FILE NO. 70-9711
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
APPLICATION/DECLARATION
ON
FORM U-1
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
CONSOLIDATED EDISON, INC. NORTHEAST UTILITIES
(a New York Corporation) Western Massachusetts Electric
Consolidated Edison, Inc. Company
(a Delaware Corporation) The Quinnehtuck Company
Consolidated Edison Company of 174 Brush Hill Road
New York, Inc. West Springfield, MA 01089
4 Irving Place
New York, N.Y. 10003 The Connecticut Light and Power
Company
Consolidated Edison Solutions, Inc. Northeast Utilities Service
Consolidated Edison Energy, Inc. Company
701 Westchester Avenue, Suite 201 West Yankee Energy System, Inc.
White Plains, N.Y. 10604 NU Enterprises, Inc.
Northeast Generation Company
Consolidated Edison Development, Inc. Northeast Generation Services
CED/SCS Newington, LLC Company
CED Generation Holding Company, Select Energy, Inc.
LLC Mode 1 Communications, Inc.
CED Management Company, Inc. The Rocky River Realty Company
CED Operating Company, L.P. Northeast Nuclear Energy
Consolidated Edison Energy Company
Massachusetts, Inc. Select Energy Portland Pipeline,
CED-GTM 1, LLC Inc.
CED Ada, Inc. Charter Oak Energy, Inc.
Lakewood Cogeneration , L.P. 107 Selden Street
CED - Lakewood Inc. Berlin, CT 06037
CED Generation Lakewood Company
111 Broadway, 16th Floor North Atlantic Energy Service
New York, N.Y. 10006 Corporation
North Atlantic Energy Corporation
Consolidated Edison Communications, Public Service Company of New
Inc. Hampshire
132 West 31st Street, 13th Floor 1000 Elm Street
New York, N.Y. - 10001 Manchester, NH 03101
Orange and Rockland Utilities, Inc. Holyoke Water Power Company
Rockland Electric Company 1 Canal Street
Pike County Light & Power Company Holyoke, MA 01040
1 Blue Hill Plaza
Pearl River, NY 10965
HEC Inc.
Reeds Ferry, Inc.
24 Prime Parkway
Natick, MA 01760
Yankee Gas Services Company
Yankee Energy Financial
Services Company
NorConn Properties, Inc.
599 Research Parkway
Meriden, CT 06450-1030
Yankee Energy Services
Company
148 Norton Street
P.O. Box 526
Milldale, CT 06467
R.M. Services, Inc.
639 Research Parkway
Meriden, CT 06450-1030
CONSOLIDATED EDISON, INC.
(Name of top registered holding company)
Peter A. Irwin Cheryl W. Grise,
Consolidated Edison, Inc. General Counsel
4 Irving Place Northeast Utilities Service Company
New York, New York 10003 107 Selden Street
Berlin, CT 06037
(Name and address of agents for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
J.A. Bouknight, Jr. Jeffrey C. Miller, Esq.
Douglas G. Green Assistant General Counsel
James B. Vasile Northeast Utilities
Steptoe & Johnson LLP Service Company
1330 Connecticut Ave, NW 107 Selden Street
Washington, D.C. 20036-1795 Berlin, CT 06037
Table of Contents
Item 1. Description of the Proposed Transaction
A. Introduction
B. Description of New CEI and its Subsidiaries
C. Summary of Requested Approvals
D. Use of Proceeds
E. Issuance of Securities; Incurrence of Indebtedness, Provision of
Guarantees and Other Credit Support
1. Merger Indebtedness
2. New CEI and the Subsidiaries other than NU and its Subsidiaries
a) New CEI
(i) Financing Arrangements
(ii) Financing Subsidiaries
(iii) New CEI Investments in and Support of Nonutility
Subsidiaries
(iv) Investment in EWGs and FUCOs and Calculation of
Consolidated Retained Earnings
b) The Intermediate Holding Companies and the Utility
Subsidiaries
F. New CEI Money Pool
G. Consolidation and Reorganization of Nonutility Subsidiaries
H. Payment of Dividends by New CEI Non-Utility Subsidiaries
I. Establishment of Service Companies and Approval of Service Agreements
J. Provision of Services by the Non-Utility Subsidiaries to Other Non-K.
Utility Subsidiaries at Other than "Cost"
K. Activities of Rule 58 Subsidiaries Outside the United States
L. New CEI Stock Plans
1. The New CEI Drip
2. Incentive Compensation Plans
3. Other Plans
M. Interest Rate Hedges
N. Tax Allocation Agreement
O. Certificates of Notification
Item 2 Fees, Commissions and Expenses
Item 3 Applicable Statutory Provisions
A. Issuance of Securities, Incurrence of Indebtedness, Provisions of
Guarantees
B. Services Among Non-Utility Subsidiaries at Other than "Cost"
C. Inclusion of NU CREs in New CEI's Calculation of CREs for purposes of
Rule 53(a)
D. Compliance with Rules 53 and 54
Item 4. Regulatory Approvals
Item 5 Procedure
Item 6 Exhibits and Financial Statements
Item 7 Information as to Environmental Effects
Item 1. Description of Proposed Transaction
A. Introduction
1. Consolidated Edison, Inc. ("CEI"), a New York corporation currently a
public utility holding company exempt from the provisions of the Public
Utility Holding Company Act of 1935 (the "Act") by virtue of Section 3(a)(1)
of the Act, and Northeast Utilities ("NU"), a Massachusetts business trust
currently a registered public utility holding company under the Act, filed an
Application/Declaration on Form U-1 on January 20, 2000 (See File 70-9613)
seeking approvals relating to the proposed combination of NU with CEI (the
"Merger Application"). Under the proposal, CEI will merge with and into
Consolidated Edison, Inc. (formerly CWB Holdings, Inc.), a new Delaware
holding company ("New CEI") which is currently a wholly-owned subsidiary of
CEI (the "CEI Merger"). New CEI will be the surviving entity of this merger.
NU will merge with N Acquisition LLC, a Massachusetts limited liability
company controlled by New CEI, with NU being the surviving entity (the "NU
Merger" and together with the CEI Merger collectively, the "Mergers"). The
Mergers are more fully described in the Amended and Restated Agreement and
Plan of Merger dated as of January 11, 2000 (the "Merger Agreement") and
described in more detail in the Merger Application, which description is
incorporated by reference herein. Upon consummation of the Mergers, New CEI
intends to register as a holding company pursuant to Section 5 of the Act.
New CEI, CEI and NU herein seek authorization and approval of the Commission
with respect to the ongoing financing activities of New CEI and its
subsidiaries, intrasystem extensions of credit, the creation of service
companies, the payment of dividends out of capital and unearned surplus and
other related matters pertaining to the combined company after giving effect
to the Mergers.
B. Description of New CEI and its Subsidiaries
2. New CEI is authorized under its Amended and Restated Certificate of
Incorporation (see Exhibit A-1 hereto), to issue 510,000,000 shares
consisting of 500,000,000 shares of Common Stock, par value $.10 per share
("Common Stock") and 10,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock"). Immediately following the Mergers, New CEI expects
that it will have issued and outstanding approximately 270,000,000 shares of
Common Stock. New CEI has not issued any Preferred Stock. The cash portion
of the consideration to be paid in the Mergers will be financed by the
issuance of approximately $2.2 billion of unsecured debt or a mix of
unsecured debt and hybrid debt securities (the "Acquisition Debt") or a
combination of the Acquisition Debt and Preferred Stock and cash on hand.
The hybrid securities, which are considered debt for financial statement
purposes, would be structured to have characteristics of both debt and equity
(for example, the ability of the issuer to defer interest) and may have
maturities ranging up to 50 years. The terms and conditions of the
Acquisition Debt and Preferred Stock, if any, have not been negotiated as of
the time of this filing. The choice of hybrid securities would come from any
of several proprietary structures currently marketed by established financial
institutions. It is expected that the Acquisition Debt will ultimately have
a maturity of not more than 50 years. Immediately after the Mergers, it
is projected that common equity as a percentage of the pro forma consolidated
capitalization of New CEI and its subsidiaries will be approximately 35%.
3. Upon completion of the Mergers, New CEI will own, directly or indirectly,
interests in the following public utility companies, each of whom will be
wholly-owned by companies in the New CEI system:
Consolidated Edison Company of New York, Inc. ("CECONY"), a New York
corporation which provides gas and electric service to its customers in New
York City and Westchester County and steam service to customers in part of
Manhattan.
Orange and Rockland Utilities, Inc. ("O&R"), a New York corporation, provides
retail gas and electric services to its customers in the southeastern section
of New York. O&R is a public utility holding company exempt from the
provisions of the Act by virtue of Section 3(a)(2).
Rockland Electric Company ("RECO"), a New Jersey corporation and subsidiary
of O&R, provides electric service to customers in parts of New Jersey.
Pike County Light and Power Company ("Pike"), a Pennsylvania corporation and
subsidiary of O&R, provides electric and gas service to customers in the
northeast corner of Pike County in Pennsylvania.
The Connecticut Light and Power Company ("CL&P"), a Connecticut corporation,
provides electric service to customers in Connecticut.
Western Massachusetts Electric Company ("WMECO"), a Massachusetts corporation
provides electric service to customers in the western part of Massachusetts.
Public Service Company of New Hampshire ("PSNH"), a New Hampshire
corporation, provides electric retail service to customers in portions of New
Hampshire.
North Atlantic Energy Corporation ("NAEC"), a New Hampshire corporation, is a
special-purpose operating subsidiary that owns a 35.98 percent interest in
the Seabrook Nuclear Generating Facility ("Seabrook") in Seabrook, New
Hampshire and sells its share of the capacity and output from Seabrook to
PSNH under two life-of-unit, full-cost recovery contracts.
Holyoke Water Power Company ("HWP"), a Massachusetts corporation, provides
electric service to a limited number of customers in Holyoke, Massachusetts
and has a public utility subsidiary, Holyoke Power and Electric Company
("HPE").
Yankee Gas Services Company ("Yankee Gas"), a Connecticut corporation,
provides gas services to customers in parts of Connecticut.
Northeast Nuclear Energy Company, a Connecticut corporation, is a nuclear
management service company subsidiary that operates the Millstone Nuclear
Power Plants.
4. Collectively, the twelve subsidiaries (including HPE) referenced above
are referred to herein as the "Utility Subsidiaries." In addition, NU will
remain in existence as a first-tier registered public utility holding company
subsidiary of New CEI following the Mergers and Yankee Energy System, Inc.
("YES") will remain as a public utility holding company under NU. NU and
YES, along with O&R, are sometimes referred to herein as the "Intermediate
Holding Companies."
5. Upon completion of the Mergers, New CEI will also own interests in four
companies owning nuclear power plants, namely, Maine Yankee Atomic Power
Company, which has permanently shut down its nuclear electric generating
plant located in Wiscasset, Maine, Yankee Atomic Electric Company, which has
permanently shut down its plant located in Rowe, Massachusetts, Connecticut
Yankee Atomic Power Company, which has permanently shut down its plant in
Haddam, Connecticut and Vermont Yankee Nuclear Power Company, which has
contracted to sell its nuclear plant located in Vernon, Vermont. In
addition, CL&P and WMECO each own an interest in the Millstone 1 and 2
nuclear power plants located in Waterford, Connecticut (Millstone 1 has been
permanently shut down), CL&P, WMECO and PSNH each own an interest in the
Millstone 3 nuclear power plant, NAEC and CL&P each own an interest in
Seabrook and CECONY owns the Indian Point 1 nuclear power plant, which has
been permanently shut down, and the Indian Point 2 nuclear power plant. On
August 17, 2000. CL&P, WMECO and PSNH (along with most other joint owners of
Millstone 3) entered into a purchase agreement with Dominion Resources, Inc.
("DRI") pursuant to which DRI will purchase the owners' respective interests
in Millstone 1, 2 and 3, along with the related nuclear fuel, for an
aggregate of approximately $1.287 billion. This transaction is expected to
close by April 1, 2001. On November 9, 2000, CECONY announced it had reached
an agreement with Entergy Corporation for the sale of Indian Point Units 1
and 2 and related gas turbines and facilities for $602 million.
6. Upon completion of the Mergers, New CEI will also directly or indirectly
own approximately 50 other active subsidiary companies that are not public
utility companies, service companies or public utility holding companies
under the Act. Such entities are listed on Exhibit I-2 hereto and those
nonutility companies, other than service companies, which are applicants
hereto are collectively referred to herein as the "Nonutility Subsidiaries."
A more complete description of the Utility Subsidiaries and Nonutility
Subsidiaries may be found in the Merger Application, which descriptions are
incorporated herein by reference. Attached as Exhibit I-1 is a chart showing
the proposed pro forma corporate chart of the combined companies prior to any
restructuring or movement of subsidiaries. The Utility Subsidiaries, the
Nonutility Subsidiaries and the Intermediate Holding Companies, along with
companies that become subsidiaries of New CEI subsequent to the Mergers are
sometimes referred to herein as the "Subsidiaries."
C. Summary of Requested Approvals.
7. New CEI and the Subsidiaries, as specified below, hereby request approval
for a program of external financing, credit support arrangements, and other
related proposals for the period through September 30, 2004 ("Authorization
Period"), as follows:
(i) New CEI requests authority to issue up to 60 million shares of its
Common Stock to shareholders of NU and to issue the Acquisition Debt, both in
connection with the NU Merger;
(ii) New CEI and the Subsidiaries, including NU and its subsidiaries, request
authority to maintain in effect through the Authorization Period, all
existing credit facilities and financing arrangements and to maintain
outstanding all indebtedness and similar obligations created thereunder as of
the date of the closing of the Merger (including the Acquisition Debt) and to
amend, renew, extend, and/or replace any of such credit facilities, financing
arrangements, indebtedness or similar obligations up to the aggregate dollar
amounts specified below, subject to the terms and conditions set forth below;
(iii) New CEI requests authority to issue and sell from time to time,
pursuant to its dividend reinvestment plan and stock-based management
incentive and employee benefit plans or in exchange for securities or assets
being acquired from other companies, up to 50 million shares of Common Stock
(as such number may hereafter be adjusted to reflect any stock split);
(iv) New CEI requests authority to issue and sell from time to time (A)
Preferred Stock of up to $750 million and (B) unsecured indebtedness having
maturities of one year or less ("Short-term Debt"), and long term debt
("Debentures") with an aggregate principal amount at any time outstanding
(including the Acquisition Debt) of not more than the sum of (I) $4.75
billion and (ii) the amount of New CEI Short-term Debt and Debentures issued,
as discussed below, in place of NU's authorized Short-term Debt or Yes
Acquisition Debt (the "New CEI Debt Limit") provided that New CEI's
consolidated equity capitalization immediately following the issuance of any
such New Short-term Debt or Debentures would not be not less than 30%. NU
received Commission authorization to issue up to $400 million in Short-term
Debt through June 30, 3002 (Holding Co. Act Rel. 35-27328, File No. 70-9755
(December 28, 2000)). New CEI and NU request authorization for NU to issue
such debt from time to time through the Authorization Period. NU received
Commission authorization to issue up to $275 million in short or long term
debt for the purpose of acquiring YES (the "YES Acquisition Debt") through
June 30, 2002 (Holding Co. Act Rel. 27127, January 31, 2000). New CEI and NU
request authorization for NU to amend, renew, extend, and/or replace the YES
Acquisition Debt through the Authorization Period. New CEI may determine to
substitute the issuance by CEI of Short-term Debt and Debentures for the
issuance by NU of all or part of the NU authorized Short-term Debt and the
YES Acquisition Debt.
(v) The Utility Subsidiaries and Intermediate Holding Companies request
authority to issue, sell and have outstanding at any one time Short-term Debt
in the following aggregate principal amounts:
Utility Subsidiaries Aggregate Principal Amount
CECONY $800 million
Pike $ 2 million
RECO $ 60 million
CL&P $ 375 million*
WMECO $ 250 million*
PSNH $ 225 million*#
NAEC $ 260 million*#
Yankee Gas $ 100 million*
HWP $ 5 million*
NNECO $ 75 million*
Intermediate Holding Company Aggregate Principal Amount
O&R $113 million
NU $400 million*
YES $ 50 million*
* The amounts listed above for NU and its subsidiaries were previously
authorized by the Commission in Holding Co. Act Rel. No. 35-27328, File No. 70-
9755 (December 28, 2000). No increase in such short-term debt limits is being
requested in this Application.
# PSNH and NAEC only seek short-term debt authorization for amounts up to
10% of each company's respective net fixed plant, short-term debt in excess of
such amount requires approval of the New Hampshire Public Utilities Commission
("NHPUC").
(vi) New CEI requests authority to provide guaranties and other forms of
credit support ("New CEI Guaranties") with respect to the securities or other
obligations of its Nonutility Subsidiaries in an aggregate principal or
nominal amount not to exceed $2.5 billion at any one time outstanding. NU
intends to continue to provide guaranties and other forms of credit support
with respect to the securities or other obligations ("NU Guaranties") of the
nonutility subsidiaries of NU in an aggregate amount not to exceed $500
million, as authorized through December 31, 2002 in Commission order Holding
Co. Act Rel. No. 35-27093 (October 21, 1999). NU herein seeks authority to
issue NU Guaranties through the Authorization Period. New CEI also requests
authority to undertake an additional $500 million of guaranties so that it
may assume any of the NU Guaranties it deems necessary and appropriate to
acquire. In such event, the New CEI Guaranties could aggregate up to $3.0
billion.
(vii) New CEI and, to the extent not exempt under Rule 52, the Subsidiaries
request authority to enter into hedging transactions ("Interest Rate Hedges")
with respect to outstanding indebtedness of such companies in order to manage
and minimize interest rate costs. Such companies also request authority to
enter into hedging transactions ("Anticipatory Hedges") with respect to
anticipatory debt issuances in order to lock-in current interest rates and/or
manage interest rate risk exposure;
(viii) New CEI requests authority to establish and maintain a corporate
services company , by transferring the stock of Northeast Utilities Service
Company to New CEI and renaming it Consolidated Edison, Inc. Service Company
("CEISCO") and Nonutility Service Company ("Nonutility ServCo") as subsidiary
service companies of New CEI and requests approval of the Service Agreements
described herein;
(ix) As permitted by Rule 87(b)(1), Nonutility Subsidiaries may from time to
time provide services and sell goods to each other. To the extent not exempt
pursuant to Rule 90(d), such companies request authority to perform such
services and to sell such goods to each other at fair market prices, without
regard to "cost," as determined in accordance with Rules 90 and 91, subject
to certain limitations that are noted herein;
(x) New CEI requests authority on behalf of any current and future subsidiary
formed pursuant to Rule 58 promulgated under the Act ("Rule 58 Subsidiaries")
to engage in certain categories of activities permitted thereunder outside
the United States;
(xi) New CEI requests authority to acquire the equity securities of one or
more special-purpose subsidiaries ("Financing Subsidiaries") organized for
the sole purpose of issuing and selling securities, lending, dividending or
otherwise transferring the proceeds thereof to New CEI or an entity
designated by New CEI, and engaging in transactions incidental thereto,
subject to the New CEI Debt Limit and the other conditions set forth herein;
(xii) New CEI requests approval for an agreement among New CEI and the
Subsidiaries to allocate consolidated income tax (the "Tax Allocation
Agreement") as described herein;
(xiii) New CEI and the Subsidiaries seek authorization to maintain a money
pool for companies within the New CEI System (the "New CEI Money Pool")
through the Authorization Period;
(xiv) New CEI seeks authorization to include the amount of consolidated
retained earnings of NU as of the date immediately prior to the Mergers in
New CEI's calculation of its consolidated retained earnings for purposes of
Rule 53(a)(1)(ii); (FN1); and
(xvi) New CEI seeks authorization to consolidate or otherwise reorganize all
or any part of its direct and indirect ownership interests in Nonutility
Subsidiaries under one or more new or existing subsidiaries.
D. Use of Proceeds.
8. The proceeds from the financings authorized by the Commission pursuant to
this Application/Declaration will be used for general corporate purposes,
including (i) the refunding of the Acquisition Debt and the YES Acquisition
Debt, (ii) financing, in part, investments by and capital expenditures of New
CEI and its Subsidiaries, including, without limitation, the funding of
future investments in exempt wholesale generators ("EWG"), Foreign Utility
Companies ("FUCO"), Rule 58 Subsidiaries, and exempt telecommunications
companies ("ETC"), (iii) the repayment, redemption, refunding or purchase by
New CEI or any Subsidiary of any of its own securities from non-affiliates
pursuant to Rule 42, and (iv) financing working capital requirements of New
CEI and its Subsidiaries.
9. New CEI represents that no financing proceeds will be used to acquire the
securities of, or other interests in, any company unless such acquisition has
been approved by the Commission in this proceeding or in a separate
proceeding or is in accordance with an available exemption under the Act or
rules thereunder, including Sections 32 and 33 and Rule 58. New CEI states
that the aggregate amount of proceeds of financing and New CEI Guaranties
approved by the Commission in this proceeding used to fund investments in
EWGs and FUCOs will not, when added to New CEI's "aggregate investment" (as
defined in Rule 53) in all such entities at any point in time, exceed 50% of
New CEI's "consolidated retained earnings" (also as defined in Rule 53).
Further, New CEI represents that proceeds of financing and New CEI Guaranties
and NU Guaranties utilized to fund investments in Rule 58 Subsidiaries will
adhere to the limitations of that rule. (FN2)
E. Issuance of Securities; Incurrence of Indebtedness; Provision of
Guarantees and other Credit Support.
1. Securities Issued In Connection with the Merger
a. The Acquisition Debt
10. New CEI is not currently a holding company. Subsequent to the CEI
Merger and prior to the closing of the NU Merger, New CEI will be a holding
company exempt from the registration requirements of the Act and, thus, will
not be subject to Sections 6(a) and 7 of the Act. Subsequent to the Mergers,
New CEI will become a registered holding company under the Act. NU now is,
and following completion of the Mergers, will continue to be, a registered
holding company subject to the provisions of Sections 6(a) and 7 of the Act.
11. In connection with the CEI Merger, each share of CEI common stock will
be converted, without exchange or other action of the shareholders, to a
share of New CEI common stock. The CEI Merger and the exchange of New CEI
common stock thereby contemplated do not require Commission approval under
the Act.
12. New CEI will, in connection with the NU Merger, incur the Acquisition
Debt and will also issue common stock and deliver cash to the shareholders of
NU. New CEI anticipates that the cash portion of the consideration given for
the NU Shares will initially be obtained through the issuance of the
Acquisition Debt. New CEI requests Commission authorization to issue the
Acquisition Debt from time to time through the Authorization Period in an
amount sufficient to satisfy the cash portion of the consideration in
connection with the NU Merger, estimated not to exceed $2.2 billion, and to
refund and replace any and all Acquisition Debt initially issued. The
Acquisition Debt may include short or long-term notes, debentures, medium-
term notes and hybrid securities and/or borrowings from banks and other
financial institutions. Any long-term debt security will have such
designations, aggregate principal amounts, maturities, interest rate(s) or
methods of determining the same, terms of payment of interest, redemption
provisions, non-refunding provisions, sinking fund terms and other terms and
conditions will be established by negotiation or competitive bidding.
13. The effective cost of money on short-term Acquisition Debt will not
exceed at issuance 500 basis points over the comparable term London Interbank
Offered Rate ("LIBOR") Securities. The effective cost of money on long-term
Acquisition Debt will not exceed at issuance 500 basis over comparable term
U.S. Treasury Securities. The maturity of any such indebtedness will not
exceed 50 years from the date of issuance. The underwriting fees,
commissions, or other similar remuneration paid in connection with the non-
competitive issue, sale or distribution of a security pursuant to the
Application will not exceed 5.0 % of the principal or total amount of the
financing.
b. Stock Issued
14. The New CEI common stock to be issued to NU and CEI shareholders as
consideration in connection with the Mergers has been registered on Form S-4
under the Securities Act of 1933 (Registration No. 333-31390, the "New CEI
Registration Statement"). Subject to the rights of any holders of preferred
stock of New CEI, if any, each holder of New CEI common stock will be
entitled to cast one vote for each share held of record on all matters
submitted to a vote of the shareholders, including the election of directors.
Holders of New CEI common stock will be entitled to receive dividends or
other distributions as declared by the New CEI Board of Directors at its own
discretion. The right of the New CEI Board of Directors to declare
dividends, however, will be subject to the rights of any holders of New CEI
preferred stock, if any, of New CEI and certain requirements of Delaware law.
15. The New CEI Common Stock is described in the New CEI Registration
Statement, which was declared effective by the Commission on
March 1, 2000. Such Registration Statement is hereby incorporated by
reference herein and listed as Exhibit C-1. New CEI hereby requests
authorization to issue up to 60 million shares of New CEI Common Stock to NU
shareholders to satisfy the stock portion of the merger consideration.
16. New CEI and its Subsidiaries (including NU and the NU Subsidiaries) seek
to maintain their existing financing arrangements and other commitments and
to continue to carry on their newly combined business without undue
interruption. Consequently, New CEI requests that the Commission authorize
New CEI, NU and their respective subsidiaries, through the Authorization
Period, to continue to finance their operations in the same manner as prior
to closing of the Merger all as more specifically described herein. In that
connection, New CEI commits that, from and after the Mergers and for the
period through the Authorization Period, New CEI, as the registered holding
company parent of the combined consolidated CEI-NU system, will maintain and
will cause each of its public utility subsidiaries to maintain at least 30%
common equity in its respective capital structure, except that under certain
circumstances set forth in an application/declaration on Form U-1 filed by NU
in File No. 70-9541 related to restructuring of the electric industry in New
England, NU's consolidated common equity ratio, and the common equity ratio
of NU's utility subsidiaries may, as allowed by Commission order therein
(Holding Co. Act Rel. No. 35-27147, File No. 70-9541, March 7, 2000), decline
below 30% for the periods described therein. Following the Mergers, New
CEI's consolidated common equity ratio is not expected to fall below 30% and,
as a result of utility restructuring, New CEI and NU commit that the common
equity ratio of NU will be restored above 30% by December 31, 2002. In File
No. 9541, NU had anticipated that NU's common equity ratio would be above 30%
by December 31, 2001. That estimate was based on an anticipated issuance of
rate reduction bonds during the first half of 2000. This new date is based
on the fact that, because of delays by regulators in approving such issuance,
no bonds have yet been issued. NU expects that, as of the end of each fiscal
year set forth below, its consolidated common equity ratio will be as follow:
Year Ratio
2001 27.87%
2002 30.01%
2003 31.82%
2004 34.82%
2005 37.58%
2. Post-Merger Financing
a. New CEI
i. Financing Arrangements
17. CEI currently maintains in effect two revolving credit agreements which
will be assumed by New CEI pursuant to the CEI Merger. The first is a
$175,000,000 facility with seven major banks which terminates on December 3,
2003. The second is a $175,000,000 facility with thirteen major banks which
terminates on November 28, 2001 (collectively, the "CEI Credit Facility").
18. CEI may borrow directly against these facilities or may use them to
support the issuance of commercial paper, which is sold through dealers to
the market, at a discount from par.
19. In addition, CEI may borrow funds from Hawkeye Funding ("Hawkeye").
Hawkeye is a limited partnership and is the lessor on a synthetic lease of a
generating station which is currently under construction. This station will
be leased to Newington Energy, LLC ("Newington"), an indirect subsidiary of
CEI. Hawkeye will lend funds to CEI up to the amount of the unexpended
proceeds of a debenture issued by Hawkeye for the purpose of providing
construction funding for the generating station.
20. As discussed above, New CEI will incur the Acquisition Debt to finance
the cash component of the consideration to be paid to NU shareholders in
connection with the NU Merger. In addition, it is possible that, prior to
the Mergers, CEI will seek to increase the commitments of the lenders, and
borrow, under the CEI Credit Facility and/or enter into additional credit
facilities renewing, extending and/or replacing the CEI Credit Facility.
21. New CEI hereby requests Commission authorization to assume and maintain
in effect the above described financing arrangements, any additional
financing arrangements entered into by CEI prior to the completion of the
Mergers and any amendments, renewals, extensions or replacements thereof
entered into prior to completion of the Mergers, obligations under which will
not in the aggregate exceed the New CEI Debt Limit. New CEI further requests
authority through the Authorization Period for New CEI to amend, renew,
extend and/or replace any financing arrangement entered into by CEI prior to
completion of the Mergers and which remains in effect on the date the Mergers
are completed and to enter into additional financing arrangements similar to
those described above for the period from and after the Mergers through the
Authorization Period; provided that the aggregate principal amount of debt
obligations incurred by New CEI (including the debt assumed from CEI and the
Acquisition Debt) pursuant to this request for authorization shall not exceed
the New CEI Debt Limit, the cost of money relative to such financing shall
not exceed 500 basis points over LIBOR for comparable short term debt or
variable rate debt or 500 basis points over comparable Treasury Securities
for long term debt and the final maturity of securities issued shall not
exceed 50 years from date of issuance. Any underwriting fees, commissions or
other similar remuneration paid in connection with the issuance of this debt,
will not exceed 5.0% of the principal or total amount of the financing.
22. Within 90 days following completion of the Mergers, New CEI will,
pursuant to Rule 24, notify the Commission of all financing arrangements
entered into by CEI prior to the Mergers and which will be assumed by New CEI
and remain in effect upon the closing of the Mergers. Thereafter, New CEI
will, pursuant to Rule 24, notify the Commission of all New CEI financings
occurring within any fiscal quarter of New CEI within 60 days following the
end of such fiscal quarter.
23. In addition to the foregoing financing facilities, CEI also supports the
operations of its non-utility subsidiaries through capital contributions,
guarantees and other support arrangements. New CEI's non-utility businesses
will be principally conducted through "Non-Utility Holding Company," a new
wholly owned subsidiary of New CEI (together with its subsidiaries, the
"Non-Utility Subsidiaries.") The Non-Utility Subsidiaries are principally
involved in energy-related and telecommunications businesses.
ii. Preferred Stock
24. The Preferred Stock for which New CEI is seeking authorization to issue
after the Mergers is described in the New CEI Registration Statement. The New
CEI Board of Directors has the full authority permitted by law to issue the
Preferred Stock in one or more classes or series and, with respect to each
class or series, to determine the voting powers, if any, and the preferences
and relative, participating, optional or other special rights, if any, and
any qualifications, limitations or restrictions thereof, of the shares of any
class or series of Preferred Stock, except that holders of Preferred Stock
will not be entitled to more than one vote for each share of Preferred Stock
held. The powers, preferences and relative, participating, optional and
other special rights of each class or series of Preferred Stock and the
qualifications, limitations or restrictions, if any, thereof may differ from
those of any other classes or series at any time outstanding. Except as
otherwise required by law, as provided in the certificate of incorporation or
as determined by the New CEI Board of Directors, holders of Preferred Stock
will not have any voting rights and will not be entitled to any notice of
shareholder meetings.
iii. Financing Subsidiaries
25. New CEI requests authority to acquire, directly or indirectly, the
equity securities of one or more corporations, trusts, partnerships or other
entities (hereinafter, "Financing Subsidiaries") created specifically for the
purpose of facilitating the financing of the authorized and exempt activities
(including exempt and authorized acquisitions) of such companies through the
issuance of long-term debt or equity securities, including but not limited to
hybrid securities, to third parties and the transfer of the proceeds of such
financings by such Financing Subsidiaries to New CEI or to a Subsidiary, as
the case may be. New CEI may, if required, guaranty or enter into expense
agreements in respect of the obligations of any Financing Subsidiary which it
organizes. The Subsidiaries may also provide guaranties and enter into
expense agreements, if required, on behalf of any Financing Subsidiaries
which they organize pursuant to Rules 45(b)(7) and 52, as applicable.
26. If the direct parent company of a Financing Subsidiary is authorized in
this proceeding or any subsequent proceeding to issue long-term debt or
similar types of equity securities, then the amount of such securities issued
by that Financing Subsidiary would count against the limitation applicable to
its parent for those securities. In such cases, however, the guaranty by the
parent of that security issued by its Financing Subsidiary would not be
counted against the limitations on New CEI Guaranties or NU Guaranties, as
the case may be, set forth above. In other cases, in which the parent
company is not authorized herein or in a subsequent proceeding to issue
similar types of securities, the amount of any guaranty not exempt pursuant
to Rules 45(b)(7) and 52 that is entered into by the parent company with
respect to securities issued by its Financing Subsidiary would be counted
against the limitation on New CEI Guaranties or NU Guaranties, as the case
may be. New CEI requests that the Commission reserve jurisdiction over any
transfer of proceeds of financing by any Financing Subsidiary to New CEI
pending completion of the record. The Commission has previously authorized
registered holding companies and their subsidiaries to create financing
subsidiaries, subject to substantially the same terms and conditions. See New
Century Energies, Inc., et al., Holding Co. Act Rel. No. 27000 (April 7,
1999); and Ameren Corp., et al., Holding Co. Act Rel. No. 27053 (July 23,
1999).
iv. New CEI Investment in and Support of the Non-Utility Subsidiaries.
27. As of December 31, 2000, CEI had issued guaranties ("CEI Guaranties")
which guarantee payment and performance obligations of the Non-Utility
Subsidiaries up to approximately $700 million, pursuant to various
agreements, which guaranties will be assumed by New CEI as a result of the
CEI Merger. A current list of CEI Guarantees is attached as Exhibit K-2. In
addition, NU has Commission authorization to issue up to $500 million in NU
Guaranties (Holding Co. Act Release No. 27093). It is expected that some of
the NU Guaranties may be assumed by New CEI.
28. New CEI hereby requests authorization to maintain in place the CEI
Guaranties and other credit support arrangements outstanding at the time of
the Mergers. New CEI further requests authorization for the period from and
after the Mergers through the Authorization Period to provide additional
guaranties or other credit support for the Non-Utility Subsidiaries,
including through the assumption of NU Guaranties; provided that the
aggregate amount guaranteed by New CEI pursuant to this authorization does
not exceed $2.5 billion or up to $3.0 billion if New CEI has to assume the NU
Guaranties. Securities issuances, including guaranties and other credit
support, made by New CEI and the other Non-Utility Subsidiaries will be
effected in compliance with all applicable laws and regulations, including,
if applicable, the Act and Rule 52. NU requests that the Commission grant NU
authorization to issue up to $500 million in Guaranties to support the
existing nonutility subsidiaries of NU through the Authorization Period
replacing the authority granted in Commission Order 35-27093. New CEI and NU
believe that, subsequent to the Mergers, certain beneficiaries of the NU
Guaranties may seek an assumption by New CEI of the NU Guaranties, in effect
obtaining a replacement of the NU Guaranties by New CEI Guaranties. For that
reason, in addition to the $2.5 billion of New CEI Guaranties for which
authorization is sought herein, New CEI requests authority to assume or
replace some or all of the NU Guaranties up to an additional $500 million.
In no event will the sum of the aggregate amount of outstanding guaranties
issued by NU and the aggregate amount of NU Guaranties assumed or replaced by
New CEI Guaranties exceed $500 million.
29. Within 90 days following completion of the Mergers, New CEI will,
pursuant to Rule 24, notify the Commission of all equity investments in, and
guaranties or other credit support for or on behalf of, the Non-Utility
Subsidiaries made or provided prior to the Mergers and which will remain in
effect upon closing of the Mergers. Thereafter, New CEI will, pursuant to
Rule 24, notify the Commission of all further equity investments in, and
guaranties or other credit support for or on behalf of, the Non-Utility
Subsidiaries made or provided during any fiscal quarter of New CEI within 60
days following the end of such fiscal quarter.
v. Investment in EWGs and FUCOs and Calculation of CREs.
30. Each of CEI and NU holds investments in various EWGs and FUCOs. CEI's
specific EWG and FUCO investments are described in detail in Exhibit J-1.
31. NU owns one EWG, Northeast Generation Company ("NGC"), which owns and
operates various hydro-electric and pumped storage electric generation plants
in Massachusetts and Connecticut. This EWG investment is described in more
detail in NU's application/declaration on Form U-1, as amended, in File No.
70-9543. On a pro forma consolidated basis, at September 30, 2000, CEI and
NU together had invested $644.8 million in EWGs and FUCOs which represents
approximately 12.9% of New CEI's pro forma "average consolidated retained
earnings" for the last four quarterly periods ("CREs") (as calculated for
purposes of Rule 53) as of September 30, 2000 ($5 billion), after giving
effect to the accounting treatment for the Mergers which does not include the
amount of NU's CREs in the calculation of New CEI's CREs. This percentage
is well within the "safe harbor" provisions of the Rules. However, if the
Commission grants the request herein to credit to New CEI's CREs the amount
of NU's "average" CREs immediately prior to the Mergers (approximately $639.5
million at September 30, 2000), the percentage decreases to approximately
11.4%.
b. The Intermediate Holding Companies and the Utility Subsidiaries
32. The Intermediate Holding Companies and the Utility Subsidiaries
currently maintain in effect the following credit and financing facilities:
33. CECONY maintains two revolving credit agreements. The first is a
$375,000,000 facility with eight major banks which terminates December 23,
2002. The second is a $125,000,000 facility with thirteen major banks which
terminates on November 28, 2001. CECONY may enter into additional revolving
credit facilities aggregating up to an additional $300 million.
34. O&R maintains a $100,000,000 facility with thirteen major banks which
terminates on November 28, 2001.
35. CECONY and O&R may borrow directly against these facilities or may use
them to support the issuance of commercial paper, which is sold through
dealers to the market, at a discount from par.
36. These facilities do not include letters of credit supporting CECONY and
O&R tax-exempt debt. The debt issues of CEI's subsidiaries themselves are
listed in Exhibit K-1
37. NU maintains a short-term Credit Agreement dated as of November 17, 2000
("NU Credit Agreement"), among NU and several banks with United Bank of
California as Administrative Agent. The NU Credit Agreement provides a
credit facility of up to $400 million comprised of borrowing commitments and
letter of credit commitments. The NU Credit Agreement has a termination date
of November 16, 2001. NU also maintains a short term credit facility in the
amount of $266 million for the YES Acquisition Debt which terminates February
28, 2001.
38. Also outstanding is a short-term Credit Agreement dated as of November
17, 2000 ("Regulated Credit Agreement"), among CL&P and WMECO on the one hand
and several banks with Citibank, N.A. as Administrative Agent on the other.
The Regulated Credit Agreement provides a credit facility of up to $350
million comprised of borrowing commitments. The Regulated Credit Agreement
has a termination date of November 16, 2001.
39. On November 9, 2000 NAEC entered into an unsecured $200 million 364-day
Term Credit Agreement with four banks which was approved by the NHPUC.
40. Yankee Gas currently has a revolving line of credit of $60 million,
which was extended on November 17, 2000, to a termination date of November
16, 2001.
41. The financing arrangements described above which are in excess of one
year are subject to approval of the respective state utility commission. New
CEI hereby requests, on behalf of the Intermediate Holding Companies and the
Utility Subsidiaries, to the extent not exempted by Rule 52(a), Commission
authorization to maintain in effect the above described financing
arrangements, any additional financing arrangements entered into by such
Intermediate Holding Companies and Utility Subsidiaries prior to the
completion of the Mergers and any amendments, renewals, extensions or
replacements thereof entered into prior to completion of the Mergers. These
financing arrangements are not expected to exceed $800 million in the case of
CECONY, $113 million in the case of O&R, $2 million in the case of Pike, and
$60 million in the case of RECO, $375 million in the case of CL&P, $250
million in the case of WMECO, $225 million in the case of PSNH, $260 million
in the case of NAEC, $100 million in the case of Yankee Gas, $5 million in
the case of HWP, $75 million in the case of NNECO, $400 million in the case
of NU and $50 million in the case of YES (collectively, the "New CEI
Subsidiary Limits").
42. New CEI further requests, on behalf of the Intermediate Holding
Companies and the Utility Subsidiaries, to the extent not exempted by Rule
52(a), Commission authorization, during the period from and after the Mergers
through the Authorization Period, to amend, renew, extend and/or replace any
financing arrangement entered into by the Intermediate Holding Companies and
the Utility Subsidiaries prior to completion of the Mergers and which remain
in effect on the date the Mergers are completed; provided that no such
amendments, renewal, extension and/or replacement which is effected following
completion of the Mergers shall exceed the respective New CEI Subsidiary
Limits, or provide for a cost of money to exceed 500 basis points over LIBOR
for comparable short term or variable rate debt unless the Commission shall
otherwise approve or such amendment, renewal, extension and/or replacement
shall not require Commission approval under the Act and the rules and
regulations promulgated thereunder. New CEI further requests, on behalf of
the Intermediate Holding Companies and the Utility Subsidiaries, to the
extent not exempted under Rule 52(a), authorization to enter into additional
financing arrangements similar to those described above for the period from
and after the Mergers through the Authorization Period; provided that the
cost of money relative to such financing shall not exceed 500 basis points
over LIBOR for comparable term securities; the final maturity of securities
issued shall not exceed 364 days and the additional aggregate principal
amount of debt obligations incurred by the CEI Utility Subsidiaries shall not
exceed the respective New CEI Subsidiary Limit. (FN3).
F. New CEI Money Pool
43. New CEI and the Subsidiaries propose establishing a system-wide Money
Pool (the "Money Pool"), which will be administered and maintained through
the Authorization Period by CEISCO, at cost, under the direction of an
officer in the CEISCO Treasury Organization. (FN4) The Money Pool will
consist principally of surplus funds in the treasury of Money Pool
participants, including New CEI. The funds available to the Money Pool will
be loaned on a short-term basis to those Subsidiaries, other than any public
utility holding company, including NU, YES and O&R, any EWG or FUCO,
including NGC, Consolidated Edison Energy Massachusetts, Inc. ("CEEMI"),
Lakewood Cogeneration LP ("Lakewood") and CED/SCS Newington, LLC ("CED/SCS"),
and any direct or indirect exempt telecommunications company subsidiary of
New CEI, including Mode 1, Inc. ("Mode 1") and Consolidated Energy
Communications, Inc. ("CECI", and together with NU, YES, O&R, NGC, CEMMI,
Lakewood, CED/SCS and Mode 1, the "Nonborrowing Companies"), that have a need
for short-term funds, subject to certain limitations described therein (FN5).
Funds would be made available from such sources in such order as CEISCO, as
administrator of the Money Pool, may determine would result in a lower cost
of borrowing, consistent with the individual borrowing needs and financial
standing of the companies providing funds to the pool. The determination of
whether a Money Pool participant at any time has surplus funds to lend to the
Money Pool or shall lend funds to the Money Pool would be made by such
participant's chief financial officer or treasurer, or by a designee thereof,
on the basis of cash flow projections and other relevant factors, in such
participant's sole discretion. See Exhibit L-1 for a copy of the Form of
Money Pool Agreement.
44. Borrowings from the Money Pool would require authorization by the
borrower's chief financial officer or treasurer, or by a designee thereof
and, for the Utility Subsidiaries, will count towards the short term debt
limit sought herein. No party would be required to effect a borrowing
through the Money Pool if it is determined that it could (and had authority
to) effect a borrowing at lower cost directly from banks or through the sale
of its own commercial paper. No loans through the Money Pool would be made
to, and no borrowings through the Money Pool would be made by the
Nonborrowing Companies. Funds not required by the Money Pool to make loans
(with the exception of funds required to satisfy the Money Pool's liquidity
requirements) would ordinarily be invested in one or more short-term
investments, including: (i) interest-bearing accounts with banks; (ii)
obligations issued or guaranteed by the U.S. government and/or its agencies
and instrumentalities, including obligations under repurchase agreements;
(iii) obligations issued or guaranteed by any state or political subdivision
thereof, provided that such obligations are rated not less than "A" (or "A-1"
or "P-1" or their equivalent for short term debt) by a nationally recognized
rating agency; (iv) commercial paper rated not less than "A-1" or "P-1" or
their equivalent by a nationally recognized rating agency; (v) moneymarket
funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; and (viii)
such other investments as are permitted by Section 9(c) of the Act and Rule
40 thereunder and, with respect to contributions from WMECO, approved by the
Massachusetts Department of Telecommunications and Energy pursuant to
Massachusetts General Laws Chapter 164, Section 17A and the regulations
thereunder.
45. In addition to surplus funds, funds borrowed by New CEI through the
issuance of short-term notes or other borrowings, by selling commercial paper
are a source of funds for making loans or open account advances to certain of
its Subsidiaries through the Money Pool. The potential recipients of such
open account advances will be all the companies in the New CEI System with
the exception of the Nonborrowing Companies. Such sorts of arrangements are
anticipated to result in a reduction in borrowing costs to the recipients
because the parent often has access to funds at lower interest rates than its
subsidiaries and/or because the transaction costs of arranging several small
financings to meet the needs of the smaller subsidiaries are higher than the
costs of arranging one larger financing by the parent. The amounts to be
borrowed by New CEI for the purpose of making open account advances and to be
borrowed through the Money Pool by the Subsidiaries (other than the
Nonborrowing Companies) will also be subject to the short-term limits on the
aggregate amount outstanding for which approval is sought in this filing.
46. PSNH and NAEC are currently prohibited, by New Hampshire statute from
borrowing short-term funds in excess of 10% of their respective net fixed
plant, without NHPUC authorization.
47. Accordingly, the Applicants request that the Commission approve the
participation by PSNH and NAEC in the new CEI Money Pool, to the extent the
borrowings of each company through the New CEI Money Pool, when aggregated
with each company's outstanding short-term debt do not exceed 10% of each
Company's respective net plant, up to $225 million in the case of PSNH and
$260 million in the case of NAEC. (FN6)
48. Money Pool transactions will be designed to match, on a daily basis, the
available cash of New CEI and the Subsidiaries and the short-term borrowing
requirements of the Subsidiaries (other than the Nonborrowing Companies),
thereby minimizing the need for short-term borrowings to be made by the
Subsidiaries (other than the Nonborrowing Companies) from external sources.
To this end, it is anticipated that the short-term borrowing requirements of
the Subsidiaries (other than the Nonborrowing Companies) will be met, in the
first instance, with the proceeds of borrowings available through the Money
Pool, and thereafter, to the extent necessary, with the proceeds of external
short-term borrowings. Those participants in the Money Pool without access
to the commercial paper market will have priority as borrowers from the Money
Pool, and all the companies in the New CEI system, with the exception of the
Nonborrowing Companies, will be eligible to borrow through the Money Pool
from the proceeds of external borrowings by New CEI. If at any time there
are funds remaining in the Money Pool after satisfaction of the borrowing
needs of the borrowers, CEISCO, as agent for the Money Pool, will invest
those funds as described above and allocate the earnings on any such
investments among the Money Pool participants, providing such excess funds on
a pro rata basis according to the amount of the funds so provided.
49. All borrowings from and contributions to the Money Pool, including the
open account advances, will be documented and will be evidenced on the books
of each participant that is borrowing from or contributing surplus funds to
the Money Pool. Any participant contributing funds to the Money Pool may
withdraw those funds at any time without notice to satisfy its daily need for
funds. Loans made by the Pool will be open account advances for periods of
less than 12 months, although the Agent may receive upon demand a promissory
note evidencing the transaction. All loans made by the Pool from Surplus
Funds are payable on demand by the Agent, except for loans from the proceeds
of external borrowings by New CEI at any time without premium or penalty and
will bear interest for both the borrower and lender, payable monthly, equal
to the daily Federal Funds Effective Rate as quoted by the Federal Reserve
Bank of New York. Loans from the proceeds of external borrowings by New CEI
will bear interest at the same rate paid by New CEI on its borrowings, and no
such loans may be prepaid unless New CEI is made whole for any additional
costs that may be incurred because of such prepayment. New CEI will be fully
reimbursed for all costs that it incurs in relation to loans made to the
other participants.
50. New CEI and the Subsidiaries believe that the cost of the proposed
borrowings through the Money Pool will generally be more favorable to the
borrowing companies than the comparable cost of external short-term
borrowings, and that the yield to the Subsidiaries contributing available
funds to the Money Pool will generally be the same as the typical yield on
short-term investments. However, if on any given day the funds available
through the Money Pool are insufficient to satisfy the short-term borrowing
requirements of a Subsidiary, such Subsidiary may effect short-term
borrowings through lending institutions and/or through the sale of commercial
paper, if appropriate.
51. New CEI and the Nonutility Subsidiaries hereby request that, to the
extent borrowings from the money pool by the Nonutility Subsidiaries are not
exempt under Rule 52, there be no limit on borrowings made through the money
pool by the Nonutility Subsidiaries (other than the Nonborrowing Companies).
A limit on Nonutility Subsidiary borrowing could result in unnecessary third
party borrowing by the New CEI System. For example, if the Nonutility
Subsidiary had a pre-arranged limit (i.e. $15 million), there could exist a
scenario where some Subsidiaries have money invested in the Money Pool but a
certain Nonutility Subsidiary might have a need to borrow more than its
limit. Even though there would be funds available in the Money Pool, the
Nonutility Subsidiary who had reached its borrowing limit would have to make
a borrowing directly from New CEI of funds borrowed by New CEI from external
sources, while the excess funds in the Money Pool which would not be
available to such Nonutility Subsidiary would be invested with third parties.
This series of transactions would be ineffective and detrimental to the New
CEI System, as a whole. Accordingly, New CEI, on behalf of the Nonutility
Subsidiaries (other than the Nonborrowing Companies), requests that, to the
extent borrowings through the Money Pool are not exempt under Rule 52, there
be no limit on the amount of borrowings which the Nonutility Subsidiaries
(other than the Nonborrowing Companies) may make through the Money Pool. A
similar request was made by Conectiv and granted by the Commission in Holding
Co. Act Rel. No. 12711 (December 14, 1999).
G. Consolidation and Reorganization of Nonutility Subsidiaries
52. New CEI may determine from time to time to consolidate or otherwise
reorganize all or any part of its direct and indirect ownership interests in
Nonutility Subsidiaries under one or more new or existing subsidiaries. To
effect any such consolidation or other reorganization, New CEI could, among
other things, directly or indirectly contribute to a new or existing
subsidiary all of the outstanding equity securities of one or more Nonutility
Subsidiaries or sell the equity securities of one or more Nonutility
Subsidiaries to a new or existing subsidiary. Alternatively, a Nonutility
Subsidiary could dividend the securities of one or more Nonutility
Subsidiaries to a new or existing subsidiary.
53. To the extent such transactions are not exempt from the Act or otherwise
authorized or permitted by rule, regulation or order of the Commission issued
thereunder, New CEI hereby requests authorization under the Act to
consolidate or otherwise reorganize, under one or more new or existing
subsidiaries, New CEI's ownership interests in one or more of Nonutility
Subsidiaries not currently owned, directly or indirectly, by a utility
company, the acquisition of the securities of which is exempt from Commission
approval under the Act. As indicated above, such transactions may take the
form of such Nonutility Subsidiaries selling, contributing or transferring in
the form of a dividend to new or existing subsidiaries, and such subsidiaries
acquiring, directly or indirectly, the equity securities of such Nonutility
Subsidiaries. Each such transaction would be effected in compliance with all
applicable state or foreign laws and accounting requirements, and any sale
transaction would be effected for a consideration equal to the book value of
the equity securities of the Nonutility Subsidiary being sold. New CEI will
report on the completion of each such transaction in the next quarterly
certificate filed pursuant to Rule 24 in this File.
H. Payment of Dividends by New CEI Nonutility Subsidiaries.
54. New CEI also requests authorization, on behalf of CEI's current and New
CEI's future non-exempt Nonutility Subsidiaries, other than Nonutility
Subsidiaries which are NU Subsidiaries and other than Nonutility Subsidiaries
that are subsidiaries of public utility companies, that such companies be
permitted to pay dividends to each subsidiary's direct parent with respect to
the securities of such companies, from time to time through the Authorization
Period, out of capital and unearned surplus. This type of authorization has
been granted to NU (see, Northeast Utilities, et al., Holding Co. Act Rel.
No. 35-27147 (March 7, 2000)) through December 31, 2005. The Applicants
request that this order remain in effect after the Mergers but only through
the Authorization Period. The Commission has also granted similar approvals
to other registered holding companies. (See Entergy Corporation, et al.,
Holding Co. Act Rel. No. 35-27039 (June 22, 1999); Interstate Energy
Corporation, et al., Holding Co. Act Rel. No. 35-27069 (August 26, 1999)).
55. New CEI anticipates that there may be situations in which one or more of
such Nonutility Subsidiaries will have unrestricted cash available for
distribution in excess of any such company's current and retained earnings.
In such situations, the declaration and payment of a dividend to its direct
parent would have to be charged, in whole or in part, to capital or unearned
surplus.
56. Further, there may be periods during which unrestricted cash available
for distribution by such Nonutility Subsidiary exceeds current and retained
earnings due, for example, to the difference between accelerated depreciation
allowed for tax purposes, which may generate significant amounts of
distributable cash, and depreciation methods required to be used in
determining book income.
57. New CEI, on behalf of each such current and future non-exempt Nonutility
Subsidiary represents that it will not declare or pay any dividend out of
capital or unearned surplus in contravention of any law restricting the
payment of dividends. New CEI also states that the Nonutility Subsidiaries
will comply with the terms of any credit agreements and indentures that
restrict the amount and timing of distributions to shareholders.
58. Accordingly, Consolidated Edison Communications, Inc., Consolidated
Edison Energy, Inc., Consolidated Edison Development, Inc. ("CEDI") and
Consolidated Edison Solutions, Inc. seek authorization to pay dividends out
of capital and unearned surplus to New CEI; CED Ada, Inc., Consolidated
Edison Leasing, Inc., Carson Acquisition, Inc., Con Edison Leasing, LLC.,
CEDST, LLC, CED/SCS Newington, LLC, CED Generation Holding Company, LLC,
Consolidated Edison Energy Massachusetts, Inc., CED-GTM 1, LLC, seek
authorization to pay dividends out of capital and unearned surplus to CEDI;
CED Management Company, Inc., CED Operating Company, L.P., Lakewood
Cogeneration, L.P., and CED-Lakewood Inc. seek authorization to pay dividends
out of capital and unearned surplus to CED Generation Holding Company; and
CED Generation Lakewood Company seeks authorization to pay dividends out of
capital and unearned surplus to CED Lakewood Inc. Ada Cogeneration L.P.
seeks authorization to pay dividends out of capital and surplus to CED/DELTA
Ada, LLC and CED/DELTA Ada, LLC seeks authorization to pay dividends out of
capital and surplus to CED Ada, Inc. Newington Energy, LLC . seeks
authorization to pay dividends out of capital and surplus to CED/SCS
Newington, LLC GTM Energy, LLC. seeks authorization to pay dividends out of
capital and surplus to CED-GTM 1, LLC. CED 42, LLC seeks authorization to
pay dividends out of capital and surplus to CEDST, LLC. Lakewood
Cogeneration, L.P. seeks authorization to pay dividends out of capital and
surplus to CED-Lakewood, Inc. and CED Generation Lakewood Company.
I. Establishment of Service Companies and Approval of Service Agreements.
59. As noted below, New CEI intends to establish an arrangement for the
system-wide provision of services that conforms to traditional Commission
precedent with respect to both the number of service companies within the
combined system and traditional pricing terms under the Commission's "at-
cost" rules.
60. As an exempt holding company, CEI currently provides a number of
services to its affiliates and subsidiaries principally through its regulated
subsidiaries CECONY and O&R. As a registered holding company, NU established
Northeast Utilities Service Company ("NUSCO") in 1966 as a service company
pursuant to Section 13(b) of, and Rule 88 under, the Act. The basic form of
service agreement, including exhibits thereto which described the services
offered and methods of allocation of costs, was an exhibit to NU's
application-declaration seeking authority for NUSCO and made effective by the
Commission. In addition, NU has filed an application/declaration on Form U-1
on February 28, 2000 seeking authorization to create and maintain a service
company for its nonutility subsidiaries.
61. As part of their business combination, CEI and NU anticipate
centralization of some of the service functions in the combined company but
have not yet completed their analysis of how best to accomplish this goal, a
task that is not expected to be completed until after the consummation of the
Mergers. However, New CEI, in accordance with the order of the NHPUC
approving the Merger (see discussion below), currently anticipates forming
two subsidiary service companies to perform services for the companies in the
New CEI System. In that connection, prior to closing of the Mergers, New CEI
anticipates that it will establish one new subsidiary service company,
Nonutility ServCo as a subsidiary of newly-formed Non-Utility Holding
Company, and immediately subsequent to the merger, NU will transfer to New
CEI, through sale, at book value, all of the stock of NUSCO, which will be
renamed and is referred to herein as CEISCO. CEISCO and Nonutility ServCo
will, subsequent to the Mergers, assume from CECONY, O&R and NUSCO all of the
service functions currently performed for affiliates by CECONY, O&R and
NUSCO, however, such an assumption of duties will require study and analysis.
Accordingly, the Applicants request a transition period of 15 months from the
date of the Order issued herein before being required to effectuate these
changes. CEISCO will be a direct subsidiary of New CEI and Nonutility ServCo
will be a direct subsidiary of the proposed Non-Utility Holding Company.
Employees performing such functions will become employees of either
Nonutility ServCo or CEISCO. Upon closing of the Mergers, New CEI and the
Subsidiaries (including the Non-Utility Subsidiaries) will enter into a new
single systemwide Service Agreement with CEISCO and the Nonutility
subsidiaries will also enter into a Nonutility Service Agreement with
Nonutility ServCo. New CEI seeks authorization for it and its Subsidiaries
from the Commission to enter into the form of Service Agreement annexed as
Exhibit M-1 with CEISCO which contemplates that the services to be offered to
system companies may include, but will not be limited to:
1. Accounting. CEISCO will offer advice and assistance to system
companies in accounting matters, including the development of accounting
practices, procedures and controls, the preparation and analysis of financial
reports, and the processing of certain accounts such as accounts payable,
payroll, customer and cash management.
2. Auditing. CEISCO's internal auditing staff will provide periodic
auditing of the accounting records and other records maintained by system
companies, coordinating their examination, where applicable, with that of
independent public accountants.
3. Legal and Regulatory. CEISCO will offer advice and assistance with
respect to legal and regulatory issues as well as regulatory compliance,
including 1935 Act authorizations and compliance and regulatory matters under
other Federal and State laws.
4. Information Technology, Electronic Transmission and Computer Services.
CEISCO will provide the organization and resources for the operation of an
information technology function including the operation of a centralized data
processing facility and the management of a telecommunications network.
5. Software Pooling. CEISCO will accept from system companies ownership
of and rights to use, assign, license or sublicense all software owned,
acquired or developed by or for system companies, if any, which system
companies can and do transfer or assign to it. CEISCO will preserve and
protect the rights to all such software to the extent reasonable and
appropriate under the circumstances; to license system companies, on a non-
exclusive, no-charge or at-cost basis, to use all software which the relevant
service sompany has the right to sell, license or sublicense; and, at the
relevant system companies' expense, to permit system companies to enhance any
such software and to license others to use all such software and enhancements
to the extent that CEISCO shall have the legal right to so permit.
6. Employee Benefits/Pension Investment. CEISCO will provide central
accounting for employee benefit and pension plans of system companies.
7. Employee Relations. CEISCO will advise and assist system companies in
the formulation and administration of employee relations policies and
programs relating to the relevant system companies' labor relations,
personnel administration, training, wage and salary administration and
safety.
8. Operations. CEISCO will advise and assist system companies in the
study, planning, engineering and construction of facilities of each system
company and of the System as a whole, and will advise, assist and manage the
planning, engineering (including maps and records) and construction
operations of system companies electing this service.
9. Executive and Administrative. CEISCO will advise and assist system
companies in the solution of major problems and in the formulation and
execution of the general plans and policies of system companies electing this
service. CEISCO will advise and assist system companies as to operations,
the issuance of securities, the preparation of filings arising out of or
required by the various Federal and State securities, business, public
utilities and corporation laws, the selection of executive and administrative
personnel, the representation of system companies before regulatory bodies,
proposals for capital expenditures, budgets, financing, acquisition and
disposition of properties, expansion of business, rate structures, public
relationships and other related matters.
10. Business & Operations Services. CEISCO will advise and assist system
companies in all matters relating to operational capacity and the preparation
and coordination of operating studies. Additionally, CEISCO will perform
general administrative support services, including travel services, aviation,
fleet, mail and facilities management.
11. Risk Management. CEISCO will advise and assist system companies in
securing requisite insurance, in the purchase and administration of all
property, casualty and marine insurance, in the settlement of insured claims
and in providing risk prevention advice.
12. Environmental Compliance. CEISCO will provide consulting, cleanup and
other service activities as required to ensure full compliance with
applicable environmental statutes and regulations.
13. Corporate Planning. CEISCO will advise and assist system companies
in studying and planning in connection with operations, budgets, economic
forecasts, capital expenditures and special projects.
14. Purchasing. CEISCO will advise and assist system companies in the
purchase of materials, supplies and services, will conduct purchase
negotiations, prepare purchasing agreements and will administer programs of
material control.
15. Rates. CEISCO will advise and assist system companies in the
analysis of their rate structure in the formulation of rate policies and in
the negotiation of large contracts. CEISCO will also advise and assist
system companies in proceedings before regulatory bodies involving the rates
and operations of system companies and of other competitors where such rates
and operations directly or indirectly affect system companies.
16. Research. CEISCO will investigate and conduct research into problems
relating to production, utilization, testing, manufacture, transmission,
storage and distribution of energy and other services.
17. Tax. CEISCO will advise and assist system companies in the
preparation of Federal and other tax returns, and will generally advise
system companies as to any problems involving taxes including the provision
of due diligence in connection with acquisitions.
18. Corporate Secretary. CEISCO will provide all necessary functions
required of a publicly held corporation; coordinating information and
activities among shareholders, the transfer agent, and Board of Directors;
providing direct services to security holders; preparing and filing required
annual and interim reports to shareholders and the SEC; conducting the annual
meeting of shareholders and ensuring proper maintenance of corporate records.
19. Investor Relations. CEISCO will provide fair and accurate analysis
of New CEI and its operating subsidiaries and its outlook within the
financial community, enhancing New CEI's position in the energy industry;
balancing and diversifying shareholder investment in New CEI through a wide
range of activities; providing feedback to New CEI and its operating
subsidiaries regarding investor concerns, trading and ownership; holding
periodic analysts meetings; and providing various operating data as requested
or required by investors.
20. Customer Service. CEISCO will provide services and systems
dedicated to customer service, including billing, remittance, credit,
collections, customer relations, call centers, energy conservation support
and metering
21. Treasury/Finance. CEISCO will provide services related to managing
all administrative activities associated with financing, including
management of capital structure; cash, credit and risk management
activities; investment and commercial banking relationships; oversight of
decommissioning trust funds and general financing activities.
22. External Affairs. CEISCO will provide services in support of
corporate strategies for managing relationships with federal, state and local
governments, agencies and legislative bodies. CEISCO will formulate and
assist with public relations and communications programs and administration
of corporate contribution and community affairs programs.
23. Office Space and Equipment. CEISCO will assist in the leasing of
land, buildings, furnishings and equipment, including computer hardware and
software and transportation equipment.
62. As compensation for services performed, the Services Agreement will
provide for the client companies to pay to CEISCO the cost of such services,
computed in accordance with the applicable rules and regulations (including,
but not limited to Rules 90 and 91) under the Act and appropriate accounting
standards. Under the terms of the Service Agreement, CEISCO will render
services to the subsidiary companies of New CEI at cost. CEISCO will account
for, allocate and charge its costs of the services provided on a full cost
reimbursement basis under a work order system consistent with the Uniform
System of Accounts for Mutual and Subsidiary Service Companies. Costs
incurred in connection with services performed for a specific subsidiary
company will be billed 100% to that subsidiary company. Where more than one
company is involved in or has received benefits from a service performed, the
Services Agreement will provide that client companies will pay their fairly
allocated pro rata share in accordance with the methods set out in a schedule
to the Services Agreement. Indirect costs incurred by CEISCO which are not
directly allocable to one or more subsidiary companies will be allocated in
proportion to how either direct salaries or total costs are billed to the
subsidiary companies depending on the nature of the indirect costs
themselves. The time CEISCO employees spend working for each subsidiary will
be billed to and paid by the applicable subsidiary on a monthly basis, based
upon time records. Each subsidiary company will maintain separate financial
records and detailed supporting records showing CEISCO's charges. A copy of
the Policies and Procedures concerning the New CEI Service Companies is
attached hereto as Exhibit M-2. Thus, charges for all services provided by
CEISCO to affiliated Utility Subsidiaries and Nonutility Subsidiaries will be
on an "at cost" basis as determined under Rules 90 and 91 of the Act.
63. NU and CEI believe that their approach to service company arrangements
provides them with the appropriate degree of flexibility to integrate their
operations in a manner consistent with applicable laws and regulations.
CEISCO will provide general administrative and corporate services system wide
to all system companies. Nonutility ServCo will provide specified
competitive services to the Nonutility Subsidiaries. This is in compliance
with the order issued by the NHPUC. In that order the NHPUC stated
"In summary, then, we approve the Merger Settlement Agreement and will
permit Consolidated Edison to consummate the merger contemplated in the
Petition. However, in addition to the commitments made by the Joint
Petitioners in the Merger Settlement Agreement, our approval is
expressly conditioned on the Joint Petitioners agreeing to the following
conditions:
4. Subsequent to the merger, Consolidated Edison will form separate
service companies to provide services to its regulated and unregulated
subsidiaries."
NHPUC Order No. 23,594, Docket No. DE 00-009, December 6, 2000, slip op.
at 117.
64. The services that Nonutility ServCo is expected to provide to the
Nonutility Subsidiaries include, without limitation, employee recruiting,
engineering, hedging and financial derivatives and arbitrage services,
electric purchasing for resale, purchasing of electric transmission, system
operations and marketing. Moreover, the Commission has found in similar
(albeit considerably more complex) circumstances that the simplicity
requirements of Section 11(b)(2) of the Act are aimed at preventing the
"leverage and pyramiding device" that gave rise to the Act and that those
requirements do not prohibit the organization of additional service companies
in the same holding company system to the extent it "offers various
benefits," including "afford[ing] separation between the utility and non-
utility businesses [within the holding company system]," especially where it
is legally required. Entergy Corp., Holding Co. Act Rel. No. 27039 (June 22,
1999). See, also, Entergy Corp., Holding Co. Act Rel. No. 26322 (June 30,
1995). Here, as in the Entergy matter, the formation of Nonutility ServCo
will allow the Applicants and the other companies in the New CEI system to
separate their regulated utility and the competitive non-utility businesses
and afford stronger compliance with code of conduct requirements that may
arise in the jurisdictions in which the New CEI companies do business. The
Nonutility ServCo Service Agreement will be substantially identical to the
CEISCO Service Agreement filed as Exhibit M-1 hereto.
65. No change in the organization of CEISCO or Nonutility ServCo, the type
and character of the companies to be serviced, the methods of allocating cost
to associate companies, or in the scope or character of the services to be
rendered subject to Section 13 of the Act, or any rule, regulation or order
thereunder, shall be made unless and until New CEI shall first have given the
Commission written notice of the proposed change not less than 60 days prior
to the proposed effectiveness of any such change. If, upon the receipt of
any such notice, the Commission shall notify New CEI within the 60-day period
that a question exists as to whether the proposed change is consistent with
the provisions of Section 13 of the Act, or of any rule, regulation or order
thereunder, then the proposed change shall not become effective unless and
until New CEI shall have filed with the Commission an appropriate declaration
regarding such proposed change and the Commission shall have permitted such
declaration to become effective.
66. Rule 88 (b) provides that "(a) finding by the commission that a
subsidiary company of a registered holding company . . . is so organized and
conducted, or is to be so conducted, as to meet the requirements of Section
13(b) of the Act with respect to reasonable assurance of efficient and
economical performance of services or construction or sale of goods for the
benefit of associate companies, at cost fairly and equitably allocated among
them (or as permitted by (Rule 90), will be made only pursuant to a
declaration filed with the Commission on Form U-13- 1, as specified in the
instructions for that form, by such company or the persons proposing to
organize it." Notwithstanding the foregoing language, the Commission has on
at least two recent occasions made findings under Section 13(b) based on
information set forth in an application on Form U-1, without requiring the
formal filing on a Form U-13-1. See Unitil Corp., 51 SEC Docket 562 (Apr.
24, 1992); CINergy Corp., 57 SEC Docket 2353 (Oct. 21, 1994). In this
Application, New CEI has submitted substantially the same application
information as would have been submitted in a Form U-13-1.
67. Accordingly, it is submitted that it is appropriate to find that
CEISCO and Nonutility ServCo will be so organized and shall be so conducted
as to meet the requirements of Section 13(b), and that the filing of a Form
U-13-1 is unnecessary, or, alternatively, that this Application should be
deemed to constitute a filing on Form U-13-1 for purposes of Rule 88.
68. Accordingly, New CEI requests authorization to maintain, subsequent to
the Mergers, Non-Utility Holding Company, CEISCO and Nonutility ServCo.
Initially, Non-Utility Holding Company will issue 1000 shares of common
stock, at no or nominal par value, all of which will be subscribed to by New
CEI at a price of $1 per share. NU will transfer all of its shares in NUSCO
to CEI and NUSCO will be renamed. Nonutility ServCo will issue 1000 shares
of common stock, at no or nominal par value, all of which will be subscribed
to by Non-Utility Holding Company at a price of $1 per share. New CEI will
file with the Commission, within the 15 month transition period, a post-
effective amendment to this Application seeking a supplemental order
concerning the maintenance of the two service companies, the finalized
service agreements, the cost allocations and the New CEI policies and
procedures.
69. In addition, Pike and RECO, two utility subsidiaries of New CEI, have no
employees. Traditionally, utility services provided by these companies to
their customers have been provided by employees of O&R. Such services are
provided at cost. New CEI, on behalf of O&R, Pike and RECO, seek
authorization for this arrangement to continue pursuant to Section 13(b).
J. Provision of Services by the Nonutility Subsidiaries to other Nonutility
Subsidiaries at other than Cost
70. Nonutility ServCo and the Nonutility Subsidiaries propose to provide
services to each other at any price they deem appropriate, including, but not
limited to, cost or fair market prices, and request an exemption pursuant to
Section 13(b) and Rule 100(a) from the "at cost requirement" of Rules 90 and
91 to the extent that a price other than "cost" is charged. (Authority for
NGS to provide certain services to NGC at other than at cost has been
separately requested in NU's application/declaration, as amended, in File No.
70-9543). Nonutility ServCo and the Nonutility Subsidiaries propose to
retain the option to provide services to each other at cost, consistent with
Rules 90 and 91, if reasonable business considerations call for such an at-
cost charge. Nonutility ServCo will not perform any services for any of New
CEI's regulated public utility subsidiaries or enter into any other
transactions in which those public utility subsidiaries would be required to
make payments directly to Nonutility ServCo. Any services provided by the
Nonutility Subsidiaries to CEI's regulated public utility subsidiaries will
be provided at "cost" consistent with Rules 90 and 91. Nonutility ServCo and
the Nonutility Subsidiaries will not provide services to any associate
company that, in turn, provides such services or sells such goods, directly
or indirectly, to any other associate company that is not a Nonutility
Subsidiary, except pursuant to the requirements of the Commission's rules and
regulations under Section 13(b) or an exemption therefrom obtained in a
separate filing.
71. Accordingly, the Nonutility Subsidiaries request authorization to
provide services to each other (other than services provided by NGS to NGC)
at other than cost. However, such services will not be provided at other
than cost to an associate power project unless one or more of the following
conditions is satisfied:
(i) the project is a FUCO or an EWG which derives no part of its income,
directly or indirectly, from the generation, transmission, or
distribution of electric energy for sale within the United States;
(ii) the project is an EWG which sells electricity at market-based rates
which have been approved by the Federal Energy Regulatory Commission,
provided that the purchaser is not one of the Utility Subsidiaries.
(iii) the project is a "qualifying facility" ("QF") within the meaning of
the Public Utility Regulatory Policies Act of 1978, as amended ("PURPA")
that sells electricity exclusively (a) at rates negotiated at arms'-
length to one or more industrial or commercial customers purchasing such
electricity for their own use and not for resale, and/or (b) to an
electric utility company (other than a Utility Subsidiary) at the
purchaser's "avoided cost" as determined in accordance with the
regulations under PURPA; or
(iv) the project is a domestic EWG or QF that sells electricity at rates
based upon its cost of service, as approved by FERC or any state public
utility commission having jurisdiction, provided that the purchaser
thereof is not one of the Utility Subsidiaries; or
(v) the project is a Rule 58 Subsidiary or any other Nonutility
Subsidiary that (a) is partially-owned by New CEI, provided that the
ultimate purchaser of such goods or services is not a Utility Subsidiary
(or any other entity that New CEI may form whose activities and
operations are primarily related to the provision of goods and services
to the Utility Subsidiaries), (b) is engaged solely in the business of
developing, owning, operating and/or providing services or goods to
Nonutility Subsidiaries described in clauses (i) through (iv) immediately
above, or (c) does not derive, directly or indirectly, any material part
of its income from sources within the United States and is not a public-
utility company operating within the United States.
72. These circumstances for which market based pricing authority is being
requested are substantially the same as those approved by the Commission in
other cases. See Entergy Corporation, et al., Holding Co. Act Rel. No. 27039
(June 22, 1999); Ameren Corp., et al., Holding Co. Act Rel. No. 27053 (July
23, 1999); and Interstate Energy Corporation, Holding Co. Act Rel. No. 27069
(August 26, 1999).
K. Activities Of Non-Utility Subsidiaries Outside The United States.
73. New CEI, on behalf of any current or future Non-Utility Subsidiaries,
requests authority to engage in the type of business activities listed in
Rule 58 outside the United States. Such activities may include:
(i) the brokering and marketing of electricity, natural gas and other energy
commodities ("Energy Marketing"), though the Applicants request that the
Commission reserve jurisdiction over the provision of Energy Marketing
outside the United States and Canada;
(ii) energy management services ("Energy Management Services"), including the
marketing, sale, installation, operation and maintenance of various products
and services related to energy management and demand-side management,
including energy and efficiency audits; facility design and process control
and enhancements; construction, installation, testing, sales and maintenance
of (and training client personnel to operate) energy conservation equipment;
design, implementation, monitoring and evaluation of energy conservation
programs; development and review of architectural, structural and engineering
drawings for energy efficiencies, design and specification of energy
consuming equipment; and general advice on programs; the design,
construction, installation, testing, sales and maintenance of new and
retrofit heating, ventilating, and air conditioning ("HVAC"), electrical and
power systems, alarm and warning systems, motors, pumps, lighting, water,
water-purification and plumbing systems, and related structures, in
connection with energy-related needs; and the provision of services and
products designed to prevent, control, or mitigate adverse effects of power
disturbances on a customer's electrical systems; and
(iii) engineering, consulting and other technical support services
("Consulting Services") with respect to energy-related businesses, as well as
for individuals. Such Consulting Services would include technology
assessments, power factor correction and harmonics mitigation analysis, meter
reading and repair, rate schedule design and analysis, environmental
services, engineering services, billing services (including consolidation
billing and bill disaggregation tools), risk management services,
communications systems, information systems/data processing, system planning,
strategic planning, finance, feasibility studies, and other similar services.
74. The Commission previously authorized similar activities with similar
reservations in Interstate Energy Corporation, Holding Co. Act Rel. 35-27069
(August 26, 1999), Energy East Corp., Holding Co. Act Rel. 35-27228
(September 12, 2000) and Southern Energy, Inc., Holding Co. Act Rel. 35-27020
(May 13, 1999).
L. New CEI Stock Plans and other Employee Benefit Plans.
75. New CEI proposes, from time to time during the Authorization Period, to
issue and/or acquire in open market transactions or by some other method
which complies with applicable law and Commission interpretations then in
effect up to 50 million shares of New CEI common stock under New CEI's
dividend reinvestment and cash payment plan, certain incentive compensation
plans and certain other employee benefit plans and employment or other
agreements described below.
1. The New CEI Drip
76. Both CEI and NU currently maintain dividend reinvestment plans with a
direct stock purchase feature. New CEI will have a similar plan (the "New CEI
Drip"). Participants in the CEI plan and NU plan will be eligible to become
participants in the New CEI Drip.
77. The purpose of the New CEI Drip is to provide eligible participants with
a convenient and economical way to purchase New CEI common stock by
reinvesting dividends and/or making optional monthly investments.
Shareholders of New CEI would be eligible to participate. Foreign citizens
are eligible to participate as long as their participation would not violate
any laws in their home countries.
78. At New CEI's discretion, shares of New CEI common stock purchased under
the New CEI Drip will be either newly issued or purchased on the open market
by an independent agent. Any determination by New CEI to change the manner
in which shares will be purchased for the New CEI New Drip, and
implementation of any such change, will comply with applicable law and
Commission interpretations then in effect.
79. Net proceeds from the sale of newly issued shares of New CEI common
stock will be added to the general corporate funds of New CEI and will be
used to meet its capital requirements and the capital requirements of its
subsidiaries. New CEI will not receive any proceeds from shares acquired in
the open market
2. Incentive Compensation Plans.
80. CEI and NU currently maintain employee stock option plans. NU also
maintains an incentive compensation plan under which stock options and
restricted shares may be granted. On completion of the Mergers, New CEI
will assume the CEI and NU stock option plans and each outstanding CEI and NU
stock option issued under the various CEI and NU plans. It is currently
anticipated that prior to the Mergers, CEI will adjust the terms of all
outstanding CEI employee stock options to provide that the options will
constitute options to acquire shares of New CEI common stock, on the same
terms and conditions as apply to the CEI stock options. Prior to the Mergers
NU will adjust the terms of all outstanding NU employee stock options to
provide that the options will constitute options to acquire, on the same
terms and conditions as apply to the NU employee stock options, the same
number of shares of New CEI common stock (rounded down to the nearest whole
share) as the holder of the option would have received in the NU Merger had
the holder exercised the option in full immediately prior to the NU Merger.
The amount of the exercise price per share of New CEI common stock (rounded
up to the nearest cent) under any option will be equal to the aggregate
amount of the exercise price of the NU common shares subject to the NU option
divided by the total number of shares of New CEI common stock to be subject
to the option.
3. Other Plans.
81. Both CEI and NU maintain various stock plans for employees and
directors, including investments in company stock through the employee's
401(k) plan. New CEI has not yet decided what specific plans will be
maintained for employees or directors subsequent to the Mergers.
82. In addition, prior to the Mergers, CEI may enter into employment or
other agreements with certain of its officers and employees that may provide
for grants of stock options and/or restricted stock or units, which would be
satisfied through open market purchases. Subsequent to the Mergers, New CEI
may enter into employment or other agreements with certain officers and
employees providing for similar grants.
83. Accordingly, New CEI requests authority to issue and sell, from time to
time, pursuant to its dividend reinvestment plan, stock-based management
incentive plans, and other employee and director benefit plans, up to 50
million shares of New CEI common stock (as such number may hereafter be
adjusted to reflect any stock split).
M. Interest Rate Hedges.
84. New CEI, and to the extent not exempt pursuant to Rule 52, the
Subsidiaries, request authorization to enter into interest rate hedging
transactions with respect to outstanding indebtedness ("Interest Rate
Hedges"), subject to certain limitations and restrictions, in order to reduce
or manage interest rate costs. Interest Rate Hedges would only be entered
into with counterparties ("Approved Counterparties") whose senior debt
ratings, or the senior debt ratings of the parent companies of the
counterparties, as published by Standard and Poor's, are equal to or greater
than BBB-, or an equivalent rating from Moody's Investors Service, Fitch
Investor Service or Duff and Phelps.
85. Interest Rate Hedges will involve the use of financial instruments
commonly used in today's capital markets, such as interest rate swaps, caps,
collars, floors, and structured notes (i.e., a debt instrument in which the
principal and/or interest payments are indirectly linked to the value of an
underlying asset or index), or transactions involving the purchase or sale,
including short sales, of U.S. Treasury obligations. The transactions would
be for fixed periods and stated notional amounts. Fees, commissions and other
amounts payable to the counterparty or exchange (excluding, however, the swap
or option payments) in connection with an Interest Rate Hedge will not exceed
those generally obtainable in competitive markets for parties of comparable
credit quality.
86. Anticipatory Derivatives. In addition, New CEI and the Subsidiaries
request authorization to enter into interest rate derivative transactions
with respect to anticipated debt offerings (the "Anticipatory Derivatives"),
subject to certain limitations and restrictions. Such Anticipatory
Derivatives would only be entered into with Approved Counterparties, and
would be utilized to fix and/or limit the interest rate risk associated with
any new issuance through (i) a forward sale of exchange-traded U.S. Treasury
futures contracts, U.S. Treasury obligations and/or a forward swap (each a
"Forward Sale"), (ii) the purchase of put options on U.S. Treasury
obligations (a "Put Options Purchase"), (iii) a Put Options Purchase in
combination with the sale of call options on U.S. Treasury obligations (a
"Zero Cost Collar "), (iv) transactions involving the purchase or sale,
including short sales, of U.S. Treasury obligations, or (v) some combination
of a Forward Sale, Put Options Purchase, Zero Cost Collar and/or other
derivative or cash transactions, including, but not limited to structured
notes, caps and collars, appropriate for the Anticipatory Derivatives.
87. Anticipatory Derivatives may be executed on-exchange ("On-Exchange
Trades") with brokers through the opening of futures and/or options positions
traded on the Chicago Board of Trade ("CBOT"), the opening of over-the-
counter positions with one or more counterparties ("Off-Exchange Trades"), or
a combination of On-Exchange Trades and Off-Exchange Trades. New CEI or a
Subsidiary will determine the optimal structure of each Anticipatory
Derivatives transaction at the time of execution. New CEI or a Subsidiary
may decide to lock in interest rates and/or limit its exposure to interest
rate increases. All open positions under Anticipatory Derivatives will be
closed on or prior to the date of the new issuance and neither New CEI nor
any Subsidiary will, at any time, take possession or make delivery of the
underlying U.S. Treasury Securities.
88. New CEI and the Subsidiaries will comply with the then existing
financial statement requirements of the Financial Accounting Standards Board
associated with derivative transactions and will attempt to structure
derivatives transactions such that they will qualify for derivative
accounting treatment under the applicable standards of the Financial
Accounting Standards Board then in effect.
N. Tax Allocation Agreement
89. New CEI and the Subsidiaries ask the Commission to approve an agreement
for the allocation of consolidated tax among New CEI and the Subsidiaries
(the "Tax Allocation Agreement"). Approval is necessary because the proposed
Tax Allocation Agreement may provide for the retention by New CEI of certain
payments for tax losses incurred from time to time, rather than the
allocation of such losses to Subsidiaries without payment as would otherwise
be required by Rule 45(c)(5) Attached as Exhibit N-1 is a copy of the
proposed Tax Allocation Agreement.
90. Provisions in a tax allocation agreement between a registered holding
company and its subsidiaries must comply with Section 12 of the Act and Rule
45 thereunder. Rule 45(a) of the Act generally prohibits any registered
holding company or subsidiary company from, directly or indirectly, lending
or in any manner extending its credit to or indemnifying, or making any
donation or capital contribution to, any company in the same holding company
system, except pursuant to a Commission order. Rule 45(c) provides that no
approval is required for a tax allocation agreement between eligible
associate companies in a registered holding company system, that "provides
for allocation among such associate companies of the liabilities and benefits
arising from such consolidated tax return for each tax year in a manner not
inconsistent with" the conditions of the rule. Rule 45(c)(5) provides that:
The agreement may, instead of excluding members as provided in
paragraph (c)(4), include all members of the group in the tax allocation,
recognizing negative corporate taxable income or a negative corporate tax,
according to the allocation method chosen. An agreement under this paragraph
shall provide that those associate companies with a positive allocation will
pay the amount allocated and those subsidiary companies with a negative
allocation will receive current payment of their corporate tax credits. The
agreement shall provide a method for apportioning such payments, and for
carrying over uncompensated benefits, if the consolidated loss is too large
to be used in full. Such method may assign priorities to specified kinds of
benefits.
91. Under the rule, only "subsidiary companies," as opposed to "associate
companies" (which includes the holding company in a holding company system),
are entitled to be paid for corporate tax credits. However, if a tax
allocation agreement does not fully comply with the provisions of Rule 45(c),
it may nonetheless be approved by the Commission under Section 12(b) and Rule
45(a).
92. In connection with the 1981 amendments to Rule 45, the Commission
explained that the distinction between associate companies, on the one hand,
and subsidiary companies, on the other, represented a policy decision to
preclude the holding company from sharing in consolidated return savings.
The Commission noted that exploitation of utility companies by holding
companies through the misallocation of consolidated tax return benefits was
among the abuses examined in the investigations underlying the enactment of
the Act. Holding Co. Act Rel. No. 21968 (March 25, 1981), citing Sen. Doc.
92, Part 72A, 70th Congress, 1st Sess. at 477-482. The Commission has
recognized that there is discretion on the part of the agency to approve tax
allocation agreements that do not, by their terms, comply with Rule 45(c) --
so long as the policies and provisions of the Act are otherwise satisfied.
In this matter, where the holding company is seeking only to receive payment
for tax losses that have been generated by it, the proposed arrangement will
not give rise to the types of problems (e.g., upstream loans) that the Act
was intended to address.
93. As a result of the Mergers, New CEI will be creating tax credits that
are non-recourse to the Subsidiaries. As a result, New CEI should retain the
benefits of those tax credits. This authorization requested is similar to
the authorization sought of the Commission by SCANA Corporation in File No.
70-9533 over which jurisdiction was reserved by the Commission. Accordingly,
the Applicants request that the Commission reserve jurisdiction over the Tax
Allocation Agreement discussed herein.
O. Certificates of Notification.
94. It is proposed that, with respect to New CEI, the reporting system of
the 1933 Act and the 1934 Act be integrated with the reporting system under
the Act. This would eliminate duplication of filings with the Commission that
cover essentially the same subject matters, resulting in a reduction of
expense for both the Commission and New CEI. To effect such integration, the
portion of the 1933 Act and 1934 Act reports containing or reflecting
disclosures of transactions occurring pursuant to the authorization granted
in this proceeding would be incorporated by reference into this proceeding
through Rule 24 certificates of notification. The certificates would also
contain all other information required by Rule 24, including the
certification that each transaction being reported on had been carried out in
accordance with the terms and conditions of and for the purposes represented
in this Application. Such certificates of notification would be filed within
60 days after the end of each of the first three calendar quarters, and 90
days after the end of the last calendar quarter, in which transactions occur.
95. The Rule 24 certificates will contain the following information for the
reporting period:
(a) The sales of any Common Stock by New CEI and the purchase price
per share and the market price per share at the date of the agreement of
sale;
(b) The total number of shares of Common Stock issued or issuable
under options granted during the quarter under New CEI's employee benefit
plans and dividend reinvestment plan or otherwise, including any plans
hereafter adopted;
(c) If Common Stock has been transferred to a seller of securities of
a company or assets being acquired, the number of shares so issued, the value
per share and whether the shares are restricted to the acquirer;
(d) The amount and terms of any Debentures issued during the quarter;
(e) The amount and terms of any financings consummated by any
Nonutility Subsidiary during the quarter that are not exempt under Rule 52;
(f) The notional amount and principal terms of any Interest Rate Hedge
or Anticipatory Derivative entered into during the quarter and the identity of
the parties to such instruments;
(g) The name, parent company, and amount invested in any Intermediate
Holding Company or new Subsidiary or Financing Subsidiary during the
quarter;;
(h) A list of Form U-6B-2 statements filed with the Commission during
the quarter, including the name of the filing entity and the date of the
filing;
(i) The amount and terms of any short-term debt issued by New CEI
during the quarter;
(j) The amount and terms of any short-term debt issued by any Utility
Subsidiary during the quarter;
(k) The amount and terms of any short-term debt issued by any
Intermediate Holding Company during the quarter;
(l) Consolidated balance sheets as of the end of the quarter, and
separate balance sheets as of the end of the quarter for each company,
including New CEI, that has engaged in financing transactions during the
quarter.
(m) The name of the guarantor and of the beneficiary of any guarantied
note, New CEI Guaranty or Intermediate Holding Company Guaranty issued during
the quarter, and the amount, terms and purpose of the guaranty;
(n) Consolidated balance sheets as of the end of the quarter and
separate balance sheets as of the end of the quarter for each company,
including New CEI, that has engaged in jurisdictional financing transactions
during the quarter;
(o) A table showing, as of the end of the quarter, the dollar and
percentage components of the capital structures of New CEI on a consolidated
basis, each Intermediate Holding Company and each Utility Subsidiary; and
(p). A retained earnings analysis of New CEI on a consolidated basis,
each Intermediate Holding Company and each Utility Subsidiary detailing gross
earnings, goodwill amortization, dividends paid out of each capital account,
and the resulting capital account balances at the end of the quarter. (FN7)
Item 2. Fees, Commissions and Expenses
96. The information required by Item 2 will be provided by amendment.
Item 3. Applicable Statutory Provisions.
97. The following sections of the Act and the Commission's rules thereunder
are or may be directly or indirectly applicable to the proposed transactions
for which authorization is sought in this Application.
Section of/Rule under Transactions to which such Section/Rule is
the Act or may be applicable
Sections 6(a), 7, 9(a), Issuance of Securities; Incurrence of
10, 12, 12(f) Indebtedness;
Sections 9(a), 10 Acquisition of Interest in a Business
Section 12(b), Rule 45 Provision of Guarantees and other Credit
Support
Section 13, 13(b) Establishment of Service Company; Approval
of
Rules 80-92 Service Agreement; Exemption of Certain
Transactions from At-Cost Rules
Section 12, Rule 45 Tax Allocation Agreement
Rule 42 Dividend Reinvestment Plans and Stock-Based
Employee Benefit Plans
A. Issuance of Securities; Incurrence of Indebtedness; Provision of
Guarantees
98. New CEI's proposed issuance of securities in connection with the Mergers
including the proposed issuance of common stock to shareholders of NU in
connection with the NU Merger is expressly permitted by Section 7(c)(2)(A) of
the Act as such securities are to be issued "solely...for the purpose of
effecting a merger." New CEI's credit support for its non-utility
subsidiaries is also expressly permitted by the Act under Section 7(c)(1)(C).
The particular question that arises in the current situation relates to the
existence and future issuance of long-term debt securities (the "Proposed
Securities") by New CEI generally.
99. Issuances and sales by New CEI of the Proposed Securities and of the
guaranties by New CEI of issuances of the Proposed Securities by the
Financing Subsidiaries are subject to sections 6(a), 7 and 12(b) of the Act
and rule 45 under the Act.
100. Section 7(c) addresses the kinds of securities that a registered
holding company may issue, subject to the standards of section 7(d), which
addresses the quality and cost of the securities to be issued. Section
7(c)(1), which specifies the types of securities a registered holding company
may issue, omits long-term unsecured debt securities.
101. The types of securities described in section 7(c)(1) are: (A) common
stock having a par value and being without preference as to dividends or
distribution over and having at least equal voting rights with, any
outstanding security of the declarant; (B) bonds (i) secured by a first lien
on the physical property of the declarant, or (ii) secured by an obligation
of a subsidiary company of the declarant secured by a first lien on physical
property of such subsidiary company, or (iii) secured by any other assets of
the type and character which the Commission by rules and regulations or order
may prescribe as appropriate in the public interest or for the protection of
investors; (C) guaranties of, or assumption of liability on, a security of
another company; or (D) receiver's or trustee's certificate[s] duly
authorized by the appropriate court or courts.
102. Section 7(c)(2)(D) provides an exception for other securities not
specified in section 7(c)(1) that are issued for "necessary and urgent
corporate purposes" of the issuer ("Necessary and Urgent Clause"). This
clause permits a registered holding company to issue or sell securities,
subject to section 7(d), "for [its] necessary and urgent corporate purposes
... where the requirements of ...[section 7(c)(1)] would impose an
unreasonable financial burden upon the [registered holding company] and are
not necessary or appropriate in the public interest or for the protection of
investors or consumers."
103. For many years, the Commission has authorized registered gas holding
companies to issue long-term unsecured debt to finance their subsidiaries
operations. In addition, the Commission has traditionally administered the
Necessary and Urgent Clause so as to limit issuances of long-term debt by an
electric holding company primarily to cases where there was a short-term need
to provide funds for its utility operations, together with an expectation
that the debt would be replaced with either equity or increased retained
earnings in the foreseeable future. (FN8) In a recent order granted by the
Commission for the Southern Company (Holding Co. Act Rel. 35-27134 (Feb. 9,
2000) (the "Southern Order"), the Commission authorized the holding company
to issue long-term unsecured debt stating that in today's increasingly
competitive environment which electric systems face and the changing mix of
holding company businesses, such an issuance met the requirements of the Act.
104. As was the case in the Southern order, the proposed financings by New
CEI are for a necessary and urgent corporate purpose resulting from the
competitive nature of the energy markets within which New CEI must compete.
In addition, certain non-utility subsidiaries of New CEI are unable
efficiently to secure financing for their operations on their own and thus
must look to New CEI to obtain such funds. Also, compliance with the
provisions of Subparagraph (1) of Section 7(c) would impose an unreasonable
financial burden on New CEI by imposing a more costly and unnecessary means
of raising needed capital. Compliance with the provisions of Subparagraph
(1) of Section 7(c) is not necessary or appropriate in the public interest or
for the protection of investors or consumers.
105. The financings are for necessary and urgent corporate purposes.
Congress has authorized registered holding companies to acquire EWGs, FUCOs
and ETCs and the Commission has authorized registered holding companies
either by rule or order to engage in a variety of nonutility businesses.
(e.g. energy-related companies formed under Rule 58). These businesses are
deemed by the Act to be "consistent with the operation of an integrated
public utility system." Many of these businesses, unlike utilities, are
often unable to raise funds by themselves on a cost-effective basis. As a
consequence, the Commission, in the Southern Order, found that a prohibition
imposed by a restrictive interpretation of section 7(c)(2)(D) on the use by
electric registered holding companies of securities other than equity and
short-term debt to fund these businesses would unduly burden their
participation in nonutility activities that either the Commission or Congress
have authorized. The Commission recognized as necessary and urgent those
purposes which a holding company finds to be compelling or crucial to its
operations, whether utility or nonutility. The Commission also found that is
prudent to refinance short-term debt when it has been incurred to acquire a
long-term asset and that it is often uneconomical to refinance this debt
through the issuance of securities by the acquired company or the issuance of
holding company common stock.
106. Limiting New CEI's financing options may impose an unreasonable
financial burden. As noted above, in prior financing orders relying on the
Necessary and Urgent Clause, the Commission had concluded that the holding
company could not favorably access the equity markets in order to meet its
financing requirements. The financing cost differential between equity and
either unsecured debt or hybrid securities can be very substantial. Failure
to approve the application would result in a substantial financing cost
burden on New CEI.
107. In addition, exclusive reliance on short-term debt subjects the issuer
to interest rate fluctuations and limits the ability to realize the economic
value of long-term assets. Short-term loan agreements also typically subject
the issuer to more restrictive covenants than are prevalent in long-term
financing. Exclusive reliance on equity will increase the after-tax cost of
capital and will, in the short-term, dilute earnings per share. Although New
CEI intends to also rely on a financing subsidiary to issue authorized
securities, it seeks authority to do so directly in such circumstances it may
deem to be more appropriate in light of circumstances, such as market
conditions and transaction costs. As noted above, in the Southern Order, the
Commission recognized that this sort of financing flexibility is needed by a
registered holding company and that requiring a holding company to issue
equity under circumstances when debt financing may be less expensive could
impose an unreasonable financial burden on the company. In this regard, New
CEI represents that it will not issue any proposed debt security unless it
has evaluated all relevant financial considerations (including without
limitation the cost of equity capital) and has determined that to do so is
preferable to issuing common stock or short-term debt.
108. For the reasons discussed above, the Commission should find that the
issuance of the Proposed Securities is permitted under the Necessary and
Urgent Clause and that such issuance presents no detriment to the interests
protected under the Act
B. Services Among the Nonutility Subsidiaries at Other than Cost
109. Section 13(b) of the Act generally requires that intrasystem sales,
service and construction contracts be performed at cost, "as necessary or
appropriate in the public interest or for the protection of investors or
consumers and to ensure that such contracts are performed economically and
efficiently for the benefit of such associate companies at cost, fairly and
equitably allocated among such companies." Section 13 was "designed to
protect public-utility companies against the tribute heretofore exacted from
them in the performance of service, sales, and construction contracts by
their holding companies and by servicing, construction, and other companies
controlled by their holding companies." (S. Rep. No. 621, 74th Cong., 1st
Sess. 36 (1935). See, also section 1(b)(2) of the Act).
110. Section 13(b), however, also authorizes the Commission to exempt from
the at-cost requirement transactions that "involve special or unusual
circumstances or are not in the ordinary course of business." The Commission
has previously granted exemptions under section 13(b) in circumstances where
a market rate would not "adversely affect consumers." (See, Interstate Energy
Corporation, et al., Holding Co. Act Rel. No. 35-27069, August 26, 1999,
Ameren Corporation, Holding Co. Act Rel. No. 35-27053, July 23, 1999, Cinergy
Corp. Holding Co. Act Rel. No. 35-26984 (March 1 1999), Central and South
West Corporation, et al. Holding Co. Act Rel. No. 35-26887 (June 19, 1998),
the "Exemption Orders"). For example, some orders granting an exemption from
the at-cost requirement involve power projects that (1) do not derive their
income from sales of electricity within the United States, (2) sell
electricity at rates that have been approved by federal or state regulators,
(3) sell electricity to industrial or commercial customers at arms-length
negotiated rates, or (4) sell electricity, but not to associate companies
that are retail public-utility companies, at rates based upon cost of service
and approved by federal or state regulators. The authorization requested is
similar to those the Commission has previously granted "where structural
protections to protect consumers against any adverse effect of pricing at
market rates were in place." (Entergy Corporation, Holding Co. Act Rel. No.
35-27039 (June 22, 1999)). The purpose of the structural protections was to
ensure that "departure from the at cost standard will not adversely affect
consumers." (Cinergy Corp. Holding Co. Act Rel. No. 35-26984 (March 1 1999)).
111. The requested exemption from the "at-cost" requirements of the Act in
the circumstances described in Item 1.J, above is entirely consistent with
Section 13(b) and the rules thereunder. First, as the electric industry
restructures, it is important that the subsidiaries of public utility holding
companies that are involved in competitive, unregulated businesses be free to
conduct those businesses according to the same ground rules as are used in
other competitive industries, including providing services to each other at
prices other than "cost". Also, because the Nonutility Subsidiaries will be
free to obtain services from unaffiliated companies, there will be structural
safeguards in place to permit the Nonutility Subsidiaries to deal with each
other on an appropriate, arms-length basis with respect to services provided
at a price other than cost. In addition, as long as there are structural
safeguards in place to protect ratepayers from any deviation from the cost
standard, market rates charged by the Nonutility Subsidiaries would not
"adversely affect consumers." Nonutility ServCo and the Nonutility
Subsidiaries will adhere to Section 13 of the Act and the Commission's rules
promulgated thereunder with respect to the allocation of their costs to their
customer companies. Any allocation method that is used will be consistent
with the Commission's rules with respect to allocations of costs to
affiliated companies. Any amount billed for services performed by an
affiliate under a service agreement with a Nonutility Subsidiary will be
billed directly to that Nonutility Subsidiary. Nonutility ServCo and the
Nonutility Subsidiaries will keep complete and accurate accounts of all
receipts and expenditures in accordance with the Commission's rules and the
Uniform System of Accounts prescribed by the Federal Energy Regulatory
Commission. The Nonutility Subsidiaries will therefore comply with Rule 93
by following the Commission's System of Accounts set forth in 17 C.F.R. Part
256 and the Federal Energy Regulatory Commission's Uniform System of Accounts
after which the Commission's System of Account was modeled.
112. This authorization requested is similar to other exemptions from the
"at cost" standards of Rules 90 and 91 granted by the Commission. (See,
Interstate Energy Corporation, et al., Holding Co. Act Rel. No. 35-27069,
August 26, 1999, Ameren Corporation, Holding Co. Act Rel. No. 35-27053, July
23, 1999, Cinergy Corp. Holding Co. Act Rel. No. 35-26984 (March 1 1999),
Central and South West Corporation, et al. Holding Co. Act Rel. No. 35-26887
(June 19, 1998), the "Exemption Orders").
C. Inclusion of NU's Consolidated Retained Earnings in New CEI's Calculation
of its Consolidated Retained Earnings for purposes of Rule 53(a)(1)(ii).
113. As stated earlier, at the time immediately before the effectiveness of
the Mergers, it is expected that NU will have CREs of more than $700 million
(At September 30, 2000, NU had CREs of $691 million). New CEI hereby seeks
authority to include the amount of NU's CREs as of immediately before the
Mergers in the calculation of New CEI's CREs for purposes of Rule 53(a)(1).
In addition, on a going forward basis, New CEI hereby seeks authorization and
approval to include the amount of CREs of NU in New CEI's calculation of its
CREs for purposes of Rule 53(a)(1).
D. Compliance With Rules 53 And 54.
114. The transactions proposed herein are also subject to Rules 53 and 54.
Under Rule 53(a), the Commission shall not make certain specified findings
under Sections 7 and 12 in connection with a proposal by a holding company to
issue securities for the purpose of acquiring the securities of or other
interest in an EWG, or to guaranty the securities of an EWG, if each of the
conditions in paragraphs (a)(1) through (a)(4) thereof are met, provided that
none of the conditions specified in paragraphs (b)(1) through (b)(3) of Rule
53 exists. Rule 54 provides that the Commission shall not consider the effect
of the capitalization or earnings of subsidiaries of a registered holding
company that are EWGs or FUCOs in determining whether to approve other
transactions if Rule 53(a), (b) and (c) are satisfied. These standards are
met.
115. Rule 53(a)(1): Immediately following the Mergers, New CEI's pro forma
"aggregate investment" in EWGs and FUCOs as of September 30, 2000 will be
approximately $635.4 million, or approximately 12.7% of New CEI's pro forma
"average consolidated retained earnings" as of September 30, 2000
(approximately $5 billion) not including NU's average CREs as of September
30, 2000 of $638.8 million. (When NU's CREs are included within New CEI's
CRE's, the percentage drops to 11.2%)
116. Rule 53(a)(2): New CEI will maintain books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly acquires and holds an interest. New CEI will cause
each domestic EWG in which it acquires and holds an interest, and each
foreign EWG and FUCO that is a majority-owned subsidiary, to maintain its
books and records and prepare its financial statements in conformity with
U.S. generally accepted accounting principles. All of such books and records
and financial statements will be made available to the Commission, in
English, upon request.
117. Rule 53(a)(3): No more than 2% of the employees of the Utility
Subsidiaries will, at any one time, directly or indirectly, render services
to EWGs and FUCOs.
118. Rule 53(a)(4): New CEI will submit a copy of the
Application/Declaration in this proceeding and each amendment thereto, and
will submit copies of any Rule 24 certificates required hereunder, as well as
a copy of New CEI's Form U5S, to each of the public service commissions
having jurisdiction over the retail rates of the Utility Subsidiaries.
119. In addition, New CEI states that the provisions of Rule 53(a) are not
made inapplicable to the authorization herein requested by reason of the
occurrence or continuance of any of the circumstances specified in Rule
53(b). Rule 53(c) is inapplicable by its terms.
Item 4. Regulatory Approvals.
120. The Connecticut Department Public Utilities Commission ("DPUC") has
issued interaffiliate transaction rules and regulations. The Applicants have
an obligation to comply with such interaffiliate rules and regulations.
121. NYPSC has jurisdiction over the issuance of securities by CECONY and
O&R, other than indebtedness with maturities of one year or less. The DPUC
has jurisdiction over the issuance of securities by CL&P, other than
indebtedness with maturities of one year or less. NHPUC has jurisdiction
over the issuance of securities by PSNH and NAEC, other than indebtedness of
up to one year not exceeding a stated limit. MDTE has jurisdiction over the
issuance of securities by WMECO other than indebtedness with maturities of
one year or less and has jurisdiction over the investment of WMECO funds,
including through the New CEI Money Pool. Pennsylvania Public Utility
Commission has jurisdiction over the issuance of securities by Pike, other
than indebtedness with maturities of one year or less. The New Jersey Board
of Public Utilities has jurisdiction over the issuance of securities by RECO
other than indebtedness with maturities of one year or less.
122. Except as stated above, no state commission, and no federal commission,
other than the Commission, has jurisdiction over any of the proposed
transactions.
Item 5: Procedure
123. New CEI and the Subsidiaries hereby request that the Commission publish
a notice under Rule 23 with respect to the filing of this Application as soon
as practicable and that the Commission's order be issued as soon as possible.
A form of notice suitable for publication in the Federal Register is attached
hereto as Exhibit H-1. New CEI and the Subsidiaries respectfully request the
Commission's approval, pursuant to this Application, of all transactions
described herein, whether under the sections of the Act and Rules thereunder
enumerated in Item 3 or otherwise. It is further requested that the
Commission issue an order authorizing the transactions proposed herein at the
earliest practicable date. Additionally, New CEI and the Subsidiaries (i)
request that there not be any recommended decision by a hearing officer or by
any responsible officer of the Commission, (ii) consent to the Office of
Public Utility Regulation within the Division of Investment Management
assisting in the preparation of the Commission's decision, and (iii) waive
the 30-day waiting period between the issuance of the Commission's order and
the date on which it is to become effective, since it is desired that the
Commission's order, when issued, become effective immediately.
Item 6. Exhibits and Financial Statements
* To be filed by amendment
** Previously filed
(a) Exhibits
C-1 Registration Statement on Form S-4 (incorporated by reference to
File No. 333-31390)
F-1 Opinion of Counsel*
G-1 Financial Data Schedule
H-1 Form of Notice**
I-1 New CEI Corporate Chart*
I.2 List of Nonutility Subsidiaries
J- 1 CEI Investments in EWGs and FUCOs
K-1 Debt Issuances of CEI Subsidiaries
K-2 List of CEI Guarantees
L-1 Proposed New CEI Money Pool Terms
M-1 Form of CEISCO Service Agreement
M-2 Service Company Policies and Procedures
N-1 Form of Tax Allocation Agreement
(b) Financial Statements
Item 7. Information as to Environmental Effects
124. The Transaction neither involves a "major federal action" nor
"significantly affects the quality of the human environment" as those terms
are used in Section 102(2)(C) of the National Environmental Policy Act, 42
U.S.C. Sec. 4321 et seq. The only federal actions related to the Transaction
pertain to the Commission's declaration of the effectiveness of the
Registration Statement of CEI and NU on Form S-4 and Commission approval of
this Application. Consummation of the Transaction will not result in changes
in the operations of New CEI, CEI, NU, YES or any of their respective
subsidiaries that would have any impact on the environment. No federal
agency is preparing an environmental impact statement with respect to this
matter.
SIGNATURES
Pursuant to the requirement of the Public Utility Holding Company Act of
1935, as amended, the undersigned companies have duly caused this statement
to be signed on their behalf by the undersigned thereunto duly authorized.
Date: January 16, 2001
Consolidated Edison, Inc.
(a Delaware Company)
By: /s/ John D. McMahon
John D. McMahon
Vice President and General Counsel,
Consolidated Edison, Inc.
(a New York Company)
Consolidated Edison Company of New York, Inc.
By: /s/ John D. McMahon
John D. McMahon
Senior Vice President and General Counsel,
Consolidated Edison Solutions, Inc.
By:/s/ Paula F. Jones
Paula F. Jones
Secretary
Consolidated Edison Energy, Inc.
By: /s/ Brain Cray
Brain Cray
Secretary
Consolidated Edison Development, Inc.
CED Ada, Inc.
CED/SCS Newington, LLC
CED Generation Holding Company, LLC
CED Management Company, Inc.
CED Operating Company, L.P.
Consolidated Edison Energy Massachusetts, Inc.
CED-GTM 1, LLC
Lakewood Cogeneration, L.P.
CED - Lakewood Inc.
CED Generation Lakewood Company
By: /s/Andrew W. Scher
Andrew W. Scher
Secretary
Consolidated Edison Communications, Inc.
By:/s/ Edward P. Reardon
Edward P. Reardon
Secretary
Orange and Rockland Utilities, Inc.
Rockland Electric Company
Pike County Light & Power Company
By:/s/ Peter A. Irwin
Peter A. Irwin
Secretary
Northeast Utilities
Western Massachusetts Electric Company
The Quinnehtuck Company
The Connecticut Light and Power Company
Northeast Utilities Service Company
NU Enterprises, Inc.
Northeast Generation Company
Northeast Generation Services Company
Select Energy, Inc.
Mode 1 Communications, Inc.
The Rocky River Realty Company
Northeast Nuclear Energy Company
Select Energy Portland Pipeline, Inc.
Charter Oak Energy, Inc.
Select Energy Contracting, Inc.
North Atlantic Energy Service Corporation
North Atlantic Energy Corporation
Public Service Company of New Hampshire
Holyoke Water Power Company
HEC Inc.
Reeds Ferry, Inc.
Yankee Energy System, Inc.
Yankee Gas Services Company
Yankee Energy Financial Services Company
NorConn Properties, Inc.
Yankee Energy Services Company
R.M. Services, Inc.
By: /s/ Cheryl W. Grise
Name: Cheryl W. Grise
Title: Senior Vice President, Secretary and General Counsel -Northeast
Utilities Service Company, as Agent for all of the above named companies.
Footnotes:
(FN1) Rule 53 (a), subject to conditions specified in Rule 53(b), allows a
registered holding company to issue or sell securities equal to up to 50% of
its "average consolidated retained earnings" to finance the acquisition of an
exempt wholesale generator or foreign utility company.
(FN2) NU received an order from the Commission authorizing the investment in
Northeast Generation Company, an EWG, in an amount equal to 83% of NU's
average consolidated retained earnings ("CRE") (Holding Co. Act Rel. 35-
27148(March 7, 2000)). As a result of the Merger, such authorization will no
longer be needed as the aggregate EWG and FUCO investment by the New CEI
system will be within the safe harbor provisions of Rule 53 (50% of average
CREs).
(FN3) PSNH and NAEC require the approval of the NHPUC to incur short-term
debt in excess of 10% of their respective net plants (as of June 30, 2000
$68.6 million in the case of PSNH and $53.3 million in the case of NAEC.)
Authorization is sought herein for short term borrowings of PSNH and NAEC up
to 10% of their respective net plant with a maximum of $225 million for PSNH
and $260 million for NAEC.
(FN4) CEISCO will not be a member of the Money Pool and seeks authorization
to administer the Money Pool solely under Section 13 of the Act and Rules 90
and 91.
(FN5) Under Massachusetts law. WMECO may not invest in its affiliates through
the money pool without specific Massachusetts Department of Telecommunication
and Energy ("MDTE") approval. Such approval has not yet been sought. The
Applicants request that the Commission authorize the participation by WMECO
in the Money Pool but reserve jurisdiction over any contributions of funds by
WMECO to the Money Pool pending completion of the record.
(FN6) PSNH is authorized by state order to participate in the NU System Money
Pool but is currently restricted from lending funds to the NU System Money
Pool pursuant to a subsequent order of the NHPUC, until certain write-offs
required by the Conformed Settlement Agreement approved by the NHPUC
regarding electric utility restructuring have been taken by the company. The
participation of NAEC in the NU System Money Pool was also approved by the
NHPUC in Order No. 20,416, dated March 19, 1992. Thus the participation of
PSNH and NAEC in the NU System Money Pool is exempt from Commission
jurisdiction pursuant to Rule 52(a).
(FN7) Any of the information described in items a. through p. that is
provided under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, may be incorporated into the rule 24
certificate by reference.
(FN8) See, e.g., Northeast Utilities, Holding Co. Act Rel. No. 19519
(stating an expectation that the required funds would be raised on a
permanent basis through the issuance of equity "if and when [the registered
holding company would be] in a position to do so on satisfactory terms");
GPU, Inc., Holding Co. Act Rel. No. 16540 (relying on a representation by the
registered holding company that the utility subsidiary companies requiring
the funds would in the future finance their own capital requirements as their
earnings improved).
Exhibit 99.1
NEW CON EDISON
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
Con Edison Northeast Merger
Historical Pro Forma (A) Adjustments
------------ ------------ ------------
ASSETS
Utility plant, net $ 11,914,540 $ 4,296,561
Other property and investments 550,315 985,664
Cash and temporary cash investments 72,810 237,972
Accounts receivable, net 800,019 479,957
Other current assets 944,687 642,636
Unamortized debt expense 152,854 33,524
Regulatory assets and deferred charges 1,653,397 3,552,845
Goodwill 419,328 332,664 $ 1,584,678 (B)
------------ ------------ ------------
Total Assets $ 16,507,950 $ 10,561,823 $ 1,584,678
============ ============ ============
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity* $ 5,542,724 $ 2,405,322 $ (435,322)(C)
Preferred Stock subject to mandatory redemption 37,050 15,000
Preferred stock not subject to mandatory redemption 212,563 136,200
Long-term debt 5,222,309 2,042,929 1,970,000 (D)
------------ ------------ ------------
Total Capitalization 11,014,646 4,599,451 1,534,678
------------ ------------ ------------
Minority interest in consolidated subsidiaries -- 100,000
Obligations under capital leases 32,283 50,619
Rate reduction bond obligation -- --
Other noncurrent liabilities 369,782 --
Long-term debt and preferred stock - current 158,910 539,900
Notes payable 243,004 1,127,338**
Other current liabilities 1,617,575 911,719 50,000 (B)
Accumulated deferred federal income tax 2,410,001 1,674,587
Regulatory liabilities and deferred credits 661,749 1,558,209
------------ ------------ ------------
Total Capitalization and Liabilities $ 16,507,950 $ 10,561,823 $ 1,584,678
============ ============ ============
Northeast Incremental Pro Forma
Securitization Financing* Combined
-------------- ------------ ------------
ASSETS
Utility plant, net $ 16,211,101
Other property and investments 1,535,979
Cash and temporary cash investments $ 353,329(H)&(J) $ 2,014,274(N) 2,678,385
Accounts receivable, net 115,012(H) 1,394,988
Other current assets 1,587,323
Unamortized debt expense 186,378
Regulatory assets and deferred charges 1,249,731(H) 6,455,973
Goodwill 2,336,670
------------ ------------ ------------
Total Assets $ 1,718,072 $ 2,014,274 $ 32,386,797
============ ============ ============
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity* $ --(H)&(I) $ (145,384)(P) $ 7,367,340
Preferred stock subject to mandatory redemption (15,000)(H) 37,050
Preferred stock not subject to mandatory redemption (20,000)(H) 750,000(Q) 1,078,763
Long-term debt (138,784)(H) 9,096,454
------------ ------------ ------------
Total Capitalization (173,784) 604,616 17,579,607
------------ ------------ ------------
Minority interest in consolidated subsidiaries (100,000)(H) --
Obligations under capital leases --(H)&(I) 82,902
Rate reduction bond obligation 2,188,000(H) 2,188,000
Other noncurrent liabilities 369,782
Long-term debt and preferred stock - current (171,983)(H) 526,827
Notes payable (139,173)(H) 1,409,658(O) 2,640,827
Other current liabilities 102,319(H) 2,681,613
Accumulated deferred federal income tax 12,693(H) 4,097,281
Regulatory liabilities and deferred credits 2,219,958
------------ ------------ ------------
Total Capitalization and Liabilities $ 1,718,072 $ 2,014,274 $ 32,386,797
============ ============ ============
*The issuance of 50 million shares of New CEI Common Stock pursuant to stock
plans or in exchange for securities or assets of other companies, approval of
which is being requested, has not been reflected in the Pro Forma. Currently,
all stock plans are using market purchased shares and no exchange of New CEI
Common Stock for securities or assets of another company is pending (other
than the CEI/NU merger, which has been reflected in the Pro Forma).
**Includes $430 million of short-term debt for Northeast Generation Company
which is not jurisdictional to the SEC because it has EWG status.
This statement does not reflect the operating results and financial position of
Con Edison and Northeast Utilities relating to the pending sales for utility
assets.
The accompanying notes to the pro forma are an integral part of this statement.
NEW CON EDISON
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)`
Con Edison Northeast Merger
Historical Pro Forma (A) Adjustments
----------- ---------- -----------
Operating revenues
Electric $ 6,802,697 $5,137,373 $
Gas 1,168,993 484,881
Steam 407,303 --
Non-utility 691,380 96,138
----------- ---------- ----------
Total operating revenues 9,070,373 5,718,392
----------- ---------- ----------
Operating expenses
Fuel and purchased power 4,359,755 3,046,583
Other operations 1,172,060 934,438
Maintenance 449,732 251,570
Depreciation and amortization 564,445 815,587 39,617(B)
Taxes, other than federal income tax 1,173,082 251,112
Federal income tax 324,332 254,032
----------- ---------- ----------
Total operating expenses 8,043,406 5,553,322 39,617
----------- ---------- ----------
Operating income 1,026,967 165,070 (39,617)
Other income (deductions)
Investment income 13,852 6,887
Allowance for equity funds used during construction 1,493 --
Other income less miscellaneous deductions (10,887) 197,097
Federal income tax 29,784 91,531 58,608(E)
----------- ---------- ----------
Total other income 34,242 295,515 58,608
----------- ---------- ----------
Income before interest charges 1,061,209 460,585 18,991
Interest charges 393,782 304,523 167,450(F)
Allowance for borrowed funds used during construction (4,481) --
----------- ---------- ----------
Net interest charges 389,301 304,523 167,450
----------- ---------- ----------
Preferred stock dividend requirements 13,592 16,634
----------- ---------- ----------
Net income for common stock $ 658,316 $ 139,428 $ (148,459)
----------- ---------- ----------
Common shares outstanding - average (000)* 213,372 139,166 (91,200)(G)
Basic earnings per share $ 3.09 $ 1.00
=========== ==========
Northeast Incremental Pro Forma
Securitization Financing* Combined
-------------- ------------ ----------
Operating revenues
Electric $ 115,012(H) $ $12,055,082
Gas 1,653,874
Steam 407,303
Non-utility 787,518
---------- ------------ ----------
Total operating revenues 115,012 14,903,777
---------- ------------ ----------
Operating expenses
Fuel and purchased power 7,406,338
Other operations 2,106,498
Maintenance 701,302
Depreciation and amortization 1,419,649
Taxes, other than federal income tax 1,424,194
Federal income tax 578,364
---------- ------------ ----------
Total operating expenses 13,636,345
---------- ------------ ----------
Operating income 115,012 1,267,432
Other income (deductions)
Investment income 20,739
Allowance for equity funds used during construction 1,493
Other income less miscellaneous deductions 186,210
Federal income tax 41,937(L) 221,860
---------- ------------ ----------
Total other income 41,937 430,302
---------- ------------ ----------
Income before interest charges 115,012 41,937 1,697,734
Interest charges 119,821(M) 985,576
Allowance for borrowed funds used during construction (4,481)
---------- ------------ ----------
Net interest charges -- 119,821 981,095
---------- ------------ ----------
Preferred stock dividend requirements 67,500(R) 97,726
---------- ------------ ----------
Net income for common stock $ 115,012 $ (145,384) $ 618,913
---------- ------------ ----------
Common shares outstanding - average (000)* 261,338
Basic earnings per share $ 2.37(D)
===========
*The issuance of 50 million shares of New CEI Common Stock pursuant to stock
plans or in exchange for securities or assets of other companies, approval of
which is being requested, has not been reflected in the Pro Forma. Currently,
all stock plans are using market purchased shares and no exchange of New CEI
Common Stock for securities or assets of another company is pending (other
than the CEI/NU merger, which has been reflected in the Pro Forma).
This statement does not reflect the operating results and financial position of
Con Edison and Northeast Utilities relating to the announced sales for their
utility assets.
The accompanying notes to the pro forma are an integral part of this statement.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Notes related to Con Edison and Northeast merger
Note A. Unaudited Pro Forma Combined Condensed Income Statement
Reflects the combination of the historical information of Northeast
and Yankee to give effect to the acquisition of Yankee by Northeast
as if it occurred by January 1, 2000 instead of March 1, 2000.
Note B. Goodwill
Reflects adjustment to record the goodwill resulting from the
merger:
Purchase of 148.7 million Northeast common shares $3,940,000
Estimated direct costs incurred in consummating the merger 50,000
Elimination of Northeast Shareholders' equity on September 30, 2000 (2,405,322)
Addition of Northeast goodwill to purchase price 332,664
-----------
Total goodwill created as a result of the merger $1,917,342
===========
Amortization of goodwill over 1-year period (assuming straight line method
over 40 years) $47,934
Elimination of Northeast purchased goodwill (332,664)
Reversal of amortization of Northeast purchased goodwill over 1-year period (8,317)
Note C. Common Shareholders' Equity
Reflects payment of stock consideration in the merger as
discussed in Note D net of the elimination of Northeast
shareholders' equity.
Elimination of Northeast shareholders' equity ($2,405,322)
Issuance of stock to purchase Northeast common shares 1,970,000
-----------
($435,322)
===========
Note D. Merger Consideration
The unaudited pro forma combined condensed financial
statements assume that 50% of the outstanding Northeast common
shares were exchanged for cash consideration of $26.50 and 50%
of the outstanding Northeast common shares were exchanged for
.646 shares of New Con Edison common stock. We have assumed
that the cash payment to Northeast shareholders will be
financed through the issuance of long-term debt. The merger
consideration was determined assuming that the merger would be
consummated on December 31, 2000, the average trading price of
Con Edison common shares over the specified period would be
$41.00 and the value of the fraction of a share of New Con
Edison common stock delivered to Northeast shareholders would
remain at $26.50 at the time of delivery. A Con Edison share
price of $41.00 has been assumed because it represents the
midpoint of the price collar established for Con Edison's
share price.
Cash payment to Northeast shareholders $1,970,000
Stock payment to Northeast shareholders 1,970,000
-----------
Purchase of 148.7 million Northeast common shares $3,940,000
===========
Note E. Income Taxes
Reflects tax benefit, based on an assumed tax rate of 35%, from the payments of 1 year. ($58,608)
=========
Note F. Interest Charges
Reflects $1.970 billion of long-term debt bearing interest
over one year at an effective interest rate of 8.5% inclusive
of costs of issuance, the proceeds of which may be used to
fund the cash consideration to be paid to Northeast shareholders $167,450
========
A 1/8 of 1% variation in the interest rate would result in a $2.5
million change in interest expense.
Note G. Outstanding Shares (12 Months)
Reflects the issuance of 47,966,000 New Con Edison shares at an
assumed issuance cost of $41.00 as described in Note D net of the
elimination of outstanding Northeast common shares.
Elimination of outstanding Northeast common shares $ (139,166)
Purchase of 50% of 148,700,000 Northeast common shares at an exchange rate of .646
shares of New Con Edison common stock per Northeast common share 47,966
------------
$ (91,200)
============
NORTHEAST UTILITIES AND SUBSIDIARIES
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
Note H. Receivables, net 115,012
Regulatory assets -- other 1,244,074
Unamortized debt expense 5,657
Common stock 1
Capital surplus, paid in 269,999
Preferred stock not subject to
mandatory redemption 20,000
Preferred stock subject to
mandatory redemption 15,000
Long-term debt 138,784
Minority interest in
consolidated subsidiary 100,000
Obligations under capital leases 254,894
Notes payable to banks 139,173
Long-term debt and preferred
stock - current portion 171,983
Obligations under capital
leases -- current portion 94,645
Accrued taxes 12,693
Interest on long-term debt 115,012
Cash and cash equivalents (3,790)
Rate reduction bond obligation 2,188,000
Accrued interest 115,012
Accumulated deferred income taxes 12,693
Operating revenues 115,012
Fuel, purchased and
net interchange power -
Operating expenses --
operation -- other -
Federal and state income taxes -
Income taxes -
Investment in subsidiary companies 270,000
To record summary entry for NU consolidated - securitization.
Note I. Investment in subsidiary companies 270,000
Common stock 1
Capital surplus, paid in 269,999
To eliminate impact of pro forma adjustments on investment in
subsidiary companies from securitization.
Note J. Cash 349,539
Obligations under capital leases 254,894
Obligations under capital leases - current portion 94,645
To eliminate impact of intercopmany lease pay down from
securitization.
Notes related to Con Edison and Northeast Utilities incremental debt issuance
Note K. Unaudited Pro Forma Combined Condensed Income Statement
The following Pro Forma consolidated financial information is based
upon historical consolidated financial statements of Consolidated
Edison and Northeast Utilities. These Pro Forma financial statements
reflect the $1,410 million incremental debt issuance at 8.5%.
Note L. Income Taxes
Reflects tax benefit, based on an assumed tax rate of 35%, from the
payments of one year of interest charges described in Note K. $ 41,937
==========
Note M. Interest Charges
Reflects interest over one year at an effective interest rate
of 8.5% on incremental debt. (See Note M) $ 119,821
==========
A 1/8 of 1% variation in the interest rate would result in a $1.8
million change in interest expense.
Note N. Cash
Reflects net increase to cash after payment of interest expense for a full year and tax benefit. $2,081,774
(See Notes J, K, M and O)
Reflects cash payment for preferred stock dividend (See Note P). ($67,500)
----------
$2,014,274
==========
Note O. Incremental debt financing (new issuance)
Equals New CEI Debt Limit ($4.75 billion) less acquisition
financing ($1.97 billion) and short-term
debt outstanding ($1.37 billion) as of 9/30/2000. $1,409,658
==========
Note P. Stockholders' equity
Reflects net change to stockholders' equity for interest expenses, tax benefit and
preferred stock dividends for a full year. ($145,384)
==========
Note Q.
Preferred stock
Reflects $750 million of Preferred Stock $ 750,000
==========
Note R. Preferred stock dividends
Preferred stock dividend declared bearing dividend yield of 9% over one year. $ 67,500
==========
A 1/8 of 1% variation in the dividend yield would result in a $84
thousand change in preferred stock dividends.
Exhibit 99.2
NORTHEAST UTILITIES AND SUBSIDIARIES
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
----------- ------- -------------- ---------- -----------
Utility Plant, at cost:
Electric $ 9,314,090 $ $ $ $ 9,314,090
Gas and other 847,856 847,856
----------- ------- ---------- ---------- -----------
10,161,946 0 0 0 10,161,946
Less: Accumulated provision
for depreciation 6,493,571 6,493,571
----------- ------- ---------- ---------- -----------
3,668,375 0 0 0 3,668,375
Unamortized PSNH acquisition costs 303,123 303,123
Construction work in progress 206,513 206,513
Nuclear fuel, net 118,550 118,550
----------- ------- ---------- ---------- -----------
Total net utility plant 4,296,561 0 0 0 4,296,561
----------- ------- ---------- ---------- -----------
Other Property and Investments:
Nuclear decommissioning
trusts, at market 762,686 762,686
Investments in regional nuclear
generating companies, at equity 83,284 83,284
Other, at cost 139,694 139,694
----------- ------- ---------- ---------- -----------
985,664 0 0 0 985,664
----------- ------- ---------- ---------- -----------
Current Assets:
Cash and cash equivalents 237,972 353,329[2]/[5] 1,431,173[3] 2,022,474
Investment in securitizable assets 62,635 62,635
Receivables, net 479,957 115,012[2] 594,969
Unbilled revenues 72,003 72,003
Fuel, materials and supplies,
at average cost 171,253 171,253
Recoverable energy costs,
net - current portion 109,882 109,882
Prepayments and other 226,863 226,863
----------- ------- ---------- ---------- -----------
1,360,565 0 468,341 1,431,173 3,260,079
----------- ------- ---------- ---------- -----------
Deferred Charges:
Regulatory assets:
Recoverable nuclear costs 2,096,234 2,096,234
Income taxes, net 598,942 598,942
Deferred costs - nuclear plants 50,287 50,287
Unrecovered contractual obligations 265,375 265,375
Recoverable energy costs, net 197,349 197,349
Other 152,814 1,244,074[2] 1,396,888
Unamortized debt expense 33,524 5,657[2] 39,181
Goodwill and other
purchased intangible assets 336,221 (3,557)[1] 332,664
Other 191,844 191,844
----------- ------- ---------- ---------- -----------
3,922,590 (3,557) 1,249,731 0 5,168,764
----------- ------- ---------- ---------- -----------
Total Assets $10,565,380 $(3,557) $1,718,072 $1,431,173 $13,711,068
=========== ======= ========== ========== ===========
NORTHEAST UTILITIES AND SUBSIDIARIES
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
----------- ------- -------------- ---------- -----------
Capitalization:
Common stock $ 743,480 $ $ 0[2]/[4] $ $ 743,480
Capital surplus, paid in 1,094,996 0[2]/[4] 1,094,996
Deferred contribution plan -
employee stock ownership plan (118,554) (118,554)
Retained earnings 691,164 (8,463)[1] (71,190) 611,511
Accumulated other
comprehensive income 2,699 2,699
----------- ------- ---------- ---------- -----------
Total common stockholders' equity 2,413,785 (8,463) 0 (71,190) 2,334,132
Preferred stock not subject to
mandatory redemption 136,200 (20,000)[2] 116,200
Preferred stock subject to
mandatory redemption 15,000 (15,000)[2] 0
Long-term debt 2,042,929 (138,784)[2] 1,904,145
----------- ------- ---------- ---------- -----------
Total capitalization 4,607,914 (8,463) (173,784) (71,190) 4,354,477
----------- ------- ---------- ---------- -----------
Minority Interest in Consolidated Subsidiary 100,000 (100,000)[2] 0
----------- ------- ---------- ---------- -----------
Obligations Under Capital Leases 50,619 0[2]/[5] 50,619
----------- ------- ---------- ---------- -----------
Rate Reduction Bond Obligation 0 2,188,000[2] 2,188,000
----------- ------- ---------- ---------- -----------
Current Liabilities:
Notes payable to banks** 1,127,338 (139,173)[2] 1,431,173[3] 2,419,338
Long-term debt and preferred
stock - current portion 539,900 (171,983)[2] 367,917
Obligations under capital
leases - current portion 113,101 0[2]/[5] 113,101
Accounts payable 481,411 481,411
Accrued taxes 144,282 (3,270)[1] (12,693)[2] (47,459)[3] 80,860
Accrued interest 46,760 8,176[1] 115,012[2] 118,649[3] 288,597
Other 121,259 121,259
----------- ------- ---------- ---------- -----------
2,574,051 4,906 (208,837) 1,502,363 3,872,483
----------- ------- ---------- ---------- -----------
Deferred Credits and Other
Long-term Liabilities:
Accumulated deferred income taxes 1,674,587 12,693[2] 1,687,280
Accumulated deferred investment
tax credits 156,002 156,002
Decommissioning obligation - Millstone 1 683,234 683,234
Deferred contractual obligations 255,816 255,816
Other 463,157 463,157
----------- ------- ---------- ---------- -----------
3,232,796 0 12,693 0 3,245,489
----------- ------- ---------- ---------- -----------
Total Capitalization and Liabilities $10,565,380 $(3,557) $1,718,072 $1,431,173 $13,711,068
=========== ======= ========== ========== ===========
** Includes $430 million of short-term debt for Northeast Generation Company
which is not jurisdictional to the SEC because it has EWG status.
NORTHEAST UTILITIES AND SUBSIDIARIES
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK* MERGER SECURITIZATION DEBT ADJUSTMENTS
---------- ------- -------------- ---------- ----------
Operating Revenues $5,718,392 $ $115,012[2] $ $5,833,404
---------- ------- -------- -------- ----------
Operating Expenses:
Operation -
Fuel, purchased and net
interchange power 3,046,583 0[2] 3,046,583
Other 934,438 0[2] 934,438
Maintenance 251,570 251,570
Depreciation 245,055 245,055
Amortization of regulatory assets, net 566,975 3,557[1] 570,532
Federal and state income taxes 251,112 0[2] 251,112
Taxes other than income taxes 254,032 254,032
Gain on sale of utility plant (287,672) (287,672)
---------- ------- -------- -------- ----------
Total operating expenses 5,262,093 3,557 0 0 5,265,650
---------- ------- -------- -------- ----------
Operating Income 456,299 (3,557) 115,012 0 567,754
---------- ------- -------- -------- ----------
Other Income/(Loss):
Equity in earnings of regional nuclear
generating and transmission companies 6,887 6,887
Nuclear related costs (69,354) (69,354)
Other, net (11,921) (11,921)
Minority interest in loss of subsidiary (9,300) (9,300)
Income taxes 88,261 3,270[1] 0[2] 47,459[3] 138,990
---------- ------- -------- -------- ----------
Other income/(loss), net 4,573 3,270 0 47,459 55,302
---------- ------- -------- -------- ----------
Income before interest charges 460,872 (287) 115,012 47,459 623,056
---------- ------- -------- -------- ----------
Interest Charges:
Interest on long-term debt 218,661 115,012 333,673
Other interest 77,686 8,176[1] 118,649[3] 204,511
---------- ------- -------- -------- ----------
Interest charges, net 296,347 8,176 115,012 118,649 538,184
---------- ------- -------- -------- ----------
Preferred dividends of subsidiaries 16,633 16,633
---------- ------- -------- -------- ----------
Net Income $ 147,892 $(8,463) $ 0 $(71,190) $ 68,239
========== ======= ======== ======== ==========
[1] - See adjustment a.
[2] - See adjustment b.
[3] - See adjustment c.
[4] - See adjustment d.
[5] - See adjustment e.
* - Includes income statement activity of Yankee Energy System for the 5 months
ended February 29, 2000.
Debit Credit
----- ------
a) Amortization of regulatory assets, net 3,557
Other interest 8,176
Accrued taxes 3,270
Goodwill and other 3,557
Accrued interest 8,176
Income taxes 3,270
To record summary entry for
NU Consolidated - Yankee merger
adjustment.
b) Receivables, net 115,012
Regulatory assets -- other 1,244,074
Unamortized debt expense 5,657
Common stock 1
Capital surplus, paid in 269,999
Preferred stock not subject to
mandatory redemption 20,000
Preferred stock subject to
mandatory redemption 15,000
Long-term debt 138,784
Minority interest in
consolidated subsidiary 100,000
Obligations under capital leases 254,894
Notes payable to banks 139,173
Long-term debt and preferred
stock - current portion 171,983
Obligations under capital
leases -- current portion 94,645
Accrued taxes 12,693
Interest on long-term debt 115,012
Cash and cash equivalents (3,790)
Rate reduction bond obligation 2,188,000
Accrued interest 115,012
Accumulated deferred income taxes 12,693
Operating revenues 115,012
Fuel, purchased and
net interchange power -
Operating expenses --
operation -- other -
Federal and state income taxes -
Income taxes -
Investment in subsidiary companies 270,000
To record summary entry for
NU Consolidated - securitization.
c) Cash and cash equivalents 1,431,173
Other interest 118,649
Accrued taxes 47,459
Notes payable to bank 1,431,173
Accrued interest 118,649
Income taxes 47,459
To record summary entry for
NU Consolidated - short-term debt.
d) Investment in subsidiary companies 270,000
Common stock 1
Capital surplus, paid in 269,999
To eliminate impact of pro forma
adjustments on investment in subsidiary
companies from securitization.
e) Cash 349,539
Obligations under capital leases 254,894
Obligations under capital leases -
current portion 94,645
To eliminate impact of intercopmany lease
pay down from securitization.
Exhibit 99.3
CONSOLIDATED ORANGE AND ROCKLAND UTILITIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
As At Pro Forma Pro Forma
September 30, 2000 Adjustments Combined
------------------ ----------- ---------
ASSETS
Utility plant, net $ 708,278 $ 708,278
Other property and investments 3,258 3,258
Cash and temporary cash investments 8,181 $ 159,757(D) 167,938
Accounts receivable, net 81,770 81,770
Other current assets 95,082 95,082
Regulatory assets and deferred charges 191,115 -- 191,115
---------- ---------- ----------
Total Assets $1,087,684 $ 159,757 $1,247,441
========== ========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 336,660 $ (9,343)(F) $ 327,317
Long-term debt 335,628 -- 335,628
---------- ---------- ----------
Total Capitalization 672,288 (9,343) 662,945
---------- ---------- ----------
Other noncurrent liabilities 105,266 105,266
Notes Payable 5,900 169,100(E) 175,000
Current liabilities 146,629 146,629
Accumulated deferred federal income tax 119,299 119,299
Regulatory liabilities and deferred credits 38,302 -- 38,302
---------- ---------- ----------
Total Capitalization and Liabilities $1,087,684 $ 159,757 $1,247,441
========== ========== ==========
Source: 2000 September 10Q - September 2000 Balance Sheet.
The accompanying notes to the pro forma are an integral part of this statement.
CONSOLIDATED ORANGE AND ROCKLAND UTILITIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
12 Months Pro Forma Pro Forma
Ended Sep 30, 2000 Adjustments Combined
------------------ ----------- ---------
Operating revenues
Electric $ 491,608 $ $ 491,608
Gas 170,630 170,630
Non-utility 4,568 -- 4,568
--------- --------- ---------
Total operating revenues 666,806 -- 666,806
--------- --------- ---------
Operating expenses
Fuel and purchased power 361,467 361,467
Other operations 118,772 118,772
Maintenance 26,983 26,983
Depreciation and amortization 28,692 28,692
Taxes, other than federal income tax 65,627 65,627
Federal income tax 14,121 -- 14,121
--------- --------- ---------
Total operating expenses 615,662 -- 615,662
--------- --------- ---------
Operating income 51,144 -- 51,144
--------- --------- ---------
Other income (deductions)
Investment income 5,678 5,678
Allowance for equity funds used during construction 234 234
Other income less miscellaneous deductions 1,085 1,085
Federal income tax 4,711 5,031(B) 9,742
--------- --------- ---------
Total other income 11,708 5,031 16,739
--------- --------- ---------
Income before interest charges 62,852 5,031 67,883
--------- --------- ---------
Interest charges 27,573 14,374(C) 41,947
Allowance for borrowed funds used during construction (414) -- (414)
--------- --------- ---------
Net interest charges 27,159 14,374 41,533
--------- --------- ---------
Net income for common stock $ 35,693 $ (9,343) $ 26,350
========= ========= =========
Source: 2000 September 10Q - September 1999 and 2000 Income Statement.
Source: 1999 10K - December 1999 Income Statement.
The accompanying notes to the pro forma are an integral part of this statement.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Note A. Unaudited Pro Forma Combined Condensed Income Statement
The following Pro Forma consolidated financial information is
based upon historical consolidated financial statement of
Orange and Rockland Utilities, Inc . These Pro forma financial
statements reflect the $169.1 million short-term debt issuance
at 8.5%
Note B. Income Taxes
Reflects tax benefit, on an assumed tax rate 35%, from the
payments of nine months of interest charges described in
Note F $ 3,773
Tax benefit for full year $ 5,031
Note C. Interest Charges
Reflects $169.1 million of short-term debt issued, bearing
interest over nine months at an effective interest rate of
8.5% $ 10,780
Interest expense for full year $ 14,374
Note D. Cash
Reflects net increase to cash after payment of interest
expense for a full year and tax benefit $159,757
Note E. Short-term debt
Reflects increase to short-term debt up to $175 million of
the aggregate principle amount $169,100
Note F. Stockholders' equity
Reflects net change to stockholders' equity for interest
expenses and tax benefit for a full year $ 9,343
Exhibit 99.4
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. (CECONY)
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
CECONY Pro Forma Pro Forma
Historical Adjustments Combined
---------------------------- ---------------
ASSETS
Utility plant, net $10,902,056 $ $10,902,056
Other property and investments 359,957 359,957
Cash and temporary cash investments 46,309 599,945 (D) 646,254
Accounts receivable, net 649,694 649,694
Other current assets 828,455 828,455
Regulatory assets and deferred charges 1,573,592 1,573,592
-----------------------------------------------------
Total Assets $14,360,063 $599,945 $14,960,008
=====================================================
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $4,541,343 $(35,086) (F) $4,506,257
Preferred stock subject to mandatory redemption 37,050 37,050
Preferred stock not subject to mandatory redemption 212,563 212,563
Long-term debt 4,716,901 4,716,901
-----------------------------------------------------
Total Capitalization 9,507,857 (35,086) 9,472,771
-----------------------------------------------------
Obligations under capital leases 32,184 32,184
Other noncurrent liabilities 255,212 255,212
Notes payable 164,969 635,031 (E) 800,000
Long-term debt due within one year 150,000 150,000
Other current liabilities 1,380,255 1,380,255
Accumulated deferred federal income tax 2,253,152 2,253,152
Regulatory liabilities and deferred credits 616,434 616,434
-----------------------------------------------------
Total Capitalization and Liabilities $14,360,063 $599,945 $14,960,008
=====================================================
The accompanying notes to the pro forma are an integral part of this statement.
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. (CECONY)
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CECONY Pro Forma Pro Forma
Historical Adjustments Combined
----------- ----------- ------------
Operating revenues
Electric $6,370,652 $6,370,652
Gas 1,001,363 1,001,363
Steam 407,303 407,303
----------- --------- ------------
Total operating revenues 7,779,318 7,779,318
----------- --------- ------------
Operating expenses
Fuel and purchased power 3,492,483 3,492,483
Other operations 966,454 966,454
Maintenance 422,746 422,746
Depreciation and amortization 513,891 513,891
Taxes, other than federal income tax 1,093,847 1,093,847
Federal income tax 311,369 311,369
----------- --------- ------------
Total operating expenses 6,800,790 6,800,790
----------- --------- ------------
Operating income 978,528 978,528
Other income (deductions)
Investment income 6,118 6,118
Allowance for equity funds used during construction 1,259 1,259
Other income less miscellaneous deductions (5,549) (5,549)
Federal income tax 31,084 $ 18,892 (B) 49,976
----------- --------- ------------
Total other income 32,912 18,892 51,804
----------- --------- ------------
Income before interest charges 1,011,440 18,892 1,030,332
Interest charges 358,664 53,978 (C) 412,642
Allowance for borrowed funds used during construction (4,067) (4,067)
----------- --------- ------------
Net interest charges 354,597 53,978 408,575
----------- --------- ------------
Preferred stock dividend requirements 13,592 13,592
----------- --------- ------------
Net income for common stock $643,251 ($35,086) $608,165
=========== ========= ============
The accompanying notes to the pro forma are an integral part of this statement.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Note A. Unaudited Pro Forma Combined Condensed Income Statement
The following Pro Forma consolidated financial information is based
upon historical consolidated financial statements of Consolidated
Edison Company of New York, Inc. These Pro Forma financial
statements reflect the $635 million short-term debt issuance at
8.5%.
Note B. Income Taxes
Reflects tax benefit, based on an assumed tax rate of 35%, from the payments of nine months
of interest charges described in Note F $14,169
=======
Tax benefit for full year $18,892
=======
Note C. Interest Charges
Reflects $635 million of short-term debt issuance, bearing interest over nine months
at an effective interest rate of 8.5%. $40,483
=======
Interest expense for full year $53,978
=======
A 1/8 of 1% variation in the interest rate would result in a $1 million change in
interest expense.
Note D. Cash
Reflects net increase to cash after payment of interest expense for a full year and tax benefit. $599,945
========
Note E. Short-term debt
Reflects increase to short-term debt up to $800 million of the aggregate principle amount. $635,031
========
Note F. Stockholders' equity
Reflects net change to stockholders' equity for interest expenses and tax benefit
for a full year. $35,086
=======
Exhibit 99.5
ORANGE AND ROCKLAND UTILITIES, INC. EXCLUDING SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
As At Pro Forma Pro Forma
September 30, 2000 Adjustments Combined
------------------ ----------- ---------
ASSETS
Utility plant, net $594,453 $ $594,453
Other property and investments 3,210 3,210
Cash and temporary cash investments 468 101,183(D) 101,651
Accounts receivable, net 69,155 69,155
Other current assets 79,703 79,703
Regulatory assets and deferred charges 126,935 -- 126,935
-------- --------- --------
Total Assets $873,924 $101,183 $975,107
======== ========= ========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $224,151 $ (5,917)(F) $218,234
Long-term debt 312,450 -- 312,450
-------- --------- --------
Total Capitalization 536,601 (5,917) 530,684
-------- --------- --------
Other noncurrent liabilities 90,992 90,992
Notes Payable 5,900 107,100(E) 113,000
Current liabilities 116,750 116,750
Accumulated deferred federal income tax 92,514 92,514
Regulatory liabilities and deferred credits 31,167 -- 31,167
-------- --------- --------
Total Capitalization and Liabilities $873,924 $ 101,183 $975,107
======== ========= ========
Source: 2000 September 10Q - September 2000 Balance Sheet.
The accompanying notes to the pro forma are an integral part of this statement.
ORANGE AND ROCKLAND UTILITIES, INC. EXCLUDING SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
12 Months Pro Forma Pro Forma
Ended Sep 30, 2000 Adjustments Combined
------------------ ----------- ---------
Operating revenues
Electric $ 353,731 $ $ 353,731
Gas 169,787 169,787
Non-utility 4,269 -- 4,269
--------- --------- ---------
Total operating revenues 527,787 -- 527,787
--------- --------- ---------
Operating expenses
Fuel and purchased power 279,346 279,346
Other operations 93,158 93,158
Maintenance 23,099 23,099
Depreciation and amortization 23,745 23,745
Taxes, other than federal income tax 55,477 55,477
Federal income tax 11,225 -- 11,225
--------- --------- ---------
Total operating expenses 486,050 -- 486,050
--------- --------- ---------
Operating income 41,737 -- 41,737
--------- --------- ---------
Other income (deductions)
Investment income 5,678 5,678
Allowance for equity funds used during construction 236 236
Other income less miscellaneous deductions (2,717) (2,717)
Federal income tax 5,877 3,186(B) 9,063
--------- --------- ---------
Total other income 9,074 3,186 12,260
--------- --------- ---------
Income before interest charges 50,811 3,186 53,997
--------- --------- ---------
Interest charges 23,794 9,104(C) 32,898
Allowance for borrowed funds used during construction (415) -- (415)
--------- --------- ---------
Net interest charges 23,379 9,104 32,483
--------- --------- ---------
Net income for common stock $ 27,432 $ (5,917) $ 21,515
========= ========= =========
Source: 2000 September 10Q - September 1999 and 2000 Income Statement.
Source: 1999 10K - December 1999 Income Statement.
The accompanying notes to the pro forma are an integral part of this statement.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Note A. Unaudited Pro Forma Combined Condensed Income Statement
The following Pro Forma consolidated financial information is
based upon historical financial statements of Orange and
Rockland Utilities, Inc . These Pro forma financial statements
reflect the $107.1 million short-term debt issuance at 8.5%
Note B. Income Taxes
Reflects tax benefit, on an assumed tax rate 35%, from the
payments of nine months of interest charges described in
Note F $ 2,390
Tax benefit for full year $ 3,186
Note C. Interest Charges
Reflects $107.1 million of short-term debt issued, bearing
interest over nine months at an effective interest rate of
8.5% $ 6,828
Interest expense for full year $ 9,104
Note D. Cash
Reflects net increase to cash after payment of interest
expense for a full year and tax benefit $101,183
Note E. Short-term debt
Reflects increase to short-term debt up to $113 million of the
aggregate principle amount $107,100
Note F. Stockholders' equity
Reflects net change to stockholders' equity for interest
expenses and tax benefit for a full year $ 5,917
Exhibit 99.6
ROCKLAND ELECTRIC COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
As At Pro Forma Pro Forma
September 30, 2000 Adjustments Combined
------------------ ----------- ---------
ASSETS
Utility plant, net $107,718 $ $107,718
Other property and investments 26 26
Cash and temporary cash investments 7,177 56,685(D) 63,862
Accounts receivable, net 11,584 11,584
Other current assets 14,716 14,716
Regulatory assets and deferred charges 62,840 -- 62,840
-------- -------- --------
Total Assets $204,061 $ 56,685 $260,746
======== ======== ========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $109,349 $ (3,315)(F) $106,034
Long-term debt 19,978 -- 19,978
-------- -------- --------
Total Capitalization 129,327 (3,315) 126,012
-------- -------- --------
Other noncurrent liabilities 13,960 13,960
Notes Payable -- 60,000(E) 60,000
Current liabilities 28,511 28,511
Accumulated deferred federal income tax 25,751 25,751
Regulatory liabilities and deferred credits 6,512 -- 6,512
-------- -------- --------
Total Capitalization and Liabilities $204,061 $ 56,685 $260,746
======== ======== ========
Source: 2000 September Bondholder's Report - Balance Sheet.
The accompanying notes to the pro forma are an integral part of this statement.
ROCKLAND ELECTRIC COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
12 Months Pro Forma Pro Forma
Ended Sep 30, 2000 Adjustments Combined
------------------ ----------- ---------
Operating revenues
Electric $ 132,212 $ 132,212
Non-utility 299 $ -- 299
--------- --------- ---------
Total operating revenues 132,511 -- 132,511
--------- --------- ---------
Operating expenses
Fuel and purchased power 76,968 76,968
Other operations 24,249 24,249
Maintenance 3,764 3,764
Depreciation and amortization 4,704 4,704
Taxes, other than federal income tax 9,886 9,886
Federal income tax 3,203 -- 3,203
--------- --------- ---------
Total operating expenses 122,774 -- 122,774
--------- --------- ---------
Operating income 9,737 -- 9,737
--------- --------- ---------
Other income (deductions)
Allowance for equity funds used during construction (2) (2)
Other income less miscellaneous deductions 3,940 3,940
Taxes other than income taxes (191) -- (191)
Federal income tax (1,148) 1,785(B) 637
--------- --------- ---------
Total other income 2,599 1,785 4,384
--------- --------- ---------
Income before interest charges 12,336 1,785 14,121
--------- --------- ---------
Interest charges 3,535 5,100(C) 8,635
Allowance for borrowed funds used during construction 1 -- 1
--------- --------- ---------
Net interest charges 3,536 5,100 8,636
--------- --------- ---------
Net income for common stock $ 8,800 $ (3,315) $ 5,485
========= ========= =========
Source: 2000 September Reco Bondholder's Report - Income Statement.
The accompanying notes to the pro forma are an integral part of this statement.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Note A. Unaudited Pro Forma Combined Condensed Income Statement
The following Pro Forma consolidated financial information is
based upon historical financial statements of Rockland
Electric Co. These Pro forma financial statements reflect the
$60 million short-term debt issuance at 8.5%
Note B. Income Taxes
Reflects tax benefit, on an assumed tax rate 35%, from the
payments of nine months of interest charges described in
Note F $ 1,339
Tax benefit for full year $ 1,785
Note C. Interest Charges
Reflects $60 million of short-term debt issued, bearing
interest over nine months at an effective interest rate of
8.5% $ 3,825
Interest expense for full year $ 5,100
Note D. Cash
Reflects net increase to cash after payment of interest
expense for a full year and tax benefit $56,685
Note E. Short-term debt
Reflects increase to short-term debt up to $60 million of the
aggregate principle amount $60,000
Note F. Stockholders' equity
Reflects net change to stockholders' equity for interest
expenses and tax benefit for a full year $ 3,315
Exhibit 99.7
PIKE COUNTY LIGHT AND POWER COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
As At Pro Forma Pro Forma
September 30, 2000 Adjustments Combined
------------------ ----------- ---------
ASSETS
Utility plant, net $ 6,107 $ $ 6,107
Other property and investments 22 22
Cash and temporary cash investments 536 1,890(D) 2,426
Accounts receivable, net 1,031 1,031
Other current assets 663 663
Regulatory assets and deferred charges 1,340 -- 1,340
------- ------- -------
Total Assets $ 9,699 $ 1,890 $11,589
======= ======= =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 3,160 $ (111)(F) $ 3,050
Long-term debt 3,200 -- 3,200
------- ------- -------
Total Capitalization 6,360 (111) 6,250
------- ------- -------
Other noncurrent liabilities 314 314
Notes payable -- 2,000(E) 2,000
Current liabilities 1,368 1,368
Accumulated deferred federal income tax 1,034 1,034
Regulatory liabilities and deferred credits 623 -- 623
------- ------- -------
Total Capitalization and Liabilities $ 9,699 $ 1,890 $11,589
======= ======= =======
Source: 2000 September Pike Bondholder's Report - Balance Sheet.
The accompanying notes to the pro forma are an integral part of this statement.
PIKE COUNTY LIGHT AND POWER COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
12 Months Pro Forma Pro Forma
Ended Sep 30, 2000 Adjustments Combined
------------------ ----------- ---------
Operating revenues
Electric $ 5,665 $ $ 5,665
Gas 843 -- 843
------- ------- -------
Total operating revenues 6,508 -- 6,508
------- ------- -------
Operating expenses
Fuel and purchased power 5,153 5,153
Other operations 1,365 1,365
Maintenance 120 120
Depreciation and amortization 243 243
Taxes, other than federal income tax 264 264
Federal income tax (307) -- (307)
------- ------- -------
Total operating expenses 6,838 -- 6,838
------- ------- -------
Operating income (330) -- (330)
------- ------- -------
Other income (deductions)
Other income less miscellaneous deductions 54 54
Taxes other than income taxes (1) (1)
Federal income tax (18) 60(B) 42
------- ------- -------
Total other income 35 60 95
------- ------- -------
Income before interest charges (295) 60 (236)
------- ------- -------
Interest charges 244 170(C) 414
------- ------- -------
Net interest charges 244 170 414
------- ------- -------
Net income for common stock $ (539) $ (111) $ (650)
======= ======= =======
Source: 2000 September Pike Bondholder's Report - Income Statement.
The accompanying notes to the pro forma are an integral part of this statement.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Note A. Unaudited Pro Forma Combined Condensed Income Statement
The following Pro Forma consolidated financial information is
based upon historical financial statements of Pike County L&P
Co. These Pro forma financial statements reflect the $2
million short-term debt issuance at 8.5%
Note B. Income Taxes
Reflects tax benefit, on an assumed tax rate 35%, from the
payments of nine months of interest charges described in
Note F $ 45
Tax benefit for full year $ 60
Note C. Interest Charges
Reflects $2 million of short-term debt issued, bearing
interest over nine months at an effective interest rate of
8.5% $ 128
Interest expense for full year $ 170
Note D. Cash
Reflects net increase to cash after payment of interest
expense for a full year and tax benefit $1,890
Note E. Short-term debt
Reflects increase to short-term debt up to $2 million of the
aggregate principle amount $2,000
Note F. Stockholders' equity
Reflects net change to stockholders' equity for interest
expenses and tax benefit for a full year $ 111
Exhibit 99.8
NORTHEAST UTILITIES PARENT
PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
---------- -------- -------------- ---------- -----------
Other Property and Investments:
Investments in subsidiary
companies, at equity $2,877,833 $ $(270,000)[1] $ $2,607,833
Investments in transmission
companies, at equity 14,986 14,986
Other, at cost 54 54
---------- -------- --------- -------- ----------
2,892,873 0 (270,000) 0 2,622,873
Current Assets:
Cash 1,860 270,000[1] 237,000[2] 508,860
Notes receivable from
affiliated companies 69,300 69,300
Notes and accounts receivable 590 590
Accounts receivable from
affiliated companies 52,203 52,203
Prepayments 21,335 21,335
---------- -------- --------- -------- ----------
145,288 0 270,000 237,000 652,288
Deferred Charges:
Unamortized debt expense 13 13
Other 1,722 1,722
---------- -------- --------- -------- ----------
1,735 0 0 0 1,735
---------- -------- --------- -------- ----------
Total Assets $3,039,896 $ 0 $ 0 $237,000 $3,276,896
========== ======== ========= ======== ==========
Capitalization:
Common stock $ 743,480 $ $ $ $ 743,480
Capital surplus, paid in 1,094,996 1,094,996
Deferred benefit plan -
employee stock ownership plan (118,554) (118,554)
Retained earnings 691,164 (12,698) 678,466
Accumulated other
comprehensive income 2,699 2,699
---------- -------- --------- -------- ----------
Total common stockholder's equity 2,413,785 0 0 (12,698) 2,401,087
Long-term debt 130,826 130,826
---------- -------- --------- -------- ----------
Total capitalization 2,544,611 0 0 (12,698) 2,531,913
---------- -------- --------- -------- ----------
Current Liabilities:
Notes payable to banks 426,000 237,000[2] 663,000
Accounts payable 99 99
Accounts payable to
affiliated companies 603 603
Long-term debt - current portion 20,000 20,000
Accrued taxes 7,362 (8,466)[3] (1,104)
Accrued interest 8,112 21,164[3] 29,276
Accrued Con Edison/Northeast
Utilities merger fees 3,007 3,007
Other 7 7
---------- -------- --------- -------- ----------
465,190 0 0 249,698 714,888
---------- -------- --------- -------- ----------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 5,419 5,419
Other deferred credits 24,676 24,676
---------- -------- --------- -------- ----------
30,095 0 0 0 30,095
---------- -------- --------- -------- ----------
Total Capitalization and Liabilities $3,039,896 $ 0 $ 0 $237,000 $3,276,896
========== ======== ========= ======== ==========
NORTHEAST UTILITIES PARENT
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------- -------- -------------- ---------- -----------
Operating Revenues $ 0 $ $ $ $ 0
-------- -------- -------- -------- --------
Operating Expenses:
Operation expense 32,231 32,231
Federal and state income taxes 1,482 1,482
Taxes other than income taxes 56 56
-------- -------- -------- -------- --------
Total operating expenses 33,769 0 0 0 33,769
-------- -------- -------- -------- --------
Operating Loss (33,769) 0 0 0 (33,769)
-------- -------- -------- -------- --------
Other Income:
Equity in earnings of subsidiaries 199,118 199,118
Equity in earnings of
transmission companies 2,455 2,455
Other, net 3,981 3,981
Income taxes 3,486 8,466[3] 11,952
-------- -------- -------- -------- --------
Other income, net 209,040 0 0 8,466 217,506
-------- -------- -------- -------- --------
Income before interest charges 175,271 0 0 8,466 183,737
-------- -------- -------- -------- --------
Interest Charges:
Interest on long-term debt 13,399 13,399
Other interest 25,210 21,164[3] 46,374
-------- -------- -------- -------- --------
Interest charges, net 38,609 0 0 21,164 59,773
-------- -------- -------- -------- --------
Net Income $136,662 $ 0 $ 0 $(12,698) $123,964
======== ======== ======== ======== ========
NORTHEAST UTILITIES PARENT
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
----- ------
SECURITIZATION ADJUSTMENTS:
a) Cash 270,000
Investment in subsidiary companies 270,000
To record stock repurchase by PSNH.
SHORT-TERM DEBT ADJUSTMENTS:
b) Cash 237,000
Notes payable to banks 237,000
To record the issuance of
additional short-term debt.
c) Other interest 21,164
Accrued taxes 8,466
Accrued interest 21,164
Income taxes 8,466
To record interest expense
associated with increased level of
short-term debt and related tax effect.
Exhibit 99.9
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------ ------------- ------------ ------------
Utility Plant, at cost:
Electric $ 5,722,708 $ $ $ $ 5,722,708
Less: Accumulated provision
for depreciation 4,202,763 4,202,763
------------- ------------ ------------- ------------ ------------
1,519,945 0 0 0 1,519,945
Construction work in progress 112,624 112,624
Nuclear fuel, net 73,520 73,520
------------- ------------ ------------- ------------ ------------
Total net utility plant 1,706,089 0 0 0 1,706,089
------------- ------------ ------------- ------------ ------------
Other Property and Investments:
Nuclear decommissioning
trusts, at market 549,373 549,373
Investments in regional nuclear
generating companies, at equity 55,907 55,907
Other, at cost 30,882 30,882
------------- ------------ ------------- ------------ ------------
636,162 0 0 0 636,162
------------- ------------ ------------- ------------ ------------
Current Assets:
Cash 5,242 (5,242)[1] 372,013 [14] 372,013
Investment in securitizable assets 62,635 62,635
Notes receivable from
affiliated companies 80,400 80,400
Receivables, net 36,232 71,758 [2] 107,990
Accounts receivable from
affiliated companies 135,821 135,821
Fuel, materials and supplies,
at average cost 40,206 40,206
Prepayments and other 197,864 197,864
------------- ------------ ------------- ------------ ------------
558,400 0 66,516 372,013 996,929
------------- ------------ ------------- ------------ ------------
Deferred Charges:
Regulatory assets:
Recoverable nuclear costs 1,128,135 1,128,135
Income taxes, net 377,209 377,209
Unrecovered contractual obligations 177,257 177,257
Recoverable energy costs, net 85,445 85,445
Other 66,213 1,011,679 [3] 1,077,892
Unamortized debt expense 14,977 4,783 [4] 19,760
Other 34,486 34,486
------------- ------------ ------------- ------------ ------------
1,883,722 0 1,016,462 0 2,900,184
------------- ------------ ------------- ------------ ------------
Total Assets $ 4,784,373 $ 0 $ 1,082,978 $ 372,013 $ 6,239,364
============= ============ ============= ============ ============
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------ ------------- ------------ ------------
Capitalization:
Common stock $ 75,849 $ $ $ $ 75,849
Capital surplus, paid in 412,993 412,993
Retained earnings 208,816 (18,259) 190,557
Accumulated other
comprehensive income 802 802
------------- ------------ ------------- ------------ ------------
Total common stockholder's equity 698,460 0 0 (18,259) 680,201
Preferred stock not subject to
mandatory redemption 116,200 116,200
Long-term debt 1,069,615 (86,284)[5] 983,331
------------- ------------ ------------- ------------ ------------
Total capitalization 1,884,275 0 (86,284) (18,259) 1,779,732
------------- ------------ ------------- ------------ ------------
Minority Interest in Consolidated Subsidiary 100,000 (100,000)[5] 0
------------- ------------ ------------- ------------ ------------
Obligations Under Capital Leases 42,459 42,459
------------- ------------ ------------- ------------ ------------
Rate Reduction Bond Obligation 0 1,450,000 [6] 1,450,000
------------- ------------ ------------- ------------ ------------
Current Liabilities:
Notes payable to banks 110,000 (107,013)[5] 372,013 [14] 375,000
Long-term debt and preferred
stock - current portion 160,000 (145,483)[5] 14,517
Obligations under capital
leases - current portion 90,023 90,023
Accounts payable 155,217 155,217
Accounts payable to affiliated companies 123,167 123,167
Accrued taxes 70,166 (6,585)[7] (12,172)[15] 51,409
Accrued interest 16,652 71,758 [8] 30,431 [15] 118,841
Other 29,065 29,065
------------- ------------ ------------- ------------ ------------
754,290 0 (187,323) 390,272 957,239
------------- ------------ ------------- ------------ ------------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 980,728 6,585 [9] 987,313
Accumulated deferred investment
tax credits 101,594 101,594
Decommissioning obligation - Millstone 1 592,552 592,552
Deferred contractual obligations 167,698 167,698
Other 160,777 160,777
------------- ------------ ------------- ------------ ------------
2,003,349 0 6,585 0 2,009,934
------------- ------------ ------------- ------------ ------------
Total Capitalization and Liabilities $ 4,784,373 $ 0 $ 1,082,978 $ 372,013 $ 6,239,364
============= ============ ============= ============ ============
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------ ------------- ------------ ------------
Operating Revenues $ 2,793,144 $ $ 71,758 [2] $ $ 2,864,902
------------- ------------ ------------- ------------ ------------
Operating Expenses:
Operation --
Fuel, purchased and net
interchange power 1,427,996 0 [10] 1,427,996
Other 429,412 0 [11] 429,412
Maintenance 149,207 149,207
Depreciation 121,507 121,507
Amortization of regulatory assets, net 390,410 390,410
Federal and state income taxes 168,046 0 [12] 168,046
Taxes other than income taxes 144,357 144,357
Gain on sale of utility plant (286,477) (286,477)
------------- ------------ ------------- ------------ ------------
Total operating expenses 2,544,458 0 0 0 2,544,458
------------- ------------ ------------- ------------ ------------
Operating Income 248,686 0 71,758 0 320,444
------------- ------------ ------------- ------------ ------------
Other Income/(Loss):
Equity in earnings of regional
nuclear generating companies 2,857 2,857
Nuclear related costs (53,858) (53,858)
Other, net (20,783) (20,783)
Minority interest in loss of subsidiary (9,300) (9,300)
Income taxes 34,726 0 [13] 12,172 [15] 46,898
------------- ------------ ------------- ------------ ------------
Other (loss)/income, net (46,358) 0 0 12,172 (34,186)
------------- ------------ ------------- ------------ ------------
Income before interest charges 202,328 0 71,758 12,172 286,258
------------- ------------ ------------- ------------ ------------
Interest Charges:
Interest on long-term debt 99,167 71,758 [8] 170,925
Other interest 9,344 30,431 [15] 39,775
------------- ------------ ------------- ------------ ------------
Interest charges, net 108,511 0 71,758 30,431 210,700
------------- ------------ ------------- ------------ ------------
Net Income $ 93,817 $ 0 $ 0 $ (18,259) $ 75,558
============= ============ ============= ============ ============
[1] - See adjustments a, b, d, e, and g.
[2] - See adjustments j and l.
[3] - See adjustments c and h.
[4] - See adjustment f.
[5] - See adjustment d.
[6] - See adjustment a.
[7] - See adjustments b, e, i, j, k, and l.
[8] - See adjustments i and k.
[9] - See adjustments c, f, g, and h.
[10] - See adjustments g and h.
[11] - See adjustments b, c, e, and f.
[12] - See adjustments b, c, e, f, g, and h.
[13] - See adjustments i, j, k, and l.
[14] - See adjustment m.
[15] - See adjustment n.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
SECURITIZATION ADJUSTMENTS:
a) Cash 1,450,000
Rate reduction bond obligation 1,450,000
To record the issuance of rate reduction bonds.
b) Operating expenses --
operation -- other 11,679
Accrued taxes 4,672
Cash 11,679
Federal and state income taxes 4,672
To record issuance expenses
associated with securitization and
related tax effect.
c) Regulatory assets -- other 11,679
Federal and state income taxes 4,672
Operating expenses --
operation -- other 11,679
Accumulated deferred income taxes 4,672
To record deferral of issuance
expenses associated with securitization and
related tax effect.
d) Notes payable to banks 107,013
Minority interest in
consolidated subsidiary 100,000
Long-term debt and preferred
stock - current portion 145,483
Long-term debt 86,284
Cash 438,780
To record the use of
securitization proceeds to retire
short-term and long-term debt.
e) Operating expenses --
operation -- other 4,783
Accrued taxes 1,913
Cash 4,783
Federal and state income taxes 1,913
To record the associated costs and
premiums of retiring debt.
f) Unamortized debt expense 4,783
Federal and state income taxes 1,913
Operating expenses --
operation -- other 4,783
Accumulated deferred income taxes 1,913
To record deferral of debt
retirement costs and related
tax effect.
g) Fuel, purchased and
net interchange power 1,000,000
Accumulated deferred income taxes 400,000
Cash 1,000,000
Federal and state income taxes 400,000
To record the buyout of IPP
contracts and related tax effect.
h) Regulatory assets -- other 1,000,000
Federal and state income taxes 400,000
Fuel, purchased and
net interchange power 1,000,000
Accumulated deferred income taxes 400,000
To record the deferral of IPP
buyout costs and related
tax effect.
i) Interest on long-term debt 108,750
Accrued taxes 43,500
Accrued interest 108,750
Income taxes 43,500
To record interest expense on rate
reduction bonds and related tax effect.
j) Receivables, net 108,750
Income taxes 43,500
Operating revenues 108,750
Accrued taxes 43,500
To record deferral of interest
expense on rate reduction bonds
and related tax effect.
k) Accrued interest 36,992
Income taxes 14,797
Interest on long-term debt 36,992
Accrued taxes 14,797
To record decrease in interest
costs associated with debt repurchase
and the related tax effect.
l) Operating revenues 36,992
Accrued taxes 14,797
Receivables, net 36,992
Income taxes 14,797
To record deferral of decrease in
interest costs on debt repurchased
and related tax effect.
SHORT-TERM DEBT ADJUSTMENTS:
m) Cash 372,013
Notes payable to banks 372,013
To record the issuance of
additional short-term debt.
n) Other interest 30,431
Accrued taxes 12,172
Accrued interest 30,431
Income taxes 12,172
To record interest expense
associated with increased level of
short-term debt and related tax effect.
Exhibit 99.10
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------ ------------ ------------ ------------ ------------
Utility Plant, at cost:
Electric $ 1,977,284 $ $ $ $ 1,977,284
Less: Accumulated provision
for depreciation 704,992 704,992
------------ ------------ ------------ ------------ ------------
1,272,292 0 0 0 1,272,292
Unamortized acquisition costs 303,123 303,123
Construction work in progress 20,509 20,509
Nuclear fuel, net 1,267 1,267
------------ ------------ ------------ ------------ ------------
Total net utility plant 1,597,191 0 0 0 1,597,191
------------ ------------ ------------ ------------ ------------
Other Property and Investments:
Nuclear decommissioning
trusts, at market 7,809 7,809
Investments in regional nuclear
generating companies and
subsidiary company, at equity 18,529 18,529
Other, at cost 4,073 4,073
------------ ------------ ------------ ------------ ------------
30,411 0 0 0 30,411
------------ ------------ ------------ ------------ ------------
Current Assets:
Cash and cash equivalents 170,638 (260,856)[1] 225,000 [15] 134,782
Receivables, net 75,824 36,459 [2] 112,283
Accounts receivable from
affiliated companies 2,338 2,338
Taxes receivable from
affiliated companies 6,926 6,926
Accrued utility revenues 37,346 37,346
Fuel, materials and supplies,
at average cost 32,244 32,244
Recoverable energy costs -
current portion 110,436 110,436
Prepayments and other 23,157 23,157
------------ ------------ ------------ ------------ ------------
458,909 0 (224,397) 225,000 459,512
------------ ------------ ------------ ------------ ------------
Deferred Charges:
Regulatory assets:
Recoverable energy costs 93,426 93,426
Income taxes, net 153,408 153,408
Deferred costs - nuclear plant 64,640 64,640
Unrecovered contractual obligations 43,766 43,766
Other 5,430 138,817 [3] 144,247
Deferred receivable from
affiliated company 5,676 5,676
Unamortized debt expense 9,117 9,117
Other 9,467 9,467
------------ ------------ ------------ ------------ ------------
384,930 0 138,817 0 523,747
------------ ------------ ------------ ------------ ------------
Total Assets $ 2,471,441 $ 0 $ (85,580) $ 225,000 $ 2,610,861
============ ============ ============ ============ ============
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------ ------------ ------------ ------------ ------------
Capitalization:
Common stock $ 1 $ $ (1)[4] $ $ 0
Capital surplus, paid in 424,867 (269,999)[4] 154,868
Retained earnings 326,983 (11,043) 315,940
Accumulated other
comprehensive income 1,756 1,756
------------ ------------ ------------ ------------ ------------
Total common stockholder's equity 753,607 0 (270,000) (11,043) 472,564
Long-term debt 407,285 (52,500)[5] 354,785
------------ ------------ ------------ ------------ ------------
Total capitalization 1,160,892 0 (322,500) (11,043) 827,349
------------ ------------ ------------ ------------ ------------
Obligations Under Seabrook Power
Contracts and Other Capital Leases 566,936 (254,894)[6] 312,042
------------ ------------ ------------ ------------ ------------
Rate Reduction Bond Obligation 0 575,000 [7] 575,000
------------ ------------ ------------ ------------ ------------
Current Liabilities:
Notes payable to banks 0 225,000 [15] 225,000
Long-term debt and preferred
stock - current portion 25,000 (25,000)[5] 0
Obligations under Seabrook Power
Contracts and other capital
leases - current portion 94,645 (94,645)[6] 0
Accounts payable 27,022 27,022
Accounts payable to affiliated companies 44,951 44,951
Accrued taxes 55,056 (3,527)[8] (7,362)[16] 44,167
Accrued interest 12,224 36,459 [9] 18,405 [16] 67,088
Accrued pension benefits 42,404 42,404
Other 61,330 61,330
------------ ------------ ------------ ------------ ------------
362,632 0 (86,713) 236,043 511,962
------------ ------------ ------------ ------------ ------------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 238,712 3,527 [10] 242,239
Accumulated deferred investment
tax credits 27,924 27,924
Deferred contractual obligations 43,766 43,766
Deferred revenue from
affiliated company 5,676 5,676
Other 64,903 64,903
------------ ------------ ------------ ------------ ------------
380,981 0 3,527 0 384,508
------------ ------------ ------------ ------------ ------------
Total Capitalization and Liabilities $ 2,471,441 $ 0 $ (85,580) $ 225,000 $ 2,610,861
============ ============ ============ ============ ============
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------ ------------ ------------ ------------ ------------
Operating Revenues $ 1,269,227 $ $ 36,459 [2] $ $ 1,305,686
------------ ------------ ------------ ------------ ------------
Operating Expenses:
Operation --
Fuel, purchased and net
interchange power 820,090 0 [11] 820,090
Other 130,455 0 [12] 130,455
Maintenance 44,428 44,428
Depreciation 45,230 45,230
Amortization of regulatory assets, net 45,909 45,909
Federal and state income taxes 38,548 0 [13] 38,548
Taxes other than income taxes 41,640 41,640
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,166,300 0 0 0 1,166,300
------------ ------------ ------------ ------------ ------------
Operating Income 102,927 0 36,459 0 139,386
------------ ------------ ------------ ------------ ------------
Other Income:
Equity in earnings of regional
nuclear generating companies
and subsidiary company 1,245 1,245
Other, net 5,424 5,424
Income taxes 4,101 0 [14] 7,362 [16] 11,463
------------ ------------ ------------ ------------ ------------
Other income, net 10,770 0 0 7,362 18,132
------------ ------------ ------------ ------------ ------------
Income before interest charges 113,697 0 36,459 7,362 157,518
------------ ------------ ------------ ------------ ------------
Interest Charges:
Interest on long-term debt 40,598 36,459 [9] 77,057
Other interest 34 18,405 [16] 18,439
------------ ------------ ------------ ------------ ------------
Interest charges, net 40,632 0 36,459 18,405 95,496
------------ ------------ ------------ ------------ ------------
Net Income $ 73,065 $ 0 $ 0 $ (11,043) $ 62,022
============ ============ ============ ============ ============
[1] - See adjustments a, b, d, e, g, and m.
[2] - See adjustments j and l.
[3] - See adjustments c, f and h.
[4] - See adjustment m.
[5] - See adjustment d.
[6] - See adjustment g.
[7] - See adjustment a.
[8] - See adjustments b, e, i, j, k, and l.
[9] - See adjustments i and k.
[10] - See adjustments c, f, g, and h.
[11] - See adjustments g and h.
[12] - See adjustments b, c, e, and f.
[13] - See adjustments b, c, e, f, g, and h.
[14] - See adjustments i, j, k, and l.
[15] - See adjustment n.
[16] - See adjustment o.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
SECURITIZATION ADJUSTMENTS:
a) Cash and cash equivalents 575,000
Rate reduction bond obligation 575,000
To record the issuance of
rate reduction bonds.
b) Operating expenses --
operation -- other 6,933
Accrued taxes 2,773
Cash and cash equivalents 6,933
Federal and state income taxes 2,773
To record issuance expenses
associated with securitization and
related tax effect.
c) Regulatory assets -- other 6,933
Federal and state income taxes 2,773
Operating expenses --
operation -- other 6,933
Accumulated deferred income taxes 2,773
To record deferral of issuance
expenses associated with securitization
and related tax effect.
d) Long-term debt 52,500
Long-term debt and preferred
stock - current portion 25,000
Cash and cash equivalents 77,500
To record use of
securitization proceeds to
retire long-term debt
and preferred stock.
e) Operating expenses --
operation -- other 1,884
Accrued taxes 754
Cash and cash equivalents 1,884
Federal and state income taxes 754
To record the associated costs and
premiums on retiring debt.
f) Regulatory assets -- other 1,884
Federal and state income taxes 754
Operating expenses --
operation -- other 1,884
Accumulated deferred income taxes 754
To record deferral of debt
retirement costs and related
tax effect.
g) Obligations under Seabrook Power
Contracts and other capital
leases -- current portion 94,645
Obligations under Seabrook Power
Contracts and other capital leases 254,894
Fuel, purchased and
net interchange power 130,000
Accumulated deferred income taxes 52,000
Cash and cash equivalents 479,539
Federal and state income taxes 52,000
To record the buyout of IPP
contracts and related tax effect.
h) Regulatory assets -- other 130,000
Federal and state income taxes 52,000
Fuel, purchased and
net interchange power 130,000
Accumulated deferred income taxes 52,000
To record the deferral of IPP
costs and related
tax effect.
i) Interest on long-term debt 43,125
Accrued taxes 17,250
Accrued interest 43,125
Income taxes 17,250
To record interest expense on rate
reduction bonds and related tax effect.
j) Receivables, net 43,125
Income taxes 17,250
Operating revenues 43,125
Accrued taxes 17,250
To record deferral of interest
expense on rate reduction bonds
and related tax effect.
k) Accrued interest 6,666
Income taxes 2,666
Interest on long-term debt 6,666
Accrued taxes 2,666
To record decrease in interest
costs associated with debt repurchase
and the tax effect.
l) Operating revenues 6,666
Accrued taxes 2,666
Receivables, net 6,666
Income taxes 2,666
To record deferral of decrease in
interest costs on debt repurchased
and related tax effect.
m) Common stock 1
Capital surplus, paid in 269,999
Cash and cash equivalents 270,000
To record repurchase of approximately
635 shares of common stock at the
September 30, 2000, share price
of $424,868 share, $1 par.
SHORT-TERM DEBT ADJUSTMENTS:
n) Cash and cash equivalents 225,000
Notes payable to banks 225,000
To record the issuance of
additional short-term debt.
o) Other interest 18,405
Accrued taxes 7,362
Accrued interest 18,405
Income taxes 7,362
To record interest expense
associated with increased level of
short-term debt and related tax effect.
Exhibit 99.11
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------------- ------------- ------------------ -------------- -------------
Utility Plant, at cost:
Electric $ 1,107,511 $ $ $ $ 1,107,511
Less: Accumulated provision
for depreciation 792,208 792,208
-------------- ------------- -------------- -------------- -------------
315,303 0 0 0 315,303
Construction work in progress 20,240 20,240
Nuclear fuel, net 17,013 17,013
-------------- ------------- -------------- -------------- -------------
Total net utility plant 352,556 0 0 0 352,556
-------------- ------------- -------------- -------------- -------------
Other Property and Investments:
Nuclear decommissioning
trusts, at market 152,960 152,960
Investments in regional nuclear
generating companies, at equity 15,121 15,121
Other, at cost 6,356 6,356
-------------- ------------- -------------- -------------- -------------
174,437 0 0 0 174,437
-------------- ------------- -------------- -------------- -------------
Current Assets:
Cash 112 (112)[1] 172,160 [14] 172,160
Receivables, net 34,076 6,795 [2] 40,871
Accounts receivable from
affiliated companies 16,249 16,249
Taxes receivable 2,212 2,212
Accrued utility revenues 14,784 14,784
Fuel, materials and supplies,
at average cost 1,640 1,640
Prepayments and other 47,104 47,104
-------------- ------------- -------------- -------------- -------------
116,177 0 6,683 172,160 295,020
-------------- ------------- -------------- -------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable nuclear costs 258,937 258,937
Income taxes, net 50,359 50,359
Unrecovered contractual obligations 44,352 44,352
Recoverable energy costs, net 7,168 7,168
Other 43,932 93,578 [3] 137,510
Unamortized debt expense 1,689 874 [4] 2,563
Other 4,500 4,500
-------------- ------------- -------------- -------------- -------------
410,937 0 94,452 0 505,389
-------------- ------------- -------------- -------------- -------------
Total Assets $ 1,054,107 $ 0 $ 101,135 $ 172,160 $ 1,327,402
============== ============= ============== ============== =============
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------------- -------------- ------------------ -------------- --------------
Capitalization:
Common stock $ 14,752 $ $ $ $ 14,752
Capital surplus, paid in 93,945 93,945
Retained earnings 52,223 (8,450) 43,773
Accumulated other
comprehensive income 267 267
-------------- -------------- -------------- -------------- --------------
Total common stockholder's equity 161,187 0 0 (8,450) 152,737
Preferred stock not subject to
mandatory redemption 20,000 (20,000)[5] 0
Preferred stock subject to
mandatory redemption 15,000 (15,000)[5] 0
Long-term debt 138,699 138,699
-------------- -------------- -------------- -------------- --------------
Total capitalization 334,886 0 (35,000) (8,450) 291,436
-------------- -------------- -------------- -------------- --------------
Obligations Under Capital Leases 6,550 6,550
-------------- -------------- -------------- -------------- --------------
Rate Reduction Bond Obligation 0 163,000 [6] 163,000
-------------- -------------- -------------- -------------- --------------
Current Liabilities:
Notes payable to banks 110,000 (32,160)[5] 172,160 [14] 250,000
Notes payable to affiliated company 16,600 16,600
Long-term debt and preferred
stock - current portion 61,500 (1,500)[5] 60,000
Obligations under capital
leases - current portion 21,003 21,003
Accounts payable 28,689 28,689
Accounts payable to affiliated companies 5,099 5,099
Accrued taxes 1,705 (2,581)[7] (5,633)[15] (6,509)
Accrued interest 2,998 6,795 [8] 14,083 [15] 23,876
Other 11,030 11,030
-------------- -------------- -------------- -------------- --------------
258,624 0 (29,446) 180,610 409,788
-------------- -------------- -------------- -------------- --------------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 225,322 2,581 [9] 227,903
Accumulated deferred investment
tax credits 17,918 17,918
Decommissioning obligation - Millstone 1 138,999 138,999
Deferred contractual obligations 44,352 44,352
Other 27,456 27,456
-------------- -------------- -------------- -------------- --------------
454,047 0 2,581 0 456,628
-------------- -------------- -------------- -------------- --------------
Total Capitalization and Liabilities $ 1,054,107 $ 0 $ 101,135 $ 172,160 $ 1,327,402
============== ============== ============== ============== ==============
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------------- ------------- ------------------ -------------- --------------
Operating Revenues $ 479,840 $ $ 6,795 [2] $ $ 486,635
-------------- ------------- -------------- -------------- --------------
Operating Expenses:
Operation --
Fuel, purchased and net
interchange power 216,724 0 [10] 216,724
Other 106,035 0 [11] 106,035
Maintenance 31,137 31,137
Depreciation 18,138 18,138
Amortization of regulatory assets, net 43,631 43,631
Federal and state income taxes 10,606 0 [12] 10,606
Taxes other than income taxes 18,166 18,166
Gain on sale of utility plant (1,196) (1,196)
-------------- ------------- -------------- -------------- --------------
Total operating expenses 443,241 0 0 0 443,241
-------------- ------------- -------------- -------------- --------------
Operating Income 36,599 0 6,795 0 43,394
-------------- ------------- -------------- -------------- --------------
Other Income/(Loss):
Equity in earnings of regional
nuclear generating companies 770 770
Nuclear related costs (14,496) (14,496)
Other, net 780 780
Income taxes 9,681 0 [13] 5,633 [15] 15,314
-------------- ------------- -------------- -------------- --------------
Other (loss)/income, net (3,265) 0 0 5,633 2,368
-------------- ------------- -------------- -------------- --------------
Income before interest charges 33,334 0 6,795 5,633 45,762
-------------- ------------- -------------- -------------- --------------
Interest Charges:
Interest on long-term debt 16,995 6,795 [8] 23,790
Other interest 10,208 14,083 [15] 24,291
-------------- ------------- -------------- -------------- --------------
Interest charges, net 27,203 0 6,795 14,083 48,081
-------------- ------------- -------------- -------------- --------------
Net Income $ 6,131 $ 0 $ 0 $ (8,450) $ (2,319)
============== ============= ============== ============== ==============
[1] - See adjustments a, b, d, e, and g.
[2] - See adjustments j and l.
[3] - See adjustments c and h.
[4] - See adjustment f.
[5] - See adjustment d.
[6] - See adjustment a.
[7] - See adjustments b, e, i, j, k, and l.
[8] - See adjustments i and k.
[9] - See adjustments c, f, g, and h.
[10] - See adjustments g and h.
[11] - See adjustments b, c, e, and f.
[12] - See adjustments b, c, e, f, g, and h.
[13] - See adjustments i, j, k, and l.
[14] - See adjustment m.
[15] - See adjustment n.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
SECURITIZATION ADJUSTMENTS:
a) Cash 163,000
Rate reduction bond obligation 163,000
To record the issuance of rate
reduction bonds.
b) Operating expenses --
operation -- other 5,578
Accrued taxes 2,231
Cash 5,578
Federal and state income taxes 2,231
To record issuance expenses associated with
securitization and related tax effect.
c) Regulatory assets -- other 5,578
Federal and state income taxes 2,231
Operating expenses --
operation -- other 5,578
Accumulated deferred income taxes 2,231
To record the deferral of issuance expenses
associated with securitization and related
tax effect.
d) Notes payable to banks 32,160
Preferred stock subject to
mandatory redemption 15,000
Preferred stock not subject to
mandatory redemption 20,000
Long-term debt and preferred
stock -- current portion 1,500
Cash 68,660
To record the use of securitization
proceeds to retire short-term debt,
long-term debt and preferred stock.
e) Operating expenses --
operation -- other 874
Accrued taxes 350
Cash 874
Federal and state income taxes 350
To record the associated costs and
premiums of retiring debt.
f) Unamortized debt expense 874
Federal and state income taxes 350
Operating expenses --
operation -- other 874
Accumulated deferred income taxes 350
To record deferral of debt retirement
costs and related tax effect.
g) Fuel, purchased and
net interchange power 88,000
Accumulated deferred income taxes 35,200
Cash 88,000
Federal and state income taxes 35,200
To record the buyout of IPP contracts
and related tax effect.
h) Regulatory assets -- other 88,000
Federal and state income taxes 35,200
Fuel, purchased and
net interchange power 88,000
Accumulated deferred income taxes 35,200
To record the deferral of IPP buyout
costs and related tax effect.
i) Interest on long-term debt 12,225
Accrued taxes 4,890
Accrued interest 12,225
Income taxes 4,890
To record interest expense on rate reduction
bonds and related taxes.
j) Receivables, net 12,225
Income taxes 4,890
Operating revenues 12,225
Accrued taxes 4,890
To record deferral of interest expense on
rate reduction bonds and relatedtax effect.
k) Accrued interest 5,430
Income taxes 2,172
Interest on long-term debt 5,430
Accrued taxes 2,172
To record decrease in interest costs
associated with debt repurchase and
the related increase in taxes.
l) Operating revenues 5,430
Accrued taxes 2,172
Receivables, net 5,430
Income taxes 2,172
To record deferral of decrease in interest
costs on debt repurchased and related
tax effect.
SHORT-TERM DEBT ADJUSTMENTS:
m) Cash 172,160
Notes payable to banks 172,160
To record the issuance of additional
short-term debt.
n) Other interest 14,083
Accrued taxes 5,633
Accrued interest 14,083
Income taxes 5,633
To record interest expense associated with
increased level of short-term debt and related
tax effect.
Exhibit 99.12
NORTH ATLANTIC ENERGY CORPORATION
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- ------------
Utility Plant, at cost:
Electric $ 724,005 $ $ $ $ 724,005
Less: Accumulated provision
for depreciation 220,427 220,427
------------- ------------- ------------- ------------- -------------
503,578 0 0 0 503,578
Construction work in progress 8,473 8,473
Nuclear fuel, net 26,371 26,371
------------- ------------- ------------- ------------- -------------
Total net utility plant 538,422 0 0 0 538,422
------------- ------------- ------------- ------------- -------------
Other Property and Investments:
Nuclear decommissioning
trusts, at market 52,544 52,544
------------- ------------- ------------- ------------- -------------
52,544 0 0 0 52,544
------------- ------------- ------------- ------------- -------------
Current Assets:
Cash 44 260,000 [1] 260,044
Special deposits 3,624 3,624
Notes receivable from
affiliated companies 35,000 35,000
Accounts receivable from
affiliated companies 22,278 22,278
Materials and supplies,
at average cost 13,562 13,562
Prepayments and other 84 84
------------- ------------- ------------- ------------- -------------
74,592 0 0 260,000 334,592
------------- ------------- ------------- ------------- -------------
Deferred Charges:
Regulatory assets:
Deferred costs - Seabrook 40,137 40,137
Income taxes, net 26,980 26,980
Recoverable energy costs 1,540 1,540
Unamortized debt expense 1,057 1,057
Prepaid property tax 1,377 1,377
Other 44 44
------------- ------------- ------------- ------------- -------------
71,135 0 0 0 71,135
------------- ------------- ------------- ------------- -------------
Total Assets $ 736,693 $ 0 $ 0 $ 260,000 $ 996,693
============= ============= ============= ============= =============
NORTH ATLANTIC ENERGY CORPORATION
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Capitalization:
Common stock $ 1 $ $ $ $ 1
Capital surplus, paid in 160,999 160,999
Retained earnings 1,840 (12,761) (10,921)
------------- ------------- ------------- ------------- -------------
Total common stockholder's equity 162,840 0 0 (12,761) 150,079
Long-term debt 65,000 65,000
------------- ------------- ------------- ------------- -------------
Total capitalization 227,840 0 0 (12,761) 215,079
------------- ------------- ------------- ------------- -------------
Current Liabilities:
Notes payable to banks 0 260,000 [1] 260,000
Long-term debt - current portion 270,000 270,000
Accounts payable 7,060 7,060
Accounts payable to affiliated companies 963 963
Accrued taxes 3,380 (8,507)[2] (5,127)
Accrued interest 4,649 21,268 [2] 25,917
Other 297 297
------------- ------------- ------------- ------------- -------------
286,349 0 0 272,761 559,110
------------- ------------- ------------- ------------- -------------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 192,326 192,326
Deferred obligation to
affiliated company 5,676 5,676
Other 24,502 24,502
------------- ------------- ------------- ------------- -------------
222,504 0 0 0 222,504
------------- ------------- ------------- ------------- -------------
Total Capitalization and Liabilities $ 736,693 $ 0 $ 0 $ 260,000 $ 996,693
============= ============= ============= ============= =============
NORTH ATLANTIC ENERGY CORPORATION
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------ ------------------ ------------- -------------
Operating Revenues $ 269,401 $ $ $ $ 269,401
------------- ------------ ------------- ------------- -------------
Operating Expenses:
Operation --
Fuel 16,509 16,509
Other 39,106 39,106
Maintenance 10,592 10,592
Depreciation 27,712 27,712
Amortization of regulatory assets, net 85,254 85,254
Federal and state income taxes 35,583 35,583
Taxes other than income taxes 8,505 8,505
------------- ------------- ------------- ------------- -------------
Total operating expenses 223,261 0 0 0 223,261
Operating Income 46,140 0 0 0 46,140
------------- ------------- ------------- ------------- -------------
Other Income/(Loss):
Deferred Seabrook return -
other funds 2,704 2,704
Other, net (6,651) (6,651)
Income taxes 24,134 8,507 [2] 32,641
------------- ------------- ------------- ------------- -------------
Other income, net 20,187 0 0 8,507 28,694
------------- ------------- ------------- ------------- -------------
Income before interest charges 66,327 0 0 8,507 74,834
------------- ------------- ------------- ------------- -------------
Interest Charges:
Interest on long-term debt 37,934 37,934
Other interest (1,198) 21,268 [2] 20,070
Deferred Seabrook return -
borrowed funds (4,906) (4,906)
------------- ------------- ------------- ------------- -------------
Interest charges, net 31,830 0 0 21,268 53,098
------------- ------------- ------------- ------------- -------------
Net Income $ 34,497 $ 0 $ 0 $ (12,761) $ 21,736
============= ============= ============= ============= =============
[1] - See adjustment a.
[2] - See adjustment b.
NORTH ATLANTIC ENERGY CORPORATION
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
SHORT-TERM DEBT ADJUSTMENTS:
a) Cash 260,000
Notes payable to banks 260,000
To record the issuance of
additional short-term debt.
b) Other interest 21,268
Accrued taxes 8,507
Accrued interest 21,268
Income taxes 8,507
To record interest expense
associated with increased level of
short-term debt and related tax effect.
Exhibit 99.13
HOLYOKE WATER POWER COMPANY
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Utility Plant, at cost:
Electric $ 100,521 $ $ $ $ 100,521
Less: Accumulated provision
for depreciation 47,882 47,882
------------- ------------- ------------- ------------- -------------
52,639 0 0 0 52,639
Construction work in progress 1,093 1,093
------------- ------------- ------------- ------------- -------------
Total net utility plant 53,732 0 0 0 53,732
------------- ------------- ------------- ------------- -------------
Other Property and Investments:
Nonutility property, at cost 3,474 3,474
Other investments, at cost 2 2
------------- ------------- ------------- ------------- -------------
3,476 0 0 0 3,476
------------- ------------- ------------- ------------- -------------
Current Assets:
Cash 1,379 5,000 [1] 6,379
Notes receivable from
affiliated companies 15,500 15,500
Accounts receivable 931 931
Accounts receivable from
affiliated companies 6,680 6,680
Taxes receivable 546 546
Fuel, materials and supplies,
at average cost 5,761 5,761
Prepayments and other 934 934
------------- ------------- ------------- ------------- -------------
31,731 0 0 5,000 36,731
------------- ------------- ------------- ------------- -------------
Deferred Charges:
Unamortized debt expense 765 765
Other 319 319
------------- ------------- ------------- ------------- -------------
1,084 0 0 0 1,084
------------- ------------- ------------- ------------- -------------
Total Assets $ 90,023 $ 0 $ 0 $ 5,000 $ 95,023
============= ============= ============= ============= =============
HOLYOKE WATER POWER COMPANY
PRO FORMA BALANCE SHEET -- CAPITALIZATION
AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Capitalization:
Common stock $ 2,400 $ $ $ $ 2,400
Capital surplus, paid in 6,000 6,000
Retained earnings 12,316 (268) 12,048
Accumulated other
comprehensive income (5) (5)
------------- ------------- ------------- ------------- -------------
Total common stockholder's equity 20,711 0 0 (268) 20,443
Long-term debt 38,300 38,300
------------- ------------- ------------- ------------- -------------
Total capitalization 59,011 0 0 (268) 58,743
------------- ------------- ------------- ------------- -------------
Current Liabilities:
Notes payable to banks 0 5,000 [1] 5,000
Accounts payable 2,395 2,395
Accounts payable to affiliated companies 5,506 5,506
Accrued taxes 277 (179)[2] 98
Accrued interest 533 447 [2] 980
Other 97 97
------------- ------------- ------------- ------------- -------------
8,808 0 0 5,268 14,076
------------- ------------- ------------- ------------- -------------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 14,311 14,311
Other 7,893 7,893
------------- ------------- ------------- ------------- -------------
22,204 0 0 0 22,204
------------- ------------- ------------- ------------- -------------
Total Capitalization and Liabilities $ 90,023 $ 0 $ 0 $ 5,000 $ 95,023
============= ============= ============= ============= =============
HOLYOKE WATER POWER COMPANY
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Operating Revenues $ 67,464 $ $ $ $ 67,464
------------- ------------- ------------- ------------- -------------
Operating Expenses:
Operation --
Energy and purchased capacity costs 41,257 41,257
Other 8,540 8,540
Maintenance 5,044 5,044
Depreciation 1,965 1,965
Amortization of regulatory assets, net 1,770 1,770
Federal and state income taxes 1,248 1,248
Taxes other than income taxes 4,705 4,705
------------- ------------- ------------- ------------- -------------
Total operating expenses 64,529 0 0 0 64,529
------------- ------------- ------------- ------------- -------------
Operating Income 2,935 0 0 0 2,935
------------- ------------- ------------- ------------- -------------
Other Income:
Other, net 309 309
Income taxes 2,717 179 [2] 2,896
------------- ------------- ------------- ------------- -------------
Other income, net 3,026 0 0 179 3,205
------------- ------------- ------------- ------------- -------------
Income before interest charges 5,961 0 0 179 6,140
------------- ------------- ------------- ------------- -------------
Interest Charges:
Interest on long-term debt 2,631 2,631
Other interest (18) 447 [2] 429
------------- ------------- ------------- ------------- -------------
Interest charges, net 2,613 0 0 447 3,060
------------- ------------- ------------- ------------- -------------
Net Income $ 3,348 $ 0 $ 0 $ (268) $ 3,080
============= ============= ============= ============= =============
HOLYOKE WATER POWER COMPANY
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
SHORT-TERM DEBT ADJUSTMENTS:
a) Cash 5,000
Notes payable to banks 5,000
To record the issuance of
additional short-term debt.
b) Other interest 447
Accrued taxes 179
Accrued interest 447
Income taxes 179
To record interest expense
associated with increased level of
short-term debt and related tax effect.
Exhibit 99.14
NORTHEAST NUCLEAR ENERGY COMPANY
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Utility Plant, at cost:
Electric $ 38,215 $ $ $ $ 38,215
Less: Accumulated provision
for depreciation 15,536 15,536
------------- ------------- ------------- ------------- -------------
22,679 0 0 0 22,679
Construction work in progress 442 442
------------- ------------- ------------- ------------- -------------
Total net utility plant 23,121 0 0 0 23,121
------------- ------------- ------------- ------------- -------------
Current Assets:
Cash 10,350 75,000 [1] 85,350
Accounts receivable 5,563 5,563
Accounts receivable from
affiliated companies 40,790 40,790
Materials and supplies 71,545 71,545
Prepayments and other 3,327 3,327
------------- ------------- ------------- ------------- -------------
131,575 0 0 75,000 206,575
------------- ------------- ------------- ------------- -------------
Deferred Charges:
Regulatory assets:
Accumulated deferred income taxes 40,428 40,428
Deferred decommissioning costs -
Millstone 1 44,315 44,315
Other 8,272 8,272
------------- ------------- ------------- ------------- -------------
93,015 0 0 0 93,015
------------- ------------- ------------- ------------- -------------
Total Assets $ 247,711 $ 0 $ 0 $ 75,000 $ 322,711
============= ============= ============= ============= =============
NORTHEAST NUCLEAR ENERGY COMPANY
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Capitalization:
Common stock $ 15 $ $ $ $ 15
Capital surplus, paid in 15,350 15,350
Retained earnings 1,965 (4,019) (2,054)
Accumulated other
comprehensive income (121) (121)
------------- ------------- ------------- ------------- -------------
Total common stockholder's equity 17,209 0 0 (4,019) 13,190
------------- ------------- ------------- ------------- -------------
Total capitalization 17,209 0 0 (4,019) 13,190
------------- ------------- ------------- ------------- -------------
Current Liabilities:
Notes payable to banks 0 75,000 [1] 75,000
Notes payable to
affiliated companies 50,600 50,600
Accounts payable 32,923 32,923
Accounts payable to affiliated companies 9,458 9,458
Obligations under capital
leases - current portion 1,093 1,093
Accrued taxes 1,192 (2,679)[2] (1,487)
Accrued interest 0 6,698 [2] 6,698
Accrued pension benefits 74,758 74,758
Millstone 3 funding liability 22,612 22,612
Other 17,284 17,284
------------- ------------- ------------- ------------- -------------
209,920 0 0 79,019 288,939
------------- ------------- ------------- ------------- -------------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred investment
tax credits 996 996
Deferred credit - SFAS 109 9,452 9,452
Other 10,134 10,134
------------- ------------- ------------- ------------- -------------
20,582 0 0 0 20,582
------------- ------------- ------------- ------------- -------------
Total Capitalization and Liabilities $ 247,711 $ 0 $ 0 $ 75,000 $ 322,711
============= ============= ============= ============= =============
NORTHEAST NUCLEAR ENERGY COMPANY
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
------------- ------------- ------------------ ------------- -------------
Operating Revenues $ 369,076 $ $ $ $ 369,076
------------- ------------- ------------- ------------- -------------
Operating Expenses:
Operation 241,921 241,921
Maintenance 108,719 108,719
Depreciation 1,343 1,343
Federal and state income taxes 642 642
Taxes other than income taxes 11,617 11,617
------------- ------------- ------------- ------------- -------------
Total operating expenses 364,242 0 0 0 364,242
------------- ------------- ------------- ------------- -------------
Operating Income 4,834 0 0 0 4,834
------------- ------------- ------------- ------------- -------------
Other (Loss)/Income:
Other, net (115) (115)
Income taxes 0 2,679 [2] 2,679
------------- ------------- ------------- ------------- -------------
Other (loss)/income, net (115) 0 0 2,679 2,564
------------- ------------- ------------- ------------- -------------
Income before interest charges 4,719 0 0 2,679 7,398
------------- ------------- ------------- ------------- -------------
Interest Charges:
Interest on long-term debt 767 767
Other interest 2,220 6,698 [2] 8,918
------------- ------------- ------------- ------------- -------------
Interest charges 2,987 0 0 6,698 9,685
------------- ------------- ------------- ------------- -------------
Net Income/(Loss) $ 1,732 $ 0 $ 0 $ (4,019) $ (2,287)
============= ============= ============= ============= =============
NORTHEAST NUCLEAR ENERGY COMPANY
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
----- ------
SHORT-TERM DEBT ADJUSTMENTS:
a) Cash 75,000
Notes payable to banks 75,000
To record the issuance of additional short-term debt.
b) Other interest 6,698
Accrued taxes 2,679
Accrued interest 6,698
Income taxes 2,679
To record interest expense associated with increased level of
short-term debt and related tax effect.
Exhibit 99.15
YANKEE ENERGY SYSTEM, INC. PARENT
PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------- ------- -------------- ------- -----------
Other Property and Investments:
Investments in subsidiary companies $477,198 $ $ $ $477,198
-------- ------- ------- ------- --------
477,198 0 0 0 477,198
-------- ------- ------- ------- --------
Current Assets:
Cash 592 25,000 [1] 25,592
Notes and accounts receivable 25,684 25,684
-------- ------- ------- ------- --------
26,276 0 0 25,000 51,276
-------- ------- ------- ------- --------
Deferred Charges:
Other deferred debits 74 74
-------- ------- ------- ------- --------
74 0 0 0 74
-------- ------- ------- ------- --------
Total Assets $503,548 $ 0 $ 0 $25,000 $528,548
======== ======= ======= ======= ========
Capitalization:
Capital surplus, paid in $472,787 $ $ $ $472,787
Retained earnings (6,698) (1,107) (7,805)
-------- ------- ------- ------- --------
Total common stockholder's equity 466,089 0 0 (1,107) 464,982
-------- ------- ------- ------- --------
Total capitalization 466,089 0 0 (1,107) 464,982
-------- ------- ------- ------- --------
Current Liabilities:
Notes payable to banks 25,000 25,000 [1] 50,000
Accounts payable 9,080 9,080
Notes payable to affiliated companies 4,250 4,250
Accrued taxes (698) (738)[2] (1,436)
Accrued interest 19 1,845 [2] 1,864
-------- ------- ------- ------- --------
37,651 0 0 26,107 63,758
-------- ------- ------- ------- --------
Deferred Credits and Other
Long-Term Liabilities:
Other deferred credits (192) (192)
-------- ------- ------- ------- --------
(192) 0 0 0 (192)
-------- ------- ------- ------- --------
Total Capitalization and Liabilities $503,548 $ 0 $ 0 $25,000 $528,548
======== ======= ======= ======= ========
YANKEE ENERGY SYSTEM, INC. PARENT
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------- ------- -------------- ------- -----------
Operating Revenues $ 0 $ $ $ $ 0
-------- ------- ------- ------- --------
Operating Expenses:
Operation expense 5,200 5,200
-------- ------- ------- ------- --------
Total operating expenses 5,200 0 0 0 5,200
-------- ------- ------- ------- --------
Operating Loss (5,200) 0 0 0 (5,200)
-------- ------- ------- ------- --------
Other Income:
Other, net (833) (833)
Income taxes 186 738 [2] 924
-------- ------- ------- ------- --------
Other income, net (647) 0 0 738 91
-------- ------- ------- ------- --------
Income before interest charges (5,847) 0 0 738 (5,109)
-------- ------- ------- ------- --------
Interest Charges:
Other interest 1,580 1,845 [2] 3,425
-------- ------- ------- ------- --------
Interest charges, net 1,580 0 0 1,845 3,425
-------- ------- ------- ------- --------
Net Loss $ (7,427) $ 0 $ 0 $(1,107) $ (8,534)
======== ======= ======= ======= ========
[1] - See adjustment a.
[2] - See adjustment b.
YANKEE ENERGY SYSTEM, INC. PARENT
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
----- ------
SHORT-TERM DEBT ADJUSTMENTS:
a) Cash 25,000
Notes payable to banks 25,000
To record the issuance of additional short-term debt.
b) Other interest 1,845
Accrued taxes 738
Accrued interest 1,845
Income taxes 738
To record interest expense associated with increased level of
short-term debt and related tax effect.
Exhibit 99.16
YANKEE GAS SERVICES COMPANY
PRO FORMA BALANCE SHEET -- ASSETS
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------- ------- -------------- ---------- -----------
Utility Plant, at cost:
Gas $608,112 $ $ $ $608,112
Less: Accumulated provision
for depreciation 240,176 240,176
-------- ------- ------- ------- --------
367,936 0 0 0 367,936
Construction work in progress 15,929 15,929
-------- ------- ------- ------- --------
Total net utility plant 383,865 0 0 0 383,865
-------- ------- ------- ------- --------
Other property and investments 294 294
-------- ------- ------- ------- --------
Current Assets:
Cash 1,656 60,000 [1] 61,656
Accounts receivable 45,080 45,080
Fuel supplies 1,424 1,424
Other materials and supplies 1,675 1,675
Accrued utility revenues 12,784 12,784
Other 28,523 28,523
-------- ------- ------- ------- --------
91,142 0 0 60,000 151,142
-------- ------- ------- ------- --------
Deferred Charges:
Deferred gas costs 9,193 9,193
Recoverable environmental cleanup costs 34,000 34,000
Recoverable income taxes 4,657 4,657
Recoverable postretirement benefits costs 767 767
Goodwill 303,081 303,081
Other deferred debits 42,154 42,154
-------- ------- ------- ------- --------
393,852 0 0 0 393,852
-------- ------- ------- ------- --------
Total Assets $869,153 $ 0 $ 0 $60,000 $929,153
======== ======= ======= ======= ========
YANKEE GAS SERVICES COMPANY
PRO FORMA BALANCE SHEET -- CAPITALIZATION AND LIABILITIES
AS OF SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------- ------- -------------- ---------- -----------
Capitalization:
Common stock $ 5 $ $ $ $ 5
Capital surplus, paid in 462,840 462,840
Retained earnings (5,072) (2,585) (7,657)
-------- ------- ------- ------- --------
Total common stockholder's equity 457,773 0 0 (2,585) 455,188
Long-term debt 151,440 151,440
-------- ------- ------- ------- --------
Total capitalization 609,213 0 0 (2,585) 606,628
-------- ------- ------- ------- --------
Current Liabilities:
Notes payable to banks 40,000 60,000 [1] 100,000
Long-term debt - current portion 950 950
Accounts payable 26,783 26,783
Pipeline transmission costs payable 577 577
Accrued taxes 5,627 (1,723)[2] 3,904
Accrued interest 3,148 4,308 [2] 7,456
Other 5,000 5,000
-------- ------- ------- ------- --------
82,085 0 0 62,585 144,670
-------- ------- ------- ------- --------
Deferred Credits and Other
Long-Term Liabilities:
Accumulated deferred income taxes 83,850 83,850
Accumulated deferred investment tax credits 7,571 7,571
Reserve for environmental cleanup costs 35,000 35,000
Postretirement benefits obligation 4,248 4,248
Other deferred credits 47,186 47,186
-------- ------- ------- ------- --------
177,855 0 0 0 177,855
-------- ------- ------- ------- --------
Total Capitalization and Liabilities $869,153 $ 0 $ 0 $60,000 $929,153
======== ======= ======= ======= ========
YANKEE GAS SERVICES COMPANY
PRO FORMA INCOME STATEMENT
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 2000
Unaudited
(Thousands of Dollars)
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- GIVING
YANKEE SHORT-TERM EFFECT TO
PER BOOK MERGER SECURITIZATION DEBT ADJUSTMENTS
-------- ------- -------------- ---------- -----------
Operating Revenues $307,447 $ $ $ $307,447
-------- ------- ------- ------- --------
Operating Expenses:
Operation --
Fuel, purchased and net
interchange power 154,861 154,861
Other 54,273 54,273
Maintenance 6,676 6,676
Depreciation 21,700 21,700
Federal and state income taxes 10,724 10,724
Taxes other than income taxes 26,692 26,692
-------- ------- ------- ------- --------
Total operating expenses 274,926 0 0 0 274,926
-------- ------- ------- ------- --------
Operating Income 32,521 0 0 0 32,521
-------- ------- ------- ------- --------
Other (Loss)/Income:
Other, net (5,229) (5,229)
Income taxes 0 1,723 [2] 1,723
-------- ------- ------- ------- --------
Other (loss)/income, net (5,229) 0 0 1,723 (3,506)
-------- ------- ------- ------- --------
Income before interest charges 27,292 0 0 1,723 29,015
-------- ------- ------- ------- --------
Interest Charges:
Interest expense, net 14,929 4,308 [2] 19,237
-------- ------- ------- ------- --------
Interest charges, net 14,929 0 0 4,308 19,237
-------- ------- ------- ------- --------
Net Income $ 12,363 $ 0 $ 0 $(2,585) $ 9,778
======== ======= ======= ======= ========
[1] - See adjustment a.
[2] - See adjustment b.
YANKEE GAS SERVICES COMPANY
PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS
(Thousands of Dollars)
Debit Credit
----- ------
SHORT-TERM DEBT ADJUSTMENTS:
a) Cash 60,000
Notes payable to banks 60,000
To record the issuance of additional short-term debt.
b) Other interest 4,308
Accrued taxes 1,723
Accrued interest 4,308
Income taxes 1,723
To record interest expense associated with increased level of short-term
debt and related tax effect.
EXHIBIT I-2
List of Active Nonutility Subsidiaries
1. Consolidated Edison Solutions, Inc.
2. Consolidated Edison Development, Inc.
3. Con Edison Development Guatemala, Ltd
4. Energy Finance Partners of Central America, L.P
5. Generadora Electrica Del Norte, S.R.C.
6. Consolidated Edison Leasing, Inc.
7. Con Edison Leasing, LLC
8. CED Ada, Inc.
9. CED/DELTA Ada, LLC
10. Ada Cogeneration Limited Partnership
11. CED/SCS Newington, LLC
12. Newington Energy, LLC
13. CED Generation Holding Company, LLC
14. CED Management Company, Inc.
15. CED Operating Company, L.P.
16. Lakewood Cogeneration, L.P.
17. CED-Lakewood, Inc.
18. CED Generation Lakewood Company
19. Consolidated Edison Energy Massachusetts, Inc.
20. CEDST, LLC
21. CED 42, LLC
22. Consolidated Edison Energy, Inc.
23. Consolidated Edison Communications, Inc.
24. Davids Island Development Corporation
25. D.C.K. Management Corporation
26. Steam House Leasing LLC
27. Clove Development Corporation
28. O&R Development, Inc.
29. Millbrook Holdings, Inc.
30. NU Enterprises, Inc.
31. Northeast Generation Company
32. Northeast Generation Services Company
33. Select Energy, Inc.
34. HEC Inc.
35. Select Energy Contracting, Inc.
36. Reeds Ferry Supply, Inc.
37. HEC Energy Consulting, Inc.
38. HEC/Tobyhanna Energy
39. Select Energy Portland Pipeline, Inc.
40. The Quinnehtuk Company
41. Rocky River Realty, Inc.
42. Charter Oak Energy, Inc.
43. Properties, Inc.
44. Yankee Energy Financial Services, Inc.
45. R.M. Services, Inc.
46. Yankee Energy Services Company
47. CL&P Receivables Corporation
48. NorConn Properties, Inc.
49. Northeast Utilities Service Company
50. North Atlantic Energy Services Corporation
Exhibit J-1
CEI Investments in EWGs and FUCOs
Investments by Consolidated Edison, Inc ("CEI") in exempt wholesale
generators ("EWGs") and foreign utility companies ("FUCOs") are held through
its wholly-owned subsidiary: Consolidated Edison Development, Inc. ("CEDI").
CEDI has interests in 3 EWG's (CEEMI, Lakewood Cogen and Newington) and 1
FUCO (GENOR).
EWGs
1. CEEMI
Consolidated Edison Energy Massachusetts, Inc. ("CEEMI"), a wholly-owned
subsidiary of CEDI, owns and operates 290 MW of generation facilities
acquired from Western Massachusetts Electric Company. Output from the
facilities is sold at wholesale electric power market in the NEPOOL
region. CEEMI is an EWG. As of September 30, 2000, the book value of
CEDI's investment in CEEMI was approximately 54.5 million.
2. Lakewood Cogen
CED Generation Holding Company, LLC, a Delaware limited liability
company wholly-owned by CEDI, ("Holding") owns 100% of CED-Lakewood,
Inc., a New York corporation ("CEDL"), which owns 100% of CED Generation
Lakewood Company, a Delaware corporation ("CGLC"). CEDL and CGLC each
own a 1% general partner interest (i.e., 2% altogether) in Lakewood
Cogeneration, L.P., a Delaware limited partnership which owns a 236 MW
power plant located in Lakewood, New Jersey ("Lakewood Cogen"). Holding
directly owns a 78% limited partnership interest in Lakewood Cogen.
Lakewood Cogen is an EWG. As of September 30, 2000, the book value of
CEDI's investment in Holding and its affiliates was approximately $ 99.5
million.
3. Newington
CED/SCS Newington, LLC ("CED/SCS"), a Delaware limited liability company
in which CEDI has an approximately 95% ownership interest, owns 100% of
Newington Energy, LLC ("Newington"), a Delaware limited liability
company, which is currently developing a 525 MW electric generating
facility in Newington, New Hampshire, which will qualify as an EWG. The
facility will consist of two natural gas fired, combined cycle General
Electric 7FA turbines, two heat recovery steam generators and a steam
turbine, and will be operated by General Electric Company's operations
division, General Electric International, Inc., pursuant to a long term
operations and maintenance contract. As of September 30, 2000, the book
value of CEDI's investment in CED/SCS was approximately $ 0.
FUCO
1. GENOR
Con Edison Development Guatemala, Ltd.("CEDG"), a wholly-owned
subsidiary of CEDI organized under the laws of the Cayman Islands, owns
a 92.273% interest in Energy Finance Partners of Central America, L.P,
("EFP") a Cayman Islands limited partnership, which in turn owns a
47.56% interest in Generadora Electica del Norte, S.R.L., sociedad de
responsabilidad limitada organized under the laws of the Republic of
Guatemala ("GENOR"). GENOR owns a 40 MW, oil fired, electric
generating plant in Guatemala and is a FUCO. A portion of the output of
the plant is sold to large retail customers pursuant to power purchase
agreements, with the remaining output being sold into the wholesale
electric power markets in Guatemala and El Salvador. As of September
30, 2000, the book value of CEDI's investment in CEDG was $12.0 million.
Consolidated Debt - 12/31/00
Maturity Rate Series At Par
CECONY LONG TERM DEBT
NYSERDA
08/15/20 5.250% 1993B 127,715,000
08/15/20 6.100% 1995A 128,285,000
09/15/22 5.375% 1993C 19,760,000
01/01/26 7.500% 1991A 128,150,000
01/15/27 6.750% 1992A 100,000,000
12/01/27 6.375% 1992B 100,000,000
03/15/28 6.000% 1993A 101,000,000
12/01/29 7.125% 1994A 100,000,000
NYSERDA Variable
05/01/34 Variable 1999A 292,700,000
Debentures
12/15/05 6.625% 2000C 350,000,000
09/01/10 7.500% 2000B 300,000,000
05/01/10 8.125% 2000A 325,000,000
02/01/01 6.500% 1993B 150,000,000
02/01/02 6.625% 1993C 150,000,000
04/01/03 6.375% 1993D 150,000,000
03/01/04 7.625% 1992B 150,000,000
07/05/05 6.625% 1995A 100,000,000
12/01/07 6.450% 1997B 330,000,000
02/01/08 6.250% 1998A 180,000,000
07/01/08 6.150% 1998C 100,000,000
12/01/09 7.150% 1999B 200,000,000
06/15/23 7.500% 1993G 380,000,000
06/01/26 7.750% 1996A 100,000,000
02/01/28 7.100% 1998B 105,000,000
10/01/28 6.900% 1998D 75,000,000
02/15/29 7.125% 1994A 150,000,000
03/31/31 7.750% QUICS1996A 275,000,000
06/30/39 7.350% PINES1999A 275,000,000
Debentures Variable
12/15/01 Variable 1996B 150,000,000
06/15/02 Variable 1997A 150,000,000
Maturity Rate Series At Par
O&R LONG TERM DEBT
NYSERDA
10/01/14 7.07% 55,000,000
NYSERDA Variable
08/01/15 Variable 44,000,000
Other
06/15/10 7.50% 2000A 55,000,000
03/01/03 6.56% 1993D 35,000,000
02/01/07 7.125% 1997J 20,000,000 *
10/01/18 7.07% 1998C 3,200,000 **
12/01/27 6.50% 1997F 80,000,000
03/01/29 7.00% 1999G 45,000,000
*RECO
**Pike
CEI Guarantees to Outside Entities for:
Con Ed Solutions $146,275,000
Con Ed Energy 116,569,000
Con Ed Communications 60,058,250
Con Ed Development 360,308,490
Con Ed Energy Massachusetts -
Total: $683,210,740
Outstanding CEI Guaranties to Outside Entities for CON ED SOLUTIONS
Guaranties to: Amount Signed on End Date
NY ISO $40,000,000 09/26/2000 04/30/01 or earlier upon 60 days notice
El Paso Merchant Energy- 2,000,000 08/14/2000 01/31/01 or earlier upon 15 days notice
Gas, L.P.
Exxon Mobil Corp. (1) 4,000,000 8/5/00 12/31/01 or earlier upon 15 days notice
Constellation Power (3) 6,000,000 08/01/2000 12/31/01 or earlier upon 15 days notice
Source, Inc.
PPL Energy Plus, LLC 2,000,000 07/14/2000 12/31/01 or earlier upon 15 days notice
American Electric Power 5,000,000 07/05/2000 12/31/01 or earlier upon 15 days notice
Services Corp.
PG&E Energy Trading 3,000,000 06/05/2000 12/31/01 or earlier upon 15 days notice
Power, L.P.
Western Gas Resources, Inc. 4,000,000 05/30/2000 12/31/01 or earlier upon 15 days notice
Duke Energy Trading & 5,000,000 05/24/2000 12/31/01 or earlier upon 15 days notice
Marketing, LLC
EnergyUSA-TPC 6,000,000 05/04/2000 12/31/01 or earlier upon 15 days notice
Enron North America Corp. 5,000,000 05/04/2000 12/31/01 or earlier upon 15 days notice
NY ISO 45,000,000 04/28/2000 Upon 60 days notice
NY ISO 2,000,000 04/28/2000 4/30/02 or earlier upon 60 days notice
NRG Power Marketing, Inc. 5,000,000 04/10/2000 12/31/01 or earlier upon 15 days notice
PG&E Energy Trading-Gas 5,000,000 12/29/1999 12/31/01 or earlier upon 15 days notice
Corporation
Public Service Electric & (2) 3,000,000 10/08/1999 30 days prior notice
Gas Co.
Transcontinental Gas Pipeline 750,000 7/27/99 Upon notice
Corporation
Southern Company Energy 3,500,000 7/23/99 On the bus. day after receipt of notice
Marketing L.P.
Public Service Electric & 25,000 7/27/98 5 bus. days after receipt of notice
Gas Co.
Total $146,275,000
Guaranties to: Purpose
NY ISO For ICAP for the winter 2000-2001. Replaces quasi similar 4/5/00
guarantee for $64 million.
El Paso Merchant Energy- For energy, capacity, ancillary services, natural gas,
fuel oil Gas, L.P. transactions.
Exxon Mobil Corp. General payment obligations (replaces previous similar guarantee)
Constellation Power For energy, capacity, ancillary services, natural gas, fuel oil,
and Source, Inc. commodity swap, cap, floor, collar transactions.
PPL Energy Plus, LLC For energy, capacity, ancillary services, natural gas, fuel oil
transactions
American Electric Power For energy, capacity, ancillary services, and commodity swap, cap,
Services Corp. floor, collar transactions
PG&E Energy Trading For energy, capacity, ancillary services, natural gas,
fuel oil Power, L.P. transactions
Western Gas Resources, Inc. For energy, capacity, ancillary services, natural gas, fuel oil
transactions
Duke Energy Trading & For energy, capacity, ancillary services, natural gas
transactions Marketing, LLC
EnergyUSA-TPC For energy, capacity, ancillary services, natural gas transactions
Enron North America Corp. For energy, capacity, ancillary services, natural gas transactions
NY ISO To comply with CES' Phase 3 Retail Access load requirements under the NY
ISO Tariffs (extinguishes a $12.5 million guaranty dated 11/4/99 to ISO)
NY ISO To participate in the auction of Transmission Congestion Contracts
(extinguishes a $45 mm TCC given earlier)
NRG Power Marketing, Inc. For energy, capacity, ancillary services, natural gas, fuel oil
transactions
PG&E Energy Trading-Gas For energy, capacity, ancillary services, natural gas transactions
Corporation
Public Service Electric & Electrical energy & capacity
Gas Co.
Transcontinental Gas Pipeline Obligations under natural gas transportation & storage
agreements
Corporation
Southern Company Energy Electrical energy, capacity, related products
Marketing L.P.
Public Service Electric & Security for gas transportation payments
Gas Co.
Legend:
** For either CES or CEE. The $ amount is currently shown and the guaranty is filed under
CES, and it is a blank under CEE. As of 12/19 such 'dual' guaranties totaled $12,000,000.
(1) Amended from $2,500,000 to $4,000,000 on 12/15/00.
(2) Contract assigned to PSEG Energy Resources & Trade LLC as well as of 8/21/00.
(3) Amended to $6 million on 12/27/00.
Outstanding CEI Guarantees to Outside Entities for CON ED ENERGY
Guarantees to: Amount In Effect On: End Date
NY ISO $4,000,000 09/21/2000 10/31/2005 or earlier upon 60 days notice
KeySpan- Ravenswood, Inc. 5,000,000 09/06/2000 12/31/01 or earlier upon 15 days notice
Enron Power Marketing, Inc. 5,000,000 08/04/2000 01/31/02 or earlier upon 15 days notice
Constellation Power ------ 08/01/2000 12/31/01 or earlier upon 15 days notice
Source, Inc.
PG&E Energy Trading 5,000,000 05/30/2000 12/31/01 or earlier upon 15 days notice
Power, L.P.
Western Gas Resources, ------ 05/30/2000 12/31/01 or earlier upon 15 days notice
Inc.
Duke Energy Trading & ------ 05/24/2000 12/31/01 or earlier upon 15 days notice
Marketing, LLC
PJM Interconnection, 4,000,000 05/03/2000 5/3/01 or earlier upon 90 days notice
LLC
NRG 5,000,000 04/10/2000 12/31/01 or earlier upon 15 days notice
Milford Power Limited 5,500,000 03/28/2000 4/30/01 or earlier upon 30 days notice
Partnership under certain conditions
H.Q. Energy Services 1,000,000 02/16/2000 Upon a written notice
(U.S.) Inc.
Southern Company Energy 3,500,000 01/26/2000 12/31/00 or earlier upon 30 days notice
Marketing L.P.**
American Electric Power 10,000,000 12/29/1999 12/31/01 or earlier upon 15 days notice
Aquila Energy Marketing (1) 10,000,000 12/29/1999 12/31/01 or earlier upon 15 days notice
Corp.
Aquila Energy (1) 4,000,000 12/29/1999 12/31/01 or earlier upon 15 days notice
Marketing Corp.
PG&E Energy Trading- 5,000,000 12/29/1999 12/31/01 or earlier upon 15 days notice
Gas Corporation
Reliant Energy 3,000,000 12/29/1999 12/31/00 or earlier upon 30 days notice
Services Inc.
NU Service Co. as Agent 4,000,000 12/14/1999 12/31/2001 for CL&P and WMECO
Western Massachusetts 3,500,000 12/14/1999 12/31/2000
Electric Co.
Western Massachusetts 12,969,000 12/19/2000 12/31/2001
Electric Co.
Morgan Stanley Capital 15,000,000 12/08/1999 1/31/02 or earlier upon 15 days notice
Group, Inc.
Morgan Stanley Capital 10,000,000 12/08/1999 1/31/01 or earlier upon 15 days notice
Group, Inc.
NY ISO 1,100,000 11/04/1999 60 days written notice
Total $116,569,000
Guarantees to: Purpose
NY ISO For Transmission Congestion Contracts
(TCCs)
KeySpan- Ravenswood, Inc. For energy, capacity, ancillary services, natural gas, fuel oil
transactions
Enron Power Marketing, Inc. For energy, capacity, ancillary services
Constellation Power For energy, capacity, ancillary services, natural gas, fuel oil,
and Source, Inc. commodity swap, cap, floor, collar transactions.
PG&E Energy Trading For energy, capacity, ancillary services, natural gas,
fuel oil Power, L.P. transactions
Western Gas Resources, For energy, capacity, ancillary services, natural gas,
fuel oil Inc. transactions
Duke Energy Trading & For energy, capacity, ancillary services, natural gas transactions
Marketing, LLC
PJM Interconnection, For transmission, power purchase/sale, and/or sale of capacity in PJM
LLC Control Area
NRG For energy, capacity, ancillary services, natural gas, fuel oil
transactions
Milford Power Limited For energy, capacity, ancillary services, natural gas, fuel oil
Partnership transactions
H.Q. Energy Services All payment obligations resulting from the Master Agreement dated
(U.S.) Inc. February 3, 2000
Southern Company Energy For energy, capacity, ancillary services, natural gas transactions
Marketing L.P.**
American Electric Power For energy, capacity, ancillary services, natural gas transactions
Aquila Energy Marketing (1) For energy, capacity, ancillary services
Corp.
Aquila Energy (1) For natural gas transactions
Marketing Corp.
PG&E Energy Trading- For energy, capacity, ancillary services, natural gas transactions
Gas Corporation
Reliant Energy For energy, capacity, ancillary services, natural gas transactions
Services Inc.
NU Service Co. as Agent For agreement dated 10/19/89 for purchase of unit entitlement
for CL&P and WMECO percentage from Millstone Unit 2
Western Massachusetts Relating to Standard Offer And Default Service
Wholesale Sales
Electric Co. Agreement dated 12/13/89
Western Massachusetts Relating to Standard Offer And Default Service
Wholesale Sales
Electric Co. Agreement dated 9/27/00
Morgan Stanley Capital For physical energy, capacity, and ancillary services
transactions
Group, Inc.
Morgan Stanley Capital For commodity swap, cap, floor, collar transactions
Group, Inc.
NY ISO ISO transactions
Legend:
** For either CES or CEE. The $ amount is currently shown under CES, and it is a blank
under CEE. As of 12/19 such 'dual' guaranties totaled $12,000,000, so CEI's exposure on
behalf of CEEnergy might rise to $115.6 million.
(1) Being replaced with single $10,000,000 guarantee expiring 12/31/01or earler upon 15
days notice. This guarantee will also be for CES, with a combined total of $10 million.
Note:
As of 10/31/00 there are three outstanding Promises for Guarantees from CEI to the
following parties: Bangor Hydro-Electric Co. (for up to $ 44 million); Central Maine Power
Co (for up to $169 million); Maine Public Service Co. (for up to $9.8 million). The issuance
of actual guarantees is pending the outcome of the bidding processes conducted to provide
Standard Offer Services to Electric Customers of the specified entities.
Outstanding CEI Guarantees to Outside Entities for CON ED DEVELOPMENT
Guarantee to Amount Signed on End Date
Hawkeye Funding, L.P. $353,308,490 11/14/2000 2022
Chase Manhattan Bank 7,000,000 05/24/2000 Not specified
Other-Comfort Letter
ABN Amro Bank N.V. Not specified 03/31/1998 Not specified
TOTAL: $360,308,490
Guarantee to Purpose
Hawkeye Funding, L.P. The Guaranty and Promissory Note from CEI to
Hawkeye Funding, LP for the financing of the Newington project.
Chase Manhattan Bank To support the performance letter of credit issued to Mellon
Bank for CED in connection with the Lakewood Cogeneration project. The
letter of credit was issued on May 26, 2000 and will expire on April 30, 2001.
Other-Comfort Letter
ABN Amro Bank N.V. Not specified 03/31/1998 Not specified
Outstanding CEI Guarantees to Outside Entities for CON ED COMMUNICATIONS
Guarantees to: Amount Signed on End Date
White Plains $150,000 2000 2015
Greenburgh 150,000 2000 2015
Mt.Vernon 150,000 2000 2015
Chase 250,000 05/24/2000 No end date; to the end of telecom.
franchise
NEON 50,000,000 11/23/1999 1) May be terminated at any
time in writing
prior to
closing if
termination is
mutual.
2) If closing
does not
occur on or
before the
six month
period on which
the request for
Private
Letter Ruling
is filed with
the IRS.
111 Chelsea LLC 9,358,250 01/31/2000 15 year office lease.
Total $60,058,250
Guarantees to: Purpose
White Plains Re: Various Westchester County broadband telecom
franchises.
Greenburgh
Mt.Vernon
Chase To support a performance letter of credit issued to the
City of New York for the account of CEC.
The L/C expires on 6/15/01 and is renewable annually.
NEON Guarantees prompt payments, but not performance, of all
of CEC's obligations set forth in the NEON agreement.
CEI does not guarantee the performance of CEC's
obligations in the NEON agreement, including without
limitation, the performance of any actions requiring any
Governmental Authority consent or approvals.
111 Chelsea LLC Guarantees payment of all fixed rents, additional rents
and other charges relating to the Agreement of Lease for
CEC's office at 111 Eighth Avenue. The guaranteed
amount will be reduced beginning with the sixth year and
in each succeeding year until the thirteenth year. In
year 13, the guaranteed amount is reduced to $1.1
million, which is the annual fixed rent, and remains
constant through year fifteenth.
EXHIBIT L-1
PROPOSED TERMS OF THE CEI SYSTEM MONEY POOL
(Revised October, 2000)
GENERAL
1. The members of the Money Pool (the Pool) are Consolidated Edison, Inc.
(CEI), Consolidated Edison of New York, Inc. (CECONY), Consolidated Edison
Solutions, Inc. (Solutions), Consolidated Edison Energy, Inc. (CEEI),
Consolidated Edison Development, Inc. (CEDI), CED/SCS Newington, LLC
(CED/SCS), CED Generation Holding Company, LLC (CED Generation), CED
Management Company, Inc. (CED Management), CED Operating Company, L.P. (CED
Operating), Consolidated Edison Energy Massachusetts, Inc. (CEEM), CED Ada,
Inc. (CED ADA), Lakewood Cogeneration LP (Lakewood), HCE-Lakewood, Inc. (HCE
Lakewood), CED Generation Lakewood Company (CED Generation), CED-GTM 1, LLC
(CED-GTM), Consolidated Edison Communications, Inc. (CECI), Orange and
Rockland Utilities, Inc. (O&R), Rockland Electric Company (RECO), Pike County
Light & Power Company (Pike), Northeast Utilities (NU), The Connecticut Light
and Power Company (CL&P), Western Massachusetts Electric Company (WMECO),
Northeast Nuclear Energy Company (NNECO), Holyoke Water Power Company (HWP),
The Rocky River Realty Company (RR), The Quinnehtuk Company (Quinnehtuk),
Public Service Company of New Hampshire (PSNH), North Atlantic Energy
Corporation (North Atlantic), HEC Inc. (HEC), Mode 1 Communications, Inc.
(Mode 1), Select Energy, Inc. (Select), NU Enterprises, Inc. (NUEI),
Northeast Generation Company (NGC), Northeast Generation Services Company
(NGS), Yankee Energy Systems, Inc. (YES), Yankee Gas Services Company (Yankee
Gas), Yankee Energy Financial Services Company (Yankee Financial), NorConn
Properties, Inc. (NorConn), Yankee Energy Services Company (Yesco) and RMS
Services, Inc. (RMS) (collectively, Pool Participants).
2. The Pool will be administered by [Consolidated Edison Service Company]
(Agent).
3. Each member will determine each day, on the basis of cash flow
projections, the amount of surplus funds it has available for contribution to
the Pool (Surplus Funds). In addition to its own Surplus Funds, CEI may
borrow funds from third party lenders (Excess Funds) in order to make these
Excess Funds available to meet the borrowing needs of the Pool Participants
other than the Nonborrowing Companies (as defined below).
CONTRIBUTIONS TO THE POOL
4. Each member may contribute its Surplus Funds to the Pool. CEI may also
contribute any Excess Funds to the Pool. PSNH may only contribute its
Surplus Funds to the Pool if permitted by the New Hampshire Public Utilities
Commission.
5. Each member will receive as interest with respect to its Surplus Funds
that fraction of the total interest received by the Pool equal to the ratio
of the Surplus Funds the member has contributed, times the period in which
such Surplus Funds were available, to the total Surplus Funds in the Pool,
times the period in which all Surplus Funds were in the Pool. CEI will
receive the same interest with respect to its Excess Funds that it pays for
its Excess Funds. Such interest will be computed on a daily basis and
settled once per month.
6. Each member may withdraw any of its Surplus Funds at any time without
notice. CEI may withdraw its Excess Funds at any time without notice.
BORROWINGS FROM THE POOL
7. Neither CEI, NU, O&R nor YES, as public utility holding companies, NGC,
CEEM, Lakewood nor CED/SCS, as Exempt Wholesale Generators, nor CECI nor Mode
1, as Exempt Telecommunications Companies, (collectively the "Nonborrowing
Companies") shall be entitled to borrow from the Pool.
8. No member shall be entitled to borrow Surplus Funds that are attributable
to contributions from WMECO until the Massachusetts Department of
Telecommunications and Energy (MDTE) or other appropriate Massachusetts
regulatory agency which regulates WMECO has issued an order authorizing WMECO
to lend funds to the companies in the CEI system through the Pool.
9. All short-term borrowing needs of members other than the Nonborrowing
Companies will be met by Surplus Funds in the Pool to the extent such funds
are available and to the extent they are not restricted by the conditions
specified in paragraph 8,. All Pool Participants other than the Nonborrowing
Companies may meet their short-term borrowing needs through Excess Funds
made available from CEI. The aggregate amount of short-term debt of utility
companies in the CEI system that may be outstanding at any one time, whether
through borrowings from the Pool or otherwise may not exceed the following
limits:
CECONY $800 million
O&R $100 million
Pike $ 25 million
RECO $ 50 million
CL&P $375 million
WMECO $250 million
PSNH $225 million
North Atlantic $260 million
Yankee Gas $100 million
HWP $ 5 million
NNECO $ 75 million
or such other amount which may be approved and authorized by the Securities
and Exchange Commission or the appropriate state agency and the respective
board of directors from time to time.
10. All Pool Participants, other than the Nonborrowing Companies may borrow
from Surplus Funds in the Pool, to the extent they are not restricted by the
conditions specified in paragraph 8, above and from CEI's Excess Funds
through the Pool. Loans will be made first to those Pool Participants that
cannot access the commercial paper market.
11. Members borrowing Surplus Funds will pay interest at a rate equal to the
daily Federal Funds Effective Rate as quoted by the Federal Reserve Bank of
New York. The rate to be used for weekends and holidays will be the prior
business day's rate. Members borrowing Excess Funds will pay interest at the
same rate that CEI pays for those Excess Funds.
12. Loans made by the Pool will be open account advances for periods of less
than 12 months, although the Agent may receive upon demand a promissory note
evidencing the transaction.
13. All loans made by the Pool from Surplus Funds are payable on demand by
the Agent.
14. All loans made by the Pool from Surplus Funds may be prepaid by the
borrower without penalty. No loans from Excess Funds shall be prepaid prior
to the maturity of the CEI borrowing that resulted in the Excess Funds,
unless the prepayment can be made without CEI incurring additional costs or
unless the prepayment is accompanied by payment of any additional costs
incurred by CEI as a result of such prepayment.
15. If there are more Surplus Funds in the Pool than are necessary to meet
the borrowing needs of the members, the Agent will use the Surplus Funds to
meet the CEI system's compensating balance requirements or invest them on
behalf of the Pool directly, or indirectly through an investment fund, in one
of the following instruments:
(i) interest-bearing accounts with banks;
(ii) obligations issued or guaranteed by the U.S. government and/or its
agencies and instrumentalities, including obligations under repurchase
agreements;
(iii) obligations issued or guaranteed by any state or political subdivision
thereof, provided that such obligations are rated not less than "A" (or "A-1"
or "P-1" or their equivalent for short term debt) by a nationally recognized
rating agency;
(iv) commercial paper rated not less than "A-1" or "P-1" or their equivalent
by a nationally recognized rating agency;
(v) moneymarket funds;
(vi) bank certificates of deposit,
(vii) Eurodollar funds; and
(viii) such other investments as are permitted by Section 9(c) of the Act and
Rule 40 thereunder and, as to funds contributed by WMECO, approved by the
MDTE pursuant to Massachusetts General Laws Chapter 164, Section 17A and the
regulations thereunder.
TERMINATION
16. Any member may terminate its participation in the Pool at any time
without notice.
Draft December 22, 2000
Exhibit M-1
FORM OF
CONSOLIDATED EDISON SERVICE COMPANY
SERVICE CONTRACT
AGREEMENT made and entered into as of the day of , , by
and between [NAME OF SERVICE COMPANY] (hereinafter referred to as Service
Company) and , (hereinafter referred to as Associate
Company).
WHEREAS, by order in File No. 37-65 or File No. 70-9711, as the case may
be, the Securities and Exchange Commission (hereinafter referred to as SEC)
approved and authorized in connection with the merger of Northeast Utilities
and Consolidated Edison, Inc. (hereinafter referred to as CEI), under the
Public Utility Holding Company Act of 1935 (hereinafter referred to as the
Act), the conduct of business of Service Company in accordance herewith, as a
wholly owned subsidiary service company of CEI; and
WHEREAS, Service Company is willing to render services as provided
herein to CEI and its associated subsidiaries (hereinafter collectively
referred to as the System) at cost, determined in accordance with applicable
rules and regulations under the Act or by such other method as may be
permissible under the Act; and
WHEREAS, economies, increased efficiencies and other benefits will
result to the System from the performance by Service Company of services as
herein provided:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, it is agreed as follows:
Section 1. Agreement to Furnish Services.
Service Company agrees to furnish to Associate Company and other System
companies, upon the terms and conditions herein provided, the services
hereinafter referred to in Section 2 hereof at such times and for such
periods as may be required, and Service Company will, as and to the extent
required to provide such services to the System, keep itself and its
personnel available and competent to render such services to the System so
long as it is authorized so to do by federal and state regulatory agencies
having jurisdiction.
For the purpose of providing services as herein provided, Service
Company proposes to establish various departments, one or more of which will
participate in providing particular services hereinafter described. Service
Company reserves to itself the privilege, without amendment hereof or express
prior agreement by Associate Company or other System companies, from time to
time to establish new departments, to subdivide or otherwise reorganize any
of the departments established by it, and to reallocate services among
various departments.
Service Company will provide for Associate Company and other System
companies as required such other services not referred to in Section 2 hereof
as Service Company may conclude it may furnish with economies and increased
efficiencies to the System or such other services as Associate Company or
other System companies may require and Service Company is competent to
perform.
Services will also be furnished to other System companies under
agreements similar in all respects hereto and may also be furnished, in
Service Company's discretion, to others, provided that by so doing the cost
of services to Associate Company or other System companies will not be
increased.
In supplying services hereunder, Service Company may arrange for
services of such executives, financial advisers, accountants, attorneys,
technical advisers, engineers and other persons as are required for or
pertinent to the rendition of such services.
Section 2. Services to be Performed.
Subject to the provisions of Section 1 hereof, Service Company may
provide to Associate Company and other System companies services including,
but not limited to the following:
(A) General System Management: Executive, administrative, managerial,
coordinating and advisory services, particularly with respect to the
formulation and effectuation of policies and programs affecting or
relating to the System as a whole, including financial, corporate
strategy, accounting, and economic policies and programs, power supply,
public and employee relations, regulation, contractual arrangements,
administrative and other proceedings, industry-wide activities and like
matters.
(B) Other Functions and Activities: Studying, planning, advice, assistance,
guidance, supervision, direction, administration, maintenance, handling,
performance and operation, as may be required, in connection with the
following functions and activities:
(i) Corporate and Secretarial: Policies and practices relating to the
performance of corporate secretarial functions and activities,
including the preparation and maintenance of official corporate
records, reports, minutes and correspondence in accordance with
assigned responsibilities and duties.
(ii) Financial Planning: Financial structures; financial programs to
raise funds required or to effect savings through refinancing;
relations with commercial banks and negotiation of short-term
borrowings; relationships with investment bankers, analysts,
analyst societies, securities holders, stock holders, stock
exchanges and indenture trustees, transfer agents and registrars;
general treasury, banking and financial matters.
(iii) Accounting: General accounting, customer accounting and related
records; depreciation, accounting procedures and practices to
improve efficiency; auditing, relations with independent auditors
and appearances before and requirements of regulatory bodies with
respect to accounting matters; and financial and operating reports
and other statistical matters and analyses thereof.
(iv) Taxes: Consolidated and other income tax returns and other
federal, state and municipal tax returns, and all matters related
thereto, including relations with the Internal Revenue Service and
other taxing authorities, the examination and processing of tax
returns, assessments and claims, and developments in federal, state
and municipal taxes.
(v) Insurance: Insurance programs and matters, including pension and
other employee benefit plans and programs; and relations with
insurance brokers and agents.
(vi) Budgets: Operating, construction and cash budgets, and similar
studies or documents, including estimates and other information
required therefor or related thereto.
(vii) Data Processing: Computer and other data processing activities.
(viii) Bulk Power Supply: The bulk power supply system from sources of
supply through to bulk substations, to achieve reliable service at
minimum cost, including forecasts of electric loads; power supply
arrangements among System companies; power supply relations with
other utilities; forecasts of gas requirements and the procurement
of gas supplies; design, engineering and scheduling of electric and
gas production and transmission facilities; the design, engineering
and scheduling of major and unusual distribution facilities; and
System electric load dispatching operations and related matters.
(ix) Engineering Research and Standardization: Engineering activities
in the fields of research, design, construction and
standardization; technical specifications and standard designs for
and procedures and methods of utilizing materials, equipment and
associated services; technical support and engineering as required
in all areas of the System's operations.
(x) System Operations: Electric and gas operations, including
production, transmission and distribution of electricity and gas;
the construction, operation and maintenance of electric and gas
facilities; and in general all electric and gas construction,
maintenance and operating activities.
(xi) Other Administrative Services: Management-union and all other
employee relation activities, including the definition of major
organizational responsibilities and the translation of those
responsibilities into effective organization structures; employee
welfare and other programs and problems; business methods and
procedures; and transportation activities and matters.
(xii) Purchasing and Stores: The purchasing and handling of materials
and supplies, fuel and equipment, including such activities as
buying, traffic, expediting and stock control, and scrap and
salvage sales; major and long-term purchase contracts pertaining to
the foregoing; and contacts with market conditions and principal
suppliers.
(xiii) Commercial Activities: Electric, gas and other sales; customer
service facilities; rate matters and rate structures; and area
development plans and activities.
(xiv) Marketing and Sales Activities: Marketing, sales and pricing
strategies and plans; market research and support activities;
technical services; new business and product development; trade
ally and strategic alliance services; and marketing and sales
training and support.
(C) Officers and other employees of Service Company will, on request of
Associate Company, serve, without charge other than as herein provided,
as officers or representatives of such Company.
Section 3. Agreement to Take and Pay for Services
Associate Company agrees to take from Service Company such of the
services to be performed by Service Company as may be required and to pay to
Service Company the cost of such services determined as herein provided. It
is the intent of this Agreement that the payment for services rendered by the
Service Company to the System shall cover all the costs of its doing business
(less credits for services to others and any other miscellaneous income
items), including reasonable compensation for necessary capital as permitted
by Rule 91 of the SEC under the Act. The methods and procedure for
determining the cost of services performed for Associate Company are set
forth in Appendix A hereto.
Bills will be rendered for each calendar month on or before the
twentieth day of the succeeding month and will be payable on presentation and
not later than the last day of that month. Monthly charges may be made in
whole or in part for particular expenses on an estimated basis, subject to
adjustment, so that all charges for services during a calendar year will be
made on an actual basis.
Section 4. Effective Date; Term; and Cancellation.
This Agreement shall become and be effective as of the date hereof and
it shall continue in effect, unless sooner terminated as herein provided, for
a period of one year. It may be renewed from time to time for similar one-
year periods by mutual agreement. This Agreement shall also be subject to
termination and shall terminate, without any action by either of the parties,
to the extent and from the time that performance may conflict with the Act or
with any rule, regulation or order of the SEC adopted before or after the
making hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, by their respective officers thereunto duly authorized, all as
of the day and year first above written.
CONSOLIDATED EDISON SERVICE COMPANY
By:
Its President
Attest:
Assistant Secretary
ASSOCIATE COMPANY
BY:
Its President
Attest:
Assistant Secretary
APPENDIX A
DESCRIPTION OF METHODS AND PROCEDURE
FOR ALLOCATING COST OF SERVICES
JOB OR WORK ORDERS FOR SERVICE
There shall be job or work orders covering services to be performed for
Associate Company or other System companies. These orders may be either
general or specific. Services of a continuing nature, such as accounting,
financial planning and dispatching, will be covered by general job or work
orders; specific job or work orders will cover such things as issues of
securities, special studies or construction projects. General orders, as
well as specific orders, will specify the nature of the services to be
performed thereunder in sufficient detail that charges therefor may be
determined as herein provided and properly accounted for by the Associate
Company under its prescribed Uniform System of Accounts.
CHARGES FOR SERVICES
General
Charges for services rendered to Associate Company and other System
companies will be made on the bases of benefits conferred and of actual cost
(including reasonable compensation for necessary capital as permitted by Rule
91 of the SEC under the Act), fairly and equitably allocated.
Specific Services
Charges for specific services performed will be made to the appropriate
specific job or work order number assigned to accumulate the charges
applicable to the particular activity. These charges will include both
direct and indirect costs involved in providing the specific services.
General Services
Charges for general services performed will be made to the appropriate
general job or work order number assigned to accumulate the charges
applicable to the particular activity. These charges will include both
direct and indirect costs involved in providing the general services.
NATURE OF CHARGES AND METHOD OF ALLOCATION
Direct Charges
Direct charges consist of those costs which can practicably be recorded
separately and identified not only by job or work order number and department
but also as to source, such as time reports for each employee, vehicle
reports, invoices and other source documents. Time reports will be
maintained for each employee, including officers, in such detail as may be
appropriate for such employee and the nature of the services performed.
Employees (other than stenographic, secretarial, clerical, and other workers
engaged in rendering support services) will record on their time reports
hours chargeable to the appropriate job or work order numbers and the nature
of the work performed.
CEI will be charged with 25% of the costs chargeable to job or work
orders for general services not of an operating or functional nature related
primarily to the System subsidiary companies but primarily of benefit to and
performed for CEI and the System as a whole. The balance of the charges to
such job or work orders will be allocated to among System subsidiary
companies as provided hereafter under "Charges to System Companies - General
Services."
Indirect Charges or Overhead Expenses
Indirect charges or overhead expenses consist of all costs of the
Service Company, other than direct charges described above. These charges
may be classified into the following two general categories:
1. General Service Company Overheads - These charges include costs which
cannot be identified as applicable to either a particular job or work
order number or department and which must be allocated to the various
Service Company departments on a fair and equitable basis. The
following items are illustrative, and not all-inclusive, of the types of
costs which may be so-allocated to the extent above provided: rents;
office supplies and expenses; depreciation; building operation and
maintenance; insurance; reasonable compensation for necessary capital;
general services, such as stenographic, files, mail, etc., including
salaries, employee benefits, and expenses of related employees; and
other general overheads.
These overhead costs will be allocated to each department on the basis
of functional relationship, such as number of personnel, space occupied,
use, etc.
2. Department Overheads - These charges include costs which can be
identified as applicable to a particular department but which cannot be
directly associated with a particular job or work order number. These
costs will consist of the following:
(a) Wages and salaries of stenographic, secretarial, clerical and other
workers in the department engaged in rendering support services.
(b) Lost or nonproductive time for vacations, personal time off,
sickness, holidays, etc., of all employees in department.
(c) Payroll-related Federal and State taxes and group benefit plans for
pension, life insurance, hospitalization and medical, etc., of all
employees in department.
(d) Miscellaneous supplies and expense.
(e) General Service Company overheads allocated to the particular
department as set forth in item 1 above.
The indirect charges of a particular department, as outlined in
this item 2, will be distributed to the active specific or general job
or work orders for which work is being performed by that department on
the same proportionate basis as the actual direct payroll charges of
that department.
CHARGES TO OTHER THAN SYSTEM COMPANIES
Services performed for other than System companies will be billed and
paid for by them on an appropriate basis. All amounts so billed will be
credited to the appropriate job or work orders before any charges are made
therefrom to System companies.
CHARGES TO SYSTEM COMPANIES
Specific Services
Charges for specific services recorded in the appropriate job or work
order numbers including overhead items, will be billed to the company or
companies for whom the services are performed.
General Services
Charges for general services recorded in the appropriate job or work
order numbers, including overhead items, will be allocated among System
subsidiary companies on one of the following bases determined on the basis of
functional relationship to be the most fair and equitable:
1. Revenues - The relation of each company's gross operating revenues
(electric, gas or total, as may be appropriate) to the sum of the
operating revenues of all System companies (electric, gas or total, as
may be appropriate) for the preceding calendar year.
2. Electric Peak Load - The relation of each company's annual electric peak
load to the combined electric peak load of all System companies for the
preceding calendar year.
3. Peak Day Sendout - The relation of each company's gas peak day sendout
to the combined gas peak day sendout of all System companies for the
preceding calendar year.
4. Customers Billed - The relation of each company's total customers billed
to the combined total customers billed of all System companies for the
preceding calendar year.
5. Other - Such other basis or bases as experience may show will provide,
on a functional relationship, a more fair and equitable allocation of
particular charges than any of the foregoing.
DEPARTMENT COST CONTROLS
Annual operating budgets, on a departmental basis, will be used and
costs will be controlled independently for each department so as to maintain
a periodic check on the balances, if any, over or underbilled to insure that
services rendered are being billed at cost. Each department will be charged
with all of its expenses, including overhead items allocated to it, and will
be credited with amounts billed from the department for services rendered.
The accounts of each department will be maintained so as to be substantially
in balance at all times. Accordingly, semiannual reviews will be made of
balances to determine to what extent the billings should be adjusted to
reflect actual cost.
BILLING
Bills will be provided Associate Company in sufficient detail so as to
identify the services rendered and permit proper accounting distribution of
the charges under the Associate Company's prescribed Uniform System of
Accounts. Detail on the bill will include: (1) Department; (2) Function or
type of service; (3) Nature of charges, whether direct or indirect
(overhead); and (4) Source of charges, if direct.
Exhibit M-2
NEW CONSOLIDATED EDISON SERVICE COMPANY
POLICIES AND PROCEDURES
New CEI anticipates that services provided by the New CEI Service
Company and the Non Utility Service Co. will be documented through Service
Level Agreements (SLA's). The SLA's will document the types of services
being provided, the performance measures applicable to such services, and the
estimated cost and allocation method for the services. The SLA's will be
signed by the service provider and a representative of each subsidiary that
will receive the services.
Charges will be accumulated and billed to each New CEI subsidiary
company at the end of each month through the Accounting system. A time
keeping system is expected to be implemented which will allow for each
employee in the Service company to complete time records which will be
approved by work group supervisors. The New CEI subsidiary companies will
have the ability to review the charges on a monthly basis compared to the SLA
estimates. Meetings will be held quarterly, as needed, between service
providers and the subsidiary representatives to review performance against
the SLA's.
Management plans to develop strategic performance measures for New CEI
and its subsidiary companies as a business enterprise. These measures are
expected to include financial, operational and employee goals. Management
will develop targets against which to measure the performance of New CEI and
its subsidiaries on a consolidated basis. In addition, based upon these
strategic performance measures and targets, management will develop
performance measures and targets for each subsidiary. The financial targets
of the subsidiaries will encompass the SLA costs as well. In addition, the
Service Company functions will have cost and quality performance measures and
targets.
Service Level Agreements will be developed as part of the annual
planning and budgeting process. The cost estimates and allocations will be
reviewed by the subsidiary companies and meetings will be held to discuss the
level of services and cost of services proposed to be provided by the Service
Company functions. The New CEI subsidiaries will then include the SLA costs
in their business plans and these costs will become part of the financial
targets that are developed as part of the planning and budgeting process.
New CEI's Auditing Department will continuously conduct audits of the
functions of New CEI and its subsidiaries, including those of the Service
Companies, to ensure that proper internal controls exist and to determine if
they are functioning as intended and are efficient and effective. As a part
of the audit plan, the Internal Audit Department will perform audits of the
accounting system and related billings to New CEI subsidiary companies. The
purpose of the audits will be to render an opinion on the internal controls
over the allocation and billing process and compliance with Commission-
approved cost allocation billing methodologies. The Auditing Department will
perform its audit of the cost allocations and related billings every three
years.
The [Vice President and General Auditor of Internal Audits ] (the "Vice
President") will report to the Chairman of the Audit Committee of the Board
of Directors of New CEI (the "Audit Committee"). Administratively, the Vice
President will report to the President of the respective service company.
The Vice President will attend each meeting of the Audit Committee. In
accordance with New York Stock Exchange listing requirements, the Audit
Committee will be comprised solely of outside directors.
In November or December of each year, the results of the year's audit
activities will be reviewed with the Audit Committee and the following year's
audit plan will be reviewed and approved by the Audit Committee. The Audit
Committee will annually review its Charter to ensure that it will
sufficiently allow the Vice President to carry out his duties. The Vice
President will meet privately with the Audit Committee several times during
the year and will have the addresses and telephone numbers of the Audit
Committee members and will be free to contact them at any time. The Vice
President will be reminded in these private meeting sessions that he has such
freedom.
Exhibit N-1
TAX ALLOCATION AGREEMENT
This Agreement, dated as of , 2001, the date on which each
of the following companies became a member of the Parent Company affiliated
group, as defined in Section 1504(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")) (the "Effective Date"), is made by and among
Consolidated Edison, Inc., (the "Parent Company"), Northeast Utilities, The
Connecticut Light and Power Company, Western Massachusetts Electric Company,
Holyoke Water Power Company, Northeast Utilities Service Company, Northeast
Nuclear Energy Company, Holyoke Power and Electric Company, The Rocky River
Realty Company, The Quinnehtuk Company, Charter Oak Energy, Inc., Charter Oak
Paris, Inc., HEC, Inc., Public Service Company of New Hampshire, North
Atlantic Energy Corporation, North Atlantic Energy Service Corporation,
Properties Inc., COE Development Corporation, COE Argentina II Corp., COE
Ave Fenix Corporation, HEC International Corporation, Mode I Communications
Inc., Select Energy, Inc., CL&P Receivables Corporation, NU Enterprises,
Inc., Northeast Generation Company, Northeast Generation Services Company,
Select Energy Portland Pipeline, Inc., Reeds Ferry Supply Co., Inc.,
HEC/Tobyhanna Energy Project, Inc., Yankee Energy System, Inc., Yankee Energy
Financial Services Company, NorConn Properties, Inc., Yankee Energy Services
Company, Yankee Gas Services Company and R.M. Services, Inc., Consolidated
Edison of New York, Inc., Consolidated Edison Solutions, Inc., Consolidated
Edison Energy, Inc., Consolidated Edison Development, Inc., CED Ada, Inc.,
Consolidated Edison Leasing, Inc., CED Management Company, Inc., Consolidated
Edison Energy Massachusetts, Inc., CED - Lakewood Inc., CED Generation
Lakewood Company, Consolidated Edison Communications, Inc., Orange and
Rockland Utilities, Inc., Rockland Electric Company and Pike County Light &
Power Company (hereinafter collectively "subsidiaries" and singly
"subsidiary") in accordance with Rule 45(c). The subsidiaries join in the
annual filing of a consolidated federal income tax return with the Parent
Company.
In consideration of the mutual benefits and obligations provided for
herein, the Parties to this Agreement hereby agree that the consolidated
federal income tax, as defined by Rule 45(c)(1), of the Parent Company and
the subsidiaries shall be allocated as follows:
(1) Apportionment of Parent Company Income or Loss. The net taxable income
or loss of the Parent Company computed on a separate return basis ("separate
taxable income") shall be apportioned among such subsidiaries in proportion
to the dividends paid by each subsidiary to the Parent Company. The separate
taxable income of the Parent Company or a subsidiary is the income or loss of
such company for a tax year, computed as though such company had always filed
a separate return on the same basis as used in the consolidated return, with
the following adjustments:
FN
References to Rule 45 are to Rule 45 of the Public Utility Holding Company
Act of 1935.
(a) Gains and losses on intercompany transactions shall be taken into
account as provided in Treas. Reg. Section 1.1502-13 and 13T.
(b) Gains and losses relating to inventory adjustments shall be taken into
account as provided in Treas. Reg. Section 1.1502-18.
(c) Dividends and other transactions with respect to stock, bonds, or other
obligations of members shall be reflected as provided in Treas. Reg. Section
1.1502-13(f) and -13(g).
(d) Excess losses shall be included in income as provided in Reg. Section
1.1502-19.
(e) In the computations of tax credits and recapture, Treas. Reg. Section
1.1502-3(f)(2) shall apply.
(f) Basis shall be determined under Treas. Reg. Section 1.1502-31 or Section
1.1502-32, and earnings and profits shall be determined under Treas. Reg.
Section 1.1502-33.
(g) Payments made or received under this Agreement shall be eliminated.
(h) tems attributable to a consolidated return year but not allowable on a
separate company basis (such as deductions for percentage depletion or net
operating loss carryovers or carrybacks), to the extent such items were
previously taken into account to reduce the consolidated taxable income shall
be excluded.
(2) Allocation of Consolidated Tax. The consolidated federal income tax, as
defined by Rule 45(c)(1), exclusive of capital gains taxes (see paragraph
(3)), and the alternative minimum tax (see paragraph (7)), and before the
application or recapture of any credits (see paragraph (4)) and the results
of any special benefits (see paragraph (5)), shall be allocated among the
subsidiaries based on their separate taxable income or loss, computed without
regard to net capital gains or losses, and after the application of paragraph
(1). Subject to the limitation provided in paragraph (10), such consolidated
federal income tax allocated to a subsidiary, which may be either positive or
negative, shall be equal to the separate taxable income of the subsidiary
(after elimination of capital gains and losses) multiplied times the highest
effective corporate federal income tax rate set forth in Section 11 of the
Code. However, no company shall receive a negative allocation greater (in
absolute value) than the amount by which its loss has reduced the
consolidated federal income tax liability. Conversely, a company shall
receive a negative allocation for any loss or deduction it cannot use
currently to the extent such loss or deduction reduces the consolidated
federal income tax liability. If the consolidated tax liability is greater
than the aggregate tax on the separate taxable income of the Parent Company
and each subsidiary ("separate return tax"), then no subsidiary shall receive
an allocation greater than its separate return tax, and the Parent Company
shall be liable for the excess of the consolidated tax over the sum of the
separate return taxes of the subsidiaries, subject to recovery in later years
from subsequent consolidated tax benefits.
(3) Allocation of Capital Gains Taxes. The portion of the consolidated tax
attributable to net capital gains and losses shall be allocated directly to
the subsidiaries giving rise to such items. The effects of netting capital
gains and losses in the current year shall follow the principles of paragraph
(2). The effects of capital loss carrybacks or carryforwards shall follow
the principles of paragraph (6). See Rules 45(c)(3) and 45(c)(5).
(4) Allocation of General Business Credits. General business credits
arising in a particular year shall be allocated among the subsidiaries giving
rise to such credits by multiplying the amount of consolidated general
business credits for such year utilized by a fraction, the numerator of which
is the amount of general business credit of the subsidiary for such year and
the denominator of which is the total amount of general business credit of
all such subsidiaries for such year. If the consolidated group is in a
credit carryforward situation, the utilized credit shall be allocated based
on the vintages that comprise the utilized credit. For purposes of the
consolidated return, the credits utilized are determined on a first-in first-
out basis with all credits generated by all subsidiaries in the earliest year
utilized first before credits generated in a subsequent year can be utilized.
For purposes of allocating the credits pursuant to this agreement, and in
accordance with the separate return limitation of paragraph (10), the credits
utilized shall be determined on a first-in first-out basis with the credits
generated by subsidiaries allocated positive taxes in paragraphs (2) and (3)
utilized first, for all available vintages, before credits generated by
subsidiaries allocated negative taxes in paragraphs (2) and (3) are utilized.
If the vintages of credits utilized pursuant to this agreement differ from
those utilized according to the consolidated return for a subsidiary, then
the vintages of credits utilized pursuant to this agreement shall be
exchanged among the affected subsidiaries. General business credits that are
lost due to reductions, limitations and expirations imposed by the Code or
the regulations thereunder shall be allocated in an appropriate and
reasonable manner.
(5) Allocation of Special Benefits. Any special benefits, such as the
effects of Section 1341 of the Code, shall be allocated directly to the
subsidiaries giving rise to them. See Rule 45(c)(3).
(6) Allocation of a Net Operating Loss. Should the Parent Company's
affiliated group generate a net operating loss for a tax year, each company
shall first receive an allocation of consolidated federal income tax, which
may be either positive or negative, as provided in paragraph (2); provided,
however, a negative allocation of the consolidated federal income tax shall
be made only to the extent that separate taxable income reduces consolidated
federal income tax for such tax year. The current consolidated net
operating loss shall then be apportioned to each subsidiary with a taxable
loss and carried back or forward to year(s) when the consolidated net
operating loss can be utilized. The consolidated reduction in tax resulting
from the carryback or carryforward of the net operating loss shall be
apportioned to loss subsidiaries in accordance with paragraphs (2) through
(5). For purposes of the consolidated return, the utilization of net
operating losses carried back or carried over is determined on a first-in
first-out basis with all net operatingMPANY
By:
Name:
Title:
Attest:
NORTHEAST GENERATION SERVICES COMPANY
By:
Name:
Title:
Attest:
SELECT ENERGY PORTLAND PIPELINE, INC.
By:
Name:
Title:
Attest:
REEDS FERRY SUPPLY CO., INC.
By:
Name:
Title:
Attest:
HEC/TOBYHANNA ENERGY PROJECT, INC.
By:
Name:
Title:
Attest:
YANKEE ENERGY SYSTEM, INC.
By:
Name:
Title:
Attest:
YANKEE ENERGY FINANCIAL SERVICES COMPANY
By:
Name:
Title:
Attest:
NORCONN PROPERTIES, INC.
By:
Name:
Title:
Attest:
YANKEE ENERGY SERVICES COMPANY
By:
Name:
Title:
Attest:
YANKEE GAS SERVICES COMPANY
By:
Name:
Title:
Attest:
R.M. SERVICES, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON OF NEW YORK, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON SOLUTIONS, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON ENERGY, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON DEVELOPMENT, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON LEASING, INC.
By:
Name:
Title:
Attest:
CED ADA, INC.
By:
Name:
Title:
Attest:
CED MANAGEMENT COMPANY, INC.
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON ENERGY MASSACHUSETTS, INC.
By:
Name:
Title:
Attest:
CED - LAKEWOOD INC.
By:
Name:
Title:
Attest:
CED GENERATION LAKEWOOD COMPANY
By:
Name:
Title:
Attest:
CONSOLIDATED EDISON COMMUNICATIONS, INC.
By:
Name:
Title:
Attest:
ORANGE AND ROCKLAND UTILITIES, INC.
By:
Name:
Title:
Attest:
ROCKLAND ELECTRIC COMPANY
By:
Name:
Title:
Attest:
PIKE COUNTY LIGHT & POWER COMPANY
By:
Name:
Title:
