-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C6CqKYZjWkbd29P7v9TfJgGsAkslpr3tldLW6fPMSQSA23aAFI9D1CGnE0N/PmDC IK7Bof/WttfyCC0MQZBaIA== /in/edgar/work/0000072741-00-000232/0000072741-00-000232.txt : 20001114 0000072741-00-000232.hdr.sgml : 20001114 ACCESSION NUMBER: 0000072741-00-000232 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES SYSTEM CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05324 FILM NUMBER: 758426 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT LIGHT & POWER CO CENTRAL INDEX KEY: 0000023426 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 060303850 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00404 FILM NUMBER: 758427 BUSINESS ADDRESS: STREET 1: SELDEN STREET CITY: BERLIN STATE: CT ZIP: 06037-1616 BUSINESS PHONE: 8606655000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN MASSACHUSETTS ELECTRIC CO CENTRAL INDEX KEY: 0000106170 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 041961130 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07624 FILM NUMBER: 758428 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF NEW HAMPSHIRE CENTRAL INDEX KEY: 0000315256 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 020181050 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06392 FILM NUMBER: 758429 BUSINESS ADDRESS: STREET 1: 1000 ELM ST CITY: MANCHESTER STATE: NH ZIP: 03105 BUSINESS PHONE: 6036694000 MAIL ADDRESS: STREET 1: 1000 ELM STREET CITY: MANCHESTER STATE: NH ZIP: 03105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH ATLANTIC ENERGY CORP /NH CENTRAL INDEX KEY: 0000880416 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 061339460 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-43508 FILM NUMBER: 758430 BUSINESS ADDRESS: STREET 1: 1000 ELM ST CITY: MANCHESTER STATE: NH ZIP: 03105 BUSINESS PHONE: 6036694000 MAIL ADDRESS: STREET 1: 1000 ELM STREET CITY: MANCHESTER STATE: NH ZIP: 03105 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ------------------ OR [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification No. - ----------- ----------------------------------- ------------------ 1-5324 NORTHEAST UTILITIES 04-2147929 (a Massachusetts voluntary association) 174 Brush Hill Avenue West Springfield, Massachusetts 01090-2010 Telephone: (413) 785-5871 0-11419 THE CONNECTICUT LIGHT AND POWER COMPANY 06-0303850 (a Connecticut corporation) 107 Selden Street Berlin, Connecticut 06037-1616 Telephone: (860) 665-5000 1-6392 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 02-0181050 (a New Hampshire corporation) 1000 Elm Street Manchester, New Hampshire 03105-0330 Telephone: (603) 669-4000 0-7624 WESTERN MASSACHUSETTS ELECTRIC COMPANY 04-1961130 (a Massachusetts corporation) 174 Brush Hill Avenue West Springfield, Massachusetts 01090-2010 Telephone: (413) 785-5871 33-43508 NORTH ATLANTIC ENERGY CORPORATION 06-1339460 (a New Hampshire corporation) 1000 Elm Street Manchester, New Hampshire 03105-0330 Telephone: (603) 669-4000 Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date: Company - Class of Stock Outstanding at October 31, 2000 - ------------------------ ------------------------------- Northeast Utilities Common shares, $5.00 par value 143,630,028 shares The Connecticut Light and Power Company Common stock, $10.00 par value 7,584,884 shares Public Service Company of New Hampshire Common stock, $1.00 par value 1,000 shares Western Massachusetts Electric Company Common stock, $25.00 par value 590,093 shares North Atlantic Energy Corporation Common stock, $1.00 par value 1,000 shares GLOSSARY OF TERMS The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report: COMPANIES Acumentrics....................... Acumentrics Corporation CL&P.............................. The Connecticut Light and Power Company Con Edison........................ Consolidated Edison, Inc. Dominion.......................... Dominion Resources, Inc. Mode 1............................ Mode 1 Communications, Inc. NAEC.............................. North Atlantic Energy Corporation NEON.............................. NEON Communications, Inc. NGC............................... Northeast Generation Company NNECO............................. Northeast Nuclear Energy Company NU................................ Northeast Utilities NU system......................... The Northeast Utilities system companies, including NU and its wholly owned operating subsidiaries: CL&P, PSNH, WMECO, NAEC, and Yankee Gas NUSCO............................. Northeast Utilities Service Company PSNH.............................. Public Service Company of New Hampshire Select Energy..................... Select Energy, Inc. WMECO............................. Western Massachusetts Electric Company Yankee............................ Yankee Energy System, Inc. Yankee Gas........................ Yankee Gas Services Company NUCLEAR UNITS Millstone 1....................... Millstone Unit No. 1, a 660 megawatt nuclear unit completed in 1970; Millstone 1 is currently in decommissioning status. Millstone 2....................... Millstone Unit No. 2, an 870 megawatt nuclear electric generating unit completed in 1975 Millstone 3....................... Millstone Unit No. 3, a 1,154 megawatt nuclear electric generating unit completed in 1986 Seabrook.......................... Seabrook Unit No. 1, a 1,148 megawatt nuclear electric generating unit completed in 1986; Seabrook went into service in 1990. REGULATORS DEP.............................. Department of Environmental Protection DPUC............................. Connecticut Department of Public Utility Control DTE.............................. Massachusetts Department of Telecommunications and Energy NHPUC............................ New Hampshire Public Utilities Commission NRC.............................. Nuclear Regulatory Commission NYPSC............................ New York Public Service Commission OTHER CFD Payments..................... Contract for Difference Payments DIG.............................. Derivatives Implementation Group EPS.............................. Earnings per share FASB............................. Financial Accounting Standards Board Fitch............................ Fitch IBCA MW............................... Megawatts NU 1999 Form 10-K................ The NU system combined 1999 Form 10-K as filed with the Securities and Exchange Commission O&M.............................. Operation and maintenance SAB.............................. Staff Accounting Bulletin Settlement Agreement............. Agreement to Settle PSNH Restructuring SFAS............................. Statement of Financial Accounting Standards Northeast Utilities and Subsidiaries The Connecticut Light and Power Company and Subsidiaries Public Service Company of New Hampshire Western Massachusetts Electric Company and Subsidiary North Atlantic Energy Corporation TABLE OF CONTENTS ----------------- Page ---- Part I. Financial Information Item 1. Financial Statements (Unaudited) and Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations For the following companies: Northeast Utilities and Subsidiaries Consolidated Balance Sheets - September 30, 2000 and December 31, 1999................ 2 Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 2000 and 1999............................. 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999........... 5 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 6 Report of Independent Public Accountants................ 19 The Connecticut Light and Power Company and Subsidiaries Consolidated Balance Sheets - September 30, 2000 and December 31, 1999................ 22 Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 2000 and 1999............................. 24 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999........... 25 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 26 Public Service Company of New Hampshire Balance Sheets - September 30, 2000 and December 31, 1999................ 34 Statements of Income - Three Months and Nine Months Ended September 30, 2000 and 1999............................. 36 Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999........... 37 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 38 Western Massachusetts Electric Company and Subsidiary Consolidated Balance Sheets - September 30, 2000 and December 31, 1999................ 44 Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 2000 and 1999............................. 46 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999........... 47 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 48 North Atlantic Energy Corporation Balance Sheets - September 30, 2000 and December 31, 1999................ 54 Statements of Income - Three Months and Nine Months Ended September 30, 2000 and 1999............................. 56 Statements of Cash Flows - Nine Months Ended September 30, 2000 and 1999........... 57 Management's Discussion and Analysis of Financial Condition and Results of Operations........... 58 Notes to Financial Statements (unaudited - all companies).... 61 Part II. Other Information Item 1. Legal Proceedings................................... 70 Item 6. Exhibits and Reports on Form 8-K.................... 71 Signatures............................................................. 72 NORTHEAST UTILITIES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) ASSETS - ------ Utility Plant, at cost: Electric................................................ $ 9,314,090 $ 9,185,272 Gas and other........................................... 847,856 226,002 ------------- ------------- 10,161,946 9,411,274 Less: Accumulated provision for depreciation......... 6,493,571 6,088,310 ------------- ------------- 3,668,375 3,322,964 Unamortized PSNH acquisition costs...................... 303,123 324,437 Construction work in progress........................... 206,513 177,504 Nuclear fuel, net....................................... 118,550 122,529 ------------- ------------- Total net utility plant.............................. 4,296,561 3,947,434 ------------- ------------- Other Property and Investments: Nuclear decommissioning trusts, at market............... 762,686 711,910 Investments in regional nuclear generating companies, at equity................................... 83,284 81,503 Other, at cost.......................................... 139,694 94,768 ------------- ------------- 985,664 888,181 ------------- ------------- Current Assets: Cash and cash equivalents............................... 237,972 255,154 Investments in securitizable assets..................... 62,635 107,620 Receivables, net........................................ 479,957 310,190 Unbilled revenues....................................... 72,003 75,728 Fuel, materials and supplies, at average cost........... 171,253 171,496 Recoverable energy costs, net - current portion......... 109,882 73,721 Prepayments and other................................... 226,863 77,371 ------------- ------------- 1,360,565 1,071,280 ------------- ------------- Deferred Charges: Regulatory assets: Recoverable nuclear costs............................. 2,096,234 2,210,767 Income taxes, net..................................... 598,942 636,563 Deferred costs - nuclear plants....................... 50,287 111,588 Unrecovered contractual obligations................... 265,375 349,189 Recoverable energy costs, net......................... 197,349 228,166 Other................................................. 152,814 106,166 Unamortized debt expense................................ 33,524 39,192 Goodwill and other purchased intangible assets.......... 336,221 23,542 Other .................................................. 191,844 75,984 ------------ ------------ 3,922,590 3,781,157 ------------ ------------ Total Assets.............................................. $ 10,565,380 $ 9,688,052 ============ ============
The accompanying notes are an integral part of these financial statements. NORTHEAST UTILITIES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common shareholders' equity: Common shares, $5 par value - authorized 225,000,000 shares; 148,695,939 shares issued and 143,590,018 shares outstanding in 2000 and 137,393,829 shares issued and 131,870,284 shares outstanding in 1999.................................. $ 743,480 $ 686,969 Capital surplus, paid in.............................. 1,094,996 940,726 Deferred contribution plan - employee stock ownership plan...................................... (118,554) (127,725) Retained earnings..................................... 691,164 581,817 Accumulated other comprehensive income................ 2,699 1,524 ------------- ------------- Total common shareholders' equity.............. 2,413,785 2,083,311 Preferred stock not subject to mandatory redemption..... 136,200 136,200 Preferred stock subject to mandatory redemption......... 15,000 121,289 Long-term debt.......................................... 2,042,929 2,372,341 ------------- ------------- Total capitalization........................... 4,607,914 4,713,141 ------------- ------------- Minority Interest in Consolidated Subsidiary.............. 100,000 100,000 ------------- ------------- Obligations Under Capital Leases.......................... 50,619 62,824 ------------- ------------- Current Liabilities: Notes payable to banks.................................. 1,127,338 278,000 Long-term debt and preferred stock - current portion.... 539,900 503,315 Obligations under capital leases - current portion...... 113,101 118,469 Accounts payable........................................ 481,411 347,321 Accrued taxes........................................... 144,282 158,684 Accrued interest........................................ 46,760 37,904 Other................................................... 121,259 126,768 ------------- ------------ 2,574,051 1,570,461 ------------- ------------ Deferred Credits and Other Long-term Liabilities: Accumulated deferred income taxes....................... 1,674,587 1,688,114 Accumulated deferred investment tax credits............. 156,002 140,407 Decommissioning obligation - Millstone 1................ 683,234 702,351 Deferred contractual obligations........................ 255,816 358,387 Other................................................... 463,157 352,367 ------------- ------------ 3,232,796 3,241,626 ------------- ------------ Commitments and Contingencies (Note 2) Total Capitalization and Liabilities...................... $ 10,565,380 $ 9,688,052 ============= =============
The accompanying notes are an integral part of these financial statements. NORTHEAST UTILITIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2000 1999 2000 1999 ------------- ------------- ------------- ------------- (Thousands of Dollars, except share information) Operating Revenues............................. $ 1,581,947 $ 1,240,539 $ 4,379,241 $ 3,322,515 ------------- ------------- ------------- ------------- Operating Expenses: Operation - Fuel, purchased and net interchange power.... 918,778 592,802 2,503,315 1,461,289 Other........................................ 233,646 189,276 628,067 575,913 Maintenance................................... 59,847 79,688 181,337 273,196 Depreciation.................................. 58,153 77,584 177,491 244,707 Amortization of regulatory assets, net........ 75,010 84,862 188,460 217,923 Federal and state income taxes................ 61,582 56,409 171,452 111,956 Taxes other than income taxes................. 59,170 70,616 178,857 202,099 Gain on sale of utility plant................. - (21,242) - (21,242) ------------- ------------- ------------- ------------- Total operating expenses............... 1,466,186 1,129,995 4,028,979 3,065,841 ------------- ------------- ------------- ------------- Operating Income............................... 115,761 110,544 350,262 256,674 ------------- ------------- ------------- ------------- Other Income/(Loss): Equity in earnings of regional nuclear generating and transmission companies..... 4,215 2,385 7,740 5,887 Nuclear related costs........................ (971) (18,372) (19,344) (21,056) Other, net................................... 13,032 (8,529) 10,944 (7,744) Minority interest in loss of subsidiary...... (2,325) (2,325) (6,975) (6,975) Income taxes................................. 16,029 18,556 44,984 38,995 ------------- ------------- ------------- ------------- Other income/(loss), net............... 29,980 (8,285) 37,349 9,107 ------------- ------------- ------------- ------------- Income before interest charges......... 145,741 102,259 387,611 265,781 ------------- ------------- ------------- ------------- Interest Charges: Interest on long-term debt................... 47,953 62,743 156,137 195,568 Other interest, net.......................... 29,493 2,634 67,715 2,778 ------------- ------------- ------------- ------------- Interest charges, net.................. 77,446 65,377 223,852 198,346 ------------- ------------- ------------- ------------- Income after interest charges.......... 68,295 36,882 163,759 67,435 Preferred Dividends of Subsidiaries............ 2,752 5,664 11,423 17,545 ------------- ------------- ------------- ------------- Net Income..................................... $ 65,543 $ 31,218 $ 152,336 $ 49,890 ============= ============= ============= ============= Basic Earnings Per Common Share................ $ 0.46 $ 0.24 $ 1.08 $ 0.38 ============= ============= ============= ============= Fully Diluted Earnings Per Common Share........ $ 0.45 $ 0.24 $ 1.08 $ 0.38 ============= ============= ============= ============= Common Shares Outstanding (average)............ 143,535,147 131,525,509 140,829,337 131,317,964 ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. NORTHEAST UTILITIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------- 2000 1999 ----------- ----------- (Thousands of Dollars) Operating Activities: Income after interest charges............................. $ 163,759 $ 67,435 Adjustments to reconcile to net cash flows provided by operating activities: Depreciation............................................ 177,491 244,707 Deferred income taxes and investment tax credits, net... (28,326) (30,550) Amortization of regulatory assets, net.................. 188,460 217,923 Amortization of recoverable energy costs................ (5,457) 7,960 Gain on sale of utility plant........................... - (21,242) Net other sources of cash............................... 7,162 81,787 Changes in working capital: Receivables and unbilled revenues, net.................. (62,875) (124,409) Fuel, materials and supplies............................ 4,908 (2,048) Accounts payable........................................ 113,576 (3,221) Accrued taxes........................................... (37,913) 74,168 Investments in securitizable assets..................... 44,985 115,632 Prepayments and other................................... (142,792) (30,074) Other working capital (excludes cash)................... (6,550) 12,068 ----------- ----------- Net cash flows provided by operating activities............. 416,428 610,136 ----------- ----------- Investing Activities: Investments in plant: Electric, gas and other utility plant................... (218,766) (187,650) Nuclear fuel............................................ (38,223) (38,349) ----------- ----------- Net cash flows used for investments in plant.............. (256,989) (225,999) Investments in nuclear decommissioning trusts............. (28,415) (54,218) Acquisition of unregulated businesses..................... - (24,002) Net proceeds from the sale of utility plant............... - 48,385 Other investment activities, net.......................... (46,826) (331) Payment for purchase of Yankee, net of cash acquired...... (260,347) - ----------- ----------- Net cash flows used in investing activities................. (592,577) (256,165) ----------- ----------- Financing Activities: Issuance of common shares................................. 2,699 2,962 Issuance of long-term debt................................ 26,477 200 Net increase in short-term debt........................... 779,338 221,100 Reacquisitions and retirements of long-term debt.......... (469,095) (331,175) Reacquisitions and retirements of preferred stock......... (126,039) (30,250) Cash dividends on preferred stock......................... (11,423) (17,545) Cash dividends on common shares........................... (42,990) - ----------- ----------- Net cash flows provided by/(used in) financing activities... 158,967 (154,708) ----------- ----------- Net (decrease)/increase in cash and cash equivalents........ (17,182) 199,263 Cash and cash equivalents - beginning of period............. 255,154 136,155 ----------- ----------- Cash and cash equivalents - end of period................... $ 237,972 $ 335,418 =========== =========== Supplemental schedule of noncash investing and financing activities: In conjunction with the Yankee acquisition on March 1, 2000, common stock was issued and debt was assumed as follows: Fair value of assets acquired $ 712,484 Cash paid (261,370) NU common stock issued (217,114) ----------- Debt assumed $ 234,000 ===========
The accompanying notes are an integral part of these financial statements. NORTHEAST UTILITIES AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with the consolidated financial statements and footnotes in this Form 10-Q, the First and Second Quarter 2000 Form 10-Qs, current reports on Form 8-K dated September 27, 2000, October 23, 2000, October 24, 2000, and October 31, 2000, and the 1999 Form 10-K. FINANCIAL CONDITION Overview The financial improvement that began in 1999 continued through the nine months ended September 30, 2000. Northeast Utilities' (NU) 2000 year-to-date results benefited from strong operating performance at the Millstone 2 and 3 and Seabrook nuclear units, continued control over operation and maintenance (O&M) expenses and better results in NU's competitive energy subsidiaries. Those factors more than offset lower retail rates in 2000 at The Connecticut Light and Power Company (CL&P), moderate summer temperatures in 2000, as compared to 1999, and the effects of the acquisition of Yankee Energy System, Inc. (Yankee) on March 1, 2000. NU earned $65.5 million, or $0.45 per share on a fully diluted basis, for the three months ended September 30, 2000, approximately doubling the $31.2 million, or $0.24 per share, NU earned during the same period of 1999. Nuclear related factors were a primary reason for the improvement. Millstone 2 and 3 each operated at 100 percent capacity factors during the third quarter of 2000, increasing the NU system's revenue and earnings. Should Millstone 2's and 3's strong operating performance continue through the end of 2000, this factor should continue to have a positive impact on earnings. In the third quarter of 1999, Western Massachusetts Electric Company (WMECO) recorded an after-tax charge of $13.8 million, or $0.11 per share, related to unrecoverable costs for its Millstone investment. CL&P also recorded an after-tax charge of $6.6 million, or $0.05 per share, related to Millstone. NU's subsidiaries recorded no such charges in the third quarter of 2000. For the first nine months of 2000, NU earned $152.3 million, or $1.08 per share, approximately three times the $49.9 million, or $0.38 per share, NU earned during the first nine months of 1999. The primary factors for this improvement include the return to service of Millstone 2 in May 1999, which contributed to a 4.6 percent decrease in nonfuel O&M expenses to $809.4 million in the first nine months of 2000, compared with $849.1 million during the same period of 1999. Another factor for NU's earnings improvement has been the performance of its competitive energy subsidiaries. NU's competitive energy subsidiaries earned $4.5 million in the third quarter of 2000, as compared to a loss of $14.9 in the third quarter of 1999. Also, third quarter 2000 results included an after-tax gain of $10.4 million, or $0.07 per share, as a result of NU's subsidiary, Mode 1 Communications, Inc.'s (Mode 1) investment in NEON Communications, Inc. (NEON). This gain is a result of investments in NEON by two unaffiliated companies. Partially offsetting the gains associated with strong Millstone performance, lower nonfuel O&M expenses and better results at the competitive energy subsidiaries has been a decline in regulated retail electric revenues. The decline in regulated retail electric revenues resulted from a 5 percent retail rate reduction for CL&P, effective January 1, 2000, and moderate summer temperatures in 2000, as compared to 1999. The rate reduction at CL&P reduced third quarter 2000 revenue by $25.7 million, compared with the same period of 1999 and reduced revenue by $82.3 million for first nine months 2000, compared with the same period of 1999. However, a sharp reduction in amortization expense, primarily as a result of the cessation of a period of accelerated regulatory asset amortization for CL&P, more than offset the reduced revenues. Net regulatory asset amortization expense totaled $188.5 million for the first nine months of 2000, compared with $217.9 million for the same period of 1999. Similar revenue reductions are expected in the fourth quarter of 2000. Fourth quarter 2000 results will also be negatively affected by a 5 percent reduction in retail rates at the Public Service Company of New Hampshire (PSNH), which was effective October 1, 2000. NU acquired Yankee near the end of the winter heating season and near the end of Yankee's strongest earnings period. As a result of seasonal weather factors, Yankee lost $6.7 million during the seven months it has been part of the NU system. In addition, NU's earnings have been negatively affected by the additional interest expense related to the $263 million of short-term debt NU issued to acquire Yankee and NU's earnings per share have been negatively affected by the dilutive effect of approximately 11.1 million NU common shares issued to former Yankee shareholders at the time of the acquisition. Yankee's operations are expected to become profitable in the fourth quarter of 2000 as heating-related sales increase. Moderate summer temperatures in 2000 resulted in reduced regulated retail sales, compared with the very hot third quarter of 1999. Third quarter 2000 retail sales were down 4.8 percent, compared with the same period of 1999. Regulated retail sales during the nine months ended September 30, 2000, were down 0.8 percent from the same period of 1999. However, regulated retail sales increased by 1.2 percent and 1.4 percent for the three and nine months ended September 30, 2000, respectively, on a weather-adjusted basis. NU estimates that earnings will be between $1.30 per share and $1.50 per share in 2000, compared with $0.26 per share in 1999. However, year 2000 estimates do not include the after-tax write-off of $225 million NU will record when electric industry restructuring for PSNH is probable. Fourth quarter results will be driven largely by weather-related electric and natural gas sales, the performance of the Millstone units and the performance of the competitive energy subsidiaries in a quarter that ordinarily has modest weather-related sales volume. Merger Agreement with Consolidated Edison, Inc. On October 19, 2000, the Connecticut Department of Public Utility Control (DPUC) approved the merger of NU and Consolidated Edison, Inc., (Con Edison) with extensive conditions. These conditions included a 3 percent rate reduction and a $60 million pretax write-off for CL&P immediately following the merger, a 50 percent/50 percent sharing of CL&P earnings above a return on equity of 11.3 percent through 2003, a rate reduction for Yankee Gas Services Company (Yankee Gas) immediately upon the merger date, and various operational, employment, land use, and customer service conditions. On November 3, 2000, NU and Con Edison filed a petition for reconsideration of several of the conditions imposed by the DPUC on the merger, including the 3 percent rate reduction, the $60 million pretax write-off and other conditions related to the sharing of merger savings. The petition also sought reconsideration of the Yankee Gas rate reduction and various other operational and employment conditions. Under the Connecticut General Statutes, the DPUC has the option to either grant or deny the petition for reconsideration. If the DPUC does not respond to the petition within 25 days from the date the petition is received, it is effectively denied. If the DPUC acts on the petition and agrees to reconsider specific issues in its final decision, the DPUC would then establish the scope and timing of the reconsideration process. The attorney general of Connecticut has petitioned the DPUC to reject the merger. The Office of Consumer Counsel is also opposed to the merger. The DPUC's actions on the requests for reconsideration could have an impact upon the timing of the merger. On October 3, 2000, Con Edison, the staff of the New York Public Service Commission (NYPSC) and various other parties announced the settlement of various rate issues in New York, including recommending approval of the merger and the sharing of merger synergies attributable to Con Edison's New York subsidiaries. NU was a signatory to that agreement. The attorney general of New York has petitioned the NYPSC to reject the agreement. The NYPSC's vote on the settlement is expected in November 2000. On August 22, 2000, the Nuclear Regulatory Commission (NRC) approved the indirect license transfers necessary to complete the proposed merger with Con Edison. The NRC found that the merger will not affect the qualifications of the subsidiaries of NU and Con Edison to hold licenses for Indian Point Units 1 and 2, Millstone 1, 2 and 3, and Seabrook. The approval order expires on December 31, 2001. The merger agreement calls for NU shareholders to receive a base of $25 per share plus $0.0034 per share per day for each day that the merger does not close after August 5, 2000. Additionally, NU shareholders will receive another $1 per share as a result of a recommendation by the DPUC's Utility Operations Management Analysis Unit that the DPUC accept the results of the Millstone auction that were announced on August 7, 2000. This recommendation was received by the DPUC on September 27, 2000. The $25 per share base price, the $0.0034 per share per day compensation and the additional $1 per share resulting from the Millstone auction are all subject to the collar mechanism described in the merger proxy statement dated February 29, 2000, to the extent NU shareholders receive Con Edison stock. Approvals of the New Hampshire Public Utilities Commission (NHPUC), the United State Department of Justice and the Securities and Exchange Commission also must be obtained before the merger can proceed. Liquidity Net cash flows provided by operating activities decreased to $416.4 million for the nine months ended September 30, 2000, compared with $610.1 million for the nine months ended September 30, 1999. Industry restructuring in Connecticut and Massachusetts which required retail rate cuts reduced cash flows from operating activities. Industry restructuring resulted in a reduction of depreciation and amortization expense of $96.7 million for the nine months ended September 30, 2000, as compared to 1999. Changes in working capital, primarily a decrease in accrued taxes and an increase in prepayments and other, also decreased cash flows from operating activities. The increase in prepayments and other is primarily comprised of increases in prepaid pension and prepaid property taxes. Those factors were partially offset by a $96.3 million increase in income after interest charges in the first nine months of 2000, compared with the same period in 1999. Including construction expenditures, investments in nuclear decommissioning trusts and the payment for the purchase of Yankee, net cash flows used in investing activities were $592.6 million for the nine months ended September 30, 2000, compared with $256.2 million for the nine months ended September 30, 1999. Net cash flows provided by financing activities were $159 million for the nine months ended September 30, 2000, compared with net cash flows used in financing activities of $154.7 million for the nine months ended September 30, 1999. The net cash flows provided by financing activities included a net increase in short-term debt of $779.3 million for the nine months ended September 30, 2000, compared with $221.1 million for the nine months ended September 30, 1999. The significant increase in short-term debt resulted primarily from two transactions, the $430 million debt financing that accompanied the transfer of 1,289 megawatts (MW) of hydroelectric generation assets to Northeast Generation Company (NGC) in March 2000 and a $263 million debt financing that paid for the cash portion of the merger with Yankee. Both were funded through bank debt that management believes will be refinanced in late 2000 and early 2001. The transfer of the 1,289 MW hydroelectric generation assets to NGC produced a significant source of cash for CL&P and WMECO, which was primarily used to retire their long-term debt and preferred stock. Consolidated financing activities for the nine months ended September 30, 2000, included $595.1 million for the retirement of long-term debt and preferred stock, compared with $361.4 million for the nine months ended September 30, 1999. Cash dividends on common shares paid for the nine months ended September 30, 2000, were $43 million, compared with no cash dividends paid for the nine months ended September 30, 1999. Payments made for the preferred stock dividends were $11.4 million and $17.5 million for the nine months ended September 30, 2000 and 1999, respectively, reflecting the ongoing reduction of preferred stock outstanding. In August and September 2000, PSNH repaid $109.2 million of variable-rate taxable pollution control bonds. On October 2, 2000, PSNH paid a $50 million common dividend to NU, the first common dividend paid by PSNH since February 1997. NU used the dividend to repay short-term borrowings. As agreed to by the NHPUC, the dividend was paid in connection with the 5 percent rate reduction effective October 1, 2000. On October 4, 2000, Fitch IBCA (Fitch) upgraded the debt ratings of PSNH's secured pollution control bonds and preferred stock and North Atlantic Energy Corporation's (NAEC) first mortgage bonds. Almost all NU system securities are under review for possible upgrades, or on "credit watch" with positive implications by Standard and Poor's, Moody's Investors Service and Fitch. On October 10, 2000, the NU Board of Trustees declared a 10 cent per share dividend, payable on December 29, 2000, to shareholders of record as of December 1, 2000. In the fourth quarter of 2000, NU and its subsidiaries expect to refinance most of the NU system's short-term debt. The $350 million line of credit for NU and its competitive energy subsidiaries is expected to increase to $400 million to reflect the expanding credit needs of Select Energy, Inc. (Select Energy). The $500 million line of credit for CL&P and WMECO is expected to be reduced to $350 million to reflect the declining cash needs of NU's regulated businesses. Additionally, NAEC has renewed $200 million of bank borrowings for one year and NGC must extend the $430 million borrowed in March 2000 when former CL&P and WMECO hydroelectric generation assets were transferred. Over the three-year period of 1999 through 2001, NU expects to complete the restructuring of its three major operating subsidiaries; CL&P, PSNH and WMECO. Total capitalization of each of those companies is expected to drop significantly as a result of the sale of generation assets and the securitization of stranded costs. Management currently expects these regulated companies to receive in excess of $5 billion during that period. Primary sources would include securitization of CL&P's nonnuclear stranded costs (approximately $1.5 billion), the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets (approximately $1.4 billion), the sale of Millstone (approximately $1.2 billion), the sale of PSNH's fossil and hydroelectric generation assets, and securitization of PSNH stranded costs (approximately $1.0 billion). As of September 30, 2000, only the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets have occurred, though steps to complete other transactions were under way. Management currently expects these operating subsidiaries to use proceeds from the aforementioned transactions in four primary ways. More than $2 billion would be used to repay debt and preferred stock; more than $1 billion to buyout and buydown high-cost nonutility generator arrangements; approximately $600 million to pay taxes on the gains from the sale of generation assets, and; approximately $1.2 billion that would be returned to NU, from these operating companies. Of that $1.2 billion, CL&P and WMECO repurchased $390 million of their common stock from NU in March 2000, the proceeds from which NU immediately reinvested in NGC. NU will use another $215 million to settle the forward repurchase of approximately 10 million NU common shares that was undertaken in December 1999 and January 2000. Depending on the status of the Con Edison merger, management will consider a variety of uses for the remaining $500 million to $600 million, including share repurchases and additional investments. On November 8, 2000, the DPUC approved CL&P's request to securitize an amount not to exceed $1.55 billion of approved, eligible stranded costs, primarily related to above-market purchased-power contracts and generation related regulatory assets. The NHPUC approved securitization of up to $670 million of PSNH's stranded costs on September 8, 2000. PSNH plans to complete the securitization process by early 2001. WMECO is seeking Massachusetts Department of Telecommunications and Energy (DTE) approval to securitize $160 million of stranded costs which is anticipated by the end of 2000. Unlike several other electric transmission and distribution companies that have implemented restructuring, CL&P and WMECO have been able to supply electricity to their standard offer and default service customers without deferring the collection of payments made to their suppliers, including Select Energy. CL&P's fixed-rate supply contracts extend through the end of the standard offer service period in 2003. WMECO will renew its standard offer supply contracts beginning January 1, 2001, for the calendar year 2001, through a competitive bidding solicitation process. The bidding deadline closed at the end of October 2000. Bid results reflect an increase to the current cost to supply standard offer service which is consistent with the current increase in market prices for energy. As a result, WMECO will seek rate relief under the current restructuring legislation effective January 1, 2001. Under the "Agreement to Settle PSNH Restructuring" (Settlement Agreement), PSNH will supply transition service for its customers from its own portfolio of generation assets for the first nine months after restructuring takes effect. PSNH is not expected to defer significant costs during that time. Restructuring For information regarding commitments and contingencies related to restructuring matters, see Note 2A, "Commitments and Contingencies - Restructuring," to the consolidated financial statements. Competitive Energy Subsidiaries NU's competitive energy subsidiaries engage in a variety of energy-related activities, primarily in the unregulated energy retail and wholesale commodity, marketing and services fields. In addition, these subsidiaries acquire and manage generation facilities, as well as provide services to the electric generation market and large commercial and industrial customers in the Northeast. NU's competitive energy subsidiaries earned $4.5 million in the third quarter of 2000 and earned $14.8 million for the first nine months of 2000, compared with a net loss of $14.9 million in the third quarter of 1999 and a net loss of $29 million for the first nine months of 1999. In July 1999, NGC was announced as one of the winning bidders of certain CL&P and WMECO hydroelectric generation assets. Management expected this transaction to close by January 1, 2000. The transaction actually closed on March 14, 2000. This transaction has allowed NU to better balance its energy purchase and supply commitments, improving profitability. Had the transaction closed by January 1, 2000, management estimated the competitive energy subsidiaries' earnings for the nine months ended September 30, 2000, would have been increased by $6.9 million. As a result of the delayed closing, CL&P and WMECO recognized the earnings associated with the generation assets transferred from January 1, 2000, through March 14, 2000. Unconsolidated revenues for the competitive energy subsidiaries were $592.8 million in the third quarter of 2000 and $1.51 billion for the nine months ended September 30, 2000. By comparison, unconsolidated revenues for those businesses were $199.9 million in the third quarter of 1999 and $444.4 million for the nine months ended September 30, 1999. CL&P's standard offer purchases from Select Energy, represented $485 million of total competitive energy subsidiaries' revenues for the nine months ended September 30, 2000. On September 26, 2000, NU invested $10 million in Acumentrics Corporation (Acumentrics) in return for a 5 percent share of that company. Acumentrics is a privately owned producer of advanced power generation and power protection technologies applicable to homes, telecommunications, commercial businesses, industrial facilities, and the auto industry. This investment provides NU with the entrance into the premium power and distributed generation market. Nuclear Generation Millstone: During the first nine months of 2000, Millstone 2 and 3 achieved capacity factors of 76 percent and 100 percent, respectively. Millstone 3 has been on-line for 491 consecutive days as of October 31, 2000. If the units operate as expected, the revenues that result from the sale of their entitlements are expected to recover CL&P's and WMECO's share of the nuclear operating costs including a return of and on the remaining unrecovered nuclear plant balances. As generation has been deregulated for CL&P and WMECO, recovery of these costs is contingent upon the plants operating. Seabrook: Seabrook achieved a capacity factor of 98 percent for the first nine months of 2000. Seabrook was taken out of service on October 21, 2000, for a scheduled refueling and maintenance outage. CL&P anticipates auctioning its ownership interest in Seabrook, with the ownership interest of its affiliate NAEC, after implementation of the Settlement Agreement. The Settlement Agreement requires divestiture prior to December 31, 2003. Market Risk and Risk Management Instruments Competitive Energy Subsidiaries' Market Risk: NU's competitive energy subsidiaries, as major providers of electricity and natural gas, have certain market risks inherent in their business activities. Market risk represents the risk of loss that may impact the companies' financial statements due to adverse changes in commodity market prices. Through September 30, 2000, the competitive energy subsidiaries increased their volume of electricity and gas marketing activities, increasing these risks. The servicing of CL&P's standard offer load is a significant risk for Select Energy, as this contract is for a 4-year period, ending December 31, 2003, at fixed prices. This risk is partially mitigated by Select Energy entering into purchase contracts with other energy providers to supply a portion of the standard offer requirement, including its contracts with NGC, the purchase of 850 MW of output from the Millstone and Seabrook nuclear units through 2001 and other resources in the energy marketplace. If Select Energy is unable to source its remaining load requirement at prices below the standard offer contract price as a result of energy price increases, Select Energy's earnings would be adversely impacted. Select Energy has also entered into contracts with various retail customers to provide energy services at fixed rates. Under these retail contracts, Select Energy has the option to have the host utility provide energy services and is obligated to compensate the customer as defined in the contracts (CFD Payments). For the nine months ended September 30, 2000, these CFD Payments totaled approximately $2.7 million. These CFD Payments may increase in the future. Policies and procedures have been established to manage these exposures, including the use of risk management instruments and the purchase of insurance for the output from the Millstone nuclear entitlements. Gas Supply Risk Management Instruments: Yankee Gas has gas service agreements with certain customers to supply gas at fixed prices for a 10-year term extending through 2005. Yankee Gas has hedged its gas price risk under these agreements through commodity swap agreements. Under these commodity swap agreements, the purchase price of a specified quantity of gas is effectively fixed over the term of the gas service agreements, which also extend through 2005. Other Matters Other Commitments and Contingencies: For further information regarding other commitments and contingencies, see Note 2, "Commitments and Contingencies," to the consolidated financial statements. Forward Looking Statements: This discussion and analysis includes forward looking statements, which are statements of future expectations and not facts including, but not limited to, statements regarding future earnings, refinancings, the use of proceeds from restructuring, and the recovery of operating costs. Words such as estimates, expects, anticipates, intends, plans, and similar expressions identify forward looking statements. Actual results or outcomes could differ materially as a result of further actions by state and federal regulatory bodies, competition and industry restructuring, changes in economic conditions, changes in historical weather patterns, changes in laws, developments in legal or public policy doctrines, technological developments, and other presently unknown or unforeseen factors. RESULTS OF OPERATIONS The components of significant income statement variances for the third quarter of 2000 and the first nine months of 2000 are provided in the table below. Income Statement Variances (Millions of Dollars) 2000 over/(under) 1999 ---------------------- Third Nine Quarter Percent Months Percent ------- ------- ------ ------- Operating Revenues $341 28% $1,057 32% Fuel, purchased and net interchange power 326 55 1,042 71 Other operation 44 23 52 9 Maintenance (20) (25) (92) (34) Depreciation (19) (25) (67) (27) Amortization of regulatory assets, net (10) (12) (29) (14) Federal and state income taxes 8 20 54 73 Taxes other than income taxes (11) (16) (23) (12) Gain on sale of utility plant 21 100 21 100 Nuclear related costs (17) (95) (2) (8) Other, net 22 (a) 19 (a) Interest on long-term debt (15) (24) (39) (20) Other interest, net 27 (a) 65 (a) Net Income 34 (a) 102 (a) (a) Percent greater than 100. Comparison of the Third Quarter of 2000 to the Third Quarter of 1999 - -------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $341 million or 28 percent in the third quarter of 2000, as compared to the same period of 1999, primarily due to increased revenues of NU's competitive energy subsidiaries ($396 million), as a result of an expansion of their electric and gas businesses and revenues from Yankee ($42 million), partially offset by lower regulated retail sales ($17 million), a 5 percent CL&P rate reduction ($26 million), lower CL&P and PSNH wholesale revenues ($23 million), and lower transmission revenues ($13 million). Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to higher purchased energy and capacity costs for Select Energy ($344 million) and Yankee expenses ($20 million), partially offset by lower purchased power for the regulated subsidiaries ($38 million). Other Operation and Maintenance Other operation expenses increased in 2000, primarily due to the deferral of 1999 costs associated with restructuring ($35 million), higher expenses for the unregulated businesses ($25 million), primarily due to business expansion, and the addition of Yankee operation expenses ($14 million), partially offset by higher pension income ($10 million), lower expenses due to the sale of certain CL&P and WMECO fossil generation assets ($8 million), and lower spending at the nuclear units ($5 million). Other maintenance expenses decreased in 2000, primarily due to lower spending at the nuclear units ($10 million), lower expenses due to the sale of certain CL&P and WMECO fossil generation assets ($6 million) and lower transmission expense ($5 million). Depreciation Depreciation expense decreased in 2000, primarily due to the effect of discontinuing Statement of Financial Accounting Standards (SFAS) No. 71 for the generation portion of the business for CL&P and WMECO and the resulting reclassification of depreciable nuclear plant balances to regulatory assets ($21 million). Amortization of Regulatory Assets, Net Amortization of regulatory assets, net decreased in 2000, primarily due to changes in amortization levels as a result of industry restructuring ($15 million) and the amortization of the 1999 gain on the sale of certain generation assets ($14 million). These decreases were partially offset by higher amortization associated with the reclassified nuclear plant balances ($21 million). Federal and State Income Taxes Federal and state income taxes increased in 2000, primarily due to higher taxable income. Taxes Other Than Income Taxes Taxes other than income taxes decreased in 2000, primarily due to lower Connecticut gross earnings taxes ($6 million) and lower local property taxes ($3 million). Gain on Sale of Utility Plant WMECO had a third quarter 1999 gain due to the sale of certain fossil and hydroelectric generation assets to an unaffiliated company. The gain, net of income tax expense, was offset by the amortization of regulatory assets. Nuclear Related Costs Nuclear related costs decreased in 2000, primarily due to the 1999 write-off of CL&P's capital projects as a result of its 1999 standard offer order ($11 million) and the 1999 write-off of WMECO's unrecoverable Millstone 1 investment as a result of its restructuring order ($7 million). Other, Net Other, net increased in 2000, primarily due to a gain related to Mode 1's investment in NEON ($20 million). Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to reacquisitions and retirements of long-term debt in 2000 and 1999. Other Interest, Net Other interest, net expense increased in 2000, primarily due to higher short-term borrowings associated with the NGC asset transfer and the Yankee merger. Comparison of the First Nine Months of 2000 to the First Nine Months of 1999 - ---------------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $1,057 million or 32 percent for the first nine months of 2000, as compared to the same period of 1999, primarily due to increased revenues of NU's competitive energy subsidiaries ($1,065 million), as a result of an expansion of their electric and gas businesses, and revenues from Yankee ($141 million), partially offset by lower CL&P and PSNH wholesale revenues ($74 million) and lower regulated retail revenues ($58 million). The regulated retail revenues are lower as a result of a 5 percent CL&P rate reduction ($79 million) and lower retail sales ($24 million), partially offset by the impact of Millstone 2 being returned to CL&P's rate base ($33 million). Regulated retail sales were lower by 0.8 percent in 2000, as compared to 1999. Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to higher purchased energy and capacity costs for Select Energy ($952 million), Yankee expenses ($67 million) and higher purchased power for the regulated subsidiaries ($23 million). Other Operation and Maintenance Other operation expenses increased in 2000, primarily due to higher expenses for the unregulated businesses ($52 million), primarily due to business expansion, the addition of Yankee operation expenses ($39 million), the deferral of 1999 costs associated with WMECO restructuring ($35 million), partially offset by lower spending at the nuclear units ($37 million), higher pension income ($26 million) and lower expenses due to the sale of certain CL&P and WMECO fossil generation assets ($24 million). Other maintenance expenses decreased in 2000, primarily due to lower spending at the nuclear units ($68 million), lower expenses due to the sale of certain CL&P and WMECO fossil generation assets ($19 million) and lower transmission expense ($8 million). Depreciation Depreciation expense decreased in 2000, primarily due to the effect of discontinuing SFAS No. 71 for the generation portion of the business for CL&P and WMECO and the resulting reclassification of depreciable nuclear plant balances to regulatory assets ($63 million). Amortization of Regulatory Assets, Net Amortization of regulatory assets, net decreased in 2000, primarily due to changes in amortization levels as a result of industry restructuring ($73 million) and the amortization of the 1999 gain on the sale of certain generation assets ($22 million). These decreases were partially offset by higher amortization associated with the reclassified nuclear plant balances ($63 million) and the amortization in 1999 of a net operating loss carryforward for PSNH ($11 million). Federal and State Income Taxes Federal and state income taxes increased in 2000, primarily due to higher taxable income. Taxes Other Than Income Taxes Taxes other than income taxes decreased in 2000, primarily due to lower Connecticut gross earnings taxes ($12 million) and lower general services overhead taxes ($7 million). Gain on Sale of Utility Plant WMECO had a third quarter 1999 gain due to the sale of certain fossil and hydroelectric generation assets to an unaffiliated company. The gain, net of income tax expense, was offset by the amortization of regulatory assets. Other, Net Other, net increased in 2000, primarily due to a gain related to Mode 1's investment in NEON ($20 million). Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to reacquisitions and retirements of long-term debt in 2000 and 1999. Other Interest, Net Other interest, net expense increased in 2000, primarily due to higher short-term borrowings associated with the NGC asset transfer and the Yankee merger. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Northeast Utilities: We have reviewed the accompanying consolidated balance sheet of Northeast Utilities (a Massachusetts trust) and subsidiaries as of September 30, 2000, and the related consolidated statements of income for the three and nine-month periods ended September 30, 2000 and 1999, and the consolidated statements of cash flows for the nine-month periods ended September 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1999 and the related consolidated statements of income, comprehensive income, shareholder's equity and cash flows for the year then ended (not presented separately herein), and in our report dated January 25, 2000, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Arthur Andersen LLP Arthur Andersen LLP Hartford, Connecticut November 9, 2000 THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) ASSETS - ------ Utility Plant, at original cost: Electric................................................ $ 5,722,708 $ 5,811,126 Less: Accumulated provision for depreciation......... 4,202,763 4,234,771 ------------- ------------- 1,519,945 1,576,355 Construction work in progress........................... 112,624 115,529 Nuclear fuel, net....................................... 73,520 80,766 ------------- ------------- Total net utility plant.............................. 1,706,089 1,772,650 ------------- ------------- Other Property and Investments: Nuclear decommissioning trusts, at market............... 549,373 516,796 Investments in regional nuclear generating companies, at equity................................... 55,907 54,472 Other, at cost.......................................... 30,882 36,696 ------------- ------------- 636,162 607,964 ------------- ------------- Current Assets: Cash.................................................... 5,242 364 Investment in securitizable assets...................... 62,635 107,620 Notes receivable from affiliated companies.............. 80,400 - Receivables, net........................................ 36,232 19,680 Accounts receivable from affiliated companies........... 135,821 3,390 Fuel, materials and supplies, at average cost........... 40,206 37,603 Prepayments and other................................... 197,864 148,628 ------------- ------------- 558,400 317,285 ------------- ------------- Deferred Charges: Regulatory assets: Recoverable nuclear costs............................. 1,128,135 1,781,929 Income taxes, net..................................... 377,209 399,467 Unrecovered contractual obligations................... 177,257 228,944 Recoverable energy costs, net......................... 85,445 89,422 Other................................................. 66,213 64,333 Unamortized debt expense................................ 14,977 16,323 Other................................................... 34,486 19,967 ------------- ------------- 1,883,722 2,600,385 ------------- ------------- Total Assets.............................................. $ 4,784,373 $ 5,298,284 ============= =============
The accompanying notes are an integral part of these financial statements. THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock, $10 par value - authorized 24,500,000 shares; 7,584,884 shares outstanding in 2000 and 12,222,930 shares outstanding in 1999................ $ 75,849 $ 122,229 Capital surplus, paid in.................................. 412,993 665,598 Retained earnings......................................... 208,816 153,254 Accumulated other comprehensive income.................... 802 416 ------------- ------------- Total common stockholder's equity................ 698,460 941,497 Preferred stock not subject to mandatory redemption....... 116,200 116,200 Preferred stock subject to mandatory redemption........... - 79,789 Long-term debt............................................ 1,069,615 1,241,051 ------------- ------------- Total capitalization............................. 1,884,275 2,378,537 ------------- ------------- Minority Interest in Consolidated Subsidiary................ 100,000 100,000 ------------- ------------- Obligations Under Capital Leases............................ 42,459 50,969 ------------- ------------- Current Liabilities: Notes payable to banks.................................... 110,000 90,000 Notes payable to affiliated company....................... - 11,700 Long-term debt and preferred stock - current portion...... 160,000 178,755 Obligations under capital leases - current portion........ 90,023 93,431 Accounts payable.......................................... 155,217 101,106 Accounts payable to affiliated companies.................. 123,167 3,215 Accrued taxes............................................. 70,166 169,214 Accrued interest.......................................... 16,652 18,640 Other..................................................... 29,065 26,347 ------------- ------------- 754,290 692,408 ------------- ------------- Deferred Credits and Other Long-term Liabilities: Accumulated deferred income taxes......................... 980,728 999,473 Accumulated deferred investment tax credits............... 101,594 107,064 Decommissioning obligation - Millstone 1.................. 592,552 580,320 Deferred contractual obligations.......................... 167,698 238,142 Other..................................................... 160,777 151,371 ------------- ------------- 2,003,349 2,076,370 ------------- ------------- Commitments and Contingencies (Note 2) Total Capitalization and Liabilities........................ $ 4,784,373 $ 5,298,284 ============= =============
The accompanying notes are an integral part of these financial statements. THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------------- 2000 1999 2000 1999 --------- --------- ----------- ----------- (Thousands of Dollars) Operating Revenues................................. $748,143 $667,349 $2,179,704 $1,839,415 --------- --------- ----------- ----------- Operating Expenses: Operation - Fuel, purchased and net interchange power..... 421,155 268,603 1,243,865 743,859 Other......................................... 105,753 121,024 306,789 357,515 Maintenance...................................... 35,012 47,660 101,713 170,467 Depreciation..................................... 27,836 53,191 89,232 161,501 Amortization of regulatory assets, net........... 30,505 41,342 56,944 114,309 Federal and state income taxes................... 41,212 36,418 107,162 61,175 Taxes other than income taxes.................... 34,726 47,142 103,311 133,838 --------- --------- ----------- ----------- Total operating expenses................... 696,199 615,380 2,009,016 1,742,664 --------- --------- ----------- ----------- Operating Income................................... 51,944 51,969 170,688 96,751 --------- --------- ----------- ----------- Other Income/(Loss): Equity in earnings of regional nuclear generating companies........................... 2,448 1,108 3,979 2,628 Nuclear related costs............................ (972) (12,024) (15,536) (14,709) Other, net....................................... (1,617) (4,508) (17) (5,195) Minority interest in income of subsidiary........ (2,325) (2,325) (6,975) (6,975) Income taxes..................................... 3,246 9,272 18,968 21,163 --------- --------- ----------- ----------- Other income/(loss), net................... 780 (8,477) 419 (3,088) --------- --------- ----------- ----------- Income before interest charges............. 52,724 43,492 171,107 93,663 --------- --------- ----------- ----------- Interest Charges: Interest on long-term debt....................... 21,821 31,022 67,950 96,317 Other interest................................... 2,995 2,597 6,420 7,993 --------- --------- ----------- ----------- Interest charges, net...................... 24,816 33,619 74,370 104,310 --------- --------- ----------- ----------- Net Income/(Loss).................................. $ 27,908 $ 9,873 $ 96,737 $ (10,647) ========= ========= =========== ===========
The accompanying notes are an integral part of these financial statements. THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ---------------------- 2000 1999 ----------- ---------- (Thousands of Dollars) Operating Activities: Net income/(loss)......................................... $ 96,737 $ (10,647) Adjustments to reconcile to net cash flows provided by operating activities: Depreciation............................................ 89,232 161,501 Deferred income taxes and investment tax credits, net... 4,824 (25,041) Amortization of regulatory assets, net.................. 56,944 114,309 Amortization of demand-side-management costs, net....... - 19,143 Amortization of recoverable energy costs................ 3,977 (20,126) Nuclear related costs................................... 15,536 - Amortization of gain on transfer of utility plant....... 19,083 - Allocation of ESOP benefits............................. (163) (30,351) Net other (uses)/sources of cash........................ (29,579) 106,749 Changes in working capital: Receivables............................................. (148,983) (97,794) Fuel, materials and supplies............................ (2,603) (9,852) Accounts payable........................................ 174,063 (7,066) Accrued taxes........................................... (99,048) 40,469 Investments in securitizable assets..................... 44,985 139,130 Prepayments and other................................... (49,236) (52,582) Other working capital (excludes cash)................... 730 32,577 ----------- ---------- Net cash flows provided by operating activities............. 176,499 360,419 ----------- ---------- Investing Activities: Investments in plant: Electric utility plant.................................. (127,857) (112,489) Nuclear fuel............................................ (18,794) (24,004) ----------- ---------- Net cash flows used for investments in plant.............. (146,651) (136,493) Investment in NU system Money Pool........................ (80,400) (64,200) Investments in nuclear decommissioning trusts............. (18,615) (39,348) Other investment activities, net.......................... (1,440) 2,450 Net proceeds from the transfer of utility plant........... 686,807 - ----------- ---------- Net cash flows provided by/(used in) investing activities... 439,701 (237,591) ----------- ---------- Financing Activities: Net increase in short-term debt........................... 8,300 150,000 Reacquisitions and retirements of long-term debt.......... (179,071) (214,010) Reacquisitions and retirements of preferred stock......... (99,539) (3,750) Repurchase of common shares............................... (300,000) - Cash dividends on preferred stock......................... (6,012) (9,675) Cash dividends on common stock............................ (35,000) - ----------- ---------- Net cash flows used in financing activities................. (611,322) (77,435) ----------- ---------- Net increase in cash for the period......................... 4,878 45,393 Cash - beginning of period.................................. 364 434 ----------- ---------- Cash - end of period........................................ $ 5,242 $ 45,827 =========== ==========
The accompanying notes are an integral part of these financial statements. THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations CL&P is a wholly owned subsidiary of NU. This discussion should be read in conjunction with NU's management's discussion and analysis of financial condition and results of operations, consolidated financial statements and footnotes in this Form 10-Q, the First and Second Quarter 2000 Form 10-Qs, and the NU 1999 Form 10-K. RESULTS OF OPERATIONS The components of significant income statement variances for the third quarter of 2000 and the first nine months of 2000 are provided in the table below. Income Statement Variances (Millions of Dollars) 2000 over/(under) 1999 ---------------------- Third Nine Quarter Percent Months Percent ------- ------- ------ ------- Operating revenues $ 81 12% $340 18% Fuel, purchased and net interchange power 153 57 500 67 Other operation (15) (13) (51) (14) Maintenance (13) (27) (69) (40) Depreciation (25) (48) (72) (45) Amortization of regulatory assets, net (11) (26) (57) (50) Federal and state income taxes 11 40 48 (a) Taxes other than income taxes (12) (26) (31) (23) Nuclear related costs (11) (92) 1 6 Other, net 3 64 5 100 Interest on long-term debt (9) (30) (28) (29) Net Income 18 (a) 107 (a) (a) Percent greater than 100. Comparison of the Third Quarter of 2000 to the Third Quarter of 1999 - -------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $81 million or 12 percent in the third quarter of 2000, as compared to the same period of 1999, primarily due to higher wholesale revenues ($129 million), as a result of the sale of the output from Millstone 2 and 3, partially offset by lower retail revenues ($35 million). Retail revenues were lower primarily as a result of a 5 percent rate reduction ($26 million) and lower retail sales. Retail sales decreased by 4.7 percent in 2000, compared with the same period of 1999. Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to the transition, under industry restructuring, of purchasing full requirements for customers from standard offer suppliers, in addition to the remaining fuel costs of the nuclear units and cogenerators. Other Operation and Maintenance Other O&M expenses decreased in 2000, primarily due to lower expenses as a result of the sale of certain fossil generation assets and the transfer of certain hydroelectric generation assets ($14 million), lower spending at the nuclear units ($14 million), lower transmission expense ($11 million), lower administrative and general expenses ($10 million), partially offset by higher customer service expenses ($11 million). Depreciation Depreciation expense decreased in 2000, primarily due to the effect of discontinuing SFAS No. 71 for the generation portion of the business and the resulting reclassification of depreciable nuclear plant balances to regulatory assets ($17 million), the sale of certain fossil generation assets and the transfer of certain hydroelectric generation assets. Amortization of Regulatory Assets, Net Amortization of regulatory assets, net decreased in 2000, primarily due to changes in amortization levels as a result of industry restructuring ($24 million). This decrease was partially offset by higher amortization associated with the reclassified nuclear plant balances ($17 million). Federal and State Income Taxes Federal and state income taxes increased in 2000, primarily due to higher taxable income. Taxes Other Than Income Taxes Taxes other than income taxes decreased in 2000, primarily due to lower Connecticut gross earnings taxes and lower local property taxes. Nuclear Related Costs Nuclear related costs decreased in 2000, primarily due to the 1999 write-off of capital projects as a result of the standard offer order ($11 million). Other, Net Other, net increased in 2000, primarily due to higher miscellaneous income. Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to reacquisitions and retirements of long-term debt in 2000 and 1999. Comparison of the First Nine Months of 2000 to the First Nine Months of 1999 - ---------------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $340 million or 18 percent for the first nine months of 2000, as compared to the same period of 1999, primarily due to higher wholesale revenues ($378 million), as a result of the sale of the output from Millstone 2 and 3, and the amortization of the gain on the transfer of certain hydroelectric generation assets ($9 million), partially offset by lower retail revenues ($59 million). Retail revenues were lower primarily as a result of a 5 percent rate reduction ($82 million) and lower retail sales ($18 million). Retail sales decreased by 1.1 percent in 2000. These decreases were partially offset by the impact of Millstone 2 being returned to rate base ($33 million). Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to the transition, under industry restructuring, of purchasing full requirements for customers from standard offer suppliers, in addition to the remaining fuel costs of the nuclear units and cogenerators. Other Operation and Maintenance Other O&M expenses decreased in 2000, primarily due to lower spending at the nuclear units ($76 million), lower expenses due to the sale of certain fossil generation assets ($48 million) and lower administrative and general expenses ($20 million), partially offset by higher customer service expenses ($27 million). Depreciation Depreciation expense decreased in 2000, primarily due to the effect of discontinuing SFAS No. 71 for the generation portion of the business and the resulting reclassification of depreciable nuclear plant balances to regulatory assets ($53 million), the sale of certain fossil generation assets and the transfer of certain hydroelectric generation assets. Amortization of Regulatory Assets, Net Amortization of regulatory assets, net decreased in 2000, primarily due to changes in amortization levels as a result of industry restructuring ($92 million), the amortization in 1999 of the gain on the sale of fossil plants ($9 million) and the completion of the amortization of CL&P's cogeneration deferral in the first quarter of 1999 ($6 million). These decreases were partially offset by higher amortization associated with the reclassified nuclear plant balances ($53 million). Federal and State Income Taxes Federal and state income taxes increased in 2000, primarily due to higher taxable income. Taxes Other Than Income Taxes Taxes other than income taxes decreased in 2000, primarily due to lower Connecticut gross earnings taxes and lower local property taxes. Other, Net Other, net increased in 2000, primarily due to higher miscellaneous income. Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to reacquisitions and retirements of long-term debt in 2000 and 1999. LIQUIDITY Net cash flows provided by operating activities decreased to $176.5 million for the nine months ended September 30, 2000, compared with $360.4 million for the nine months ended September 30, 1999. Industry restructuring reduced cash flows from operating activities. Industry restructuring resulted in a reduction of depreciation and amortization expense of $129.6 million for the nine months ended September 30, 2000, as compared to 1999. Changes in other uses/sources of cash and changes in working capital, primarily changes in accounts payable, accrued taxes and a reduced level of investment in securitizable assets, also decreased cash flows from operating activities. Those factors were partially offset by a $107.4 million increase in net income in the first nine months of 2000, compared with the same period in 1999. Including construction expenditures and investments in nuclear decommissioning trusts, net cash flows provided by investing activities were $439.7 million for the nine months ended September 30, 2000, compared with net cash flows used in investing activities of $237.6 million for the nine months ended September 30, 1999. The primary reason for the increase was the net proceeds from the transfer of utility plant to NGC. Net cash flows used in financing activities were $611.3 million for the nine months ended September 30, 2000, compared with $77.4 million for the nine months ended September 30, 1999. The net cash flows included a net increase in short-term debt of $8.3 million for the nine months ended September 30, 2000, compared with $150 million for the nine months ended September 30, 1999. The transfer of the 1,289 MW hydroelectric generation assets to NGC produced a significant source of cash for CL&P, which was primarily used to retire short-term debt, long-term debt and preferred stock, as well as repurchase common stock. Financing activities for the nine months ended September 30, 2000, included $578.6 million for the retirement of long-term debt and preferred stock and the repurchase of common stock, compared with $217.8 million for the nine months ended September 30, 1999. Cash dividends on common shares paid for the nine months ended September 30, 2000, were $35 million, compared with no cash dividends paid for the nine months ended September 30, 1999. Payments made for the preferred stock dividends were $6 million and $9.7 million for the nine months ended September 30, 2000 and 1999, respectively, reflecting the ongoing reduction of preferred stock outstanding. In the fourth quarter of 2000, CL&P expects to refinance its short-term debt. The $500 million line of credit for CL&P and WMECO is expected to be reduced to $350 million to reflect the declining cash needs of NU's regulated businesses. Over the three-year period of 1999 through 2001, NU expects to complete the restructuring of its three major operating subsidiaries; CL&P, PSNH and WMECO. Total capitalization of each of those companies is expected to drop significantly as a result of the sale of generation assets and the securitization of stranded costs. Management currently expects these regulated companies to receive in excess of $5 billion during that period. Primary sources would include securitization of CL&P nonnuclear stranded costs (approximately $1.5 billion), the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets (approximately $1.4 billion), the sale of Millstone (approximately $1.2 billion), the sale of PSNH's fossil and hydroelectric generation assets, and securitization of PSNH stranded costs (approximately $1.0 billion). As of September 30, 2000, only the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets have occurred, though steps to complete other transactions were under way. Management currently expects these operating subsidiaries to use proceeds from the aforementioned transactions in four primary ways. More than $2 billion would be used to repay debt and preferred stock; more than $1 billion to buyout and buydown high-cost nonutility generator arrangements; approximately $600 million to pay taxes on the gains from the sale of generation assets, and; approximately $1.2 billion that would be returned to NU from these operating companies. Of that $1.2 billion, CL&P and WMECO repurchased $390 million of their common stock from NU in March 2000, the proceeds from which NU immediately reinvested in NGC. NU will use another $215 million to settle the forward repurchase of approximately 10 million NU common shares that was undertaken in December 1999 and January 2000. Depending on the status of the Con Edison merger, management will consider a variety of uses for the remaining $500 million to $600 million, including share repurchases and additional investments. On November 8, 2000, the DPUC approved CL&P's request to securitize an amount not to exceed $1.55 billion of approved, eligible stranded costs, primarily related to above-market purchased-power contracts and generation related regulatory assets. Unlike several other electric transmission and distribution companies that have implemented restructuring, CL&P has been able to supply electricity to its standard offer and default service customers without deferring the collection of payments made to suppliers, including Select Energy. CL&P's fixed-rate supply contracts extend through the end of the standard offer period in 2003. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) ASSETS - ------ Utility Plant, at cost: Electric................................................ $ 1,977,284 $ 1,939,856 Less: Accumulated provision for depreciation......... 704,992 674,155 ------------- ------------- 1,272,292 1,265,701 Unamortized acquisition costs........................... 303,123 324,437 Construction work in progress........................... 20,509 17,160 Nuclear fuel, net....................................... 1,267 1,734 ------------- ------------- Total net utility plant.............................. 1,597,191 1,609,032 ------------- ------------- Other Property and Investments: Nuclear decommissioning trusts, at market............... 7,809 6,880 Investments in regional nuclear generating companies and subsidiary company, at equity............ 18,529 18,855 Other, at cost.......................................... 4,073 3,149 ------------- ------------- 30,411 28,884 ------------- ------------- Current Assets: Cash and cash equivalents............................... 170,638 182,588 Receivables, net........................................ 75,824 79,290 Accounts receivable from affiliated companies........... 2,338 9,091 Taxes receivable from affiliated companies.............. 6,926 11,661 Accrued utility revenues................................ 37,346 48,822 Fuel, materials and supplies, at average cost........... 32,244 38,076 Recoverable energy costs - current portion.............. 110,436 73,721 Prepayments and other................................... 23,157 18,121 ------------- ------------- 458,909 461,370 ------------- ------------- Deferred Charges: Regulatory assets: Recoverable energy costs............................... 93,426 120,721 Income taxes, net...................................... 153,408 166,155 Deferred costs - nuclear plant......................... 64,640 144,418 Unrecovered contractual obligations.................... 43,766 56,544 Other.................................................. 5,430 3,083 Deferred receivable from affiliated company............. 5,676 12,984 Unamortized debt expense................................ 9,117 11,896 Other................................................... 9,467 7,346 ------------- ------------- 384,930 523,147 ------------- ------------- Total Assets.............................................. $ 2,471,441 $ 2,622,433 ============= =============
The accompanying notes are an integral part of these financial statements. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock, $1 par value - authorized 100,000,000 shares; 1,000 shares outstanding in 2000 and 1999....................................... $ 1 $ 1 Capital surplus, paid in................................ 424,867 424,654 Retained earnings....................................... 326,983 319,938 Accumulated other comprehensive income.................. 1,756 1,074 ------------- ------------- Total common stockholder's equity.............. 753,607 745,667 Preferred stock subject to mandatory redemption......... - 25,000 Long-term debt.......................................... 407,285 516,485 ------------- ------------- Total capitalization........................... 1,160,892 1,287,152 ------------- ------------- Obligations Under Seabrook Power Contracts and Other Capital Leases................................. 566,936 624,477 ------------- ------------- Current Liabilities: Long-term debt and preferred stock - current portion.... 25,000 25,000 Obligations under Seabrook Power Contracts and other capital leases - current portion....................... 94,645 101,676 Accounts payable........................................ 27,022 38,685 Accounts payable to affiliated companies................ 44,951 38,229 Accrued taxes........................................... 55,056 33,443 Accrued interest........................................ 12,224 6,294 Accrued pension benefits................................ 42,404 45,504 Other................................................... 61,330 10,184 ------------- ------------- 362,632 299,015 ------------- ------------- Deferred Credits and Other Long-term Liabilities: Accumulated deferred income taxes....................... 238,712 266,644 Accumulated deferred investment tax credits............. 27,924 12,532 Deferred contractual obligations........................ 43,766 56,544 Deferred revenue from affiliated company................ 5,676 12,984 Other................................................... 64,903 63,085 ------------- ------------- 380,981 411,789 ------------- ------------- Commitments and Contingencies (Note 2) Total Capitalization and Liabilities...................... $ 2,471,441 $ 2,622,433 ============= =============
The accompanying notes are an integral part of these financial statements. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------- ---------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ----------- (Thousands of Dollars) Operating Revenues................................. $ 337,865 $ 310,739 $ 993,017 $ 884,362 ---------- ---------- ---------- ----------- Operating Expenses: Operation - Fuel, purchased and net interchange power..... 232,169 187,339 655,508 527,161 Other......................................... 29,584 32,350 93,126 91,679 Maintenance...................................... 9,913 13,979 34,479 42,564 Depreciation..................................... 10,312 11,868 33,361 35,825 Amortization of regulatory assets, net........... 11,468 11,481 34,407 23,414 Federal and state income taxes................... 5,275 7,204 31,087 29,349 Taxes other than income taxes.................... 10,964 11,852 33,193 34,836 ---------- ---------- ---------- ----------- Total operating expenses................... 309,685 276,073 915,161 784,828 ---------- ---------- ---------- ----------- Operating Income................................... 28,180 34,666 77,856 99,534 ---------- ---------- ---------- ----------- Other Income/(Loss): Equity in earnings of regional nuclear generating companies and subsidiary company.... 553 404 1,144 1,011 Other, net....................................... 2,257 3,985 10,031 10,288 Income taxes..................................... 6,507 (2,494) 1,319 (6,696) ---------- ---------- ---------- ----------- Other income, net.......................... 9,317 1,895 12,494 4,603 ---------- ---------- ---------- ----------- Income before interest charges............. 37,497 36,561 90,350 104,137 ---------- ---------- ---------- ----------- Interest Charges: Interest on long-term debt....................... 8,793 10,450 29,897 32,027 Other interest................................... (29) 527 37 550 ---------- ---------- ---------- ----------- Interest charges, net...................... 8,764 10,977 29,934 32,577 ---------- ---------- ---------- ----------- Net Income......................................... $ 28,733 $ 25,584 $ 60,416 $ 71,560 ========== ========== ========== ===========
The accompanying notes are an integral part of these financial statements. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------- 2000 1999 ----------- ----------- (Thousands of Dollars) Operating activities: Net income............................................... $ 60,416 $ 71,560 Adjustments to reconcile to net cash flows provided by operating activities: Depreciation........................................... 33,361 35,825 Deferred income taxes and investment tax credits, net.. (10,193) 12,472 Amortization of recoverable energy costs, net.......... (9,420) 22,683 Amortization of regulatory assets, net................. 34,407 23,414 Allocation of ESOP benefits............................ (58) (10,524) Net other uses of cash................................. (40,404) (6,876) Changes in working capital: Receivables and accrued utility revenues............... 21,695 (3,400) Fuel, materials and supplies........................... 5,832 3,648 Accounts payable....................................... (4,941) 27,679 Accrued taxes.......................................... 21,613 (17,202) Other working capital (excludes cash).................. 53,675 2,375 ----------- ----------- Net cash flows provided by operating activities............ 165,983 161,654 ----------- ----------- Investing Activities: Investments in plant: Electric utility plant................................. (39,098) (31,727) Nuclear fuel........................................... (254) (1,057) ----------- ----------- Net cash flows used for investments in plant............. (39,352) (32,784) Investment in nuclear decommissioning trust.............. (470) (504) Other investment activities, net......................... (598) (386) ----------- ----------- Net cash flows used in investing activities................ (40,420) (33,674) ----------- ----------- Financing Activities: Reacquisitions and retirements of long-term debt......... (109,200) - Reacquisitions and retirements of preferred stock........ (25,000) (25,000) Cash dividends on preferred stock........................ (3,313) (5,300) ----------- ----------- Net cash flows used in financing activities................ (137,513) (30,300) ----------- ----------- Net (decrease)/increase in cash and cash equivalents....... (11,950) 97,680 Cash and cash equivalents - beginning of period............ 182,588 60,885 ----------- ----------- Cash and cash equivalents - end of period.................. $ 170,638 $ 158,565 =========== ===========
The accompanying notes are an integral part of these financial statements. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE Management's Discussion and Analysis of Financial Condition and Results of Operations PSNH is a wholly owned subsidiary of NU. This discussion should be read in conjunction with NU's management's discussion and analysis of financial condition and results of operations, consolidated financial statements and footnotes in this Form 10-Q, the First and Second Quarter 2000 Form 10-Qs, and the NU 1999 Form 10-K. RESULTS OF OPERATIONS The components of significant income statement variances for the third quarter of 2000 and the first nine months of 2000 are provided in the table below. Income Statement Variances (Millions of Dollars) 2000 over/(under) 1999 ---------------------- Third Nine Quarter Percent Months Percent ------- ------- ------ ------- Operating revenues $27 9% $109 12% Fuel, purchased and net interchange power 45 24 128 24 Other operation (3) (9) 1 2 Maintenance (4) (29) (8) (19) Amortization of regulatory assets, net - - 11 47 Federal and state income taxes (11) (a) (6) (17) Net Income 3 12 (11) (16) (a) Percent greater than 100. Comparison of the Third Quarter of 2000 to the Third Quarter of 1999 - -------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $27 million or 9 percent in the third quarter of 2000, as compared to the same period of 1999, primarily due to the higher wholesale revenues from higher capacity and energy sales ($62 million), partially offset by lower wholesale revenues from the loss of NAEC as a customer ($17 million), lower retail sales ($7 million) and lower transmission revenues ($5 million). Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to higher wholesale energy sales. Other Operation and Maintenance Other O&M expenses decreased in 2000, primarily due to lower transmission and distribution expenses ($4 million), lower expenses associated with the fossil plants ($2 million) and lower administrative and general expenses ($1 million). Federal and State Income Taxes Federal and state income taxes decreased in 2000, primarily due to the amortization of investment tax credits in the third quarter 2000. Comparison of the First Nine Months of 2000 to the First Nine Months of 1999 - ---------------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $109 million or 12 percent for the first nine months of 2000, as compared to the same period of 1999, primarily due to higher wholesale energy sales ($200 million), partially offset by lower capacity sales ($46 million) and lower firm wholesale revenues ($47 million). Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to higher wholesale energy sales. Other Operation and Maintenance Other O&M expenses decreased in 2000, primarily due to lower administrative and general expenses ($3 million), lower transmission and distribution expenses ($2 million) and lower expenses associated with the fossil plants ($1 million). Amortization of Regulatory Assets, Net Amortization of regulatory assets, net increased in 2000, primarily due to the amortization in 1999 of a net operating loss carryforward. Federal and State Income Taxes Federal and state income taxes decreased in 2000, primarily due to the amortization of investment tax credits in the third quarter 2000. LIQUIDITY Net cash flows provided by operating activities increased to $166 million for the nine months ended September 30, 2000, compared with $161.7 million for the nine months ended September 30, 1999. The primary reasons for the increase were due to changes in working capital, including receivables and unbilled revenues, accounts payable, accrued taxes, and other working capital. The increase in net cash flows provided by operating activities was offset by a change in the amortization of recoverable energy costs, net, net other uses of cash and a decrease in net income of $11.1 million for the first nine months of 2000, compared with the same period in 1999. Net cash flows used in investing activities were $40.4 million for the nine months ended September 30, 2000, compared with $33.7 million for the nine months ended September 30, 1999, primarily as a result of increased investments in plant. Net cash flows used in financing activities were $137.5 million for the nine months ended September 30, 2000, compared with $30.3 million for the nine months ended September 30, 1999. The net cash flows included $134.2 million for the retirement of long-term debt and preferred stock, compared with $25 million for the nine months ended September 30, 1999. In August and September 2000, PSNH repaid $109.2 million of variable-rate taxable pollution control bonds. On October 2, 2000, PSNH paid a $50 million common dividend to NU, the first common dividend paid by PSNH since February 1997. As agreed to by the NHPUC, the dividend was paid in connection with the 5 percent rate reduction effective October 1, 2000. On October 4, 2000, Fitch upgraded the debt ratings of PSNH's secured pollution control bonds and preferred stock. Almost all NU system securities are under review for possible upgrades, or on "credit watch" with positive implications by Standard and Poor's, Moody's Investors Service and Fitch. Over the three-year period of 1999 through 2001, NU expects to complete the restructuring of its three major operating subsidiaries; CL&P, PSNH and WMECO. Total capitalization of each of those companies is expected to drop significantly as a result of the sale of generation assets and the securitization of stranded costs. Management currently expects these regulated companies to receive in excess of $5 billion during that period. Primary sources would include securitization of CL&P nonnuclear stranded costs (approximately $1.5 billion), the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets (approximately $1.4 billion), the sale of Millstone (approximately $1.2 billion), the sale of PSNH's fossil and hydroelectric generation assets, and securitization of PSNH stranded costs (approximately $1.0 billion). As of September 30, 2000, only the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets have occurred, though steps to complete other transactions were under way. Management currently expects these operating subsidiaries to use proceeds from the aforementioned transactions in four primary ways. More than $2 billion would be used to repay debt and preferred stock; more than $1 billion to buyout and buydown high-cost nonutility generator arrangements; approximately $600 million to pay taxes on the gains from the sale of generation assets, and; approximately $1.2 billion that would be returned to NU from these operating companies. Of that $1.2 billion, CL&P and WMECO repurchased $390 million of their common stock from NU in March 2000, the proceeds from which NU immediately reinvested in NGC. NU will use another $215 million to settle the forward repurchase of approximately 10 million NU common shares that was undertaken in December 1999 and January 2000. Depending on the status of the Con Edison merger, management will consider a variety of uses for the remaining $500 million to $600 million, including share repurchases and additional investments. The NHPUC approved securitization of up to $670 million of PSNH stranded costs on September 8, 2000. PSNH plans to complete the securitization process by early 2001. Under the Settlement Agreement, PSNH will supply transition service for its customers from its own portfolio of generation assets for the first nine months after restructuring takes effect. PSNH is not expected to defer significant costs during that time. WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------ (Thousands of Dollars) ASSETS - ------ Utility Plant, at original cost: Electric................................................ $ 1,107,511 $ 1,175,954 Less: Accumulated provision for depreciation......... 792,208 813,978 ------------- ------------ 315,303 361,976 Construction work in progress........................... 20,240 21,181 Nuclear fuel, net....................................... 17,013 18,880 ------------- ------------ Total net utility plant.............................. 352,556 402,037 ------------- ------------ Other Property and Investments: Nuclear decommissioning trusts, at market............... 152,960 144,567 Investments in regional nuclear generating companies, at equity................................... 15,121 14,723 Other, at cost.......................................... 6,356 6,232 ------------- ------------ 174,437 165,522 ------------- ------------ Current Assets: Cash.................................................... 112 950 Receivables, net........................................ 34,076 31,692 Accounts receivable from affiliated companies........... 16,249 3,918 Taxes receivable........................................ 2,212 1,912 Accrued utility revenues................................ 14,784 13,485 Fuel, materials and supplies, at average cost........... 1,640 3,097 Prepayments and other................................... 47,104 30,119 ------------- ------------ 116,177 85,173 ------------- ------------ Deferred Charges: Regulatory assets: Recoverable nuclear costs.............................. 258,937 428,838 Income taxes, net...................................... 50,359 49,008 Unrecovered contractual obligations.................... 44,352 63,701 Recoverable energy costs, net.......................... 7,168 16,319 Other.................................................. 43,932 36,934 Unamortized debt expense................................ 1,689 1,926 Other................................................... 4,500 4,146 ------------- ------------ 410,937 600,872 ------------- ------------ Total Assets.............................................. $ 1,054,107 $ 1,253,604 ============= ============
The accompanying notes are an integral part of these financial statements. WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------ (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock, $25 par value - 1,072,471 shares authorized; 590,093 shares outstanding in 2000 and 1,072,471 shares outstanding in 1999............... $ 14,752 $ 26,812 Capital surplus, paid in................................ 93,945 171,691 Retained earnings....................................... 52,223 38,712 Accumulated other comprehensive income.................. 267 160 ------------- ------------ Total common stockholder's equity.............. 161,187 237,375 Preferred stock not subject to mandatory redemption..... 20,000 20,000 Preferred stock subject to mandatory redemption......... 15,000 16,500 Long-term debt.......................................... 138,699 290,279 ------------- ------------ Total capitalization........................... 334,886 564,154 ------------- ------------ Obligations Under Capital Leases.......................... 6,550 8,106 ------------- ------------ Current Liabilities: Notes payable to banks.................................. 110,000 123,000 Notes payable to affiliated company..................... 16,600 9,400 Long-term debt and preferred stock - current portion.... 61,500 1,500 Obligations under capital leases - current portion...... 21,003 21,866 Accounts payable........................................ 28,689 12,974 Accounts payable to affiliated companies................ 5,099 3,208 Accrued taxes........................................... 1,705 589 Accrued interest........................................ 2,998 6,046 Other................................................... 11,030 14,384 ------------- ------------ 258,624 192,967 ------------- ------------ Deferred Credits and Other Long-term Liabilities: Accumulated deferred income taxes....................... 225,322 242,942 Accumulated deferred investment tax credits............. 17,918 19,765 Decommissioning obligation - Millstone 1................ 138,999 136,130 Deferred contractual obligations........................ 44,352 63,701 Other................................................... 27,456 25,839 ------------- ------------ 454,047 488,377 ------------- ------------ Commitments and Contingencies (Note 2) Total Capitalization and Liabilities...................... $ 1,054,107 $ 1,253,604 ============= ============
The accompanying notes are an integral part of these financial statements. WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------- --------------------- 2000 1999 2000 1999 --------- --------- --------- ----------- (Thousands of Dollars) Operating Revenues............................. $130,400 $107,776 $379,900 $ 314,291 --------- --------- --------- ----------- Operating Expenses: Operation - Fuel, purchased and net interchange power. 61,245 62,974 185,873 120,863 Other..................................... 24,651 (6,154) 55,544 51,352 Maintenance.................................. 7,064 14,469 25,112 41,561 Depreciation................................. 4,389 3,904 13,334 22,967 Amortization of regulatory assets............ 8,322 10,667 33,227 16,084 Federal and state income taxes............... 6,728 15,559 14,923 23,166 Taxes other than income taxes................ 4,061 4,778 13,191 15,702 Gain on sale of utility plant................ - (21,242) - (21,242) --------- --------- --------- ----------- Total operating expenses............... 116,460 84,955 341,204 270,453 --------- --------- --------- ----------- Operating Income............................... 13,940 22,821 38,696 43,838 --------- --------- --------- ----------- Other Income/(Loss): Equity in earnings of regional nuclear generating companies....................... 669 300 1,081 718 Nuclear related costs........................ - (6,348) (2,808) (6,348) Other, net................................... 335 (2,584) 1,107 (3,291) Income taxes................................. 592 4,583 5,192 5,418 --------- --------- --------- ----------- Other income/(loss), net............... 1,596 (4,049) 4,572 (3,503) --------- --------- --------- ----------- Income before interest charges......... 15,536 18,772 43,268 40,335 --------- --------- --------- ----------- Interest Charges: Interest on long-term debt................... 2,968 5,944 11,076 18,337 Other interest............................... 2,930 1,460 8,545 1,595 --------- --------- --------- ----------- Interest charges, net.................. 5,898 7,404 19,621 19,932 --------- --------- --------- ----------- Net Income..................................... $ 9,638 $ 11,368 $ 23,647 $ 20,403 ========= ========= ========= ===========
The accompanying notes are an integral part of these financial statements. WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------- 2000 1999 ----------- ----------- (Thousands of Dollars) Operating Activities: Net income.................................................... $ 23,647 $ 20,403 Adjustments to reconcile to net cash flows provided by/(used in) operating activities: Depreciation................................................ 13,334 22,967 Deferred income taxes and investment tax credits, net....... (10,450) 1,631 Amortization of recoverable energy costs, net............... 9,151 4,102 Amortization of regulatory assets, net...................... 33,227 16,084 Nuclear related costs....................................... 2,809 - Amortization of gain on transfer of utility plant........... 3,849 - Allocation of ESOP benefits................................. (36) (6,857) Buyout of IPP contract...................................... - (19,700) Gain on sale of utility plant............................... - (21,242) Net other uses of cash...................................... (18,442) (10,143) Changes in working capital: Receivables and accrued utility revenues.................... (16,014) (63,252) Fuel, materials and supplies................................ 1,457 1,930 Accounts payable............................................ 17,606 (8,072) Accrued taxes............................................... 1,116 2,634 Investments in securitizable assets......................... - 21,865 Prepayments and other....................................... (16,985) (4,194) Other working capital (excludes cash)....................... (6,702) 23,798 ----------- ----------- Net cash flows provided by/(used in) operating activities....... 37,567 (18,046) ----------- ----------- Investing Activities: Investments in plant: Electric utility plant...................................... (15,084) (21,106) Nuclear fuel................................................ (4,005) (5,343) ----------- ----------- Net cash flows used for investments in plant.................. (19,089) (26,449) Investments in nuclear decommissioning trusts................. (3,031) (8,875) Other investment activities, net.............................. (522) 1,053 Net proceeds from the transfer/sale of utility plant.......... 185,787 48,385 ----------- ----------- Net cash flows provided by investing activities................. 163,145 14,114 ----------- ----------- Financing Activities: Net (decrease)/increase in short-term debt.................... (5,800) 28,400 Reacquisitions and retirements of long-term debt.............. (94,150) (40,000) Reacquisitions and retirements of preferred stock............. (1,500) (1,500) Repurchase of common shares................................... (90,000) - Cash dividends on preferred stock............................. (2,098) (2,570) Cash dividends on common stock................................ (8,002) - Capital contribution.......................................... - 20,000 ----------- ----------- Net cash flows (used in)/provided by financing activities....... (201,550) 4,330 ----------- ----------- Net (decrease)/increase in cash for the period.................. (838) 398 Cash - beginning of period...................................... 950 106 ----------- ----------- Cash - end of period............................................ $ 112 $ 504 =========== ===========
The accompanying notes are an integral part of these financial statements. WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY Management's Discussion and Analysis of Financial Condition and Results of Operations WMECO is a wholly owned subsidiary of NU. This discussion should be read in conjunction with NU's management's discussion and analysis of financial condition and results of operations, consolidated financial statements and footnotes in this Form 10-Q, the First and Second Quarter 2000 Form 10-Qs, and the NU 1999 Form 10-K. RESULTS OF OPERATIONS The components of significant income statement variances for the third quarter 2000 and the first nine months of 2000 are provided in the table below. Income Statement Variances (Millions of Dollars) 2000 over/(under) 1999 ---------------------- Third Nine Quarter Percent Months Percent ------- ------- ------ ------- Operating revenues $23 21% $66 21% Fuel, purchased and net interchange power (2) (3) 65 54 Other operation 31 (a) 4 8 Maintenance (7) (51) (16) (40) Depreciation - - (10) (42) Amortization of regulatory assets, net (2) (22) 17 (a) Federal and state income taxes (5) (44) (8) (45) Gain on sale of utility plant 21 100 21 100 Nuclear related costs (6) (100) (4) (56) Other, net 3 (a) 4 (a) Interest on long-term debt (3) (50) (7) (40) Other interest 1 (a) 7 (a) Net Income (2) (15) 3 16 (a) Percent greater than 100. Comparison of the Third Quarter of 2000 to the Third Quarter of 1999 - -------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $23 million or 21 percent in the third quarter of 2000, as compared to the same period of 1999, primarily due to higher wholesale revenues ($22 million), as a result of the sale of the output from Millstone 2 and 3. Other Operation and Maintenance Other operation expenses increased in 2000, primarily due to the deferral of 1999 costs as a result of restructuring ($35 million). Other maintenance expenses decreased in 2000, primarily due to lower spending at the nuclear units ($6 million). Federal and State Income Taxes Federal and state income taxes increased in 2000, primarily due to higher taxable income. Gain on Sale of Utility Plant WMECO had a third quarter 1999 gain due to the sale of certain fossil and hydroelectric generation assets to an unaffiliated company. The gain, net of income tax expense, was offset by the amortization of regulatory assets. Nuclear Related Costs Nuclear related costs decreased in 2000, primarily due to the 1999 write-off of WMECO's unrecoverable Millstone 1 investment as a result of its restructuring order ($7 million). Other, Net Other, net increased in 2000, primarily due to an increase in the environmental reserve in 1999 ($3 million). Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to reacquisitions and retirements of long-term debt in 2000 and 1999. Comparison of the First Nine Months of 2000 to the First Nine Months of 1999 - ---------------------------------------------------------------------------- Operating Revenues Total operating revenues increased by $66 million or 21 percent for the first nine months of 2000, as compared to the same period of 1999, primarily due to higher wholesale revenues ($68 million), as a result of the sale of the output from Millstone 2 and 3 and the amortization of the gain on the transfer of certain hydroelectric generation assets ($2 million), partially offset by lower retail sales ($6 million). Fuel, Purchased and Net Interchange Power Fuel, purchased and net interchange power expense increased in 2000, primarily due to the transition, under industry restructuring, of purchasing full requirements for customers from standard offer suppliers, in addition to the remaining fuel costs of the nuclear units and cogenerators. Other Operation and Maintenance Other operation expenses increased in 2000, primarily due to the deferral of 1999 costs associated with restructuring ($35 million), partially offset by lower administrative and general expenses ($14 million), lower spending at the nuclear units ($8 million) and lower transmission expenses ($6 million). Other maintenance expenses decreased in 2000, primarily due to lower spending at the nuclear units ($13 million). Depreciation Depreciation expense decreased in 2000, primarily due to the effect of discontinuing SFAS No. 71 for the generation portion of the business and the resulting reclassification of depreciable nuclear plant balances to regulatory assets ($10 million), the sale of certain fossil generation assets and the transfer of certain hydroelectric generation assets. Amortization of Regulatory Assets, Net Amortization of regulatory assets, net increased in 2000, primarily due to changes in amortization levels as a result of industry restructuring ($19 million) and higher amortization associated with the reclassified nuclear plant balances ($10 million), partially offset by the amortization in 1999 of the gain on the sale of the fossil plants ($12 million). Federal and State Income Taxes Federal and state income taxes increased in 2000, primarily due to higher taxable income. Gain on Sale of Utility Plant WMECO had a third quarter 1999 gain due to the sale of certain fossil and hydroelectric generation assets to an unaffiliated company. The gain, net of income tax expense, was offset by the amortization of regulatory assets. Nuclear Related Costs Nuclear related costs decreased in 2000, primarily due to the 1999 write-off of WMECO's unrecoverable Millstone 1 investment as a result of its restructuring order ($7 million), partially offset by the 2000 settlement of Millstone-related litigation, net of insurance proceeds ($3 million). Other, Net Other, net increased in 2000, primarily due to an increase in the environmental reserve in 1999 ($3 million). Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to reacquisitions and retirements of long-term debt in 2000 and 1999. Other Interest Other interest expense increased in 2000, primarily due to higher average short-term debt outstanding in 2000. LIQUIDITY Net cash flows provided by operating activities increased to $37.6 million for the nine months ended September 30, 2000, compared with net cash flows used in operating activities of $18 million for the nine months ended September 30, 1999. The 1999 buyout of a certain IPP contract and the 1999 gain on the sale of utility plant primarily increased cash flows from operating activities in 2000. Changes in working capital, primarily changes in receivables and accrued utility revenues, accounts payable, a reduced level of investment in securitizable assets, prepayments and other, and other working capital, also increased cash flows from operating activities. A $3.2 million increase in net income in the first nine months of 2000, compared with the same period in 1999 also increased net cash flows from operating activities. Including construction expenditures and investments in nuclear decommissioning trusts, net cash flows provided by investing activities were $163.1 million for the nine months ended September 30, 2000, compared with $14.1 million for the nine months ended September 30, 1999. The primary reasons for the increase were the net proceeds from the transfer of utility plant to NGC and lower investments in plant and decommissioning trusts. Net cash flows used in financing activities were $201.6 million for the nine months ended September 30, 2000, compared with net cash flows provided by financing activities of $4.3 million for the nine months ended September 30, 1999. The net cash flows included a net decrease in short-term debt of $5.8 million for the nine months ended September 30, 2000, compared with an increase in short-term debt of $28.4 million for the nine months ended September 30, 1999. The transfer of the 1,289 MW hydroelectric generation assets to NGC produced a significant source of cash for WMECO, which was primarily used to retire short-term debt, long-term debt and preferred stock, as well as repurchase common stock. Financing activities for the nine months ended September 30, 2000, included $185.7 million for the retirement of long-term debt and preferred stock and the repurchase of common stock, compared with $41.5 million for the nine months ended September 30, 1999. Cash dividends on common shares paid for the nine months ended September 30, 2000, were $8 million, compared with no cash dividends paid for the nine months ended September 30, 1999. Payments made for the preferred stock dividends were $2.1 million and $2.6 million for the nine months ended September 30, 2000 and 1999, respectively, reflecting the ongoing reduction of preferred stock outstanding. In the fourth quarter of 2000, WMECO expects to refinance its short-term debt. The $500 million line of credit for WMECO and CL&P is expected to be reduced to $350 million to reflect the declining cash needs of NU's regulated businesses. Over the three-year period of 1999 through 2001, NU expects to complete the restructuring of its three major operating subsidiaries; CL&P, PSNH and WMECO. Total capitalization of each of those companies is expected to drop significantly as a result of the sale of generation assets and the securitization of stranded costs. Management currently expects these regulated companies to receive in excess of $5 billion during that period. Primary sources would include securitization of CL&P nonnuclear stranded costs (approximately $1.5 billion), the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets (approximately $1.4 billion), the sale of Millstone (approximately $1.2 billion), the sale of PSNH's fossil and hydroelectric generation assets, and securitization of PSNH stranded costs (approximately $1.0 billion). As of September 30, 2000, only the sale and transfer of CL&P's and WMECO's fossil and hydroelectric generation assets have occurred, though steps to complete other transactions were under way. Management currently expects these operating subsidiaries to use proceeds from the aforementioned transactions in four primary ways. More than $2 billion would be used to repay debt and preferred stock; more than $1 billion to buyout and buydown high-cost nonutility generator arrangements; approximately $600 million to pay taxes on the gains from the sale of generation assets, and; approximately $1.2 billion that would be returned to NU from these operating companies. Of that $1.2 billion, CL&P and WMECO repurchased $390 million of their common stock from to NU in March 2000, the proceeds from which NU immediately reinvested in NGC. NU will use another $215 million to settle the forward repurchase of approximately 10 million NU common shares that was undertaken in December 1999 and January 2000. Depending on the status of the Con Edison merger, management will consider a variety of uses for the remaining $500 million to $600 million, including share repurchases and additional investments. WMECO is seeking DTE approval to securitize $160 million of stranded costs which is anticipated by the end of 2000. Unlike several other electric transmission and distribution companies that have implemented restructuring, WMECO has been able to supply electricity to its standard offer and default service customers without deferring the collection of payments made to suppliers, including Select Energy. WMECO will renew its standard offer supply contracts beginning January 1, 2001, for the calendar year 2001, through a competitive bidding solicitation process. The bidding deadline closed at the end of October 2000. Bid results reflect an increase to the current cost to supply standard offer service which is consistent with the current increase in market prices for energy. As a result, WMECO will seek rate relief under the current restructuring legislation effective January 1, 2001. NORTH ATLANTIC ENERGY CORPORATION BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) ASSETS - ------ Utility Plant, at original cost: Electric................................................ $ 724,005 $ 736,472 Less: Accumulated provision for depreciation......... 220,427 196,694 ------------- ------------- 503,578 539,778 Construction work in progress........................... 8,473 10,274 Nuclear fuel, net....................................... 26,371 21,149 ------------- ------------- Total net utility plant.............................. 538,422 571,201 ------------- ------------- Other Property and Investments: Nuclear decommissioning trusts, at market............... 52,544 43,667 ------------- ------------- 52,544 43,667 ------------- ------------- Current Assets: Cash.................................................... 44 - Special deposits........................................ 3,624 7 Notes receivable from affiliated companies.............. 35,000 56,400 Accounts receivable from affiliated companies........... 22,278 22,840 Taxes receivable........................................ - 11,717 Materials and supplies, at average cost................. 13,562 13,088 Prepayments and other................................... 84 1,766 ------------- ------------- 74,592 105,818 ------------- ------------- Deferred Charges: Regulatory assets: Deferred costs - Seabrook.............................. 40,137 88,545 Income taxes, net...................................... 26,980 35,605 Recoverable energy costs............................... 1,540 1,703 Unamortized loss on reacquired debt.................... - 3,788 Unamortized debt expense................................ 1,057 1,780 Prepaid property tax.................................... 1,377 - Other................................................... 44 - ------------- ------------- 71,135 131,421 ------------- ------------- Total Assets.............................................. $ 736,693 $ 852,107 ============= =============
The accompanying notes are an integral part of these financial statements. NORTH ATLANTIC ENERGY CORPORATION BALANCE SHEETS
September 30, 2000 December 31, (Unaudited) 1999 ------------- ------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock, $1 par value - 1,000 shares authorized and outstanding in 2000 and 1999............ $ 1 $ 1 Capital surplus, paid in................................ 160,999 160,999 Retained earnings....................................... 1,840 12,752 ------------- ------------- Total common stockholder's equity.............. 162,840 173,752 Long-term debt.......................................... 65,000 135,000 ------------- ------------- Total capitalization........................... 227,840 308,752 ------------- ------------- Current Liabilities: Long-term debt - current portion........................ 270,000 270,000 Accounts payable........................................ 7,060 11,694 Accounts payable to affiliated companies................ 963 806 Accrued taxes........................................... 3,380 - Accrued interest........................................ 4,649 2,340 Other................................................... 297 272 ------------- ------------- 286,349 285,112 ------------- ------------- Deferred Credits and Other Long-term Liabilities: Accumulated deferred income taxes....................... 192,326 222,601 Deferred obligation to affiliated company............... 5,676 12,984 Other................................................... 24,502 22,658 ------------- ------------- 222,504 258,243 ------------- ------------- Commitments and Contingencies (Note 2) Total Capitalization and Liabilities...................... $ 736,693 $ 852,107 ============= =============
The accompanying notes are an integral part of these financial statements. NORTH ATLANTIC ENERGY CORPORATION STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (Thousands of Dollars) Operating Revenues................................. $ 66,921 $ 69,779 $ 199,303 $ 217,271 ---------- ---------- ---------- ---------- Operating Expenses: Operation - Fuel.......................................... 4,195 4,248 12,261 11,347 Other......................................... 9,396 9,090 27,701 30,322 Maintenance...................................... 3,242 2,818 8,499 16,938 Depreciation..................................... 6,944 6,844 20,833 20,697 Amortization of regulatory assets, net........... 21,294 21,372 63,882 64,116 Federal and state income taxes................... 9,504 8,758 26,899 26,170 Taxes other than income taxes.................... 1,876 4,527 5,916 10,781 ---------- ---------- ---------- ---------- Total operating expenses................... 56,451 57,657 165,991 180,371 ---------- ---------- ---------- ---------- Operating Income................................... 10,470 12,122 33,312 36,900 ---------- ---------- ---------- ---------- Other Income/(Loss): Deferred Seabrook return - other funds........... 456 1,037 1,805 3,518 Other, net....................................... (1,922) (2,113) (4,821) (5,601) Income taxes..................................... 4,837 3,867 16,890 11,886 ---------- ---------- ---------- ---------- Other income, net.......................... 3,371 2,791 13,874 9,803 ---------- ---------- ---------- ---------- Income before interest charges............. 13,841 14,913 47,186 46,703 ---------- ---------- ---------- ---------- Interest Charges: Interest on long-term debt....................... 7,076 10,576 27,328 34,691 Other interest................................... (493) (115) (1,046) (389) Deferred Seabrook return - borrowed funds........ (805) (1,990) (3,184) (6,745) ---------- ---------- ---------- ---------- Interest charges, net...................... 5,778 8,471 23,098 27,557 ---------- ---------- ---------- ---------- Net Income......................................... $ 8,063 $ 6,442 $ 24,088 $ 19,146 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. NORTH ATLANTIC ENERGY CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ----------------------- 2000 1999 ----------- ----------- (Thousands of Dollars) Operating Activities: Net income.................................................. $ 24,088 $ 19,146 Adjustments to reconcile to net cash flows provided by operating activities: Depreciation.............................................. 20,833 20,697 Deferred income taxes and investment tax credits, net..... (21,724) 1,136 Amortization of nuclear fuel.............................. 9,733 9,265 Deferred return - Seabrook................................ (4,989) (10,263) Amortization of regulatory assets, net.................... 63,882 64,116 Deferred obligation to affiliated company................. (7,308) (7,308) Net other sources of cash................................. 13,472 13,373 Changes in working capital: Receivables............................................... 562 1,029 Materials and supplies.................................... (474) 467 Accounts payable.......................................... (4,477) 3,009 Accrued taxes............................................. 3,380 5,493 Other working capital (excludes cash)..................... 12,116 25,135 ----------- ----------- Net cash flows provided by operating activities............... 109,094 145,295 ----------- ----------- Investing Activities: Investments in plant: Electric utility plant.................................... (4,359) (4,785) Nuclear fuel.............................................. (14,792) (8,590) ----------- ----------- Net cash flows used for investments in plant................ (19,151) (13,375) Investment in NU system Money Pool.......................... 21,400 (6,500) Investments in nuclear decommissioning trusts............... (6,299) (5,491) ----------- ----------- Net cash flows used in investing activities................... (4,050) (25,366) ----------- ----------- Financing Activities: Reacquisitions and retirements of long-term debt............ (70,000) (70,000) Cash dividends on common stock.............................. (35,000) (50,000) ----------- ----------- Net cash flows used in financing activities................... (105,000) (120,000) ----------- ----------- Net increase/(decrease) in cash for the period................ 44 (71) Cash - beginning of period.................................... - 71 ----------- ----------- Cash - end of period.......................................... $ 44 $ - =========== ===========
The accompanying notes are an integral part of these financial statements. NORTH ATLANTIC ENERGY CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations NAEC is a wholly owned subsidiary of NU. This discussion should be read in conjunction with NU's management's discussion and analysis of financial condition and results of operations, consolidated financial statements and footnotes in this Form 10-Q, the First and Second Quarter 2000 Form 10-Qs, and the NU 1999 Form 10-K. RESULTS OF OPERATIONS The components of significant income statement variances for the third quarter of 2000 and the first nine months of 2000 are provided in the table below. Income Statement Variances (Millions of Dollars) 2000 over/(under) 1999 ---------------------- Third Nine Quarter Percent Months Percent ------- ------- ------ ------- Operating revenues $(3) (4)% $(18) (8)% Other operation - - (3) (9) Maintenance - - (8) (50) Federal and state income taxes - - (4) (30) Taxes other than income taxes (3) (59) (5) (45) Interest on long-term debt (4) (33) (7) (21) Net Income 2 25 5 26 Comparison of the Third Quarter of 2000 to the Third Quarter of 1999 - -------------------------------------------------------------------- Operating Revenues Total operating revenues decreased by $3 million or 4 percent in the third quarter of 2000, as compared to the same period of 1999, primarily due to lower O&M costs billed to PSNH through the Seabrook Power Contracts. Taxes Other Than Income Taxes Taxes other than income taxes decreased in 2000, primarily due to the tax true-up in the third quarter of 1999 as a result of a change to the statewide utility property tax. Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to lower long-term debt outstanding in 2000. Comparison of the First Nine Months of 2000 to the First Nine Months of 1999 - ---------------------------------------------------------------------------- Operating Revenues Total operating revenues decreased by $18 million or 8 percent for the first nine months of 2000, as compared to the same period of 1999, primarily due to lower O&M costs billed to PSNH through the Seabrook Power Contracts. Other Operation and Maintenance Other O&M expenses decreased in 2000, primarily due to the 1999 refueling outage. Federal and State Income Taxes Federal and state income taxes decreased in 2000, primarily due to lower taxable income. Taxes Other Than Income Taxes Taxes other than income taxes decreased in 2000, primarily due to the tax true-up in the third quarter of 1999 as a result of a change to the statewide utility property tax. Interest on Long-Term Debt Interest on long-term debt decreased in 2000, primarily due to lower long-term debt outstanding in 2000. LIQUIDITY Net cash flows provided by operating activities decreased to $109.1 million for the nine months ended September 30, 2000, compared with $145.3 million for the nine months ended September 30, 1999. The primary reasons for the reduction were changes in working capital, including changes in accounts payable and other working capital, and the change in deferred income taxes and investment tax credits, net, partially offset by an increase in net income of $4.9 million for the first nine months of 2000, compared with the same period in 1999, and the Seabrook deferred return. Net cash flows used in investing activities were $4.1 million for the nine months ended September 30, 2000, compared with $25.4 million for the nine months ended September 30, 1999, primarily as a result of the change on the investment in the NU system Money Pool, offset by increased investments in plant. Net cash flows used in financing activities were $105 million for the nine months ended September 30, 2000, compared with $120 million for the nine months ended September 30, 1999, as a result of a decrease in cash dividends on common stock. On October 4, 2000, Fitch upgraded the debt ratings of NAEC's first mortgage bonds. Almost all NU system securities are under review for possible upgrades, or on "credit watch" with positive implications by Standard and Poor's, Moody's Investors Service and Fitch. In the fourth quarter of 2000, NU and its subsidiaries expect to refinance most of the NU system's short-term debt. NAEC has renewed $200 million of bank borrowings for one year. Northeast Utilities and Subsidiaries The Connecticut Light and Power Company and Subsidiaries Public Service Company of New Hampshire Western Massachusetts Electric Company and Subsidiary North Atlantic Energy Corporation NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (All Companies) A. Presentation The accompanying unaudited financial statements should be read in conjunction with management's discussion and analysis of financial condition and results of operations in this Form 10-Q, the First and Second Quarter 2000 Form 10-Qs, the Annual Reports of Northeast Utilities (NU), The Connecticut Light and Power Company (CL&P), Public Service Company of New Hampshire (PSNH), Western Massachusetts Electric Company (WMECO), and North Atlantic Energy Corporation (NAEC), which were filed as part of the NU 1999 Form 10-K, and the current reports on Form 8-K dated September 27, 2000, October 23, 2000, October 24, 2000, and October 31, 2000. The accompanying financial statements contain, in the opinion of management, all adjustments necessary to present fairly NU's and each NU system company's financial position as of September 30, 2000, the results of operations for the three-month and nine-month periods ended September 30, 2000 and 1999, and statements of cash flows for the nine-month periods ended September 30, 2000 and 1999. All adjustments are of a normal, recurring nature except those described in Note 2. The results of operations for the three-month and nine- month periods ended September 30, 2000 and 1999, are not indicative of the results expected for a full year. The consolidated financial statements of NU and of its subsidiaries include the accounts of all their respective wholly owned subsidiaries. Significant intercompany transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications of prior period data have been made to conform with the current period presentation. B. Regulatory Accounting and Assets The accounting policies of the NU system operating companies and the accompanying consolidated financial statements conform to generally accepted accounting principles applicable to rate-regulated enterprises and historically reflect the effects of the rate-making process in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." As a result of final restructuring orders issued in 1999, CL&P and WMECO discontinued the application of SFAS No. 71 for the generation portion of their businesses. Their transmission and distribution businesses will continue to be cost-of-service based. At this time, management continues to believe that the application of SFAS No. 71 for PSNH and NAEC remains appropriate. If the "Agreement to Settle PSNH Restructuring" (Settlement Agreement) becomes probable of implementation, PSNH will discontinue the application of SFAS No. 71 for the generation portion of its business and record an after-tax write-off of $225 million. The remaining contingencies include certain appeals of restructuring legislation and other matters. Management hopes these contingencies will be resolved favorably in the fourth quarter of 2000. Management also currently believes that until these contingencies are resolved it is unlikely industry restructuring will proceed as contemplated in the Settlement Agreement. PSNH's transmission and distribution business will continue to be rate-regulated on a cost-of-service basis, as the Settlement Agreement allows for the recovery of the remaining regulatory assets through that portion of the business. See Note 2A for further information related to New Hampshire restructuring. C. Recently Issued Accounting Standards Derivative Instruments: Upon adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, on January 1, 2001, the derivative instruments utilized by the NU system companies will be recognized on the balance sheets as assets or liabilities at fair value. Management continues to evaluate the impact of the adoption of the new derivative accounting on its financial statements. The Financial Accounting Standards Board (FASB) Derivatives Implementation Group (DIG) is currently addressing two significant items for energy companies related to the definition of "normal purchases and sales" as defined by SFAS No. 138. The conclusions reached by the DIG on these accounting interpretations will have an impact on the implications of adopting the new derivative accounting. Management believes there may be an impact of adopting the new derivative accounting, but has not estimated this impact pending final interpretation of those issues by the DIG. Transfers of Financial Assets: In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement of FASB Statement No. 125." SFAS No. 140 revises the criteria for accounting for securitizations, other financial asset transfers and collateral and introduces new disclosures, but otherwise carries forward most of the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," without amendment. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Management has not evaluated the impact SFAS No. 140 will have on NU's consolidated financial statements. Revenue Recognition: In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." NU is required to adopt this new accounting guidance, as amended by SAB No. 101A and SAB No. 101B, through a cumulative charge to retained earnings in accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes," no later than the fourth quarter of 2000. Management does not expect SAB No. 101, as amended, to have a material impact on NU's consolidated financial statements. 2. COMMITMENTS AND CONTINGENCIES A. Restructuring (CL&P, PSNH, WMECO) Connecticut: The 1999 restructuring orders allowed for securitization of CL&P's nonnuclear regulatory assets and the costs to buyout or buydown the various purchased-power contracts. CL&P filed an application with the Connecticut Department of Public Utility Control (DPUC) on May 31, 2000, requesting authorization to securitize $1.4 billion of its stranded costs. On November 8, 2000, the DPUC approved CL&P's request to securitize an amount not to exceed $1.55 billion of approved, eligible stranded costs. New Hampshire: On September 8, 2000, the New Hampshire Public Utilities Commission (NHPUC) issued an order addressing various motions for clarification and the rehearing of its April 19, 2000, order. In its order, the NHPUC rejected motions for rehearing by the various parties, granted the relief requested by PSNH related to certain regulatory obligations and authorized PSNH to securitize up to $670 million, less $6 million for each month beginning October 2000 until competition begins. The NHPUC also issued an order addressing specific issues related to securitization permitted under the Settlement Agreement. In addition to the $225 million after-tax write-off, the Settlement Agreement reduces PSNH's rates by another 10.5 percent in addition to the 5 percent rate decrease implemented on October 1, 2000, and among other things, requires PSNH to divest of its generation assets and offer retail choice to its more than 420,000 electric customers. However, in October 2000, the securitization process and the implementation of the Settlement Agreement were delayed by two appeals of the NHPUC's order to the New Hampshire Supreme Court. These two appeals are based on the argument that it may be unconstitutional for customers' rates to include repayment of PSNH's stranded costs. The appeals remain outstanding. The New Hampshire Supreme Court issued an order on October 31, 2000, scheduling briefs regarding the appeals in November 2000 and oral arguments in December 2000. These appeals could substantially delay the securitization process, affect the rating of the bonds to be issued and the feasibility of the securitization process and substantially delay the implementation of the Settlement Agreement. If the appeals are successful and the Settlement Agreement is terminated, management believes the regulatory assets would still be recoverable. Massachusetts: A Massachusetts Department of Telecommunications and Energy (DTE) decision on the securitization plan was originally anticipated in August 2000. The DTE postponed its decision in this docket based on the announcement of the results of the Millstone nuclear generation asset auction on August 7, 2000. Based on those results, WMECO revised its original $261 million securitization plan downward to $160 million. Additionally, a settlement has been reached with the Massachusetts attorney general finalizing the securitization plan. WMECO is seeking DTE approval of its securitization plan which is anticipated by the end of 2000. B. Long-Term Contractual Arrangements (Select Energy) Select Energy, Inc. (Select Energy) maintains long-term agreements to purchase energy in the normal course of business as part of its portfolio of resources to meet its actual or expected sales commitments. The aggregate amount of these purchase contracts was $2.9 billion at September 30, 2000. These contracts extend through 2004 as follows (millions of dollars): Year ---- 2000 $ 612.2 2001 1,002.4 2002 494.5 2003 463.1 2004 281.4 -------- Total $2,853.6 ======== C. Nuclear Generation Assets Auction (NU, CL&P, PSNH, WMECO) On August 7, 2000, CL&P, WMECO and certain other joint owners reached an agreement to sell substantially all of the Millstone nuclear units, located in Waterford, Connecticut, to Dominion Resources, Inc. (Dominion), for approximately $1.3 billion, including approximately $105 million for nuclear fuel. Dominion has also agreed to assume responsibility for decommissioning the three units. Various federal and state regulatory approvals are needed before the transaction can be finalized. Filings were made in August and September 2000 and approvals are expected to be obtained by April 2001. If the transaction is approved and finalized as proposed, CL&P and WMECO would receive gross proceeds of approximately $843.2 million and $196.2 million on a pretax basis for their respective ownership interests. The net gain from the sale of these interests will be used to reduce the companies' stranded costs under restructuring and the net proceeds will be used to repay subsidiary debt and capital lease obligations and to return equity capital to the parent company. PSNH will receive $26 million on a pretax basis which will be reflected as a gain in accordance with the Settlement Agreement. 3. GAS SUPPLY RISK MANAGEMENT INSTRUMENTS (Yankee Gas) Yankee Gas Services Company (Yankee Gas) maintains gas service agreements with certain customers to supply gas at fixed prices for a 10-year term extending through 2005. Yankee Gas has hedged its gas supply risk under these agreements through commodity swap agreements. Under these commodity swap agreements, the purchase price of a specified quantity of gas is effectively fixed over the term of the gas service agreements, which also extend through 2005. As of September 30, 2000, the commodity swap agreements had a notional value of $18 million and a positive mark-to- market position of $2.9 million. 4. COMMODITY DERIVATIVES (Select Energy) Select Energy, primarily through trading and marketing, manages its exposure to risk from existing contractual commitments and provides risk management services to its customers through forward contracts, futures, over-the-counter swap agreements, and options (collectively, "commodity derivatives"). Select Energy engages in the trading of commodity derivatives, and therefore experiences net open positions. Select Energy manages these open positions with strict policies which limit its exposure to market risk and requires daily reporting to management of potential financial exposure. Commodity derivatives utilized for trading purposes are accounted for using the mark-to-market method, under Emerging Issues Task Force Issue No. 98-10, "Accounting for Energy Trading and Risk Management Activities." Under this methodology, these instruments are adjusted to market value, and the unrealized gains and losses are recognized in income in the current period in the consolidated statements of income as operating expenses - other and in the consolidated balance sheets as prepayments and other. The mark-to-market position at September 30, 2000, was a positive $7 million. 5. COMPREHENSIVE INCOME (NU, CL&P, PSNH, WMECO) The total comprehensive income/(loss), which includes all comprehensive income items, for the NU system is as follows: Nine Months Ended September 30, ------------------------------- 2000 1999 ---- ---- (Millions of Dollars) NU Consolidated $153.5 $ 50.0 CL&P 91.1 (20.3) PSNH 57.8 66.3 WMECO 21.7 17.8 6. EARNINGS PER SHARE (NU) Earnings per share (EPS) is computed based upon the weighted average number of common shares outstanding during each period. Diluted EPS is computed on the basis of the weighted average number of common shares outstanding plus the potential dilutive effect if certain securities are converted into common stock. The following table sets forth the components of basic and diluted EPS: -------------------------------------------------------------------------- (Millions of Dollars, Nine Months Ended September 30, except share information) 2000 1999 -------------------------------------------------------------------------- Income after interest charges $163.7 $67.4 Preferred dividends of subsidiaries 11.4 17.5 -------------------------------------------------------------------------- Net income $152.3 $49.9 Basic EPS common shares outstanding (average) 140,829,337 131,317,964 Dilutive effect of employee stock options 620,065 462,353 -------------------------------------------------------------------------- Diluted EPS common shares outstanding (average) 141,449,402 131,780,317 -------------------------------------------------------------------------- Basic and Fully Diluted EPS $1.08 $0.38 -------------------------------------------------------------------------- 7. SEGMENT INFORMATION (NU) The NU system is organized between regulated utilities (electric and gas for the nine months ended September 30, 2000, and electric only for the nine months ended September 30, 1999) and competitive energy subsidiaries. The regulated utilities segment represents approximately 84 percent and 87 percent of the NU system's total revenues for the nine months ended September 30, 2000 and 1999, respectively, and is comprised of several business units. Regulated utilities revenues primarily are derived from residential, commercial and industrial customers and are not dependent on any single customer. The competitive energy subsidiaries segment has two major customers, one unaffiliated company and CL&P. Their purchases represented approximately 4 percent and 32 percent, respectively, of total competitive energy subsidiaries' revenues for the nine months ended September 30, 2000. Purchases from the unaffiliated company represented approximately 48 percent of total competitive energy subsidiaries' revenues for the nine months ended September 30, 1999. There were no purchases from CL&P in 1999. The competitive energy subsidiaries segment in the following table includes HEC Inc., a provider of energy management, demand-side management and related consulting services for commercial, industrial and institutional electric companies and electric utility companies; Holyoke Water Power Company, a company engaged in the production and distribution of electric power; Northeast Generation Company, a corporation that acquires and manages generation facilities; Northeast Generation Services Company, a corporation that maintains and services any fossil or hydroelectric facility that is acquired or contracted with for fossil or hydroelectric generation services, and; Select Energy, a corporation engaged in the marketing, transportation, storage, and sale of energy commodities, at wholesale, in designated geographical areas and in the marketing of electricity to retail customers. Other in the following table includes the results for Mode 1 Communications, Inc. (Mode 1), an investor in a fiber-optic communications network. Mode 1 had earnings of $5.9 million and a net loss of $3.9 million for the nine months ended September 30, 2000 and 1999, respectively. See Note 8 for further information related to Mode 1's earnings for the nine months ended September 30, 2000. Other also includes the results of the nonenergy related subsidiaries of Yankee Energy System, Inc. Interest expense included in Other primarily relates to the debt of NU parent. Inter-segment eliminations of revenues and expenses are also included in Other. For the Nine Months Ended September 30, 2000 ------------------------------------------------------------ Competitive Eliminations (Millions of Regulated Utilities Energy and Dollars) Electric Gas Subsidiaries Other Total --------- --------- ------------ ------------ ----- Operating revenues $ 3,550.3 $131.7 $1,508.9 $ (811.6) $ 4,379.3 Operating expenses (3,229.2) (125.2) (1,466.8) 792.2 (4,029.0) Operating income/ (loss) 321.1 6.5 42.1 (19.4) 350.3 Other income/ (loss) 30.8 (2.9) 2.9 6.5 37.3 Interest expense (147.0) (8.7) (37.1) (31.1) (223.9) Preferred dividends (11.4) - - - (11.4) --------- ------ -------- --------- --------- Net income/ (loss) $ 193.5 $ (5.1) $ 7.9 $ (44.0) $ 152.3 ========= ====== ======== ========= ========= Total assets $ 9,757.1 $873.7 $ 700.5 $ (765.9) $10,565.4 ========= ====== ======== ========= ========= For the Nine Months Ended September 30, 1999 ------------------------------------------------------------ Regulated Competitive Eliminations (Millions of Electric Energy and Dollars) Utilities Subsidiaries Other Total --------- ------------ ------------ ----- Operating revenues $2,895.5 $444.4 $(17.4) $ 3,322.5 Operating expenses (2,617.8) (474.6) 26.6 (3,065.8) -------- ------ ------ --------- Operating income/ (loss) 277.7 (30.2) 9.2 256.7 Other income/ (loss) 7.1 4.2 (2.2) 9.1 Interest expense (184.4) (3.0) (11.0) (198.4) Preferred dividends (17.5) - - (17.5) -------- ------ ------ --------- Net income/ (loss) $ 82.9 $(29.0) $ (4.0) $ 49.9 ======== ====== ====== ========= Total assets $9,909.3 $285.9 $ 69.7 $10,264.9 ======== ====== ====== ========= 8. MODE 1 (NU) On November 23, 1999, NEON Communications, Inc. (NEON) entered into agreements with two unaffiliated companies. Under the terms of the agreements, NEON will provide network transport and carrier services in its service areas and that of the two unaffiliated companies and each company will provide connectivity from the backbone system to their respective local loops. Additionally, each company will manage their local distribution into their respective end-users' locations. NEON will also develop, operate and market the combined telecommunications infrastructure created under the two agreements. As the agreements are implemented, the two unaffiliated companies will ultimately obtain a total of approximately 4.6 million shares of NEON common stock or approximately 12 percent and 10 percent ownership interests, respectively. Each unaffiliated company will also nominate one member to the NEON Board of Directors. Prior to the implementation of these agreements, Mode 1 had approximately a 29 percent ownership interest in the common shares of NEON. In conjunction with the consummation of the agreements on September 14, 2000, a portion of the total common shares to be issued were issued to the two unaffiliated companies. The remainder of these shares will be issued as the two unaffiliated companies complete certain milestones, as defined in their respective agreements. The issuance of these shares had the effect of decreasing Mode 1's ownership interest in NEON's outstanding common shares to approximately 25 percent. However, these shares were issued at an amount greater than Mode 1's investment, resulting in a $19.8 million pretax increase to Mode 1's equity. NU's accounting policy is to recognize the gain or loss from this type of change in ownership interest in net income. PART II. OTHER INFORMATION Item 1. Legal Proceedings 1. Millstone 3 - Damage to Fish Population Lawsuits (NU, CL&P, PSNH, and WMECO) On April 20, 2000, two lawsuits were filed in New London Superior Court against Northeast Nuclear Energy Company (NNECO) and Northeast Utilities Service Company (NUSCO) seeking to enjoin operations at Millstone due to alleged damage caused to the winter flounder population in the Niantic River and Long Island Sound. The first action, brought by certain citizens groups, seeks a temporary injunction to suspend Millstone 3 operations through the second week of June 2000. On August 30, 2000, NNECO filed a motion to dismiss on the grounds that the plaintiffs failed to exhaust their administrative remedies before resorting to the court. The motion also contended that the action should be dismissed as moot since plaintiffs only sought to enjoin the operation of Millstone 3 through June 2000. On October 16, 2000, NNECO's motion to dismiss this action was granted. On April 24, 2000, a third lawsuit was filed in Hartford Superior Court against NUSCO, NNECO and the Commissioner of the Department of Environmental Protection (DEP) challenging the validity of previously issued DEP emergency and temporary authorizations allowing Millstone to discharge wastewater not expressly authorized by the facility's National Pollution Discharge Elimination System permit. The suit seeks a temporary and permanent injunction against operations at Millstone 1, 2 and 3. On August 30, 2000, NNECO filed a motion to dismiss, and on October 16, 2000, NNECO's motion was granted. For more information regarding these matters, see "Part II, Item 1 - Legal Proceedings" in NU's 2000 First Quarter Report on Form 10-Q. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Listing of Exhibits Exhibit No. Description ----------- ----------- 3.1 NAEC's Amendment to By-Laws 15 Arthur Andersen LLP Letter Regarding Unaudited Financial Information 27 NU Financial Data Schedule 27.1 CL&P Financial Data Schedule 27.2 PSNH Financial Data Schedule 27.3 WMECO Financial Data Schedule 27.4 NAEC Financial Data Schedule (b) Reports on Form 8-K: NU filed a current report on Form 8-K dated September 27, 2000, disclosing: o The Utility Operations Management Analysis Unit of the DPUC recommended that the DPUC approve the results of the recently completed auction of the Millstone nuclear units. NU filed a current report on Form 8-K dated October 23, 2000, disclosing: o Consolidated Edison, Inc. (Con Edison) issued a press release on October 23, 2000, regarding the DPUC's decision on October 19, 2000, which approved the proposed merger between NU and Con Edison, subject to a number of conditions. NU filed a current report on Form 8-K dated October 24, 2000, disclosing: o NU's earnings press release for the third quarter of 2000. NU filed a current report on Form 8-K dated October 31, 2000, disclosing: o NU's and Con Edison's presentation dated October 31, 2000, entitled "The Northeast's Energy Company." SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NORTHEAST UTILITIES ------------------- Registrant Date: November 9, 2000 By /s/ John H. Forsgren ----------------------------------- John H. Forsgren Executive Vice President and Chief Financial Officer Date: November 9, 2000 By /s/ John J. Roman ----------------------------------- John J. Roman Vice President and Controller SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE CONNECTICUT LIGHT AND POWER COMPANY --------------------------------------- Registrant Date: November 9, 2000 By /s/ Randy A. Shoop ----------------------------------- Randy A. Shoop Treasurer Date: November 9, 2000 By /s/ John P. Stack ----------------------------------- John P. Stack Controller SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE --------------------------------------- Registrant Date: November 9, 2000 By /s/ David R. McHale ----------------------------------- David R. McHale Vice President and Treasurer Date: November 9, 2000 By /s/ John J. Roman ----------------------------------- John J. Roman Vice President and Controller SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WESTERN MASSACHUSETTS ELECTRIC COMPANY -------------------------------------- Registrant Date: November 9, 2000 By /s/ David R. McHale ----------------------------------- David R. McHale Vice President and Treasurer Date: November 9, 2000 By /s/ John J. Roman ----------------------------------- John J. Roman Vice President and Controller SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NORTH ATLANTIC ENERGY CORPORATION --------------------------------- Registrant Date: November 9, 2000 By /s/ David R. McHale ----------------------------------- David R. McHale Vice President and Treasurer of Northeast Utilities as Agent for North Atlantic Energy Corporation Date: November 9, 2000 By /s/ John J. Roman ----------------------------------- John J. Roman Vice President and Controller of Northeast Utilities as Agent for North Atlantic Energy Corporation Exhibit 3.1 BY-LAWS OF NORTH ATLANTIC ENERGY CORPORATION Adopted June 15, 1992 Amended June 1, 2000 NORTH ATLANTIC ENERGY CORPORATION BY-LAWS ARTICLE I MEETINGS OF SHAREHOLDERS Section 1. Meetings of the shareholders may be held at such place either within or without the State of New Hampshire as may be designated by the Board of Directors. Section 2. The Annual Meeting of Shareholders for the election of Directors and the transaction of such other business as may properly be brought before the meeting shall be held in March, April, May, June or July in each year on the day and at the hour designated by the Board of Directors. Section 3. Notice of all meetings of shareholders, stating the day, hour and place thereof, shall be given by a written or printed notice, delivered or sent by mail, at least ten days but not more than fifty days before the date of the meeting, to each shareholder of record on the books of the Company and entitled to vote at such meeting, at the address appearing on such books, unless such shareholder shall waive notice in writing. Notice of a special meeting of shareholders shall state also the general purpose or purposes of such meeting and no business other than that of which notice has been so given shall be transacted at such meeting. Section 4. At all meetings of shareholders each share of Common Stock entitled to vote, and represented in person or by proxy, shall be entitled to one vote. Section 5. The Board of Directors may fix a date as the record date for the purpose of determining shareholders entitled to notice of and to vote at any meeting of shareholders or any adjournment thereof, such date in any case to be not earlier than the date such action is taken by the Board of Directors and not more than fifty days and not less than ten days immediately preceding the date of such meeting. In such case only such shareholders or their legal representatives as shall be shareholders on the record date so fixed shall be entitled to such notice and to vote at such meeting or any adjournment thereof, notwithstanding the transfer of any shares of stock on the books of the Company after any such record date so fixed. ARTICLE II DIRECTORS Section 1. The business, property and affairs of the Company shall be managed by a Board of not less than three nor more than sixteen Directors. Within these limits, the number of positions on the Board of Directors for any year shall be the number fixed by resolution of the shareholders or of the Board of Directors, or, in the absence of such a resolution, shall be the number of Directors elected at the preceding Annual Meeting of Shareholders. The Directors so elected shall continue in office until their successors have been elected and qualified, except that a Director shall cease to be in office upon his death, resignation, lawful removal or court order decreeing that he is no longer a Director in office. Section 2. The Board of Directors shall have power to fill vacancies that may occur in the Board, or any other office, by death, resignation or otherwise, by a majority vote of the remaining members of the Board, and the person so chosen shall hold the office until the next Annual Meeting of Shareholders and until his successor shall be elected and qualified. Section 3. The Board of Directors shall have power to employ such and so many agents and factors or employees as the interests of the Company may require, and to fix the compensation and define the duties of all of the officers, agents, factors and employees of the Company. All the officers, agents, factors and employees of the Company shall be subject to the order of said Board, shall hold their offices at the pleasure of said Board, and may be removed at any time by said Board at its discretion. Section 4. Any one or more Directors may be removed from office at a meeting of Shareholders expressly called for that purpose with or without any showing of cause by an affirmative vote of the holders of a majority of the Company's issued and outstanding shares entitled to vote. ARTICLE III MEETINGS OF DIRECTORS Section 1. A regular meeting of the Board of Directors shall be held annually, without notice, directly following the annual meeting of the shareholders, or as soon as practicable thereafter, for the election of officers and the transaction of other business. Section 2. All other regular meetings of the Board of Directors may be held at such time and place as the Board may from time to time determine. Special meetings of the Board may be held at any place upon call of the Chairman (if there be one) or the President, or, in the event of the absence or inability of either to act, of a Vice President, or upon call of any three or more directors. Section 3. Oral or written notice of the time and place of each special meeting of the Board of Directors shall be given to each director personally or by telephone, or by mail or telegraph at his last-known post office address, at least twenty-four hours prior to the time of the meeting, provided that any director may waive such notice in writing or by telegraph or by attendance at such meeting. Section 4. One-third of the number of directors as fixed in accordance with Section 1 of Article II of these By-Laws shall constitute a quorum. A number less than a quorum may adjourn from time to time until a quorum is present. In the event of such an adjournment, notice of the adjourned meeting shall be given to all Directors. Section 5. Except as otherwise provided by these By-Laws, the act of a majority of the Directors present at a meeting at which a quorum is present at the time of the act shall be the act of the Board of Directors. Section 6. Any resolution in writing concerning action to be taken by the Company, which resolution is approved and signed by all of the Directors, severally and collectively, shall have the same force and effect as if such action were authorized at a meeting of the Board of Directors duly called and held for that purpose, and such resolution, together with the Directors' written approval thereof, shall be recorded by the Secretary in the minute book of the Company. Section 7. One or more Directors or members of a committee of the Board of Directors may participate in a meeting of the Board of Directors or of such committee by means of conference telephone or similar communications equipment enabling all Directors participating in the meeting to hear one another, and participation in a meeting in such manner shall constitute presence in person at such meeting. ARTICLE IV OFFICERS Section 1. At its annual meeting the Board of Directors shall elect a President and a Secretary, and, if the Board shall so determine, a Chairman and a Treasurer, each of whom shall, subject to the provisions of Article IV, Section 3, hold office until the next annual election of officers and until his successor shall have been elected and qualified. Any two or more offices may be held by the same person except that the offices of the President and Secretary may not be simultaneously held by the same person. The Board shall also elect at such annual meeting, and may elect at any regular or special meeting, such other officers as may be required for the prompt and orderly transaction of the business of the Company, and each such officer shall have such authority and shall perform such duties as may be assigned to him from time to time by the Board of Directors. Any vacancy occurring in any office may be filled at any regular meeting of the Board or at any special meeting of the Board held for that purpose. Section 2. In addition to such powers and duties as these By-Laws and the Board of Directors may prescribe, and except as may be otherwise provided by the Board, each officer shall have the powers and perform the duties which by law and general usage appertain to his particular office. Section 3. Any officer may be removed, with or without cause, at any time by the Board in its discretion. Vacancies among the officers by reason of death, resignation, removal (with or without cause) or other reason shall be filled by the Board of Directors. ARTICLE V CHAIRMAN AND PRESIDENT Section 1. The Chairman, if such office shall be filled by the Directors, shall, when present, preside at all meetings of said Board and of the stockholders. He shall have such other authority and shall perform such additional duties as may be assigned to him from time to time by the Board of Directors. Section 2. If the Chairman shall be absent or unable to perform the duties of his office, or if the office of the Chairman shall not have been filled by the Directors, the President shall preside at meetings of the Board of Directors and of the stockholders. He shall have such other authority and shall perform such additional duties as may be assigned to him from time to time by the Board of Directors. ARTICLE VI VICE PRESIDENTS Section 1. The Vice Presidents shall have such powers and duties as may be assigned to them from time to time by the Board of Directors or the President. One of such Vice Presidents may be designated by said Board as Executive Vice President and, if so designated, shall exercise the powers and perform the duties of the President in the absence of the President or if the President is unable to perform the duties of his office. The Board of Directors may also designate one or more of such Vice Presidents as Senior Vice President(s). ARTICLE VII SECRETARY Section 1. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors. He shall give notice of all meetings of the stockholders and of said Board. He shall record all votes taken at such meetings. He shall be custodian of all contracts, leases, assignments, deeds and other instruments in writing and documents not properly belonging to the office of the Treasurer, and shall perform such additional duties as may be assigned to him from time to time by the Board of Directors, the Chairman, the President or by law. He shall be the registered agent of the Company. Section 2. He shall have the custody of the Corporate Seal of the Company and shall affix the same to all instruments requiring a seal except as otherwise provided in these By-Laws. ARTICLE VIII ASSISTANT SECRETARIES Section 1. One or more Assistant Secretaries shall perform the duties of the Secretary if the Secretary shall be absent or unable to perform the duties of his office. The Assistant Secretaries shall perform such additional duties as may be assigned to them from time to time by the Board of Directors, the Chairman, the President or the Secretary. ARTICLE IX TREASURER Section 1. The Treasurer, if such office shall be filled by the Directors, shall have charge of all receipts and disbursements of the Company, and shall be the custodian of the Company's funds. He shall have full authority to receive and give receipts for all moneys due and payable to the Company from any source whatever, and give full discharge for the same, and to endorse checks, drafts and warrants in its name and on its behalf. He shall sign all checks, notes, drafts and similar instruments, except as otherwise provided for the Board of Directors. Section 2. The Treasurer shall perform such additional duties as may be assigned to him from time to time by the Board of Directors, the President or by law. Section 3. In the absence of the appointment of a Treasurer by the Board of Directors, the duties of the Treasurer may be performed by the Treasurer of Northeast Utilities Service Company, as agent for the Company. ARTICLE X ASSISTANT TREASURERS Section 1. One or more Assistant Treasurers, if such offices shall be filled by the Directors, shall perform the duties of the Treasurer if the Treasurer shall be absent or unable to perform the duties of his office. The Assistant Treasurers shall perform such additional duties as may be assigned to them from time to time by the Board of Directors, the President or the Treasurer. Section 2. In the absence of the appointment of an Assistant Treasurer by the Board of Directors, the duties of the Assistant Treasurer may be performed by the Assistant Treasurer of Northeast Utilities Service Company, as agent for the Company. ARTICLE XI COMMITTEES Section 1. The Board of Directors may designate, by resolution adopted by a majority of the full Board of Directors, two or more Directors to constitute an executive committee or other committees, which committees shall have and may exercise all such authority of the Board of Directors as may be delegated to such committees in accordance with law. At the time of such appointment, the Board of Directors may also appoint, in respect to each member of any such committee, another Director to serve as his alternate at any meeting of such committee which such member is unable to attend. Each alternate shall have, during his attendance at a meeting of such committee, all the rights and obligations of a regular member thereof. Any vacancy on any committee or among alternate members thereof shall be filled by the Board of Directors. ARTICLE XII STOCK CERTIFICATES Section 1. All stock certificates may bear the facsimile signatures of the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and a facsimile seal of the Company, or may be signed by the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed by one of such officers. ARTICLE XIII CORPORATE SEAL Section 1. The corporate seal of the Company shall be circular in form with the name of the Company inscribed therein. ARTICLE XIV INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Section 1. The Board of Directors may, as and to the extent permitted by law, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of the action or suit. ARTICLE XV AMENDMENTS Section 1. These By-Laws may be altered, amended, added to or repealed from time to time by an affirmative vote of the holders of a majority of the voting powers of shares entitled to vote thereon at any meeting of the shareholders called for the purpose or by an affirmative vote of Directors holding a majority of the number of directorships at any meeting of the Board of Directors called for that purpose. I HEREBY CERTIFY that the foregoing copy of "North Atlantic Energy Corporation By-Laws" is a true and correct copy of said By-Laws in full force and effect as of this day of , . /s/ Assistant Secretary Exhibit 15 To Northeast Utilities: We are aware that Northeast Utilities has incorporated by reference in its Registration Statements No. 33-34622, No. 33-40156, No. 33-44814, No. 33-63023, No. 33-55279, No. 33-56537, No. 333-52413, No. 333-52415, and No. 333-85613, its Form 10-Q for the quarter ended September 30, 2000, which includes our report dated November 9, 2000, covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. /s/ Arthur Andersen LLP Arthur Andersen LLP Hartford, Connecticut November 9, 2000 EX-27 2 0002.txt FDS FOR NU
UT 0000072741 NORTHEAST UTILITIES AND SUBSIDIARIES 1,000 9-MOS DEC-31-2000 SEP-30-2000 PER-BOOK 4,296,561 985,664 1,360,565 3,922,590 0 10,565,380 743,480 1,094,996 691,164 2,413,785 15,000 136,200 2,042,929 1,127,338 0 0 513,400 26,500 50,619 113,101 4,010,653 10,565,380 4,379,241 126,468 3,857,527 4,028,979 350,262 (7,635) 387,611 223,852 163,759 11,423 152,336 42,990 0 416,428 1.08 1.08 EX-27.1 3 0003.txt FDS FOR CL&P
UT 0000023426 THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES 1,000 9-MOS DEC-31-2000 SEP-30-2000 PER-BOOK 1,706,089 636,162 558,400 1,883,722 0 4,784,373 75,849 412,993 208,816 698,460 0 116,200 1,069,615 110,000 0 0 160,000 0 42,459 90,023 2,498,418 4,784,373 2,179,704 88,194 1,901,854 2,009,016 170,688 (18,549) 171,107 74,370 96,737 6,012 90,725 35,000 0 176,499 0.00 0.00
EX-27.2 4 0004.txt FDS FOR PSNH
UT 0000315256 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 1,000 9-MOS DEC-31-2000 SEP-30-2000 PER-BOOK 1,597,191 30,411 458,909 384,930 0 2,471,441 1 424,867 326,983 753,607 0 0 407,285 0 0 0 0 25,000 566,936 94,645 623,968 2,471,441 993,017 29,768 884,074 915,161 77,856 11,175 90,350 29,934 60,416 3,313 57,103 50,000 0 165,983 0.00 0.00
EX-27.3 5 0005.txt FDS FOR WMECO
UT 0000106170 WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY 1,000 9-MOS DEC-31-2000 SEP-30-2000 PER-BOOK 352,556 174,437 116,177 410,937 0 1,054,107 14,752 93,945 52,223 161,187 15,000 20,000 138,699 126,600 0 0 60,000 1,500 6,550 21,003 503,835 1,054,107 379,900 9,731 326,281 341,204 38,696 (620) 43,268 19,621 23,647 2,098 21,549 8,002 0 37,567 0.00 0.00
EX-27.4 6 0006.txt FDS FOR NAEC
UT 0000880416 NORTH ATLANTIC ENERGY CORPORATION 1,000 9-MOS DEC-31-2000 SEP-30-2000 PER-BOOK 538,422 52,544 74,592 71,135 0 736,693 1 160,999 1,840 162,840 0 0 65,000 0 0 0 270,000 0 0 0 238,853 736,693 199,303 10,009 139,092 165,991 33,312 (3,016) 47,186 23,098 24,088 0 24,088 35,000 0 109,094 0.00 0.00
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