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Proc-Type: 2001,MIC-CLEAR
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SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission |
Exact name of Registrant as specified in its charter, |
IRS Employer |
1-14766 |
Energy East Corporation (A New York Corporation) P. O. Box 12904 Albany, New York 12212-2904 (518) 434-3049 |
14-1798693 |
1-5139 |
Central Maine Power Company (A Maine Corporation) 83 Edison Drive Augusta, Maine 04336 (207) 623-3521 |
01-0042740 |
1-3103-2 |
New York State Electric & Gas Corporation (A New York Corporation) P. O. Box 3287 Ithaca, New York 14852-3287 (607) 347-4131 |
15-0398550 |
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
As of July 31, 2001, shares of common stock outstanding for each registrant were:
Registrant |
Description |
Shares |
Energy East Corporation |
Par value $.01 per share |
116,349,598 |
Central Maine Power Company |
Par value $5 per share |
31,211,471 (1) |
New York State Electric & Gas Corporation |
Par value $6.66 2/3 per share |
64,508,477 (2) |
(1)
All shares are owned by CMP Group, Inc., a wholly-owned subsidiary of Energy East Corporation.This combined Form 10-Q is separately filed by Energy East Corporation, Central Maine Power Company and New York State Electric & Gas Corporation. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
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TABLE OF CONTENTS |
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PART I - FINANCIAL INFORMATION |
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1 |
Financial Statements |
|
Energy East Corporation Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Retained Earnings Consolidated Statements of Comprehensive Income Management's Discussion and Analysis of Financial Condition and Results of Operations (a) Liquidity and Capital Resources (b) Results of Operations |
|
|
Central Maine Power Company Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Retained Earnings Consolidated Statements of Comprehensive Income Management's Discussion and Analysis of Financial Condition and Results of Operations (a) Liquidity and Capital Resources (b) Results of Operations |
|
|
New York State Electric & Gas Corporation Statements of Income Balance Sheets Statements of Cash Flows Statements of Retained Earnings Statements of Comprehensive Income Management's Discussion and Analysis of Financial Condition and Results of Operations (a) Liquidity and Capital Resources (b) Results of Operations |
|
|
Notes to Financial Statements |
31 |
|
3 |
Quantitative and Qualitative Disclosures About Market Risk |
35 |
|
||
4 |
Submission of Matters to a Vote of Security Holders Central Maine Power Company New York State Electric & Gas Corporation |
|
6 |
Exhibits and Reports on Form 8-K (a) Exhibits (b) Reports on Form 8-K |
|
Signatures |
37 |
|
Exhibit Index |
38 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Energy East Corporation
Consolidated Statements of Income - (Unaudited)
Three Months |
Six Months |
|||
Periods Ended June 30 |
2001 |
2000 |
2001 |
2000 |
(Thousands, except per share amounts) |
||||
Operating Revenues |
||||
Sales and services |
$849,010 |
$571,919 |
$2,120,148 |
$1,256,345 |
Operating Expenses |
||||
Electricity purchased and fuel |
|
|
|
|
Natural gas purchased |
144,688 |
67,271 |
514,159 |
180,900 |
Other operating expenses |
145,050 |
83,430 |
285,788 |
163,239 |
Maintenance |
32,441 |
26,343 |
68,454 |
47,321 |
Depreciation and amortization |
51,173 |
34,631 |
102,513 |
67,570 |
Other taxes |
46,028 |
39,434 |
104,448 |
80,743 |
Total Operating Expenses |
758,849 |
473,803 |
1,767,459 |
988,902 |
Operating Income |
90,161 |
98,116 |
352,689 |
267,443 |
Other (Income) and Deductions |
(10,322) |
(7,559) |
(9,076) |
(15,155) |
Interest Charges, Net |
56,629 |
29,164 |
112,254 |
57,576 |
Preferred Stock Dividends of Subsidiaries |
477 |
99 |
955 |
198 |
Income Before Income Taxes |
43,377 |
76,412 |
248,556 |
224,824 |
Income Taxes |
16,803 |
19,941 |
106,381 |
75,026 |
Net Income |
$26,574 |
$56,471 |
$142,175 |
$149,798 |
Earnings Per Share, basic and diluted |
$.23 |
$.50 |
$1.22 |
$1.32 |
Dividends Paid Per Share |
$.23 |
$.22 |
$.46 |
$.44 |
Average Common Shares Outstanding |
116,399 |
113,397 |
116,890 |
113,087 |
Item 1.
Financial Statements (Cont'd)Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
June 30, |
Dec. 31, |
|
Assets |
(Thousands) |
|
Current Assets |
||
Cash and cash equivalents |
$159,051 |
$143,626 |
Special deposits |
656 |
21,516 |
Accounts receivable, net |
563,575 |
536,280 |
Fuel, at average cost |
67,434 |
65,496 |
Materials and supplies, at average cost |
22,237 |
22,759 |
Accumulated deferred income tax benefits, net |
3,970 |
5,007 |
Prepayments |
34,066 |
57,720 |
Total Current Assets |
850,989 |
852,404 |
Utility Plant, at Original Cost |
||
Electric |
4,694,849 |
4,784,312 |
Natural gas |
1,693,888 |
1,665,386 |
Common |
212,955 |
220,124 |
6,601,692 |
6,669,822 |
|
Less accumulated depreciation |
3,042,699 |
3,096,283 |
Net Utility Plant in Service |
3,558,993 |
3,573,539 |
Construction work in progress |
43,936 |
59,389 |
Total Utility Plant |
3,602,929 |
3,632,928 |
Other Property and Investments, Net |
287,766 |
259,708 |
Regulatory and Other Assets |
||
Regulatory assets |
||
Nuclear plant obligations |
229,148 |
234,929 |
Unfunded future income taxes |
192,280 |
184,570 |
Unamortized loss on debt reacquisitions |
56,083 |
58,848 |
Demand-side management program costs |
33,533 |
48,929 |
Environmental remediation costs |
75,964 |
78,406 |
Other |
251,397 |
241,396 |
Total regulatory assets |
838,405 |
847,078 |
Other assets |
||
Goodwill, net |
935,803 |
952,358 |
Prepaid pension benefits |
391,583 |
350,038 |
Other |
121,643 |
119,214 |
Total other assets |
1,449,029 |
1,421,610 |
Total Regulatory and Other Assets |
2,287,434 |
2,268,688 |
Total Assets |
$7,029,118 |
$7,013,728 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
June 30, |
Dec. 31, |
|
Liabilities |
(Thousands) |
|
Current Liabilities |
||
Current portion of long-term debt |
$84,015 |
$25,285 |
Notes payable |
359,777 |
418,995 |
Accounts payable and accrued liabilities |
240,602 |
345,424 |
Interest accrued |
35,917 |
35,309 |
Taxes accrued |
17,064 |
- |
Other |
129,283 |
211,784 |
Total Current Liabilities |
866,658 |
1,036,797 |
Regulatory and Other Liabilities |
||
Regulatory liabilities |
||
Deferred income taxes |
112,078 |
91,421 |
Deferred income taxes, unfunded future income taxes |
78,443 |
75,473 |
Gain on sale of generation assets |
215,992 |
232,041 |
Pension benefits |
93,766 |
96,514 |
Other |
74,778 |
76,813 |
Total regulatory liabilities |
575,057 |
572,262 |
Other liabilities |
||
Deferred income taxes |
435,848 |
457,495 |
Nuclear plant obligations |
229,148 |
234,929 |
Other postretirement benefits |
287,530 |
279,864 |
Environmental remediation costs |
90,497 |
91,811 |
Other |
270,579 |
233,910 |
Total other liabilities |
1,313,602 |
1,298,009 |
Total Regulatory and Other Liabilities |
1,888,659 |
1,870,271 |
Long-term debt |
2,470,193 |
2,346,814 |
Total Liabilities |
5,225,510 |
5,253,882 |
Commitments |
- |
- |
Preferred Stock of Subsidiaries Preferred stock redeemable solely at the option of subsidiaries |
|
|
Common Stock Equity Common stock |
|
|
Capital in excess of par value |
846,974 |
871,078 |
Retained earnings |
1,006,411 |
918,016 |
Accumulated other comprehensive income |
(55,339) |
(34,823) |
Treasury stock, at cost |
(38,940) |
(38,940) |
Total Common Stock Equity |
1,760,284 |
1,716,522 |
Total Liabilities and Stockholders' Equity |
$7,029,118 |
$7,013,728 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)Energy East Corporation
Consolidated Statements of Cash Flows - (Unaudited)
Six Months Ended June 30 |
2001 |
2000 |
Operating Activities |
(Thousands) |
|
Net income |
$142,175 |
$149,798 |
Adjustments to reconcile net income to net cash |
||
Depreciation and amortization |
102,513 |
67,570 |
Income taxes and investment tax |
|
|
Pension income |
(34,915) |
(32,047) |
Changes in current operating assets and liabilities |
||
Accounts receivable |
124,705 |
37,582 |
Inventory |
(1,416) |
(5,181) |
Prepayments |
23,654 |
3,467 |
Accounts payable and accrued liabilities |
(104,822) |
(27,296) |
Taxes accrued |
17,064 |
39,978 |
Other current liabilities |
(82,501) |
7,375 |
Other, net |
6,038 |
(30,822) |
Net Cash Provided by Operating Activities |
197,094 |
195,340 |
Investing Activities |
||
Acquisition, net of cash acquired |
- |
(212,025) |
Utility plant additions |
(76,101) |
(51,813) |
Temporary investments, net |
- |
301,618 |
Other property and investments |
(15,836) |
(4,321) |
Other |
17,527 |
247 |
Net Cash (Used in) Provided by Investing Activities |
(74,410) |
33,706 |
Financing Activities |
||
Repurchase of common stock |
(24,117) |
(136,061) |
Repayments of first mortgage bonds and preferred |
|
|
Long-term note issuances |
35,000 |
3,710 |
Long-term note retirements |
(4,179) |
(785) |
Notes payable, net |
(59,218) |
(41,914) |
Dividends on common stock |
(53,780) |
(49,057) |
Net Cash Used in Financing Activities |
(107,259) |
(320,403) |
Net Increase (Decrease) in Cash and Cash Equivalents |
15,425 |
(91,357) |
Cash and Cash Equivalents, Beginning of Period |
143,626 |
116,806 |
Cash and Cash Equivalents, End of Period |
$159,051 |
$25,449 |
Supplemental Disclosure of Cash Flows Information |
||
Cash paid during the period: |
|
$57,491 |
Acquisition: |
|
|
Net cash paid for acquisition |
- |
$212,025 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)Energy East Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
Six Months Ended June 30 |
2001 |
2000 |
(Thousands) |
||
Balance, Beginning of Period |
$918,016 |
$782,588 |
Add net income |
142,175 |
149,798 |
Deduct dividends on common stock |
53,780 |
49,057 |
Balance, End of Period |
$1,006,411 |
$883,329 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Energy East Corporation
Consolidated Statements of Comprehensive Income - (Unaudited)
Three Months |
Six Months |
|||
Periods Ended June 30 |
2001 |
2000 |
2001 |
2000 |
(Thousands) |
||||
Net income |
$26,574 |
$56,471 |
$142,175 |
$149,798 |
Other comprehensive income (loss), net of tax |
||||
Foreign currency translation adjustment |
86 |
12 |
86 |
1 |
Net unrealized gain on investments |
5,798 |
794 |
1,208 |
2,319 |
Minimum pension liability adjustment |
50 |
- |
50 |
(1,351) |
Unrealized gains (losses) on derivatives |
||||
Unrealized gains on derivatives qualified |
|
|
|
|
Unrealized losses on derivatives qualified |
|
|
|
|
Reclassification adjustment for gains |
|
|
|
|
Net unrealized losses on derivatives qualified |
|
|
|
|
Total other comprehensive income (loss) |
(48,732) |
806 |
(20,516) |
969 |
Comprehensive income (loss) |
$(22,158) |
$57,277 |
$121,659 |
$150,767 |
Item 2.
Management's Discussion and Analysis of Financial ConditionEnergy East Corporation
(a) Liquidity and Capital Resources
RGS Energy Merger Agreement
In February 2001 Energy East Corporation (Energy East or the company) announced that it had entered into a merger agreement with RGS Energy Group, Inc. under which all of the outstanding common stock of RGS Energy would be exchanged for a combination of cash and Energy East common stock valued at approximately $1.4 billion in the aggregate. The company will also assume approximately $1.0 billion of RGS Energy debt. RGS Energy will become a wholly-owned subsidiary of the company and the transaction will be accounted for under the purchase method of accounting.
Under the merger agreement 45% of the RGS Energy common stock will be exchanged for Energy East common stock with a value of $39.50 per RGS Energy share, subject to restrictions on the minimum and maximum number of shares to be issued, and 55% of the RGS Energy common stock will be converted into $39.50 in cash per RGS Energy share. RGS Energy shareholders will be able to elect the form of consideration they wish to receive, subject to proration. The company intends to finance the cash portion of the transaction primarily through the issuance of long-term debt and trust preferred securities. (See Item 2 - Financing Activities.)
The merger is subject to, among other things, the approvals of various regulatory agencies, including the New York State Public Service Commission (NYPSC), Federal Energy Regulatory Commission (FERC), Nuclear Regulatory Commission (NRC) and Securities and Exchange Commission (SEC). The company has made filings with the NYPSC, FERC and SEC. All regulatory approvals are expected to be obtained by the first quarter of 2002. RGS Energy and Energy East each held their annual meeting on June 15, 2001: RGS Energy's shareholders approved the merger and Energy East's shareholders approved the issuance of Energy East shares in connection with the merger.
Electric Delivery Business
(See the company's Form 10-K for the fiscal year ended December 31, 2000, Item 7 - Liquidity and Capital Resources , Electric Delivery Business and the company's Form 10-Q for the quarter ended March 31, 2001, Item 2(a) Liquidity and Capital Resources - Electric Delivery Business.)
Sale of Nine Mile Point 2: New York State Electric & Gas Corporation (NYSEG) owns an 18% interest in the Nine Mile Point 2 nuclear generating station (NMP2). In December 2000 Constellation Nuclear was announced as the successful bidder in the sale of 82% of the interest in NMP2, including NYSEG's 18% share. NYSEG will receive $64 million at closing and five annual principal and interest payments totaling $85 million for its share of NMP2. The NRC, FERC, NYPSC and other regulatory bodies must approve the sale on terms acceptable to the sellers. Settlement discussions with the NYPSC and other parties are ongoing. The transaction is expected to close later this year.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
NYSEG's Price Protection Plan: On August 3, 2001, NYSEG revised the Price Protection Plan it previously filed with the NYPSC on March 14, 2001. The more significant modifications to the Price Protection Plan include:
NYSEG has requested approval of the modified Price Protection Plan by September 30, 2001.
Retail Access Credit: In May 2000 the NYPSC instituted proceedings to review NYSEG's retail access credit (the amount backed out of a customer's bill when that customer participates in retail access). In September 2000 the NYPSC issued an order denying a petition NYSEG had filed in August 2000 related to issues concerning its retail access credit. In January 2001 the NYPSC issued an order directing NYSEG to adopt a market-based retail access credit, effective February 1, 2001. As a result of this order, NYSEG will be exposed to fluctuations in the spot price of electricity for customers who have chosen retail access.
On April 26, 2001, the NYPSC issued an order denying NYSEG's request to recover costs and lost revenues associated with the implementation of the market-based retail access credit. On May 24, 2001, NYSEG filed a petition for rehearing with the NYPSC. On May 25, 2001, NYSEG began an action in the New York State Supreme Court (Albany County) for review of the NYPSC order.
Central Maine Power Alternative Rate Plan: In September 2000 the Maine Public Utilities Commission (MPUC) approved Central Maine Power Company's (CMP) Alternative Rate Plan (ARP 2000). On December 18, 2000, an appeal was filed in the Maine Supreme Judicial Court by the Industrial Energy Consumer Group arguing that the MPUC order in CMP's ARP 2000, in certain respects, was unlawful. On July 18, 2001, the Court issued a decision affirming the MPUC's ARP 2000 order.
Independent System Operators: The New York Independent System Operator (NYISO) has operational control over certain transmission facilities of each of the New York transmission-owning utilities, including NYSEG. The NYISO administers centralized capacity, energy, transmission and ancillary service markets, including operating reserves markets in New York.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
In early 2000 the NYISO's operating reserves markets experienced problems that resulted in substantial charges to all customers required to buy operating reserves, including NYSEG. Several parties, including NYSEG, commenced FERC and court proceedings in response to these problems. In May 2000 the FERC ordered a bid cap for a portion of the operating reserves markets until the market problems are corrected and the NYISO demonstrates that all reserves markets are competitive, but did not order refunds of earlier higher operating reserves prices as sought by NYSEG.
In response to complaints and other filings by NYSEG and other parties that raised concerns over energy market flaws, FERC approved in July 2000 a bid cap on energy of $1,000 per megawatt-hour in the NYISO's energy markets. FERC subsequently extended the bid cap until October 31, 2001. The bid cap may limit the price NYSEG pays or receives for energy it buys or sells in the NYISO energy markets.
In the second quarter of 2001 the NYISO filed with FERC an Automated Mitigation Procedure (AMP). The AMP is designed to mitigate certain unusually high bids so that market prices are not driven by bids that appear to be influenced by the exercise of market power. FERC approved the implementation of the AMP through October 31, 2001.
On July 12, 2001, FERC issued an order requiring the NYISO to negotiate with neighboring independent system operators and trading partners to form a single Northeastern Regional Transmission Organization (RTO). The NYISO and other parties involved in negotiating the formation of the RTO have been ordered to participate in settlement discussions for 45 days. NYSEG had previously advocated the formation of a Northeast/Mid-Atlantic RTO because it believes that a regional operator of the power transmission grid and wholesale power market is essential to ensure market liquidity and an orderly transition to a competitive market.
Energy Taxes: New York State legislation in 2000 included major changes to the taxation of electric and natural gas companies. Those changes included, among others, the repeal of certain gross receipts taxes and the imposition of a net income tax. On June 28, 2001, the NYPSC issued an order concerning the ratemaking treatment related to the implementation of those tax changes. The order placed certain limits on the recovery of state income taxes but authorized NYSEG to petition for recovery of such taxes. NYSEG filed a petition dated July 26, 2001, for recovery of all costs associated with the tax law changes consistent with its approved electric rate and restructuring agreement.
Electricity Transmission Rates: On July 2, 2001, CMP filed with FERC to increase its local transmission rates, beginning June 1, 2001, to recover increased costs associated with transmission during periods of high demand and other costs.
Transmission Planning and Expansion: On June 13, 2001, FERC issued an order that addressed a number of transmission planning and expansion issues that would directly affect CMP as a New England transmission owner. The FERC order discussed giving exclusive responsibility for the transmission planning process to the ISO New England, Inc., rather than the transmission owner. It also discussed redefining the cost-sharing responsibilities of independent power producers for transmission expansion costs.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
Natural Gas Delivery Business
(See the company's Form 10-K for the fiscal year ended December 31, 2000, Item 7 - Liquidity and Capital Resources , Natural Gas Delivery Business and the company's Form 10-Q for the quarter ended March 31, 2001, Item 2(a) Liquidity and Capital Resources - Natural Gas Delivery Business.)
Natural Gas Supply Alliance: Energy East's four natural gas companies: NYSEG, The Southern Connecticut Gas Company (SCG), Connecticut Natural Gas Corporation (CNG) and The Berkshire Gas Company (Berkshire Gas), entered into a one-year strategic alliance agreement with BP Energy Company effective March 30, 2001, for the acquisition, optimization and management of natural gas supply, including price risk management. The alliance is expected to provide the companies with greater supply flexibility and enhance the benefits of a larger natural gas portfolio as a result of Energy East's mergers that were completed in 2000. The alliance is based on sharing incremental savings. The companies still own and control their natural gas assets and work with BP Energy to obtain the lowest cost supply while maintaining reliability of service. The Energy East natural gas companies have received the required regulatory approvals concerning the alliance.
Southern Connecticut Gas Incentive Rate Plan: In January 2001 the Office of Consumer Counsel (OCC) filed an appeal in State Superior Court arguing that the Connecticut Department of Public Utility Control's (DPUC) order in December 2000 approving the SCG multi-year incentive rate plan (IRP) was unlawful. On March 30, 2001, the OCC filed a Motion to Stay the implementation of the DPUC's order, but the Court denied the motion on June 18, 2001. The outcome of the appeal cannot be predicted, but the company believes it is without merit.
The DPUC initiated settlement discussions in July 2001 with the company and other parties concerning certain open proceedings including the method and timing of recovery, through SCG's purchased gas adjustment clause, of gas costs that have been deferred. SCG cannot predict whether or not a settlement proposal will be reached as a result of the discussions.
Connecticut Natural Gas Incentive Rate Plan: In May 2001 the DPUC issued a decision for CNG's IRP, approving a four-year term and replacing the proposed sharing in returns on equity with a graduated sharing in returns on equity in excess of 10.8%. The excess over 10.8% would be shared among shareholders and customers as follows: first 2% 75/25, next 4% 50/50 and over 6% 25/75. Performance and service measures were also adopted. After-tax merger-related natural gas cost savings are to be shared 50/50. On June 20, 2001, the OCC filed an appeal in Superior Court, arguing that the IRP approved by the DPUC for CNG was unlawful. The outcome of the appeal cannot be predicted, but the company believes it is without merit.
Berkshire Gas Rate Increase: On July 17, 2001, Berkshire Gas filed a petition with the Massachusetts Department of Telecommunications and Energy (DTE) for a rate increase that would add about $5 million, or 9%, to Berkshire Gas' total annual revenues. The DTE established February 1, 2002, as the effective date of any rate adjustments. The filing proposes a 10-year incentive-based rate plan with a mid-period review after five years. After the initial rate increase rates would be frozen until September 2004, except for potential limited adjustments
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
for certain uncontrollable costs, and service quality measurements would be established. The filing also proposes a rate design based on annual rather than seasonal rates for residential and small commercial and industrial customers.
Other Businesses
Cayuga Energy Generating Plant: On May 29, 2001, Cayuga Energy, a wholly-owned subsidiary of the company, and PEI Power Corporation announced that their newly-constructed peaking-power plant in Archbald, Pennsylvania is in service and selling electricity to the mid-Atlantic market. In July 2000 the two companies announced the formation of a joint venture company, PEI Power II, L.L.C., to build and operate the 45-megawatt natural gas-fired plant. Cayuga Energy owns 50.1% of the plant and manages fuel procurement and electricity sales. PEI Power Corporation owns the remaining 49.9% and is responsible for the plant's daily operation.
Other Matters
Accounting Issues: The Financial Accounting Standards Board (FASB), in July 2001, issued Statement of Financial Accounting Standards No. 141, Business Combinations (Statement 141) and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (Statement 142).
Statement 141 requires that all business combinations be accounted for using the purchase method of accounting. Use of the pooling-of-interests method of accounting for business combinations is prohibited. Statement 141 also addresses the initial recognition and measurement of goodwill and other intangible assets. The provisions of Statement 141 will apply to all business combinations that are initiated after June 30, 2001, and to all business combinations accounted for by the purchase method of accounting that are completed after June 30, 2001. Transition provisions that apply to business combinations completed before July 1, 2001, that were accounted for by the purchase method of accounting, may require companies to reclassify certain intangible assets and/or goodwill. The company is evaluating the effect that the adoption of Statement 141 is expected to have on its financial position and results of operations, including the need to reclassify certain intangible assets and/or goodwill.
Statement 142 requires that goodwill no longer be amortized, but instead be tested for impairment at least annually and an impairment loss recognized as appropriate. It also requires that recognized intangible assets be amortized over their useful lives and be reviewed for impairment, and that a recognized intangible asset with an indefinite life not be amortized until its life is determined to be no longer indefinite. A recognized intangible asset that is not amortized is to be tested for impairment annually and on an interim basis if there are indications that the asset might be impaired, and an impairment loss recognized as appropriate. The provisions of Statement 142 are to become effective in fiscal years beginning after December 15, 2001. The company will adopt Statement 142 as of January 1, 2002. The company is evaluating the effects that the adoption of Statement 142 is expected to have on its financial position and results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
Investing and Financing Activities
Investing Activities: Capital spending for the first six months of 2001 was $91 million, including nuclear fuel. For 2001 capital spending is projected to be $226 million, including nuclear fuel, and is expected to be paid for with internally generated funds. Capital spending will be primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Financing Activities: During the six months ended June 30, 2001, the company repurchased 1.3 million shares of its common stock at an average price of $18.45 per share.
The company has renewed its revolving credit agreement with certain banks that provides for borrowing up to $300 million for a 364-day period, which the company expects to continue to renew annually.
On May 31, 2001, the company filed a shelf registration statement with the SEC to sell up to $1 billion in an unspecified combination of debt and trust preferred securities. The company plans to use the net proceeds to fund the cash portion of the consideration for the pending merger with RGS Energy. (See Item 2 - RGS Energy Merger Agreement.) The company may also use a portion of the proceeds for general corporate purposes such as debt reduction, new facilities, working capital and repurchases of securities. In July 2001 a business trust subsidiary issued $345 million of 81/4% trust preferred securities. The proceeds were used to purchase Energy East's 81/4% junior subordinated debt securities. Payments on such debt securities will be used by the trust to pay dividends on the trust preferred securities.
CMP issued the following Series E Medium Term Notes (MTN), the proceeds of which were used to redeem debt and for general corporate purposes:
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
(b) Results of Operations
Due to the mergers completed in 2000 - Connecticut Energy Corporation (CNE) in February 2000 and CMP Group, Inc, CTG Resources, Inc. and Berkshire Energy Resources in September 2000 - the company's results of operations for the quarter and six months ended June 30, 2001, include those merged companies. Results of operations for the quarter ended June 30, 2000, include CNE and for the six months ended June 30, 2000, include CNE beginning with February 2000.
Three months ended June 30 (Thousands, except per share amounts) |
2001 |
2000 |
Change |
Operating Revenues |
$849,010 |
$571,919 |
48% |
Operating Income |
$90,161 |
$98,116 |
(8%) |
Net Income |
$26,574 |
$56,471 |
(53%) |
Average Common Shares Outstanding |
116,399 |
113,397 |
3% |
Earnings Per Share, basic and diluted |
$.23 |
$.50 |
(54%) |
Dividends Paid Per Share |
$.23 |
$.22 |
5% |
Earnings per share decreased 20 cents for the quarter, excluding a non-recurring benefit in 2000 from the sale of the company's coal-fired generation assets. The decrease is primarily due to the seasonal nature of the earnings from the merged companies and lower electric transmission revenues as compared to last year's abnormally high levels.
Six months ended June 30 (Thousands, except per share amounts) |
2001 |
2000 |
Change |
Operating Revenues |
$2,120,148 |
$1,256,345 |
69% |
Operating Income |
$352,689 |
$267,443 |
32% |
Net Income |
$142,175 |
$149,798 |
(5%) |
Average Common Shares Outstanding |
116,890 |
113,087 |
3% |
Earnings Per Share, basic and diluted |
$1.22 |
$1.32 |
(8%) |
Dividends Paid Per Share |
$.46 |
$.44 |
5% |
Earnings per share for the six months decreased three cents, excluding a non-recurring benefit in 2000 from the sale of the company's coal-fired generation assets. The decrease is primarily due to higher prices of natural gas purchased, lower electric transmission revenues as compared to last year's abnormally high levels and a federal income tax audit adjustment that benefited earnings in 2000. Those decreases were partially offset by earnings from the merged companies, higher retail electricity deliveries because of colder winter weather this year and the share repurchase program. Earnings for the remainder of 2001, as compared to last year, are expected to be weaker in the third quarter due to the seasonal nature of the merged companies' businesses and stronger in the fourth quarter due to the realization of merger synergies and lower earnings last year for NYSEG.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
Operating Results for the Electric Delivery Business
Three months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Megawatt-hours |
5,501 |
3,261 |
69% |
Operating Revenues |
$592,781 |
$432,624 |
37% |
Operating Expenses |
$492,260 |
$328,685 |
50% |
Operating Income |
$100,521 |
$103,939 |
(3%) |
The $160 million increase in operating revenues is primarily due to the addition of CMP's delivery revenues and higher retail deliveries due to warmer weather this quarter. Those increases were partially offset by lower wholesale deliveries and lower transmission revenues.
Operating expenses increased $164 million primarily due to the addition of CMP's purchases for retail deliveries and its operating costs. That increase was partially offset by lower purchased power costs, primarily due to lower wholesale deliveries, and cost control efforts.
Six months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Megawatt-hours |
11,705 |
6,822 |
72% |
Operating Revenues |
$1,280,787 |
$870,635 |
47% |
Operating Expenses |
$991,128 |
$659,835 |
50% |
Operating Income |
$289,659 |
$210,800 |
37% |
The $410 million increase in operating revenues is primarily due to the addition of CMP's delivery revenues and higher retail deliveries because of colder weather in the first quarter this year. Those increases were partially offset by lower wholesale deliveries and lower transmission revenues.
Operating expenses increased $331 million primarily due to the addition of CMP's operating costs. That increase was partially offset by lower purchased power costs, primarily due to lower wholesale deliveries, and cost control efforts.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Energy East Corporation
Operating Results for the Natural Gas Delivery Business
Three months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Dekatherms |
26,442 |
18,081 |
46% |
Operating Revenues |
$181,610 |
$105,041 |
73% |
Operating Expenses |
$184,875 |
$106,983 |
73% |
Operating Loss |
$(3,265) |
$(1,942) |
68% |
The $77 million increase in operating revenues is primarily due to the addition of delivery revenues from CNG and Berkshire Gas and the recovery of increased natural gas costs caused by higher market prices. Those increases were partially offset by lower wholesale sales and lower retail deliveries.
Operating expenses increased $78 million primarily due to operating costs associated with CNG and Berkshire Gas, and an increase in retail purchased gas costs caused by higher market prices.
Six months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Dekatherms |
81,938 |
52,574 |
56% |
Operating Revenues |
$694,823 |
$316,344 |
120% |
Operating Expenses |
$615,735 |
$253,892 |
143% |
Operating Income |
$79,088 |
$62,452 |
27% |
The $378 million increase in operating revenues is primarily due to the addition of delivery revenues from CNG, SCG and Berkshire Gas and the recovery of increased natural gas costs caused by higher market prices.
Operating expenses increased $362 million primarily due to operating costs associated with CNG, SCG and Berkshire Gas, and an increase in retail purchased gas costs caused by higher market prices.
Item 1. Financial Statements
(CMP is a wholly-owned subsidiary of CMP Group, Inc. Effective September 1, 2000, CMP Group became a wholly-owned subsidiary of Energy East Corporation.)
Central Maine Power Company
Consolidated Statements of Income - (Unaudited)
Three Months |
Six Months |
|||
|
|
Predecessor |
|
Predecessor |
(Thousands, except per share amounts) |
||||
Operating Revenues |
||||
Sales and services |
$192,472 |
$192,558 |
$422,632 |
$458,354 |
Operating Expenses |
||||
Electricity purchased and fuel |
|
|
|
|
Other operating expenses |
43,361 |
59,767 |
85,539 |
106,522 |
Maintenance |
9,233 |
11,674 |
20,748 |
18,150 |
Depreciation and amortization |
9,095 |
8,095 |
18,240 |
18,493 |
Other taxes |
4,912 |
5,010 |
9,978 |
9,909 |
Total Operating Expenses |
181,959 |
202,349 |
368,165 |
409,961 |
Operating Income |
10,513 |
(9,791) |
54,467 |
48,393 |
Other (Income) and Deductions |
(1,804) |
(3,867) |
(2,083) |
(10,652) |
Interest Charges, Net |
6,565 |
4,409 |
13,065 |
26,961 |
Recovery of Non-Provided Deferred |
|
|
|
|
Income (Loss) Before Income Taxes |
5,752 |
(11,114) |
43,485 |
106,724 |
Income Taxes |
1,977 |
(5,571) |
17,465 |
78,499 |
Net Income |
3,775 |
(5,543) |
26,020 |
28,225 |
Preferred Stock Dividends |
361 |
559 |
721 |
1,118 |
Earnings Available for Common Stock |
$3,414 |
$(6,102) |
$25,299 |
$27,107 |
Item 1.
Financial Statements (Cont'd)Central Maine Power Company
Consolidated Balance Sheets - (Unaudited)
June 30, |
Dec. 31, |
|
Assets |
(Thousands) |
|
Current Assets |
||
Cash and cash equivalents |
$11,720 |
$17,933 |
Accounts receivable, net |
117,410 |
135,707 |
Materials and supplies, at average cost |
9,348 |
9,052 |
Accumulated deferred income tax benefits, net |
1,404 |
4,533 |
Prepayments |
7,844 |
9,574 |
Other |
34 |
38 |
Total Current Assets |
147,760 |
176,837 |
Utility Plant, at Original Cost |
||
Electric |
1,298,317 |
1,392,693 |
Less accumulated depreciation |
477,658 |
571,275 |
Net Utility Plant in Service |
820,659 |
821,418 |
Construction work in progress |
16,135 |
16,682 |
Total Utility Plant |
836,794 |
838,100 |
Other Property |
6,557 |
6,526 |
Investment in Associated Companies, at Equity |
33,766 |
33,952 |
Regulatory and Other Assets |
||
Regulatory assets |
||
Nuclear plant obligations |
229,148 |
234,929 |
Unfunded future income taxes |
84,230 |
80,999 |
Unamortized loss on debt reacquisitions |
11,208 |
12,057 |
Demand-side management program costs |
17,308 |
20,563 |
Environmental remediation costs |
7,058 |
8,217 |
Other |
133,510 |
118,480 |
Total regulatory assets |
482,462 |
475,245 |
Other assets |
||
Goodwill, net |
338,243 |
342,306 |
Prepaid pension benefits |
29,670 |
32,070 |
Other |
16,700 |
23,761 |
Total other assets |
384,613 |
398,137 |
Total Regulatory and Other Assets |
867,075 |
873,382 |
Total Assets |
$1,891,952 |
$1,928,797 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)Central Maine Power Company
Consolidated Balance Sheets - (Unaudited)
June 30, |
Dec. 31, |
|
Liabilities |
(Thousands) |
|
Current Liabilities |
||
Current portion of long-term debt |
$72,218 |
$12,946 |
Notes payable |
24,000 |
46,500 |
Accounts payable and accrued liabilities |
75,200 |
77,075 |
Interest accrued |
4,810 |
5,084 |
Other |
41,941 |
57,423 |
Total Current Liabilities |
218,169 |
199,028 |
Regulatory and Other Liabilities |
||
Deferred income taxes |
40,335 |
28,812 |
Deferred income taxes, unfunded future income taxes |
34,370 |
33,051 |
Gain on sale of generation assets |
215,993 |
232,041 |
Pension benefits |
45,824 |
47,632 |
Other |
29,091 |
37,796 |
Total regulatory liabilities |
365,613 |
379,332 |
Other liabilities |
||
Deferred income taxes |
15,369 |
20,065 |
Nuclear plant obligations |
229,148 |
234,929 |
Other postretirement benefits |
69,822 |
69,808 |
Environmental remediation costs |
3,946 |
4,147 |
Other |
112,992 |
99,710 |
Total other liabilities |
431,277 |
428,659 |
Total Regulatory and Other Liabilities |
796,890 |
807,991 |
Long-term debt |
196,588 |
222,309 |
Total Liabilities |
1,211,647 |
1,229,328 |
Commitments |
- |
- |
Preferred Stock Preferred stock |
|
|
Capital in excess of par value |
(3,410) |
(3,503) |
Common Stock Equity Common stock |
|
|
Capital in excess of par value |
501,142 |
500,897 |
Retained earnings |
3,605 |
23,291 |
Accumulated other comprehensive income |
184 |
- |
Treasury stock, at cost |
(19,000) |
(19,000) |
Total Common Stock Equity |
648,144 |
667,401 |
Total Liabilities and Stockholder's Equity |
$1,891,952 |
$1,928,797 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)Central Maine Power Company
Consolidated Statements of Cash Flows - (Unaudited)
|
|
Predecessor |
(Thousands) |
||
Operating Activities |
||
Net income |
$26,020 |
$28,225 |
Adjustments to reconcile net income to net |
||
Depreciation and amortization |
18,240 |
18,493 |
Income taxes and investment tax credits deferred, net |
8,677 |
(11,895) |
Power supply costs recovered with asset sale |
- |
(9,612) |
Changes in current operating assets and liabilities |
||
Accounts receivable |
18,297 |
37,903 |
Inventory |
(296) |
121 |
Prepayments |
1,689 |
(7,573) |
Accounts payable and accrued liabilities |
(1,875) |
(30,463) |
Other current liabilities |
(12,882) |
15,816 |
Changes in deferred balances and related carrying costs |
(754) |
8,351 |
Other, net |
(5,900) |
16,527 |
Net Cash Provided by Operating Activities |
51,216 |
65,893 |
Investing Activities |
||
Utility plant additions |
(22,692) |
(36,848) |
Contributions in aid of construction, net |
- |
22,737 |
Other property and investments, net |
(54) |
848 |
Net Cash Used in Investing Activities |
(22,746) |
(13,263) |
Financing Activities |
||
Long-term note issuances |
35,000 |
75,000 |
Long-term note retirements |
(1,477) |
(61,467) |
Notes payable, net |
(22,500) |
- |
Dividends on common and preferred stock |
(45,706) |
(23,707) |
Net Cash Used in Financing Activities |
(34,683) |
(10,174) |
Net Increase in Cash and Cash Equivalents |
(6,213) |
42,456 |
Cash and Cash Equivalents, Beginning of Period |
17,933 |
112,873 |
Cash and Cash Equivalents, End of Period |
$11,720 |
$155,329 |
Supplemental Disclosure of Cash Flows Information |
||
Cash paid during the period: |
||
Interest, net of amounts capitalized |
$11,700 |
$8,517 |
Income taxes |
$10,697 |
$24,824 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)Central Maine Power Company
Consolidated Statements of Retained Earnings - (Unaudited)
|
|
Predecessor |
(Thousands) |
||
Balance, beginning of period |
$23,291 |
$100,754 |
Add net income |
26,020 |
28,225 |
49,311 |
128,979 |
|
Deduct dividends on capital stock |
||
Preferred |
721 |
1,225 |
Common |
44,985 |
22,482 |
Amortization of reacquired capital stock |
- |
17 |
45,706 |
23,724 |
|
|
|
|
The notes on pages 31 through 34 are an integral part of the financial statements.
Central Maine Power Company
Consolidated Statements of Comprehensive Income - (Unaudited)
Three Months |
Six Months |
|||
|
|
Predecessor |
|
Predecessor |
(Thousands) |
||||
Net income |
$3,775 |
$(5,543) |
$26,020 |
$28,225 |
Other comprehensive income (loss), net of tax |
||||
Net unrealized gain (loss) on investments |
(91) |
- |
184 |
- |
Total other comprehensive income (loss) |
(91) |
- |
184 |
- |
Comprehensive income (loss) |
$3,684 |
$(5,543) |
$26,204 |
$28,225 |
Item 2.
Management's Discussion and Analysis of Financial ConditionCentral Maine Power Company
(a) Liquidity and Capital Resources
Electric Delivery Business
Central Maine Power Alternative Rate Plan: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Electricity Transmission Rates : See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Transmission Planning and Expansion : See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Other Matters
Accounting Issues: See Energy East Corporation's Item 2(a), Other Matters, for the discussion of this item.
Investing and Financing Activities
Investing Activities: Capital spending for the first half of 2001 was $23 million, including nuclear fuel. For 2001 capital spending is projected to be $45 million, including nuclear fuel, and is expected to be paid for with internally generated funds. Capital spending will be primarily for the extension of electric delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Financing Activities: CMP issued the following Series E Medium Term Notes (MTN), the proceeds of which were used to redeem debt and for general corporate purposes:
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Central Maine Power Company
(b) Results of Operations
Three months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Megawatt-hours |
2,221 |
2,316 |
(4%) |
Operating Revenues |
$192,472 |
$192,558 |
- |
Operating Expenses |
$181,959 |
$202,349 |
(10%) |
Operating Income |
$10,513 |
$(9,791) |
207% |
Earnings Available for Common Stock |
$3,414 |
$(6,102) |
156% |
Earnings for the quarter increased $10 million primarily due to reductions in other operating expenses as a result of cost control efforts.
Operating revenues for the quarter were about the same as for the prior year. A decrease in other electric sales revenue was offset by higher transmission revenue, regional network service revenue and asset sale gain amortization.
Operating expenses decreased $20 million primarily as a result of reductions in other operating expenses due to cost control efforts.
Item 2.
Management's Discussion and Analysis of Financial ConditionCentral Maine Power Company
Six months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Megawatt-hours |
4,639 |
4,668 |
(1%) |
Operating Revenues |
$422,632 |
$458,354 |
(8%) |
Operating Expenses |
$368,165 |
$409,961 |
(10%) |
Operating Income |
$54,467 |
$48,393 |
13% |
Earnings Available for Common Stock |
$25,299 |
$27,107 |
(7%) |
Earnings for the six months decreased $2 million primarily due to the deregulation of Maine's electric industry, which affected operating revenues and expenses this year as discussed below. That decrease was substantially offset by reductions in other operating expenses due to cost control efforts. CMP no longer supplies electricity unless it is directed by the MPUC to be the standard offer provider. CMP is currently the standard offer provider for commercial and industrial rate classes.
The $36 million decrease in operating revenues is primarily the result of CMP no longer collecting revenue for the supply of electricity unless directed to by the MPUC, and a rate reduction that began March 1, 2000. Those decreases were partially offset by higher transmission revenues and asset sale gain amortization.
Operating expenses decreased $42 million primarily due to decreased purchased power expenses, because CMP no longer supplies electricity unless directed to by the MPUC, and reductions in other operating expenses due to cost control efforts.
Item 1.
Financial StatementsNew York State Electric & Gas Corporation
Statements of Income - (Unaudited)
Three Months |
Six Months |
|||
Periods Ended June 30 |
2001 |
2000 |
2001 |
2000 |
(Thousands, except per share amounts) |
||||
Operating Revenues |
||||
Electric |
$400,220 |
$432,624 |
$857,982 |
$870,635 |
Natural gas |
55,320 |
62,619 |
223,019 |
200,372 |
Total Operating Revenues |
455,540 |
495,243 |
1,081,001 |
1,071,007 |
Operating Expenses |
||||
Electricity purchased and fuel |
|
|
|
|
Natural gas purchased |
39,907 |
40,982 |
162,516 |
109,535 |
Other operating expenses |
61,882 |
58,451 |
116,796 |
117,203 |
Maintenance |
19,811 |
25,453 |
40,873 |
45,690 |
Depreciation and amortization |
25,791 |
27,246 |
51,128 |
54,737 |
Other taxes |
31,034 |
34,008 |
65,903 |
70,100 |
Total Operating Expenses |
372,221 |
394,008 |
832,532 |
820,248 |
Operating Income |
83,319 |
101,235 |
248,469 |
250,759 |
Interest Charges, Net |
27,112 |
24,749 |
53,764 |
50,175 |
Other (Income) and Deductions |
(919) |
1,074 |
1,467 |
253 |
Income Before Income Taxes |
57,126 |
75,412 |
193,238 |
200,331 |
Income Taxes |
23,907 |
20,721 |
80,421 |
62,175 |
Net Income |
33,219 |
54,691 |
112,817 |
138,156 |
Preferred Stock Dividends |
99 |
99 |
198 |
198 |
Earnings Available for Common Stock |
$33,120 |
$54,592 |
$112,619 |
$137,958 |
Item 1.
Financial Statements (Cont'd)New York State Electric & Gas Corporation
Balance Sheets - (Unaudited)
June 30, |
Dec. 31, |
|
Assets |
(Thousands) |
|
Current Assets |
||
Cash and cash equivalents |
$12,647 |
$17,618 |
Special deposits |
522 |
21,440 |
Accounts receivable, net |
288,976 |
200,846 |
Fuel, at average cost |
23,049 |
28,677 |
Materials and supplies, at average cost |
7,116 |
7,395 |
Prepayments |
23,281 |
27,893 |
Accumulated deferred income tax benefits, net |
3,966 |
3,943 |
Total Current Assets |
359,557 |
307,812 |
Utility Plant, at Original Cost |
||
Electric |
3,396,532 |
3,391,619 |
Natural gas |
642,025 |
635,563 |
Common |
132,838 |
140,020 |
4,171,395 |
4,167,202 |
|
Less accumulated depreciation |
2,141,141 |
2,116,787 |
Net Utility Plant in Service |
2,030,254 |
2,050,415 |
Construction work in progress |
16,483 |
25,006 |
Total Utility Plant |
2,046,737 |
2,075,421 |
Other Property and Investments, Net |
78,314 |
76,737 |
Regulatory and Other Assets |
||
Regulatory assets |
||
Unfunded future income taxes |
45,001 |
44,610 |
Unamortized loss on debt reacquisitions |
44,875 |
46,791 |
Demand-side management program costs |
16,225 |
28,366 |
Environmental remediation costs |
57,200 |
58,200 |
Other |
32,253 |
30,386 |
Total regulatory assets |
195,554 |
208,353 |
Other assets |
||
Prepaid pension benefits |
292,978 |
250,826 |
Goodwill, net |
11,390 |
11,582 |
Other |
20,325 |
22,254 |
Total other assets |
324,693 |
284,662 |
Total Regulatory and Other Assets |
520,247 |
493,015 |
Total Assets |
$3,004,855 |
$2,952,985 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)New York State Electric & Gas Corporation
Balance Sheets - (Unaudited)
June 30, |
Dec. 31, |
|
Liabilities |
(Thousands) |
|
Current Liabilities |
||
Current portion of long-term debt |
$551 |
$1,088 |
Notes payable |
38,000 |
123,000 |
Accounts payable and accrued liabilities |
102,858 |
160,654 |
Interest accrued |
17,556 |
15,925 |
Taxes accrued |
12,038 |
9,006 |
Other |
49,862 |
71,510 |
Total Current Liabilities |
220,865 |
381,183 |
Regulatory and Other Liabilities |
||
Deferred income taxes |
44,543 |
50,306 |
Deferred income taxes, unfunded future income taxes |
18,848 |
18,848 |
Other |
23,286 |
16,975 |
Total regulatory liabilities |
86,677 |
86,129 |
Other liabilities |
||
Deferred income taxes |
287,692 |
287,560 |
Other postretirement benefits |
190,404 |
183,666 |
Environmental remediation costs |
76,500 |
77,500 |
Derivative liabilities |
32,570 |
- |
Other |
93,417 |
100,148 |
Total other liabilities |
680,583 |
648,874 |
Total Regulatory and Other Liabilities |
767,260 |
735,003 |
Long-term debt |
1,341,488 |
1,189,249 |
Total Liabilities |
2,329,613 |
2,305,435 |
Commitments |
- |
- |
Preferred Stock Preferred stock redeemable solely at NYSEG's option |
|
|
Common Stock Equity Common stock |
|
|
Capital in excess of par value |
170,678 |
170,678 |
Retained earnings |
82,405 |
35,329 |
Accumulated other comprehensive income |
(18,057) |
1,327 |
Total Common Stock Equity |
665,083 |
637,391 |
Total Liabilities and Stockholder's Equity |
$3,004,855 |
$2,952,985 |
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)New York State Electric & Gas Corporation
Statements of Cash Flows - (Unaudited)
Six Months Ended June 30 |
2001 |
2000 |
Operating Activities |
(Thousands) |
|
Net income |
$112,817 |
$138,156 |
Adjustments to reconcile net income to net |
||
Depreciation and amortization |
51,128 |
54,737 |
Income taxes and investment tax credits deferred, net |
6,285 |
(6,551) |
Pension income |
(36,082) |
(32,625) |
Changes in current operating assets and liabilities |
||
Accounts receivable |
63,870 |
16,759 |
Loan receivable, affiliated company |
- |
17,789 |
Inventory |
5,907 |
(3,787) |
Prepayments |
4,612 |
2,401 |
Accounts payable and accrued liabilities |
(57,796) |
(35,897) |
Taxes accrued |
3,032 |
38,209 |
Other current liabilities |
(21,648) |
(4,551) |
Other, net |
20,189 |
(4,221) |
Net Cash Provided by Operating Activities |
152,314 |
180,419 |
Investing Activities |
||
Utility plant additions |
(30,142) |
(38,857) |
Other property and investments |
1,374 |
1,186 |
Other |
22,224 |
184 |
Net Cash Used in Investing Activities |
(6,544) |
(37,487) |
Financing Activities |
||
Notes payable, net |
(85,000) |
(129,240) |
Dividends on common and preferred stock |
(65,741) |
(121,702) |
Net Cash Used in Financing Activities |
(150,741) |
(250,942) |
Net Decrease in Cash and Cash Equivalents |
(4,971) |
(108,010) |
Cash and Cash Equivalents, Beginning of Period |
17,618 |
114,494 |
Cash and Cash Equivalents, End of Period |
$12,647 |
$6,484 |
Supplemental Disclosure of Cash Flows Information |
||
Cash paid during the period: |
|
|
The notes on pages 31 through 34 are an integral part of the financial statements.
Item 1.
Financial Statements (Cont'd)New York State Electric & Gas Corporation
Statements of Retained Earnings - (Unaudited)
Six Months Ended June 30 |
2001 |
2000 |
(Thousands) |
||
Balance, Beginning of Period |
$35,329 |
$26,731 |
Add net income |
112,817 |
138,156 |
148,146 |
164,887 |
|
Deduct Dividends on Capital Stock |
||
Preferred |
198 |
198 |
Common |
65,543 |
121,504 |
65,741 |
121,702 |
|
|
|
|
The notes on pages 31 through 34 are an integral part of the financial statements.
New York State Electric & Gas Corporation
Statements of Comprehensive Income - (Unaudited)
Three Months |
Six Months |
|||
Periods Ended June 30 |
2001 |
2000 |
2001 |
2000 |
(Thousands) |
||||
Net income |
$33,219 |
$54,691 |
$112,817 |
$138,156 |
Other comprehensive income (loss), net of tax |
||||
Net unrealized gain on investments |
5 |
756 |
84 |
894 |
Minimum pension liability adjustment |
50 |
- |
50 |
(1,351) |
Unrealized gains (losses) on derivatives |
||||
Unrealized gains on derivatives qualified |
|
|
54,602 |
|
Unrealized losses on derivatives qualified |
|
|
|
|
Reclassification adjustment for gains included |
|
|
|
|
Net unrealized losses on derivatives qualified |
|
|
|
|
Total other comprehensive income (loss) |
(50,966) |
756 |
(19,384) |
(457) |
Comprehensive income (loss) |
$(17,747) |
$55,447 |
$93,433 |
$137,699 |
Item 2.
Management's Discussion and Analysis of Financial ConditionNew York State Electric & Gas Corporation
(a) Liquidity and Capital Resources
Electric Delivery Business
Sale of Nine Mile Point 2: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
NYSEG's Price Protection Plan: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Retail Access Credit: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Independent System Operators: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Energy Taxes: See Energy East Corporation's Item 2(a), Electric Delivery Business, for the discussion of this item.
Natural Gas Delivery Business
Natural Gas Supply Alliance: See Energy East Corporation's Item 2(a), Natural Gas Delivery Business, for the discussion of this item.
Other Matters
Accounting Issues: See Energy East Corporation's Item 2(a), Other Matters, for the discussion of this item.
Investing Activities
Investing Activities: Capital spending for the first six months of 2001 was $29 million, including nuclear fuel. For 2001 capital spending is projected to be $77 million, including nuclear fuel, and is expected to be paid for with internally generated funds. Capital spending will be primarily for the extension of energy delivery service, necessary improvements to existing facilities and compliance with environmental requirements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
New York State Electric & Gas Corporation
(b) Results of Operations
Three months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Operating Revenues |
$455,540 |
$495,243 |
(8%) |
Operating Income |
$83,319 |
$101,235 |
(18%) |
Earnings Available for Common Stock |
$33,120 |
$54,592 |
(39%) |
Earnings decreased $14 million for the second quarter, excluding a non-recurring benefit in 2000 from the sale of an affiliate's coal-fired generation assets. The decrease is due to lower electric transmission revenues as compared to last year's abnormally high levels and higher prices of natural gas purchased, partially offset by cost control efforts.
Six months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Operating Revenues |
$1,081,001 |
$1,071,007 |
1% |
Operating Income |
$248,469 |
$250,759 |
(1%) |
Earnings Available for Common Stock |
$112,619 |
$137,958 |
(18%) |
Earnings for the six months decreased $18 million, excluding a non-recurring benefit in 2000 from the sale of an affiliate's coal-fired generation assets. The decrease is primarily due to higher prices of natural gas purchased, lower electric transmission revenues as compared to last year's abnormally high levels and a federal income tax audit adjustment that benefited earnings in 2000. Those decreases were partially offset by higher retail electricity deliveries because of colder winter weather this year, lower electric ancillary services costs and cost control efforts.
Operating Results for the Electric Delivery Business
Three months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Megawatt-hours |
3,280 |
3,261 |
1% |
Operating Revenues |
$400,220 |
$432,624 |
(7%) |
Operating Expenses |
$310,211 |
$328,685 |
(6%) |
Operating Income |
$90,009 |
$103,939 |
(13%) |
The $32 million decrease in operating revenues for the second quarter is primarily due to lower wholesale deliveries and lower transmission revenues. Those decreases were partially offset by higher retail deliveries due to warmer weather this quarter.
Operating expenses decreased $18 million for the quarter due to lower purchased power costs, primarily due to lower wholesale deliveries, and cost control efforts.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
New York State Electric & Gas Corporation
Six months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Megawatt-hours |
7,067 |
6,822 |
4% |
Operating Revenues |
$857,982 |
$870,635 |
(1%) |
Operating Expenses |
$622,785 |
$659,835 |
(6%) |
Operating Income |
$235,197 |
$210,800 |
12% |
The $13 million decrease in operating revenues is primarily due to lower wholesale deliveries and lower transmission revenues. Those decreases were partially offset by higher retail deliveries because of colder winter weather this year.
Operating expenses decreased $37 million due to lower purchased power costs, primarily due to lower wholesale deliveries, and cost control efforts.
Operating Results for the Natural Gas Delivery Business
Three months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Dekatherms |
9,773 |
10,552 |
(7%) |
Operating Revenues |
$55,320 |
$62,619 |
(12%) |
Operating Expenses |
$62,010 |
$65,323 |
(5%) |
Operating Loss |
$(6,690) |
$(2,704) |
147% |
The $7 million decrease in operating revenues is primarily due to lower wholesale and retail deliveries.
Operating expenses decreased $3 million primarily due to lower purchased gas costs, caused by lower wholesale and retail deliveries, and cost control efforts.
Six months ended June 30 (Thousands) |
2001 |
2000 |
Change |
Retail Deliveries - Dekatherms |
33,737 |
34,800 |
(3%) |
Operating Revenues |
$223,019 |
$200,372 |
11% |
Operating Expenses |
$209,747 |
$160,413 |
31% |
Operating Income |
$13,272 |
$39,959 |
(67%) |
The $23 million increase in operating revenues is primarily due to the recovery of increased natural gas costs for non-residential deliveries from the first quarter this year, partially offset by lower wholesale and retail deliveries.
Operating expenses increased $49 million primarily due to an increase in the price of natural gas. That increase was partially offset by cost control efforts.
Item 1.
Financial StatementsNotes to Financial Statements
for
Energy East Corporation
Central Maine Power Company
New York State Electric & Gas Corporation
Notes to Financial Statements of Registrants:
Registrant |
Applicable Notes |
Energy East |
1, 2, 3, 4, 5, 6 |
CMP |
1, 2, 4, 6 |
NYSEG |
1, 4, 5, 6 |
Note 1. Unaudited Financial Statements
The accompanying unaudited financial statements reflect all adjustments which are necessary, in the opinion of the management of the registrants, for a fair presentation of the interim results. All such adjustments are of a normal, recurring nature.
Energy East's financial statements and CMP's financial statements consolidate their majority-owned subsidiaries after eliminating all intercompany transactions.
The accompanying unaudited financial statements for each registrant should be read in conjunction with the financial statements and notes contained in the report on Form 10-K filed by each registrant for the year ended December 31, 2000. Due to the seasonal nature of the registrants' operations, financial results for interim periods are not necessarily indicative of trends for a 12-month period.
Note 2. Acquisitions of Connecticut Energy, CMP Group, CTG Resources and Berkshire Energy
Due to completion of the company's merger with CNE on February 8, 2000, and its mergers with CMP Group, CTG Resources and Berkshire Energy on September 1, 2000, the company's consolidated financial statements include CNE's results beginning with February 2000 and include CMP Group's, CTG Resources' and Berkshire Energy's results beginning with September 2000.
Amounts presented in the consolidated financial statements for CMP for the three months and six months ended June 30, 2000, reflect the historical predecessor amounts reported by CMP prior to its acquisition by Energy East. Amounts reported for the three months and six months ended June 30, 2001, include the amortization of goodwill related to the acquisition of CMP by Energy East.
The four merger transactions were accounted for using the purchase method. In each transaction the purchase price was allocated to the assets acquired and liabilities assumed based on values on the date of purchase. The cost in excess of the fair value of the net assets acquired in each transaction was recorded as goodwill and will be amortized on a straight-line basis over the estimated useful life. (See Energy East Corporation's Item 2(a), Other Matters - Accounting Issues.) The useful life is determined based on the individual characteristics of each acquired company and the lives range from four to 40 years. Goodwill may be adjusted over the 12 months following the mergers as actual amounts for estimated liabilities become known.
The following pro forma information for the company for the three months and six months ended June 30, 2000, which is based on unaudited data, gives effect to the company's four mergers as if they had been completed January 1, 2000. This information does not reflect future revenues or cost savings that may result from the mergers and is not indicative of actual results of operations had the mergers occurred at the beginning of the period presented or of results that may occur in the future.
Periods Ended June 30, 2000 |
Three Months |
Six Months |
Revenues |
$848,773 |
$2,000,201 |
Net income |
$67,177 |
$186,843 |
Earnings per share of common stock |
$.56 |
$1.52 |
Pro forma adjustments reflected in the amounts presented above include: (1) adjusting the four merged companies' non-utility assets to fair value based on an independent appraisal, (2) amortization of goodwill, (3) elimination of merger costs, (4) adjustments for estimated tax effects of the above adjustments, (5) lower investment income due to the sale of temporary investments to complete the mergers and (6) interest expense due to the issuance of merger-related debt.
Note 3. Fair Value of Financial Instruments
CMP Group, Inc. has a $90 million investment in NEON Communications, Inc. that is classified as available-for-sale and reported at fair value, with unrealized gains and losses included in other comprehensive income. At June 30, 2001, the fair value of the investment in NEON Communications, Inc., based on quoted market prices, was $31 million. The company is evaluating this decline in fair value to determine if it is other than temporary. If the decline is determined to be other than temporary, the cost basis of the investment will be written down and the amount of the writedown will be accounted for as a realized loss.
Note 4. Segment Information
Energy East's electric delivery business consists of its regulated transmission, distribution and generation operations in New York and Maine; and its natural gas delivery business consists of its regulated transportation, storage and distribution operations in New York, Connecticut, Maine and Massachusetts. Other includes: the company's corporate assets, interest costs and operating expenses; intersegment eliminations; and non-utility businesses.
CMP's electric delivery business consists of its transmission and distribution operations. CMP operates in the State of Maine. Other includes CMP's corporate assets.
NYSEG's electric delivery business consists of its transmission, distribution and generation operations; and its natural gas segment consists of its transportation, storage and distribution operations. NYSEG operates in the State of New York. Other includes NYSEG's corporate assets.
Selected financial information for Energy East's, CMP's and NYSEG's business segments is presented in the table on the next page.
Electric |
Natural Gas |
|
|
|
(Thousands) |
||||
Three Months Ended |
||||
June 30, 2001 |
||||
Operating Revenues |
|
|
|
|
Net Income |
|
|
|
|
June 30, 2000 |
||||
Operating Revenues |
|
|
|
|
Net Income (Loss) |
|
|
|
|
Six Months Ended |
||||
June 30, 2001 |
||||
Operating Revenues |
|
|
|
|
Net Income |
|
|
|
|
June 30, 2000 |
||||
Operating Revenues |
|
|
|
|
Net Income |
|
|
|
|
Total Assets |
||||
June 30, 2001 Energy East CMP NYSEG |
|
|
|
|
December 31, 2000 Energy East CMP NYSEG |
|
|
|
|
Note 5. Statement 140
The FASB issued Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement 125), in September 2000. Statement 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of Statement 125's provisions. The company adopted Statement 140 as of April 1, 2001.
NYSEG has an agreement that expires in November 2002 to sell, with limited recourse, undivided percentage interests in certain of its accounts receivable from customers. The agreement allows the company to receive up to $152 million from the sale of such interests. As of April 1, 2001, the effective date of Statement 140, the agreement no longer qualifies as a sale of accounts receivable under the Statement 140 criteria. As a result, both accounts receivable and long-term debt on Energy East's and NYSEG's balance sheet at June 30, 2001, have increased by $152 million.
Note 6. Reclassifications
Certain amounts have been reclassified on the unaudited financial statements to conform with the 2001 presentation.
Forward-looking Statements
This Form 10-Q contains certain forward-looking statements that are based upon 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," 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 continued regulatory unbundling of a vertically integrated industry; the companies' ability to compete in the rapidly changing and increasingly competitive electricity and natural gas utility markets; regulatory uncertainty in a politically-charged environment of rising energy prices; the operation of the New York Independent System Operator (NYISO) and ISO New England, Inc.; the operation of a regional transmission organization; the ability to control non-utility generator and other costs; changes in fuel supply or cost and the success of strategies to satisfy power requirements now that all of the company's coal-fired generation assets have been sold; the company's ability to expand its products and services, including its energy infra structure in the Northeast; the company's ability to integrate the operations of CNE, CMP Group, CTG Resources, Berkshire Energy and RGS 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 the companies are doing business; weather variations affecting customer energy usage; and other considerations that may be disclosed from time to time in the companies publicly disseminated documents and filings. The companies undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
(See reports on Form 10-K for Energy East, CMP and NYSEG for fiscal year ended December 31, 2000, Item 7A- Quantitative and Qualitative Disclosures About Market Risk.)
Commodity Price Risk: The company's natural gas supply alliance with BP Energy provides the company with additional tools and expertise in natural gas price risk management. (See Item 2, Natural Gas Delivery Business - Natural Gas Supply Alliance.)
NYSEG has hedged approximately 91% of its expected residential natural gas load for the remainder of 2001 through gas in storage, futures and option contracts. For its remaining unhedged positions in 2001, a $1.00 per dekatherm change in the cost of natural gas changes natural gas costs by about $1 million.
NYSEG uses electricity contracts and contracts for differences (CFDs) to manage against fluctuations in the cost of electricity. Those contracts allow NYSEG to fix margins on the majority of its retail electricity sales. The cost or benefit of those contracts is included in the amount expensed for electricity purchased when the electricity is sold. NYSEG has CFDs, generation and other electricity contracts, which provide for all of its expected electric energy requirements for the remainder of 2001, 89% for 2002 and 67% for 2003.
NYSEG is also exposed to daily price fluctuations in the spot price of electric energy. In situations where the electric energy contracts do not cover peak requirement, NYSEG must buy electric energy in the spot market. Conversely, when NYSEG has contracts for more electric energy than its requirement, it must sell the excess in the spot market. NYSEG uses a cash flow at risk (CFAR) calculation to measure price risk for electric energy. At July 31, 2001, the CFAR for electric energy requirements was approximately $7 million for the next 12-month period. The CFAR indicates the amount by which the fair value of NYSEG's net position could vary from its current level over a 12-month period, with a 97.5% certainty, assuming all unhedged positions during that period are filled in the spot market.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Energy East Corporation
Energy East's Annual Meeting of Stockholders was held on June 15, 2001. The following matters were voted on:
(a) Approval of the issuance of Energy East common stock in connection with the RGS Energy merger:
Shares For: |
82,763,581 |
Shares Against: |
1,552,819 |
Shares Abstain: |
2,050,269 |
Broker Non Voted: |
30,182,929 |
(b) The election of six directors:
Nominees |
Votes For |
Votes Withheld |
Richard Aurelio |
98,918,185 |
2,186,737 |
James A. Carrigg |
98,892,899 |
2,212,023 |
Paul L. Gioia |
97,895,848 |
3,209,074 |
David M. Jagger |
99,043,726 |
2,061,196 |
Ben E. Lynch |
99,009,514 |
2,095,408 |
Peter J. Moynihan |
98,957,727 |
2,147,195 |
Central Maine Power Company
CMP's Annual Meeting of Stockholders was held on May 17, 2001. The following matters were voted on:
(a) The election of four directors:
Nominees |
Votes For |
Votes Withheld |
Sara J. Burns |
3,121,680 |
- |
Michael I. German |
3,121,680 |
- |
Kenneth M. Jasinski |
3,121,680 |
- |
Wesley W. von Schack |
3,121,680 |
- |
(b) Approval of By-Law amendments:
Shares For: |
3,121,680 |
Shares Against: |
- |
Shares Abstain: |
- |
New York State Electric & Gas Corporation
On June 15, 2001, Energy East Corporation, the owner of all of the outstanding shares of NYSEG's common stock, by written consent in lieu of the annual meeting of stockholders, elected Michael I. German, Kenneth M. Jasinski, Ralph R. Tedesco and Wesley W. von Schack directors of the company to hold office until the next annual meeting of stockholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ENERGY EAST CORPORATION |
|
Date: August 9, 2001 |
By /s/ Robert E. Rude |
CENTRAL MAINE POWER COMPANY |
|
Date: August 9, 2001 |
By /s/ Curtis I. Call |
NEW YORK STATE ELECTRIC & GAS CORPORATION |
|
Date: August 9, 2001 |
By /s/ Sherwood J. Rafferty |
EXHIBIT INDEX
The following exhibits are delivered with this report:
Registrant |
Exhibit No. |
Description of Exhibit |
Energy East Corporation |
(A) 10-28 - |
Annual Executive Incentive Plan Amendment No. 2. |
Energy East Corporation |
(A) 10-29 - |
Long-Term Executive Incentive Share Plan. |
Energy East Corporation |
(A) 10-30 - |
Long-Term Executive Incentive Share Plan Amendment No. 1. |
Central Maine Power Company |
3-2 - |
Amended and Restated By-Laws. |
_________________________________
(A) Management contract or compensatory plan or arrangement.
Exhibit 10-28
AMENDMENT NO. 2
to the
ANNUAL EXECUTIVE INCENTIVE PLAN
of
ENERGY EAST CORPORATION
The Annual Executive Incentive Plan (the "Plan") of Energy East Corporation is hereby amended as follows, effective as of June 15, 2001:
(iii) an incentive award with respect to the fiscal year of the Company in which the Change in Control occurs which shall be calculated by (x) assuming that the Threshold Earnings Level for such fiscal year has been achieved and that a Participant's Level of Achievement for each individual objective is one hundred percent, and (y) multiplying the result so obtained by a fraction the numerator of which is the number of days elapsed from the beginning of such fiscal year until the Change in Control and the denominator of which is three hundred sixty-five (365). Notwithstanding anything contained herein to the contrary, if, following a Change in Control, the Plan continues in full force and effect for the remainder (if any) of the Performance Period in which the Change in Control occurs, a Participant shall be entitled to receive an additional incentive award with respect to such Performance Period, equal to the excess (if any) of the amount of the incentive award for such year , determined in accordance with Article VII hereof, over the amount paid pursuant to the preceding provision of this paragraph (iii).
B. Definition of a Change in Control.
A "Change in Control" shall be deemed to have occurred if the conditions set forth in any of the following paragraphs shall have been satisfied:
(i) an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (l) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or ( 4) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or
(ii) a change in the composition of the Board such that the individuals who, as of June 15, 2001, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section B of Article VI, that any individual who becomes a member of the Board subsequent to June 15, 2001, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board, but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or
(iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through on e or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or any entity controlled by the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the Company resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Cor porate Transaction; or
(iv) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
Plan Administration After a Change in Control
Notwithstanding any other provisions of the Plan (including, without limitation, Articles VI(B) and X hereof), neither the Board, nor the Committee shall be authorized to, and no termination, suspension, modification or amendment of the Plan shall be permitted to, amend or modify the terms and provisions (including, without limitation, the payment provisions) of any incentive awards made to Participants in any way which adversely affects the rights of such Participants before such action is taken, if such action is taken (i) upon or after a Change in Control, or (ii) at the request of a third party that has taken steps reasonably calculated to effect a Change in Control.
Exhibit 10-29
As Amended and Restated
effective January 1, 2001
ENERGY EAST CORPORATION
LONG-TERM EXECUTIVE INCENTIVE SHARE PLAN
I. Plan Objective
The objective of the Long-Term Executive Incentive Share Plan (the "Plan") is to attract and motivate current and future executives of Energy East Corporation ("Energy East") and New York State Electric & Gas Corporation ("NYSEG") by providing them with the opportunity to receive, in addition to current compensation, long-term incentives which are tied directly to the creation of shareholder value.
II. Definitions
Wherever used in the Plan, unless the context clearly indicates otherwise, the following words and phrases shall have the meanings set forth below:
III. Administration
The Plan shall be administered by the Executive Compensation and Succession Committee (the "Committee") of the Board of Directors of Energy East composed of such members as shall be appointed from time to time by the Energy East Board. No member of the Committee while serving as such shall be eligible for participation in the Plan.
Except as otherwise provided in this Plan, decisions and determinations by the Committee shall be final and binding upon all parties. The Committee shall have the authority to interpret the Plan, to establish and revise rules and regulations relating to the Plan, and to make any other determinations that it believes necessary or advisable for the administration of the Plan.
IV. Eligibility
Eligibility for participation in the Plan is limited to officers of Energy East or NYSEG holding the positions set forth below. Each Plan Participant has an incentive level assigned by Class based on the Class's potential impact on Energy East's and NYSEG's performance which will be used in determining initial awards of Performance Shares. If a Participant holds different offices of Energy East and NYSEG, such Participant shall participate in the Plan at the highest Incentive Level applicable to such officers.
Participants shall be divided into the following Classes for purposes of initial awards of Performance Shares:
|
|
Incentive |
I |
Chairman and President |
40% |
II |
Executive Vice Presidents & Senior Vice Presidents |
30% |
III |
Vice Presidents, Treasurer, Executive Director - Human |
20% |
V. Performance Shares and Dividend Performance Shares
All Performance Shares granted to a Participant shall be credited to a Performance Share Account which shall be maintained for the Participant. On each common stock dividend payment date of Energy East, Dividend Performance Shares, including fractional Dividend Performance Shares computed to four decimal places, shall be credited to each Participant's Performance Share Account. The number of Dividend Performance Shares to be credited shall be calculated by first determining the amount of dividends that would be paid by Energy East upon all Performance Shares and Dividend Performance Shares held for the Participant as if such shares actually were issued and outstanding common stock of Energy East. The amount of dividends so determined shall then be divided by the price per share paid by Energy East's dividend reinvestment plan for common stock that was purchased by said plan with respect to the common stock dividend payment date for which the Dividend Performance Shares are being credited. The quot ient of said division is the number of Dividend Performance Shares which shall be credited to a Participant's Performance Share Account.
An award of Performance Shares or Dividend Performance Shares under the Plan shall not entitle the recipient to any actual dividend or voting rights or any other rights of a shareholder with respect to such Performance Shares or Dividend Performance Shares.
VI. Initial Plan Grants
An initial grant of Performance Shares will be made to a Participant at the beginning of each Performance Cycle. The initial grant will be determined by multiplying a Participant's Base Salary on the first day of the Performance Cycle by an incentive factor based on a Participant's Class as set forth in Article IV and then dividing said product by the average of the last five trading days' closing prices of Energy East's common stock in the preceding calendar year.
Individuals who become eligible to participate in the Plan while one or more Performance Cycles are in progress will receive an initial grant of Performance Shares only for the Performance Cycle that began in the same calendar year that the individual became a Participant. The initial grant shall be based on the Participant's new Base Salary on the first day of the Performance Cycle multiplied by an incentive level based on the Participant's Class as set forth in Article IV with the product then divided by the average of the last five trading days' closing prices of Energy East's common stock prior to the beginning of the Performance Cycle. The initial grant will then be prorated based on the number of full months remaining out of a possible 36 months in the Performance Cycle that the Participant is eligible to participate in the Plan.
A Participant who is promoted into a higher Class, or salary grade within a Class, while one or more Performance Cycles are in progress will receive a grant of additional Performance Shares only for the Performance Cycle that began in the calendar year of the promotion. As of the effective date of the promotion, a Participant shall receive additional Performance Shares based on the Participant's new Class and/or Base Salary calculated pursuant to the following formula: First, the Participant's Base Salary as of the effective date of the promotion shall be multiplied by an incentive level based on the Participant's Class as set forth in Article IV as of the effective date of the promotion. From this product shall be subtracted the product of the Participant's Base Salary at the beginning of the calendar year of the promotion (or if the Participant received a prior promotion in the same calendar year, the Participant's Base Salary as of the effective date of the prior promotion) multiplied by an incentiv e level based on the Participant's Class as set forth in Article IV at the beginning of the calendar year of the promotion (or in the case of a prior promotion in the same calendar year, the effective date of the prior promotion). This difference shall then be divided by the average of the last five trading days' closing prices of Energy East's common stock prior to the effective date of the promotion. The resulting quotient shall then be prorated based on the number of full months remaining out of a possible 36 months in the Performance Cycle that the Participant is eligible to participate in the Plan. Such grant of additional Performance Shares will be in addition to shares granted at the beginning of the Performance Cycle that began in the calendar year of the promotion. No additional Performance Shares will be granted in connection with Performance Cycles which may be running concurrently but which began in prior years.
VII. Termination of Employment
If during the term of the Plan, a Participant ceases to be an employee of Energy East or NYSEG by reason of death, retirement, disability (as defined in NYSEG's long-term disability plan), or termination without cause, the Participant (or his or her successor in interest) shall remain a Participant in the Plan and eligible for incentive award payments pursuant to Article IX for all Performance Cycles which were in progress while the Participant was an employee. All Performance Shares and Dividend Performance Shares in such Participant's Performance Share Account will continue to accrue Dividend Performance Shares in accordance with Article V. At the conclusion of each Performance Cycle any incentive award payments to be made under the Plan will be prorated based on the number of full months that the Participant was an employee during the Performance Cycle; provided, however, that if a Participant ceases to be an employee for the reasons set forth above at any time during 1996, the Participant will b e deemed to have been an employee for all of 1996.
For a Participant that ceases to be an employee by reason of transfer in employment to another subsidiary of Energy East, the Participant will continue to participate in the Plan at the position level held by the individual prior to the transfer in employment, with employment by the subsidiary treated for purposes of the Plan as employment by Energy East for all Performance Cycles which were in progress in the year in which the transfer in employment occurred. Such Participant, however, shall not be eligible for awards for any Performance Cycles that commence after the transfer of employment occurs.
If a Participant leaves the employ of Energy East or NYSEG (or in the case of an individual described in the prior paragraph, the subsidiary of Energy East) voluntarily or involuntarily, for any reason other than retirement, disability, death, termination without cause, the Participant shall forfeit any payment opportunity for the Performance Cycles in progress and the Performance Shares and Dividend Performance Shares in the Participant's Performance Share Account shall be forfeited and canceled, unless the Energy East Board determines otherwise.
Notwithstanding anything to the contrary contained herein, a Participant who either ceases to be an employee of Energy East by reason of transfer to NYSEG or ceases to be an employee of NYSEG by reason of a transfer of employment to Energy East shall remain a Participant of the Plan.
VIII. Performance Measurement and Criteria
The Plan uses one comparative performance measure as the basis for determining incentive award payments to Participants. This measure compares Energy East's average TSR for the three year period of a Performance Cycle to the average total shareholder return for such three year period of each of the top 100 utilities (including any utility holding companies) by revenue in the United States, such utilities to include electric, gas and combination utilities ("top 100 utilities"). The Energy East Board may adopt any other measurers to define the top 100 utilities. Energy East's performance is based on Energy East's percentile ranking of TSR for the Performance Cycle ("Percentile Ranking"). The top 100 utilities shall be determined for each Performance Cycle at the commencement of each Performance Cycle. For all periods prior to May 1, 1998, the TSR of NYSEG shall be deemed to be Energy East's TSR.
Each Performance Cycle is three years in length, with a new Performance Cycle beginning on January 1 of each calendar year and ending on December 31 of the third year. Cash payments payable under the Plan shall be paid only at the end of a Performance Cycle. A Participant is not entitled to receive any payments prior to the completion of a Performance Cycle.
The following Performance Schedule sets forth an Award Percentage ("Award Percentage") for Energy East's achievement of various Percentile Rankings (where 100% is the worst percentile ranking and 1% is the best percentile ranking). The Award Percentage shall be used to calculate the amount of incentive award payments in accordance with Article X.
Energy East |
|
Energy East |
|
Below 65% |
0% |
||
65% |
25.0% |
42% |
113.3% |
64% |
30.0% |
41% |
115.0% |
63% |
35.0% |
40% |
116.7% |
62% |
40.0% |
39% |
118.3% |
61% |
45.0% |
38% |
120.0% |
60% |
50.0% |
37% |
121.7% |
59% |
55.0% |
36% |
123.3% |
58% |
60.0% |
35% |
125.0% |
57% |
65.0% |
34% |
126.7% |
56% |
70.0% |
33% |
128.3% |
55% |
75.0% |
32% |
130.0% |
54% |
80.0% |
31% |
131.7% |
53% |
85.0% |
30% |
133.3% |
52% |
90.0% |
29% |
135.0% |
51% |
95.0% |
28% |
136.7% |
50% |
100.0% |
27% |
138.3% |
49% |
101.7% |
26% |
140.0% |
48% |
103.3% |
25% |
141.7% |
47% |
105.0% |
24% |
143.3% |
46% |
106.7% |
23% |
145.0% |
45% |
108.3% |
22% |
146.7% |
44% |
110.0% |
21% |
148.3% |
43% |
111.7% |
20% or better |
150.0% |
IX. Determination of Payments
At the conclusion of each Performance Cycle, a determination will be made by the Energy East Board of Energy East's Percentile Ranking within the top 100 utilities. The Performance Schedule will then be used to determine the applicable Award Percentage. Interpolation will be applied between those ranges listed in the Performance Schedule rounded to the nearest four decimal places. The Award Percentage will then be used to determine the incentive award payments in accordance with Article X. Final determination of incentive award payments will be approved by the Energy East Board and will be made not later than the end of May following the end of each Performance Cycle. Distribution of incentive award payments will be made as soon thereafter as practical.
X. Incentive Award Payments
Incentive award payments will be made only in cash. Incentive award payments will be calculated by multiplying the Award Percentage as determined in Article VIII by the number of Performance Shares and Dividend Performance Shares in a Participant's Performance Share Account accumulated for that Performance Cycle and multiplying the product by the closing price of Energy East's common stock calculated as the average of the last five trading days' closing prices of the Performance Cycle.
If on the basis of the Performance Schedule, a cash payment for only a portion of the Performance Shares and Dividend Performance Shares accumulated during a Performance Cycle is to be made, then the remaining portion of the Performance Shares and Dividend Performance Shares accumulated for that Performance Cycle will be forfeited and canceled.
XI. Dilution and Other Adjustments
In the event of any change in the outstanding shares of common stock of Energy East by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change, if the Committee shall determine, in its sole discretion, that such change equitably requires an adjustment in the number of Performance Shares then held in Participants' Performance Share Accounts or which may be awarded to any employee, or an adjustment in the number of Dividend Performance Shares then held in Participants' Performance Share Accounts, such adjustments shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan.
Notwithstanding anything to the contrary contained herein, in connection with a binding share exchange between NYSEG and Energy East on the effective date of the binding share exchange, the Performance Shares and Dividend Performance Shares held in each Participant's Performance Share Account will, without further action, be deemed to be converted into the equivalent number of Performance Shares and Dividend Performance Shares of Energy East, with the same terms and conditions as set forth herein.
XII. Amendments and Termination
The Energy East Board may at any time suspend, terminate, modify or amend this Plan.
XIII. Miscellaneous Provisions
XIV. Effective Date
The Plan shall be effective as of January 1, 1996.
XV. Payments upon and after a Change in Control
A. Calculation of Payments. Notwithstanding any other provisions of this Plan (including, without limitation, Article XIII(E) hereof), if a Change in Control (as defined in Section C of this Article XV) shall occur, the following shall be paid, in cash, no later than the tenth (10th) day following such Change in Control:
(i) amounts which have already been determined to be payable pursuant to Article IX hereof, based on Energy East's Percentile Ranking for any completed Performance Cycle which preceded the Change in Control, which amounts have not yet been paid (or deferred pursuant to procedures established in accordance with Article XIII(E) hereof),
(ii) if, at the time of the Change in Control, the Energy East Board has not yet determined Energy East's Percentile Ranking with respect to the Performance Cycle ending on the December 31 immediately preceding the Change in Control, amounts determined by the Energy East Board to be payable, based on its calculation (in accordance with the provisions of the preceding Articles hereof) of Energy East's Percentile Ranking with respect to the Performance Cycle ending on the December 31 immediately preceding the Change in Control, and
(iii) amounts, which might otherwise subsequently be determined by the Energy East Board to be payable for the Performance Cycles existing on the date on which the Change in Control occurs, calculated based on an assumed Percentile Ranking of 50%.
(iv) for purposes of the incentive awards payable pursuant to paragraph (iii) of this Section A, the calculation of the payments shall be made using the "Change-in-Control Price" of Energy East's common stock. For this purpose, "Change-in-Control Price" means the higher of (x) the highest reported sales price, regular way, of a share of Energy East's common stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on the NASDAQ during the 60-day period prior to and including the date of a Change in Control or (y) if the Change in Control is the result of a tender or exchange offer or approval of a merger or consolidation, the highest price per share of common stock paid or to be paid in such tender or exchange offer or merger or consolidation. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non-cash consideration, the value of such securitie s or other non-cash consideration shall be determined based on the public trading value of such property or, if such property is not publicly traded, by the Energy East Board based on reasonable assumptions.
B. Forfeitures After a Change in Control. Notwithstanding anything contained herein to the contrary, following a Change in Control, the Plan shall continue in full force and effect, and a Participant shall be entitled to receive incentive award payments for outstanding Performance Shares and Dividend Performance Shares with respect to any Performance Cycle that begins before and ends after the Change in Control, equal to the excess of (i) the amount determined in accordance with Articles IX and X hereof over (ii) the amount previously paid with respect to such Performance Cycle pursuant to paragraph (iii) of Section A above.
C. Definition of a Change in Control. A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:
(i) any Person (as defined in this Section C) is or becomes the Beneficial Owner (as defined in this Section C), directly or indirectly, of securities of Energy East (not including in the securities beneficially owned by such Person any securities acquired directly from Energy East or its affiliates) representing 25% or more of the combined voting power of Energy East's then outstanding securities; or
(ii) during any period of two consecutive years (not including any period prior to May 1, 1998), individuals who at the beginning of such period constitute the Energy East Board and any new director (other than a director designated by a Person who has entered into an agreement with Energy East to effect a transaction described in paragraph (i), (iii) or (iv) of this Change in Control definition or a director whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitations of proxies or consents by or on behalf of a Person other than the Energy East Board) whose election by the Energy East Board or nomination for election by Energy East's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease fo r any reason to constitute a majority thereof; or
(iii) the shareholders of Energy East approve a merger or consolidation of Energy East with any other corporation, other than (x) a merger or consolidation which would result in the voting securities of Energy East outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of Energy East or any of its subsidiaries, at least 75% of the combined voting power of the voting securities of Energy East or such surviving entity outstanding immediately after such merger or consolidation, or (y) a merger or consolidation effected to implement a recapitalization of Energy East (or similar transaction) in which no Person acquires more than 50% of the combined voting power of Energy East's then outstanding securities; or
(iv) the shareholders of Energy East approve a plan of complete liquidation of Energy East or an agreement for the sale or disposition by Energy East of all or substantially all of Energy East's assets.
For purposes of the definition of Change in Control in this Section C:
"Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) Energy East or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of Energy East or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of Energy East in substantially the same proportions as their ownership of stock of Energy East.
XVI. Plan Administration After a Change in Control
Notwithstanding any other provisions of the Plan (including, without limitation, Articles III and XII hereof), upon and after the occurrence of a Change in Control, neither the Energy East Board, nor the Committee, shall be authorized to, and no termination, suspension, modification or amendment of the Plan shall be permitted to, amend or modify the terms and provisions (including, without limitation, the payment provisions) of any awards theretofore made to Participants in any way which adversely affects the rights of such Participants.
Exhibit 10-30
AMENDMENT NO. 1
to
LONG-TERM EXECUTIVE INCENTIVE SHARE PLAN
of
ENERGY EAST CORPORATION
The Long-Term Executive Incentive Share Plan (the "Plan") of Energy East Corporation, is hereby amended as follows:
XVII. Winding Down of Plan
Notwithstanding anything to the contrary contained in this Plan, no new Performance Cycles shall commence on or after January 1, 2001, and no new initial grants of Performance Shares shall be made under the Plan on or after that date. All Performance Shares and Dividend Performance Shares in Participants' Performance Share Accounts for Performance Cycles which commenced prior to January 1, 2001 will continue to accrue Dividend Performance Shares in accordance with Article V hereof.
B. Additional Payments after a Change in Control. Notwithstanding anything contained herein to the contrary, if, following a Change in Control, the Plan continues in full force and effect for the remainder (if any) of Performance Cycles that began before and end after the Change in Control, a Participant shall be entitled to receive additional incentive award payments with respect to such Performance Cycles, equal to the excess of (i) the amounts determined in accordance with Articles IX and X hereof over (ii) the amounts previously paid with respect to such Performance Cycles pursuant to paragraph (iii) of Section A above.
C. Definition of a Change in Control.
A "Change in Control" shall be deemed to have occurred if the conditions set forth in any of the following paragraphs shall have been satisfied:
(i) an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (l) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the C ompany, or (4) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or
(ii) a change in the composition of the Board such that the individuals who, as of June 15, 2001, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section C of Article XV, that any individual who becomes a member of the Board subsequent to June 15, 2001, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board, but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or
(iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or mo re subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or any entity controlled by the Company or such corporation resulting from such Corporate Transaction) will beneficially own, direct or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the Company resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Tra nsaction; or
(iv) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
For purposes of the definition of Change in Control in this Section C, "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
Plan Administration After a Change in Control
Notwithstanding any other provisions of the Plan (including, without limitation, Articles III and XII hereof), neither the Board, nor the Committee shall be authorized to, and no termination, suspension, modification or amendment of the Plan shall be permitted to, amend or modify the terms and provisions (including, without limitation, the payment provisions) of any awards made to Participants in any way which adversely affects the rights of such Participants before such action is taken, if such action is taken (i) upon or after a Change in Control, or (ii) at the request of a third party that has taken steps reasonably calculated to effect a Change in Control.
Exhibit 3-2
CENTRAL MAINE POWER COMPANY
AMENDED and RESTATED BY-LAWS
ARTICLE 1.
Meetings of Shareholders.
SECTION 1. Annual Meeting. The annual meeting of the shareholders of the Corporation for the election of Directors and the transaction of any other proper business shall be held at such place within the State of Maine, on such date and at such time as the Board of Directors shall determine.
SECTION 2. Special Meeting. Special meetings of the shareholders may be called at any time by the President, by the Board of Directors or any other person or persons authorized under the Maine Business Corporation Act and shall be held in the location designated in the call for the meeting.
SECTION 3. Notice of Meeting. Written notice of each meeting of shareholders shall be given in accordance with the provisions of the Maine Business Corporation Act, including, without limitation, Section 604 of said Act, unless such notice shall be waived as provided in said Act, including, without limitation, Section 605 of said Act.
SECTION 4. Quorum. Quorum of Shareholders. At all shareholders' meetings, unless otherwise specifically provided in these By-Laws, a representation of shares entitled in the aggregate to a majority of the total votes to which the outstanding shares of capital stock of the Company of all classes are then entitled at the meeting shall be necessary to constitute a quorum for the transaction of business other than (a) adjourning from time to time until a quorum shall be present, or (b) adjourning sine die, and for any such adjournment a majority vote of whatever stock shall be represented shall be sufficient; provided, that such quorum requirement shall be applicable to shareholders' meetings only when the outstanding Preferred Stock of all classes and series are not entitled to vote as a class for the election of a majority of the Directors of the Company; and, provided further, that, at shareholders' meetings when the outstanding Preferred Stock of all classes and series are entitled to vote as a class for the election of a majority of the Directors, the foregoing quorum requirement shall be reduced from a majority of such total votes to one-third of such total votes. When a quorum is present at any meeting, a majority of the votes to which stock represented thereat and voting is entitled shall, except when a larger vote is required by law, by the Charter or by these By-Laws, decide any question brought before such meeting.
At all meetings of shareholders held: (i) for any of the purposes specified in Section B.6(b) of the Capital Stock Provisions of the Articles of Incorporation the presence in person or by proxy of the holders of shares, of the Common Stock and other stock having the general right to vote with the Common Stock, entitled in the aggregate to not less than one-third of the total votes to which all outstanding shares of such capital stock of the Company are then entitled, shall be required to constitute a quorum of such class for the election of Directors; and (ii) for any of the purposes specified in Section B.6(b) and in Section B.8 of the Capital Stock Provisions of the Articles of Incorporation, the presence in person or by proxy of the holders of a majority of the total number of shares of all classes and series of the Company's Preferred Stock then issued and outstanding shall be necessary to constitute a quorum of such classes, pro vided, for the purposes specified in said Section B.6(b), that if such quorum shall not have been obtained at such meeting, or at any adjournment thereof, within ninety (90) days from the date of such meeting as originally called, the presence in person or by proxy of the holders of one-third of the total number of shares of all classes and series of the Company's Preferred Stock then issued and outstanding shall then be sufficient to constitute a quorum of such classes. The absence of a quorum of the holders of stocks of either class shall not prevent the election at any such meeting, or any adjournment thereof, of Directors by the other such class, if the necessary quorum of the holders of stock of such other class is present in person or by proxy at such meeting. In the absence of a quorum of the holders of stocks of either class, a majority of those holders of the stocks of such class who are present in person or by proxy shall have power to adjourn such meeting from time to time (without notice, o ther than announcement at the meeting, if for thirty (30) days or less) until the requisite amount of holders of stock of such class shall be present in person or by proxy, but such adjournment shall not be made to a date beyond the date for the mailing of notice of the next annual meeting or special meeting in lieu thereof.
SECTION 5. Voting. At all shareholders' meetings, holders of record of stock entitled to vote on any question or at any election shall be entitled to one vote for each share of stock held by them respectively, except that holders of Common Stock shall be entitled to one-tenth vote for each share of said stock held by them. In elections of Directors by the shareholders, when, and only when, the Preferred Stocks are not entitled to vote as a class for the election of a majority of the full Board of Directors, each shareholder having the right to vote shall be entitled to as many votes as pertain to his shares of stock multiplied by the number of Directors to be elected, and he may cast all such votes for a single Director or may distribute them among the number to be voted for, or any two or more of them, as he may see fit. Such vote may, in all cases, be given by proxy duly authorized in writing; but no proxy granted more than six months before the meeting, which shall be named therein, shall be accepted, and no proxy shall be valid after the final adjournment of such meeting.
ARTICLE 2.
Directors.
SECTION 1. Number and Election. The business, property and affairs of the Corporation shall be under the care, control and management of a Board of Directors which shall consist of not less than three nor more than nine Directors as fixed by the Board of Directors.
The election of the members of the Board of Directors shall be done annually by vote of the shareholder, except as otherwise fixed in or pursuant to the Capital Stock Provisions of the Articles of Incorporation with respect to the rights of the holders of any class or series of Capital Stock having a preference over Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances.
SECTION 2. Vacancies. Except as otherwise fixed in or pursuant to provisions of the Articles of Incorporation with respect to the right of the holders of any class or series of capital stock having a preference over Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, vacancies in the Board of Directors because of death, resignation, or for any other reason, may be filled by the remaining Directors.
SECTION 3. Meetings. Regular meetings of the Board of Directors shall be held monthly or as designated by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or any two Directors.
SECTION 4. Notice of Meeting. Notice of all regular and special meetings of the Board of Directors shall be given to each member of the Board of Directors, at least eight hours before any such meeting, giving the time and place of such meeting.
SECTION 5. Quorum. A majority of the Directors then in office at the time shall constitute a quorum; and a majority of the Directors in attendance at any meeting of the Board of Directors shall, in the presence of a quorum, decide its action.
SECTION 6. Action Without A Meeting. Action may be taken by the Board of Directors without a meeting as provided in the Maine Business Corporation Act.
SECTION 7. Election of Officers. On an annual basis, the Board of Directors shall meet and elect the officers of the Corporation in accordance with the By-Laws.
SECTION 8. Committees. The Board of Directors may, from time to time, elect or appoint such committees and prescribe the duties and authority thereof as the Board of Directors may deem necessary or convenient.
ARTICLE 3.
Officers.
SECTION 1. Election and Qualifications. The Directors shall elect annually a President and a Treasurer of the Corporation and may also elect or appoint one or more Vice Presidents, and a Secretary and such other officers as the Board of Directors may, from time to time, deem necessary or advisable.
SECTION 2. Term of Office. The term of office of all officers of the Corporation shall be one year and until their respective successors shall have been chosen and qualified; but any officer may be removed from office at any time by the affirmative vote of a majority of the Board of Directors then in office.
SECTION 3. Powers. Subject to the Maine Business Corporation Act, the Articles of Incorporation and the other provisions of these By-Laws, each officer shall have such duties and powers as are usually incident to his respective office and such other duties and powers as may be prescribed from time to time by the Board of Directors.
SECTION 4. Clerk. The Corporation shall also have a Clerk who shall not be an officer by reason of such position. The Clerk shall be appointed and shall hold office until his death or a change of Clerk is made pursuant to Section 304 of the Maine Business Corporation Act.
ARTICLE 4.
Seal.
The Corporation shall have a common seal which shall be kept by the Secretary.
ARTICLE 5.
Stock Certificates and Transfers.
Stock certificates shall be in such form as the Board of Directors may, from time to time, determine and shall be signed by the President or any Vice President and by the Secretary or Assistant Secretary or by the Treasurer or Assistant Treasurer and sealed with the common seal of the Corporation. When such stock certificates shall be signed by a transfer agent or an assistant transfer agent or a registrar, the respective signatures of such Chairman of the Board of Directors, President, Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer may be facsimiles of such signatures, and the seal of the Corporation may be a facsimile of such seal.
ARTICLE 6.
Negotiable Instruments.
SECTION 1. Signatures. All bills, notes, checks or other negotiable instruments shall be made in the name of the Corporation and shall be signed by such officer or officers of the Corporation and in such manner as the Board of Directors shall designate.
SECTION 2. Endorsements. No officer or agent of this Corporation shall have power to endorse in the name of or on behalf of the Corporation any note, bill of exchange, draft, check or other written instrument for the payment of money--save only for the purpose of collection of said instrument--except upon the express authority of the Directors.
ARTICLE 7.
Indemnification of Directors, Officers and Employees.
The Corporation shall indemnify the persons described in Title 13-A Section 714 of the Maine Revised Statutes Annotated or the equivalent section of the Maine Business Corporation Act to the full extent and in the manner permitted by such law.
ARTICLE 8.
Amendments.
These By-Laws may be amended or repealed at any regular or special meeting of the Board of Directors by the vote of a majority of the Directors, except as may be otherwise expressly provided by law or in other sections of these By-Laws or in the Articles of Incorporation, at any annual or special meeting of the shareholders called for the purpose, of which the notice shall include the proposed action, by vote of shareholders holding shares entitled in the aggregate to a majority of the total votes to which the outstanding shares of capital stock of the Company of all classes are then entitled, except that in the case of the provisions of the first paragraph of Article 1, Section 4 relating to the requirements for a quorum and in the case of the provisions of Article 1, Section 5 relating to cumulative voting such vote shall be by the affirmative vote of shareholders holding shares entitled in the aggregate to two-thirds of the total vot es to which the outstanding shares of capital stock of the Company of all classes are then entitled and except that in the case of the provisions of Article 1, Section 5 relating to the rights of the Company's Preferred Stock to vote such vote shall be by the affirmative vote of two-thirds in interest of each class of the Company's Preferred Stock then outstanding which is affected by the change, voting separately as a class. These By-Laws may also be amended or repealed by vote of a majority of the Board of Directors then in office, except that the Board of Directors shall not alter, amend or repeal the provisions of the first paragraph of Article 1, Section 4 relating to the requirements for a quorum, the provisions of Article 1, Section 5 relating to cumulative voting and any provision of this Article 8 pertaining to the foregoing sections.