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Proc-Type: 2001,MIC-CLEAR
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SECURITIES AND EXCHANGE COMMISSION
_____________________
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 1, 2000
_____________________
Energy East Corporation
New York |
1-14766 |
14-1798693 |
(State or other jurisdiction |
(Commission File Number) |
(IRS Employer |
P.O. Box 12904 |
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(Address of principal |
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(Registrant's telephone number, |
Not Applicable
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets.
On September 1, 2000, pursuant to the Agreement and Plan of Merger dated as of June 14, 1999, Energy East Corporation completed its merger with CMP Group, Inc. Energy East acquired all of the common stock of CMP Group for $29.50 per share in cash. The transaction had an equity market value of approximately $957 million, and will be accounted for using the purchase method. Central Maine Power Company, CMP Group's principal subsidiary, will continue to operate as a regulated electric utility, serving customers in central and southern Maine.
On September 1, 2000, pursuant to the Agreement and Plan of Merger dated as of June 29, 1999, Energy East completed its merger with CTG Resources, Inc. As a result of the merger, approximately 45% of the common stock of CTG Resources became exchangeable for 1.7320 of Energy East common stock, and approximately 55% was convertible into $41.00 in cash per CTG Resources share, subject to the terms of the merger agreement. The transaction had an equity market value of approximately $350 million, and will be accounted for using the purchase method. Connecticut Natural Gas Corporation, CTG Resources' principal subsidiary, will continue to operate as a regulated natural gas utility, serving customers in Greenwich, Hartford and 21 other cities and towns in central Connecticut.
On September 1, 2000, pursuant to the Agreement and Plan of Merger dated November 9, 1999, Energy East completed its merger with Berkshire Energy Resources. Energy East acquired all of the common shares of Berkshire Energy Resources for $38.00 per share in cash. The transaction had an equity market value of approximately $96 million, and will be accounted for using the purchase method. The Berkshire Gas Company, Berkshire Energy Resources' principal subsidiary, will continue to operate as a regulated natural gas utility, serving customers in 19 communities in the western portion of the Commonwealth of Massachusetts.
Energy East's sources of funds for the consideration for the CMP Group, CTG Resources and Berkshire Energy Resources merger transactions include proceeds from the sale of generation assets, a $500 million bank facility by the Union Bank of Switzerland, and a drawing on its $300 million revolving credit agreement with Chase Manhattan Bank acting as administrative agent. The bank facility will be replaced by a long-term public offering of debentures by Energy East.
With the completion of these transactions, Energy East becomes one of the largest energy providers in the Northeast, serving 2 million customers (1.4 million electricity and 600,000 natural gas), double that of a year ago. Its combined service area stretches across upstate New York and New England incorporating 32,000 square miles.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired
The following audited financial statements of CMP Group, Inc. and Subsidiaries, together with the report of independent accountants, are incorporated by reference: consolidated balance sheet, consolidated statement of earnings and consolidated statement of cash flows, and the notes related thereto, included in CMP Group's Annual Report on Form 10-K for the year ended December 31, 1999. The following unaudited financial statements of CMP Group, Inc. and Subsidiaries are incorporated by reference: consolidated balance sheet, consolidated statement of earnings and consolidated statement of cash flows, and the notes related thereto, included in CMP Group's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(b) Pro forma financial information
Energy East Corporation
Combined Condensed Balance Sheet
Giving Effect to the CMP Group, CTG Resources
and Berkshire Energy Resources Mergers
At June 30, 2000
Actual and Pro Forma
(Unaudited)
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Berkshire |
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Assets |
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(thousands) |
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Current Assets |
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Regulatory Assets Other Assets Goodwill |
295,915 283,126 302,601 |
389,668 138,809 - |
13,282 21,944 - |
6,494 1,416 1,952 |
- 55,285 563,163 |
(5) (6,7) |
705,359 500,580 867,716 |
Total Assets |
$4,148,648 |
$1,766,783 |
$486,997 |
$113,999 |
$144,326 |
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$6,660,753 |
The notes on pages 6 to 8 are an integral part of the pro forma combined condensed financial statements.
Energy East Corporation
Combined Condensed Balance Sheet
Giving Effect to the CMP Group, CTG Resources
and Berkshire Energy Resources Mergers
At June 30, 2000
Actual and Pro Forma
(Unaudited)
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Berkshire Energy |
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Liabilities |
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(thousands) |
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Current Liabilities |
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Regulatory Liabilities |
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Deferred Income Taxes and |
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Common Stock Equity |
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Total Liabilities and |
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The notes on pages 6 to 8 are an integral part of the pro forma combined condensed financial statements.
Energy East Corporation
Combined Condensed Statement of Income
Giving Effect to the Connecticut Energy, CMP Group,
CTG Resources and Berkshire Energy Resources Mergers
Twelve Months Ended December 31, 1999
Actual and Pro Forma
(Unaudited)
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Berkshire |
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(in thousands, except per share amounts) |
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Operating Revenues Operating Expenses |
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The notes on pages 6 to 8 are an integral part of the pro forma combined condensed financial statements.
Energy East Corporation
Combined Condensed Statement of Income
Giving Effect to the CMP Group, CTG Resources
and Berkshire Energy Resources Mergers
Six Months Ended June 30, 2000
Actual and Pro Forma
(Unaudited)
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Berkshire |
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(in thousands, except per share amounts) |
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Operating Revenues |
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Earnings per share, basic and diluted Average Common Shares Outstanding |
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The notes on pages 6 to 8 are an integral part of the pro forma combined condensed financial statements.
Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
Giving Effect to the Connecticut Energy, CMP Group,
CTG Resources and Berkshire Energy Resources Mergers
Note 1. Unaudited Pro Forma Combined Condensed Financial Statements.
The unaudited pro forma combined condensed financial statements as of and for the six months ended June 30, 2000, have been adjusted to give effect to the CMP Group, CTG Resources and Berkshire Energy Resources mergers. The unaudited pro forma combined condensed income statement as of December 31, 1999, has been adjusted to give effect to the Connecticut Energy merger, which was completed in February 2000, and the CMP Group, CTG Resources and Berkshire Energy Resources mergers. The unaudited pro forma combined condensed financial statements reflect preliminary purchase accounting adjustments in accordance with generally accepted accounting principles. Estimates relating to the fair value of some assets, liabilities and other events have been made as more fully described below. Actual adjustments will be made on the basis of actual assets, liabilities and other items as of the closing date of the mergers on the basis of appraisals and evaluations. Therefore, actual amounts may differ from those reflected below.
The unaudited pro forma combined condensed balance sheet assumes that the mergers occurred on June 30, 2000. The unaudited pro forma combined condensed statement of income for the 12 months ended December 31, 1999, assumes that the mergers were completed on January 1, 1999, reflects the effect of the sales of Energy East's coal-fired generation assets and CMP Group's steam and hydro generation assets when they occurred in March and May 1999 and April 1999, respectively, has not been adjusted to reflect the effect of those transactions as of January 1, 1999, and does not give effect to the pending sale of Energy East's interest in nuclear generation assets. The unaudited pro forma combined condensed statement of income for the six months ended June 30, 2000, assumes that the mergers were completed on January 1, 2000, and does not give effect to the pending sale of Energy East's interest in nuclear generation assets.
The pro forma combined condensed financial statements should be read in conjunction with the consolidated historical financial statements and the related notes of Energy East and CMP Group, which are incorporated by reference. The pro forma statements are for illustrative purposes only. They are not necessarily indicative of the financial position or operating results that would have occurred had the sales and the mergers been completed on January 1, 1999, January 1, 2000, or June 30, 2000, as assumed above; nor is the information necessarily indicative of future financial position or operating results.
Note 2. Accounting Method.
The CMP Group, CTG Resources and Berkshire Energy Resources mergers will be accounted for as an acquisition of CMP Group, CTG Resources and Berkshire Energy Resources by Energy East under the purchase method in accordance with generally accepted accounting principles. The amount of goodwill recorded will reflect the excess of the purchase prices over the estimated net fair value of assets and liabilities of CMP Group's, CTG Resources' and Berkshire Energy Resources' utility and nonutility businesses at the time of closing, plus Energy East's estimated transaction costs related to the mergers. The assets and liabilities of CMP Group's, CTG Resources' and Berkshire Energy Resources unregulated subsidiaries will be revalued to fair value, including an allocation of goodwill to the subsidiaries, if appropriate. The remaining goodwill will be allocated to Central Maine Power, Connecticut Natural Gas, and Berkshire Gas Company and will be recorded as an acquisition adjustment.
Note 3. Earnings Per Share and Average Shares Outstanding.
The pro forma earnings per share and number of average shares outstanding for the 12 months ended December 31, 1999, have been restated to reflect Energy East's two-for-one common stock split, effective April 1, 1999, the number of shares, 9.4 million, that were issued to Connecticut Energy shareholders upon completion of that merger in February 2000 and the average number of shares that would have been outstanding if the CTG Resources merger occurred at the beginning of the period presented assuming a conversion of approximately 45% CTG Resources shares into 1.7320 Energy East shares per CTG Resources share.
The pro forma earnings per share and number of average shares outstanding for the six months ended June 30, 2000, have been restated to reflect the average number of shares that would have been outstanding if the CTG Resources merger occurred at the beginning of the period presented assuming a conversion of approximately 45% CTG Resources shares into 1.7320 Energy East shares per CTG Resources share.
The following table presents the range of shares that could be issued based on various potential conversion ratios under the CTG Resources merger agreement:
Conversion ratio |
1.36 |
1.57 |
1.73 |
Number of shares (thousands) |
5,296 |
6,107 |
7,000 |
Note 4. Cash Consideration.
This amount reflects the cash consideration paid to CMP Group's shareholders based on a purchase price per share of $29.50 for all of the CMP Group shares outstanding, the cash consideration paid to CTG Resources shareholders based on a purchase price per share of $41.00 for approximately 55% of the CTG Resources shares outstanding and the cash consideration paid to Berkshire Energy shareholders based on a purchase price per share of $38.00 for all of the Berkshire Energy Resources shares outstanding.
Note 5. Other Asset and Related Regulatory Liability.
This amount reflects the recognition of an other asset and related regulatory liability for the estimated difference between CMP Group's, CTG Resources' and Berkshire Energy Resources' net pension and other postretirement benefit obligations and the previously recognized asset or liability.
Note 6. Goodwill.
This amount reflects the recognition of an amount of goodwill that is equal to the combined excess of the estimated purchase price over the estimated net fair value of the assets and liabilities acquired, plus estimated transaction costs related to the mergers, as presented in the following table:
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Berkshire |
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Note 7. Merger-Related Costs.
Energy East, CMP Group, CTG Resources and Berkshire Energy Resources will incur direct expenses related to the merger, including financial advisory, legal and accounting fees. The pro forma adjustments include an estimate for Energy East's merger-related costs of $11 million for the CMP Group merger, $6.5 million for the CTG Resources merger, and $1 million for the Berkshire Energy Resources merger, which are included in goodwill. CMP Group, CTG Resources and Berkshire Energy Resources expect to incur approximately $7.5 million, $5.5 million and $2 million, of merger-related costs, respectively, which they will expense as incurred. The actual amount of merger-related costs may differ from the amounts reflected in the unaudited pro forma combined condensed financial statements.
Note 8. Income Taxes.
Income taxes on the pro forma combined condensed income statement have been based on the statutory rate and adjusted for goodwill, which is not tax deductible.
Note 9. Notes Payable.
This amount reflects the issuance of $500 million principal amount of notes payable with an assumed interest rate of 8%, the proceeds of which will be used to fund the consideration paid. A one-eighth of 1% change in the interest rate will increase or decrease interest expense $.6 million.
Note 10. Common Stock.
This amount reflects the Energy East shares to be issued to CTG Resources shareholders in exchange for approximately 45% of their CTG Resources shares, assuming a conversion ratio of 1.7320 Energy East shares per CTG Resources share, and the purchase of approximately 55% of their CTG Resources shares for cash.
Note 11. Amortization of Goodwill.
This amount represents the amortization of goodwill, for financial accounting purposes, over a 40-year period. The goodwill is not amortizable for tax purposes.
Note 12. Energy East Shares Issued.
This reflects the number of Energy East shares to be issued on the merger with CTG Resources assuming a conversion of approximately 45% of the CTG Resources shares into 1.7320 Energy East shares per CTG Resources share.
(c) Exhibits
1-1 |
Agreement and Plan of Merger between Energy East and CMP Group (filed as Appendix A to CMP Group's definitive Proxy Statement dated August 30, 1999, filed with the Securities and Exchange Commission on September 1, 1999, and incorporated herein by reference). |
Forward-looking Statements
This Form 8-K contains certain forward-looking statements that are based on management's current expectations and information that is currently available. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements in certain circumstances. Whenever used in this report, the words "estimate," "expect," "believe," "anticipate," or similar expressions are intended to identify such forward-looking statements.
In addition to the assumptions and other factors referred to specifically in connection with such statements, factors that could cause actual results to differ materially from those contemplated in any forward-looking statements include, among others, the deregulation and unbundling of energy services; the company's ability to compete in the rapidly changing and increasingly competitive electricity and natural gas utility markets; its ability to control non-utility generator and other costs; changes in fuel supply or cost and the success of its strategies to satisfy its power requirements now that all of its coal-fired generation assets have been sold; its ability to expand its products and services, including its energy infrastructure in the Northeast; its ability to integrate the operations of CNE, CMP Group, CTG Resources and Berkshire Energy with its operations; market risk; the ability to obtain adequate and timely rate relief; nuclear or environmental incidents; legal or administrative proceedings; changes in the cost or availability of capital; growth in the areas in which it is doing business; weather variations affecting customer energy usage; and other considerations that may be disclosed from time to time in its publicly disseminated documents and filings. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ENERGY EAST CORPORATION |
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By /s/ Kenneth M. Jasinski |
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Kenneth M. Jasinski |
Date: September 1, 2000
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