Facilities Support
Agreement
10.66 Eighteenth Amendment to Form 10-Q, 2nd Quarter 1986,
Seabrook Joint Ownership Exhibit 10.5
Agreement
10.67 Amendment Number 3 to Form 10-Q, 3rd Quarter 1986,
Hydro-Quebec Phase l Exhibit 10.1
Terminal Facility Support
Agreement
10.68 Amendment Number 3 to Form 10-Q, 3rd Quarter 1986,
Hydro-Quebec Phase I Exhibit 10.2
Vermont Transmission Line
Support Agreement
10.69 Power Sale Agreement for Form 10-Q, 3rd Quarter 1986,
sale of approximately Exhibit 10.3
31 MW of system power by
Bangor Hydro-Electric
Company to UNITIL
Power Corp.
10.70 Purchase Agreement with Form 10-Q, 3rd Quarter 1986,
respect to Wyman No. 4 Exhibit 10.4
between Bangor Hydro-
Electric Company and
Fitchburg Gas and Electric
Light Company
10.71 Nineteenth Amendment to Form 10-K, 1986, Exhibit 10(a)
Seabrook Joint Ownership
Agreement
10.72 Twentieth Amendment to Form 10-K, 1986, Exhibit 10(b)
Seabrook Joint Ownership
Agreement
10.73 Agreement of Purchase and Form 10-K, 1986, Exhibit 10(c)
Sale dated February 19,
1986, regarding the sale
of the Company's Seabrook
interest to EUA Power
10.74 Bill of Sale and Assumption Form 10-K, 1986, Exhibit 10(d)
of Obligations dated
November 25, 1986 regarding
the sale of the Company's
Seabrook interest to EUA
Power
10.75 Deed dated November 21, Form 10-K, 1986, Exhibit 10(e)
1986 regarding the sale
of the Company's Seabrook
interest to EUA Power
10.76 Agreement to Share Certain Form 10-K, 1986, Exhibit 10(f)
Costs re Tewksbury-Seabrook
Transmission Line dated
May 8, 1986
10.77 Joint Venture Agreement Form 10-K, 1986, Exhibit 10(g)
effective as of June 9,
1986, between the Company
and Pacific Lighting Energy
Systems (as amended by a
First Amendment thereto
dated June 16, 1986) re
Bangor-Pacific Hydro
Associates (formerly West
Enfield Associates)
10.78 Capital Support Agreement Form 10-K, 1986, Exhibit 10(h)
dated as of January 29,
1987, among the Company
and lenders to Bangor-
Pacific Hydro Associates
10.79 Power Purchase Agreement Form 10-K, 1986, Exhibit 10(i)
dated June 9, 1986 and
Amendment No. 1 thereto
dated January 14, 1987,
between the Company and
Bangor-Pacific Hydro
Associates (formerly West
Enfield Associates)
10.80 Deed and Bill of Sale re Form 10-K, 1986, Exhibit 10(j)
transfer of West Enfield
site from the Company to
Bangor-Pacific Hydro
Associates
10.81 Assignment by the Company Form 10-K, 1986, Exhibit 10(k)
of Joint Venture Interest
to Penobscot Hydro Co., Inc.
10.82 Power Sale Agreement dated Form 10-K, 1986, Exhibit 10(l)
August 1, 1986, and First
Amendment thereto, between
the Company and Unitil
Power Corp. re Wyman No. 4
10.83 Third Amendment to Pre- Form 10-K, 1987, Exhibit 10(a)
liminary Quebec Intercon-
nection Support Agreement -
Phase II
10.84 Fourth Amendment to Pre- Form 10-K, 1987, Exhibit 10(b)
liminary Quebec Intercon-
nection Support Agreement -
Phase II
10.85 Fifth Amendment to Pre- Form 10-K, 1987, Exhibit 10(c)
liminary Quebec Intercon-
nection Support Agreement -
Phase II
10.86 Sixth Amendment to Pre- Form 10-K, 1987, Exhibit 10(d)
liminary Quebec Intercon-
nection Support Agreement -
Phase II
10.87 Seventh Amendment to Pre- Form 10-K, 1987, Exhibit 10(e)
liminary Quebec Intercon-
nection Support Agreement -
Phase II
10.88 Amendment to New England Form 10-K, 1987, Exhibit 10(f)
Power Pool Agreement dated
March 1, 1988
10.89 Second Amendment to Credit Form 10-K, 1987, Exhibit 10(h)
Agreement, dated as of July
22, 1987, among the Company
and the Banks named therein
10.90 Dividend Reinvestment and Form 10-K, 1987, Exhibit 10(i)
Common Stock Purchase Plan
Effective as of December 1,
1987
10.91 Deed dated December 2, Form 10-K, 1988, Exhibit 10(a)
1988 regarding the sale
of certain Seabrook trans-
mission facilities to EUA
Power
10.92 Ninth Amendment to Form 10-K, 1988, Exhibit 10(b)
Preliminary Quebec
Interconnection Support
Agreement - Phase II
10.93 Tenth Amendment to Form 10-K, 1988, Exhibit 10(c)
Preliminary Quebec
Interconnection Support
Agreement - Phase II
10.94 Second Amendment to Form 10-K, 1988, Exhibit 10(d)
Massachusetts Trans-
mission Facilities
Support Agreement
10.95 Third Amendment to Form 10-K, 1988, Exhibit 10(e)
Massachusetts Trans-
mission Facilities
Support Agreement
10.96 Fourth Amendment to Form 10-K, 1988, Exhibit 10(f)
Massachusetts Trans-
mission Facilities
Support Agreement
10.97 Fifth Amendment to Form 10-K, 1988, Exhibit 10(g)
Massachusetts Trans-
mission Facilities
Support Agreement
10.98 Sixth Amendment to Form 10-K, 1988, Exhibit 10(h)
Massachusetts Trans-
mission Facilities
Support Agreement
10.99 Second Amendment to Form 10-K, 1988, Exhibit 10(i)
New Hampshire Trans-
mission Facilities
Support Agreement
10.100 Third Amendment to Form 10-K, 1988, Exhibit 10(j)
New Hampshire Trans-
mission Facilities
Support Agreement
10.101 Fourth Amendment to Form 10-K, 1988, Exhibit 10(k)
New Hampshire Trans-
mission Facilities
Support Agreement
10.102 Fifth Amendment to Form 10-K, 1988, Exhibit 10(l)
New Hampshire Trans-
mission Facilities
Support Agreement
10.103 Sixth Amendment to Form 10-K, 1988, Exhibit 10(m)
New Hampshire Trans-
mission Facilities
Support Agreement
10.104 Second Amendment to Form 10-K, 1988, Exhibit 10(n)
Phase II AC New England
Power Facilities Sup-
port Agreement
10.105 Third Amendment to Form 10-K, 1988, Exhibit 10(o)
Phase II AC New England
Power Facilities Sup-
port Agreement
10.106 Fourth Amendment to Form 10-K, 1988, Exhibit 10(p)
Phase II AC New England
Power Facilities Sup-
port Agreement
10.107 Fifth Amendment to Form 10-K, 1988, Exhibit 10(q)
Phase II AC New England
Power Facilities Sup-
port Agreement
10.108 Second Amendment to Form 10-K, 1988, Exhibit 10(r)
Phase II Boston Edison
AC Facilities Support
Agreement
10.109 Third Amendment to Form 10-K, 1988, Exhibit 10(s)
Phase II Boston Edison
AC Facilities Support
Agreement
110.110 Fourth Amendment to Form 10-K, 1988, Exhibit 10(t)
Phase II Boston Edison
AC Facilities Support
Agreement
10.111 Fifth Amendment to Form 10-K, 1988, Exhibit 10(u)
Phase II Boston Edison
AC Facilities Support
Agreement
10.112 Letter of Assurances, Form 10-K, 1988, Exhibit 10(v)
Consents and Agreements
With Respect to Credit
Facility Financing for
Phase II Hydro-Quebec
Financing
10.113 Agreement With Hanlin Form 10-K, 1988, Exhibit 10(w)
Group, Inc., also known
as "LCP", for the sale of
electricity
10.114 401 (k) Plan for Non- Form 10-K, 1988, Exhibit 10(x)
Union Employees
10.115 Credit Agreement dated Form 10-Q, First Quarter, 1989
as of May 2, 1989 among Exhibit 4.2
the Company, the Banks
named therein, and
Manufacturers Hanover
Trust Company, as Agent
10.116 Agreement for the Sale Form S-2, Reg. No. 33-39181,
and Purchase of Electricity Exhibit 10.79
dated as of August 13, 1984
between Ultrapower Incorpor-
ated-Jonesboro and the
Company
10.117 Agreement for the Sale Form S-2, Reg. No. 33-39181,
and Purchase of Electricity Exhibit 10.80
dated as of August 13, 1984
between Ultrapower Incorpor-
ated-West Enfield and the
Company
10.118 Amendment Agreement Form S-2, Reg. No. 33-39181,
dated November 3, 1988 Exhibit 10.81
between the Company and
Babcock-Ultrapower West
Enfield and Babcock-
Ultrapower-Jonesboro
10.119 Agreement for the Form S-2, Reg. No. 33-39181,
Purchase and Sale of Exhibit 10.82
Electricity dated as of
June 21, 1984 between
Penobscot Energy Recovery
Company and the Company
10.120 Amendment No. 1 as of Form S-2, Reg. No. 33-39181,
March 24, 1986 to the Exhibit 10.83
Agreement for the Purchase
and Sale of Electricity
dated as of June 21, 1984
between Penobscot Energy
Recovery Company and the
Company
10.121 Power Purchase Agree- Form S-2, Reg. No. 33-39181,
ment dated October 24, 1984 Exhibit 10.84
between Alternative Energy
Decisions, Inc. and the
Company
10.122 Partnership Agreement Form S-2, Reg. No. 33-39181,
dated as of July 1, 1990 Exhibit 10.85
between NORVARCO and
Bangor Var Co., Inc.
10.123 Form of Agreement with Form 10-K, 1992, Exhibit 10(a)
certain Executive Officers
providing supplemental
death and retirement
benefits
10.124 Form of Agreement with Form 10-K, 1992, Exhibit 10(b)
certain Executive Officers
providing benefits upon
a change of control
EXHIBITS FILED HEREWITH
--------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- -----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
for Bangor Hydro-Electric Company for the Year Ended December 31, 1994 and is
qualified in its entirety by reference to such 10-K.
</LEGEND>
<CIK> 0000009548
<NAME> BANGOR HYDRO-ELECTRIC COMPANY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $199,162,748
<OTHER-PROPERTY-AND-INVEST> 32,288,853
<TOTAL-CURRENT-ASSETS> 36,135,697
<TOTAL-DEFERRED-CHARGES> 113,662,747
<OTHER-ASSETS> 0
<TOTAL-ASSETS> $381,250,045
<COMMON> $35,925,715
<CAPITAL-SURPLUS-PAID-IN> 55,974,218
<RETAINED-EARNINGS> 13,757,751
<TOTAL-COMMON-STOCKHOLDERS-EQ> $105,657,684
13,740,491
4,734,000
<LONG-TERM-DEBT-NET> 116,367,155
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 27,000,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,461,253
1,500,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 110,789,462
<TOT-CAPITALIZATION-AND-LIAB> $381,250,045
<GROSS-OPERATING-REVENUE> $174,097,860
<INCOME-TAX-EXPENSE> 3,613,598
<OTHER-OPERATING-EXPENSES> 153,152,400
<TOTAL-OPERATING-EXPENSES> $156,765,998
<OPERATING-INCOME-LOSS> $17,331,862
<OTHER-INCOME-NET> 1,308,157
<INCOME-BEFORE-INTEREST-EXPEN> $18,640,019
<TOTAL-INTEREST-EXPENSE> 11,182,946
<NET-INCOME> $7,457,073
1,652,432
<EARNINGS-AVAILABLE-FOR-COMM> $5,804,641
<COMMON-STOCK-DIVIDENDS> $9,433,334
<TOTAL-INTEREST-ON-BONDS> $10,767,934
<CASH-FLOW-OPERATIONS> $28,261,523
<EPS-PRIMARY> $.84
<EPS-DILUTED> $.84
</TABLE>
