SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended MARCH 31, 2000 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
- ------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
33 STATE STREET, BANGOR, MAINE 04401
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 207-945-5621
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NONE
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Outstanding Common Stock, $5 Par Value - 7,363,424 Shares
March 31, 2000
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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FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
PART I - FINANCIAL INFORMATION
PAGE
----
Cover Page 1
Index 2
Consolidated Statements of Income 3
Management's Discussion and Analysis of Results of
Operations and Financial Condition 4
Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999 17
Consolidated Statements of Capitalization 19
Consolidated Statements of Cash Flows 20
Consolidated Statements of Common Stock Investment 21
Notes to the Consolidated Financial Statements 22
PART II - OTHER INFORMATION 32
Item 6 - Exhibits and Reports on Form 8-K 33
Signature Page 34
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Per Share Amounts
(Unudited)
Three Months Ended
Mar. 31, Mar. 31,
2000 1999
-------- --------
ELECTRIC OPERATING REVENUES $ 50,121 $ 50,222
-------- --------
OPERATING EXPENSES:
Fuel for generation and purchased power $ 21,883 $ 18,515
Other operation and maintenance 8,871 9,593
Depreciation and amortization 1,971 2,520
Amortization of Seabrook Nuclear Unit 425 425
Amortization of contract buyouts
and restructuring 5,394 5,200
Amortization of deferred asset sale gain (491) -
Taxes -
Property and payroll 1,387 1,633
State income 365 494
Federal income 2,009 1,956
-------- --------
$ 41,814 $ 40,336
-------- --------
OPERATING INCOME $ 8,307 $ 9,886
-------- --------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction $ (220) $ 143
Other, net of applicable income taxes 270 260
-------- --------
$ 50 $ 403
-------- --------
INCOME BEFORE INTEREST EXPENSE $ 8,357 $ 10,289
-------- --------
INTEREST EXPENSE:
Long-term debt $ 3,979 $ 5,753
Other 238 528
Allowance for borrowed funds used
during construction 203 (204)
-------- --------
$ 4,420 $ 6,077
-------- --------
NET INCOME $ 3,937 $ 4,212
DIVIDENDS ON PREFERRED STOCK 66 279
-------- --------
EARNINGS APPLICABLE TO COMMON STOCK $ 3,871 $ 3,933
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES 7,363 7,363
======== ========
EARNINGS PER COMMON SHARE,
Basic $ .53 $ .53
Diluted .47 .47
======== ========
DIVIDENDS DECLARED PER COMMON SHARE $ .20 $ -
======== ========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Management's Discussion and Analysis of the Results of Operations and
Financial Condition contained in Bangor Hydro-Electric Company's (the
Company) Annual Report on Form 10-K for the year ended December 31, 1999
(1999 Form 10-K) should be read in conjunction with the comments below.
EARNINGS
Each of the quarters ended March 31, 2000 and 1999 resulted in basic
earnings per common share of $.53. First quarter 1999 earnings reflected a
one-time benefit of $802,000 ($.07 per common share after taxes) due to the
settlement, by the New England Power Pool (NEPOOL), of a contract dispute
with Hydro-Quebec (HQ). Absent that benefit, first quarter 2000 earnings
were higher than in 1999, primarily due to an increase in energy sales.
IMPORTANT CURRENT ACTIVITIES
IMPLEMENTATION OF COMPETITION IN ELECTRIC UTILITY INDUSTRY - In connection
with the state of Maine's electric industry restructuring law, effective
March 1, 2000, consumers of electricity have the right to purchase generation
services directly from competitive electricity suppliers. The Company's
electric rates were changed effective March 1, as well, to reflect the
Company's revenue requirement as a transmission and distribution utility,
including the recovery of stranded costs. The electric utility industry
restructuring and the Company's associated rate proceedings at the Maine
Public Utilities Commission (MPUC) are discussed in more detail in the 1999
Form 10-K.
As discussed in the 1999 Form 10-K, the restructuring law also
provided for a standard-offer service being available for all customers who
do not choose to purchase energy from a competitive supplier starting March
1, 2000. As a result of the bids from competitive energy suppliers to
provide energy under the standard- offer service being too high, and as
ordered by the MPUC, the Company assumed the responsibility of being the
standard-offer service provider starting March 1, 2000 for a one-year period.
At the end of this period, it is anticipated that the Company will no longer
be the standard-offer service provider, although, this is dependent upon the
level of future bids from competitive energy suppliers to serve the standard-
offer load and MPUC approvals. The MPUC established the schedule of rates
the Company may charge for this service starting March 1, 2000.
The Company has entered into arrangements with third parties to
purchase the energy to serve the standard-offer customers. The Company is
allowed by the MPUC to defer the difference between revenues realized from
the standard-offer sales and the costs incurred to provide this service,
including carrying costs on the deferred balance. As a result of this
reconciliation mechanism, standard-offer related revenues and expenses do not
have any impact on the Company's earnings, although they do result in
increases in both categories in the Company's consolidated statements of
income. The deferred amount will be recovered from/returned to customers in
a future rate proceeding. In March 2000, the Company recorded a regulatory
liability of $1.2 million related to the excess of revenues over costs
incurred in connection with the standard-offer service. This amount is
included in Other regulatory liabilities on the Consolidated Balance Sheets
at March 31, 2000.
BANGOR GAS INVESTMENT - As discussed in the 1999 Form 10-K, the Company
announced in late 1999 that it no longer intended to participate in the
Bangor Gas Company, LLC (Bangor Gas) joint venture and intended to sell its
joint venture interest. On March 7, 2000, the Company and Penobscot Natural
Gas Company (Penobscot Gas),the Company's wholly-owned subsidiary which owns
a 50% interest in Bangor Gas, entered into a stock purchase agreement to sell
the Company's interest in Penobscot Gas to Sempra Energy (Sempra). Sempra
currently owns the other 50% interest in Bangor Gas. The parties are
currently seeking the approval of the sale by the MPUC and expect a decision
in June 2000. If the transaction is timely completed, the Company expects to
realize a one-time gain on the sale of Penobscot Gas in the second quarter of
2000.
INCREASE IN COMMON STOCK DIVIDEND - On March 15, 2000 the Company's board of
directors declared a cash dividend on its common stock of $.20 per share.
The quarterly dividend represented a $.05 increase over the $.15 per share
dividend declared in each of the prior three quarters. In June of 1999, the
board of directors resumed payment of quarterly common stock dividends after
having suspended them in March 1997 due to financial difficulties triggered
by problems at the Maine Yankee nuclear generating plant. The Company has a
7% ownership interest in Maine Yankee, which was permanently shut down in
1997 and is now in the process of being decommissioned.
The Company's board of directors continues to take a cautious
approach to the payment of common dividends. The Company and other Maine
utilities are still in the process of implementing changes under Maine's
comprehensive electric utility restructuring law, and management is cognizant
of continuing uncertainties associated with this transition.
MAINE YANKEE - TERMINATION OF DECOMMISSIONING OPERATIONS CONTRACT - On May 4,
2000, Maine Yankee notified its decommissioning operations contractor, Stone
& Webster Engineering Corporation (Stone & Webster), that it was terminating
the decommissioning operations contract after becoming aware of the extent of
financial difficulties being experienced by Stone & Webster. On May 8, 2000,
Stone & Webster announced that it had signed a letter of intent with Jacobs
Engineering Group, Inc. (Jacobs), regarding a proposed transaction in which
Jacobs would acquire substantially all of Stone & Webster's assets in
exchange for an immediate $50 million secured credit facility and other
stated consideration, including cash and stock. Stone & Webster said that
the credit facility was intended to enable it to address its current
liquidity difficulties and continue to operate its business until the asset
sale in consummated. In addition, Stone & Webster announced that, as a
condition to the proposed transactions with Jacobs, it intended to seek
bankruptcy court approval of the asset sale and credit agreement, and
therefore intended to file a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code after it signed a definitive sale
agreement with Jacobs, which it expected to occur later in May.
Maine Yankee has stated that it remains committed to the successful
completion of the decommissioning project and on May 10, 2000, entered into
an interim agreement with Stone & Webster for the purpose of avoiding the
adverse consequences of an abrupt or inefficient demobilization from the
Maine Yankee Plant site and allowing decommissioning work to continue through
June 30, 2000. During that period, Maine Yankee will also continue to
evaluate all available long-term alternatives for safely and efficiently
completing the decommissioning project. However, we cannot predict at this
time what affect the financial difficulties of Stone & Webster, the interim
agreement, or any subsequent arrangement with Stone & Webster or a new
general contractor will have on the cost or schedule of the decommissioning
project.
REVENUES
With the previously discussed implementation of competition in the
electric utility industry starting March 1, 2000, and excluding the standard-
offer service, the Company is no longer selling electricity to customers.
The Company's transmission and distribution and stranded cost charges to
customers, though, continue to be based on customers' electricity usage
measured in kilowatt-hours (KWH). Consequently, discussion related to
electric operating revenues will continue to have a KWH sales component.
Electric operating revenue decreased by $101,000 in the first quarter of
2000. The small decrease is due to several factors. Prior to March 1,
electric operating revenues for the first two months of 2000 were $1.8
million greater than the first two months of 1999 due principally to a 3.6%
increase in KWH sales and the 1.36% rate increase effective June 1, 1999.
Increased KWH sales were positively impacted by colder weather in January and
February 2000. As a result of certain commercial and industrial customers
choosing a competitive electricity supplier starting March 1, 2000 and not
falling under standard-offer service, revenues were $1.7 million lower in
March 2000 as compared to March 1999. The reduction was also impacted by
warmer weather in March 2000 and an overall rate reduction, including the
impact of the standard-offer prices, of approximately 2.9% starting March 1,
2000. The Company did recognize $5.6 million in revenues in March 2000
associated with providing standard-offer service, which was reduced by the
previously discussed deferral of $1.2 million of standard-offer service
revenues in excess of costs.
EXPENSES
Fuel for generation and purchased power expense increased $3.4
million in the first quarter of 2000 as compared to 1999. The increased
expense was a result of several factors. The previously discussed settlement
of the dispute with HQ resulted in a $747,000 reduction in expense in the
first quarter of 1999. Purchased power expenses increased by about $1 million
in the first two months of 2000 due to the May 27, 1999 sale of the Company's
generating facilities and subsequent buyback contract with PP&L Global for
the power from the plants. Also as a result of the sale to PP&L Global,
incremental replacement power costs for other entitlements in Wyman #4,
Hydro-Quebec and MEPCO transmission were $549,000 greater for the first
quarter of 2000 as compared to 1999 (See the 1999 Form 10-K for a complete
discussion of the sale of generation assets and certain transmission rights
to PP&L Global in May 1999). Purchased power costs were greater for the
first two months of 2000 as a result of the previously discussed increase in
KWH sales and by higher power costs. Also NEPOOL and ISO New England
(ISO)expenses were greater in 2000 as compared to the 1999 period due to the
implementation of NEPOOL new market rules and certain new ISO charges in 2000
that had not been previously incurred.
With the implementation of competition on March 1, 2000, the Company
was still obligated to purchase power at significantly above market rates
under its existing contracts with certain small power producers, although the
output from the generation facilities was resold to a third party at market
rates pursuant to Chapter 307 of Maine's 1997 restructuring law. For a more
complete discussion of the Company's power purchase commitments and the
resale of power under Chapter 307, see the 1999 Form 10-K. The Company also
purchased power in March 2000 necessary to serve the load associated with
standard-offer service customers. Consequently, while restructuring was
implemented on March 1, 2000, the customer's purchased power expenses were
not materially lower in March 2000 as compared to March 1999.
Other operation and maintenance (O&M) expense decreased by $722,000
in the first quarter of 2000 as compared to 1999. Decreasing other O&M
expense in the 2000 quarter was a $303,000 reduction in expenses associated
with the Company's hydroelectric facilities and interest in the Wyman #4
generating plant as a result of the sale to PP&L Global in May 1999. Also
decreasing other O&M expense in the 2000 quarter was a $239,000 decrease in
non-labor expenditures related to electric utility industry restructuring
activities, costs associated with assessment and testing of systems for year
2000 compliance, and an upgrade to the Company's customer information system.
Finally, in the first quarter of 2000, pension income was $218,000 higher
than in the first quarter of 1999.
Depreciation and amortization expense decreased $549,000 in the first
quarter of 2000 as compared to the 1999 quarter due principally to the sale
of the Company's generation assets in May 1999, offset to some extent by
property additions in 1999 and the first quarter of 2000.
The $194,000 increase in amortization of contract buyouts and
restructuring in the 2000 quarter was due to changes, effective March 1, 2000
with the implementation of new rates, in the amortization of the deferred
Beaver Wood contract buyout costs and the deferred costs associated with the
June 1998 restructuring of the Penobscot Energy Recovery Company (PERC)
purchased power contract. The Beaver Wood amortization was $141,000 higher in
the first quarter of 2000 and will be amortized at an annual rate of $3.9
million starting March 2000. Prior to the implementation of new rates in
March 2000, the Company was recovering deferred PERC restructuring costs at
an annual rate of $1 million. Effective March 1, 2000, recovery of PERC
restructuring costs was adjusted to include the estimated future value of
warrants to be exercised. The adjusted annual amortization amounted to $1.6
million. For a complete discussion of the Beaver Wood purchased power
contract buyout and the PERC contract restructuring, see the 1999 Form 10-K.
Effective with the March 1, 2000 rate change, the Company began
amortizing the deferred asset sale gain over a 70 month period. The annual
amortization amounts are to be recorded in an uneven manner in order to
levelize the Company's revenue requirement over this period. The Company
will record $4.9 million of amortization during 2000.
The decrease in property and other taxes in the first quarter of 2000
was due principally to reductions in property taxes as a result of the sale
of the Company's generation assets. This reduction in property taxes was
offset to some extent by increased electric plant additions and higher
property tax rates.
The decrease in total federal and state income taxes was principally
a function of slightly lower earnings in the first quarter of 2000 as
compared to the 1999 quarter. See Footnote 2 to the Consolidated Financial
Statements for a reconciliation of the Company's effective income tax rate.
Allowance for funds used during construction, which includes carrying
costs on certain regulatory assets and liabilities, decreased in 2000
relative to 1999 due mainly to $454,000 in carrying costs being recorded on
the deferred asset sale gain.
Long-term debt interest expense decreased $1.8 million in the first
quarter of 2000 as compared to 1999 due primarily to principal repayments on
the Company's 12.25% first mortgage bonds (which were fully repaid in August
1999); a $13.1 million principal payment at the end of June 1999 on the
Finance Authority of Maine Revenue Notes; monthly principal payments from
April 1999 through March 2000 amounting to $4.9 million on the $24.8 million
medium term notes; the redemption of the remaining outstanding principal on
the $45 million medium term notes in May 1999 amounting to $38.8 million; the
full redemption of $15 million in outstanding 10.25% Series First Mortgage
Bonds in early July 1999; and the redemption of $4.2 million in outstanding
variable rate Pollution Control Revenue Bonds in early September 1999.
Other interest expense decreased due principally to an $11 million
reduction in weighted average short-term borrowings outstanding in the 2000
quarter as compared to 1999. The Company fully repaid the outstanding balance
under its revolving credit line in April 1999, and no new borrowings have
subsequently occurred.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in the first
quarters of 2000 and 1999 as they affect the Company's liquidity. Net
increase in cash from operating activities was $19.1 million in 2000 as
compared to $16.3 million in the 1999 quarter. Positively impacting cash
flows from operating activities in the 2000 quarter as compared to the 1999
quarter was the beneficial impact of the 1.36% rate increase effective June
1, 1999; the deferral of $1.2 million of standard-offer service revenues in
the 2000 quarter, a $510,000 reduction in deferred Maine Yankee incremental
costs, and a $1.6 million reduction in interest payments in the 2000 quarter
principally as a result of the previously discussed long-term debt principal
payments. These operating cash flow enhancements were offset to some extent
by a $1.75 million payment received in the 1999 quarter related to a
terminated purchased power contract (See 1999 Form 10-K).
Construction expenditures were $2.4 million lower in the 2000 quarter
as compared to 1999. In the first quarter of 1999 the Company incurred
approximately $2.3 million in costs associated with the construction of a
major transmission line which was completed in 1999. In late January 1999 the
$6.2 million in proceeds from the Graham Station property sale were released
by the trustee(see 1999 Form 10-K) and were utilized to repay outstanding
medium term notes.
As previously discussed, the Company reinstated its common dividend
in the second quarter of 1999, resulting in the increase in common dividends
in the first quarter of 2000.
The reduction in preferred dividends paid resulted principally from
the final redemption of the remaining outstanding 8.76% mandatory redeemable
preferred stock in October 1999.
The decrease in payments on long-term debt is due principally to the
previously discussed utilization of the $6.2 million in property sale
proceeds released by the trustee in January 1999 to repay principal in
connection with the $45 million medium term notes.
As previously discussed, and principally as a result of generation asset sale
proceeds, the Company has continued to maintain full borrowing capacity under
its revolving credit facility, with no new borrowings since early 1999. The
reduction in short-term borrowings in the 1999 quarter was a result of
improved cash flows from operating activities and the $1.75 million payment
received related to the terminated purchased power contract.
For additional discussion of liquidity and capital resources, see the
Company's 1999 Form 10-K.
OTHER
Management's discussion and analysis of results of operations and
financial condition contains items that are "forward-looking" as defined in
the Private Securities Litigation Reform Act of 1995. These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking statements.
Readers should not place undue reliance on forward-looking statements, which
reflect management's view only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances. Factors that might cause such differences
include, but are not limited to, future economic conditions, relationships
with lenders, earnings retention and dividend payout policies, electric
utility restructuring, developments in the legislative, regulatory and
competitive environments in which the Company operates, and other
circumstances that could affect revenues and costs.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
Mar. 31, Dec. 31,
ASSETS 2000 1999
-------- --------
INVESTMENT IN UTILITY PLANT:
Electric plant in service, at original cost $ 302,416 $ 306,971
Less - Accumulated depreciation and amortization 80,992 84,825
-------- --------
$ 221,424 $ 222,146
Construction work in progress 7,203 5,668
-------- --------
$ 228,627 $ 227,814
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 5,171 $ 5,267
Maine Electric Power Company, Inc. 554 530
-------- --------
Total investment in utility plant $ 234,352 $ 233,611
-------- --------
OTHER INVESTMENTS, principally at cost $ 3,625 $ 3,629
-------- --------
FUNDS HELD BY TRUSTEE, at cost $ 23,044 $ 22,699
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 29,055 $ 15,691
Accounts receivable, net of reserve 18,624 18,270
Unbilled revenue receivable 9,467 14,128
Inventories, at average cost:
Material and supplies 2,549 2,793
Fuel oil 67 45
Prepaid expenses 503 928
-------- --------
Total current assets $ 60,265 $ 51,855
-------- --------
REGULATORY ASSETS AND DEFERRED CHARGES:
Investment in Seabrook Nuclear Project, net of
accumulated amortization of $32,297 in 2000
and $31,872 in 1999 $ 26,545 $ 26,970
Costs to terminate/restructure power contracts,
net of accumulated amortization of $106,255
in 2000 and $100,861 in 1999 113,745 118,565
Maine Yankee decommissioning costs 44,961 46,041
Other regulatory assets 36,384 36,925
Other deferred charges 3,393 3,655
-------- --------
Total regulatory assets and deferred charges $ 225,028 $ 232,156
-------- --------
Total assets $ 546,314 $ 543,950
======== ========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
Mar. 31, Dec. 31,
STOCKHOLDERS' INVESTMENT AND LIABILITIES 2000 1999
-------- --------
CAPITALIZATION:
Common stock investment $ 135,073 $ 132,722
Preferred stock 4,734 4,734
Long-term debt, net of current portion 181,800 183,300
-------- --------
Total capitalization $ 321,607 $ 320,756
-------- --------
CURRENT LIABILITIES:
Notes payable - banks $ - $ -
-------- --------
Other current liabilities -
Current portion of long-term debt $ 19,670 $ 19,460
Accounts payable 11,426 14,175
Dividends payable 1,539 1,171
Accrued interest 3,922 2,553
Customers' deposits 406 399
Current income taxes payable 7,252 4,126
-------- --------
Total other current liabilities $ 44,215 $ 41,884
-------- --------
Total current liabilities $ 44,215 $ 41,884
-------- --------
REGULATORY AND OTHER LONG-TERM LIABILITIES:
Deferred income taxes - Seabrook $ 13,773 $ 13,995
Other accumulated deferred income taxes 54,024 55,827
Maine Yankee decommissioning liability 44,961 46,041
Deferred gain on asset sale 28,809 29,357
Other regulatory liabilities 11,928 9,872
Unamortized investment tax credits 1,557 1,592
Accrued pension and postretirement benefit costs 11,858 11,301
Other long-term liabilities 13,582 13,325
-------- --------
Total regulatory and other long-term liabilities $ 180,492 $ 181,310
-------- --------
Total Stockholders' Investment and Liabilities $ 546,314 $ 543,950
======== ========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(Unaudited)
Mar. 31, Dec. 31,
2000 1999
--------- ---------
COMMON STOCK INVESTMENT
Common stock, par value $5 per share- $ 36,817 $ 36,817
Authorized -- 10,000,000 shares
Outstanding -- 7,363,424 shares in 2000 and 1999
Amounts paid in excess of par value 58,843 58,890
Retained earnings 39,413 37,015
--------- ---------
Total common stock investment $ 135,073 $ 132,722
--------- ---------
PREFERRED STOCK
Non participating, cumulative, par value $100 per share,
authorized 600,000 shares, not redeemable or
redeemable solely at the option of the issuer-
7%, Noncallable, 25,000 shares,
authorized and outstanding $ 2,500 $ 2,500
4.25%, Callable at $100, 4,840 shares,
authorized and outstanding 484 484
4%, Series A, Callable at $110, 17,500 shares,
authorized and outstanding 1,750 1,750
--------- ---------
Total preferred stock $ 4,734 $ 4,734
--------- ---------
LONG-TERM DEBT
First Mortgage Bonds-
10.25% Series due 2020 $ 30,000 $ 30,000
8.98% Series due 2022 20,000 20,000
7.38% Series due 2002 20,000 20,000
7.30% Series due 2003 15,000 15,000
--------- ---------
Total first mortgage bonds $ 85,000 $ 85,000
--------- ---------
Other Long-Term Debt-
Finance Authority of Maine - Taxable Electric Rate
Stabilization Revenue Notes,
7.03% Series 1995A, due 2005 $ 100,600 $ 100,600
Medium Term Notes, Variable interest rate-
LIBO Rate plus 1.125%, due 2002 15,870 17,160
--------- ---------
$ 116,470 $ 117,760
Less: Current portion of long-term debt 19,670 19,460
--------- ---------
Total other long-term debt $ 96,800 $ 98,300
--------- ---------
Total long-term debt $ 181,800 $ 183,300
--------- ---------
Total Capitalization $ 321,607 $ 320,756
========= =========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
000's Omitted
(Unaudited)
Three Months Ended
Mar. 31, Mar. 31,
2000 1999
--------- ---------
Cash Flows From Operating Activities:
Net income $ 3,937 $ 4,212
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 1,971 2,520
Amortization of Seabrook Nuclear Project 425 425
Amortization of contract buyouts and
restructuring 5,394 5,200
Amortization of deferred asset sale gain (448) -
Other amortizations 640 530
Allowance for equity funds used during
construction 220 (143)
Deferred income tax provision and amortization
of investment tax credits (2,616) 2,333
Changes in assets and liabilities:
Costs to restructure purchased power contract (250) (349)
Deferred standard-offer service revenues 1,237 -
Deferred incremental Maine Yankee costs 894 384
Exercise of PERC warrants-cash paid in lieu
of issuing shares (310) -
Payment received related to terminated purchased
power contract - 1,750
Accounts receivable, net and unbilled revenue 4,307 (2,173)
Accounts payable (2,749) (236)
Accrued interest 1,369 956
Current and deferred income taxes 3,942 202
Accrued postretirement benefit costs 696 396
Other current assets and liabilities, net 495 983
Other, net (40) (667)
--------- ---------
Net Increase in Cash From Operating Activities: $ 19,114 $ 16,323
--------- ---------
Cash Flows From Investing Activities:
Construction expenditures $ (3,492) $ (5,938)
Release of Graham Station property sale proceeds
by trustee - 6,200
Allowance for borrowed funds used during construction 203 (204)
--------- ---------
Net (Decrease) Increase in Cash From Investing
Activities $ (3,289) $ 58
--------- ---------
Cash Flows From Financing Activities:
Dividends on common stock $ (1,105) $ -
Dividends on preferred stock (66) (296)
Payments on long-term debt (1,290) (8,168)
Short-term debt, net - (8,000)
--------- ---------
Net Decrease in Cash From Financing Activities $ (2,461) $ (16,464)
--------- ---------
Net Increase in Cash and Cash Equivalents $ 13,364 $ (83)
Cash and Cash Equivalents at Beginning of Period 15,691 2,946
--------- ---------
Cash and Cash Equivalents at End of Period $ 29,055 $ 2,863
========= =========
Cash Paid During the Three Months For:
Interest (Net of Amount Capitalized) $ 3,046 $ 4,674
Income Taxes 1,300 -
========= =========
See notes to consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF COMMON STOCK INVESTMENT
000's Omitted
(Unaudited)
Amounts Total
Paid in Common
Common Excess of Retained Stock
Stock Par Value Earnings Investment
BALANCE DECEMBER 31, 1998 $ 36,817 $ 59,054 $ 22,993 $118,864
Net income - - 4,212 4,212
Cash dividends declared on-
Preferred stock - - (264) (264)
Other - - (15) (15)
---------- ---------- ----------- -----------
BALANCE MARCH 31, 1999 $ 36,817 $ 59,054 $ 26,926 $122,797
========== ========== =========== ===========
BALANCE DECEMBER 31, 1999 $ 36,817 $ 58,890 $ 37,015 $132,722
Net income - - 3,937 3,937
Cash dividends declared on-
Preferred stock - - (66) (66)
Common stock - - (1,473) (1,473)
Exercise of warrants-cash paid
in lieu of issuing shares - (47) - (47)
---------- ---------- ----------- -----------
BALANCE MARCH 31, 2000 $ 36,817 $ 58,843 $ 39,413 $135,073
========== ========== =========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
--------------
(Unaudited)
(1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES:
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted in this Form 10-Q
pursuant to the Rules and Regulations of the Securities and Exchange
Commission. However, in the opinion of Bangor Hydro-Electric Company
(the Company), the disclosures contained in this Form 10-Q are adequate
to make the information presented not misleading. The year end
condensed balance sheet data was derived from audited consolidated
financial statements but does not include all disclosures required by
generally accepted accounting principles. These statements should be
read in conjunction with the consolidated financial statements,
footnotes and all other information included in the 1999 Form 10-K.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements reflect all adjustments, including
normal recurring accruals, necessary to present fairly the financial
position as of March 31, 2000 and the results of operations and cash
flows for the periods ended March 31, 2000 and 1999.
The Company's significant accounting policies are described in the
Notes to the Consolidated Financial Statements included in its 1999
Form 10-K filed with the Securities and Exchange Commission. For
interim reporting purposes, the Company follows these same basic
accounting policies but considers each interim period as an integral
part of an annual period. Accordingly, certain expenses are allocated
to interim periods based upon estimates of such expenses for the year.
(2) INCOME TAXES:
The following table reconciles a provision calculated by
multiplying income before federal income taxes by the statutory federal
income tax rate to the federal income tax provision:
Three Months Ended March 31,
-----------------------------
2000 1999
---- ----
Amount % Amount %
-----------------------------
(Dollars in Thousands)
Federal income tax provision
at statutory rate $2,263 35.0 $2,395 35.0
Less permanent reductions
in tax expense resulting
from statutory exclusions
from taxable income (1) - (47) (.7)
------ ---- ------ ----
Federal income tax provision before
effect of temporary differences
and investment tax credits $2,262 35.0 $2,348 34.3
Less temporary differences that
are flowed through for rate-
making and accounting purposes (97) (1.6) (198) (2.8)
Less utilization and amortization
of investment tax credits (35) (.5) (52) (.8)
------ ---- ------ ----
Federal income tax provision $2,130 32.9 $2,098 30.7
====== ==== ====== ====
(3) INVESTMENT IN JOINTLY OWNED FACILITIES:
Condensed financial information for Maine Yankee Atomic Power
Company (Maine Yankee), Maine Electric Power Company, Inc. (MEPCO),
Bangor-Pacific Hydro Associates (BPHA), Chester SVC Partnership
(Chester) and Bangor Gas Company, LLC (Bangor Gas) is as follows:
MAINE YANKEE MEPCO
-------------------------------------
(Dollars in Thousands - Unaudited)
Operations for Three Months Ended
-------------------------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2000 1999 2000 1999
OPERATIONS: -------- -------- -------- --------
As reported by investee-
Operating revenues $ 12,953 $ 15,683 $ 690 $ 744
======== ======== ======== ========
Earnings applicable to
common stock $ 1,190 $ 1,253 $ 273 $ 2,888
======== ======== ======== ========
Company's reported equity-
Equity in net income $ 83 $ 88 $ 39 $ 410
Add(Deduct)-Effect of
adjusting Company's
estimate to actual (4) 169 6 (390)
-------- -------- -------- --------
Amounts reported by Company $ 79 $ 257 $ 45 $ 20
======== ======== ======== ========
MAINE YANKEE MEPCO
---------------------------------------
(Dollars in Thousands - Unaudited)
Financial Position at
---------------------------------------
Mar. 31, Dec. 31, Mar. 31, Dec. 31,
2000 1999 2000 1999
FINANCIAL POSITION: --------- --------- --------- --------
As reported by investee-
Total assets $1,023,168 $1,091,950 $ 5,837 $ 8,067
Less-
Preferred stock 15,000 15,000 - -
Long-term debt 50,000 54,000 - -
Other liabilities and
deferred credits 884,199 947,972 1,859 4,339
---------- --------- -------- --------
Net assets $ 73,969 $ 74,978 $ 3,978 $ 3,728
========== ========== ======== ========
Company's reported equity-
Equity in net assets $ 5,178 $ 5,248 $ 565 $ 529
Add(Deduct)- Effect
of adjusting Company's
estimate to actual (7) 19 (11) 1
---------- ---------- -------- --------
Amounts reported by Co. $ 5,171 $ 5,267 $ 554 $ 530
========== ========== ======== ========
BPHA Chester
------------------- ------------------
(Dollars in Thousands - Unaudited)
Operations for Three Months Ended
------------------------------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
2000 1999 2000 1999
--------- --------- --------- ---------
OPERATIONS:
As reported by investee-
Operating revenues $ - $ 2,035 $ 1,083 $ 1,089
======= ======= ======= =======
Net Income $ - $ 885 $ - $ -
======= ======= ======= =======
Company's reported equity
in net income $ - $ 443 $ - $ -
======= ======= ======= =======
Financial Position at
Mar. 31, Dec. 31, Mar. 31, Dec. 31,
2000 1999 2000 1999
--------- -------- --------- --------
FINANCIAL POSITION:
As reported by investee-
Total assets $ - $ - $ 24,897 $25,302
Less-
Long-term debt - - 24,359 23,471
Other liabilities - - 538 1,831
------- ------- -------- -------
Net assets $ - $ - $ - $ -
======= ======= ======== =======
Company's reported equity
in net assets $ - $ - $ - $ -
======= ======= ======== =======
On May 4, 2000, Maine Yankee notified its decommissioning operations
contractor, Stone & Webster Engineering Corporation (Stone & Webster),
that it was terminating the decommissioning operations contract after
becoming aware of the extent of financial difficulties being experienced
by Stone & Webster. On May 8, 2000, Stone & Webster announced that it
had signed a letter of intent with Jacobs Engineering Group, Inc. (Jacobs),
regarding a proposed transaction in which Jacobs would acquire substantially
all of Stone & Webster's assets in exchange for an immediate $50 million
secured credit facility and other stated consideration, including cash and
stock. Stone & Webster said that the credit facility was intended to enable
it to address its current liquidity difficulties and continue to operate its
business until the asset sale in consummated. In addition, Stone & Webster
announced that, as a condition to the proposed transactions with Jacobs, it
intended to seek bankruptcy court approval of the asset sale and credit
agreement, and therefore intended to file a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code after it signed a
definitive sale agreement with Jacobs, which it expected to occur later
in May.
Maine Yankee has stated that it remains committed to the
successful completion of the decommissioning project and on May 10,
2000, entered into an interim agreement with Stone & Webster for the
purpose of avoiding the adverse consequences of an abrupt or
inefficient demobilization from the Maine Yankee Plant site and
allowing decommissioning work to continue through June 30, 2000.
During that period, Maine Yankee will also continue to evaluate all
available long-term alternatives for safely and efficiently completing
the decommissioning project. However, we cannot predict at this time
what affect the financial difficulties of Stone & Webster, the interim
agreement, or any subsequent arrangement with Stone & Webster or a new
general contractor will have on the cost or schedule of the
decommissioning project.
As discussed in the 1999 Form 10-K, the Company sold its wholly-
owned subsidiary, Penobscot Hydro Co., Inc., which held a 50%
ownership interest in BPHA, in July 1999.
At March 31, 2000, and December 31, 1999, the Company's wholly
owned subsidiary, Penobscot Natural Gas Company (Penobscot Gas), had
$277,000 and $328,000 equity investment in Bangor Gas, respectively
and recorded equity losses in Bangor Gas of approximately $51,000 and
$37,000 for the quarters ended March 31, 2000 and 1999, respectively.
At March 31, 2000 and December 31, 1999, Bangor Gas' total assets,
principally construction work in progress, amounted to $13.6 million
and $12.5 million, respectively.
As discussed in the 1999 Form 10-K, the Company announced in
late 1999 that it no longer intended to participate in Bangor Gas and
intended to sell its joint venture interest. On March 7, 2000, the
Company and Penobscot Gas entered into a stock purchase agreement to
sell the Company's interest in Penobscot Gas to Sempra Energy
(Sempra). Sempra currently owns the other 50% interest in Bangor Gas.
The parties are currently seeking the approval of the sale by the MPUC
and expect a decision in June 2000. If the transaction is timely
completed, the Company expects to realize a one-time gain on the sale
of Penobscot Gas in the second quarter of 2000.
(4) EARNINGS PER SHARE:
The following table reconciles basic and diluted earnings per common
share assuming all stock warrants were converted to common shares.
(Amounts in 000's, except per share data)
For the Quarters
Ended
--------------------
Mar. 31, Mar. 31,
2000 1999
-------- ---------
Earnings
applicable to
common stock $ 3,871 $ 3,933
-------- --------
Average common
shares outstanding 7,363 7,363
Plus: incremental
shares from assumed
conversion 887 940
-------- --------
Average common shares
outstanding plus
assumed warrants
converted 8,250 8,303
-------- --------
Basic earnings
per common share $ .53 $ .53
======== =======
Diluted earnings
per common share $ .47 $ .47
======== =======
(5) PURCHASED POWER CONTRACT OBLIGATIONS -
Under Chapter 307 of Maine's electric utility industry
restructuring law, the Company was required to sell all of the energy
and capacity associated with its six purchased power contracts. In
late 1999 the Company selected Morgan Stanley Dean Witter & Co.,
subsidiary Morgan Stanley Capital Group, Inc., (Morgan Stanley) as the
winning bidder for this energy and capacity. The Company, though
still maintains all obligations to the small power producers under the
power purchase contracts. These obligations are not presently
recorded on the Company's balance sheet and are being charged to
expense as incurred in accordance with generally accepted accounting
principles. Included in the Company's rates, effective March 1, 2000,
are expenses associated with the estimated annual costs under these
contracts, net of the estimated amounts to be received from the resale
of the power to Morgan Stanley. The net present value of the estimated
future purchased power costs under the contracts, net of estimated
revenues to be realized associated with the resale of the power
amounted to approximately $128.3 million as of March 31, 2000.
(6) IMPLEMENTATION OF COMPETITION IN THE ELECTRIC UTILITY INDUSTRY -
In connection with the state of Maine's electric industry
restructuring law, effective March 1, 2000, consumers of electricity
have the right to purchase generation services directly from
competitive electricity suppliers. The Company's electric rates were
changed effective March 1, as well, to reflect the Company's revenue
requirement as a transmission and distribution utility, including the
recovery of stranded costs. The electric utility industry
restructuring and the Company's associated rate proceedings at the
Maine Public Utilities Commission (MPUC) are discussed in more detail
in the 1999 Form 10-K.
As discussed in the 1999 Form 10-K, the restructuring law also
provided for a standard-offer service being available for all
customers who do not choose to purchase energy from a competitive
supplier starting March 1, 2000. As a result of the bids from
competitive energy suppliers to provide energy under the standard-
offer service being too high, and as ordered by the MPUC, the Company
assumed the responsibility of being the standard-offer service
provider starting March 1, 2000 for a one-year period. At the end of
this period it is anticipated that the Company will no longer be the
standard-offer service provider, although, this is dependent upon the
level of future bids from competitive energy suppliers to serve the
standard-offer load and MPUC approvals. The MPUC established the
schedule of rates the Company may charge for this service starting
March 1, 2000.
The Company has entered into arrangements with third parties to
purchase the energy to serve the standard-offer customers. The
Company is allowed by the MPUC to defer the difference between
revenues realized from the standard-offer sales and the costs incurred
to provide this service, including carrying costs on the deferred
balance. As a result of this reconciliation mechanism, standard-offer
related revenues and expenses do not have any impact on the Company's
earnings, although they do result in increases in both categories in
the Company's consolidated statements of income. The deferred amount
will be recovered from/returned to customers in a future rate
proceeding. In March 2000, the Company recorded a regulatory
liability of $1.2 million related to the excess of revenues over costs
incurred in connection with the standard-offer service. This amount
is included in Other regulatory liabilities on the Consolidated
Balance Sheets at March 31, 2000.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDING MARCH 31, 2000
PART II
Item 6. Exhibits and Reports on Form 8-K
Exhibits: None.
Reports on Form 8-K: None.
BANGOR HYDRO-ELECTRIC COMPANY
FORM 10-Q FOR PERIOD ENDED MARCH 31, 2000
The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the
results for the interim period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANGOR HYDRO-ELECTRIC COMPANY
(Registrant)
Dated: May 12, 2000 /s/ Mathieu A. Poulin
---------------------------
Mathieu A. Poulin
Treasurer
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This schedule contains summary financial information extracted from Bangor
Hydro-Electric Company's Form 10-Q for 1st quarter 2000 and is qualified in its
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