-----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, BzxvaSQCaFs6M5UodbuoL9i2sqvCOBZFAizwrUsPUj1FVKpKaTpoU2tThgNc3aqE wPFoapR/mbrURvR59tgNng== 0000950109-97-004899.txt : 19970710 0000950109-97-004899.hdr.sgml : 19970710 ACCESSION NUMBER: 0000950109-97-004899 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970708 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT LIGHT & POWER CO CENTRAL INDEX KEY: 0000023426 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 060303850 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-30911 FILM NUMBER: 97637612 BUSINESS ADDRESS: STREET 1: 707 SELDEN ST CITY: BERLIN STATE: CT ZIP: 06037-1616 BUSINESS PHONE: 2036655000 S-1 1 FORM S-1 FOR CL & P As filed with the Securities and Exchange Commission on July 8, 1997 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- THE CONNECTICUT LIGHT AND POWER COMPANY (Exact name of registrant as specified in its charter) Connecticut 4911 06-0303850 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification Number) incorporation or Classification Code Number) organization) ----------------- Selden Street Berlin, Connecticut 06037 (860) 665-5000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------------- Robert P. Wax, Senior Vice President, Secretary and General Counsel The Connecticut Light and Power Company Selden Street, Berlin, Connecticut 06037 (860) 665-5000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------- Copy to: JEFFREY C. MILLER, Esq. PAULA L. HERMAN, Esq. Northeast Utilities Service Company Day, Berry & Howard P.O. Box 270 CityPlace I Hartford, CT 06141-0270 Hartford, CT 06103-3499 (860) 665-3532 (860) 275-0270 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ----------------- CALCULATION OF REGISTRATION FEE
========================================================================================================= Title of Each Class of Amount to be Maximum Offering Maximum Aggregate Amount of Securities to be Registered Registered Price Per Unit(1) Offering Price(1) Registration Fee - --------------------------------------------------------------------------------------------------------- First and Refunding Mortgage 7 3/4% Bonds, 1997 Series C $200,000,000 100% $200,000,000 $60,607 - ---------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended, using the book value of the securities to be exchanged as of June 30, 1997. ----------------- The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. THE CONNECTICUT LIGHT AND POWER COMPANY FORM S-1 REGISTRATION STATEMENT CROSS-REFERENCE SHEET Pursuant to Item 501(b) of Regulation S-K
Form S-1 Item Caption or Location Number and Caption in Prospectus ------------------ ------------- 1. Forepart of the Registration Facing Page; Outside Front Cover Page Statement and Outside Front Cover.. of Prospectus 2. Inside Front and Outside Back Cover Inside Front Cover Page of Pages of Prospectus................ Prospectus; Available Information; Outside Back Cover Page of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Prospectus Summary; Risk Factors; Charges............................ Selected Consolidated Financial Data 4. Use of Proceeds.................... Prospectus Summary; Use of Proceeds 5. Determination of Offering Price.... Not Applicable 6. Dilution........................... Not Applicable 7. Selling Security Holders........... Not Applicable 8. Plan of Distribution............... Outside Front Cover Page of Prospectus; Plan of Distribution; The Exchange Offer 9. Description of Securities to be Registered......................... Outside Front Cover Page of Prospectus; Description of the New Bonds 10. Interests of Named Experts and Counsel............................ Legal Matters and Experts 11. Information with Respect to the Registrant......................... Prospectus Summary; Risk Factors; Selected Consolidated Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Description of the New Bonds; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liability...................... Not Applicable
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +Information contained herein is subject to completion or amendment. A + +registration statement relating to these securities has been filed with the + +Securities and Exchange Commission. These securities may not be sold nor may + +offers to buy be accepted prior to the time the registration statement becomes+ +effective. This prospectus shall not constitute an offer to sell or the + +solicitation of an offer to buy nor shall there be any sale of these + +securities in any State in which such offer, solicitation or sale would be + +unlawful prior to registration or qualification under the securities laws of + +any such State. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PRELIMINARY PROSPECTUS Subject to completion: Dated July __, 1997 Offer For All Outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 In Exchange For First and Refunding Mortgage 7 3/4% Bonds, 1997 Series C Due June 1, 2002 Each Issued By THE CONNECTICUT LIGHT AND POWER COMPANY -------------------- The Exchange Offer will expire at 5:00 p.m., New York City time, on ________ ___, 1997 unless extended. -------------------- The Connecticut Light and Power Company, a Connecticut corporation (the Company or CL&P), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (which together constitute the Exchange Offer), to exchange an aggregate principal amount of up to $200,000,000 of its First and Refunding Mortgage 7 3/4% Bonds, 1997 Series C Due June 1, 2002 (the New Bonds) for a like principal amount of its issued and outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 (the Old Bonds and together with the New Bonds, the Bonds). The Company will not receive any proceeds from the Exchange Offer and will pay all the expenses incident to the Exchange Offer. The New Bonds will be issued under, and entitled to the benefits of, the Indenture (as defined) governing the Old Bonds. The New Bonds are identical in all material respects to the Old Bonds, except for the elimination of certain transfer restrictions, registration rights and interest rate provisions relating to the Old Bonds. The New Bonds are being offered hereunder in order to satisfy certain obligations of the Company contained in a Registration Rights Agreement dated as of June 19, 1997 (the Registration Rights Agreement). The Company will accept for exchange any and all Old Bonds validly tendered and not withdrawn prior to 5:00 p.m. New York City time on ____________, 1997, unless extended (as so extended, the Expiration Date). The Bonds will mature on June 1, 2002 and will bear interest from June 1, 1997 at the rate of 7 3/4% per annum. Interest will be payable semiannually on June 1 and December 1, commencing December 1, 1997 at the principal office of the Trustee in New York City, to registered owners at the close of business on the May 15 or November 15, as the case may be, preceding such June 1 or December 1, or if such record date is a legal holiday or a day on which banks are authorized to close in New York City, on the next preceding day which is not a legal holiday or a day on which banks are so authorized to close. -------------------- See "Risk Factors" beginning on page 13 for a discussion of certain risks that should be considered by holders of Old Bonds in considering whether to tender their Old Bonds in the Exchange Offer. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is July __, 1997. The New Bonds will be redeemable at the option of the Company, as a whole or in part, at a redemption price equal to the greater of (i) 100% of their principal amount and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield (as defined), plus in each case accrued interest to the date of redemption. Tenders of Old Bonds pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Subject to certain conditions, the Company may terminate the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Bonds, the Company will promptly return the Old Bonds to the Holders thereof. See "The Exchange Offer." The Old Bonds were sold to Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (collectively, the Initial Purchasers) in the Original Offering (as defined), in a transaction not registered under the Securities Act of 1933, as amended (the Securities Act), in reliance upon the exemption provided in Section 4(2) of the Securities Act. The Initial Purchasers subsequently placed the Old Bonds with "qualified institutional buyers," as defined in Rule 144A under the Securities Act. Accordingly, the Old Bonds may not be reoffered, resold or otherwise transferred in the United States unless so registered or unless an applicable exemption from the registration requirements of the Securities Act is available. The New Bonds are being offered hereunder in order to satisfy the obligations of the Company under the Registration Rights Agreement. Based on interpretations by the staff of the Securities and Exchange Commission (the Commission) issued to other issuers in similar contexts, New Bonds issued pursuant to the Exchange Offer in exchange for Old Bonds may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Bonds are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Bonds. Each broker-dealer that receives New Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Bonds. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Bonds received in exchange for Old Bonds where such Old Bonds were acquired as a result of market-making activities or other trading activities. The Company has agreed, for a period of 180 days after the Expiration Date, that it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Prior to this Exchange Offer, there has been no public market for the New Bonds. The Company does not intend to list the New Bonds on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the New Bonds will develop. See "Risk Factors--Market for the New Bonds." Moreover, to the extent that Old Bonds are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Bonds could be adversely affected. If a market for the New Bonds should develop, the New Bonds could trade at a discount from their face amount. There can be no assurance that an active public market for the New Bonds will develop. Holders whose Old Bonds are not tendered and accepted in the Exchange Offer will continue to hold such Old Bonds and will be entitled to all the rights and preferences, and will be subject to the limitations applicable thereto under the Indenture (as herein defined) and, with respect to transfer, under the Securities Act. See "Risk Factors--Consequences of Failure to Exchange." -2- THIS PROSPECTUS (PROSPECTUS) DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW BONDS OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE AN OFFERING OR A SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE NEW BONDS, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE COMPANY IS NOT MAKING ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF THE NEW BONDS REGARDING THE LEGALITY OF AN INVESTMENT BY SUCH OFFEREE OR PURCHASER UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS. EACH INVESTOR SHOULD CONSULT WITH HIS OWN ADVISORS AS TO LEGAL, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS OF A PURCHASE OF THE NEW BONDS. -------------------- -3- AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 (the Registration Statement) under the Securities Act for the registration of the New Bonds offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, certain portions of which are omitted from the Prospectus as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the New Bonds offered hereby, reference is made to the Registration Statement, including the exhibits thereto, and financial statements and notes filed as a part thereof. Statements made in this Prospectus concerning the contents of any documents referred to herein are not necessarily complete. With respect to each such document filed with the Commission as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Company is subject to the periodic reporting and certain other informational requirements of the Securities Exchange Act of 1934, as amended (Exchange Act) and files periodic reports and other information with the Commission. The Registration Statement in which this Prospectus is included and the exhibits and schedules thereto, as well as such reports and other information filed by the Company with the Commission may be inspected and copied at prescribed rates, at the public reference facility of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the Commission's regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also can be obtained by mail from the public reference facilities of the Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the aforementioned material can be inspected at the offices of The New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The Commission also maintains a Website that contains reports and other information regarding registrants, such as the Company, that file electronically with the Commission. The address of such site is (http://www.sec.gov/). Anyone who receives this Prospectus may obtain a copy of the Indenture and the Registration Rights Agreement (as defined herein) without charge by writing to Theresa H. Allsop, Assistant Secretary, at the Company's principal executive offices at Selden Street, Berlin, Connecticut 06037- 1616 or by telephone at 860/665-3019. FORWARD-LOOKING STATEMENTS Certain statements contained in this Prospectus are "forward-looking statements" within the meaning of the Securities Act and the Exchange Act, such as forecasts and projections of expected future performance or statements of plans and objectives of the Company and/or the Northeast Utilities (NU) System (System). Although such forward-looking statements have been based on -4- reasonable assumptions, there is no assurance that the expected results will be achieved, and actual results could differ materially from these statements. Some of the factors that could cause actual results to differ materially include, but are not limited to: governmental and regulatory actions and initiatives; the impact of deregulation and increased competition in the industry; generating plant performance; weather conditions; fuel prices and availability; general economic conditions, including the effects of inflation; and technological changes. -5- PROSPECTUS SUMMARY The following material is qualified in its entirety by, and should be considered in conjunction with, the detailed information and financial statements appearing elsewhere in this Prospectus. The Company The Company, a Connecticut corporation organized in 1907, is a wholly- owned subsidiary of NU. The Company is the largest electric utility in Connecticut and is engaged principally in the production, purchase, transmission, distribution and sale of electricity at retail for residential, commercial, industrial and municipal purposes to approximately 1.1 million customers in 149 cities and towns in Connecticut.
The Exchange Offer Old Bonds............ The Old Bonds were sold by the Company to the Initial Purchasers on June 26, 1997 (the Issue Date) pursuant to an exemption from or in transactions not subject to the registration requirements of the Securities Act and applicable state securities laws. The Initial Purchasers resold the Old Bonds to "qualified institutional buyers," as defined in Rule 144A under the Securities Act. The Registration Statement of which this Prospectus is a part relates only to the registration of the New Bonds in exchange for the Old Bonds. Registration Rights.. The Company and the Initial Purchasers entered into a Registration Rights Agreement, dated as of June 19, 1997 (Registration Rights Agreement), which grants the holders of the Old Bonds certain exchange and registration rights. The New Bonds are being offered hereunder in order to satisfy the obligations of the Company under the Registration Rights Agreement. The Exchange Offer... Up to $200,000,000 aggregate principal amount of the New Bonds are being offered in exchange for a like principal amount of the Old Bonds. No accrued interest will be paid on the Old Bonds upon the exchange thereof, but interest will accrue on the New Bonds from June 1, 1997. Holders of the Old Bonds to whom this Exchange Offer is made have special rights under the Registration Rights Agreement that will terminate upon the consummation of the Exchange Offer. For procedures for tendering the Old Bonds, see "The Exchange Offer."
-6- Based on interpretations by the staff of the Commission set forth in certain no-action letters issued by the Commission to third parties, the Company believes that New Bonds issued pursuant to the Exchange Offer in exchange for Old Bonds may be offered for resale, resold and otherwise offered by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and (except as set forth below) the prospectus delivery provisions of the Securities Act, provided that such New Bonds are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Bonds. Both (i) broker-dealers and (ii) holders of Old Bonds who are considering tendering Old Bonds in order to participate in the distribution of the New Bonds should see "Risk Factors--Consequences of Failure to Exchange,""The Exchange Offer--Purpose and Effect of the Exchange Offer" and "--Resales of the New Bonds" and "Plan of Distribution" for information concerning certain requirements that may apply to their activities. New Bonds............ The New Bonds are identical in all material respects to the Old Bonds, except for the elimination of certain transfer restrictions, registration rights and interest rate provisions. The New Bonds will be represented by a global security registered in the name of The Depository Trust Company (DTC) or its nominee. Book-entry interests in the global security will be shown on, and transfers thereof will be effected only through, records maintained by DTC or its nominee. Conditions of the Exchange Offer...... The Exchange Offer is not conditioned upon any minimum principal amount of Old Bonds being tendered for exchange except that Old Bonds may be tendered only in integral multiples of US$1,000 principal amount. Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Bonds in exchange for, any Old Bonds and may terminate or amend the Exchange Offer, at any time prior to the consummation of the Exchange Offer if: (i) the Exchange Offer would violate applicable law or any applicable interpretation of the staff of the Commission, (ii) an action or proceeding is instituted or threatened in any court or by any governmental agency which
-7- might materially impair the ability of the Company to proceed with the Exchange Offer or a material adverse development has occurred in any existing action or proceeding with respect to the Company, or (iii) all governmental approvals which the Company deems necessary for the consummation of the Exchange Offer have not been obtained. See "The Exchange Offer--Certain Conditions to the Exchange Offer." Tenders; Expiration Date; Withdrawal.... The Exchange Offer will expire at 5:00 p.m., New York City time, on __________, 1997, or such later date and time to which it is extended (as so extended, the Expiration Date). The tender of Old Bonds pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Bonds not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after expiration or termination of the Exchange Offer. Procedures for Tendering Old Bonds............... Each holder of Old Bonds desiring to accept the Exchange Offer must complete and sign the Letter of Transmittal in accordance with the instructions contained herein and therein, and mail or deliver the Letter of Transmittal, together with the Old Bonds and any other required documents to the Exchange Agent (as defined herein) at the address set forth herein and in the Letter of Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the New Bonds acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Bonds, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such New Bonds and that neither the holder nor any such other person is an "affiliate" of the Company, as defined under Rule 405 of the Securities Act. Consequences of Failure to Exchange............ Holders of Old Bonds eligible to participate who do not exchange their Old Bonds for New Bonds pursuant to the Exchange Offer will not have any further registration rights and such Old Bonds will continue to be subject to the restrictions on
-8- transfer as set forth in the legend thereon as a consequence of the issuance of the Old Bonds pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Bonds under the Securities Act. Accordingly, the market for such Old Bonds could be highly illiquid. See "Risk Factors- Consequences of Failure to Exchange." Guaranteed Delivery Procedures.......... Holders of Old Bonds who wish to tender their Old Bonds and (i) whose Old Bonds are not immediately available or (ii) who cannot deliver their Old Bonds, the Letter of Transmittal and any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfers) prior to 5:00 p.m., New York City time, on the Expiration Date, must tender their Old Bonds according to the guaranteed delivery procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures." Acceptance of Old Bonds and Delivery of New Bonds........ Subject to the satisfaction or waiver of all conditions of the Exchange Offer, the Company will accept for exchange any and all Old Bonds that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Bonds issued pursuant to the Exchange Offer will be delivered in exchange for the applicable Old Bonds accepted in the Exchange Offer promptly following the Expiration Date. See "The Exchange Offer--Acceptance of Old Bonds for Exchange; Delivery of New Bonds." Federal Income Tax Consequences........ The exchange pursuant to the Exchange Offer will not result in any income, gain or loss to the holders of the Bonds or the Company for federal income tax purposes. See "Certain Federal Income Tax Considerations." Use of Proceeds...... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent....... Bankers Trust Company has agreed to act as Exchange Agent for the Exchange Offer.
-9- Summary Description of the New Bonds Interest Rate........ 7 3/4% per annum. Interest Payment Dates............... June 1 and December 1, commencing December 1, 1997 Maturity............. June 1, 2002. Security............. The New Bonds will be secured by the Indenture (as defined herein), which constitutes a first mortgage lien (subject to liens permitted by the Indenture, including liens and encumbrances existing at the time of acquisition by the Company) on substantially all of the Company's physical property and franchises, including the Company's generating stations (but not including the Company's interest in the plants of the four regional nuclear generating companies described herein) and its transmission and distribution facilities. Optional Redemption.. The New Bonds will be redeemable at any time on not less than 30 days notice by the Company, in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount thereof, and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, plus accrued interest to the date of redemption, if any. See "Description of the New Bonds--Redemption Provisions." Sinking Fund Redemption.......... There will be no sinking fund requirements. Form and Denomination........ The New Bonds will be issued in fully registered form without coupons in denominations of US$1,000 and integral multiples thereof. The New Bonds will be represented by a single permanent Global Security, registered in the name of Cede & Co., as nominee of DTC. See "Book-Entry; Delivery and Form." Use of Proceeds...... The Company will receive no cash proceeds from the issuance of the New Bonds. The net proceeds from the sale of the Old Bonds were or will be used for the repayment of the Company's short term debt incurred for general working capital purposes, including costs associated with the current outages at Millstone.
For additional information regarding the New Bonds, see "Description of the New Bonds." -10- Risk Factors See "Risk Factors" beginning on page 13 for a discussion of certain risks that should be considered by holders of Old Bonds in evaluating whether to tender the Old Bonds. -11- Summary Consolidated Financial Data (thousands, except percentages and ratios)
12 Months Ended March 31, 1997 Year Ended December 31, ------------- -------------------------------- (unaudited) 1996 1995 1994 ---- ---- ---- Income Summary: Operating Revenues............ $2,363,013 $2,397,460 $2,387,069 $2,328,052 Operating (Loss) Income....... (7,057) 29,773 324,026 286,948 Net (Loss) Income............ (119,520) (80,237) 205,216 198,288 Total Assets (end of period)... $6,275,896 $6,244,036 $6,045,631 $6,217,457 As of March 31, 1997 --------------------------------------- (unaudited) As % of Adjusted Actual Adjusted (a) Capitalization ------ ------------ -------------- Capitalization Summary: Long-Term Debt (including current maturities)...................... $2,040,773 $2,240,773 58.82% Preferred Stock Subject to Mandatory Redemption....................... 155,000 155,000 4.07% Preferred Stock Not Subject to Mandatory Redemption............. 116,200 116,200 3.05% Common Stockholder's Equity 1,297,490 1,297,490 34.06% ---------- ---------- -------- Total Capitalization............. $3,609,463 $3,809,463 100.00% ========== ========== ======== 12 Months Ended March 31, 1997 Year Ended December 31, -------------- ------------------------------------------------ (unaudited) 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges (b).................... (0.13)(c) 0.30(c) 3.64 3.65 2.71 2.96
(a) Adjusted to reflect the sale of $200 million principal amount of the Bonds. The issuance of the New Bonds will not affect the Company's capitalization. (b) The "Earnings" component of the "Ratio of Earnings to Fixed Charges" represents the aggregate of net income or loss, taxes based on income, investment tax credit adjustments, and fixed charges. "Fixed Charges" represent the aggregate of interest (whether capitalized or expensed), related amortizations, and the interest component of leases. (c) For the twelve-month periods ended December 31, 1996 and March 31, 1997, the ratio of earnings to fixed charges reflects the effects of additional costs, including replacement power costs, associated with the outages at the three Millstone units. For such periods, earnings were inadequate to cover fixed charges; the additional earnings required to bring the ratio of earnings to fixed charges to 1.0 for such periods would have been $102,872,000 and $171,463,000, respectively. See "Risk Factors." -12- RISK FACTORS Prospective investors should consider carefully all of the information set forth in this Prospectus, including the following risks, before investing in the New Bonds. Nuclear Plant Outages and Liquidity As a result of the prolonged outages at the three Millstone nuclear units (Millstone) located in Waterford, Connecticut, the Company faced an extremely difficult year in 1996 and continues to face some of the most severe regulatory scrutiny and financial challenges in the history of the United States nuclear industry, including numerous civil lawsuits and criminal investigations and regulatory proceedings, requesting among other things license revocation. These outages have resulted in significantly increased expenditures for replacement power and work undertaken at Millstone. The length of the outages and the high costs of the recovery efforts weakened the Company's 1996 earnings, balance sheet and cash flows and continue to have an adverse impact on the Company's financial condition. The Company currently anticipates having Millstone 3 ready for restart around the end of the third quarter of 1997, Millstone 2 in the fourth quarter of 1997, and Millstone 1 in the first quarter of 1998. Restart of each unit is contingent upon, among other things, the affirmative vote of the Commissioners of the Nuclear Regulatory Commission (NRC). Management hopes that Millstone 3 can begin operating by the end of 1997. There can be no assurances, however, that the Company's expectations will be met. If the return to service of one or more of the Millstone units is delayed substantially, or if any needed waivers or modifications to the Company's financing arrangements are not forthcoming on reasonable terms, or if the Company encounters additional significant costs or other significant deviations from management's current assumptions, resulting in the Company's inability to meet its cash requirements, management would take actions to reduce costs and to obtain additional sources of funds. The availability of these funds would be dependent upon general market conditions and the Company's and the System's credit and financial condition at that time. Both Moody's Investors Service (Moody's) and Standard and Poor's Corporation (S&P) have recently downgraded the Company's senior debt to Ba1 and BB+, respectively. Management has committed not to seek recovery of the portion of these costs attributable to the failure to meet industry standards in operating Millstone. In light of that commitment, and in recognition of the NRC's watch list designation of Millstone and that numerous internal and external reports have been critical of the operation of Millstone, management believes that the Company will not seek rate recovery of a substantial portion of such costs. While the Company believes that it is entitled to recovery of a portion of the costs that have been and will be incurred, and intends to apply for recovery of such costs, the Connecticut Department of Public Utility Control (DPUC) on June 27, 1997 orally granted summary judgment in a prudence proceeding disallowing recovery by the Company of substantially all of its Millstone outage related costs. Management currently does not intend to request any such recoveries until after the Millstone units begin returning to service, so it is unlikely that any additional revenues from any permitted recovery -13- of these costs will be available while the units are out of service to contribute to funding the recovery efforts. In a separate proceeding, the DPUC ordered the Company to submit studies by July 1, 1997 that analyze the economic benefits from continued operation of Millstone 1 and 2. On July 1, 1997, the Company submitted continued unit operation studies to the DPUC showing that, under base case assumptions, Millstone 1 will have a value to System customers (as compared to the cost of shutting down the unit and incurring replacement power costs) of approximately $70 million during the remaining thirteen years of its operating license and Millstone 2 will have a value to System customers (on the same assumptions as used with Millstone 1) of approximately $500 million during the remaining eighteen years of its operating license. Two other cases submitted to the DPUC based on higher assumed operation and maintenance (O&M) costs, which the Company considers less likely, indicated that Millstone 1 would be uneconomic in varying degrees. At the present time, the Company expects to continue operating both Millstone 1 and Millstone 2 for the remaining terms of their respective operating licenses; however, the Company cannot predict the outcome of this proceeding. In addition, the DPUC is required to review a utility's rates every four years if there has not been a rate proceeding during such period. On June 16, 1997, the Company filed with the DPUC certain financial information consistent with the DPUC's filing requirements applicable to such four year review. The Company expects hearings before the DPUC with respect to such review to begin during the summer of 1997. The Company cannot predict the outcome of this proceeding. No formal claims have been made, but management believes that it is possible that some or all of the non-NU owners of Millstone 3 will assert liability on the part of the System for the additional costs non-NU owners have borne as a result of the current outage. At March 31, 1997, the costs related to this potential litigation were estimated to be $13 million for incremental operating and maintenance costs and between $49 million and $57 million for replacement power costs. These costs are likely to increase as long as Millstone 3 remains out of service. NU will vigorously contest such suits if they are brought. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Overview of Nuclear and Related Financial Matters," "--Electric Operations--Nuclear Plant Performance and Regulatory Oversight," "--Competition and Cost Recovery," "--Rates" and "--Financing Program--Financing Limitations," and "Legal Proceedings." Industry Restructuring and Competition Competition in the energy industry continues to grow as a result of legislative and regulatory action, technological advances, relatively high electric rates in certain regions of the country, including New England, surplus generating capacity and the increased availability of natural gas. These competitive pressures are particularly strong in the System's service territories, where legislators and regulatory agencies have been at the forefront of the restructuring movement. -14- Changes in the industry are expected to place downward pressure on prices and to increase customer choice through competition. Although the Company continues to operate predominantly in a state-approved franchise territory under traditional cost-of-service regulation, restructuring initiatives in the State of Connecticut have created uncertainty with respect to future rates and the recovery of "strandable investments." Strandable investments are expenditures that have been made by utilities in the past to meet their public service obligations, with the expectation that they would be recovered from customers in the future. However, under certain circumstances these costs might not be recoverable from customers in a fully competitive electric utility industry. The Company continues to believe such costs will be recoverable. The Company is particularly vulnerable to strandable investments because of (i) the Company's relatively high investment in nuclear generating capacity, which had a high initial cost to build, (ii) state-mandated purchased power arrangements priced above market, and (iii) significant regulatory assets, which are those costs that have been deferred by state regulators for future collection from customers. As of March 31, 1997, the Company's net investment in nuclear generating capacity, excluding its investment in certain regional nuclear companies, was $2.3 billion, and its regulatory assets were approximately $1.3 billion. The Company's exposure to strandable investments and above-market purchased power obligations exceeds its shareholder's equity. The Company's ability to compete in a restructured environment would be negatively affected unless the Company were able to recover substantially all of the past investments and commitments. Unless amortization levels are changed from currently scheduled rates, the Company's regulatory assets are expected to be substantially decreased over the next five years. For more information regarding electric industry restructuring, see "Business--Competition and Cost Recovery," "Business--Rates" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Regulatory Accounting and Assets The accounting policies of the Company conform to generally accepted accounting principles applicable to rate regulated enterprises and reflect the effects of the ratemaking process in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Assuming a cost-of-service based regulatory structure, regulators may permit incurred costs, normally treated as expenses, to be deferred and recovered through future revenues. Through their actions, regulators may also reduce or eliminate the value of an asset, or create a liability. Recently, the Commission has questioned the ability of certain utilities to continue to follow SFAS No. 71 in light of state legislation regarding the transition to retail competition. The industry expects guidance on this issue from the Financial Accounting Standards Board's Emerging Issues Task Force in the near future. The Company is not yet subject to a transition plan. Criteria that could give rise to discontinuation of the application of SFAS No. 71 include: (1) increasing competition which significantly restricts the Company's ability to charge prices which allow it to -15- recover operating costs, earn a fair return on invested capital and recover the amortization of regulatory assets, and (2) a significant change in the manner in which rates are set by the DPUC from cost-based regulation to some other form of regulation. In the event the Company determines it no longer meets the criteria for following SFAS No. 71, the Company would be required to write off its regulatory assets and liabilities. At March 31, 1997, the Company's regulatory assets were approximately $1.3 billion. In addition, the Company would be required to evaluate whether the changes in the competitive and regulatory environment which led to discontinuing the application of SFAS No. 71 would also result in an impairment of the net book value of the Company's long-lived assets in accordance with SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of." SFAS No. 121 requires the evaluation of long-lived assets, including regulatory assets, for impairment when certain events occur or when conditions exist that indicate the carrying amounts of assets may not be recoverable. SFAS No. 121 requires that any long-lived assets which are no longer probable of recovery through future revenues be revalued based on estimated future cash flows. If the revaluation is less than the book value of the asset, an impairment loss would be charged to earnings. Management continues to believe that it is probable that the Company will recover its investments in long-lived assets, including regulatory assets, through future revenues. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in the electric utility industry or if the cost-of-service based regulatory structure were to change. Environmental Regulation The Company is subject to federal, state and local regulations with respect to water quality, air quality, toxic substances, hazardous waste and other environmental matters. Similarly, the Company's major generation and transmission facilities may not be constructed or significantly modified without a review by the applicable state agency of the environmental impact of the proposed construction or modification. See "Business--Other Regulatory and Environmental Matters--Environmental Regulation." Environmental requirements could hinder the construction of new generating units, transmission and distribution lines, substations, and other facilities. Changing environmental requirements could also require extensive and costly modifications to the Company's existing generating units and transmission and distribution systems, and could limit operations and/or raise operating costs significantly. As a result, the Company may incur significant additional environmental costs, greater than amounts included in reserves, in connection with the generation and transmission of electricity and the storage, transportation and disposal of by-products and wastes. The Company may also encounter significantly increased costs to remedy the environmental effects of prior waste handling activities. The cumulative long-term cost impact of increasingly stringent environmental requirements cannot accurately be estimated. -16- Market for the New Bonds The New Bonds are a new issue of securities with no established trading market, and the Company does not intend to apply for listing of the New Bonds on a national securities exchange, but has been advised by the Initial Purchasers that they presently intend to make a market in the New Bonds, as permitted by applicable law and regulations. The Initial Purchasers are not obligated, however, to make a market in the New Bonds, and any such market making may be discontinued at any time at the sole discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of the trading market for the New Bonds. Consequences of Failure to Exchange Holders of Old Bonds who do not participate in the Exchange Offer will continue to be subject to the restrictions on transfer of the Old Bonds as set forth in the legend thereon. In general, the Old Bonds may not be offered or sold, unless registered under, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Bonds under the Securities Act. Based on interpretations of the Securities Act by the staff of the Commission, New Bonds issued pursuant to the Exchange Offer in exchange for Old Bonds may be offered for resale, resold, or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Bonds are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Bonds. Notwithstanding the foregoing, each broker-dealer that receives New Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Bonds. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of New Bonds received in exchange for Old Bonds where such Old Bonds were acquired by such broker- dealer as a result of market-making activities or other trading activities (other than Old Bonds acquired directly from the Company). The Company has agreed that, for a period of 180 days from the consummation of the Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Compliance with Exchange Offer Procedures To participate in the Exchange Offer and to avoid the restrictions on transfer of the Old Bonds, holders of Old Bonds must transmit a properly completed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to the Exchange Agent at the address set forth below under "The Exchange Offer--Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Old Bonds must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer of such Old -17- Bonds, if such procedure is available, into the Exchange Agent's account at the DTC pursuant to the procedure for book-entry transfer described herein, must be received by the Exchange Agent prior to the Expiration Date, or (iii) the holder must comply with the guaranteed delivery procedures described herein. THE COMPANY The Company, a Connecticut corporation organized in 1907, is a wholly-owned subsidiary of NU. Four wholly-owned operating subsidiaries of NU--the Company, Public Service Company of New Hampshire (PSNH), Western Massachusetts Electric Company (WMECO) and Holyoke Water Power Company (HWP)--furnish electric service in portions of Connecticut and New Hampshire and in western Massachusetts. A fifth wholly-owned subsidiary of NU, North Atlantic Energy Corporation (NAEC), owns a 35.98 percent interest in the Seabrook nuclear generating facility (Seabrook) in Seabrook, New Hampshire and sells its share of the output and capacity of Seabrook to PSNH. The Company is the largest electric utility in Connecticut and is engaged principally in the production, purchase, transmission, distribution and sale of electricity at retail for residential, commercial, industrial and municipal purposes to approximately 1.1 million customers in 149 cities and towns in Connecticut. The principal executive offices of the Company are located at Selden Street, Berlin, Connecticut 06037-1616 (telephone 860/665-5000). THE ORIGINAL OFFERING On June 26, 1997, in the Original Offering, the Company issued and sold to the Initial Purchasers $200,000,000 in aggregate principal amount of the Old Bonds. The Old Bonds were sold pursuant to exemptions from or in transactions not subject to the registration requirements of the Securities Act and applicable state securities laws. The Initial Purchasers subsequently placed the Old Bonds with "qualified institutional buyers," as defined in Rule 144A under the Securities Act. See "The Exchange Offer." The Company received approximately $197 million of net proceeds from the Original Offering. The entire net proceeds of the Original Offering were or will be used for general working capital purposes, including costs associated with the current outages at Millstone. THE EXCHANGE OFFER Purpose and Effect of the Exchange Offer The Old Bonds were sold to Initial Purchasers in the Original Offering in a transaction not registered under the Securities Act, in reliance upon the exemption provided in Section 4(2) of the Securities Act. The Initial Purchasers subsequently placed the Old Bonds with "qualified institutional buyers," as defined in Rule 144A under the Securities Act. Accordingly, the Old Bonds may not be reoffered, resold or otherwise transferred in the United States unless so registered or unless an applicable exemption from the registration requirements of the Securities Act is available. -18- The New Bonds are being offered hereunder in order to satisfy the obligations of the Company under the Registration Rights Agreement. Capitalized terms used under this heading and not otherwise defined shall have the meaning set forth in the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company agreed, for the benefit of the holders of the Old Bonds, that (i) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company would use its best efforts to have a registration statement (the Exchange Offer Registration Statement) on the appropriate form under the Securities Act, with respect to an offer to exchange the Old Bonds for a like aggregate amount of New Bonds declared effective by the Commission on or prior to 150 days after the date of original issuance of the Old Bonds (the Issue Date) and (ii) if obligated to file the Shelf Registration Statement (defined below), the Company will file prior to 30 days after such filing obligation arises and use its best efforts to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 150 days after such obligation arises. The Registration Statement of which this Prospectus is a part is intended to satisfy the Company's obligation to file an Exchange Offer Registration Statement. In the event that any change in law or currently prevailing interpretations of law by the Commission's staff do not permit the Company to effect the Exchange Offer, or if for any reason the Exchange Offer is not consummated within 180 days of the Issue Date and the holders of a majority in principal amount of the Old Bonds so request, or if a holder of the Old Bonds notifies the Company that (a) due to a change in law or policy it is not entitled to participate in the Exchange Offer; (b) due to a change in law or policy it may not resell the Exchange Bonds acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (c) it is a broker-dealer and owns Bonds acquired directly from the Company or any affiliate of the Company, the Company agreed to use its best efforts to cause to be filed a registration statement (the Shelf Registration Statement) with respect to the resale of such Old Bonds or New Bonds, as the case may be. The Company further agreed to use its best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended until the second anniversary of the Issue Date or such shorter period that will terminate when all the Old Bonds covered by the Shelf Registration Statement have been sold pursuant thereto or cease being Bonds. If (a) the Company fails to consummate the Exchange Offer within 180 days after the Issue Date, or (b) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter, subject to certain exceptions, ceases to be effective or usable in connection with the Exchange Offer or resales of Old Bonds, as the case may be, during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) and (b) above, a Registration Default), then the interest rate on transfer restricted bonds will increase (Additional Interest), with respect to the first 90-day period immediately following the occurrence of such Registration Default by 0.50% per annum and will increase by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of 1.50% per annum. Following the cure of all Registration -19- Defaults, the accrual of Additional Interest will cease and the interest rate will revert to the original rate. Based on interpretations by the staff of the Commission issued to other issuers in similar contexts, the Company believes that New Bonds issued pursuant to the Exchange Offer in exchange for Old Bonds may be offered for resale, resold and otherwise transferred by any holder of such New Bonds (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Bonds are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such New Bonds. Each holder is required to acknowledge in the Letter of Transmittal that it is not engaged in, and does not intend to engage in, a distribution of the New Bonds. Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Bonds must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives New Bonds for its own account pursuant to the Exchange Offer will also be required to acknowledge that (i) Old Bonds tendered by it in the Exchange Offer were acquired in the ordinary course of its business as a result of market-making or other trading activities, and (ii) it will deliver a prospectus in connection with any resale of New Bonds received in the Exchange Offer. The Letter of Transmittal will also state that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Bonds received in exchange for Old Bonds where such Old Bonds were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Bonds acquired directly from the Company). The Company has agreed that, for a period of 180 days after Consummation of the Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Notwithstanding the foregoing, based on the above-mentioned interpretations by the staff of the Commission, the Company believes that broker-dealers who acquired the Old Bonds directly from the Company and not as a result of market-making activities or other trading activities cannot rely on such interpretations by the staff of the Commission and must, in the absence of an exemption, comply with the registration and prospectus delivery requirements of the Securities Act in connection with secondary resales of the New Bonds. Such broker-dealers may not use this Prospectus, as it may be amended or supplemented from time to time, in connection with any such resales of the New Bonds. Terms of the Exchange Offer; Period for Tendering Old Bonds Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept for exchange Old Bonds which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means 5:00 -20- p.m., New York City time, on __________, 1997; provided, however, that if the Company, in its sole discretion, has extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $200,000,000 aggregate principal amount of the Old Bonds was outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent to all holders of Old Bonds known to the Company on or about __________, 1997. The Company's obligation to accept Old Bonds for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "-- Certain Conditions to the Exchange Offer" below. The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance for exchange of any Old Bonds, by giving oral or written notice of such extension to the holders thereof. During any such extension, all Old Bonds previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by the Company. Any Old Bonds not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Procedures for Tendering Old Bonds The tender to the Company of Old Bonds by a holder thereof as set forth below and acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Old Bonds for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to Bankers Trust Company (the Exchange Agent), at the address set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Old Bonds must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a Book-Entry Confirmation) of such Old Bonds, if such procedure is available, into the Exchange Agent's account at the DTC (the Book-Entry Transfer Facility) pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent on or prior to the Expiration Date, or (iii) the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD BONDS, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD BONDS SHOULD BE SENT TO THE COMPANY. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Old Bonds surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Old Bonds who has not completed the box entitled "Special Issuance -21- Instructions" or "Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the account of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an officer or correspondent in the United States (collectively, Eligible Institutions.) In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of one of the following recognized Medallion Signature Guarantee Programs: the Securities Transfer Agents Medallion Program (STAMP), the New York Stock Exchange Medallion Signature Program (MSP) or the Stock Exchanges Medallion Program (SEMP) (collectively, Eligible Guarantor Institutions). If Old Bonds are registered in the name of a person other than a signer of the Letter of Transmittal, the Old Bonds surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Guarantor Institution. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of Old Bonds tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Old Bonds not properly tendered or to not accept any particular Old Bonds which acceptance might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects, irregularities or conditions of the Exchange Offer as to any particular Old Bonds either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Bonds in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Old Bonds either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Bonds for exchange must be cured within such reasonable period of time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Old Bonds for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal is signed by a person or persons other than the registered holder or holders of Old Bonds, such Old Bonds must be endorsed or accompanied by appropriate powers of attorney in either case signed exactly as the name or names of the registered holder or holders appear on the Old Bonds. If the Letter of Transmittal or any Old Bonds or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. -22- By tendering, each holder will represent to the Company that, among other things (i) the New Bonds acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Bonds, whether or not such person is the holder, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Bonds, and (iii) neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker-dealer that receives New Bonds for its own account in exchange for Old Bonds will also acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Bonds. Acceptance of Old Bonds for Exchange; Delivery of New Bonds Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will accept, promptly after the Expiration Date, all Old Bonds properly tendered and will issue the New Bonds promptly after acceptance of the Old Bonds. See "--Certain Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Bonds for exchange when as and if the Company has given oral or written notice thereof to the Exchange Agent. In all cases, issuance of New Bonds for Old Bonds that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Bonds or a timely Book-Entry Confirmation of such Old Bonds into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Bonds are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Bonds are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Old Bonds will be returned without expense to the tendering holder thereof (or, in the case of Old Bonds tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry procedures described below, such non-exchanged Old Bonds will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. Book-entry Transfer The Exchange Agent will make a request to establish an account with respect to the Old Bonds at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Bonds by causing the Book-Entry Transfer Facility to transfer such Old Bonds into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Bonds may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal, together with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by -23- the Exchange Agent at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. Guaranteed Delivery Procedure If a registered holder of the Old Bonds desires to tender such Old Bonds and the Old Bonds are not immediately available, or time will not permit such holder's Old Bonds or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent received from such Eligible Institution a properly completed and duly executed Letter of Transmittal and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by mail or hand delivery), setting forth the name and address of the holder of Old Bonds, the certificate number or numbers of such Old Bonds and the principal amount of Old Bonds tendered, stating that the tender is being made thereby and guaranteeing that within five business days after the Expiration Date, the certificates for all physically tendered Old Bonds, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, the Letter of Transmittal and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Bonds, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five business days after the Expiration Date. Withdrawal Rights Tenders of Old Bonds may be withdrawn at any time prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth below under "Exchange Agent." Any such notice of withdrawal must specify the name of the person having tendered the Old Bonds to be withdrawn, identify the Old Bonds to be withdrawn (including the principal amount of such Old Bonds), and (where certificates for Old Bonds have been transmitted) specify the name in which such Old Bonds are registered, if different from that of the withdrawing holder. If certificates for Old Bonds have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal and signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Old Bonds have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Bonds and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Bonds so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Bonds which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in -24- the case of Old Bonds tendered by book-entry transfer procedures described above, such Old Bonds will be credited to an account maintained at such Book-Entry Transfer Facility for the Old Bonds) as soon as practicable after returned by following one of the procedures described under "--Procedures for Tendering Old Bonds" above at any time on or prior to the Expiration Date. Certain Conditions to the Exchange Offer Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Bonds in exchange for, any Old Bonds and may terminate or amend the Exchange Offer, at any time prior to the consummation of the Exchange Offer if: (i) the Exchange Offer would violate applicable law or any applicable interpretation of the staff of the Commission, (ii) an action or proceeding is instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Company to proceed with the Exchange Offer or a material adverse development has occurred in any existing action or proceeding with respect to the Company, or (iii) all governmental approvals which the Company deems necessary for the consummation of the Exchange Offer have not been obtained. If the Company determines in its sole discretion that the conditions to the Exchange Offer are not satisfied, the Company may (i) refuse to accept any Old Bonds and return all tendered Old Bonds to the tendering holders, (ii) extend the Exchange Offer and retain all Old Bonds tendered prior to 5:00 p.m. New York City time, on the Expiration Date, subject, however, to the rights of holders to withdraw such Old Bonds (see "--Withdrawal Rights") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all validly tendered Old Bonds. If such waiver constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered holders, and the Company will extend the Exchange Offer for a period of five to 10 business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to 10 business day period. Termination of Certain Rights Holders of the Old Bonds to whom this Exchange Offer is made have special rights under the Registration Rights Agreement that will terminate upon the consummation of the Exchange Offer. The Registration Rights Agreement provides that certain rights under such agreement shall terminate upon the occurrence of (i) the filing with the Commission of the Exchange Offer Registration Statement, (ii) the effectiveness under the Securities Act of the Exchange Offer Registration Statement, and (iii) the consummation of the Exchange Offer. Exchange Agent Bankers Trust Company has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or -25- of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Mail: Bankers Trust Company Four Albany Street New York, New York 10006 Attn: By Hand or Overnight Delivery: Bankers Trust Company Four Albany Street New York, New York 10006 Attn: DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. Fees and Expenses The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The fees and expenses incident to the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. -26- Consequences of Failure to Exchange Holders of Old Bonds eligible to participate who do not exchange their Old Bonds for New Bonds pursuant to the Exchange Offer will not have any further registration rights and such Old Bonds will continue to be subject to the restrictions on transfer as set forth in the legend thereon as a consequence of the issuance of the Old Bonds pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Bonds under the Securities Act. See "Risk Factors-Consequences of Failure to Exchange." Resales of the New Bonds With respect to resales of New Bonds, based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder (other than a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act) who exchanges Old Bonds for New Bonds in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the New Bonds, will be allowed to resell the New Bonds to the public without further registration under the Securities Act and without delivering to the purchasers of the New Bonds a prospectus that satisfies the requirements of Section 10 thereof. However, if any holder acquires New Bonds in the Exchange Offer for the purpose of distributing or participating in a distribution of the New Bonds, such holder cannot rely on the position of the staff of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) or similar no-action letters or any similar interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction, unless an exemption from registration is otherwise available. Further, each broker- dealer that receives New Bonds for its own account in exchange for Old Bonds, where such Old Bonds were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Bonds. The Shelf Registration Statement In the event that applicable law or applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if a holder of the Bonds is not permitted to participate in the Exchange Offer or does not receive freely tradeable New Bonds pursuant to the Exchange Offer or is an affiliate of the Company, the Company will file a Shelf Registration Statement prior to 30 days after such filing obligation arises, relating to all Bonds for which the holders have provided the necessary information. The Company will use its best efforts to have the Shelf Registration Statement declared effective within 150 days after such obligation arises and to keep the Shelf Registration Statement continuously effective until two years after the Issue Date or such shorter period that will terminate when all the registrable Bonds covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or otherwise cease being registrable Bonds -27- The summary herein of the material provisions of the Registration Rights Agreement is believed by the Company to be accurate and complete in all material respects, but is subject to and is qualified in its entirety by reference to, all provisions of the Registration Rights Agreement which provisions are incorporated by reference herein. A copy of the Registration Rights Agreement has been filed with the Commission as an Exhibit to the Registration Statement of which this Prospectus is a part. Accounting Treatment The New Bonds will be recorded at the same carrying value as the Old Bonds, which is face value, as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer and the unamortized expenses related to the issuance of the Old Bonds will be amortized over the term of the New Bonds. -28- The Connecticut Light and Power Company and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------- SELECTED FINANCIAL DATA/(a)/ - ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) For the Three Months Ended March 31, For the Year Ended December 31, ------------------------- ------------------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ------------------------- ------------------------------------------------------------------- (unaudited) Operating Revenues.......... $ 624,908 $ 659,355 $2,397,460 $2,387,069 $2,328,052 $2,366,050 $2,316,451 Operating Income............ 23,148 59,977 29,773 324,026 286,948 241,655 288,088 Net (Loss) Income........... (6,431) 32,851 (80,237) 205,216 198,288 191,449/(b)/ 206,714 Cash Dividends on Common Stock.............. 5,990 60,259 138,608 164,154 159,388 160,365 164,277 At March 31, At December 31, ------------------------- ------------------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ------------------------- ------------------------------------------------------------------- (unaudited) Total Assets................ $6,275,896 $5,933,992 $6,244,036 $6,045,631 $6,217,457 $6,397,405 $5,582,831 Long-Term Debt/(c)/......... 2,040,773 1,824,204 2,038,521 1,822,018 1,823,690 2,057,280 2,087,936 Preferred Stock Not Subject to Mandatory Redemption................ 116,200 116,200 116,200 116,200 166,200 166,200 231,196 Preferred Stock Subject to Mandatory Redemption/(c)/........... 155,000 155,000 155,000 155,000 230,000 230,000 200,000 Obligations Under Capital Leases/(c)/....... 156,432 161,747 155,708 172,264 175,969 177,418 197,404
a) Reclassifications of prior data have been made to conform with the current presentation. b) Includes the cumulative effect of change in accounting for municipal property tax expense, which increased earnings for common shares by $47.7 million. c) Includes portion due within one year. -29- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This following discussion and analysis of the results of operations for the three months ended March 31, 1997 and the three years ended December 31, 1996 contains management's assessment of the Company's financial condition and the principal factors having an impact on the results of operations. This discussion should be read in conjunction with the Company's Consolidated Financial Statements and footnotes appearing elsewhere in this Prospectus. Earnings Overview The outages at the three Millstone nuclear units (Millstone) have resulted in significantly increased expenditures for replacement power and work undertaken at Millstone, which resulted in a net loss for the Company for the year 1996 and the first quarter of 1997. In 1997, while all three units are out of service, the Company expects to continue operating at a loss. The combination of higher expenditures and the uncertainty surrounding when the units will return to service made it necessary to ensure that access to adequate cash levels would be available for the duration of the outages. Management has taken various actions to address NU's nuclear program and liquidity issues; however, these areas continue to be a serious challenge. The Company faces future uncertainty with the rapidly moving trend toward industry restructuring. While restructuring had little direct impact on 1996 or the first quarter 1997 financial results, it creates an environment of significant uncertainty and financial risk for the coming years. As discussed in further detail in "--Restructuring," the financial treatment that strandable investments will be accorded will impact the Company's ability to compete in a restructured environment. Millstone Outages The Company has an 81 percent ownership interest in Millstone 1 and 2 and a 52.93 percent ownership interest in Millstone 3. Millstone 1, 2 and 3 have been out of service since November 4, 1995, February 21, 1996 and March 30, 1996, respectively. Subsequent to its January 31, 1996, announcement that Millstone had been placed on its watch list, the NRC has stated that the units cannot return to service until independent, third-party verification teams have reviewed the actions taken to improve the design, configuration and employee concerns issues that prompted the NRC to place the units on its watch list. Upon successful completion of these reviews, the NRC must approve the restart of each unit through a formal commission vote. Management took several key steps toward improving NU's nuclear program during 1996 and will continue to place a high priority on its recovery in 1997. The NU Board of Trustees (NU Board) formed a committee in April 1996, to provide high-level oversight of the safety and effectiveness of NU's nuclear operations, progress toward resolving open NRC issues and progress -30- in resolving employee, community and customer concerns. In September 1996, Bruce D. Kenyon was appointed President and Chief Executive Officer of Northeast Nuclear Energy Company (NNECO), a wholly-owned subsidiary of NU that operates Millstone, and retired Admiral David M. Goebel was selected to serve as Vice President for Nuclear Oversight. In early 1997, Neil S. Carns was selected to serve as Senior Vice President and Chief Nuclear Officer to oversee Millstone operations. Shortly after his arrival, Mr. Kenyon unveiled a reorganization of NU's nuclear organization that includes executives loaned from unaffiliated utility companies. Millstone 3 has been designated as the lead unit for restart. Millstone 2 remains on a schedule to be ready for restart shortly after Millstone 3. To provide the resources and focus for Millstone 3, the work on the restart of Millstone 1 will be reduced until late in 1997 when the full work effort will be resumed. Management believes that Millstone 3 will be ready for restart around the end of the third quarter of 1997, Millstone 2 in the fourth quarter of 1997 and Millstone 1 in the first quarter of 1998. Because of the need for completion of independent inspections and reviews and for the NRC to complete its processes before the NRC Commissioners can vote on permitting a unit to restart, the actual beginning of operations is expected to take several months beyond the time when a unit is declared ready for restart. The NRC's internal schedules at present indicate that a meeting of the Commissioners to act upon a Millstone 3 restart request could occur by mid- December if NU, the independent review teams and NRC staff concur that the unit is ready for restart by that time. Management hopes that Millstone 3 can begin operating by the end of 1997. Based on a recent review of the work efforts and budgets, management believes that the overall 1997 nuclear spending levels - both nuclear O&M expenditures and associated support services and capital expenditures - will be approximately the same as previously estimated. However, 1997 nuclear O&M expenditures and related support services are expected to increase slightly, while 1997 capital expenditures are expected to decrease. Management also believes that it is possible that 1997 nuclear spending will increase somewhat as the detailed work needed to restore the units to service progresses. A portion of the increased nuclear O&M expenditures in 1997 will be reserved in the second quarter of 1997. The Company's share of nonfuel O&M costs for Millstone in 1996 totalled $322 million, including $93 million for incremental costs related to the outages and $50 million reserved for future costs. Nonfuel O&M costs have been and will continue to be absorbed by the Company without adjustment to its current rates. Although 1998 nuclear operating budgets have not been established at this time, management believes that the nuclear spending levels at Millstone will be reduced considerably from 1997 levels, although they will be higher than before the station was placed on the NRC's watch list. The actual level of 1998 spending will depend on when the units return to operation and the cost of restoring them to service. Management will continue to evaluate the costs to be incurred in 1998 to determine whether adjustments to the existing reserves are required. -31- Replacement power costs for the Company averaged approximately $28 million per month during the first quarter of 1997 and are projected to average approximately $24 million per month for the remainder of 1997. Replacement power costs for the Millstone units expensed in 1996 were $216 million, which was a substantial portion of the total 1996 replacement power costs. The Company will continue to expense its replacement power costs in 1997. See "Risk Factors--Nuclear Plant Outages and Liquidity," "--Rate Matters" and "Business--Overview of Nuclear and Related Financial Matters" and "--Rates" for information relating to the Company's ability to recover these replacement power costs. As a result of the nuclear situation, a number of civil lawsuits, criminal investigations and regulatory proceedings have been initiated, including litigation by NU's shareholders. In addition, there is the potential for claims by the non-NU owners of Millstone 3 for the costs associated with the current outage. To date, no reserves have been established for existing or potential litigation. See "Legal Proceedings" and the notes to the Company's Consolidated Financial Statements, Note 11B, for further information on litigation. Capacity During 1996 and continuing into 1997, the System companies have taken measures to improve their capacity position. The Company anticipates spending approximately $55 million for additional capacity-related costs in 1997, of which $37 million is expected to be expensed. The projected 1997 capacity-related expenditures have increased from previous estimates due to additional improvements to existing fossil units and the Company's estimated share of costs to reactivate generating units in New England. In the first quarter of 1997, the Company spent approximately $14 million to ensure adequate generating capacity, of which $5 million was expensed. During 1996, the Company spent approximately $60 million of which $42 million was expensed. Assuming normal weather conditions and generating unit availability, management expects that the Company will have sufficient capacity to meet peak load demands in the summer of 1997. If there are high levels of unplanned outages at other units in New England, or if any transmission lines used to import power from other states are unavailable, at times of peak load demand, the Company and the other New England utilities may have to resort to operating procedures designed to reduce customer demand. The Company has a 12 percent ownership interest in the Maine Yankee nuclear generating facility (MY). MY is projected to incur substantially increased costs over the balance of 1997 while the unit is not operating. On May 27, 1997, MY announced that it was considering permanent closure of the plant based on economic concerns and uncertainty about the operation of the plant. MY disclosed that it would reduce spending to a level that would preserve the option of restarting the plant or closing it. The Company's share of replacement-power costs while MY is out of service is projected to average approximately $1.5 million per month. -32- Liquidity and Capital Resources Cash provided from operations decreased approximately $194 million in the first quarter of 1997, compared to the first quarter of 1996, primarily due to higher 1997 cash operating costs related to the Millstone outages, and the pay down of the 1996 year end accounts payable balance. The year- end accounts payable balance was relatively high due to costs related to a severe December storm and costs associated with the Millstone outages that had been incurred but not yet paid by the end of 1996. Net cash from financing activities increased approximately $306 million, primarily due to an increase in short-term borrowings through the use of the $200 million accounts receivable facility established in 1996. Net cash from financing activities was also impacted by lower cash dividends on common shares. Cash used for investments increased approximately $112 million primarily due to higher investments in the Money Pool (defined below). Cash provided from operations decreased by approximately $229 million in 1996 compared to 1995, primarily due to higher cash operating costs related to the Millstone outages and costs associated with ensuring adequate generating capacity, partially offset by higher retail sales and lower income tax payments. Cash flows from operations were also impacted by a sharp increase in the level of accounts payable principally caused by costs related to a severe December 1996 storm and costs associated with the Millstone outages that had not been paid by year end. Net cash used for financing activities decreased by approximately $350 million in 1996, primarily due to higher long-term debt issuances, lower repayment of short- term debt and lower common dividend payments. Cash used for investments increased by approximately $122 million in 1996, primarily due to an increase in investments under the Money Pool. During 1996, the Company took various actions to ensure that it will have access to adequate cash resources, at reasonable cost. The Company completed two bond issues totaling $222 million, one of which was issued in anticipation of the maturity of approximately $193 million of bonds in April, 1997. The Company established a facility under which it may sell up to $200 million of its billed and unbilled accounts receivable. As of March 31, 1997, $200 million had been sold using this facility. Additionally, NU, the Company and WMECO entered into a new $313.75 million three-year revolving credit agreement (the New Credit Agreement). Under the New Credit Agreement, NU has a contractual short-term borrowing limit of $150 million, the Company has a limit of $313.75 million and WMECO has a limit of $150 million. The overall limit for all borrowers is $313.75 million. Some of the borrowing facilities contain financial covenants that must be satisfied before borrowings can be made and for outstanding borrowings to remain outstanding. On May 30, 1997, the First Amendment and Waiver became effective for the New Credit Agreement. This amendment permits $313.75 million of credit to remain available to the Company and WMECO through the securing of such borrowings with first mortgage bonds. Interest coverage and common equity ratios were also loosened to enable the companies to meet certain financial tests. The Company will be able to borrow up to approximately $225 million on the strength of bonds it has provided as collateral for borrowings under the revolving credit agreement. WMECO will be able to borrow up to approximately $90 million on the basis of bonds it has provided as collateral and NU, which -33- as a holding company cannot issue first mortgage bonds, will be able to borrow up to $50 million if the Company, WMECO and NU consolidated financial statements meet certain interest coverage tests for two consecutive quarters. On April 1, 1997, $193 million of the Company's first mortgage bonds matured. The Company funded the maturity with cash available and from long- term debt issuances that took place in 1996 in anticipation of this maturity. In April, 1997, Moody's downgraded most of the securities ratings of the Company because of the extended Millstone outages. In May, 1997, S&P further downgraded the Company's securities as a result of the Connecticut legislature failing to approve a utility restructuring bill during the recently completed legislative session. As a result, all System securities are currently rated below investment grade by Moody's and S&P. These actions will adversely affect the availability and cost of funds for the System companies. On April 17, 1997, the holders of approximately $38 million of notes issued by NU's real estate company (Rocky River Realty Company or RRR) notified RRR that it wished RRR to repurchase the notes. The notes are secured by real estate leases between RRR as lessor and Northeast Utilities Service Company (NUSCO) as lessee. The leases provide for the acceleration of rent equal to RRR's note obligations if RRR is unable to repay the obligation. On July 1, 1997, RRR received a commitment for the purchase of approximately $12 million of the notes and RRR intends to repurchase the remaining $26 million of notes on July 14, 1997. The Company may be billed by NUSCO for its proportionate share of the accelerated lease obligations when RRR repurchases the notes. The Company does not expect the resolution of this matter to have a material adverse impact on its financial condition or liquidity. See the notes to the Company's Consolidated Financial Statements, Note 11G for further information. On June 21, 1996, the Company entered into an operating lease with a third party to acquire the use of four turbine generators having an installed cost of approximately $70 million. During the first quarter of 1997, the Company determined that it would not be in compliance with financial coverage tests required under the lease agreement based on projections of its 1997 financial results. The Company has requested waivers of this covenant from the lessor, and the matter is pending. If the Company is unable to negotiate mutually satisfactory lease revisions, it expects to have sufficient liquidity to purchase the turbine generators from the lessor. The purchase price for the turbine generators would be slightly less than the installed cost of $70 million. Each major company in the System finances its own needs. Neither the Company nor WMECO has any agreements containing cross defaults based on events or occurrences involving NU, PSNH or NAEC. Similarly, neither PSNH nor NAEC has any agreements containing cross defaults based on events or occurrences involving NU, the Company or WMECO. Nevertheless, it is possible that investors will take negative operating results or regulatory developments at one company in the System into account when evaluating other companies in the System. That could, as a practical matter and despite the contractual and legal separations among the NU companies, negatively affect each company's access to the financial markets. -34- If the return to service of one or more of the Millstone units is delayed substantially, or if the needed waivers or modifications discussed above are not forthcoming on reasonable terms, or if some borrowing facilities become unavailable because of difficulties in meeting borrowing conditions, or if the system encounters additional significant costs or any other significant deviations from management's current assumptions, the currently available borrowing facilities could be insufficient to meet all of the system's cash requirements. In those circumstances, management would take actions to reduce costs and cash outflows and would attempt to take other actions to obtain additional sources of funds. The availability of these funds would be dependent upon the general market conditions and the Company's and the System's credit and financial condition at the time. Restructuring The movement toward electric industry restructuring continues to gain momentum nationally as well as within Connecticut. Factors that are driving the move toward restructuring, in the Northeast in particular, include legislative and regulatory actions and relatively high electricity prices. These actions will impact the way that the Company has historically conducted its business. Although the Company continues to operate under cost-of-service based regulation, various restructuring initiatives in Connecticut have created uncertainty with respect to future rates and the recovery of strandable investments. Strandable investments are regulatory assets or other assets that would not be economical in a competitive environment. The Company has exposure to strandable investments for its investment in high-priced nuclear generating plants, state mandated purchased power arrangements that are priced above the market and significant regulatory assets that represent costs deferred by state regulators for future recovery. The Company's exposure to strandable investments and purchased power obligations exceeds its shareholder's equity. The Company's ability to compete in a restructured environment would be negatively affected unless the Company were able to recover substantially all of these past investments and commitments. On June 4, 1997, the Connecticut Legislature completed its session without passage of a proposed electric industry restructuring bill. The legislature may consider restructuring legislation in the future. The Company follows accounting principles in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation," which allows the economic effects of rate regulation to be reflected. Recently, the Commission has questioned the ability of certain utilities to remain on SFAS No. 71 in light of state legislation regarding the transition to retail competition. The industry expects guidance on this issue from the Financial Accounting Standards Board's Emerging Issues Task Force in the near future. While there are restructuring initiatives pending in Connecticut, the Company is not yet subject to transition plans. If future competition or regulatory actions cause any portion of its operations to no longer be subject to SFAS No. 71, the Company would no longer be able to recognize regulatory assets and -35- liabilities for that portion of its business unless these costs would be recoverable by a portion of the business remaining on cost-of-service based regulation. Under its current regulatory environment, management believes that the Company's use of SFAS No. 71 remains appropriate. If events create uncertainty about the recoverability of any of the Company's remaining long-lived assets, the Company would be required to determine the fair value of its long-lived assets, including regulatory assets, in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The implementation of SFAS 121 did not have a material impact on the Company's financial position or results of operations as of December 31, 1996. Management believes it is probable that the Company will recover its investments in long-lived assets through future revenues. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in the electric utility industry or if the cost-of-service based regulatory structure were to change. See "Risk Factors--Regulatory Accounting and Assets." Competition In addition to legislative and regulatory actions, competition in the electric utility industry continues to grow at a rapid pace as a result of technological advances; relatively high electricity prices in certain regions of the country, including New England; surplus generating capacity; and the increased availability of natural gas. Competitive forces in the electric utility industry have already caused some customers to choose alternative energy suppliers or relocate outside of the Company's territory. In response, the Company is preparing for a competitive environment by expanding previously established programs and developing new ways to fortify its relationships with existing customers and attract new customers, both within and outside its service territory. The Company has continued to negotiate long-term power supply arrangements with certain large commercial and industrial retail customers that require an incentive to locate or expand their operations within the Company's service territory, are considering leaving or reducing operations in the service territory, are facing short-term financial problems, or are considering generating their own electricity. Approximately 10 percent of the Company's commercial and industrial retail revenues were under negotiated rate agreements at the end of 1996. These negotiated rate reductions amounted to approximately $19 million in 1996 and 1995. These activities are expected to continue in 1997. During 1996, the System devoted significantly more resources to its retail marketing organization, whose primary mission is to provide value added energy solutions to customers. Training was emphasized for its 170 new employees, the majority of whom are account executives charged with developing tailored solutions for the System's customers and positioning NU as a valuable partner for the future. The ability of these account executives to obtain an intimate understanding of customers' needs and concerns and provide value added energy solutions will play a key role in the System's ability to effectively compete in the future. -36- Revenue erosion from traditional retail electric sales may be significant after restructuring. While margins on retail electric sales are likely to be thin, utilities can compete successfully if they are allowed to recover their strandable investments. During 1997 and beyond, the System plans to continue to participate in state sanctioned retail access programs; invest in new unregulated businesses; develop new energy-related products and services; and pursue strategic alliances with companies in various energy-related fields, including fuel supply and management, power quality, energy efficiency and load management services. Strategic alliances will allow NU subsidiaries to enter markets that provide access to new product lines and technologies that complement the System's current products and services. Rate Matters In July 1996, the DPUC approved a rate settlement agreement with the Company (the Settlement). Under the Settlement, the Company froze base rates until at least December 31, 1997, accelerated the amortization of regulatory assets by $73 million in 1996 and between $54 million and $68 million in 1997, and extended the depreciable lives of transmission and distribution assets by ten years. Additionally, the Settlement terminated all pending litigation, as of March 31, 1996, among the parties that could potentially affect the Company's rates. The Settlement does not impact costs incurred subsequent to March 31, 1996 that are associated with the Millstone outages. The Settlement reduced 1996 earnings by approximately $35 million. The impact on 1997 earnings is not significant. In October 1996, the DPUC issued a final order establishing an Energy Adjustment Clause (EAC), which replaced both the Company's fossil-fuel adjustment clause and its generation utilization adjustment clause (GUAC). The EAC, which is designed to calculate the difference between actual fuel costs and fuel costs collected through base rates, took effect on January 1, 1997. The order includes an incentive mechanism which disallows recovery of the first $9 million of actual fuel costs in excess of base rate levels, but permits the Company to retain the first $9 million in actual fuel costs below base rate levels. In connection with an ongoing management audit of the Company, including matters related to the NRC watch list designation, the two consulting firms hired by the DPUC to review such matters issued reports in December 1996 that were highly critical of NU's management of its nuclear program. The results of these reports may affect future DPUC positions with respect to the System's nuclear related operations and costs. Despite an earlier procedural order indicating that prudence hearings on the current nuclear outages at Millstone would take place after the nuclear plants return to service, on January 15, 1997, the DPUC notified the Company that it would be conducting its prudence review of nuclear cost recovery issues in multiple phases. The first phase, covering the period April 1 through June 30, 1996, was in progress when various intervenors moved for summary judgment with respect to the costs for the entire outage. On June 27, 1997, the DPUC orally granted summary judgment in the prudence docket, disallowing recovery of substantially all of the costs associated with the ongoing outages at Millstone. The Company has projected that its share of the total costs for the Millstone outages, including -37- replacement power, operation and maintenance and capacity reliability projects, will be about $990 million. The Company had not requested cost recovery and had said that it did not expect to seek recovery for a substantial portion of these costs and did not intend to request any cost recovery until the units had returned to operation. Any requests by the Company for recovery would include only costs for projects the Company would have undertaken under normal operating conditions or that provide long-term value for the Company's customers. The DPUC did leave open the possibility for the Company in a future rate case to seek recovery of up to $40 million of capital costs associated with capacity reliability projects. The Company currently expects to appeal the decision to the Connecticut Superior Court. The Company has expensed, and continues to expense, the bulk of the Millstone outage costs as they are incurred. Therefore, the Company does not expect this decision to have a material financial impact on projected 1997 results. In a separate proceeding, the DPUC ordered the Company to submit studies by July 1, 1997 that analyze the economic benefits from continued operation of Millstone 1 and 2. The DPUC stated that these studies were necessary in light of the uncertainty regarding restart dates of the units and the costs associated with returning these units to operation. On July 1, 1997, the Company submitted continued unit operation studies to the DPUC showing that, under base case assumptions, Millstone 1 will have a value to System customers (as compared to the cost of shutting down the unit and incurring replacement power costs) of approximately $70 million during the remaining thirteen years of its operating license and Millstone 2 will have a value to System customers (on the same assumptions as used with Millstone 1) of approximately $500 million during the remaining eighteen years of its operating license. Two other cases submitted to the DPUC based on higher assumed O&M costs, which the Company considers less likely, indicated that Millstone 1 would be uneconomic in varying degrees. At the present time, the Company expects to continue operating both Millstone 1 and Millstone 2 for the remaining terms of their respective operating licenses; however, the Company cannot predict the outcome of this proceeding. In addition, the DPUC is required to review a utility's rates every four years if there has not been a rate proceeding during such period. On June 16, 1997, the Company filed with the DPUC certain financial information consistent with the DPUC's filing requirements applicable to such four year review. The Company expects hearings before the DPUC with respect to such review to begin during the summer of 1997. The Company cannot predict the outcome of this proceeding. Nuclear Decommissioning The Company has a 34.5 percent ownership interest in the Connecticut Yankee nuclear generating facility (CY). On December 4, 1996, the CYAPC Board of Directors voted unanimously to cease permanently the production of power at CY. The decision to retire CY from commercial operation was based on an economic analysis of the costs of operating it compared to the costs of closing it and incurring replacement power costs over the remaining period of CY's operating license, which expires in 2007. The economic analysis showed that closing CY and incurring replacement power costs produced substantial savings. -38- CYAPC has undertaken a number of regulatory filings intended to implement the decommissioning. In late December 1996, CYAPC filed an amendment to its power contracts with the Federal Energy Regulatory Commission (FERC) to clarify the obligations of its purchasing utilities following the decision to cease power production. At December 31, 1996, the Company's share of these obligations was approximately $263 million, including the cost of decommissioning and the recovery of existing assets. Management expects that the Company will continue to be allowed to recover such FERC-approved costs from its customers. Accordingly, the Company has recognized its share of the estimated costs as a regulatory asset, with a corresponding obligation, on its balance sheets. The Company's estimated cost to decommission its shares of Millstone 1, 2 and 3 and Seabrook is approximately $858 million in year end 1996 dollars. These costs are being recognized over the lives of the respective units with a portion being currently recovered through rates. As of December 31, 1996, the market value of the contributions already made to the decommissioning trusts, including their investment returns, was approximately $297 million. See the notes to the Company's Consolidated Financial Statements, Note 3, for further information on nuclear decommissioning, including the Company's share of costs to decommission the regional nuclear generating units. Environmental Matters The Company is potentially liable for environmental cleanup costs at a number of sites inside and outside its service territory. To date, the future estimated environmental remediation liability has not been material with respect to the earnings or financial position of the Company. At March 31, 1997, the Company had recorded an environmental reserve of approximately $8 million, the most probable amount as required by SFAS No. 5, "Accounting for Contingencies." See the notes to the Company's Consolidated Financial Statements, Note 11C, for further information on environmental matters. Risk Management Instruments The Company uses fuel price management instruments to reduce a portion of the fuel price risk associated with certain of its long-term negotiated energy contracts. The Company's fuel price management instruments seek to minimize exposure associated with rising fuel prices and effectively fix the cost of fuel and maintain the profitability of certain of its long-term negotiated contract sales. These instruments are not used for trading purposes. The differential paid or received as fuel prices change is recognized in income when realized. As of March 31, 1997, the Company had outstanding fuel price management instruments with a total notional value of approximately $215 million. The settlement amounts associated with -39- the instruments increased fuel expense by approximately $0.9 million for the first quarter of 1997. Since March 31, 1997, the Company has entered into additional fuel price management agreements with a total notional value of approximately $75 million. As of December 31, 1996, the Company had outstanding fuel-price management instruments with a total notional value of approximately $229 million. The settlement amounts associated with the instruments reduced fuel expense by approximately $7.5 million for the Company during 1996. The Company's fuel-price management instruments seek to minimize exposure associated with rising fuel prices and effectively fix the cost of fuel and profitability of certain of its long-term negotiated contract sales. For further information on risk management instruments, see the notes to the Company's Consolidated Financial Statements, Note 12. Results Of Operation Comparison of the First Quarter of 1997 to the First Quarter of 1996 The Company had a net loss of approximately $6 million in the first quarter of 1997 compared to net income of approximately $33 million in the first quarter of 1996. The first quarter loss was primarily attributable to replacement-power expenditures for the Millstone units in the first quarter of 1997. In 1996, two of the Millstone units were operating for some part of the first quarter. First quarter 1997 earnings were also negatively affected by a much milder winter. Retail kilowatt-hour sales for the quarter decreased 3.2 percent from 1996. Although nuclear operation and maintenance spending was higher in 1997, this impact was offset by reserves for nuclear expenditures recognized in 1996. Total operating revenues decreased in 1997, primarily due to lower fuel recoveries and lower retail sales, partially offset by lower conservation reserves. Fuel recoveries decreased $32 million primarily due to lower recoveries under the Company's fuel clause. Lower reserves for over-recoveries of demand-side-management costs increased revenues by $10 million. Fuel, purchased and net interchange power expense increased in 1997, primarily due to higher replacement-power costs in 1997 due to the nuclear outages, partially offset by the timing of the recognition of costs under the Company's fuel clause. Other O&M expenses decreased in 1997. The major factors were the recognition of nuclear reserves in the first quarter of 1996 ($31 million) and spending against these reserves in the first quarter of 1997 ($23 million); lower recognition of nuclear refueling outage costs primarily as a result of the Settlement discussed above under "--Rate Matters" ($10 million) and lower pension, benefit and storm costs ($7 million), partially offset by higher costs associated with the Millstone outages ($41 million); and higher 1997 costs associated with meeting capacity requirements ($5 million). Amortization of regulatory assets, net increased in 1997, primarily due to the completion of cogeneration deferrals in 1996 and increased amortization in 1997 ($14 million); and higher -40- amortizations as a result of the Settlement ($8 million), partially offset by the completion of the amortization of phase-in costs for Seabrook in 1996 ($3 million). Federal and state income taxes decreased in 1997, primarily due to lower book taxable income. Comparison of 1996 to 1995 The Company had a net loss of approximately $80 million in 1996, compared to net income of approximately $205 million in 1995. The 1996 loss was primarily due to costs related to the ongoing outages at Millstone which totaled approximately $400 million and reduced the Company's 1996 earnings by approximately $232 million. These costs included replacement power, higher 1996 Millstone O&M costs, a reserve recognized in 1996 for 1997 expenditures to return the Millstone units to service and costs associated with ensuring adequate generating capacity. In addition, 1996 earnings decreased due to the impact of the Company's approved rate settlement agreement, higher recognition of cogeneration costs and higher nonnuclear O&M costs. These decreases were partially offset by higher retail sales and lower recognition of Millstone 3 phase-in costs. Total operating revenues increased in 1996, primarily due to higher retail sales and regulatory decisions, partially offset by lower fuel recoveries and lower wholesale revenues. Retail sales increased 1.8 percent ($29 million) primarily due to modest economic growth in 1996. Regulatory decisions increased revenues by $15 million primarily due to the mid-1995 retail rate increase, partially offset by 1996 reserves for over-recoveries of demand side management costs. Fuel recoveries decreased $24 million primarily due to lower average fossil fuel prices. Wholesale revenues decreased $18 million primarily due to higher recognition in 1995 of lump- sum payments for the termination of a long-term contract and capacity sales contracts that expired in 1995. Fuel, purchased and net interchange power expense increased in 1996, primarily due to replacement power due to the nuclear outages and the 1996 write-off of GUAC balances under the Settlement, partially offset by lower nuclear generation and the timing of the recognition of costs under the Company's fuel clauses. Other O&M expenses increased in 1996, primarily due to higher costs associated with the Millstone outages ($143 million, including $50 million reserved for future costs) and 1996 costs to ensure adequate generating capacity ($39 million). In addition, these costs reflect higher storm and reliability expenditures, higher recognition of conservation expenses and higher marketing costs. Higher plant balances and higher decommissioning levels in 1996 were partially offset by longer depreciable lives of transmission and distribution assets under the Settlement. Amortization of regulatory assets, net increased in 1996, primarily due to lower cogeneration deferrals and the accelerated amortization of regulatory assets as a result of the Settlement, partially offset by the completion of the Millstone 3 phase-in amortization in 1995. -41- Federal and state income taxes decreased in 1996, primarily due to lower book taxable income, partially offset by 1995 tax benefits from a favorable tax ruling. Although the change in 1996 was not significant, deferred nuclear plants return decreased in 1995, primarily due to the completion of the Millstone 3 phase-in in 1995. Other, net increased in 1996, primarily due to higher income on temporary cash investments in 1996. Comparison of 1995 to 1994 Total operating revenues increased in 1995, primarily due to regulatory decisions and higher fuel recoveries, partially offset by lower retail sales and wholesale revenues. Revenues related to regulatory decisions increased $61 million primarily due to the effects of the mid- 1994 and 1995 retail rate increases and higher recoveries for demand side management costs. Fuel and purchased power cost recoveries increased $25 million primarily due to higher energy costs and the recovery of GUAC costs. Wholesale revenues decreased $16 million primarily due to capacity sales contracts that expired in 1994. Fuel, purchased and net interchange power expense increased in 1995, primarily due to higher fossil generation and higher priced outside energy purchases from other utilities. Other O&M expenses increased in 1995, primarily due to higher recognition of conservation expense, higher recognition of post-retirement benefit costs and higher capacity charges from the regional nuclear generating units, partially offset by higher reserves for excess/obsolete inventory in 1994 and lower maintenance costs at the fossil units. Depreciation increased in 1995, primarily due to higher plant balances and higher decommissioning levels. Amortization of regulatory assets, net decreased in 1995, primarily due to higher cogeneration deferrals in 1995 and the completion during 1994 of the amortization of a 1993 cogeneration buyout, partially offset by higher 1995 amortization of Millstone 3 and Seabrook 1 phase-in costs. Federal and state income taxes decreased in 1995, primarily due to tax benefits from a favorable tax ruling, partially offset by higher book taxable income. Other, net decreased in 1995, primarily due to the 1993 property tax accounting change as ordered in the 1993 rate decision. The allocation of this change to customers occurred in 1994 and amortization began in 1995. Minority interest in income of subsidiary increased in 1995, primarily due to the issuance of Monthly Income Preferred Securities in 1995. -42- BUSINESS Overview of Nuclear and Related Financial Matters On January 29, 1996, Millstone was placed on the NRC's watch list as a Category 2 facility. As set forth below, the Company has significant financial and capacity interests in Millstone. Facilities in Category 2 have been identified by the NRC as having weaknesses that warrant increased attention until the licensee, NNECO, demonstrates a period of improved performance. Millstone was subsequently reclassified as a Category 3 facility, which requires NNECO to receive formal NRC Commissioners' approval to restart any of the units. Millstone 1, 2 and 3 have been out of service since November 4, 1995, February 21, 1996 and March 30, 1996, respectively. Following these decisions, the System faced in 1996, and continues to face, some of the most severe regulatory scrutiny and financial challenges in the history of the United States nuclear industry, including numerous civil lawsuits and criminal investigations and regulatory proceedings. See "Risk Factors--Nuclear Plant Outages and Liquidity" and "Legal Proceedings." Millstone 1, a 660-MW boiling water reactor, and Millstone 2, an 870- MW pressurized water reactor, are each owned 81 percent by the Company and 19 percent by WMECO. Millstone 3, a 1,154-MW pressurized water reactor, is jointly owned by the Company (52.93 percent), WMECO (12.24 percent), PSNH (2.85 percent) and other New England utilities. The System companies have initiated a number of changes in the management of the System's nuclear program to address the problems at Millstone. In April 1996, the NU Board announced the formation of a special committee of the NU Board to provide high-level oversight of the safety and effectiveness of NU's nuclear operations and the progress toward resolving open NRC issues and employee, community and customer concerns. The committee consists exclusively of outside trustees. It is chaired by E. Gail de Planque, who is a former NRC Commissioner. In light of substantial NU Board activities associated with the current nuclear situation, the NU Board elected Elizabeth T. Kennan in 1996 as Lead Trustee to facilitate the extensive ongoing communications and activities between the NU Board and management. In addition, on June 17, 1997, the shareholders elected William F. Conway, a nuclear power industry consultant, and former executive with several power companies, to the NU Board. In response to various internal reports and other reviews that focused on nuclear management as a fundamental cause for the decline in the performance of Millstone, the NU Board elected Bruce D. Kenyon as President--Nuclear Group of NU, in September 1996. Following this appointment, management unveiled a reorganization of NU senior nuclear management at each of the nuclear power units that the System operates. The new management team, including executives loaned from unaffiliated utility companies with excellent nuclear programs, has focused in the near- term on the recovery efforts of Millstone and improving nuclear oversight and the System's employee concerns program. In January 1997, Neil S. Carns was elected to the position of Senior Vice President and Chief Nuclear Officer of NNECO to oversee the operations of Millstone. Both Mr. Kenyon and Mr. Carns have extensive experience at other utilities with reputations for excellent nuclear operation. -43- The new nuclear management team has developed comprehensive plans for restarting each of the Millstone units. The Company currently anticipates having Millstone 3 ready to restart around the end of the third quarter of 1997, Millstone 2 in the fourth quarter of 1997, and Millstone 1 in the first quarter of 1998. Restart of each unit is contingent upon, among other things, the affirmative vote of the Commissioners of the NRC, which could occur by mid-December 1997 for Millstone 3. Management hopes that Millstone 3 can begin operating by the end of 1997. There can be no assurances, however, that the Company's expectations will be met. Because of the need for completion of independent inspections and reviews and for the NRC to complete its processes before the NRC Commissioners can vote on permitting a unit to restart, the actual beginning of operations is expected to take several months beyond the time a unit is declared ready for restart. Before and following notification to the NRC that a unit is ready to resume operations, management expects that the NRC staff will conduct extensive reviews and inspections, and before such notification, independent corrective action verification teams also will inspect each unit. The System also will need to comply with an NRC order regarding the development of a comprehensive employee concerns program, which will need to be reviewed by an independent third party. Furthermore, because of the length of the outages, management cannot estimate the time it will take for the units to resume full power after NRC approval to restart. For more information regarding specific regulatory actions related to NU's nuclear units and the December 4, 1996 decision of the board of directors of Connecticut Yankee Atomic Power Company (CYAPC) to retire CY from commercial operation, see "--Electric Operations--Nuclear Generation." For information regarding actions taken to meet System capacity needs caused by the Millstone outages, see "--Electric Operations--Distribution and Load." As a result of the extended Millstone outages, the System companies have incurred and will continue to bear substantial costs at least until the three Millstone units have been restarted. Most of the costs are being borne by the Company and WMECO, which have the greatest investment share of the Millstone units. In 1996, the Company expensed a total of approximately $322 million for Millstone-related non-fuel O&M costs, which included among other costs $93 million for non-fuel incremental O&M costs related to the Millstone outages and $50 million reserved for future Millstone incremental O&M costs. Management believes that the overall 1997 nuclear spending levels for both nuclear O&M expenditures and associated support services and capital expenditures will be approximately the same as previously estimated. However, 1997 nuclear O&M expenditures and related support services are expected to increase slightly, while 1997 capital expenditures are expected to decrease. Management also believes that it is possible that 1997 nuclear spending will increase somewhat as the detailed work needed to restore the units to service progresses. For further information concerning estimated 1997 spending levels, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," and notes to the Company's Consolidated Financial Statements, Notes 11B and 11E. -44- The Company also expensed approximately $216 million for replacement power costs in 1996. Monthly replacement power costs for the Company attributable to the Millstone outages averaged approximately $28 million during the first quarter of 1997, and are projected to average approximately $24 million per month for the remainder of 1997. The Company expensed a significant portion of its 1996 replacement power costs related to the nuclear outages and it is continuing to expense 1997 replacement power costs. Management has committed not to seek recovery of the portion of these costs attributable to the failure to meet industry standards in operating Millstone. In light of that commitment, management believes that the Company will not seek rate recovery of a substantial portion of such costs. While the Company believes that it is entitled to recovery of a portion of the costs that have been and will be incurred, and intends to apply for recovery of such costs, the DPUC on June 27, 1997 orally granted summary judgment in a prudence proceeding disallowing recovery by the Company of substantially all of its Millstone outage related costs. Management currently does not intend to request any such recoveries until after the Millstone units begin returning to service, so it is unlikely that any additional revenues from any permitted recovery of these costs will be available while the units are out of service to contribute to funding the recovery efforts. The Company has arranged a variety of borrowing facilities to fund its cash requirements, including the nuclear recovery efforts. See "-- Financing Program--1997 Financing Requirements." The length of the Millstone outages and the high costs of the recovery efforts weakened the Company's 1996 earnings, balance sheet and cash flows, and they continue to have a significant negative impact on the Company's earnings. The Company had a net loss of approximately $6 million in the first quarter of 1997. In 1997, while all three units are out of service the Company expects to continue operating at a loss. Management believes that the borrowing facilities that are currently in place provide the Company with adequate access to the funds needed to bring the Millstone units back to service if those units begin operating close to the currently envisioned schedules and if the other assumptions, on which management has based its planning, do not substantially change. If the return to service of one or more Millstone units is delayed substantially, or if any needed waivers or modifications to the Company's financing arrangements are not forthcoming on reasonable terms, or if the Company encounters additional significant costs or other significant deviations from management's current assumptions, the currently available borrowing facilities could be insufficient to meet all of the Company's cash requirements, and some facilities could become unavailable because of difficulties in meeting borrowing conditions. In those circumstances, management would take actions to reduce costs and cash outflows and would attempt to take actions to arrange additional sources of funds. The availability of such sources would be dependent on general market conditions and the Company's and the System's credit and financial condition at the time. Both Moody's and S&P have recently downgraded the Company's senior debt to Ba1 and BB+, respectively. -45- Electric Operations Distribution and Load The System companies own and operate a fully integrated electric utility business. The Company's retail electric service territory covers approximately 4,400 square miles and has an estimated total population of approximately 2.5 million. The Company furnishes retail electric franchise service in 149 cities and towns in Connecticut. In December 1996 the Company furnished retail electric franchise service to approximately 1.1 million customers. The following table shows the sources of the Company's 1996 electric revenues based on categories of customers:
Residential............................... 42% Commercial................................ 35 Industrial................................ 13 Wholesale*................................ 8 Other..................................... 2 --- Total..................................... 100%
* Includes capacity sales Through December 31, 1996, the all-time peak demand on the System was 6,358 MW, which occurred on August 2, 1995. At the time of the peak, the System's generating capacity, including capacity purchases, was 8,035 MW. System energy requirements were met in 1996 and 1995 as set forth below:
Source 1996 1995 ------ ---- ---- Nuclear..................... 28% 52% Oil......................... 12 4 Coal........................ 11 10 Hydroelectric............... 5 3 Natural gas................. 3 5 NUGs........................ 13 13 Purchased-power............. 28 13 ---- ---- 100% 100%
The actual changes in retail KWh sales for the last two years and the forecasted sales growth estimates for the ten-year period 1996 through 2006, in each case exclusive of wholesale revenues, for the Company are set forth below: -46-
1996 compared to 1995 compared to Forecast 1996-2006 1995 1994 Compound Rate of Growth ---------------- ---------------- ----------------------- 1.8% (.3)% 1.1%
Retail electric sales for the Company rose by 1.8 percent in 1996 compared to 1995, primarily due to moderate growth in the residential and commercial classes, which increased by 2.0 and 2.9 percent, respectively, in 1996. Industrial sales decreased by 1.0 percent in 1996. Weather has had a minimal effect on 1996 growth rates because the increase in winter heating requirements due to abnormally cold winter weather was offset by the decrease in summer cooling requirements due to a relatively cool summer. In spite of further defense and insurance curtailments, moderate growth is forecasted to resume over the next ten years. The forecasted annual growth rate for the Company of one percent is significantly below historic rates due to a general slow down of economic growth in the region and, in part, because of forecasted savings from Company-sponsored DSM programs that are designed to minimize operating expenses for Company customers and reduce their demand for electricity. The forecasted ten-year annual growth rate of the Company sales would be approximately 1.7 percent if the Company did not pursue DSM programs at the forecasted levels. See "- -Rates" for information about rate treatment of DSM costs. The Company also acts as both a buyer and a seller of electricity in the highly competitive wholesale electricity market in the Northeastern United States (Northeast). The Company's revenues from long-term contracts were $188 million in 1995 and $177 million in 1996, and are expected to be at approximately the same level in 1997. The Company's most important wholesale market at this time remains New England. With the System's generating capacity of 8,034 MW (which includes the Millstone units) as of January 1, 1997 (including the net of capacity sales to and purchases from other utilities, and approximately 660 MW of capacity purchased from NUGs under existing contracts), the System expects to meet reliably its projected annual peak load growth of 1.6 percent until at least the year 2010 without adding new capacity. The System companies operate and dispatch their generation as provided in the New England Power Pool (NEPOOL) Agreement (as defined below). In 1996, the peak demand on the NEPOOL system was 19,507 MW in August, which was 992 MW below the 1995 peak load of 20,499 MW in July of that year. NEPOOL has projected that there will be an increase in demand in 1997 and estimates that the summer 1997 peak load could reach 21,390 MW. Management expects that the System and NEPOOL will have sufficient capacity to meet peak load demands for New England even if Millstone, the Maine Yankee nuclear unit (MY) and the 300 MW Long Island Cable are not operational at any time during the 1997 summer season, so long as the remaining generating units and transmission systems in Connecticut and the New England region have normal operability. If high levels of unplanned outages in New England were -47- to occur, or if any of the System's transmission lines used to import power from other states were unavailable at times of peak load demand, NU and the other New England utilities may have to resort to operating procedures designed to reduce load. The Company spent approximately $60 million in 1996 to reduce the risk of unplanned outages and expects to spend approximately $55 million in 1997. Most of the money budgeted for 1997 will be used to improve the System's network of transmission lines to increase imports into Connecticut and for lease payments for additional capacity. Regional and System Coordination The System companies and most other New England utilities are parties to an agreement (NEPOOL Agreement), which coordinates the planning and operation of the region's generation and transmission facilities. System transmission lines form part of the New England transmission system linking System generating plants with one another and with the facilities of other utilities in the Northeast and Canada. The generating facilities of all NEPOOL participants are dispatched as a single system through the New England Power Exchange, a central dispatch facility. The NEPOOL Agreement provides for a determination of the generating capacity responsibilities of participants and certain transmission rights and responsibilities. NEPOOL's objectives are to assure that the bulk power supply of New England and adjoining areas conforms to proper standards of reliability, to attain maximum practical economy in the bulk power supply system consistent with such reliability standards and to provide for equitable sharing of the resulting benefits and costs. Pursuant to the NEPOOL Agreement, if a participant is unable to meet its capacity responsibility obligations, the participant is required to pay NEPOOL a deficiency charge based on the cost of a proxy generating unit . In the event that none of the Millstone units is returned to service by November 1, 1997, the System companies could be required to begin paying this deficiency charge under the NEPOOL Agreement. Management, however, expects to meet its capacity responsibility obligations even if the Millstone units do not return to service as currently scheduled through purchased power contracts with other utilities and/or reactivating System fossil generating units and thus avoid the deficiency charge. The costs of these alternative plans cannot be estimated at this time. A restated and revised NEPOOL Agreement, providing for pool-wide open access transmission tariff and a proposal for the creation of an Independent System Operator (ISO), became effective on March 1, 1997. Under these new arrangements (1) the ISO, a non-profit corporation, whose board of directors and staff will not be controlled by or affiliated with market participants, will ensure the reliability of the NEPOOL transmission system, administer the NEPOOL tariff and oversee the efficient and competitive functioning of the regional power market, (2) the NEPOOL tariff will provide for non-discriminatory open access to the regional transmission network at one rate regardless of transmitting distance for all transactions, and (3) the new NEPOOL Agreement will establish a broader governance structure for NEPOOL and develop a more open, competitive market structure. -48- There are two agreements that determine the manner in which costs and savings are allocated among the System companies. Under an agreement among CL&P, WMECO and HWP (Initial System Companies), such parties pool their electric production costs and the costs of their principal transmission facilities (NUG&T). Pursuant to the merger agreement between NU and PSNH, the Initial System Companies and PSNH entered into a ten-year sharing agreement (Sharing Agreement), expiring in June 2002, that provides, among other things, for the allocation of the capability responsibility savings and energy expense savings resulting from a single-system dispatch through NEPOOL. Transmission Access and FERC Regulatory Changes On April 24, 1996, FERC issued its final open access rule (the Rule) to promote competition in the electric industry. As required by the Rule, all public utilities that own, control or operate facilities used for transmitting electric energy in interstate commerce must file an open access, non-discriminatory transmission tariff and take transmission service for their own new wholesale sales and purchases under the open access tariffs. The Rule also requires public utilities to develop and maintain a same-time information system that will give existing and potential transmission users the same access to transmission information that the public utility enjoys, and requires public utilities to separate transmission from generation marketing functions and communications. The Rule also supports full recovery of legitimate, prudent and verifiable wholesale strandable investments. On February 26, 1997, FERC reaffirmed the Rule with a few minor clarifications. On July 8, 1996, NU refiled its transmission tariffs to conform with the minimum terms and conditions set forth in the Rule. On December 31, 1996, NU filed amendments to its transmission tariff and several other compliance filings to meet the Rule's year-end requirements, including standards of conduct ensuring that transmission and wholesale generation personnel function independently. As of January 3, 1997, NU operates pursuant to the requirements of the standards of conduct and participates in a NEPOOL-wide Open Access Same-Time Information System, which provides transmission customers with electronic access to information on available capacity, tariffs and other information. On January 22, 1997, NU refiled its transmission tariff to account for certain transmission services that would be provided by NEPOOL under the new NEPOOL Agreement (discussed above), which was filed on December 31, 1996. In 1996, the Company collected approximately $30 million in incremental transmission revenues from other electric utility generators. Fossil Fuels In 1996, 12 percent and 11 percent of the System's generation was oil and coal-derived, respectively. The Company's residual oil-fired generation stations used approximately 5.8 million barrels of oil in 1996. The Company obtained the majority of its oil requirements in 1996 through contracts with several large, independent oil companies. Those contracts allow for some spot purchases when market conditions warrant. Spot purchases represented approximately 15 percent of the Company's fuel oil purchases in 1996. The contracts expire annually or biennially. The -49- Company currently does not anticipate any difficulties in obtaining necessary fuel oil supplies on economic terms. The Company has four generating stations, aggregating approximately 2,060 MW, which can fully or partially burn either residual oil or natural gas, as economics, environmental concerns or other factors dictate. The Company is currently converting two of the four units at its oil-fired Middletown Station in Connecticut comprising approximately 350 MW of capacity to a dual-fuel generating facility. The Company expects the conversion to be completed in the summer of 1997. The Company has contracts with the local gas distribution companies where the dual-fuel generating units are located, under which natural gas is made available by those companies on an interruptible basis. In addition, gas for the Company's Devon and Montville generating stations is being purchased directly from producers and brokers on an interruptible basis and transported through the interstate pipeline system and the local gas distribution company. The Company expects that interruptible natural gas will continue to be available for its dual-fuel electric generating units on economic terms and will continue to economically supplement fuel oil requirements. Nuclear Generation General Certain System companies have ownership interests in four operating nuclear units, Millstone 1, 2 and 3 and Seabrook 1, and equity interests in four regional nuclear companies (the Yankee Companies) that separately own CY, MY, Vermont Yankee (VY) and the Yankee Rowe nuclear generating facility (Yankee Rowe). System companies operate the three Millstone units and Seabrook 1. Yankee Rowe was permanently removed from service in 1992, and CY was permanently removed from service on December 4, 1996. The System companies will have responsibility for administering the decommissioning of CY. The Company and WMECO own 100 percent of Millstone 1 and 2 as tenants in common. Their respective ownership interests in each unit are 81 percent and 19 percent. The Company, PSNH and WMECO have agreements with other New England utilities covering their joint ownership as tenants in common of Millstone 3. The Company's ownership interest in the unit is 52.93 percent, PSNH's ownership interest in the unit is 2.85 percent and WMECO's interest is 12.24 percent. NAEC and the Company have 35.98 percent and 4.06 percent ownership interests, respectively, in Seabrook. The Millstone 3 and Seabrook joint ownership agreements provide for pro-rata sharing by the owners of each unit of the construction and operating costs, the electrical output and the associated transmission costs. The Company and WMECO, through NNECO as agent, operate Millstone 3 at cost, and without profit, under a sharing agreement that obligates them to utilize good utility operating practice and requires the joint owners to share the risk of employee negligence and other risks pro rata in accordance with their ownership shares. The sharing agreement provides that the Company and WMECO would only be liable for damages to the non-NU owners for a deliberate breach of the agreement pursuant to authorized corporate action. -50- The Company, PSNH, WMECO and other New England electric utilities are the stockholders of the Yankee Companies. Each Yankee Company owns a single nuclear generating unit. The stockholder-sponsors of each Yankee Company are responsible for proportional shares of the operating costs of the respective Yankee company and are entitled to proportional shares of the electrical output. The relative rights and obligations with respect to the Yankee Companies are approximately proportional to the stockholders' percentage stock holdings, but vary slightly to reflect arrangements under which nonstockholder electric utilities have contractual rights to some of the output of particular units. The Yankee Companies and the Company's, PSNH's and WMECO's stock ownership percentages in the Yankee Companies are set forth below:
CL&P PSNH WMECO System ---- ---- ----- ------ Connecticut Yankee Atomic Power Company (CYAPC).................... 34.5% 5.0% 9.5% 49.0% Maine Yankee Atomic Power Company (MYAPC).......................... 12.0% 5.0% 3.0% 20.0% Vermont Yankee Nuclear Power Corporation (VYNPC)................ 9.5% 4.0% 2.5% 16.0% Yankee Atomic Electric Company (YAEC)........................... 24.5% 7.0% 7.0% 38.5%
The Company is obligated to provide its percentage of any additional equity capital necessary for the Yankee Companies, but does not expect to need to contribute additional equity capital in the future. The Company believes that the two remaining operating plants, MY and VY, could require additional external financing in the next several years to finance construction expenditures, nuclear fuel and for other purposes. Although the ways in which MYAPC and VYNPC would attempt to finance these expenditures, if they are needed, have not been determined, the Company could be asked to provide further direct or indirect financial support for these companies. For information regarding additional capital requirements at MY and related watch list costs, see "--Nuclear Plant Performance and Regulatory Oversight--Yankee Units--Maine Yankee." The operators of Millstone 1, 2 and 3, MY, VY and Seabrook 1 hold full power operating licenses from the NRC. As holders of licenses to operate nuclear reactors, the Company, WMECO, North Atlantic Energy Service Corporation (NAESCO), NNECO and the Yankee Companies are subject to the jurisdiction of the NRC. The NRC has broad jurisdiction over the design, construction and operation of nuclear generating stations, including matters of public health and safety, financial qualifications, antitrust considerations and environmental impact. The NRC issues 40-year initial operating licenses to nuclear units and NRC regulations permit renewal of licenses for an additional 20-year period. -51- The NRC also regularly conducts generic reviews of technical and other issues, a number of which may affect the nuclear plants in which System companies have interests. The cost of complying with any new requirements that may result from these reviews cannot be estimated at this time, but such costs could be substantial. For information regarding recent actions taken by the NRC with respect to the System's nuclear units, see "-- Overview of Nuclear and Related Financial Matters" and "--Nuclear Generation--Nuclear Plant Performance and Regulatory Oversight." Nuclear Plant Performance and Regulatory Oversight Millstone Units Millstone 1, 2 and 3 are located in Waterford, Connecticut and have license expirations of October 6, 2010, July 31, 2015 and November 25, 2025, respectively and are currently out of service. These units are presently on the NRC's watch list as Category 3 plants, the lowest such category. Plants in this category are required to receive formal NRC Commissioners' approval to resume operations. Millstone 1 began a planned refueling and maintenance outage on November 4, 1995. Millstone 2 was shut down on February 21, 1996 as a result of an engineering evaluation that determined that some valves could be inoperable in certain emergency scenarios. On March 30, 1996, Millstone 3 was shut down by NNECO following an engineering evaluation which determined that four safety-related valves would not be able to perform their design function during certain postulated events. Each of these outages has been extended in order to respond to various NRC requests to describe actions taken, including the resolution of specific technical issues, and to ensure that future operation of the units will be conducted in accordance with the terms and conditions of their operating licenses, NRC regulations and their Updated Final Safety Analysis Report. The System also must demonstrate that it maintains an effective corrective action program for Millstone, as required by NRC regulations, to identify and resolve conditions that are adverse to safety or quality. For more information regarding nuclear management changes and costs related to the outages, see "--Overview of Nuclear Matters and Related Financial Matters." Based upon management's current plans, it is estimated that Millstone 3 will be ready for restart around the end of the third quarter of 1997, Millstone 2 in the fourth quarter of 1997, and Millstone 1 in the first quarter of 1998. Prior to and following notification to the NRC that the units are ready to resume operations, management expects that the NRC staff will conduct extensive reviews and inspections, and prior to such notification, independent corrective action verification teams (as discussed more fully below) also will inspect each unit. The System also will need to comply with an NRC order regarding the implementation of a comprehensive employee concerns program, which will need to be reviewed by an independent third party (as discussed more fully below). The units will not be allowed to restart without an affirmative vote of the NRC Commissioners following completion of these reviews and inspections. Because of the need for completion of independent inspections and reviews and for the NRC to complete its processes before -52- the NRC Commissioners can vote on permitting a unit to restart, the actual beginning of operations is expected to take several months beyond the time when a unit is declared ready for restart. The NRC Commissioners' vote on a Millstone 3 restart request could occur by mid-December if NU, the independent review teams and NRC staff concur that the unit is ready for restart by that time. Management hopes that Millstone 3 can begin operating by the end of 1997. Because of the length of the outages, however, management cannot estimate the time it will take for the units to resume full power after NRC approval to restart. On August 14, 1996, the NRC issued an order confirming NNECO's agreement to conduct an Independent Corrective Action Verification Program (ICAVP) prior to the restart of each of the Millstone units. The order requires that an independent, third-party team, whose appointment is subject to NRC approval, verify the results of the corrective actions taken to resolve identified design and configuration management issues. NNECO has submitted to the NRC its selection of an ICAVP contractor for each of the units and the NRC has approved those selections. The ICAVP for Millstone 3 began on May 27, 1997, as scheduled. On June 30, 1997, the Company announced that Millstone 2 was ready to begin the ICAVP, as scheduled, and requested that the NRC identify the particular systems to be reviewed by the Millstone 2 ICAVP contractor. In the fall of 1996, the NRC established a Special Projects Office to oversee inspection and licensing activities at Millstone. The Special Projects Office is responsible for (1) licensing and inspection activities at Millstone, (2) oversight of the independent corrective action verification program, (3) oversight of NU's corrective actions related to safety issues involving employee concerns, and (4) inspections necessary to implement NRC oversight of the plants' restart activities. On December 5, 1996, the NRC conducted an enforcement conference regarding numerous apparent regulatory violations at Millstone that were discovered during routine and special inspections at the units between November 1995 and November 1996. It is likely that this proceeding will result in the issuance of notices of violation and the imposition of significant civil penalties for each of the Millstone units. In addition to the various technical and design basis issues at Millstone, the NRC continues to focus on the System's response to employee concerns at the units. On October 24, 1996, the NRC issued an order that requires NNECO to devise and implement a comprehensive plan for handling safety concerns raised by Millstone employees and for assuring an environment free from retaliation and discrimination. The NRC also ordered NNECO to contract for an independent third party to oversee this comprehensive plan. The members of the independent third-party organization must not have had any direct previous involvement with activities at Millstone and must be approved by the NRC. Oversight by the third-party group will continue until NNECO demonstrates, by performance, that the conditions leading to this order have been corrected. NNECO has submitted to the NRC its selection of the third-party oversight organization and the NRC has approved that selection. NNECO has submitted to the NRC its comprehensive employee concerns plan. On March 7, 1997, the NRC issued a letter to NNECO confirming NNECO's commitment to evaluate and correct problems identified within its licensed operator training programs at -53- Millstone and CY. On June 27, 1997, NNECO temporarily suspended all nuclear training programs at Millstone to address programmatic deficiencies identified by NNECO and NRC inspectors during reviews of the System's training programs at Millstone and CY. The decision to suspend the nuclear training programs was primarily based on a determination that there is insufficient feedback between work functions and training so as to ensure training programs are appropriately refined to reflect such items as changing needs and experience. Management has not yet determined when the various training programs will be fully operational, but is currently developing a list of priorities for programs to get back on line. Management does not believe at this time that the suspension will affect the System's schedule for restarting the Millstone units. See "Legal Proceedings--NRC Office of Investigations and U.S. Attorney Investigations and Related Matters." Nuclear management is investigating the cause of a temperature rise in the Millstone 3 spent fuel pool that occurred during the last week of June 1997. Preliminary analysis indicates that the cause of the event was an incomplete changeover from one cooling system to another. Nuclear management does not believe that this incident, when considered in isolation, presented a significant safety issue, but is taking steps to prevent it from recurring and identify lessons to be learned from the event. The NRC has been informed of the event but is not expected to impose any material sanctions on the Company. However, the event has indicated to nuclear management that further focus on operational matters will be necessary to ensure proper operation of the units. For information regarding replacement power costs and incremental nuclear O&M costs associated with the extended Millstone outages, see "Risk Factors--Nuclear Plant Outages and Liquidity" and "--Overview of Nuclear and Related Financial Matters." For information regarding the recoverability of these costs, see "--Rates." For information regarding the 1996 nuclear workforce reduction, see "Employees." For information regarding criminal investigations by the NRC's Office of Investigations (OI) and the Office of the U.S. Attorney for the District of Connecticut related to various matters at Millstone and CY; certain citizens petitions related to NU's nuclear operations; and potential joint owner litigation related to the extended outages, see "Legal Proceedings." Seabrook Seabrook 1, a 1,148-MW pressurized-water reactor, has a license expiration date of October 17, 2026. The Seabrook operating license expires 40 years from the date of issuance of authorization to load fuel, which was about three and one-half years before Seabrook's full-power operating license was issued. The System will determine at the appropriate time whether to seek recapture of some or all of this period from the NRC and thus add up to an additional three and one-half years to the operating term for Seabrook. In 1996, Seabrook operated at a capacity factor of 96.5 percent. On June 28, 1997, the unit completed a planned refueling and maintenance outage that lasted 50 days. On October 9, 1996, the NRC issued a request for information concerning all nuclear plants in the United States, except the three Millstone units and CY, which had previously received such -54- requests. Such information will be used to verify that these facilities are being operated and maintained in accordance with NRC regulations and the unit's specific licenses. The NRC has indicated that the information will be used to determine whether future inspection or enforcement activities are warranted for any plant. NAESCO has submitted its response to the NRC's request with respect to Seabrook. Seabrook's operations have not been restricted by the request. The NRC's April 1996 comprehensive review found Seabrook to be a well-operated facility without any major safety issues or weaknesses and noted that it would reduce its future inspections in a number of areas as a result of its findings. Yankee Units Connecticut Yankee. CY, a 582-MW pressurized-water reactor, has a license expiration date of June 29, 2007. On July 22, 1996, CY began an unscheduled outage as a precautionary measure to evaluate the plant's service water system, which provides cooling water to certain critical plant components. On August 8, 1996, after evaluating certain other pending technical and regulatory issues, CY's management decided to delay the restart of the unit and to begin a scheduled September refueling outage. The refueling outage was accelerated in order to allow time to resolve the pending issues. On December 4, 1996, the board of directors of CYAPC voted unanimously to retire CY. The decision to shut down CY was based on economic analyses that showed that shutting down the unit prematurely and incurring replacement power costs could produce potential savings compared to the costs of operating it over the remaining period of the unit's operating license. These analyses indicated that this shutdown decision could produce savings in excess of $130 million on a net present value basis. These analyses did not consider the costs of addressing concerns about CY's design and licensing basis raised by the NRC during the summer of 1996 similar to those raised at Millstone. If these costs had been considered, the economic analyses would have favored shutdown by an even greater margin. CYAPC has undertaken a number of regulatory filings intended to implement the decommissioning. For more information regarding the CYAPC revised decommissioning estimate that was submitted to FERC in December 1996, see "--Decommissioning." In late December 1996, CY filed amendments to its power contracts with FERC to clarify any obligations of its purchasing utilities, including the Company. This filing estimated the unrecovered obligations, including the funding of decommissioning, to be approximately $762.8 million. On February 27, 1997, FERC approved an order for hearing which, among other things, accepted CY's contract amendments for filing and suspended the new rates for a nominal period. The new rates became effective March 1, 1997, subject to a refund. At March 31, 1997, the Company's share of the CY unrecovered contractual obligation which also has been recorded as a regulatory asset, was $248.3 million. Based upon FERC regulatory precedent, CYAPC believes it will be allowed to continue to collect from its power purchasers, including the Company, WMECO and PSNH, CYAPC's decommissioning costs, the owners' unrecovered investments in CYAPC, and other costs associated -55- with the permanent closure of the plant over the remaining period of its NRC operating license. Management in turn expects that the Company, WMECO and PSNH will continue to be allowed to recover such FERC-approved costs from their customers. On May 12, 1997 the NRC staff assessed a $650,000 fine against CYAPC for more than 70 alleged violations of regulatory requirements, which CYAPC paid on June 13, 1997. Most of the violations cited by the NRC pertain to numerous longstanding deficiencies in engineering programs and practices, as well as errors related to an event involving a nitrogen buildup in the reactor vessel in 1996. As confirmed by the NRC on March 4, 1997, CYAPC has agreed to undertake various steps to resolve deficiencies and weaknesses in the radiation protection program at CY. Management does not believe that this undertaking will have a material adverse effect on the System companies or CYAPC. Maine Yankee. MY, a 870-MW pressurized-water reactor, has a license expiration date of October 21, 2008. MY's operating license expires 40 years from the date of issuance of the construction permit, which was about four years before MY's full-power operating license was issued. If appropriate, MYAPC will determine whether to seek recapture of this construction period from the NRC and add it to the term of the MY operating license. In 1996, MY operated at a capacity factor of 65.5 percent. By order issued on January 3, 1996, the NRC suspended MY's authority to operate at full power and limited MY to operating at 90 percent power pending the NRC's review and approval of a computer code application used at MY. The plant was taken out of service on December 5, 1996 after finding that certain cables did not have the proper separation required by the plant's design and licensing basis to protect them during accident conditions. MYAPC has agreed not to restart the plant until it completes a number of actions required by the NRC and prior to receiving NRC approval. On January 29, 1997, the NRC announced that MY had been placed on the NRC's watch list as a Category 2 plant. Plants in this category have been identified as having weaknesses that warrant increased NRC attention until the licensee demonstrates a period of improved performance. The NRC cited a number of deficiencies in the engineering design to support operations at MY, which were identified by an independent safety assessment team during the latter half of 1996. Although MY has developed a plan and initiated steps to correct the problems, including entering into an agreement with Entergy Corporation to acquire outside management expertise in the operation of the facility, the NRC indicated that increased agency attention was still needed. On May 27, 1997, MY announced that it was considering permanent closure of the plant based on economic concerns and uncertainty about the operation of the plant. MY disclosed that it would reduce spending to a level that would preserve the option of restarting the plant or closing it. -56- The Company cannot determine whether or when MY will return to service and expects that, if the decision is made to restart the plant, there will be substantial costs associated with the NRC's actions that cannot be accurately estimated at this time. Vermont Yankee. VY, a 514-MW boiling water reactor, has a license expiration date of March 21, 2012. In 1996, VY operated at a capacity factor of 81.4 percent. VY had a 57-day planned refueling outage during 1996 that ended on November 1, 1996. The unit expects to begin a 56-day planned refueling and maintenance outage on September 28, 1998. Yankee Rowe. In 1992, YAEC's owners voted to shut down Yankee Rowe permanently based on an economic evaluation of the cost of a proposed safety review, the reduced demand for electricity in New England, the price of alternative energy sources and uncertainty about certain regulatory requirements. The power contracts between the Company, PSNH, WMECO, and other owners and YAEC permit YAEC to recover from each its proportional share of the Yankee Rowe shutdown and decommissioning costs. For more information regarding the decommissioning of Yankee Rowe, see "-- Decommissioning." Nuclear Insurance The NRC requires nuclear plant licensees to maintain a minimum of $1.06 billion in nuclear property and decontamination insurance coverage. The NRC requires that proceeds from the policy following an accident that exceed $100 million will first be applied to pay expenses. The insurance carried by the licensees of the Millstone units, Seabrook 1, CY, MY and VY meets the NRC's requirements. YAEC has obtained an exemption for Yankee Rowe from the $1.06 billion requirement and currently carries $25 million of insurance that otherwise meets the requirements of the rule. CYAPC expects to seek a similar exemption for CY in 1997. For more information regarding nuclear insurance, see "Commitments and Contingencies--Nuclear Insurance Contingencies" in the notes to the Company's Consolidated Financial Statements, Note 11D. Nuclear Fuel The supply of nuclear fuel for the System's existing units requires the procurement of uranium concentrates, followed by the conversion, enrichment and fabrication of the uranium into fuel assemblies suitable for use in the System's units. The majority of the System companies' uranium enrichment services requirements is provided under a long-term contract with the United States Enrichment Corporation (USEC), a wholly-owned United States government corporation. The majority of Seabrook's uranium enrichment services requirements is furnished through a Russian trading company. The System expects that uranium concentrates and related services for the units operated by the System and for the other units in which the System companies are participating, that are not covered by existing contracts, will be available for the foreseeable future on reasonable terms and prices. In August 1995, NAESCO filed a complaint in the United States Court of Federal Claims challenging the propriety of the prices charged by the USEC for uranium enrichment services -57- procured for Seabrook Station in 1993. The complaint is an appeal of the final decision rendered by the USEC contracting officer denying NAESCO's claims, which range from $2.5 to $5.8 million, and will likely be considered along with similar complaints that are pending before the court on behalf of 13 other utilities. The NAESCO complaint has been suspended pending the outcome of an appeal in another proceeding involving a similar complaint. As a result of the Energy Act, the United States commercial nuclear power industry is required to pay the United States Department of Energy (DOE), through a special assessment for the costs of the decontamination and decommissioning of uranium enrichment plants owned by the United States government, no more than $150 million per annum for 15 years beginning in 1993. Each domestic nuclear utility's payment is based on its pro rata share of all enrichment services received by the United States commercial nuclear power industry from the United States government through October 1992. Each year, the DOE adjusts the annual assessment using the Consumer Price Index. The Energy Act provides that the assessments are to be treated as reasonable and necessary current costs of fuel, which costs shall be fully recoverable in rates in all jurisdictions. The Company's total share of the estimated assessment was approximately $49.2 million at March 31, 1997 and December 31, 1996. Management believes that the DOE assessments against the Company will be recoverable in future rates. Accordingly, the Company has recognized these costs as a regulatory asset, with a corresponding obligation on its consolidated balance sheet. In June 1995, the United States Court of Federal Claims held that, as applied to YAEC, the Uranium Enrichment Decontamination and Decommissioning Fund is an unlawful add-on to the bargained-for contract price for enriched uranium. As a result of that ruling, the federal government would be required to refund the approximately $3.0 million that YAEC has paid into the fund since its inception. On May 6, 1997, the United States Court of Appeals for the Federal Circuit issued a 2-1 panel decision reversing the Court of Federal Claims' decision. YAEC has filed a motion for rehearing en banc with the Appeals Court. NU is evaluating the applicability of these decisions to the $21 million that the System companies have already paid into the fund for the System companies' obligation to pay such special assessments in the future. Nuclear fuel costs associated with nuclear plant operations include amounts for disposal of nuclear waste. The System companies include in their nuclear fuel expense spent fuel disposal costs accepted by the DPUC, NHPUC and DPU in rate case or fuel adjustment decisions. Spent fuel disposal costs also are reflected in FERC-approved wholesale charges. High-Level Radioactive Waste The Nuclear Waste Policy Act of 1982 (NWPA) provides that the federal government is responsible for the permanent disposal of spent nuclear reactor fuel and high-level waste. As required by the NWPA, electric utilities generating spent nuclear fuel (SNF) and high-level waste are obligated to pay fees into a fund which would be used to cover the cost of siting, constructing, developing and operating a permanent disposal facility for this waste. The System companies have been paying for such services for fuel burned starting in April 1983 on a quarterly basis since July 1983. The DPUC, NHPUC and DPU permit the fee to be recovered through rates. -58- In return for payment of the fees prescribed by the NWPA, the federal government is to take title to and dispose of the utilities' high-level wastes and spent nuclear fuel. The NWPA provides that a disposal facility be operational and for the DOE to accept nuclear waste for permanent disposal in 1998. On March 3, 1997 CYAPCO, NAESCO and NUSCO intervened as parties in a lawsuit brought in the U.S. Court of Appeals for the District of Columbia Circuit by 35 nuclear utilities in late January, seeking additional action based on the DOE's assertion that it expects to be unable to begin acceptance of spent nuclear fuel for disposal by January 31, 1998. Among other requests for relief, the lawsuit requests that utilities be relieved of their contractual obligation with DOE to pay fees into the Nuclear Waste Fund and be authorized to place such fee payments into escrow "unless and until" DOE begins accepting spent fuel for disposal. The DOE's current estimate for an available site is 2010. Until the federal government begins accepting nuclear waste for disposal, operating nuclear generating plants will need to retain high- level waste and spent fuel onsite or make some other provisions for their storage. With the addition of new storage racks, storage facilities for Millstone 3 are expected to be adequate for the projected life of the unit. With the implementation of currently planned modifications, the storage facilities for Millstone 1 and 2 are expected to be adequate (maintaining the capacity to accommodate a full-core discharge from the reactor) until 2003 and 2004, respectively. Fuel consolidation, which has been licensed for Millstone 2, could provide adequate storage capability for the accommodation of all of the SNF at CY. In addition, other licensed technologies, such as dry storage casks or on-site transfers, are being considered to accommodate spent fuel storage requirements. With the current installation of new racks in its existing spent fuel pool, Seabrook is expected to have spent fuel storage capacity until at least 2010. MYAPC believes it has adequate storage capacity through MY's current licensed operating life. The storage capacity of the spent fuel pool at VY is expected to be reached in 2005 and the available capacity of the pool is expected to be able to accommodate full-core removal until 2001. Because the Yankee Rowe plant was permanently shut down in February 1992, YAEC is considering the construction of a temporary facility to store the spent nuclear fuel produced by the Yankee Rowe plant over its operating lifetime until that fuel is removed by the DOE. Low-Level Radioactive Waste The System currently has contracts to dispose its low-level radioactive waste (LLRW) at two privately operated facilities in Clive, Utah and in Barnwell, South Carolina. Because access to LLRW disposal may be lost at any time, the System has plans that will allow for onsite storage of LLRW for at least five years. Neither Connecticut nor New Hampshire has developed alternatives to out-of-state disposal of LLRW to date. Both Maine and Vermont are in the process of implementing an agreement with Texas to provide access to an LLRW disposal facility that is to be developed in that state. All three states plan to form an LLRW compact that is currently awaiting approval by Congress. -59- Decommissioning Based upon the System's most recent comprehensive site-specific updates of the decommissioning costs for each of the three Millstone units and for Seabrook, the recommended decommissioning method continues to be immediate and complete dismantlement of those units at their retirement. The table below sets forth the estimated Millstone and Seabrook decommissioning costs for the Company. The estimates are based on the latest site studies, escalated to March 31, 1997 dollars.
(Millions) Millstone 1 $320.1 Millstone 2 282.5 Millstone 3 248.2 Seabrook 18.5 ------ Total $869.3
As of March 31, 1997, the Company recorded balances (at market) in its external decommissioning trust funds as follows:
(Millions) Millstone 1 $145.2 Millstone 2 95.6 Millstone 3 64.1 Seabrook 2.3 ------ Total $307.2
In 1986, the DPUC approved the establishment of separate external trusts for the currently tax-deductible portions of decommissioning expense accruals for Millstone 1 and 2 and for all expense accruals for Millstone 3. The DPUC has authorized the Company to collect its current decommissioning estimate for the three Millstone units from customers. This estimate includes an approximate 16 percent contingency factor for the decommissioning cost of each unit. The decommissioning cost estimates for the Company's nuclear units are reviewed and updated regularly to reflect inflation and changes in decommissioning requirements and technology. Changes in requirements or technology, or adoption of a decommissioning method other than immediate dismantlement, could change these estimates. The Company attempts to recover sufficient amounts through its allowed rates to cover its expected decommissioning costs. Only the portion of currently estimated total decommissioning costs that has been accepted by the DPUC and FERC is reflected in rates of the Company. Based on present estimates, and assuming its nuclear units operate to the end of their respective license periods, the Company expects that the decommissioning trust funds will be substantially funded when those expenditures have to be made. -60- CYAPC, YAEC, VYNPC and MYAPC are all collecting revenues for decommissioning from their power purchasers. The table below sets forth the Company's estimated share of decommissioning costs of the Yankee units. The estimates are based on the latest site studies, escalated to December 31, 1996 dollars. For information on the equity ownership of the System companies in each of the Yankee units, see "--Electric Operations--Nuclear Generation--General."
(Millions) VYNPC $ 34.8 YAEC* 42.5 CYAPC* 263.2 MYAPC 44.3 ------ Total $384.8
* As discussed more fully below, the costs shown include all remaining decommissioning costs and other closing costs associated with the early retirement of Yankee Rowe and CY as of December 31, 1996. If the decision is made to retire MY rather than to incur the expenses required to return the plant to service, decommissioning costs may increase. See "--Electric Operations--Nuclear Generation--Yankee Units--Maine Yankee." The Company expects to recover all decommissioning costs from its customers pursuant to FERC tariffs. As of March 31, 1997, the Company's share of the respective external decommissioning trust fund balances (at market), which have been recorded on the books of each of the respective Yankee Companies, is as follows:
(Millions) VYNPC $ 15.5 YAEC 30.0 CYAPC 73.1 MYAPC 20.1 ------ Total $138.7
Effective January 1996, YAEC began billing its sponsors, including CL&P, WMECO and PSNH, amounts based on a revised estimate approved by the FERC that assumes decommissioning by the year 2000. This revised estimate was based on continued access to the Barnwell, South Carolina, low-level radioactive waste facility, changes in assumptions about earnings on decommissioning trust investments, and changes in other decommissioning cost assumptions. -61- CYAPC accrues decommissioning costs on the basis of immediate dismantlement at retirement. In late December 1996, CYAPC made a filing with FERC to amend the wholesale power contracts between the owners of the facility, and revise decommissioning cost estimates and other cost estimates for the facility. The amendments clarify the owners' entitlement to full recovery of amounts previously invested and the ongoing costs of maintaining the plant in accordance with NRC rules until decommissioning begins, and ensures that decommissioning will continue to be funded through June 2007, the full license term, despite the unit's early shutdown. On February 26, 1997, FERC approved a draft order setting for hearing the prudence of the decision to close CY. On February 27, 1997, FERC approved an order for hearing which, among other things, accepted CYAPC's contract amendments for filing and suspended the new rates for a nominal period. The new rates became effective March 1, 1997, subject to refund. FERC will determine the prudence of CYAPC's decision to retire the plant before it finally determines the justness and reasonableness of CYAPC's proposed amended power contract rates. For more information regarding nuclear decommissioning, see "Nuclear Decommissioning" in the notes to the Company's Consolidated Financial Statements, Note 3. Competition and Cost Recovery Competition in the energy industry continues to grow as a result of legislative and regulatory action, technological advances, relatively high electric rates in certain regions of the country, including New England, surplus generating capacity and the increased availability of natural gas. These competitive pressures are particularly strong in the System's service territories, where legislators and regulatory agencies have been at the forefront of the restructuring movement. A major risk of competition for the Company is "strandable investments." These are expenditures that have been made by utilities in the past to meet their public service obligations, with the expectation that they would be recovered from customers in the future. However, under certain circumstances these costs might not be recoverable from customers in a fully competitive electric utility industry. The Company is particularly vulnerable to strandable investments because of (i) the Company's relatively high investment in nuclear generating capacity, which had a high initial cost to build, (ii) state-mandated purchased power arrangements priced above market, and (iii) significant regulatory assets, which are those costs that have been deferred by state regulators for future collection from customers. See "Risk Factors--Industry Restructuring and Competition." As of March 31, 1997, the Company's net investment in nuclear generating capacity, excluding its investment in certain regional nuclear companies, was approximately $2.3 billion, and in its regulatory assets was approximately $1.3 billion. The Company expects to recover substantially all of its nuclear investment and its regulatory assets from customers. The Company is currently collecting its nuclear investment through depreciation charges approved by the DPUC. See "Depreciation" in the notes to the Company's Consolidated Financial Statements. Unless amortization levels are changed from currently scheduled rates, the Company's regulatory assets are expected to be substantially decreased in the next five years. Although the Company continues to operate predominantly in a state-approved franchise territory under traditional cost-of-service -62- regulation, restructuring initiatives in the State of Connecticut have created uncertainty with respect to future rates and the recovery of strandable investments. See "Risk Factors--Regulatory Accounting and Assets." In 1995 regulators in Connecticut concluded that electric utilities should be allowed a reasonable opportunity to recover strandable investments. Various electric utility restructuring legislative proposals were introduced in the Connecticut Legislature in 1997. On June 4, 1997, the Connecticut Legislature completed its most recent session without passage of a proposed electric restructuring bill. The legislature may consider restructuring legislation in the future. Notwithstanding these legislative and regulatory initiatives, the System has developed, and is continuing to develop, a number of marketing initiatives to retain and continue to serve its existing customers. In particular, the System has been devoting increasing attention in recent years to negotiating long-term power supply arrangements with certain large commercial and industrial retail customers. Approximately 10 percent of the Company's commercial and industrial retail revenues were under negotiated rate agreements at the end of 1996. The Company was a party to negotiated rate agreements which accounted for approximately $19 million of rate reductions in 1996. The average term of these agreements is approximately 5.2 years. The System has expanded its retail marketing organization to provide value-added solutions to its customers. The System devoted significantly more resources to its retail marketing efforts in 1996 than in prior years. In particular, NUSCO hired approximately 170 new employees as part of its retail sales organization. The new employees will allow the System to have more direct contact with customers in order to develop tailor-made solutions for customers' energy needs. In addition, the System companies, as well as other NU subsidiaries, received orders from the Commission and FERC in 1996 that increased their flexibility to market and broker electricity, gas, oil and other forms of energy throughout the United States and to provide various services related thereto. Rates General The Company's retail rates are subject to the jurisdiction of the DPUC. Connecticut law provides that revised rates may not be put into effect without the prior approval of the DPUC. Connecticut law also authorizes the DPUC to order a rate reduction under certain circumstances before holding a full-scale rate proceeding. The DPUC is further required to review a utility's rates every four years if there has not been a rate proceeding during such period. On June 16, 1997, the Company filed with the DPUC certain financial information consistent with the DPUC's filing requirements applicable to such four year review. The Company expects hearings before the DPUC with respect to such review to begin during the summer of 1997. Based on recently enacted legislation, if the DPUC approves performance-based incentives for a particular company, the DPUC will include in such an order periodic monitoring and review of the Company's performance in lieu of the four-year review. -63- On July 1, 1996, the DPUC approved a settlement agreement (Settlement) that had been jointly submitted to the DPUC by the Company, the Connecticut Office of Consumer Counsel (OCC) and the independent Prosecutorial Division of the DPUC. The Settlement provides that the Company's base rates will be frozen until at least December 31, 1997. The Settlement provides that during the rate freeze, the Company's target return on equity (ROE) will be 10.7 percent, but the Settlement does not alter Company's allowed ROE of 11.7 percent. One-third of earnings above the target ROE will be refunded to customers. The Settlement also accelerated the amortization of the Company's regulatory assets ($73 million in 1996 and $54 to $68 million in 1997). As of March 31, 1997, the Company's regulatory assets totaled approximately $1.3 billion. The Settlement terminated all outstanding litigation pending as of March 31, 1996 among the parties that potentially could affect the Company's rates. Such litigation included appeals by the Company and the OCC from the Company's 1993 rate case decision, appeals from the DPUC's decisions concerning the 1992-1993 and 1993-1994 fuel-recovery periods, nuclear operating prudence review proceedings pending at the time of the settlement, and OCC's appeal from the DPUC guidelines adopted in 1995 allowing additional flexibility in negotiating special rates with electric customers. In exchange, the Company agreed not to seek recovery from its customers of approximately $115 million in uncollected nuclear costs incurred before March 31, 1996. The Settlement does not affect issues to be addressed by the DPUC in future restructuring proceedings and the recovery of costs related to the ongoing Millstone outages. For information regarding the prudence proceeding related to nuclear operations for the period March 31, 1996 to June 30, 1996. See "--Rates--CL&P Adjustment Clauses and Prudence." Electric Industry Restructuring in Connecticut Pursuant to legislation introduced in 1995, a legislative task force was created to consider electric industry restructuring in Connecticut. Although the members of the task force did not come to a consensus on restructuring, the task force's December 1996 report included several recommendations on legislation, including, among other things, legislation to enable securitization of strandable investments; reduction of tax burdens incorporated in electric rates; reduction of rate impacts of government-mandated contracts with NUGs; and elimination of obsolete regulation. On June 4, 1997, the Connecticut Legislature completed its most recent session without passage of a proposed electric industry restructuring bill. The legislature may consider restructuring legislation in the future. CL&P Adjustment Clauses and Prudence On October 8, 1996, the DPUC issued its final order establishing an EAC in place of the Company's existing Fuel Adjustment Clause and Generation Utilization Adjustment Clause (GUAC). The EAC took effect on January 1, 1997. The EAC is designed to reconcile and adjust every six months the difference between actual fuel costs and the fuel revenue collected through base rates. The EAC includes an incentive mechanism that disallows recovery of the first $9 million in fuel costs that exceeds base levels and permits the Company to retain the first $9 million in fuel -64- cost savings. The EAC also designates a 60 percent nuclear capacity factor floor. When the six-month nuclear capacity factor falls below 60 percent, related energy costs are deferred to the subsequent EAC period for consideration for recovery. Finally, the costs to serve nonfirm wholesale transactions will continue to be removed from the calculation of fuel costs at actual marginal cost. On December 31, 1996, the DPUC issued a decision approving the Company's request to recover $25 million, excluding replacement power costs (see below), through the GUAC for the period April 1-July 31, 1996. The $25 million will be recovered over a twelve-month period beginning January 1, 1997. On June 6, 1997, the Company filed with the DPUC a request to recover approximately $28 million of fuel costs for the period August 1, 1996 through April 30, 1997, through the EAC, which includes $5.3 million of fuel costs from 1996, which would have been recovered through the GUAC. Pursuant to a DPUC order in the prudence proceeding discussed below, the filing excluded any fuel cost associated with the current outages at Millstone. On the same date, the DPUC issued a procedural order, which stated that the Company could not include CY replacement power costs in its EAC until the DPUC concluded its prudence investigation, discussed more fully below, and that this prudence decision would be directly affected by the on-going FERC proceeding regarding the decision to retire CY before the expiration of its operating license. The Company revised its EAC filing on June 13, 1997 to identify approximately $17 million of CY fuel costs. See "--Nuclear Plant Performance and Regulatory Oversight--Yankee Units-- Connecticut Yankee" and "--Decommissioning." In connection with an ongoing management audit of the Company, including matters related to the NRC watch list designation, the two consulting firms hired by the DPUC to review such matters issued reports in December 1996 that were highly critical of NU's management of its nuclear program. The results of these reports may affect future DPUC positions with respect to the System's nuclear related operations and costs. Despite an earlier procedural order indicating that prudence hearings on the current nuclear outages at Millstone would take place after the nuclear plants return to service, on January 15, 1997, the DPUC notified the Company that it would be conducting its prudence review of nuclear cost recovery issues in multiple phases. The first phase, covering the period April 1 through June 30, 1996, was in progress when various intervenors moved for summary judgment with respect to the costs for the entire outage. On June 27, 1997, the DPUC orally granted summary judgment in the prudence docket, disallowing recovery of substantially costs associated with the ongoing outages at Millstone. The Company has projected that its share of the total costs for the Millstone outages, including replacement power, operation and maintenance and capacity reliability projects, will be about $990 million. The Company had not requested cost recovery and had said that it did not expect to seek recovery for a substantial portion of these costs and did not intend to request any cost recovery until the units had returned to operation. Any requests by the Company for recovery would include only costs for projects the Company would have undertaken under normal operating conditions or that provide long-term value for the Company's customers. The DPUC did leave open the possibility for the Company in a future rate case to seek recovery of up to $40 million of capital costs associated with capacity reliability projects. The Company currently expects to appeal the decision to the Connecticut Superior Court. The Company does not expect this decision to have any immediate a material financial impact on 1997 results. The Company has expensed, and continues to expense, the bulk of the Millstone outage costs as they are incurred. Therefore, the Company does not expect this decision to have a material financial impact on projected 1997 results. -65- In a separate proceeding, the DPUC ordered the Company to submit studies by July 1, 1997 that analyze the economic benefits from the continued operation of Millstone 1 and 2. The DPUC stated that these studies were necessary in light of the uncertainty regarding restart dates of the units and the costs associated with returning these units to operation. On July 1, 1997, the Company submitted continued unit operation studies to the DPUC showing that, under base case assumptions, Millstone 1 will have a value to System customers (as compared to the cost of shutting down the unit and incurring replacement power costs) of approximately $70 million during the remaining thirteen years of its operating license and Millstone 2 will have a value to System customers (on the same assumptions as used with Millstone 1) of approximately $500 million during the remaining eighteen years of its operating license. Two other cases submitted to the DPUC based on higher assumed O&M costs, which the Company considers less likely, indicated that Millstone 1 would be uneconomic in varying degrees. At the present time, the Company expects to continue operating both Millstone 1 and Millstone 2 for the remaining terms of their respective operating licenses; however, the Company cannot predict the outcome of this proceeding. In May 1996, the Connecticut state legislature enacted legislation to create the Nuclear Energy Advisory Council (NEAC), a volunteer group of fourteen members. The NEAC was charged with conducting a broad review of safety and operations of the System's four Connecticut nuclear units and to advise the Governor, the legislature and affected municipalities on these issues. The NEAC issued its first report on February 7, 1997, which provided a wide range of preliminary recommendations, including legislation and additional public hearings related to nuclear spent fuel, federal congressional hearings, review by the Connecticut Attorney General of the NRC's oversight of the System's nuclear operations and the requirement for a state nuclear plant resident inspector. These recommendations are similar to various legislative proposals currently pending at the state legislature related to nuclear oversight, operations and cost recovery. Management cannot predict the ultimate effect of this report or such proposed legislation. Demand-Side Management The Company provides demand-side management (DSM) programs for its residential, commercial and industrial customers. The Company is allowed to recover DSM costs in excess of costs reflected in base rates over periods ranging from approximately two to ten years. On April 9, 1996, the DPUC issued an order approving the Company's budget of $37.1 million for 1996 DSM expenditures, which will be recovered over a 2.43-year amortization period. In November 1996, the Company filed its 1996 DSM program and forecasted conservation adjustment mechanism (CAM) for 1997 with the DPUC. The filing proposed expenditures of $36 million in 1997. In April 1997, the DPUC approved 1997 expenditures of $36 million. The Company's unrecovered DSM costs at December 31, 1996, excluding carrying costs, which are collected currently, were approximately $90 million. -66- Resource Plans Construction The Company's construction program in the period 1997 through 2001 is estimated as follows:
1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- (Millions) $148 $180 $164 $163 $170
The 1997 data include costs of approximately $18 million related to upgrading the Company's transmission facilities to meet capacity needs caused by the extended Millstone outages. See "--Electric Operations-- Distribution and Load." The construction program data shown above include all anticipated capital costs necessary for committed projects and for those reasonably expected to become committed, regardless of whether the need for the project arises from environmental compliance, nuclear safety, reliability requirements or other causes. The construction program's main focus is maintaining and upgrading the existing transmission and distribution system and nuclear and fossil-generating facilities. The construction program data shown above generally include the anticipated capital costs necessary for fossil-generating units to operate at least until their scheduled retirement dates. Whether a unit will be operated beyond its scheduled retirement date, be deactivated or be retired on or before its scheduled retirement date is regularly evaluated in light of the System's needs for resources at the time, the cost and availability of alternatives and the costs and benefits of operating the unit compared with the costs and benefits of retiring the unit. Retirement of certain of the units could, in turn, require substantial compensating expenditures for other parts of the System's bulk power supply system. Those compensating capital expenditures have not been fully identified or evaluated and are not included in the table. Future Needs The System periodically updates its long-range resource needs through its integrated demand and supply planning process. While the System does not foresee the need for any new major generating facilities at least until 2010, it has reactivated some older facilities and leased additional facilities in 1996 to supplement its capacity requirements due to the extended Millstone outages. The System's long-term plans rely, in part, on certain DSM programs. These System companies-sponsored measures, including installations to date, are projected to lower the System summer peak load in 2010 by 703 MW and lower the winter peak load as of January 1, 2011 by 482 MW. See "--Rates" for information about rate treatment of DSM costs. -67- In addition, System companies have long-term arrangements to purchase the output from certain NUGs under federal and state laws, regulations and orders mandating such purchases. NUGs supplied 660 MW of firm capacity in 1996. The System companies, including the Company, do not expect to purchase additional new capacity from NUGs for the foreseeable future. See "Cogeneration Costs" in the notes to the Company's Consolidated Financial Statements, Note 1L, for information regarding the Company's renegotiation of one of its purchased-power agreements. The System's need for new resources may be affected by premature retirements of existing generating units, regulatory approval of the continued operation of certain fossil fuel units past scheduled retirement dates, and the possible deactivation of plants resulting from environmental compliance costs, licensing decisions and other regulatory matters. The System's need for new resources also may be substantially affected by restructuring of the electric industry. For more information regarding restructuring, see "--Rates." Financing Program Recent Financing Activity On May 21, 1996, the Connecticut Development Authority issued $62 million of tax-exempt pollution control revenue bonds. Concurrent with that issuance, the proceeds of the bonds were loaned to the Company for the reimbursement of a portion of the Company's share of the previously incurred costs of financing, acquiring, constructing, and installing pollution control, sewage, and solid waste disposal facilities at Millstone 3. The bonds were issued with an initial variable interest rate of 3.7 percent per annum, which is reset on a weekly basis. The bonds will mature on May 1, 2031 and may bear, at the Company's discretion, a variable or fixed interest rate, which may not exceed 12 percent. The bonds were originally backed by a five-year letter of credit, which was secured by a second mortgage on the Company's interest in Millstone 1. On January 23, 1997, the letter of credit was replaced with an insurance facility and a standby bond purchase agreement. The second mortgage was replaced with the issuance of $62 million of First and Refunding Mortgage Bonds, 1996 Series B, bearing the same interest rate as the underlying bonds. On June 21, 1996, the Company entered into an operating lease agreement for the Company to acquire the use of four turbine generators having an installed cost of approximately $70 million. The initial lease term is for a five-year period. The lease agreement provides for five consecutive renewal options under which the Company may lease the turbines for five additional twelve-month terms. The rental payments are based on a 30-day floating interest rate plus 1 percent. The interest rate averaged 6.4 percent during 1996. Upon termination of the lease agreement, ownership of the turbines will remain with the lessor, unless the Company exercises its purchase option. During the first quarter of 1997, the Company determined that it would not be in compliance with financial coverage tests required under the lease agreement, based on projections of its 1997 financial results. The Company has requested waivers of this covenant from the lessor, and the matter is pending. If the Company is unable to negotiate satisfactory lease revisions, it expects to have sufficient liquidity to purchase the turbine generators from the lessor. The purchase price for the turbine generators would be slightly less than the installed cost of $70 million. -68- On June 25, 1996, the Company issued $160 million of First and Refunding Mortgage Bonds, 1996 Series A. The 1996 Series A Bonds bear interest at an annual rate of 7.875%, and will mature on June 1, 2001. The net proceeds from the issuance and sale of the 1996 Series A Bonds, plus funds from other sources, were used to repay approximately $193.3 million in principal amount of the Company's Series UU bonds, which matured April 1, 1997. On July 11, 1996, the Company entered into an agreement to sell up to $200 million of fractional undivided percentage interests in eligible accounts receivable with limited recourse. The agreement provides for a loss reserve pursuant to which additional customer receivables are allocated to the purchaser on an interim basis, to protect against bad debt. To the extent actual loss experience of the pool receivables exceeds the loss reserve, the purchaser absorbs the excess. For receivables sold, the Company has retained collection and servicing responsibilities as agent for the purchaser. In order to comply with new accounting requirements, effective January 1, 1997, the Company's receivables agreement is being restructured. On November 21, 1996, NU, the Company and WMECO entered into a new three-year Revolving Credit Agreement (the New Credit Agreement) with a group of banks. On May 30, 1997, the New Credit Agreement was amended to reflect (i) the provision by the Company of first mortgage bonds in the principal amount of $225,000,000 and by WMECO of first mortgage bonds in the principal amount of $90,000,000 as collateral for their respective obligations under the New Credit Agreement (ii) revised financial covenants consistent with NU's, the Company's and WMECO's financial forecasts, and (iii) an upfront payment to the lenders in order to maintain commitments under the New Credit Agreement. Following such amendment, the Company is able to borrow up to approximately $225,000,000 (which may increase to approximately $313,750,000 with the provision of additional first mortgage bonds as collateral in an amount which would bring the total Company collateral to $313,750,000) and WMECO will be able to borrow up to approximately $90,000,000 (which may increase to approximately $150,000,000 with the provision of additional first mortgage bonds as collateral in an amount which would bring total WMECO collateral to $150,000,000), subject to a total borrowing limit of $313,750,000 for all three borrowers. NU will be able to borrow up to $50,000,000 when each of the parties to the New Credit Agreement has maintained a consolidated operating income to consolidated interest expense ratio of at least 2.50 to 1 for two consecutive fiscal quarters. For information regarding issues related to financial covenants under the New Credit Agreement, see "--Financing Limitations" below. On April 17, 1997, the holders of approximately $38 million of notes issued by NU's real estate company (Rocky River Realty Company or RRR) notified RRR that it wished RRR to repurchase the notes. The notes are secured by real estate leases between RRR as lessor and Northeast Utilities Service Company (NUSCO) as lessee. The leases provide for the acceleration of rent equal to RRR's note obligations if RRR is unable to repay the obligation. On July 1, 1997, RRR received a commitment for the purchase of approximately $12 million of the notes and RRR intends to repurchase the remaining $26 million of notes on July 14, 1997. The Company may be billed by NUSCO for its proportionate share of the accelerated lease obligations when RRR repurchases the notes. The Company does not expect the resolution of this matter to have a material adverse impact on its -69- financial condition or liquidity. See the notes to the Company's Consolidated Financial Statements, Note 11G for further information. Total Company debt, including short term and capitalized lease obligations, was $2.4 billion as of March 31, 1997, compared with $2.19 billion as of December 31, 1996. For more information regarding Company financing, see the notes to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." In April, 1997, Moody's downgraded most of the securities ratings of the Company and WMECO because of the extended Millstone outages. In May, 1997, S&P downgraded the Company and WMECO securities as a result of the Connecticut legislature's failure to approve a utility restructuring bill during the recently completed legislative session. As a result, all Company securities are currently rated below investment grade by Moody's and S&P. These actions will adversely affect the availability and cost of funds for the Company. 1997 Financing Requirements The Company's aggregate capital requirements for 1997, exclusive of requirements under the Niantic Bay Fuel Trust (NBFT) are approximately as follows:
(Millions) Construction $148 Nuclear Fuel 5 Maturities 204 ---- Total $357
For further information on NBFT and the Company's financing of its nuclear fuel requirements, see "Leases" in the notes to the Company's Consolidated Financial Statements. For further information on the Company's 1997 and five-year financing requirements, see "Long-Term Debt" in the notes to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." For further information concerning the Company's financing of operations, see "--Overview of Nuclear and Related Financial Matters" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Financing Limitations The Company's charter and many of its borrowing facilities contain financial limitations (as discussed more fully below) that must be satisfied before borrowings can be made and for outstanding borrowings to remain outstanding. -70- The amount of short term borrowings that may be incurred by the Company is subject to periodic approval by the Commission under the Public Utility Holding Company Act of 1935 (the Holding Company Act). As of January 1, 1997, the Company's maximum authorized short term borrowing limit was $375 million. At December 31, 1996, the Company had no short-term borrowings outstanding. At March 31, 1997, the Company had short term borrowings of $200 million. The supplemental indentures under which NU issued $175 million in principal amount of 8.58 percent amortizing notes in December 1991 and $75 million in principal amount of 8.38 percent amortizing notes in March 1992 contain restrictions on dispositions of certain System companies' stock, limitations of liens on NU assets and restrictions on distributions on and acquisitions of NU stock. Under these provisions, neither NU nor the Company may dispose of voting stock of the Company other than to NU or another System company, except that the Company may sell voting stock for cash to third persons if so ordered by a regulatory agency so long as the amount sold is not more than 19 percent of the Company's voting stock after the sale. The Company's charter contains preferred stock provisions restricting the amount of unsecured debt the Company may incur. As of March 31, 1997, the Company's charter permits the Company to incur an additional $321 million of unsecured debt. In connection with NU's acquisition of PSNH, the DPUC imposed certain financial conditions intended to prevent NU from relying on the Company's resources if the PSNH acquisition strained NU's financial condition. The principal conditions provided for a DPUC review if the Company's common equity ratio falls to 36 percent or below, require NU to obtain DPUC approval to secure NU financings with the Company's stock or assets and obligate NU to use its best efforts to sell the Company's preferred or common stock to the public if NU cannot meet the Company's need for equity capital. If, at any time, the Company projects that its common equity ratio as of the end of the next fiscal quarter will be below 36% or plans to take any action that will result or can reasonably be expected to result in reducing the above ratio below 36% then the Company is required to notify the DPUC in writing at least 45 days before such action is taken or event is anticipated to occur. The DPUC may conduct a proceeding after its receipt of the Company's notice. At March 31, 1997, the Company's common equity ratio was 36.3 percent. The Company does not expect to meet this condition as of June 30, 1997 and has notified the DPUC in accordance with the foregoing requirement. While not directly restricting the amount of short term debt that the Company, WMECO, RRR, NNECO and NU may incur, the revolving credit agreements to which the Company, WMECO, HWP, RRR, NNECO and NU are parties provide that the lenders are not required to make additional loans, and that the maturity of indebtedness can be accelerated, if NU (on a consolidated basis) does not meet a common equity ratio test that requires, in effect, that NU's consolidated common equity (as defined) be not less than 30 percent for any three consecutive fiscal quarters. At March 31, 1997, NU's common equity ratio was 32.7 percent. -71- Additionally, under the New Credit Agreement, the Company is prohibited from incurring additional debt unless it is able to demonstrate, on a pro forma basis for the prior quarter and going forward, that its equity ratio will be at least 31 percent of its total capitalization through December 31, 1997 and 32 percent thereafter. At March 31, 1997, the Company's common equity ratio was 33.2 percent. Beginning in the fourth quarter of 1997, the Company must demonstrate that its ratio of operating income to interest expense will be at least 1.25 to 1 through December 31, 1997; 1.50 to 1 from January 1, 1998 through June 30, 1998; 2.00 to 1 from July 1, 1998 through September 30, 1998 and 2.50 to 1 thereafter. For the three month period ending March 31, 1997, the Company's interest coverage ratio (computed in accordance with the New Credit Agreement) was 2.06 to 1. The Indenture provides that additional bonds may not be issued, except for certain refunding purposes, unless earnings (as defined in the Indenture and before income taxes) are at least twice the pro forma annual interest charges on outstanding bonds and certain prior lien obligations and the bonds to be issued. The Company's 1996 earnings do not permit it to meet those earnings coverage tests, but as of May 31, 1997, after giving effect to the amendment of the Indenture to eliminate requirements for the sinking and improvement fund previously set forth therein, and after giving effect to the issue of the Old Bonds, the Company would be able to issue up to approximately $113 million of additional first mortgage bonds on the basis of previously issued but refunded bonds, without having to meet the earnings coverage test. The preferred stock provisions of the Company's charter also prohibit the issuance of additional preferred stock (except for refinancing purposes) unless income before interest charges (as defined and after income taxes and depreciation) is at least 1.5 times the pro forma annual interest charges on indebtedness and the annual dividend requirements on preferred stock that will be outstanding after the additional stock is issued. The Company is currently unable to issue additional preferred stock under these provisions. The supplemental indentures under which the Company's first mortgage bonds have been issued limit the amount of cash dividends and other distributions the Company can make to NU out of its retained earnings. As of March 31, 1997, the Company's retained earnings were $4.9 million below the required level for payment of dividends, and the Company is not expected to be able to declare any dividends under these provisions in 1997. Certain subsidiaries of NU, including the Company, have established a money pool (Money Pool), a system for the pooling of funds established by certain of the System Companies to provide a more effective use of their cash resources and to reduce outside short-term borrowings. NUSCO administers the Money Pool as agent for the participating companies. Short-term borrowing needs of the participating companies (except NU) are first met with available funds of other member companies, including funds borrowed by NU from third parties. NU may lend to, but not borrow from, the Money Pool. Investing and borrowing subsidiaries receive or pay interest based on the average daily Federal Funds rate, except that borrowings based on loans from NU bear interest at NU's cost. Funds may be withdrawn or repaid to the Money Pool at any time without prior notice. -72- Other Regulatory and Environmental Matters Environmental Regulation General The System and its subsidiaries are subject to federal, state and local regulations with respect to water quality, air quality, toxic substances, hazardous waste and other environmental matters. Similarly, the System's major generation and transmission facilities may not be constructed or significantly modified without a review by the applicable state agency of the environmental impact of the proposed construction or modification. Compliance with environmental laws and regulations, particularly air and water pollution control requirements, may limit operations or require substantial investments in new equipment at existing facilities. See "--Resource Plans" for a discussion of the System's construction plans. Surface Water Quality Requirements The Federal Clean Water Act (CWA) requires "point source" discharge of pollutants into navigable waters to obtain a National Pollutant Discharge Elimination System (NPDES) permit from the United States Environmental Protection Agency (EPA) or state environmental agency specifying the allowable quantity and characteristics of its effluent. System facilities have all required NPDES permits in effect. Compliance with NPDES and state water discharge permits has necessitated substantial expenditures and may require further expenditures because of additional requirements that could be imposed in the future. For information regarding ongoing criminal and civil investigations by the Office of the U.S. Attorney for the District of Connecticut and the Connecticut Attorney General related to allegations that there were some violations of certain facilities' NPDES permits, see "Legal Proceedings." In October 1995, the Connecticut Department of Environmental Protection (CDEP) issued a consent order to the Company and the Long Island Lighting Company (LILCO) requiring those companies to address leaks of dielectric fluids from the Long Island cable, which is jointly owned by the Company and LILCO. This cable enables the Company to interchange up to 300 MW of capacity with LILCO. In May 1996, the consent order was modified to address issues relating to a leak, which occurred in January 1996. The modified order requires the Company and LILCO to study and propose alternatives for the prevention, detection and mitigation of leaks from the cable and to evaluate the ecological effects of leaks on the environment. Alternatives to be studied include cable replacement and alternative dielectric fluids. These studies are ongoing. The System will incur additional costs to meet the requirements of the order and to meet any subsequent CDEP requirements that may result from these studies. These costs, as well as the long-term future and cost-effectiveness of the cable operation subsequent to any additional CDEP requirements, cannot be estimated at this time. The United States Attorney's Office in New Haven, Connecticut has commenced an investigation and issued subpoenas to the Company, NU, NUSCO, CONVEX and LILCO seeking -73- documents relating to operation and maintenance of the cable and the most recent leaks from the cable described above. The government has not revealed the scope of its investigation, so management cannot evaluate the likelihood of a criminal proceeding being initiated at this time. However, management is aware of nothing that would suggest that any System company, officer or employee has engaged in conduct that would warrant a criminal proceeding. For information regarding a lawsuit related to discharges from the cable, see "Legal Proceedings." The ultimate cost impact of the CWA and state water quality regulations on the Company cannot be estimated because of uncertainties such as the impact of changes to the effluent guidelines or water quality standards. Additional modifications, in some cases extensive and involving substantial cost, may ultimately be required for some or all of the Company's generating facilities. The Federal Oil Pollution Act of 1990 (OPA 90) sets out the requirements for facility response plans and periodic inspections of spill response equipment at facilities that can cause substantial harm to the environment by discharging oil or hazardous substances into the navigable waters of the United States and onto adjoining shorelines. The System companies, including the Company, are currently in compliance with the requirements of OPA 90. OPA 90 includes limits on the liability that may be imposed on persons deemed responsible for release of oil. The limits do not apply to oil spills caused by negligence or violation of laws or regulations. OPA 90 also does not preempt state laws regarding liability for oil spills. In general, the laws of the states in which the Company owns facilities and through which the Company transports oil could be interpreted to impose strict liability for the cost of remediating releases of oil and for damages caused by releases. The System currently carries general liability insurance in the total amount of $100 million per occurrence for oil spills. Air Quality Requirements The Clean Air Act Amendments of 1990 (CAAA) impose stringent requirements on emissions of sulfur dioxide (SO2) and nitrogen oxide (NOX) for the purpose of controlling acid rain and ground level ozone. In addition, the CAAA address the control of toxic air pollutants. Installation of continuous emissions monitors (CEMs) and expanded permitting provisions also are included. Existing and future federal and state air quality regulations, including recently proposed standards, could hinder or possibly preclude the construction of new, or the modification of existing, fossil units in the System's service area and could raise the capital and operating cost of existing units. The ultimate cost impact of these requirements on the System cannot be estimated because of uncertainties about how EPA and the states will implement various requirements of the CAAA. Nitrogen Oxide. Title I of the CAAA identifies NOX emissions as a -------------- precursor of ambient ozone. Connecticut, Massachusetts and New Hampshire, as well as other Northeastern states, currently exceed the ambient air quality standard for ozone. Pursuant to the CAAA, states exceeding the ozone standard must implement plans to address ozone nonattainment. All three -74- states have issued final regulations to implement Phase I reduction requirements and the System has met these requirements. Compliance with Phase I requirements has cost the System a total of approximately $41 million including $10 million for the Company. Compliance has been achieved using a combination of currently available technology, combustion efficiency improvements and emissions trading. Compliance costs for Phase II, effective in 1999, are expected to result in an additional cost of approximately $5 million for the Company. Sulfur Dioxide. The CAAA mandates reductions in SO2 emissions to -------------- control acid rain. These reductions are to occur in two phases. First, certain high SO2 emitting plants were required to reduce their emissions beginning in 1995. All Phase I units have been allocated SO2 allowances for the period 1995-1999. These allowances are freely tradable. One allowance entitles a source to emit one ton of SO2. No unit may emit more SO2 than the amount for which it has allowances. The only System units subject to the Phase I reduction requirements are PSNH's Merrimack Units 1 and 2. Newington Station in New Hampshire and Mt. Tom Station in Massachusetts are conditional Phase I units, which means that the System can decide to include these plants as Phase I units during any year and obtain allowances for that year. The System included these plants as Phase I units in 1996. On January 1, 2000, the start of Phase II, a nationwide cap of 8.9 million tons per year of utility SO2 emissions will be imposed and existing units will be granted allowances to emit SO2. Most of the System companies' allocated allowances will substantially exceed their expected SO2 emissions for 2000 and subsequent years, except for PSNH, which expects to purchase additional SO2 allowances. New Hampshire and Massachusetts have each instituted acid rain control laws that limit SO2 emissions. The System is meeting the new SO2 limitations by using natural gas and/or lower sulfur coal in its plants. Under the existing fuel adjustment clauses in Connecticut, New Hampshire and Massachusetts, the System should be able to recover the additional fuel costs of compliance with the CAAA and state laws from its customers. Management does not believe that the acid rain provisions of the CAAA will have a significant impact on the System's overall costs or rates due to the very strict limits on SO2 emissions already imposed by Connecticut, New Hampshire and Massachusetts. In addition, management believes that Title IV of the CAAA (acid rain) requirements for NOX limitations will not have a significant impact on System costs due to the more stringent NOX limitations resulting from Title I of the CAAA discussed above. EPA, Connecticut, New Hampshire and Massachusetts regulations also include other air quality standards, emission standards and monitoring and testing and reporting requirements that apply to the System's generating stations. They require new or modified fossil fuel-fired electric generating units to operate within stringent emission limits. The System could incur additional costs to meet these requirements, which costs cannot be estimated at this time. -75- Air Toxics. Title III of the CAAA directed EPA to study air toxics ---------- and mercury emissions from fossil fired steam electric generation units to determine if they should be regulated. EPA exempted these plants from the hazardous air pollutant program pending completion of the studies, expected in 1997 or 1998. Should EPA determine that such generating plants' emissions must be controlled to the same extent as emissions from other sources under Title III, the System, including the Company, could be required to make substantial capital expenditures to upgrade or replace pollution control equipment, but the amount of these expenditures cannot be readily estimated. Toxic Substances and Hazardous Waste Regulations PCBs. Under the federal Toxic Substances Control Act of 1976 (TSCA), ---- EPA has issued regulations that control the use and disposal of polychlorinated biphenyls (PCBs). PCBs had been widely used as insulating fluids in many electric utility transformers and capacitors before TSCA prohibited any further manufacture of such PCB equipment. System companies have taken numerous steps to comply with these regulations and have incurred increased costs for disposal of used fluids and equipment that are subject to the regulations. In general, the System sends fluids with concentrations of PCBs equal to or higher than 500 ppm to an unaffiliated company to dispose of using approved methods. Electrical capacitors that contain PCB fluid are sent off-site to dispose of through burning in high temperature incinerators approved by EPA. The System disposes of solid wastes containing PCBs in secure chemical waste landfills. Asbestos. Federal, Connecticut, New Hampshire and Massachusetts -------- asbestos regulations have required the System to expend significant sums in the past on removal of asbestos, including measures to protect the health of workers and the general public and to properly dispose of asbestos wastes. Asbestos removal costs for the System are not expected to be material in 1997. RCRA. Under the federal Resource Conservation and Recovery Act of ---- 1976, as amended (RCRA), the generation, transportation, treatment, storage and disposal of hazardous wastes are subject to EPA regulations. Connecticut, New Hampshire and Massachusetts have adopted state regulations that parallel RCRA regulations but in some cases are more stringent. The procedures by which System companies handle, store, treat and dispose of hazardous wastes are regularly revised, where necessary, to comply with these regulations. Hazardous Waste Liability. As many other industrial companies have ------------------------- done in the past, System companies disposed of residues from operations by depositing or burying such materials on-site or disposing of them at off- site landfills or facilities. Typical materials disposed of include coal gasification waste, fuel oils, gasoline and other hazardous materials that might contain PCBs. It has since been determined that deposited or buried wastes, under certain circumstances, could cause groundwater contamination or create other environmental risks. The System has recorded a liability for what it believes is, based upon currently available information, its estimated environmental remediation costs for waste disposal sites for which the System companies expect to bear legal liability, and continues to evaluate the environmental impact of its former disposal practices. Under -76- federal and state law, government agencies and private parties can attempt to impose liability on System companies for such past disposal. As of March 31, 1997, the liability recorded by the Company for its estimated environmental remediation costs for known sites needing remediation, including those sites described below, exclusive of recoveries from insurance or third parties, was approximately $7.6 million. These costs could be significantly higher if alternative remedies become necessary. Under the federal Comprehensive Environmental, Response, Compensation and Liability Act of 1980, as amended, commonly known as Superfund, EPA has the authority to cleanup or order cleanup of hazardous waste sites and to impose the cleanup costs on parties deemed responsible for the hazardous waste activities on the sites. Responsible parties include the current owner of a site, past owners of a site at the time of waste disposal, waste transporters and waste generators. It is EPA's position that all responsible parties are jointly and severally liable, so that any single responsible party can be required to pay the entire costs of cleaning up the site. As a practical matter, however, the costs of cleanup are usually allocated by agreement of the parties, or by the courts on an equitable basis among the parties deemed responsible, and several federal appellate court decisions have rejected EPA's position on strict joint and several liability. Superfund also contains provisions that require System companies to report releases of specified quantities of hazardous materials and require notification of known hazardous waste disposal sites. System companies are in compliance with these reporting and notification requirements. The System currently is involved in two Superfund sites in Connecticut, one in Kentucky, one in New Jersey and two in New Hampshire. The level of study of each site and the information about the waste contributed to the site by the System and other parties differs from site to site. Where reliable information is available that permits the System to make a reasonable estimate of the expected total costs of remedial action and/or the System's likely share of remediation costs for a particular site, those cost estimates are provided below. All cost estimates were made in accordance with generally accepted accounting principles where remediation costs were probable and reasonably estimable. Any estimated costs disclosed for cleaning up the sites discussed below were determined without consideration of possible recoveries from third parties, including insurance recoveries. Where the System has not accrued a liability, the costs either were not material or there was insufficient information to accurately assess the System's exposure. At two Connecticut sites, the Beacon Heights and Laurel Park landfills, the major parties formed coalitions and joined as defendants a number of other parties including "Northeast Utilities (Connecticut Light and Power)". Litigation on both sites was consolidated in a single case in the federal district court. In 1993, the coalitions' claims against a number of defendants including NU (CL&P) were dismissed. In 1994, the Beacon Heights Coalition indicated that they would not pursue NU (CL&P) as a defendant. As a result, the Company does not expect to incur cleanup costs for the Beacon Heights site. Meanwhile, the coalitions appealed the 1993 federal district court dismissal, which was overturned. A petition for rehearing was filed and it is unlikely the district court will take further action until the petition is resolved. In any event, the Company's liability at the Laurel Park site is expected to be minimal because of the non-hazardous nature and small volume of the materials that were sent there. -77- The System had sent a substantial volume of LLRW from Millstone 1, Millstone 2 and CY to the Maxey Flats nuclear waste disposal site in Fleming County, Kentucky. On April 18, 1996, the U.S. District Court for the Eastern District of Kentucky approved a consent decree between EPA and members of the Maxey Flats PRP Steering Committee, including System companies, and several federal government agencies, including DOE and the Department of Defense as well as the Commonwealth of Kentucky. The System has recorded a liability for future remediation costs for this site based on its share of ultimate remediation costs under the tentative agreement. The System's liability at the site has been assessed at slightly over $1 million. The Company, as successor to The Hartford Electric Light Company (HELCO), has been named as one of over 100 defendants in a cost recovery action filed in the federal district court in New Jersey. Plaintiffs have not disclosed the amount of the recovery they are seeking and, due to the nature of HELCO's limited dealings with the plaintiffs, the Company believes its liability is minimal. As discussed below, in addition to the remediation efforts for the above-mentioned Superfund sites, the System has been named as a PRP and is monitoring developments in connection with several state environmental actions. In 1987, CDEP published a list of 567 hazardous waste disposal sites in Connecticut. The Company owns two sites on this list. The Company has spent approximately $2.7 million, as of December 31, 1996, completing investigations and limited remediation at these sites. Both sites were formerly used by CL&P predecessor companies for the manufacture of coal gas (also known as town gas sites) from the late 1800s to the 1950s. This process resulted in the production of coal tar and creosote residues and other byproducts, which, when not sold for other industrial or commercial uses, were frequently deposited on or near the production facilities. Site investigations have been completed at these sites and discussions with state regulators are in progress to address the need and extent of remediation necessary to protect public health and the environment. One of the sites is a 25.8-acre site located in the south end of Stamford, Connecticut. Site investigations have located coal tar deposits covering approximately 5.5 acres and having a volume of approximately 45,000 cubic yards. A final risk assessment report for the site was completed in January 1994. The System is currently considering redevelopment of the site in cooperation with the local municipality as part of the State of Connecticut's Urban Sites Program. Several remedial options have been evaluated to remediate the site, if necessary to accommodate redevelopment. The estimated cost of remediation and institutional controls ranges from $5 to $8 million. The second site is a 3.5-acre former coal gasification facility that currently serves as an active substation in Rockville, Connecticut. Site investigations have located creosote and other polyaromatic hydrocarbon contaminants. The Company has provided to the CDEP and local officials the Company's plan to determine whether any remediation of the site will be necessary or advisable. -78- As part of the 1989 divestiture of the Company's gas business, site investigations were performed for properties that were transferred to Yankee Gas Services Company (Yankee Gas). The Company agreed to accept liability for any required cleanup for the three sites it retained. These three sites include Stamford and Rockville (discussed above) and Torrington, Connecticut. At the Torrington site, investigations have been completed and the cost of any remediation, if necessary, is not expected to be material. The Company and Yankee Gas also share a site in Winsted, Connecticut and any liability for required cleanup there. The Company and Yankee Gas will share the costs of cleanup of sites formerly used in the Company's gas business but not currently owned by either of them. In the past, the System has received other claims from government agencies and third parties for the cost of remediating sites not currently owned by the System but affected by past System disposal activities and may receive more such claims in the future. The System expects that the costs of resolving claims for remediating sites about which it has been notified will not be material, but cannot estimate the costs with respect to sites about which it has not been notified. Electric and Magnetic Fields In recent years, published reports have discussed the possibility of adverse health effects from electric and magnetic fields (EMF) associated with electric transmission and distribution facilities and appliances and wiring in buildings and homes. Most researchers, as well as numerous scientific review panels considering all significant EMF epidemiological and laboratory research to date, agree that current information remains inconclusive, inconsistent and insufficient for risk assessment of EMF exposures. Most recently, a review issued in October 1996 by the U.S. National Academy of Sciences concluded "that the current body of evidence does not show that exposure to these fields presents a human-health hazard." Based on this information management does not believe that a causal relationship between EMF exposure and adverse health effects has been established or that significant capital expenditures are appropriate to minimize unsubstantiated risks. The System is closely monitoring research and government policy developments. The System supports further research into the subject and is voluntarily participating in the funding of the ongoing National EMF Research and Public Information Dissemination Program. If further investigation were to demonstrate that the present electricity delivery system is contributing to increased risk of cancer or other health problems, the industry could be faced with the difficult problem of delivering reliable electric service in a cost-effective manner while managing EMF exposures. In addition, if the courts were to conclude that individuals have been harmed and that utilities are liable for damages, the potential monetary exposure for all utilities, including the System companies, could be enormous. Without definitive scientific evidence of a causal relationship between EMF and health effects, and without reliable information about the kinds of changes in utilities' transmission and distribution systems that might be needed to address the problem, if one is found, no estimates of the cost impacts of remedial actions and liability awards are available. -79- The Connecticut Interagency EMF Task Force (Task Force) last provided a report to the state legislature in January 1995. The Task Force advocated a policy of "voluntary exposure control," which involves providing people with information to enable them to make individual decisions about EMF exposure. Neither the Task Force, nor any Connecticut state agency, has recommended changes to the existing electrical supply system. The Task Force is required to provide another report to the legislature by 1998. The Connecticut Siting Council (Siting Council) previously adopted a set of EMF "Best Management Practices," which are now considered in the justification, siting and design of new or modified transmission lines and substations. In 1996, the Siting Council concluded a generic proceeding in which it conducted a comparative life-cycle cost analysis of overhead and underground transmission lines, pursuant to a law that was adopted in 1994 in part due to public EMF concerns. This proceeding is expected to be referenced in future comparisons of overhead and underground alternatives to proposed transmission line projects. EMF has become increasingly important as a factor in facility siting decisions in many states, and local EMF concerns occasionally make the news when utilities propose new or changed facilities. In prior years, various bills involving EMF were introduced in the Massachusetts and Connecticut legislatures with no action taken. No such bills were introduced in either state in 1996. The Company has been the focus of media reports since 1990 charging that EMF associated with a substation and related distribution lines in Guilford, Connecticut are linked with various cancers and other illnesses in several nearby residents. See "Legal Proceedings" for information about two suits brought by plaintiffs who now or formerly lived near that substation. FERC Hydro Project Licensing Federal Power Act licenses may be issued for hydroelectric projects for terms of 30 to 50 years as determined by FERC. Upon the expiration of a license, any hydroelectric project so licensed is subject to reissuance by FERC to the existing licensee or to others upon payment to the licensee of the lesser of fair value or the net investment in the project plus severance damages less certain amounts earned by the licensee in excess of a reasonable rate of return. The System companies hold FERC licenses for 19 hydroelectric projects aggregating approximately 1,375 MW of capacity, located in Connecticut, Massachusetts and New Hampshire. The Company's FERC licenses for operation of the Falls Village and Housatonic Hydro Projects expire in 2001. The relicensing process was initiated in August of 1996 with the issuance of a Notice of Intent (NOI) to the FERC indicating the intention of the Company to relicense both projects. An Initial Consultation Document (ICD) was issued to consulting agencies in September 1996 and two public meetings were held in early November 1996 to discuss relicensing issues. The Company is awaiting the submittal of resource agency comments. FERC has issued a notice indicating that it has authority to order project licensees to decommission projects that are no longer economic to operate. FERC has not required any such project decommissioning to date. The potential costs of decommissioning a project, however, could -80- be substantial. It is likely that this FERC decision will be appealed if, and when, they attempt to exercise this authority. EMPLOYEES As of December 31, 1996, the System companies had 8,842 full and part- time employees on their payrolls, of which 2,194 were employed by the Company, 1,279 by PSNH, 497 by WMECO, 92 by HWP, 1,274 by NNECO, 2,692 by NUSCO and 814 by NAESCO. NU, NAEC, Charter Oak, Mode 1 and Select Energy Inc. have no employees. In 1995 and early 1996, the System implemented a program to reduce the nuclear organization's total workforce by approximately 220 employees, which included both early retirements and involuntary terminations. The pretax cost of the program was approximately $8.7 million. For information regarding the criminal investigations by the NRC's Office of Investigation and the Office of the U.S. Attorney for the District of Connecticut related to this workforce reduction, see "Legal Proceedings." In December 1996, the System announced a voluntary separation program affecting approximately 1,100 employees. The separations will be effected between April 1, 1997 and March 1, 1998. The estimated cost of the program is approximately $7 million. Approximately 2,200 employees of the Company, PSNH, WMECO, NAESCO and HWP are covered by 11 union agreements, which expire between October 1, 1997 and May 31, 1999. PROPERTIES The Company's principal plants and other properties are located either on land which is owned in fee or on land, as to which the Company owns perpetual occupancy rights adequate to exclude all parties except possibly state and federal governments, which has been reclaimed and filled pursuant to permits issued by the United States Army Corps of Engineers. In addition, the Company has certain substation equipment, data processing equipment, nuclear fuel, gas turbines, nuclear control room simulators, vehicles, and office space that are leased. With few exceptions, the Company's lines are located on or under streets or highways, or on properties either owned or leased, or in which the Company has appropriate rights, easements, or permits from the owners. Substantially all of the Company's properties are subject to the lien of the Indenture, subject to the exceptions described herein. See "Description of the New Bonds--Security." In addition, the Company's interest in Millstone 1 is subject to second liens for the benefit of lenders under agreements related to pollution control revenue bonds. Various of these properties are also subject to minor encumbrances which do not substantially impair the usefulness of the properties to the Company. The Company believes its properties to be well maintained and in good operating condition. -81- Transmission and Distribution System At December 31, 1996, the System companies owned 103 transmission and 416 distribution substations that had an aggregate transformer capacity of 25,200,069 kilovolt amperes (kVa) and 9,127,367 kVa, respectively, 3,057 circuit miles of overhead transmission lines ranging from 69 kilovolt (kV) to 345 kV, and 192 cable miles of underground transmission lines ranging from 69 kV to 138 kV; 32,649 pole miles of overhead and 1,958 conduit bank miles of underground distribution lines; and 398,452 line transformers in service with an aggregate capacity of 16,472,221 kVa. Electric Generating Plants As of March 31, 1997, the electric generating plants, including leased property, of the Company and the Company's entitlements in the generating plants of the two operating Yankee regional nuclear generating companies were as follows:
Claimed Year Capability* Plant Name (Location) Type Installed (kilowatts) - --------------------- ---- --------- ----------- Millstone (Waterford, CT) Unit 1 Nuclear 1970 524,637 Unit 2 Nuclear 1975 708,345 Unit 3 Nuclear 1986 606,453 Seabrook (Seabrook, NH) Nuclear 1990 47,175 MY (Wiscasset, ME) Nuclear 1972 94,725 VY (Vernon, VT) Nuclear 1972 45,353 --------- Total Nuclear-Steam Plants (6 Units) 2,026,688 Total Fossil-Steam Plants (10 Units) 1954-73 1,869,370 Total Hydro-Conventional (25 Units) 1903-55 98,970 Total Hydro-Pumped Storage (7 Units) 1928-73 905,150 Total Internal Combustion (21 Units) 1966-96 601,510 --------- Total CL&P Generating Plant (69 Units) 5,501,688 =========
* Claimed capability represents winter ratings as of March 31, 1997 Franchises For more information regarding recent regulatory and legislative decisions and initiatives that may affect the terms under which the Company provides electric service in its franchised territory, see "--Rates-- Electric Industry Restructuring in Connecticut," and "Legal Proceedings." Subject to the power of alteration, amendment or repeal by the General Assembly of Connecticut and subject to certain approvals, permits and consents of public authority and others -82- prescribed by statute, the Company has, subject to certain exceptions not deemed material, valid franchises free from burdensome restrictions to sell electricity in the respective areas in which it is now supplying such service. In addition to the right to sell electricity as set forth above, the franchises of the Company include, among others, rights and powers to manufacture, generate, purchase, transmit and distribute electricity, to sell electricity at wholesale to other utility companies and municipalities and to erect and maintain certain facilities on public highways and grounds, all subject to such consents and approvals of public authority and others as may be required by law. The franchises of the Company include the power of eminent domain. LEGAL PROCEEDINGS Litigation Relating to Electric and Magnetic Fields NU and the Company are currently involved in two lawsuits alleging physical and emotional damages from exposure to "electromagnetic radiation" generated by the defendants. Management believes that the allegations that EMF caused or contributed to the plaintiffs' illnesses are not supported by scientific evidence. One of these cases has been resolved in NU and the Company's favor at the trial level, but it has been appealed and is now pending at the Connecticut Supreme Court. Southeastern Connecticut Regional Resources Recovery Authority (SCRRRA)-- Application of the Municipal Rate This matter involves three separate disputes over the rates that apply to the Company's purchases of the generation of the SCRRRA project in Preston, Connecticut. A favorable ruling on all of these matters could result in savings to Company customers of approximately $20 million over the terms of the agreement with the SCRRRA. FERC has ruled in the Company's favor in one of these matters, but this decision has been appealed to the United States D.C. Circuit Court of Appeals. A final ruling in this decision in favor of the Company would also resolve the second dispute. A Connecticut Superior Court, however, has ruled in favor of the SCRRRA in the final dispute. The Company appealed this decision to the Connecticut Appellate Court, and the Connecticut Supreme Court has transferred the appeal to itself. Connecticut DPUC-CL&P's Petition for Declaratory Ruling Regarding Proposed Retail Sales of Electricity by Texas--Ohio Power, Inc. (TOP) On August 3, 1995, the Company filed a petition for declaratory rulings with the DPUC to determine whether TOP, which built a small cogeneration plant in Manchester, Connecticut, can sell electricity from the facility to two Company retail customers in Manchester. On December 6, 1995, the DPUC ruled that, because TOP's project would not use the public streets, it did not require specific legislative authorization to make retail sales of electricity. In February 1997, the Hartford -83- Superior Court upheld the DPUC's decision. The Company has appealed the decision to the Connecticut Appellate Court. Tax Litigation In 1991, the Town of Haddam performed a town-wide revaluation of the CYAPC property in that town. Based on the report of the engineering firm hired by the town to perform the revaluation, Haddam determined that the full fair-market value of the property, as of October 1, 1991, was $840 million. At that time, CY's net-book value was $245 million. On September 5, 1996, a Connecticut court ruled that Haddam had over-assessed CY at three and a half times its proper assessment. The decision set the plant's fair market value at $235 million. CYAPC estimated that the town owed it approximately $16.2 million in refunds, including accrued interest, for taxes that were overpaid from July 31, 1992 through July 31, 1996. On May 9, 1997, Haddam and CYAPC reached an agreement regarding the repayment of property taxes due CYAPC for the tax years beginning October 1, 1991 through October 1, 1995. Haddam has agreed to repay to CYAPC an amount totaling $13,990,000 which is inclusive of taxes and interest for those years. As part of this negotiated settlement, Haddam has paid CYAPC $2,000,000 and may bond all or part of the remaining $11,990,000. Long Island Cable--Citizen's Suit On April 4, 1996, a citizen's suit against Long Island Lighting Company (LILCO), a non-affiliate of NU, the Company (collectively, the Companies) and NUSCO was filed in Federal District Court in Connecticut. The suit alleges the Companies are in violation of the Federal Clean Water Act because they are maintaining an unpermitted discharge of pollutants from the Long Island Cable and claims the pollutants are an imminent danger to the environment and public health. The suit asks the Court, among other things, to enjoin further operation of the Long Island Cable without a permit and to impose a civil penalty of $25,000 for each violation. On April 23, 1997, the Company, NUSCO, LILCO and the Long Island Soundkeeper Fund, Inc. jointly filed a Stipulation of Dismissal in Federal District Court, which settled this suit. The settlement will not impose material costs on the Company or any other System companies. Connecticut Municipal Electric Energy Cooperative (CMEEC) Dispute This matter involves a dispute with CMEEC over its obligations under its Millstone Units 1 & 2 contract with the Company, under which CMEEC has a 3.49 percent life-of-unit interest in each of the units. CMEEC and the Company have been negotiating since May 1996 over issues related to Millstone Units 1 & 2 and have taken preliminary steps to prepare for arbitration of the matter. Since October 1996, CMEEC has failed to make payment on its obligations of approximately $1.6 million per month, claiming that the Company materially breached its contractual obligations, and requesting arbitration of the issues. The Company has denied the allegations and filed a petition on July 1, 1997 requesting the Connecticut Superior Court to order CMEEC to pay its outstanding obligations (about $13.3 million) and make continuing payments while the arbitration action is proceeding. -84- Millstone 3--Potential Joint Owner Litigation This matter involves claims that the non-NU owners of Millstone 3 could potentially bring against the System companies for the costs associated with the current extended outage of this facility. The non-NU owners of Millstone 3 have been paying their monthly shares of the cost of that unit since it went out of service in March 1996, but have reserved their rights to contest whether the NU System companies have any responsibility for the additional costs the non-NU owners have borne as a result of the extended outage. No formal claims have been made, but it is possible that some or all of the non-NU owners will assert liability on the part of the System companies. The Company and WMECO, through NNECO as agent, operate Millstone 3 at cost, and without profit, under a Sharing Agreement that obligates them to utilize good utility operating practices and requires the joint owners to share the risk of employee negligence and other risks pro-rata in accordance with their ownership shares. The Sharing Agreement also provides that the Company and WMECO would only be liable for damages to the non-NU owners for a deliberate breach of the agreement pursuant to authorized corporate action. The non-NU owners have retained a team of technical and regulatory experts to review and monitor activities at Millstone 3. As representatives of Millstone 3 joint owners, NU is cooperating fully with the team. NRC--Section 2.206 Petitions Spent Fuel Pool Off-Load Practices 2.206 Petition: In August 1995, a petition was filed with the NRC under Section 2.206 of the NRC's regulations by the organization We the People and a NUSCO employee. The petitioners maintained that NU's historic practice of off-loading the full reactor core at Millstone 1 resulted in spent fuel pool heat loads in excess of the pool's NRC-approved cooling capability, and asserted that the practice was a knowing and willful violation of NRC requirements. The petitioners also filed a supplemental petition concerning refueling practices at Millstone 2 and 3 and Seabrook Station. On December 26, 1996, the Acting Director of the Office of Nuclear Reactor Regulation issued a partial decision granting, in part, the petition. The decision, which is limited to the NRC staff's technical review of the issues raised by petitioners, concluded that the design of the spent fuel pool and related system at Millstone 1 was adequate, and that the full core off-load practices at that unit, Millstone 3 and Seabrook were safe. The petitioners' assertions regarding Millstone 2 were not substantiated. The Director further concluded that the regulatory actions taken by the NRC to date regarding the three Millstone units, including the imposition of an Independent Corrective Action Verification Program prior to restart, were broader than the actions requested by petitioners and thus constituted a partial grant of petitioners' request. Issues of wrongdoing raised in the petition remain under consideration by the NRC staff, and will not be addressed until after the U.S. Attorney has concluded its investigation of the spent fuel pool issues and decided whether to commence criminal proceedings. See "--NRC Office of Investigations and U.S. Attorney Investigations and Related Matters" below. -85- In March 1997, a Section 2.206 petition was filed with the NRC seeking enforcement action and the placement of certain restrictions on the decommissioning activities at the CY nuclear power plant. Specifically, the petitioners requested that the NRC issue a civil monetary penalty to assure compliance with radiation protection requirements, and that CY's license be modified to prohibit any decommissioning activities for a six month period following any radiological contamination event. In addition, petitioners requested that CY be placed on the NRC's "watch list." Management is currently evaluating whether and how to respond to this petition. Other 2.206 Petitions: Two petitions under Section 2.206 have been filed with the NRC requesting various actions be taken with respect to the operating licenses for Millstone Units 1, 2 and 3 and CY, including revocation and suspension, and other enforcement action due to alleged mismanagement of the units and violations of NRC regulations that petitioners allege have jeopardized public health and safety. While management believes that the NRC is already addressing a number of the issues raised in these petitions, it cannot predict the ultimate outcome of these petitions. NRC Office of Investigations and U.S. Attorney Investigations and Related Matters The NRC's Office of Investigations (OI) has been examining various matters at Millstone and CY, including but not limited to procedural and technical compliance matters and employee concerns. One of these matters has been referred, and others may be referred, to the Office of the U.S. Attorney for the District of Connecticut (U.S. Attorney) for possible criminal prosecution. The referred matter concerns full core off-load procedures and related matters at Millstone (see "--NRC--Section 2.206 Petitions"). The U.S. Attorney is also reviewing possible criminal violations arising out of certain of NNECO's other activities at Millstone and CY, including the 1996 nuclear workforce reduction and its licensed operator training programs. The U.S. Attorney, together with the U.S. EPA and the Connecticut Attorney General, is also investigating possible criminal violations of federal environmental laws at certain NU facilities, including Millstone. NU has been informed by the government that it is a target of the investigation, but that no one in senior management is either a target or a subject of the investigation. Management does not believe that any System company or officer has engaged in conduct that would warrant a federal criminal prosecution. NU intends to fully cooperate with the OI and the U.S. Attorney in their ongoing investigations. Connecticut DEP The Connecticut Department of Environmental Protection (DEP) has referred to the Connecticut Attorney General a series of alleged environmental violations at Millstone for a possible civil penalty action. Management does not believe that this action will have a material adverse impact on the System. -86- Other Legal Proceedings The following sections of this Prospectus discuss additional legal proceedings: see "Business--Overview of Nuclear Matters and Related Financial Matters" for information regarding NRC watch list issues; "Business--Rates" for information about the Company's rate and fuel clause adjustment clause proceedings, various state restructuring proceedings and civil lawsuits related thereto; "Business--Electric Operations-- Transmission Access and FERC Regulatory Changes" for information about proceedings relating to power and transmission issues; "Business--Electric Operations--Nuclear Generation" and "Business--Electric Operations--Nuclear Plant Performance and Regulatory Oversight" for information related to nuclear plant performance, nuclear fuel enrichment pricing, high-level and low-level radioactive waste disposal, decommissioning matters and NRC regulation; and "Business--Other Regulatory and Environmental Matters" for information about proceedings involving surface water and air quality, toxic substances and hazardous waste, electric and magnetic fields, licensing of hydroelectric projects, and other matters. -87- MANAGEMENT AND COMPENSATION Executive Officers and Directors The following table sets forth certain information concerning the executive officers and directors of the Company as of the date of this Prospectus.
First Elected First Elected Name Positions Held an Officer a Director - -------------------- --------------- ---------- ---------- Robert G. Abair D - 01/01/89 John H. Forsgren EVP, CFO, D 02/01/96 06/10/96 Bernard M. Fox CH, D 05/15/81 05/01/83 William T. Frain, Jr. D - 02/01/94 Cheryl W. Grise SVP, CAO, D 06/01/91 01/01/94 Barry Ilberman VP 02/01/89 - John B. Keane VP, TR, D 08/01/92 08/01/92 Bruce D. Kenyon P, D 09/03/96 09/03/96 Francis L. Kinney SVP 04/24/74 - Hugh C. MacKenzie P, D 07/01/88 06/06/90 John J. Roman VP, CONT 04/01/92 - Robert P. Wax SVP, SEC, GC 08/01/92 - Key: - --- AC - Assistant Clerk CAO - Chief Administrative Officer EVP - Executive Vice President CEO - Chief Executive Officer GC - General Counsel CFO - Chief Financial Officer P - President CH - Chairman SEC - Secretary CONT - Controller SVP - Senior Vice President D - Director TR - Treasurer VP - Vice President Name Age Business Experience During Past 5 Years - ------------------- --- --------------------------------------- Robert G. Abair (1) 58 Elected Vice President and Chief Administrative Officer of WMECO in 1988. John H. Forsgren (2) 50 Elected Executive Vice President and Chief Financial Officer of NU, CL&P, PSNH, WMECO and NAEC February, 1996; previously Managing Director of Chase Manhattan Bank since 1995; and Senior Vice President-Chief Financial Officer of Euro Disney, The Walt Disney Company.
-88- Bernard M. Fox (3) 54 Elected Chairman of the Board, President and Chief Executive Officer of NU, Chairman of CL&P, PSNH, WMECO and NAEC, and Chief Executive Officer of PSNH and NAEC in 1995; previously Vice Chairman of CL&P and WMECO, and Vice Chairman and Chief Executive Officer of NAEC since 1994; Chief Executive Officer of NU, CL&P, PSNH, WMECO and NAEC in 1993; President and Chief Operating Officer of NU, CL&P and WMECO in 1990 and NAEC since 1991; Vice Chairman of PSNH since 1992. William T. Frain, Jr.(4) 55 Elected President and Chief Operating Officer of PSNH in 1994; previously Senior Vice President of PSNH since 1992. Cheryl W. Grise 44 Elected Senior Vice President and Chief Administrative Officer of CL&P, PSNH and NAEC, and Senior Vice President of WMECO in 1995; previously Senior Vice President-Human Resources and Administrative Services of CL&P, WMECO and NAEC since 1994; Vice President-Human Resources of NAEC since 1992. Barry Ilberman (5) 47 Elected Vice President-Corporate and Environmental Affairs of CL&P, PSNH, WMECO and NAEC in 1994; previously Vice President-Corporate Planning of CL&P, WMECO since 1992. John B. Keane (6) 50 Elected Vice President and Treasurer of NU, CL&P, PSNH, WMECO and NAEC in 1993; previously Vice President, Secretary and General Counsel-Corporate of NU, CL&P and WMECO since 1992; Vice President, Assistant Secretary and General Counsel-Corporate of PSNH and NAEC, Vice President, Secretary and General Counsel-Corporate of NU and CL&P, and Vice President, Secretary, Assistant Clerk and General Counsel-Corporate of WMECO since 1992. Bruce D. Kenyon (7) 54 President and Chief Executive Officer of NAEC and President-Nuclear Group of CL&P, PSNH and WMECO since 1996; previously President and Chief
-89- Operating Officer of South Carolina Electric and Gas Company from 1990. Francis L. Kinney (8) 64 Elected Senior Vice President-Governmental Affairs of CL&P, WMECO and NAEC in 1994; previously Vice President-Public Affairs of NAEC since 1992. Hugh C. MacKenzie (9) 55 Elected President-Retail Business Group of NU February, 1996 and President of CL&P and WMECO in 1994; previously Senior Vice President-Customer Service Operations of CL&P and WMECO since 1990. John J. Roman 43 Elected Vice President and Controller of NU, CL&P, PSNH, WMECO and NAEC in 1995; previously Assistant Controller of CL&P, PSNH, WMECO and NAEC since 1992. Robert P. Wax 48 Elected Senior Vice President, Secretary and General Counsel of NU, CL&P, PSNH, NAEC and WMECO in 1997. Previously elected Vice President, Secretary and General Counsel of PSNH and NAEC in 1994; elected Vice President, Secretary and General Counsel of NU and CL&P and Vice President, Secretary, Assistant Clerk and General Counsel of WMECO in 1993; previously Vice President, Assistant Secretary and General Counsel of PSNH and NAEC since 1993; previously Vice President and General Counsel-Regulatory of NU, CL&P, PSNH, WMECO and NAEC since 1992.
(1) Member-Advisory Committee, Bank of Boston Springfield/Pioneer Valley. (2) Director of Connecticut Yankee Atomic Power Company. (3) Director of The Institute of Living, the Institute of Nuclear Power Operations, the Connecticut Business and Industry Association, Fleet Financial Group, Inc., CIGNA Corporation, Connecticut Yankee Atomic Power Company, Edison Electric Institute, Hartford Hospital, The Dexter Corporation, a Trustee of Mount Holyoke College and The Hartford Courant Foundation and a Fellow and Founder of the American Leadership Forum. (4) Director of the Business and Industry Association of New Hampshire, the Greater Manchester Chamber of Commerce; Trustee of Optima Health, Inc. and Saint Anselm College. (5) Director of Connecticut Yankee Atomic Power Company. (6) Director of Maine Yankee Atomic Power Company, Vermont Yankee Nuclear Power Corporation, Yankee Atomic Electric Company and Connecticut Yankee Atomic Power Company, Member-Advisory Committee, Fleet Bank Connecticut. -90- (7) Trustee of Columbia College and Director of Connecticut Yankee Atomic Power Company. (8) Director of Mid-Conn Bank. (9) Director of Connecticut Yankee Atomic Power Company. There are no family relationships between any director or executive officer and any other director or executive officer of NU, the Company, PSNH, WMECO or NAEC. -91- Executive Compensation and Employment Agreements The Company does not directly compensate any executive officer. The following table presents the cash and non-cash compensation received by the CEO and the next four highest paid executive officers of the System (and indicates the position held by such officer in the Company), and by a retired executive officer who would have been among the five highest paid executive officers but for his retirement, in accordance with rules of the Securities and Exchange Commission (Commission):
Annual Compensation Long Term Compensation Awards Options/ Payouts Re- Stock Long Term All Other stricted Appreci- Incentive Other Annual Stock ation Program Compen- Name and Salary Compensa- Awards Rights Payouts sation($) Principal Position Year ($) Bonus($) tion($) ($) (#) ($) (1) ------------------------------------------------------------------------------------------------------------------------------ Bernard M. Fox 1996 551,300 None None None None 65,420 7,500 Chairman 1995 551,300 246,168 None None None 130,165 7,350 (Note 2) 1994 544,459 308,896 None None None 115,771 4,500 Bruce D. Kenyon 1996 144,231 400,000 None 499,762 None None None President-Nuclear (Note 3) Group (Note 2) 1995 None None None None None None None 1994 None None None None None None None John H. Forsgren 1996 305,577 None 62,390 80,380 None None None Executive Vice President (Note 4) (Note 4) and Chief Financial 1995 None None None None None None None Officer (Note 2) 1994 None None None None None None None Hugh C. MacKenzie 1996 264,904 None None None None 19,834 7,500 President-Retail 1995 247,665 128,841 None None None 46,789 7,350 Business Group 1994 245,832 113,416 None None None 40,449 4,500 (Note 2)
-92- Ted C. Feigenbaum 1996 248,858 (Note 5) None None None 14,770 7,222 (Note 2) 1995 185,300 126,002 None None None None 5,553 1994 183,331 47,739 None None None None 4,500 Robert E. Busch 1996 300,385 None None None None 26,747 2,637,500 Formerly President- (Note 6) Energy-Resources Group 1995 350,000 147,708 None None None 63,100 7,350 of NU, CL&P, WMECO 1994 346,122 173,366 None None None 44,073 4,500 and PSNH and formerly President of NAEC (Note 6)
Notes: 1. "All Other Compensation" consists of employer matching contributions under the Northeast Utilities Service Company 401(k) Plan, generally available to all eligible employees. It also includes, in the case of Mr. Busch, certain payments made to him pursuant to the terms of his separation agreement with Northeast Utilities Service Company (see Note 6). 2. See "Management and Compensation" for information on the directorships and officer positions held by each active individual named in the summary compensation table with each of the registrants. 3. The restricted stock will vest when Millstone Station is removed from the NRC's "watch list," provided that this occurs within three years of Mr. Kenyon's commencement of employment and the SRLP and INPO ratings of Seabrook Station have not materially changed from their 1996 levels. Dividends accruing on these shares are reinvested in additional shares subject to the same restrictions. At the end of 1996, Mr. Kenyon owned 39,585 restricted shares with a market value of $519,555, plus a $9,896 dividend that was reinvested into an additional 740 restricted shares on January 2, 1997. 4. The "other annual compensation" consists of tax payments on a restricted stock award. The restricted stock will vest on January 1, 1999. Dividends accruing on these shares are reinvested in additional shares subject to the same restrictions. At the end of 1996, Mr. Forsgren owned 5,305 restricted shares with a market value of $69,621, plus a $1,326 dividend that was reinvested into an additional 99 restricted shares on January 2, 1997. 5. Awards under the 1996 short term incentive program of the Northeast Utilities Executive Incentive Plan have not yet been made. Based on preliminary estimates of corporate performance, no short term awards will be made. 6. Mr. Busch left the Company during 1996. Pursuant to his separation agreement with Northeast Utilities Service Company, Mr. Busch received cash payments of $880,000 during 1996 and $220,000 during 1997, a supplemental retirement benefit with a present value of $1,400,000, continued medical coverage for himself and his family with a present value of $100,000 and career planning with a value of $30,000. See "Employment Contracts and Termination of Employment Arrangements," below. -93- Pension Benefits The following table shows the estimated annual retirement benefits payable to an executive officer of the registrant upon retirement, assuming that retirement occurs at age 65 and that the officer is at that time not only eligible for a pension benefit under the Northeast Utilities Service Company Retirement Plan (the Retirement Plan) but also eligible for the make-whole benefit and the target benefit under the Supplemental Executive Retirement Plan for Officers of Northeast Utilities System Companies (the Supplemental Plan). The Supplemental Plan is a non-qualified pension plan providing supplemental retirement income to system officers. The make- whole benefit under the Supplemental Plan, available to all officers, makes up for benefits lost through application of certain tax code limitations on the benefits that may be provided under the Retirement Plan, and includes as "compensation" awards under the Executive Incentive Compensation Program and the Executive Incentive Plan and deferred compensation (as earned). The target benefit further supplements these benefits and is available to officers at the Senior Vice President level and higher who are selected by the Board of Trustees of Northeast Utilities to participate in the target benefit and who remain in the employ of Northeast Utilities companies until at least age 60 (unless the Board of Trustees sets an earlier age). Each of the executive officers of Northeast Utilities named in the Summary Compensation Table is currently eligible for a target benefit, except Mr. Kenyon, whose Employment Agreement provides a specially calculated retirement benefit, based on his previous arrangement with South Carolina Electric and Gas. If Mr. Kenyon retires with at least three but less than five years of service with NU, he will be deemed to have five years of service. In addition, if Mr. Kenyon retires with at least three years of service with NU, he will receive a lump sum payment of $500,000. The benefits presented below are based on a straight life annuity beginning at age 65 and do not take into account any reduction for joint and survivorship annuity payments. Annual Target Benefit
Final Average Compensation Years of Credited Service ------------ ------------------------- 15 20 25 30 35 -- -- -- -- -- $200,000 $ 72,000 $ 96,000 $120,000 $120,000 $120,000 250,000 90,000 120,000 150,000 150,000 150,000 300,000 108,000 144,000 180,000 180,000 180,000 350,000 126,000 168,000 210,000 210,000 210,000 400,000 144,000 192,000 240,000 240,000 240,000 450,000 162,000 216,000 270,000 270,000 270,000 500,000 180,000 240,000 300,000 300,000 300,000 600,000 216,000 288,000 360,000 360,000 360,000 700,000 252,000 336,000 420,000 420,000 420,000 800,000 288,000 384,000 480,000 480,000 480,000 900,000 324,000 432,000 540,000 540,000 540,000
-94- 1,000,000 360,000 480,000 600,000 600,000 600,000 1,100,000 396,000 528,000 660,000 660,000 660,000 1,200,000 432,000 576,000 720,000 720,000 720,000
Final average compensation for purposes of calculating the target benefit is the highest average annual compensation of the participant during any 36 consecutive months compensation was earned. Compensation taken into account under the target benefit described above includes salary, bonus, restricted stock awards, and long-term incentive payouts shown in the Summary Compensation Table, but does not include employer matching contributions under the 401(k) Plan. In the event that an officer's employment terminates because of disability, the retirement benefits shown above would be offset by the amount of any disability benefits payable to the recipient that are attributable to contributions made by NU and its subsidiaries under long term disability plans and policies. As of December 31, 1996, the five executive officers named in the Summary Compensation Table had the following years of credited service for retirement compensation purposes: Mr. Fox-32, Mr. Kenyon-0, Mr. Forsgren- 0, Mr. MacKenzie-31, and Mr. Feigenbaum-10. Assuming that retirement were to occur at age 65 for these officers, retirement would occur with 43, 11, 15, 41 and 29 years of credited service, respectively. Mr. Fox has announced that he will retire in the second half of 1997. Employment Contracts and Termination of Employment Arrangements Officer Agreements Northeast Utilities Service Company (NUSCO) has entered into employment agreements (the Officer Agreements) with each of the named executive officers (except for Mr. Fox--see separate description below) and certain other executive officers and directors of the registrants. The Officer Agreements are also binding on NU and on each majority-owned subsidiary of NU with at least fifty employees on its direct payroll. Each Officer Agreement obligates the officer to perform such duties as may be directed by the NUSCO Board of Directors or the NU Board, protect the System's confidential information, and refrain, while employed by the System and for a period of time thereafter, from competing with the Company in a specified geographic area. Each Officer Agreement provides that the officer's base salary will not be reduced below certain levels without the consent of the officer, that the officer will participate in specified benefits under the Supplemental Executive Retirement Plan (see Pension Benefits, above), in the applicable divisional officer executive incentive programs or the Stock Price Recovery Program, as the case may be, under the Executive Incentive Plan (see Report on Executive Compensation, above), and, beginning on January 1, 1999, if the employment term has not ended, in each short term and long term incentive compensation program established by the System for such senior level executives generally, at an incentive opportunity level not less than that in effect for the officer as of January 1, 1996 (or January 1, 1997 for certain officers). -95- Each Officer Agreement provides for automatic one-year extensions of the employment term unless at least six months' notice of non-renewal is given by either party. The employment term may also be ended by the System for "cause", as defined, at any time (in which case no target benefit, if any, shall be due the officer under the Supplemental Executive Retirement Plan), or by the officer on thirty days' prior written notice for any reason. Absent "cause", the System may remove the officer from his or her position on sixty days' prior written notice, but in the event the officer is so removed and signs a release of all claims against the System, the officer will receive one or two years' base salary and annual incentive payments, specified employee welfare and pension benefits, and vesting of stock appreciation rights, options and restricted stock. Under the terms of an Officer Agreement, upon any termination of employment of the officer within two years following a change in control, as defined, if the officer signs a release of all claims against the System the officer will be entitled to certain payments including two or three times base salary and annual incentive payments, specified employee welfare and pension benefits, and vesting of stock appreciation rights, options and restricted stock. Certain of the change in control provisions may be modified by the Board of Trustees prior to a change in control, on at least two years' notice to the affected officer(s). Besides the terms described above, Mr. Forsgren's Officer Agreement provides for a starting salary of $350,000 per year and a $100,000 restricted stock grant. Mr. Feigenbaum's Officer Agreement provides for a starting salary of $250,000 per year. Mr. Kenyon's Officer Agreement provides for an initial starting salary of at $500,000 per year, a $500,000 restricted stock grant and a $400,000 cash signing bonus (See Summary Compensation Table, above). Mr. Kenyon's Officer Agreement also provides for a special retirement benefit (described above in Pension Benefits) instead of a target benefit and a make-whole benefit under the Supplemental Plan, and a special short term incentive compensation program in lieu of a portion of the Stock Price Recovery Program. Under this incentive program Mr. Kenyon will be eligible to receive a payment up to 100 percent of base salary depending on his fulfillment of certain incentive goals for each of the years ending August 31, 1997 and August 31, 1998, and for the 16 month period ending December 31, 1999. Transition and Retirement Agreement In 1992, NU entered into an agreement with Mr. Fox (the 1992 Agreement) to provide for an orderly chief executive officer succession. The agreement states that if Mr. Fox is terminated without cause, he will be entitled to two years' base pay; specified employee welfare benefits; a supplemental retirement benefit equal to the difference between the target benefit he would be entitled to receive if he had reached the age of 55 on the termination date and the actual target benefit to which he is entitled as of the termination date; and a target benefit under the Supplemental Executive Retirement Plan, notwithstanding that he might not have reached age 60 on the termination date and notwithstanding other forfeiture provisions of that plan. In January 1997, NU entered into a Transition and Retirement Agreement (the Transition Agreement) with Mr. Fox to reflect his election to retire on the later of August 1, 1997 and the date -96- his successor is elected. The Transition Agreement is intended to supersede the 1992 Agreement at the time of Mr. Fox's retirement. The Transition Agreement obligates Mr. Fox to maintain the confidentiality of System information during his employment and following his retirement, and not to compete with the System for certain periods of time in specified geographic areas. The Transition Agreement provides that Mr. Fox will be engaged as a consultant to the Board of Trustees of NU for 24 months following his retirement, with a fee of $500,000 for the first 12 months and $300,000 for the second 12 months, payable in full notwithstanding Mr. Fox's death or disability during such period or the occurrence of a change in control, as defined. The Transition Agreement also provides that Mr. Fox will be entitled to a target benefit under the Supplemental Executive Retirement Plan (actuarially reduced, if applicable, to reflect payments beginning prior to age 57), and for vesting of all stock appreciation rights granted to him in the Stock Price Recovery Program. All payments and benefits under the Transition Agreement are conditioned on Mr. Fox signing a release of claims against the System "and all related parties" with respect to matters arising out of his employment with the System, and the System releasing Mr. Fox from all civil liability which may arise from his being or having been a Trustee or officer of NU and its subsidiaries, except for any liability which has been or may be asserted against Mr. Fox by the System as the result of an investigation conducted upon the demand of a shareholder or by a shareholder on behalf of the System. Both the 1992 Agreement and the Transition Agreement are binding on each majority-owned subsidiary of NU with at least fifty employees on its direct payroll. Separation Agreement NUSCO entered into a Separation Agreement with Mr. Busch in August 1996 in connection with the termination of Mr. Busch's employment. The agreement provided for a severance payment of two times annual compensation, and specified supplemental employee welfare and pension benefits. It provides for confidentiality restrictions on Mr. Busch and a two year non-competition period in specified geographic locations. It includes a release by Mr. Busch of claims against the System and a release by the System of claims against Mr. Busch, except such as might be brought as the result of an investigation conducted upon the demand of a shareholder or on behalf of the System by shareholders. NUSCO's obligations under this agreement are binding on each majority-owned subsidiary of NU with at least fifty employees on its direct payroll. The descriptions of the various agreements set forth above are for purpose of disclosure in accordance with the disclosure rules of the Commission and shall not be controlling on any party; the actual terms of the agreements themselves determine the rights and obligations of the parties. Compensation of Directors No Director of the Company receives any compensation for service as a Director. -97- DESCRIPTION OF THE NEW BONDS General The terms of the New Bonds are identical in all material respects with the terms of the Old Bonds, except for the elimination of certain transfer restrictions, registration rights and interest rate provisions relating to the Old Bonds. The Old Bonds are, and the New Bonds will be issued under and secured by the Indenture of Mortgage and Deed of Trust dated as of May 1, 1921 between the Company and Bankers Trust Company, Trustee, as heretofore supplemented and amended, and which, as it is to be further supplemented by the Sixty-Eighth Supplemental Indenture (which is hereinafter referred to as the Sixty-Eighth Supplemental Indenture), is hereinafter called the Indenture. The summary description of the provisions of the Indenture which follows does not purport to be complete or to cover all the provisions thereof. Copies of the Indenture and the form of Sixty-Eighth Supplemental Indenture have been filed as exhibits to, or incorporated by reference in, the Registration Statement of which this Prospectus is a part (the Registration Statement) and reference is made thereto for a complete statement of the applicable provisions. Article and section references herein are to provisions of the original Indenture as heretofore amended unless otherwise indicated. The Trustee acts as a depository bank of, makes loans to, and performs other services for the Company and other companies in the System in the ordinary course of business. The New Bonds will be issued initially under a book-entry only system, registered in the name of Cede & Co., as registered bondholder and nominee for DTC. DTC will act as securities depositary for the New Bonds. Individual purchases of Book-Entry Interests (as herein defined) in any New Bonds will be made in book-entry form. Purchasers of Book-Entry Interests in New Bonds will not receive certificates representing their interests in such New Bonds. So long as Cede & Co., as nominee of DTC, is the bondholder, references herein to the bondholders or registered owners will mean Cede & Co., rather than the owners of Book-Entry Interests in New Bonds. See "Book-Entry; Delivery and Form" herein for certain information regarding DTC and DTC's book-entry only system. General Terms of New Bonds The New Bonds will mature on June 1, 2002 and will bear interest from June 1, 1997 at the rate of 7 3/4% per annum. Interest will be payable semiannually on June 1 and December 1, commencing December 1, 1997 at the principal office of the Trustee in New York City, to registered owners at the close of business on the May 15 or November 15, as the case may be, preceding such June 1 or December 1, or if such record date is a legal holiday or a day on which banks are authorized to close in New York City, on the next preceding day which is not a legal holiday or a day on which banks are so authorized to close. The New Bonds will be issued only in the form of fully registered bonds without coupons in denominations of US$1,000 or integral multiples thereof and may be presented for exchange for a like aggregate principal amount of the same series of New Bonds of other authorized -98- denominations and for transfer at the principal office of the Trustee in New York City without payment in either case of any charge other than for any tax or other governmental charges required to be paid by the Company. Security The Indenture constitutes a first mortgage lien (subject to liens permitted by the Indenture, including liens and encumbrances existing at the time of acquisition by the Company) on substantially all of the Company's physical property and franchises, including the Company's generating stations (but not including the Company's interest in the plants of the four regional nuclear generating companies described under "Business--Electric Operations--Nuclear Generation--General") and its transmission and distribution facilities. Subject to the provisions of the Federal Bankruptcy Code, the Indenture will also constitute a lien on after-acquired property. The Indenture also permits after-acquired property to be subject to liens prior to that of the Indenture. The security afforded by the Indenture is for the equal and ratable protection of all the Company's presently outstanding bonds and any bonds which may hereafter be issued under the Indenture, including the Bonds. (The granting clauses and (S)(S)6.04 and 6.05.) Under certain limited circumstances, the lien of the Indenture on real property in Connecticut acquired by the Company after June 3, 1985 could be subordinated to a lien in favor of the State of Connecticut pursuant to a Connecticut law (Connecticut General Statutes Section 22a- 452a) providing for such a lien for reimbursement for expenses incurred in containing, removing or mitigating hazardous waste. Also, under certain limited circumstances the lien of the Indenture on real property in Massachusetts could be subordinated to a lien in favor of the Commonwealth of Massachusetts pursuant to the Massachusetts Oil and Hazardous Materials Release Prevention and Response Act, commonly known as the Massachusetts Superfund. Further, under certain limited circumstances, the lien of the Indenture on real property in New Hampshire, personal property located thereon and business revenues generated therefrom could be subordinated to a lien in favor of the State of New Hampshire pursuant to New Hampshire Revised Statutes Annotated 147B:10-b, as amended, for expenses incurred in containing or removing hazardous waste or materials, and any necessary mitigation of damages with respect to hazardous waste or materials. If the Trustee exercises its rights to foreclose on the collateral, the transferral of required governmental approvals to a purchaser or new operator of the Company's generating facilities, particularly nuclear and hydro generating facilities, will require additional governmental proceedings and consequent delays. There can be no assurance that such transfers would be approved. -99- Redemption Provisions The New Bonds will be redeemable at the option of the Company, as a whole or in part, at any time upon at least 30 days and not more than 60 days prior written notice (which notice may state that it is subject to the receipt of redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date) at a redemption price equal to the greater of (i) 100% of their principal amount and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus in each case accrued interest to the date of redemption (the Redemption Date). "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker having a maturity comparable to the remaining term of the New Bonds that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the New Bonds. "Independent Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Quotations, or (B) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and another Primary Treasury Dealer (as defined herein) at the option of the Company, provided, however, that if any of the foregoing shall cease to be a primary U.S. Government -100- Securities dealer in New York City (a Primary Treasury Dealer), the Company shall substitute therefor another Primary Treasury Dealer. Issuance of Additional Bonds; Earnings Coverage The Indenture permits, subject to various conditions and restrictions set forth therein, the issuance of an unlimited amount of additional first mortgage bonds. Additional bonds may be issued under the Indenture (a) to refund other bonds or certain prior lien obligations, or (b) on the basis of a certification of unbonded property additions, or (c) against the deposit of an equal amount of cash with the Trustee. The aggregate amount of first mortgage bonds (including two collateral series which secure an identical principal amount of other outstanding debt of the Company) outstanding on May 31, 1997 was $1,546,000,000. Additional bonds may be issued to the extent of 60% (or such greater percent, not exceeding 66-2/3%, as may be authorized by the Commission under the Holding Company Act of unbonded property additions ((S)3.54). Additional bonds may also be issued to finance 60% (or such greater percent, not exceeding 66-2/3%, as may be authorized by the Commission under the Holding Company Act) of the bondable amount of the Company's interest in the inventory of nuclear fuel required for a nuclear generating plant ((S)3.55). Except in the case of certain refunding issues, the Company may not issue additional bonds unless its net earnings, as defined and as computed without deducting income taxes, for 12 consecutive calendar months during the period of 15 consecutive calendar months immediately preceding the first day of the month in which the application to the Trustee for authentication of additional bonds is made were at least twice the annual interest charges on all the Company's outstanding bonds, including the proposed additional bonds, and any outstanding prior lien obligations ((S)3.58). On the basis of this formula, based on the bonds and prior lien obligations outstanding as of March 31, 1997, the earnings coverage was negative and equalled (.45). The additional earnings required to bring the ratio of earnings to fixed charges to 2.0 for the twelve-month period ended March 31, 1997 would have been $294,995,000. Where cash is deposited with the Trustee as a basis for the issue of bonds, it may be withdrawn against 60% (or such greater percent, not exceeding 66-2/3%, as may be authorized by the Commission under the Holding Company Act) of bondable property additions or against the deposit of bonds or prior lien obligations that would otherwise be available to be made the basis of the issue of additional bonds. Such cash may also be used to purchase or redeem bonds of any series as the Company may designate ((S)3.56). As of March 31, 1997, the Company had unbonded property additions available that would support the issuance of additional bonds in the principal amount of $555,031,563, subject to the net earnings and other requirements of the Indenture. The Bonds are being issued on the basis of previously retired bonds. -101- Other Financial Restrictions In addition to the foregoing restrictions, there are additional limitations upon the creation and/or issuance by the Company of long-term debt securities. Under certain bank and bank reimbursement agreements, lenders are not required to make additional loans or the maturity of indebtedness can be accelerated if the Company does not meet an equity ratio that requires, in effect, that the Company's common equity (as defined) be at least 27 percent of its total capitalization. On March 31, 1992, the DPUC issued a decision approving NU's acquisition of PSNH, which occurred on June 5, 1992. The DPUC's approval included several conditions designed principally to insulate the Company's customers from possible financial risks associated with NU's investment in PSNH. Among the conditions is a requirement that the Company use its best efforts to maintain the amount of common equity in the Company's capital structure (including short term debt in excess of 7 percent of total capitalization) above 36 percent. The Company must notify the DPUC if the ratio is projected to fall below 36 percent, in which case the DPUC may conduct a review of the Company's financial condition. At March, 1997, the Company's equity ratio (so calculated) was 36.3%. The Company does not expect to meet this condition at June 30, 1997 and has so notified the DPUC in accordance with the foregoing requirement. Also, in future rate cases, the Company will be required to accept a methodology for determining the Company's cost of capital for ratemaking purposes without regard to NU's cost of capital if the DPUC finds that the Company's actual debt costs are unduly influenced by effects of the PSNH acquisition. These conditions are to remain in effect until the later of May 15, 1998 and the time at which PSNH achieves investment grade ratings for its first mortgage bonds and a common equity to total capitalization ratio of at least 30 percent. Renewal and Replacement Fund If, as at the end of any year, the aggregate amount expended by the Company for property additions since December 31, 1966 is less than the "replacement fund requirement" (referred to below) for the same period, the Company is required to make up the deficit by depositing cash with the Trustee, or by depositing with the Trustee bonds or prior lien obligations which would otherwise be available as a basis for the issue of additional bonds or by certifying unbonded property additions taken at 100% of the amount certified. At the request of the Company, any cash so deposited may be used to purchase or redeem (at the applicable Special Redemption Price) bonds of such series as the Company may designate. A replacement fund deficit may thereafter be offset by expenditures in a later year in excess of the requirement for such year and thereupon the Company will be entitled, to the extent of such offset, to the return of cash, bonds or prior lien obligations deposited to make up the deficit or to reinstate as bondable any property additions certified for such purpose ((S)6.06). The replacement fund requirement is computed on an annual basis, and is equal, for each year, to 2.25% of the average of the amounts carried on the Company's books for depreciable property at the beginning and end of the year ((S)1.01 (pp)). As of March 31, 1997, the Company's -102- expenditures for property additions had exceeded the replacement fund requirement by $4,262,068,539. Withdrawal or Application of Cash Cash deposited with the Trustee pursuant to the sinking and improvement fund or replacement fund requirements may, at the Company's option, be withdrawn against a certification of unbonded property additions, or against the deposit of bonds or prior lien obligations which would otherwise be available to be made the basis of the issue of additional bonds or may be applied to the purchase or redemption (at the applicable Special Redemption Price) of bonds of such series as the Company may designate ((S)(S)6.06, 6.14 and 9.04). When the cash to be withdrawn has been deposited under the replacement fund requirement, a withdrawal equal to 100% is permitted ((S)6.06). Dividend Restrictions The Indenture contains restrictions on the payment of common stock dividends, which were included in certain Supplemental Indentures at the time of issuance of prior series of bonds. The Supplemental Indenture dated as of July 1, 1992, which contains restrictions applicable so long as any Series VV Bonds, maturing July 1, 1999, are outstanding, currently contains the most restrictive provision. Under this provision, the aggregate amount which may be declared, paid or otherwise applied by the Company as dividends or other distributions on its common stock (other than by way of stock dividends or when an equal amount of cash is received concurrently as a capital contribution or on the sale of common stock) or to the purchase or other acquisition of common stock may not exceed earned surplus (as defined, and after deducting accrued preferred stock dividends) accumulated after June 30, 1993, plus $207,000,000, plus such further amount as may be authorized by the Commission under the Holding Company Act. Pursuant to these provisions, unrestricted earned surplus at March 31, 1997 was negative, and would have amounted to approximately ($4,911,244). Similar dividend restrictions are binding on the Company so long as certain prior series of the Company's bonds are outstanding. Default The Indenture provides that the following events will constitute "events of default" thereunder: failure to pay principal; failure for 90 days to pay interest; failure to perform any of the other Indenture covenants for 90 days after notice to the Company; failure to perform any covenant contained in any lien securing prior lien obligations if such default permits enforcement of the lien; and certain events in bankruptcy, insolvency or receivership ((S)10.02). The Indenture requires the Company to deliver to the Trustee an annual officers' certificate as to compliance with certain provisions of the Indenture ((S)6.16). -103- The Indenture provides that, if any event of default exists, the holders of a majority in principal amount of the bonds outstanding may, after tender to the Trustee of indemnity satisfactory to it, direct the sale of the mortgaged property ((S)10.04). Modification of the Indenture The Indenture may be supplemented or amended to convey additional property, to state indebtedness of companies merged, to add further limitations to the Indenture, to evidence a successor company, or to make such provision in regard to questions arising under the Indenture as may be necessary or desirable and not inconsistent with its terms ((S)14.01). The Indenture also permits the modification, with the consent of holders of 66-2/3% of the bonds affected, of any provision of the Indenture, except that (a) no such modification may effect a reduction of such percentage or the creation of a lien prior to or concurrent with that of the Indenture unless all bondholders consent, (b) no bondholder who refuses to consent may be deprived of his security, and (c) the Company's obligations as to the maturities, payment of principal, interest or premium and other terms of payment may not be modified unless all affected bondholders consent ((S)14.03). BOOK-ENTRY; DELIVERY AND FORM The New Bonds will be issued in fully-registered form. The description which follows of the procedures and recordkeeping with respect to beneficial ownership interests in the New Bonds, payments of principal of, and premium, if any, and interest on, the New Bonds to DTC and its Participants or Beneficial Owners, in each case as defined below, confirmation and transfer of beneficial ownership interests in the New Bonds and other related transactions by and among DTC, the DTC Participants and Beneficial Owners is based solely on information furnished by DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (Participants) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book- entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants (Direct Participants) include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear -104- through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect Participants). The rules applicable to DTC and its Participants are on file with the SEC. Purchases of New Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the New Bonds on DTC's records. The ownership interest of each actual purchaser of New Bonds (Beneficial Owner) is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the New Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the New Bonds, except in the event that use of the book-entry system for the New Bonds is discontinued. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE HOLDER OF THE NEW BONDS, THE TRUSTEE SHALL TREAT CEDE & CO. AS THE ONLY HOLDER OF THE NEW BONDS FOR ALL PURPOSES UNDER THE INDENTURE, INCLUDING RECEIPT OF ALL PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON SUCH NEW BONDS, RECEIPT OF NOTICES, AND VOTING AND REQUESTING OR DIRECTING THE TRUSTEE TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER THE INDENTURE. To facilitate subsequent transfers, all New Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of New Bonds with DTC and their registration into the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the New Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such New Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in any Global Security. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices, if any, shall be sent to Cede & Co. If less than all of the New Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the New Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as possible after the -105- record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the New Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal of, and premium, if any, and interest payments on the New Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the applicable payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, and premium, if any, and interest to DTC is the responsibility of the Company or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depositary with respect to the New Bonds at any time by giving notice to the Company or the Trustee. Under such circumstances, in the event that a successor securities depositary is not obtained, individual bond certificates are required to be printed and delivered. The Company may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, individual bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company believes to be reliable (including DTC), but the Company takes no responsibility for the accuracy thereof. THE COMPANY AND THE TRUSTEE HAVE NO RESPONSIBILITY OR OBLIGATION TO THE DTC PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT, (B) THE PAYMENT BY ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON, THE NEW BONDS, (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY DTC TO ANY DTC PARTICIPANT OR BY ANY DTC PARTICIPANT TO ANY BENEFICIAL OWNER OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO HOLDERS OF THE NEW BONDS, OR (D) ANY OTHER ACTION TAKEN BY DTC, OR ITS NOMINEE, CEDE & CO., AS HOLDER OF THE NEW BONDS. -106- MARKET FOR NEW BONDS The Company has been advised by the Initial Purchasers that they presently intend to make a market in the New Bonds as permitted by applicable laws and regulations. The Initial Purchasers are not obligated, however, to make a market in the New Bonds and any such market making may be discontinued at any time without prior notice at the sole discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the New Bonds. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion, based on current law, is a general summary of the anticipated United States federal income tax consequences relevant to the exchange of Old Bonds for New Bonds and the ownership and disposition of the New Bonds by holders acquiring New Bonds pursuant to the Exchange Offer. The summary does not address all aspects of taxation that may be relevant to particular holders in light of their personal circumstances (including the effect of any foreign, state or local tax laws) or to certain types of holders subject to special treatment under federal income tax laws (including dealers in securities, options or currencies, insurance companies, financial institutions, persons holding Bonds as part of a hedging or conversion transaction or straddle, persons whose functional currency is not the United States dollar and tax-exempt entities). The discussion of the federal income tax consequences set forth below is based upon the Internal Revenue Code of 1986, as amended (the Code), and judicial decisions and administrative interpretations thereunder, as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in federal income tax consequences different from those discussed below. For purposes of the discussion set forth below, the term "Holder" includes a beneficial owner of a Bond. The discussion below is premised upon the assumption that the Bonds are held as capital assets. The discussion below pertains only to Holders that are citizens or residents of the United States, corporations, partnerships or other entities created in or under the laws of the United States or any political subdivision thereof, estates, or trusts the administration over which a United States court can exercise primary supervision and for which one or more United States fiduciaries have the authority to control all substantial decisions, the income of which is subject to United States federal income taxation regardless of its source. EACH PROSPECTIVE HOLDER OF BONDS IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO ITS PARTICULAR TAX SITUATION, INCLUDING THE TAX EFFECTS OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS. -107- Exchange of Bonds The exchange of Old Bonds for New Bonds pursuant to the Exchange Offer should not be treated as an exchange or other taxable event for federal income tax purposes because, under regulations promulgated by the United States Treasury Department, the New Bonds should not be considered to significantly modify the Old Bonds and thus should not differ materially in kind or extent from the Old Bonds. Rather, the New Bonds received by a Holder should be treated as a continuation of the Old Bonds in the hands of such Holder. As a result, there should be no federal income tax consequences to Holders exchanging Old Bonds for New Bonds pursuant to the Exchange Offer and a Holder should have the same adjusted basis and holding period in the New Bonds as it had in the Old Bonds immediately before the exchange. Sale or Retirement of Bonds Upon the sale, exchange or retirement of a Bond, the Holder generally will recognize gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and the Holder's adjusted tax basis in the Bond. Gain or loss realized on the sale, exchange or retirement of a Bond will be capital, and will be long-term if at the time of sale, exchange or retirement the Bond has been held for more than one year. The deductibility of capital losses is subject to limitations. Information Reporting and Backup Withholding Under current United States federal income tax law (i) information reporting requirements apply to "reportable payments," which include interest and principal payments made to, and the proceeds of sales by, certain noncorporate Holders of Bonds, and (ii) a Holder of Bonds may be subject to backup withholding at the rate of 31% with respect to reportable payments in respect of Bonds. Backup withholding will not apply to payments to corporations and certain other exempt recipients, such as tax-exempt organizations, which demonstrate their entitlement to exemption when required. The payor will be required to deduct and withhold (at the rate of 31%) if (i) the payee fails to furnish a taxpayer identification number (TIN) to the payor in the manner required by the Code and applicable Treasury regulations, (ii) the Internal Revenue Service notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a "notified payee underreporting" described in Section 3406(c) of the Code, or (iv) there has been a failure of the payee to certify under penalty of perjury that the payee is not subject to withholding under 3406(c) of the Code. Amounts withheld under these rules do not constitute an additional tax and will be credited against the Holder's federal income tax liability, so long as the required information is provided to the Internal Revenue Service. The Company will report to the Holders of Bonds and to the Internal Revenue Service the amount of any "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to such payments. -108- PLAN OF DISTRIBUTION Each broker-dealer that receives New Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Bonds. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resale of New Bonds received in exchange for Old Bonds where such Old Bonds were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker- dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of New Bonds by broker-dealers. New Bonds received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Bonds or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Bonds. Any broker-dealer that resells New Bonds that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Bonds may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Bonds any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the fees and disbursements of one counsel for the holders of the New Bonds) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the New Bonds (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS AND EXPERTS Legal matters in connection with the issue of the New Bonds will be passed upon for the Company by Robert P. Wax, Esq., Senior Vice President, Secretary and General Counsel of the Company, or Jeffrey C. Miller, Esq., Assistant General Counsel of Northeast Utilities Service Company. Statements of law and legal conclusions herein and in the Registration Statement pertaining to the description of the New Bonds have been reviewed by Mr. Miller. Certain statements of law and legal conclusions set forth with respect to short term borrowing authority and the earnings coverage requirement of the Indenture and preferred stock provisions of the Company, its -109- franchises, its participation in joint projects, the laws and regulations to which it is or may be subject, and litigation and legal proceedings, have been reviewed by Mr. Miller and said statements are made upon his authority as an expert. The Company's audited financial statements included in this Prospectus and schedules related thereto incorporated by reference in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, which have also been included or incorporated by reference herein or therein, in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. GLOSSARY OF TERMS The following is a glossary of frequently used abbreviations or acronyms that are found throughout this Prospectus:
COMPANIES NU............................ Northeast Utilities CL&P or the Company........... The Connecticut Light and Power Company Charter Oak or COE............ Charter Oak Energy, Inc. WMECO......................... Western Massachusetts Electric Company HWP........................... Holyoke Water Power Company NUSCO or the Service Company.. Northeast Utilities Service Company NNECO......................... Northeast Nuclear Energy Company NAEC.......................... North Atlantic Energy Corporation NAESCO........................ North Atlantic Energy Service Corporation PSNH.......................... Public Service Company of New Hampshire RRR........................... The Rocky River Realty Company Mode 1........................ Mode 1 Communications, Inc. System........................ The Northeast Utilities System CYAPC......................... Connecticut Yankee Atomic Power Company MYAPC......................... Maine Yankee Atomic Power Company VYNPC......................... Vermont Yankee Nuclear Power Corporation the Yankee Companies.......... CYAPC, MYAPC, VYNPC, and YAEC GENERATING UNITS Millstone 1................... Millstone Unit No. 1, a 660-MW nuclear generating unit completed in 1970 Millstone 2................... Millstone Unit No. 2, an 870-MW nuclear electric generating unit completed in 1975.
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Millstone 3 ............................ Millstone Unit No. 3, a 1,154-MW nuclear electric generating unit completed in 1986 Seabrook or Seabrook 1 .................. Seabrook Unit No. 1, a 1,148-MW nuclear electric generating unit completed in 1986. Seabrook 1 went into service in 1990. REGULATORS Commission ............................. Securities and Exchange Commission DOE .................................... U.S. Department of Energy DPU .................................... Massachusetts Department of Public Utilities DPUC ................................... Connecticut Department of Public Utility Control MDEP ................................... Massachusetts Department of Environmental Protection CDEP ................................... Connecticut Department of Environmental Protection EPA .................................... U.S. Environmental Protection Agency FERC ................................... Federal Energy Regulatory Commission NHDES .................................. New Hampshire Department of Environmental Services NHPUC .................................. New Hampshire Public Utilities Commission NRC .................................... Nuclear Regulatory Commission OTHER Holding Company Act .................... Public Utility Holding Company Act of 1935 CAAA ................................... Clean Air Act Amendments of 1990 DSM .................................... Demand-Side Management Energy Act ............................. Energy Policy Act of 1992 EWG .................................... Exempt wholesale generator EAC .................................... Energy Adjustment Clause (CL&P) FAC .................................... Fuel Adjustment Clause (CL&P) FPPAC .................................. Fuel and purchased power adjustment clause (PSNH) GUAC ................................... Generation Utilization Adjustment Clause (CL&P) IRM .................................... Integrated resource management kWh .................................... Kilowatt-hour Money Pool ............................. A asystem for the pooling of funds established by certain of the System Companies to provide
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a more effective use of their cash resources and to reduce outside short-term borrowings. MW ..................................... Megawatt NBFT ................................... Niantic Bay Fuel Trust, lessor of nuclear fuel used by CL&P and WMECO NEPOOL ................................. New England Power Pool NUGs ................................... Nonutility generators NUG&T .................................. Northeast Utilities Generation and Transmission agreement QF ..................................... Qualifying facility
-112- THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants............................ F-2 Consolidated Balance Sheets as of December 31, 1996 and 1995 and March 31, 1997 (unaudited).................................... F-3 - F-4 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 and the three months ended March 31, 1997 (unaudited) and 1996 (unaudited).............................................. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 and the three months ended March 31, 1997 (unaudited) and 1996 (unaudited).................................................. F-6 Consolidated Statements of Common Stockholder's Equity for the years ended December 31, 1996, 1995 and 1994 and three months ended March 31, 1997 (unaudited).................................. F-7
F-1 Report Of Independent Public Accountants To the Board of Directors of The Connecticut Light and Power Company: We have audited the accompanying consolidated balance sheets of The Connecticut Light and Power Company (a Connecticut corporation and a wholly owned subsidiary of Northeast Utilities) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, common stockholder's equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Connecticut Light and Power Company and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP Hartford, Connecticut February 21, 1997 F-2 THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1997 At December 31, ------------- ----------------------------------- (Unaudited) 1996 1995 ------------- ---- ---- (Thousands of Dollars) ASSETS - ------ Utility Plant, at original cost: Electric ............................................. $6,312,883 $6,283,736 $6,147,961 Less: Accumulated provision for depreciation (Note 1F) ...................... 2,722,637 2,665,519 2,418,557 ---------- ---------- ---------- 3,590,246 3,618,217 3,729,404 Construction work in progress ........................ 96,735 95,873 103,026 Nuclear fuel, net .................................... 133,892 133,050 138,203 ---------- ---------- ---------- Total net utility plant ............................ 3,820,873 3,847,140 3,970,633 ---------- ---------- ---------- Other Property and Investments: Nuclear decommissioning trusts, at market ............ 307,230 296,960 238,023 Investments in regional nuclear generating companies, at equity (Note 1E) ...................... 58,369 56,925 54,624 Other, at cost ....................................... 18,736 16,565 16,241 ---------- ---------- ---------- 384,335 370,450 308,888 ---------- ---------- ---------- Current Assets: Cash ................................................. 197 404 337 Notes receivable from affiliated companies ........... 225,300 109,050 -- Receivables, net ..................................... 224,041 226,112 231,574 Accounts receivable from affiliated companies ........ 564 3,481 3,069 Taxes receivable ..................................... 32,414 40,134 -- Accrued utility revenues ............................. 77,461 78,451 91,157 Fuel, materials, and supplies, at average cost ....... 85,110 79,937 68,482 Recoverable energy costs, net--current portion ....... 18,724 25,436 78,108 Prepayments and other ................................ 79,562 63,344 42,894 ---------- ---------- ---------- 743,373 626,349 515,621 ---------- ---------- ---------- Deferred Charges: Regulatory assets (Note 1H) .......................... 1,297,061 1,370,781 1,225,280 Unamortized debt expense ............................. 17,084 17,033 14,977 Other ................................................ 13,170 12,283 10,232 ---------- ---------- ---------- 1,327,315 1,400,097 1,250,489 ---------- ---------- ---------- ---------- ---------- ---------- Total Assets ..................................... $6,275,896 $6,244,036 $6,045,631 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, 1997 At December 31, --------------- --------------------------------- (Unaudited) 1996 1995 --------------- ---- ---- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock--$10 par value. Authorized 24,500,000 shares; outstanding 12,222,930 shares ............ $ 122,229 $ 122,229 $ 122,229 Capital surplus, paid in .................................... 640,077 639,657 637,981 Retained earnings ........................................... 535,184 551,410 785,476 ---------- ---------- ---------- Total common stockholder's equity .................. 1,297,490 1,313,296 1,545,686 Preferred stock not subject to mandatory redemption ......... 116,200 116,200 116,200 Preferred stock subject to mandatory redemption ............. 155,000 155,000 155,000 Long-term debt .............................................. 1,816,657 1,834,405 1,812,646 ---------- ---------- ---------- Total capitalization ............................... 3,385,347 3,418,901 3,629,532 ---------- ---------- ---------- Minority Interest in Consolidated Subsidiary (Note 13) ....... 100,000 100,000 100,000 ---------- ---------- ---------- Obligations Under Capital Leases (Note 2) ..................... 144,062 143,347 108,408 ---------- ---------- ---------- Current Liabilities: Notes payable to banks ...................................... 200,000 -- 41,500 Notes payable to affiliated companies ....................... -- -- 10,250 Long-term debt and preferred stock--current portion ......... 224,116 204,116 9,372 Obligations under capital leases--current portion (Note 2) ........................................... 12,370 12,361 63,856 Accounts payable ............................................ 96,027 160,945 110,798 Accounts payable to affiliated companies .................... 58,008 78,481 44,677 Accrued taxes ............................................... 28,223 28,707 52,268 Accrued interest ............................................ 34,982 31,513 30,854 Nuclear compliance (Note 11B) ............................... 27,855 50,500 -- Other ....................................................... 23,516 34,433 20,027 ---------- ---------- ---------- 705,097 601,056 383,602 ---------- ---------- ---------- Deferred Credits: Accumulated deferred income taxes (Note 1I) ................. 1,349,880 1,365,641 1,486,873 Accumulated deferred investment tax credits ................. 133,239 135,080 142,447 Deferred contractual obligations (Note 3) ................... 287,773 305,627 65,847 Other ....................................................... 170,498 174,384 128,922 ---------- ---------- ---------- 1,941,390 1,980,732 1,824,089 ---------- ---------- ---------- Commitments and Contingencies (Note 11) Total Capitalization and Liabilities ............... $6,275,896 $6,244,036 $6,045,631 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
For Three Months Ended March 31, For the Years Ended December 31, ------------------------- ------------------------------------------- 1997 1996 1996 1995 1994 ---- ---- ---- ---- ---- (Unaudited) (Thousands of Dollars) Operating Revenues ..................................... $ 624,908 $ 659,355 $ 2,397,460 $ 2,387,069 $ 2,328,052 --------- --------- ----------- ----------- ----------- Operating Expenses: Operation -- Fuel, purchased and net interchange power ......... 265,500 223,375 830,924 608,600 568,394 Other ............................................. 142,145 189,844 778,329 614,382 593,851 Maintenance .......................................... 70,621 49,048 300,005 192,607 207,003 Depreciation ......................................... 59,919 62,716 247,109 242,496 231,155 Amortization of regulatory assets, net ............... 15,869 (2,750) 57,432 54,217 77,384 Federal and state income taxes (Note 8) .............. 836 28,527 (20,174) 178,346 190,249 Taxes other than income taxes ........................ 46,870 48,618 174,062 172,395 173,068 --------- --------- ----------- ----------- ----------- Total operating expenses ....................... 601,760 599,378 2,367,687 2,063,043 2,041,104 --------- --------- ----------- ----------- ----------- Operating Income ....................................... 23,148 59,977 29,773 324,026 286,948 --------- --------- ----------- ----------- ----------- Other Income: Deferred nuclear plants return--other funds .......... 36 449 1,268 4,683 13,373 Equity in earnings of regional nuclear generating companies ............................... 1,817 1,836 6,619 6,545 7,453 Other, net ........................................... 4,574 3,639 19,442 9,902 5,136 Minority interest in income of subsidiary (Note 13) ............................... (2,325) (2,325) (9,300) (8,732) -- Income taxes ......................................... (95) (487) 160 (2,978) 4,248 --------- --------- ----------- ----------- ----------- Other income, net .............................. 4,007 3,112 18,189 9,420 30,210 --------- --------- ----------- ----------- ----------- Income before interest charges ................. 27,155 63,089 47,962 333,446 317,158 --------- --------- ----------- ----------- ----------- Interest Charges: Interest on long-term debt ........................... 33,277 29,792 127,198 124,350 119,927 Other interest ....................................... 334 492 1,147 5,596 6,378 Deferred nuclear plants return--borrowed funds ....... (25) (46) (146) (1,716) (7,435) --------- --------- ----------- ----------- ----------- Interest charges, net .......................... 33,586 30,238 128,199 128,230 118,870 --------- --------- ----------- ----------- ----------- ========= ========= =========== =========== =========== Net (Loss) Income ...................................... $ (6,431) $ 32,851 $ (80,237) $ 205,216 $ 198,288 ========= ========= =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-5 THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, For the Years Ended December 31, -------------------------- ----------------------------------- 1997 1996 1996 1995 1994 ---- ---- ---- ---- ---- (Unaudited) (Thousands of Dollars) Operating Activities: Net(Loss)Income .............................................. $ (6,431) $ 32,851 $ (80,237) $ 205,216 $ 198,288 Adjustments to reconcile to net cash from operating activities: Depreciation ............................................... 59,919 62,716 247,109 242,496 231,155 Deferred income taxes and investment tax credits, net ...... (6,376) (36,122) (60,773) 49,520 37,664 Deferred nuclear plants return, net of amortization ........ -- 3,143 7,746 95,559 82,651 Deferred demand-side-management costs, net of amortization . 13,182 16,870 26,941 (937) (4,691) Recoverable energy costs, net of amortization .............. 20,071 50,361 (35,567) (16,169) 3,975 Deferred cogeneration costs, net of amortization ........... 8,176 (8,790) 25,957 (55,341) (36,821) Nuclear compliance, net .................................... (22,645) 30,369 50,500 -- -- Deferred nuclear refueling outage, net of amortization ..... (11,333) 7,503 45,643 (20,712) (4,653) Other sources of cash ...................................... 20,521 47,493 75,552 86,956 47,791 Other uses of cash ......................................... (1,637) (16,170) (23,862) (53,745) (4,697) Changes in working capital: Receivables and accrued utility revenues ................... 13,698 (2,576) (22,378) (33,032) 45,386 Fuel, materials and supplies ............................... (5,173) 332 (11,455) (4,479) (3,756) Accounts payable ........................................... (85,391) (42,801) 83,951 9,605 (24,167) Accrued taxes .............................................. (484) 33,318 (23,561) 25,855 (9,726) Other working capital (excludes cash) ...................... (23,666) (12,104) (5,385) (1,869) (18,403) --------- --------- --------- --------- --------- Net cash flows (used for) from operating activities ........... (27,569) 166,393 300,181 528,923 539,996 --------- --------- --------- --------- --------- Financing Activities: Issuance of long-term debt ................................... -- -- 222,000 -- 535,000 Issuance of Monthly Income Preferred Securities ........................................ -- -- -- 100,000 -- Net increase (decrease) in short-term debt ................... 200,000 (51,750) (51,750) (127,000) 82,500 Reacquisitions and retirements of long-term debt ............. (11) (5) (14,329) (10,866) (774,020) Reacquisitions and retirements of preferred stock ............ -- -- -- (125,000) -- Cash dividends on preferred stock ............................ (3,805) (3,805) (15,221) (21,185) (23,895) Cash dividends on common stock ............................... (5,990) (60,259) (138,608) (164,154) (159,388) --------- --------- --------- --------- --------- Net cash flows from (used for) financing activities ............ 190,194 (115,819) 2,092 (348,205) (339,803) --------- --------- --------- --------- --------- Investment Activities: Investment in plant: Electric utility plant ..................................... (32,493) (25,945) (140,086) (131,858) (149,889) Nuclear fuel ............................................... (589) (45) 553 (1,543) (20,905) --------- --------- --------- --------- --------- Net cash flows used for investments in plant ................. (33,082) (25,990) (139,533) (133,401) (170,794) Investment in NU system money pool ........................... (116,250) (12,250) (109,050) -- -- Investment in nuclear decommissioning trusts ................. (9,885) (11,549) (50,998) (47,826) (28,129) Other investment activities, net ............................. (3,615) (953) (2,625) 581 (1,565) --------- --------- --------- --------- --------- Net cash flows used for investments ............................ (162,832) (50,742) (302,206) (180,646) (200,488) --------- --------- --------- --------- --------- Net (Decrease) Increase In Cash For The Period ................. (207) (168) 67 72 (295) Cash - beginning of period ..................................... 404 337 337 265 560 ========= ========= ========= ========= ========= Cash - end of period ........................................... $ 197 $ 169 $ 404 $ 337 $ 265 ========= ========= ========= ========= ========= Supplemental Cash Flow Information: Cash paid during the year for: Interest, net of amounts capitalized ......................... $ 114,458 $ 117,074 $ 115,120 ========= ========= ========= Income taxes ................................................. $ 77,790 $ 137,706 $ 161,513 ========= ========= ========= Increase in obligations: Niantic Bay Fuel Trust and other capital leases .............. $ 2,855 $ 33,537 $ 52,353 ========= ========= =========
The accompanying notes are an integral part of these financial statements. THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
Capital Retained Common Surplus, Earnings Stock Paid In (a) Total -------------- --------------- -------------- -------------- (Thousands of Dollars) Balance at January 1, 1994 .............................. $ 122,229 $ 630,271 $ 750,719 $ 1,503,219 Net income for 1994 ................................. 198,288 198,288 Cash dividends on preferred stock ................... (23,895) (23,895) Cash dividends on common stock ...................... (159,388) (159,388) Capital stock expenses, net ......................... 1,846 1,846 -------------- --------------- -------------- -------------- Balance at December 31, 1994 ............................ 122,229 632,117 765,724 1,520,070 Net income for 1995 ................................. 205,216 205,216 Cash dividends on preferred stock ................... (21,185) (21,185) Cash dividends on common stock ...................... (164,154) (164,154) Loss on the retirement of preferred stock ........... (125) (125) Capital stock expenses, net ......................... 5,864 5,864 -------------- --------------- -------------- -------------- Balance at December 31, 1995 ............................ 122,229 637,981 785,476 1,545,686 Net loss for 1996 ................................... (80,237) (80,237) Cash dividends on preferred stock ................... (15,221) (15,221) Cash dividends on common stock ...................... (138,608) (138,608) Capital stock expenses, net ......................... 1,676 1,676 -------------- --------------- -------------- -------------- Balance at December 31, 1996 ............................ 122,229 639,657 551,410 1,313,296 Net loss for three months ended March 31, 1997 .................................... (6,431) (6,431) Cash dividends on preferred stock ................... (3,805) (3,805) Cash dividends on common stock ...................... (5,990) (5,990) Capital stock expenses, net ......................... 420 420 -------------- --------------- -------------- -------------- Balance at March 31, 1997 (unaudited) ................... $ 122,229 $ 640,077 $ 535,184 $ 1,297,490 ============== =============== ============== ==============
(a) The company has dividend restrictions imposed by its long-term debt agreements. At March 31, 1997 and December 31, 1996, these restrictions totaled approximately $540 million. The accompanying notes are an integral part of these financial statements. F-7 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. About The Connecticut Light and Power Company The Connecticut Light and Power Company and Subsidiaries (the company or CL&P), Western Massachusetts Electric Company (WMECO), Holyoke Water Power Company (HWP), Public Service Company of New Hampshire (PSNH), and North Atlantic Energy Corporation (NAEC) are the operating subsidiaries comprising the Northeast Utilities system (the system) and are wholly owned by Northeast Utilities (NU). The system furnishes retail electric service in Connecticut, New Hampshire, and western Massachusetts through CL&P, PSNH, WMECO, and HWP. A fifth subsidiary, NAEC, sells all of its capacity to PSNH. In addition to its retail service, the system furnishes firm and other wholesale electric services to various municipalities and other utilities. The system serves about 30 percent of New England's electric needs and is one of the 20 largest electric utility systems in the country as measured by revenues. Other wholly owned subsidiaries of NU provide support services for the system companies and in some cases, for other New England utilities. Northeast Utilities Service Company (NUSCO) provides centralized accounting, administrative, information resources, engineering, financial, legal, operational, planning, purchasing, and other services to the system companies. Northeast Nuclear Energy Company (NNECO) acts as agent for the system companies in operating the Millstone nuclear generating facilities. North Atlantic Energy Service Corporation (NAESCO) acts as agent for CL&P and NAEC and has operational responsibilities for the Seabrook nuclear generating facility. B. Presentation General: The consolidated financial statements of CL&P include the accounts of all 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 disclosure 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's data have been made to conform with the current period's presentation. All transactions among affiliated companies are on a recovery of cost basis which may include amounts representing a return F-8 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) on equity, and are subject to approval by various federal and state regulatory agencies. Unaudited Interim Financial Statements: In the opinion of the company, the accompanying interim financial statements contain all adjustments necessary to present fairly the financial position as of March 31, 1997, the results of operations for the three-month periods ended March 31, 1997 and 1996, and the statements of cash flows for the three- month periods ended March 31, 1997 and 1996. All adjustments are of a normal, recurring, nature except those described below in Note 11B. The results of operations for the three-month periods ended March 31, 1997 and 1996 are not necessarily indicative of the results expected for a full year. Certain notes to financial statements have not been updated for the interim periods because there have been no significant events. C. Public Utility Regulation NU is registered with the Securities and Exchange Commission (SEC) as a holding company under the Public Utility Holding Company Act of 1935 (1935 Act), and it and its subsidiaries, including the company, are subject to the provisions of the 1935 Act. Arrangements among the system companies, outside agencies and other utilities covering interconnections, interchange of electric power and sales of utility property are subject to regulation by the Federal Energy Regulatory Commission (FERC) and/or the SEC. The company is subject to further regulation for rates, accounting and other matters by the FERC and/or the Connecticut Department of Public Utility Control (DPUC). D. New Accounting Standards The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which established accounting standards for evaluating and recording asset impairment. The company adopted SFAS 121 as of January 1, 1996. See Note 1H, "Summary of Significant Accounting Policies - Regulatory Accounting and Assets" for further information on the regulatory impacts of the company's adoption of SFAS 121. See Note 10, "Sale of Customer Receivables," and Note 11C, "Commitments and Contingencies-Environmental Matters," for information on newly issued accounting and reporting standards related to those specific areas. The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 129, "Disclosure of Information about Capital Structure" in February 1997. SFAS 129 will be effective for 1997 year-end F-9 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) reporting. Management believes that the implementation of SFAS 129 will not have a material impact on CL&P's financial position or its results of operations. E. Investments and Jointly Owned Electric Utility Plant Regional Nuclear Generating Companies: CL&P owns common stock of four regional nuclear generating companies (Yankee companies). The Yankee companies, with the company's ownership interests are:
------------------------------------------------------------------------ Connecticut Yankee Atomic Power Company (a) (CY)................. 34.5% Yankee Atomic Electric Company (a) (YAEC)........................ 24.5 Maine Yankee Atomic Power Company (MY)........................... 12.0 Vermont Yankee Nuclear Power Corporation (VY).................... 9.5 ------------------------------------------------------------------------
(a) YAEC's and CY's nuclear power plants were shut down permanently on February 26, 1992 and December 4, 1996, respectively. CL&P's investments in the Yankee companies are accounted for on the equity basis due to the company's ability to exercise significant influence over their operating and financial policies. CL&P's investments in the Yankee companies at December 31, 1996 are:
------------------------------------------------------------------------ (Thousands of Dollars) Connecticut Yankee Atomic Power Company............... $36,954 Yankee Atomic Electric Company........................ 5,854 Maine Yankee Atomic Power Company..................... 8,956 Vermont Yankee Nuclear Power Corporation.............. 5,161 ------- $56,925 ------------------------------------------------------------------------
The electricity produced by MY and VY is committed substantially on the basis of ownership interests and is billed pursuant to contractual agreements. Under ownership agreements with the Yankee companies, CL&P may be asked to provide direct or indirect financial support for one or more of the companies. For more information on these agreements, see Note 11F, "Commitments and Contingencies - Long-Term Contractual Arrangements." For more information on the Yankee companies, see Note 3, "Nuclear Decommissioning" and Note 11B, "Commitments and Contingencies- Nuclear Performance." Millstone 1: CL&P has an 81.0 percent joint ownership interest in Millstone 1, a 660-megawatt (MW) nuclear F-10 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) generating unit. As of December 31, 1996 and 1995, plant-in-service included approximately $384.5 million and $372.6 million, respectively, and the accumulated provision for depreciation included approximately $159.4 million and $148.4 million, respectively, for CL&P's share of Millstone 1. CL&P's share of Millstone 1 expenses is included in the corresponding operating expenses on the accompanying Consolidated Statements of Income. Millstone 2: CL&P has an 81.0 percent joint ownership interest in Millstone 2, an 870-MW nuclear generating unit. As of December 31, 1996 and 1995, plant-in-service included approximately $690.4 million and $684.5 million, respectively, and the accumulated provision for depreciation included approximately $224.1 million and $198.5 million, respectively, for CL&P's share of Millstone 2. CL&P's share of Millstone 2 expenses is included in the corresponding operating expenses on the accompanying Consolidated Statements of Income. Millstone 3: CL&P has a 52.93 percent joint ownership interest in Millstone 3, a 1,154-MW nuclear generating unit. As of December 31, 1996 and 1995, plant-in-service included approximately $1.9 billion, and the accumulated provision for depreciation included approximately $504.1 million and $455.1 million, respectively, for CL&P's share of Millstone 3. CL&P's share of Millstone 3 expenses is included in the corresponding operating expenses on the accompanying Consolidated Statements of Income. For more information regarding the Millstone units, see Note 11B, "Commitments and Contingencies-Nuclear Performance." Seabrook 1: CL&P has a 4.06 percent joint ownership interest in Seabrook 1, a 1,148-MW nuclear generating unit. As of December 31, 1996 and 1995, plant-in-service included approximately $173.7 million and $173.3 million, respectively, and the accumulated provision for depreciation included approximately $29.7 million and $24.8 million, respectively, for CL&P's share of Seabrook 1. CL&P's share of Seabrook 1 expenses is included in the corresponding operating expenses on the accompanying Consolidated Statements of Income. F. Depreciation The provision for depreciation is calculated using the straight-line method based on estimated remaining lives of depreciable utility plant- in-service, adjusted for salvage value and removal costs, as approved by the appropriate regulatory agency. Except for major facilities, depreciation rates are applied to the average plant-in-service during the period. Major facilities are depreciated from the time they are placed in service. When plant is retired from service, the original cost of plant, including costs of removal, less salvage, is charged to the accumulated provision for F-11 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) depreciation. The depreciation rates for the several classes of electric plant-in-service are equivalent to a composite rate of 4.0 percent in 1996 and 1995, and 3.9 percent in 1994. See Note 3, "Nuclear Decommissioning," for information on nuclear plant decommissioning. CL&P's nonnuclear generating facilities have limited service lives. Plant may be retired in place or dismantled based upon expected future needs, the economics of the closure and environmental concerns. The costs of closure and removal are incremental costs and, for financial reporting purposes, are accrued over the life of the asset as part of depreciation. At December 31, 1996, the accumulated provision for depreciation included approximately $43 million accrued for the cost of removal, net of salvage for nonnuclear generation property. G. Revenues Other than revenues under fixed-rate agreements negotiated with certain wholesale, industrial and commercial customers and limited pilot retail access programs, utility revenues are based on authorized rates applied to each customer's use of electricity. In general, rates can be changed only through a formal proceeding before the appropriate regulatory commission. At the end of each accounting period, CL&P accrues an estimate for the amount of energy delivered but unbilled. H. Regulatory Accounting and Assets The accounting policies of CL&P and the accompanying consolidated financial statements conform to generally accepted accounting principles applicable to rate regulated enterprises and reflect the effects of the ratemaking process in accordance with SFAS 71, "Accounting for the Effects of Certain Types of Regulation." Assuming a cost-of-service based regulatory structure, regulators may permit incurred costs, normally treated as expenses, to be deferred and recovered through future revenues. Through their actions, regulators may also reduce or eliminate the value of an asset, or create a liability. If any portion of the company's operations were no longer subject to the provisions of SFAS 71, as a result of a change in the cost-of-service based regulatory structure or the effects of competition, the company would be required to write off related regulatory assets and liabilities. Recently, the SEC has questioned the ability of certain utilities to remain on SFAS 71 in light of state legislation regarding the transition to retail competition. The industry expects guidance on this issue from FASB's Emerging Issues Task Force in the near future. While there are restructuring initiatives pending in the NU system companies' respective jurisdictions, CL&P is not yet subject to a transition plan. F-12 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) The company continues to believe that its use of regulatory accounting remains appropriate. SFAS 121 requires the evaluation of long-lived assets, including regulatory assets, for impairment when certain events occur or when conditions exist that indicate the carrying amounts of assets may not be recoverable. SFAS 121 requires that any long-lived assets which are no longer probable of recovery through future revenues be revalued based on estimated future cash flows. If the revaluation is less than the book value of the asset, an impairment loss would be charged to earnings. The implementation of SFAS 121 did not have a material impact on the company's financial position or results of operations as of March 31, 1997 and December 31, 1996. Management continues to believe that it is probable that the company will recover its investments in long-lived assets through future revenues. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in the electric utility industry or if the cost-of-service based regulatory structure were to change. The components of CL&P's regulatory assets are as follows:
------------------------------------------------------------------------ March 31, December 31, 1997 1996 1995 ------------------------------------------------------------------------ (Unaudited) (Thousands of Dollars) Income taxes, net (Note 1I)....... $ 735,844 $ 753,390 $ 863,521 Recoverable energy costs, net (Note 1J)................... 84,541 97,900 9,662 Deferred demand side management costs (Note 1K)................. 76,947 90,129 117,070 Cogeneration costs (Note 1L)...... 58,029 66,205 92,162 Unrecovered contractual obligations (Note 3)............. 281,527 300,627 65,847 Other............................. 60,173 62,530 77,018 ---------- ---------- ---------- $1,297,061 $1,370,781 $1,225,280 ========== ========== ==========
For more information on the company's regulatory environment and the potential impacts of restructuring, see Note 11A, "Commitments and Contingencies-Restructuring" and Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). I. Income Taxes The tax effect of temporary differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of taxable income) is accounted for in accordance with the ratemaking treatment of the applicable regulatory commissions. The adoption of SFAS 109, "Accounting F-13 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) for Income Taxes," in 1993 increased the company's net deferred tax obligation. As it is probable that the increase in deferred tax liabilities will be recovered from customers through rates, CL&P established a regulatory asset. See Note 8, "Income Tax Expense" for the components of income tax expense. The tax effect of temporary differences, including timing differences accrued under previously approved accounting standards, which give rise to the accumulated deferred tax obligation is as follows:
------------------------------------------------------------------------ March 31, December 31, 1997 1996 1995 ------------------------------------------------------------------------ (Unaudited) (Thousands of Dollars) Accelerated depreciation and other plant- related differences...... $1,028,507 $1,032,857 $1,074,242 Regulatory assets - income tax gross up...... 307,999 313,420 347,673 Other...................... 13,373 19,364 64,958 ---------- ---------- ---------- $1,349,879 $1,365,641 $1,486,873 ========== ========== ==========
J. Recoverable Energy Costs Under the Energy Policy Act of 1992 (Energy Act), CL&P is assessed for its proportionate share of the costs of decontaminating and decommissioning uranium enrichment plants owned by the United States Department of Energy (D&D assessment). The Energy Act requires that regulators treat D&D assessments as a reasonable and necessary current cost of fuel, to be fully recovered in rates, like any other fuel cost. CL&P is currently recovering these costs through rates. As of March 31, 1997 and December 31, 1996, the company's total D&D deferrals were approximately $49.2 million. During 1996, retail electric rates included a fuel adjustment clause (FAC) under which fossil fuel prices above or below base-rate levels are charged or credited to customers. In addition, CL&P also utilized a generation utilization adjustment clause (GUAC), which deferred the effect on fuel costs caused by variations from a specified composite nuclear generation capacity factor embedded in base rates. At March 31, 1997 and December 31, 1996, CL&P's net recoverable energy costs, excluding current net recoverable energy costs, were approximately $84.5 million and $97.9 million, respectively, which includes the D&D assessment. For F-14 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) additional information, see Note 11B, "Commitments and Contingencies - Nuclear Performance." On October 8, 1996, the DPUC issued an order establishing an Energy Adjustment Clause (EAC) which became effective January 1, 1997. The EAC has replaced CL&P's existing FAC and GUAC. For further information regarding the EAC, see the MD&A. K. Demand Side Management (DSM) CL&P's DSM costs are recovered in base rates through a Conservation Adjustment Mechanism (CAM). The $90.1 million of costs on CL&P's books as of December 31, 1996, will be fully recovered by 2000. During November, 1996, CL&P filed its 1997 DSM program and forecasted CAM for 1997 with the DPUC. The filing proposes expenditures of $36 million in 1997, with recovery over 1.9 years and a zero CAM rate. In April 1997, the DPUC approved 1997 expenditures of $36 million, a zero CAM rate for 1997 and recovery of the 1997 expenditures over 1.7 years beginning January 1, 1998. L. Cogeneration Costs Beginning on July 1, 1996, the deferred cogeneration balance of approximately $86 million is being amortized over a five year period. An additional $9 million of amortization is being applied to the deferred balance in 1997, as required under a settlement agreement which CL&P reached with the DPUC. CL&P will continue to apply any savings associated with the renegotiation of a certain contract with a cogeneration facility to the deferred balance. Under current expectations, CL&P expects complete amortization of the deferred balance by December 31, 1998. M. Spent Nuclear Fuel Disposal Costs Under the Nuclear Waste Policy Act of 1982, CL&P must pay the United States Department of Energy (DOE) for the disposal of spent nuclear fuel and high-level radioactive waste. Fees for nuclear fuel burned on or after April 7, 1983 are billed currently to customers and paid to the DOE on a quarterly basis. For nuclear fuel used to generate electricity prior to April 7, 1983 (prior-period fuel), payment must be made prior to the first delivery of spent fuel to the DOE. The DOE was originally scheduled to begin accepting delivery of spent fuel in 1998. However, delays in identifying a permanent storage site have continually postponed plans for the DOE's long-term storage and disposal site. The DOE's current estimate for an available site is 2010. Until such payment is made, the outstanding balance will continue to accrue interest at the three-month Treasury Bill Yield Rate. At December 31, 1996, fees due to the DOE for the disposal of prior-period fuel were approximately $158.0 million, including interest costs of $91.5 million. At F-15 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) March 31, 1997, fees due to the DOE for the disposal of incremental fuel were approximately $160 million, including interest costs of $93.5 million. As of March 31, 1997, all fees had been collected through rates. N. Fuel Price Management The company utilizes fuel-price management instruments to manage well defined fuel price risks. Amounts receivable or payable under fuel-price management instruments are recognized in income when realized. Any material unrealized gains or losses on fuel-price management instruments will be deferred until realized. For further information, see Note 12, "Fuel Price Management." 2. LEASES CL&P and WMECO finance up to $450 million of nuclear fuel for Millstone 1 and 2 and their respective shares of the nuclear fuel for Millstone 3 under the Niantic Bay Fuel Trust (NBFT) capital lease agreement. CL&P and WMECO make quarterly lease payments for the cost of nuclear fuel consumed in the reactors, based on a units-of-production method at rates which reflect estimated kilowatt-hours of energy provided, plus financing costs associated with the fuel in the reactors. Upon permanent discharge from the reactors, ownership of the nuclear fuel transfers to CL&P and WMECO. CL&P has also entered into lease agreements, some of which are capital leases, for the use of data processing and office equipment, vehicles, gas turbines, nuclear control room simulators and office space. The provisions of these lease agreements generally provide for renewal options. The following rental payments have been charged to expense:
Year Capital Leases Operating Leases ---- -------------- ---------------- 1996.................. $17,993,000 $22,032,000 1995.................. 56,307,000 23,793,000 1994.................. 60,975,000 24,192,000
Interest included in capital lease rental payments was $10,144,000 in 1996, $10,587,000 in 1995, and $10,228,000 in 1994. Substantially all of the capital lease rental payments were made pursuant to the nuclear fuel lease agreement. Future minimum lease payments under the nuclear fuel capital lease cannot be reasonably estimated on an annual basis due to variations in the usage of nuclear fuel. F-16 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) Future minimum rental payments, excluding annual nuclear fuel lease payments and executory costs, such as property taxes, state use taxes, insurance and maintenance, under long-term noncancelable leases, as of December 31, 1996 are:
Year Capital Leases Operating Leases ---- -------------- ---------------- (Thousands of Dollars) 1997...................... $ 2,800 $ 26,100 1998...................... 2,900 21,500 1999...................... 2,900 19,900 2000...................... 2,900 18,800 2001...................... 3,000 13,700 After 2001................ 66,400 46,400 -------- -------- Future minimum lease payments................ 80,900 $146,400 ======== Less amount representing interest............... 61,900 -------- Present value of future minimum lease payments for other than nuclear fuel............ 19,000 Present value of future nuclear fuel lease payments................ 136,800 -------- Total..................... $155,800 ========
Certain operating lease payments related to NUSCO leases may be accelerated from future years into 1997. See Note 11G, "The Rocky River Realty Company - Obligations" for additional information. On June 21, 1996, CL&P entered into an operating lease with a third party to acquire the use of four turbine generators having an installed cost of approximately $70 million. During the first quarter of 1997, CL&P determined that it would not be in compliance with financial coverage tests required under the lease agreement, based on projections of its 1997 financial results. CL&P has requested waivers of this covenant from the lessor and the matter is pending. If CL&P is unable to renegotiate mutually satisfactory lease revisions, it has sufficient liquidity to purchase the turbines from the lessor. The purchase price would be slightly less than the installed cost. 3. NUCLEAR DECOMMISSIONING CL&P's nuclear power plants have service lives that are expected to end during the years 2010 through 2026. Upon retirement, F-17 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) these units must be decommissioned. Decommissioning studies prepared in 1996 concluded that complete and immediate dismantlement at retirement continues to be the most viable and economic method of decommissioning the three Millstone units and Seabrook 1. Decommissioning studies are reviewed and updated periodically to reflect changes in decommissioning requirements, costs, technology and inflation. The estimated cost of decommissioning CL&P's ownership share of Millstone 1 and 2, in year-end 1996 dollars, is $316.0 million and $279.0 million, respectively. CL&P's ownership share of the estimated cost of decommissioning Millstone 3 and Seabrook 1 in year-end 1996 dollars, is $244.9 million and $18.3 million, respectively. The Millstone units and Seabrook 1 decommissioning costs will be increased annually by their respective escalation rates. Nuclear decommissioning costs are accrued over the expected service life of the units and are included in depreciation expense on the Consolidated Statements of Income. Nuclear decommissioning costs amounted to $37.8 million in 1996, $30.5 million in 1995, and $25.6 million in 1994. Nuclear decommissioning, as a cost of removal, is included in the accumulated provision for depreciation on the Consolidated Balance Sheets. At March 31, 1997 and December 31, 1996, the balance in the accumulated reserve for decommissioning amounted to $341.9 million and $329.1 million, respectively. CL&P has established external decommissioning trusts through a trustee for its portion of the costs of decommissioning Millstone 1, 2, and 3. CL&P's portion of the cost of decommissioning Seabrook 1 is paid to an independent decommissioning financing fund managed by the state of New Hampshire. Funding of the estimated decommissioning costs assume levelized collections for the Millstone units and escalated collections for Seabrook 1 and after- tax earnings on the Millstone and Seabrook decommissioning funds of 5.8 percent and 6.5 percent, respectively. As of March 31, 1997 and December 31, 1996, CL&P has collected, through rates, $250.1 million and $240.8 million, respectively, towards the future decommissioning costs of its share of the Millstone units, of which $215.9 million and $209.1 million, respectively, have been transferred to external decommissioning trusts. As of March 31, 1997 and December 31, 1996, CL&P has paid approximately $2.5 million and $2.4 million, respectively, into Seabrook 1's decommissioning financing fund. Earnings on the decommissioning trusts and financing fund increase the decommissioning trust balance and the accumulated reserve for decommissioning. Unrealized gains and losses associated with the decommissioning trusts and financing fund also impact the balance of the trusts and financing fund and the accumulated reserve for decommissioning. Changes in requirements or technology, the timing of funding or dismantling, or adoption of a decommissioning method other than F-18 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) immediate dismantlement would change decommissioning cost estimates and the amounts required to be recovered. CL&P attempts to recover sufficient amounts through its allowed rates to cover its expected decommissioning costs. Only the portion of currently estimated total decommissioning costs that has been accepted by regulatory agencies is reflected in CL&P's rates. Based on present estimates and assuming its nuclear units operate to the end of their respective license periods, CL&P expects that the decommissioning trusts and financing fund will be substantially funded when the units are retired from service. MY and VY: Each Yankee company owns a single nuclear generating unit. MY and VY have service lives that are expected to end in 2008 and 2012, respectively. The estimated cost, in year-end 1996 dollars, of decommissioning CL&P's ownership share of units owned and operated by MY and VY are $44.3 million and $34.8 million, respectively. Under the terms of the contracts with the Yankee companies, the shareholders-sponsors are responsible for their proportionate share of the operating costs of each unit, including decommissioning. The nuclear decommissioning costs of the Yankee companies are included as part of the cost of power purchased by CL&P. On May 27, 1997, MY announced that it was considering permanent closure of the plant based on economic concerns and uncertainty about the operation of the plant. MY disclosed that it would reduce spending to a level that would preserve the option of restarting the plant or closing it. For further information on MY, see Note 11B, "Commitments and Contingencies - Nuclear Performance." CY and YAEC: On December 4, 1996, the board of directors of CY voted unanimously to cease permanently the production of power at its nuclear plant. The system companies relied on CY for approximately three percent of their capacity. CY has undertaken a number of regulatory filings intended to implement the decommissioning and the recovery of remaining assets of CY. During late December, 1996, CY filed an amendment to its power contracts to clarify the obligations of its purchasing utilities following the decision to cease power production. At December 31, 1996, the estimated obligation, including decommissioning, amounted to $762.8 million of which CL&P's share was approximately $263.2 million. On February 27, 1997, FERC approved an order for hearing which, among other things, accepted CY's contract amendments for filing and suspended the new rates for a nominal period. The new rates became effective March 1, 1997, subject to refund. At March 31, 1997, CL&P's share of the CY unrecovered contractual obligation, which also has been recorded as a regulatory asset, was $248.3 million. F-19 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) YAEC is in the process of decommissioning its nuclear facility. At December 31, 1996, the estimated remaining costs, including decommissioning, amounted to $173.3 million of which CL&P's share was approximately $42.5 million. At March 31, 1997, CL&P's share of the YAEC unrecovered contractual obligation was $33.2 million. Management expects that CL&P will continue to be allowed to recover these costs from its customers. Accordingly, CL&P has recognized these costs as regulatory assets, with corresponding obligations, on its Consolidated Balance Sheets. Proposed Accounting: The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry, including the company, regarding the recognition, measurement and classification of decommissioning costs for nuclear generating units in the financial statements. In response to these questions, FASB agreed to review the accounting for removal costs, including decommissioning, and issued a proposed statement entitled "Accounting for Liabilities Related to Closure or Removal of Long-Lived Assets," in February, 1996. If current electric utility industry accounting practices for decommissioning are changed in accordance with the proposed statement: (1) annual provisions for decommissioning could increase, (2) the estimated cost for decommissioning could be recorded as a liability with an offset to plant rather than as part of accumulated depreciation, and (3) trust fund income from the external decommissioning trusts could be reported as investment income rather than as a reduction to decommissioning expense. 4. SHORT-TERM DEBT Limits: The amount of short-term borrowings that may be incurred by CL&P is subject to periodic approval by either the SEC under the 1935 Act or by its state regulator. In addition, the charter of CL&P contains provisions restricting the amount of short-term debt borrowings. Under the SEC and/or charter restrictions, the company was authorized, as of January 1, 1997, to incur short-term borrowings up to a maximum of $375 million. Credit Agreements: In November, 1996, NU entered into a three-year revolving credit agreement (New Credit Agreement) with a group of 12 banks. Under the terms of the New Credit Agreement, NU, CL&P and WMECO will be able to borrow up to $150 million, $313.75 million, and $150 million, respectively. The overall limit for all of the borrowing system companies under the entire New Credit Agreement is $313.75 million. The system companies are currently obligated to pay a facility fee of .50 percent per annum of each bank's total commitment under the new credit facility which will expire November 21, 1999. At December 31, 1996 there were $27.5 million in borrowings under this agreement, F-20 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) all of which were borrowed by other system companies. At March 31, 1997, there were no borrowings under this agreement. Access to the New Credit Agreement is contingent upon certain financial tests being met. NU is currently renegotiating these restrictions so that the financial impacts of the current nuclear outages do not impact the ability to access these facilities. Through February 21, 1997, CL&P and WMECO have satisfied all financial covenants required under their respective borrowing facilities, but NU needed and obtained a limited waiver of an interest coverage covenant that had to be satisfied for NU to borrow under the New Credit Agreement. NU, CL&P, and WMECO are currently maintaining their access to the New Credit Agreement under an interim written agreement, under which NU agreed not to borrow more than $27.5 million against the facility. On May 30, 1997, the First Amendment and Waiver became effective, replacing the interim written agreement and amending the New Credit Agreement. This closing permitted $313.75 million of credit to remain available to CL&P and WMECO through securing their borrowings with first mortgage bonds. Interest coverage and common equity ratios were revised to enable the companies to meet certain financial tests. CL&P will be able to borrow up to $225 million on the strength of bonds it has provided as collateral for borrowings under this agreement. WMECO will be able to borrow up to $90 million on the basis of bonds it has provided as collateral and the NU parent company, which as a holding company cannot issue first mortgage bonds, will be able to borrow up to $50 million if CL&P, WMECO, and NU consolidated financial statements meet certain interest coverage tests for two consecutive quarters. In addition to the New Credit Agreement, NU, CL&P, WMECO, HWP, NNECO and The Rocky River Realty Company (RRR) have various revolving credit lines through separate bilateral credit agreements. Under the remaining three- year portion of the facility, four banks maintain commitments to the respective system companies totaling $56.25 million. NU, CL&P and WMECO may borrow up to the aggregate $56.25 million, whereas HWP, NNECO and RRR may borrow up to their short-term debt limit of $5 million, $50 million and $22 million, respectively. Under the terms of the agreement, the system companies are obligated to pay a facility fee of .15 percent per annum of each bank's total commitment under the three-year portion of the facility. These commitments will expire December 3, 1998. At December 31, 1996 and 1995, there were $11.3 million and $42.5 million in borrowings, respectively, under the facility, of which CL&P had no borrowings in 1996 and $10 million in borrowings in 1995. At March 31, 1997, there were $11.3 million in borrowings under the facility, of which CL&P had no borrowings. F-21 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) Under both credit facilities above, the company may borrow funds on a short-term revolving basis under the remaining portion of its agreement, using either fixed-rate loans or standby loans. Fixed rates are set using competitive bidding. Standby loans are based upon several alternative variable rates. The weighted average annual interest rate on CL&P's notes payable to banks outstanding at December 31, 1995 was 6.0 percent. Maturities of CL&P's short-term debt obligations are for periods of three months or less. Money Pool: Certain subsidiaries of NU, including CL&P, are members of the Northeast Utilities System Money Pool (Pool). The Pool provides a more efficient use of the cash resources of the system, and reduces outside short-term borrowings. NUSCO administers the Pool as agent for the member companies. Short-term borrowing needs of the member companies are first met with available funds of other member companies, including funds borrowed by NU parent. NU parent may lend to the Pool but may not borrow. Funds may be withdrawn from or repaid to the Pool at any time without prior notice. Investing and borrowing subsidiaries receive or pay interest based on the average daily Federal Funds rate. However, borrowings based on loans from NU parent bear interest at NU parent's cost and must be repaid based upon the terms of NU parent's original borrowing. At March 31, 1997 and December 31, 1996, CL&P had no borrowings outstanding from the Pool. At December 31, 1995, CL&P had $10.3 million of borrowings outstanding from the Pool. The interest rate on borrowings from the Pool on December 31, 1995 was 4.7 percent. For further information on short-term debt see the MD&A. F-22 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) 5. PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION Details of preferred stock not subject to mandatory redemption are:
Shares December 31, Outstanding 1996 at 3/31/97 March 31, December 31, Redemption and 1997 ---------------------------- Description Price 12/31/96 (Unaudited) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------- (Thousands of Dollars) $1.90 Series of 1947........ $52.50 163,912 $ 8,196 $ 8,196 $ 8,196 $ 8,196 $2.00 Series of 1947........ 54.00 336,088 16,804 16,804 16,804 16,804 $2.04 Series of 1949........ 52.00 100,000 5,000 5,000 5,000 5,000 $2.06 Series E of 1954...... 51.00 200,000 10,000 10,000 10,000 10,000 $2.09 Series F of 1955...... 51.00 100,000 5,000 5,000 5,000 5,000 $2.20 Series of 1949........ 52.50 200,000 10,000 10,000 10,000 10,000 $3.24 Series G of 1968...... 51.84 300,000 15,000 15,000 15,000 15,000 3.90% Series of 1949........ 50.50 160,000 8,000 8,000 8,000 8,000 4.50% Series of 1956........ 50.75 104,000 5,200 5,200 5,200 5,200 4.50% Series of 1963........ 50.50 160,000 8,000 8,000 8,000 8,000 4.96% Series of 1958........ 50.50 100,000 5,000 5,000 5,000 5,000 5.28% Series of 1967........ 51.43 200,000 10,000 10,000 10,000 10,000 6.56% Series of 1968........ 51.44 200,000 10,000 10,000 10,000 10,000 1989 Adjustable Rate DARTS.. - - - - - 50,000 Total preferred stock not subject to mandatory redemption $116,200 $116,200 $116,200 $166,200 ======== ======== ======== ========
All or any part of each outstanding series of such preferred stock may be redeemed by the company at any time at established redemption prices plus accrued dividend to the date of redemption. F-23 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) 6. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION Details of preferred stock subject to mandatory redemption are:
Shares December 31, Outstanding 1996 at 3/31/97 March 31, December 31, Redemption and 1997 --------------------------- Description Price* 12/31/96 (Unaudited) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------- (Thousands of Dollars) 9.00% Series of 1989........ - - $ - $ - $ - $ 75,000 7.23% Series of 1992........ $52.41 1,500,000 75,000 75,000 75,000 75,000 5.30% Series of 1993........ $51.00 1,600,000 80,000 80,000 80,000 80,000 -------- -------- -------- -------- $155,000 $155,000 $155,000 $230,000 ======== ======== ======== ======== Less preferred stock to be redeemed within one year............ - - - 3,750 Total preferred stock subject to mandatory redemption................. $155,000 $155,000 $155,000 $226,250 ======== ======== ======== ========
*Each of these series is subject to certain refunding limitations for the first five years after they were issued. Redemption prices reduce in future years. The following table details redemption and sinking fund activity for preferred stock subject to mandatory redemption:
Minimum Annual Shares Reacquired Sinking-Fund ---------------------------- Series Requirement 1996 1995 1994 - ------------------------------------------------------------------------------------ (Thousand of Dollars) 9.00% Series of 1989 $ - - 3,000,000 - 7.23% Series of 1992 (1) 3,750 - - - 5.30% Series of 1993 (2) 16,000 - - -
(1) Sinking fund requirements commence September 1, 1998. (2) Sinking fund requirements commence October 1, 1999. F-24 The Connecticut Light and Power Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------ (Information Subsequent to December 31, 1996 is Unaudited) The minimum sinking-fund provisions of the series subject to mandatory redemption, for the years 1998 through 2001, aggregate approximately $3.8 million in 1998, and $19.8 million in 1999, 2000 and 2001. There were no minimum sinking-fund provisions in 1997. In case of default on sinking- fund payments or the payment of dividends, no payments may be made on any junior stock by way of dividends or otherwise (other than in shares of junior stock) so long as the default continues. If the company is in arrears in the payment of dividends on any outstanding shares of preferred stock, the company would be prohibited from redemption or purchase of less than all of the preferred stock outstanding. All or part of each of the series named above may be redeemed by the company at any time at established redemption prices plus accrued dividends to the date of redemption, subject to certain refunding limitations. 7. LONG-TERM DEBT Details of long-term debt outstanding are:
March 31, December 31, 1997 ---------------------- (Unaudited) 1996 1995 - ------------------------------------------------------------------------ (Thousands of Dollars) First Mortgage Bonds: 7 5/8% Series UU due 1997....... $ 193,288 $ 193,288 $ 197,245 6 1/2% Series T due 1998....... 20,000 20,000 20,000 7 1/4% Series VV due 1999....... 99,000 99,000 100,000 5 1/2% Series A due 1999....... 140,000 140,000 140,000 5 3/4% Series XX due 2000....... 200,000 200,000 200,000 7 7/8% Series A due 2001....... 160,000 160,000 - 6 1/8% Series B due 2004....... 140,000 140,000 140,000 7 3/8% Series TT due 2019....... 20,000 20,000 20,000 7 1/2% Series YY due 2023....... 100,000 100,000 100,000 8 1/2% Series C due 2024....... 115,000 115,000 115,000 7 7/8% Series D due 2024....... 140,000 140,000 140,000 7 3/8% Series ZZ due 2025....... 125,000 125,000 125,000 ---------- ---------- ---------- Total First Mortgage Bonds 1,452,288 1,452,288 1,297,245 Pollution Control Notes: Variable rate, due 2016-2022.... 46,400 46,400 46,400 Tax exempt, due 2028-2031....... 377,500 377,500 315,500 Fees and interest due for spent fuel disposal costs (Note 1M)................. 160,000 157,968 149,978 Other............................. 10,904 10,915 20,286 Less amounts due within one year........................ 224,116 204,116 9,372 Unamortized premium and discount, net................... (6,319) (6,550) (7,391) ---------- ---------- ---------- Long-term debt, net $1,816,657 $1,834,405 $1,812,646 ========== ========== ==========
F-25 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) Long-term debt and cash sinking-fund requirements on debt outstanding at December 31, 1996 for the years 1997 through 2001 are approximately $204.1 million, $20.0 million, $239.0 million, $200.0 million, and $160.0 million, respectively. In addition, there are annual one-percent sinking-and improvement-fund requirements, currently amounting to $14.5 million for 1997, $12.6 million for 1998, $12.4 million for 1999, $10.0 million for 2000, and $8.0 million for 2001. Such sinking- and improvement-fund requirements may be satisfied by the deposit of cash or bonds or by certification of property additions. All or any part of each outstanding series of first mortgage bonds may be redeemed by the company at any time at established redemption prices plus accrued interest to the date of redemption, except certain series which are subject to certain refunding limitations during their respective initial five-year redemption periods. Essentially all of the company's utility plant is subject to the lien of its first mortgage bond indenture. As of December 31, 1996 and 1995, the company has secured $315.5 million of pollution control notes with second mortgage liens on Millstone 1, junior to the lien of its first mortgage bond indenture. The average effective interest rate on the variable-rate pollution control notes ranged from 3.4 percent to 3.6 percent for 1996 and from 3.8 percent to 4.0 percent for 1995. On January 23, 1997, the letter of credit associated with CL&P's $62 million tax-exempt PCRBs, issued on May 21, 1996, was replaced with a bond insurance and liquidity facility secured by First Mortgage Bonds. The bonds were originally backed by a five-year letter of credit and secured by a second mortgage on CL&P's interest in Millstone 1. Downgrade Events: On April 28, 1997, Moody's Investors Service (Moody's) announced that it was downgrading both CL&P's and WMECO's first mortgage bonds from their "Baa3" rating to a "Ba1" rating. This rating change has placed CL&P's and WMECO's first mortgage bonds in Moody's below investment grade category. On May 22, 1997, Standard and Poor's Corporation (S&P) announced that it was downgrading both CL&P's and WMECO's corporate credit and its senior secured debt from their rating of "BBB-" to "BB+." This rating change has placed CL&P's and WMECO's first mortgage bonds in S&P'S below investment grade category. F-26 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) 8. INCOME TAX EXPENSE The components of the federal and state income tax provisions charged to operations are:
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended For the Years Ended March 31, December 31, 1997 1996 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ (Unaudited) (Thousands of Dollars) Current income taxes: Federal ........................................... $ 7,268 $ 48,625 $ 30,650 $ 93,906 $ 108,371 State ............................................. 39 16,510 9,789 37,898 39,966 ------- -------- -------- --------- --------- Total current.................................... 7,307 65,135 40,439 131,804 148,337 ------- -------- -------- --------- --------- Deferred income taxes, net: Federal ........................................... (3,206) (25,611) (38,680) 52,075 44,180 State.............................................. (1,328) (8,668) (14,726) 5,085 842 ------- -------- -------- --------- --------- Total deferred................................... (4,534) (34,279) (53,406) 57,160 45,022 Investment tax credits, net ........................... (1,842) (1,842) (7,367) (7,640) (7,358) ------- -------- -------- --------- --------- Total income tax expense ........................ $ 931 $ 29,014 $(20,334) $ 181,324 $ 186,001 ======= ======== ======== ========= ========= The components of total income tax expense are classified as follows: Income taxes charged to operating expenses .................................. $ 836 $ 28,527 $(20,174) $ 178,346 $ 190,249 Other income taxes .................................... 95 487 (160) 2,978 (4,248) ------- -------- -------- --------- --------- Total income tax expense .............................. $ 931 $ 29,014 $(20,334) $ 181,324 $ 186,001 ======= ======== ======== ========= =========
Deferred income taxes are comprised of the tax effects of temporary differences as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended For the Years Ended March 31, December 31, 1997 1996 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Thousands of Dollars) Depreciation, leased nuclear fuel, settlement credits and disposal costs ............................. $ 2,257 $ (250) $ 3,981 $ 44,278 $ 38,874 Energy adjustment clauses .................... (12,892) (21,489) (1,654) 23,302 14,465 Demand-side management ....................... (7,589) (9,406) (17,099) 1,310 203 Nuclear plant deferrals ...................... 5,204 (3,379) (18,861) (8,055) (20,452) Bond redemptions ............................. (401) (469) (1,789) (2,255) 6,826 Contractual settlements ...................... 438 665 2,513 (9,496) 109 Nuclear compliance reserves .................. 9,440 -- (21,131) -- -- Other ........................................ (991) 49 634 8,076 4,997 -------- -------- -------- -------- -------- Deferred income taxes, net ................... $ (4,534) $(34,279) $(53,406) $ 57,160 $ 45,022 ======== ======== ======== ======== ========
F-27 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) A reconciliation between income tax expense and the expected tax expense at the applicable statutory rate is as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended For the Years Ended March 31, December 31, 1997 1996 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Thousands of Dollars) Expected federal income tax at 35 percent of pretax income .............. $(2,047) $ 21,653 $(35,931) $ 135,289 $ 134,501 Tax effect of differences: State income taxes, net of federal benefit ........................ (838) 5,097 (3,209) 27,939 26,526 Depreciation ............................. 4,869 4,942 21,313 23,517 18,602 Deferred nuclear plants return ........... (13) (157) (444) (1,639) (4,681) Amortization of regulatory assets ...................... 1,219 698 8,601 20,218 19,755 Property tax ............................. -- -- -- (159) 5,286 Investment tax credit amortization ........................... (1,842) (1,842) (7,367) (7,640) (7,358) Adjustment for prior years' taxes .................................. -- -- -- (10,442) (2,706) Other, net ............................... (417) (1,377) (3,297) (5,759) (3,924) ------- -------- -------- --------- --------- Total income tax expense ................... $ 931 $ 29,014 $(20,334) $ 181,324 $ 186,001 ======= ======== ======== ========= =========
9. EMPLOYEE BENEFITS A. Pension Benefits The company participates in a uniform noncontributory defined benefit retirement plan covering all regular system employees. Benefits are based on years of service and the employees' highest eligible compensation during 60 consecutive months of employment. The company's direct portion of the system's pension income, part of which was credited to utility plant, approximated $8.8 million in 1996, $10.4 million in 1995 and $2.3 million in 1994. The company's pension costs for 1996, 1995, and 1994 included approximately $2.8 million, $0.1 million, and $4.8 million, respectively, related to workforce reduction programs. Currently, the company funds annually an amount at least equal to that which will satisfy the requirements of the Employee Retirement Income Security Act and the Internal Revenue Code. Pension costs are determined using market-related values of pension assets. Pension assets are invested primarily in domestic and international equity securities and bonds. F-28 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) The components of net pension cost for CL&P are:
------------------------------------------------------------------------------------------------------------------------- For the Years Ended December 31, 1996 1995 1994 ------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Service cost ........................... $ 11,896 $ 7,543 $ 13,072 Interest cost .......................... 37,226 37,110 36,103 Return on plan assets .................. (103,248) (138,582) 1,020 Net amortization ....................... 45,300 83,516 (52,536) --------- --------- -------- Net pension income ..................... (8,826) $ (10,413) $ (2,341) ========= ========= ========
For calculating pension cost, the following assumptions were used:
-------------------------------------------------------------------------------------------------------------------------- For the Years Ended December 31, 1996 1995 1994 -------------------------------------------------------------------------------------------------------------------------- Discount rate .......................... 7.50% 8.25% 7.75% Expected long-term rate of return ....................... 8.75 8.50 8.50 Compensation/progression rate ................................. 4.75 5.00 4.75
The following table represents the plan's funded status reconciled to the Consolidated Balance Sheets:
------------------------------------------------------------------------------------------------------------------------------ At December 31, 1996 1995 ------------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Accumulated benefit obligation, including vested benefits at December 31, 1996 and 1995 of $405,340,000 and $404,540,000, respectively ............. $ 434,473 $ 432,987 ========= ========= Projected benefit obligation .............................. $ 514,989 $ 515,121 Market value of plan assets ............................... 736,448 668,929 --------- --------- Market value in excess of projected benefit obligation .... 221,459 153,808 Unrecognized transition amount ............................ (7,365) (8,285) Unrecognized prior service costs .......................... 3,818 1,293 Unrecognized net gain ..................................... (198,088) (135,817) --------- --------- Prepaid pension asset ..................................... $ 19,824 $ 10,999 ========= =========
F-29 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) The following actuarial assumptions were used in calculating the plan's year-end funded status:
-------------------------------------------------------------------------- At December 31, 1996 1995 -------------------------------------------------------------------------- Discount rate ............................ 7.75% 7.50% Compensation/progression rate ............ 4.75 4.75
B. Postretirement Benefits Other Than Pensions The company provides certain health care benefits, primarily medical and dental, and life insurance benefits through a benefit plan to retired employees (referred to as SFAS 106 benefits). These benefits are available for employees retiring from the company who have met specified service requirements. For current employees and certain retirees, the total SFAS 106 benefit is limited to two times the 1993 per-retiree health care costs. The SFAS 106 obligation has been calculated based on this assumption. CL&P's direct portion of SFAS 106 benefits, part of which were deferred or charged to utility plant, approximated $17.9 million in 1996, $20.7 million in 1995 and $22.3 million in 1994. During 1996 and 1995, the company funded SFAS 106 postretirement costs through external trusts. The company is funding, on an annual basis, amounts that have been rate-recovered and which also are tax deductible under the Internal Revenue Code. The trust assets are invested primarily in equity securities and bonds. The components of health care and life insurance cost are:
-------------------------------------------------------------------------- For the Years Ended December 31, 1996 1995 1994 -------------------------------------------------------------------------- (Thousands of Dollars) Service cost ........................ $ 2,270 $ 2,248 $ 2,371 Interest cost ....................... 10,211 11,510 12,157 Return on plan assets ............... (2,904) (1,015) 2 Amortization of unrecognized transition obligation ............. 7,344 7,344 7,344 Other amortization, net ............. 956 602 430 -------- -------- ------- Net health care and life insurance costs ................... $ 17,877 $ 20,689 $22,304 ======== ======== =======
F-30 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) For calculating SFAS 106 benefit costs, the following assumptions were used:
-------------------------------------------------------------------------- For the Years Ended December 31, 1996 1995 1994 -------------------------------------------------------------------------- Discount rate ...................... 7.50% 8.00% 7.75% Long-term rate of return - Health assets, net of tax ........ 5.25 5.00 5.00 Life assets ...................... 8.75 8.50 8.50
The following table represents the plan's funded status reconciled to the Consolidated Balance Sheets:
-------------------------------------------------------------------------- At December 31, 1996 1995 -------------------------------------------------------------------------- (Thousands of Dollars) Accumulated postretirement benefit obligation of: Retirees ................................ $ 109,299 $ 126,624 Fully eligible active employees ......... 165 198 Active employees not eligible to retire ............................. 27,913 29,798 --------- --------- Total accumulated postretirement benefit obligation ..................... 137,377 156,620 Market value of plan assets .............. 38,783 11,378 --------- --------- Accumulated postretirement benefit obligation in excess of plan assets ............................ (98,594) (145,242) Unrecognized transition amount ........... 117,506 124,850 Unrecognized net (gain)/loss ............. (18,912) 1,260 --------- --------- Accrued postretirement benefit liability .............................. $ 0 $ (19,132) ========= ========= --------------------------------------------------------------------------
The following actuarial assumptions were used in calculating the plan's year-end funded status:
-------------------------------------------------------------------------- At December 31, 1996 1995 -------------------------------------------------------------------------- Discount rate.......................... 7.75% 7.50% Health care cost trend rate (a)........ 7.23 8.40
(a) The annual growth in per capita cost of covered health care benefits was assumed to decrease to 4.91 percent by 2001. F-31 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) The effect of increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996, by $7.6 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $600,000. The trust holding the health plan assets is subject to federal income taxes at a 39.6 percent tax rate. CL&P is currently recovering SFAS 106 costs. 10. SALE OF CUSTOMER RECEIVABLES CL&P has entered into an agreement to sell up to $200 million of eligible customer billed and unbilled accounts receivable. The eligible receivables are sold with limited recourse. The agreement was entered into during July, 1996 and will expire in five years. The company has retained collection responsibilities for receivables which have been sold under the agreement. The agreement provides for a loss reserve determined by a formula which reflects credit exposure. There were no accounts receivable sold under the agreement as of December 31, 1996. As of March 31, 1997, CL&P had sold approximately $200 million of its accounts receivable under the agreement. The FASB issued SFAS 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," in June, 1996. SFAS 125 became effective on January 1, 1997, and establishes, in part, criteria for concluding whether a transfer of financial assets in exchange for consideration should be accounted for as a sale or as a secured borrowing. At present, CL&P is required to record the sales of its customer accounts receivable as secured short-term borrowings. CL&P is currently in the process of restructuring its accounts receivable sales agreement so that CL&P may treat this transaction as a sale as permitted under SFAS 125. Management believes that the adoption of SFAS 125 will not have a material impact on the company's financial position or results of operations. 11. COMMITMENTS AND CONTINGENCIES A. Restructuring Although CL&P continues to operate under cost-of-service based regulation, various restructuring initiatives in its jurisdiction have created uncertainty with respect to future rates and the recovery of strandable investments and certain future costs such as purchase power obligations. Strandable investments are regulatory assets or other assets that would not be economical in a competitive environment. Management is unable to predict the ultimate outcome of restructuring initiatives; however, it believes that it is entitled to full recovery of its prudently incurred costs, including regulatory assets and strandable investments based on the F-32 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) general nature of public utility cost of service regulation. For further information on restructuring, see the MD&A. B. Nuclear Performance Millstone: The three Millstone units are managed by NNECO. Millstone 1, 2, and 3 have been out of service since November 4, 1995, February 21, 1996 and March 30, 1996, respectively, and are on the Nuclear Regulatory Commission's (NRC) watch list. The company has restructured its nuclear organization and is currently implementing comprehensive plans to restart the units. Millstone 3 has been designated as the lead unit for restart. Millstone 2 remains on a schedule to be ready for restart shortly after Millstone 3. To provide the resources and focus for Millstone 3, the work on the restart of Millstone 1 will be reduced until late in 1997 when the full work effort will be resumed. Management believes that Millstone 3 will be ready for restart around the end of the third quarter of 1997, Millstone 2 in the fourth quarter of 1997 and Millstone 1 in the first quarter of 1998. Because of the need for completion of independent inspections and reviews and for the Nuclear Regulatory Commission (NRC) to complete its processes before the NRC Commissioners can vote on permitting a unit to restart, the actual beginning of operations is expected to take several months beyond the time when a unit is declared ready for restart. The NRC's internal schedules at present indicate that a meeting of the Commissioners to act upon a Millstone 3 restart request could occur by mid-December if NU, the independent review teams and NRC staff concur that the unit is ready for restart by that time. Management hopes that Millstone 3 can begin operating by the end of 1997. The company is currently incurring substantial costs, including replacement power costs, while the three Millstone units are not operating. Management does not expect to recover a substantial portion of these costs. CL&P expensed approximately $143 million of incremental nonfuel nuclear operation and maintenance costs (O&M) in 1996, including a reserve of $50 million against 1997 expenditures. At year- end management estimated that CL&P will expense approximately $309 million of nonfuel O&M costs in 1997. Based on a recent review of the work efforts and budgets, management believes that the overall 1997 nuclear spending levels - both nuclear operations and maintenance (O&M) expenditures and associated support services and capital expenditures - will be approximately the same as previously estimated. However, 1997 nuclear O&M expenditures and related support services are expected to increase slightly, while 1997 capital expenditures are expected to decrease. Management F-33 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) also believes that it is possible that 1997 nuclear spending will increase somewhat as the detailed work needed to restore the units to service progresses. CL&P expensed approximately $69 million of non-fuel nuclear operation and maintenance costs in the first quarter of 1997. An additional $22.6 million was expended in the first quarter of 1997 and charged against the reserve established in 1996. The balance of the reserve at March 31, 1997 was $31 million. Management will continue to evaluate the costs to be incurred for the remainder of 1997 and in 1998 to determine whether adjustments to the existing reserves are required. A portion of the increased nuclear O&M expenditures in 1997 will be reserved in the second quarter of 1997. As discussed above, management cannot predict when the NRC will allow any of the Millstone units to return to service and thus cannot estimate the total replacement power costs the companies will ultimately incur. Replacement power costs incurred by CL&P attributable to the Millstone outages averaged approximately $28 million per month during the first quarter of 1997, and are projected to average approximately $24 million per month for the remainder of 1997. Management believes the system has sufficient resources to fund the restoration of the Millstone units to service under its present timetable. Prudence Investigation: In response to motions filed by various intervenors, the Connecticut Department of Public Utility Control (DPUC) on June 27, 1997 orally granted summary judgment in CL&P's prudence docket, disallowing recovery of costs associated with the ongoing outages at Millstone. CL&P has projected that its share of the total costs for the Millstone outages, including replacement power, operation and maintenance and capacity reliability projects, will be about $990 million. CL&P had not requested cost recovery and had said that it did not expect to seek recovery for a substantial portion of these costs and did not intend to request any cost recovery until the units had returned to operation. Any requests for recovery would include only costs for projects CL&P would have undertaken under normal operating conditions or that provide long-term value for CL&P customers. CL&P currently expects to appeal the decision to the Connecticut Superior Court. CL&P does not expect this decision to have a material financial impact on projected 1997 results. MY: The system companies rely on MY for approximately two percent of their capacity. The MY nuclear generating plant has been limited to operating at 90 percent of capacity since early 1996, pending the resolution of issues related to investigations initiated by the NRC, and on December 6, 1996, was taken off line to resolve cable-separation and associated issues. The NRC has notified MY that the NRC staff has placed the MY plant on its watch list. Returning the plant to service would require NRC approval. Management cannot predict if or when MY's plant will be allowed to return to service. The owners of MY are evaluating a range of options, including closure of the plant, with respect to MY's future operations, and have curtailed expenditures pending resolution of this evaluation. CL&P's monthly replacement power costs attributable to MY being out of service are projected to average approximately $1.5 million. Potential Litigation: The non-NU owners of Millstone 3 have been paying their share of the monthly costs for Millstone 3 since the unit went out of service in March, 1996, but have reserved their rights to contest whether the NU system companies have any responsibility for the additional costs the non-NU owners have borne as a result of the current F-34 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) outage. No formal claims have been made, but management believes that it is possible that some or all of the non-NU owners will assert liability on the part of the NU system. CL&P and WMECO, through NNECO as agent, operate Millstone 3 at cost, and without profit, under a Sharing Agreement that obligates them to utilize good utility operating practice and requires the joint owners to share the risk of employee negligence and other risks pro rata in accordance with their ownership shares. The Sharing Agreement provides that CL&P and WMECO would only be liable for damages to the non-NU owners for a deliberate breach of the Sharing Agreement. At December 31, 1996, the costs related to this potential litigation were estimated to be $10.5 million for incremental O&M costs and between $32 million and $40 million for replacement power costs. At March 31, 1997, the costs related to this potential litigation were estimated to be $13 million for incremental O&M costs and between $49 million and $57 million for replacement power costs. These costs are likely to increase as long as Millstone 3 remains out of service. NU would vigorously contest such suits if they are brought. C. Environmental Matters CL&P is subject to regulation by federal, state and local authorities with respect to air and water quality, the handling and disposal of toxic substances and hazardous and solid wastes, and the handling and use of chemical products. CL&P has an active environmental auditing and training program and believes that it is in substantial compliance with current environmental laws and regulations. Environmental requirements could hinder the construction of new generating units, transmission and distribution lines, substations, and other facilities. Changing environmental requirements could also require extensive and costly modifications to CL&P's existing generating units and transmission and distribution systems, and could raise operating costs significantly. As a result, CL&P may incur significant additional environmental costs, greater than amounts included in cost of removal and other reserves, in connection with the generation and transmission of electricity and the storage, transportation and disposal of by-products and wastes. CL&P may also encounter significantly increased costs to remedy the environmental effects of prior waste handling activities. The cumulative long-term cost impact of increasingly stringent environmental requirements cannot accurately be estimated. CL&P has recorded a liability based upon currently available information for what it believes are its estimated environmental remediation costs for waste disposal sites. In most cases, additional future environmental cleanup costs are not reasonably estimable due to a number of factors, including the unknown magnitude of possible contamination, F-35 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) the appropriate remediation methods, the possible effects of future legislation or regulation and the possible effects of technological changes. At December 31, 1996, the net liability recorded by CL&P for its estimated environmental remediation costs, excluding any possible insurance recoveries or recoveries from third parties, amounted to approximately $7.5 million, which management has determined to be the most probable amount within the range of $7.5 million to $14.0 million. On October 10, 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1, "Environmental Remediation Liabilities" (SOP). The principal objective of the SOP is to improve the manner in which existing authoritative accounting literature is applied by entities to specific situations of recognizing, measuring and disclosing environmental remediation liabilities. The SOP became effective January 1, 1997. The adoption of the SOP resulted in a $400 thousand increase to CL&P's environmental reserve. At March 31, 1997, CL&P's net liability recorded for its estimated environmental remediation costs, excluding any possible insurance recoveries or recoveries from third parties, amounted to approximately $7.6 million, which management has determined to be the most probable amount within the range of $7.6 million to $13.4 million. CL&P cannot estimate the potential liability for future claims, including environmental remediation costs, that may be brought against it. However, considering known facts, existing laws and regulatory practices, management does not believe the matters disclosed above will have a material effect on CL&P's financial position or future results of operations. D. Nuclear Insurance Contingencies Under certain circumstances, in the event of a nuclear incident at one of the nuclear facilities covered by the federal government's third- party liability indemnification program, the company could be assessed in proportion to its ownership interest in each nuclear unit up to $75.5 million, not to exceed $10.0 million per nuclear unit in any one year. Based on its ownership interest in Millstone 1, 2, and 3 and in Seabrook 1, CL&P's maximum liability, including any additional potential assessments, would be $173.6 million per incident. In addition, through power purchase contracts with MY, VY and CY, CL&P would be responsible for up to an additional $44.4 million per incident. Payments for CL&P's ownership interest in nuclear generating facilities would be limited to a maximum of $27.5 million per incident per year. F-36 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) Insurance has been purchased to cover the primary cost of repair, replacement or decontamination of utility property resulting from insured occurrences. CL&P is subject to retroactive assessments if losses exceed the accumulated funds available to the insurer. The maximum potential assessment against CL&P with respect to losses arising during the current policy year was approximately $10.4 million under the primary property insurance program at December 31, 1996. Based on the most recent renewal, the maximum potential assessment against CL&P with respect to losses arising during the current policy year is approximately $11.2 million under the primary property insurance program at March 31, 1997. Insurance has been purchased to cover certain extra costs incurred in obtaining replacement power during prolonged accidental outages and the excess cost of repair, replacement, or decontamination or premature decommissioning of utility property resulting from insured occurrences. CL&P is subject to retroactive assessments if losses exceed the accumulated funds available to the insurer. The maximum potential assessments against the company with respect to losses arising during current policy years are approximately $9 million under the replacement power policies and $20.4 million under the excess property damage, decontamination and decommissioning policies. The cost of a nuclear incident could exceed available insurance proceeds. Insurance has been purchased aggregating $200 million on a industry basis for coverage of worker claims. All participating reactor operators insured under this coverage are subject to retrospective assessments of $3 million per reactor. The maximum potential assessment against CL&P with respect to losses arising during the current policy period is approximately $8.9 million. E. Construction Program The construction program is subject to periodic review and revision by management. CL&P currently forecasts construction expenditures of approximately $842 million for the years 1997-2001, including $165 million for 1997. In addition, the company estimates that nuclear fuel requirements, including nuclear fuel financed through the NBFT, will be approximately $238.4 million for the years 1997-2001, including $12.2 million for 1997. See Note 2, "Leases," for additional information about the financing of nuclear fuel. As a result of the most recent capital program review, management has decreased the construction program forecast for 1997 expenditures from $165 million to $148 million. F-37 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) F. Long-Term Contractual Arrangements Yankee Companies: CL&P, along with PSNH and WMECO, relies on MY and VY for approximately three percent of their capacity under long-term contracts. Under the terms of their agreements, the system companies pay their ownership (or entitlement) shares of costs, which include depreciation, O&M expenses, taxes, the estimated cost of decommissioning and a return on invested capital. These costs are recorded as purchased power expense and recovered through the company's rates. CL&P's total cost of purchases under contracts with the Yankee companies, excluding YAEC, amounted to $96.4 million in 1996, $105.8 million in 1995, and $102.1 million in 1994. See Note 1E, "Summary of Significant Accounting Policies-Investments and Jointly Owned Electric Utility Plant," and Note 3, "Nuclear Decommissioning," for more information on the Yankee companies. Nonutility Generators: CL&P has entered into various arrangements for the purchase of capacity and energy from nonutility generators. These arrangements have terms from 10 to 30 years, currently expiring in the years 2001 through 2027, and requires the company to purchase energy at specified prices or formula rates. For the 12 months ended December 31, 1996, approximately 13 percent of system electricity requirements was met by nonutility generators. CL&P's total cost of purchases under these arrangements amounted to $279.5 million in 1996, $282.2 million in 1995, and $277.4 million in 1994. These costs are eventually recovered through the company's rates. Hydro-Quebec: Along with other New England utilities, CL&P, PSNH, WMECO, and HWP have entered into agreements to support transmission and terminal facilities to import electricity from the Hydro-Quebec system in Canada. CL&P is obligated to pay, over a 30-year period ending in 2020, its proportionate share of the annual O&M and capital costs of these facilities. The estimated annual costs of CL&P's significant long-term contractual arrangements are as follows:
- ----------------------------------------------------------------- 1997 1998 1999 2000 2001 - ----------------------------------------------------------------- (Millions of Dollars) MY and VY............... $ 39.0 $ 33.1 $ 39.1 $ 38.9 $ 36.4 Nonutility generators............ 274.0 281.0 291.0 291.0 294.0 Hydro-Quebec............ 19.4 18.8 18.2 17.9 17.3 - -----------------------------------------------------------------
F-38 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) G. The Rocky River Realty Company - Obligations RRR provides real estate support services which includes the leasing of property and facilities used by system companies. RRR is the obligor under financing arrangements for certain system facilities. Under those financing arrangements, the holders of notes for approximately $38 million are entitled to request that RRR repurchase the notes if any major subsidiary of NU (as defined by the notes) has debt ratings below investment grade as of any year-end during the term of the financing. The notes are secured by real estate leases between RRR as lessor and NUSCO as lessee. The leases provide for the acceleration of rent equal to RRR's note obligations. The operating companies, primarily CL&P, WMECO and PSNH may be billed by NUSCO for their proportionate share of the accelerated lease obligations when RRR repurchases the notes. NU has guaranteed the notes. In April 1997, the holders of approximately $38 million of RRR's notes elected to have RRR repurchase the notes at par. On July 1, 1997, RRR received a commitment from an alternative purchaser to purchase approximately $12 million of the notes that RRR had been required to repurchase. RRR intends to repurchase the remaining $26 million of notes on July 14, 1997. Management does not expect the resolution of this matter to have a material adverse impact on CL&P's financial condition or liquidity. 12. FUEL PRICE MANAGEMENT The company utilizes various financial instruments to manage well- defined fuel price risks. The company does not use these instruments for trading purposes. CL&P uses fuel-price management instruments with financial institutions to hedge against some of the fuel-price risk created by long-term negotiated energy contracts. These agreements minimize exposure associated with rising fuel prices and effectively fix a portion of CL&P's cost of fuel for these negotiated energy contracts. Under the agreements, CL&P exchanges monthly payments based on the differential between a fixed and variable price for the associated fuel. As of December 31, 1996, CL&P had outstanding agreements with a total notional value of approximately $228.8 million, and a positive mark-to- market position of approximately $1.1 million. As of March 31, 1997, CL&P had outstanding fuel price management agreements with a total notional value of approximately $215.5 F-39 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) million with a negative mark-to-market position of approximately $2.5 million. Since March 31, 1997, CL&P has entered into additional fuel price management agreements with a total notional value of approximately $74.8 million. Under the terms of CL&P's fuel price management agreements, CL&P can be required to post cash collateral with its counterparties approximately equivalent to the amount of a negative mark-to-market position. In general, the amount of collateral is to be returned to CL&P when the mark-to-market position becomes positive, when CL&P meets specified credit ratings, or when an agreement ends. These agreements have been made with various financial institutions, each of which is rated "A" or better by Standard & Poor's rating group. CL&P is exposed to credit risk on fuel-price management instruments if the counterparties fail to perform their obligations. However, management anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. 13. MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY In January 1995, CL&P Capital LP (CL&P LP is a subsidiary of CL&P) issued $100 million of cumulative 9.3 percent Monthly Income Preferred Securities (MIPS), Series A. CL&P has the sole ownership interest in CL&P LP, as a general partner, and is the guarantor of the MIPS securities. Subsequent to the MIPS issuance, CL&P LP loaned the proceeds of the MIPS issuance, along with CL&P's $3.1 million capital contribution, back to CL&P in the form of an unsecured debenture. CL&P consolidates CL&P LP for financial reporting purposes. Upon consolidation, the unsecured debenture is eliminated, and the MIPS securities are accounted for as minority interests. 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each of the following financial instruments: Cash and nuclear decommissioning trusts: The carrying amounts approximate fair value. SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," requires investments in debt and equity securities to be presented at fair value. As a result of this requirement, the investments held in the company's nuclear decommissioning trusts were adjusted to market by approximately $22.3 million as of December 31, 1996 and by approximately $14.4 million as of December 31, 1995, with corresponding offsets to the accumulated provision for depreciation. The amounts adjusted in 1996 and 1995, represent cumulative gross unrealized holding gains. The F-40 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) cumulative gross unrealized holding losses were immaterial for both 1996 and 1995. Preferred stock and long-term debt: The fair value of CL&P's fixed rate securities is based upon the quoted market price for those issues or similar issues. Adjustable rate securities are assumed to have a fair value equal to their carrying value. The carrying amounts of CL&P's financial instruments and the estimated fair values are as follows:
- -------------------------------------------------------------------------------- Carrying Fair At December 31, 1996 Amount Value - -------------------------------------------------------------------------------- (Thousands of Dollars) Preferred stock not subject to mandatory redemption....................... $ 116,200 $ 111,845 Preferred stock subject to mandatory redemption.......................... 155,000 120,900 Long-term debt - First Mortgage Bonds.......................... 1,452,288 1,410,665 Other long-term debt.......................... 592,783 592,783 MIPS........................................... 100,000 108,520 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Carrying Fair At December 31, 1995 Amount Value - -------------------------------------------------------------------------------- (Thousands of Dollars) Preferred stock not subject to mandatory redemption....................... $ 116,200 $ 82,448 Preferred stock subject to mandatory redemption.......................... 155,000 157,575 Long-term debt - First Mortgage Bonds.......................... 1,297,245 1,329,549 Other long-term debt.......................... 532,164 532,164 MIPS........................................... 100,000 108,520 - --------------------------------------------------------------------------------
F-41 The Connecticut Light and Power Company and Subsidiaries - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Information Subsequent to December 31, 1996 is Unaudited) The fair values shown above have been reported to meet disclosure requirements and do not purport to represent the amounts at which those obligations would be settled. F-42
- -------------------------------------------------------------------------------- STATEMENTS OF QUARTERLY FINANCIAL DATA (Unaudited) - -------------------------------------------------------------------------------- Quarter Ended/(a)/ ------------------------------------------------- 1996 March 31 June 30 September 30 December 31 - -------------------------------------------------------------------------------- Operating Revenues........... $659,355 $542,999 $599,505 $595,601 ======== ======== ======== ======== Operating Income (Loss)...... $ 59,977 $ 15,197 $ 593 $(45,994) ======== ======== ======== ======== Net Income (Loss)............ $ 32,851 $(10,700) $(26,938) $(75,450) ======== ======== ======== ======== 1995 - -------------------------------------------------------------------------------- Operating Revenues........... $601,194 $525,147 $638,392 $622,336 ======== ======== ======== ======== Operating Income............. $ 96,191 $ 65,867 $ 88,012 $ 73,956 ======== ======== ======== ======== Net Income................... $ 65,877 $ 38,089 $ 60,462 $ 40,788 ======== ======== ======== ========
/(a)/ Reclassifications of prior data have been made to conform with the current presentation. F-44 ================================================================================ No dealer, salesperson, or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus, and, if given or made, such information and representations must not be relied upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof. This Prospectus does not constitute an offer to sell or a solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so or to any person whom it is unlawful to make such offer or solicitation. ________________ TABLE OF CONTENTS
Available Information....................................................... 4 Forward-looking Statements.................................................. 4 Prospectus Summary.......................................................... 6 Risk Factors................................................................ 13 The Company................................................................. 18 The Original Offering....................................................... 18 The Exchange Offer.......................................................... 18 Selected Financial Data..................................................... 29 Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 30 Business.................................................................... 43 Employees................................................................... 81 Properties.................................................................. 81 Legal Proceedings........................................................... 83 Management And Compensation................................................. 88 Description of the New Bonds................................................ 98 Book-entry; Delivery and Form............................................... 104 Market For New Bonds........................................................ 107 Certain Federal Income Tax Considerations................................... 107 Plan of Distribution........................................................ 109 Legal Matters and Experts................................................... 110 Glossary of Terms........................................................... 109 Index to Consolidated Financial Statements.................................. F1
Until _____ __, 1997, all dealers effecting transactions in the New Bonds, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters or with respect to their unsold allotments or subscriptions. Offer For All Outstanding First and Refunding Mortgage Bonds 1997 Series B Due June 1, 2002 In Exchange For First and Refunding Mortgage 7 3/4% Bonds 1997 Series C Due June 1, 2002 Each Issued By THE CONNECTICUT LIGHT AND POWER COMPANY ---------- PROSPECTUS ---------- July __, 1997 ================================================================================ Part II Information Not Required In Prospectus Item 13. Other Expenses of Issuance and Distribution
Filing fee-Securities and Exchange Commission- (1933 Act).....................................................$60,607 Fees of Transfer Agent*.................................................. 5,000 Legal fees*.............................................................. 40,000 Accounting fees*......................................................... 30,000 Printing expenses*....................................................... 15,000 Northeast Utilities Service Company expenses*............................ 20,000 Miscellaneous*........................................................... 9,000 $179,607 ========
__________________________ *Estimated. Item 14. Indemnification of Directors and Officers. The Connecticut Light and Power Company (the Company) is a Connecticut corporation. Sections 33-770 through 33-778 of the Connecticut General Statutes (C.G.S.) provides that a Connecticut corporation may, under certain circumstances, and shall, in other circumstances, indemnify its directors, officers, employees, agents and certain other persons. Section 33-771 of C.G.S. provides that (a) except as provided in subsection (d) of Sections 33-771, a Connecticut corporation may indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if: (1) He conducted himself in good faith; and (2) he reasonably believed (A) in the case of conduct in his official capacity with the corporation, that his conduct was in its best interests, and (B) in all other cases, that his conduct was at least not opposed to its best interests; and (3) in the case of any criminal proceeding he had no reason to believe his conduct was unlawful. (b) A director's conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the best interest of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (b) of subdivision (2) of subsection (a) of C.G.S. Section 33-771. (c) The termination of a proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent is not, or itself, determinative that the director did not meet the standard of conduct described in C.G.S. Section 33-771. (d) A corporation may not indemnify a director under C.G.S. Section 33-771; (1) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or (2) in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him. (e) Indemnification permitted under C.G.S. Section 33-771 in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. (f) Notwithstanding any provision of C.G.S. Section 33-771 to the contrary, a corporation which was incorporated under the laws of this state, whether under chapter 599 of the general statutes, revised to January 1, 1995, or any other general law or special act, prior to January 1, 1996, shall, except to the extent that the articles of incorporation expressly provide otherwise, provide its directors with the full amount of indemnification that the corporation is permitted to provide to such directors pursuant to C.G.S. Section 33-771 as limited by the provisions of C.G.S. Section 33-775. C.G.S. Section 33-772 provides that, unless limited by its articles of incorporation, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding. II-1 C.G.S. Section 33-773 provides that (a) a corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if: (1) The director furnishes the corporation a written affirmation of his good faith belief that he has met the standard of conduct described in C.G.S. Section 33- 771; (2) the director furnishes the corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct; and (3) a determination is made that the facts then known to those making the determination would not preclude indemnification under C.G.S. Sections 33-770 through 33-778, inclusive. (b) The undertaking required by subdivision (2) of subsection (a) of such section must be an unlimited obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment. (c) Determinations and authorizations of payments under C.G.S. Section 33-773 shall be made in the manner specified in C.G.S. Section 33-775. C.G.S. Section 33-774 provides that, unless a corporation's articles of incorporation provide otherwise, a director of the corporation who is a party to a proceeding may apply for indemnification if it determines: (1) The director is entitled to mandatory indemnification under C.G.S. Section 33-772, in which case the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standard of conduct set forth in C.G.S. Sections 33-771 or was adjudged liable as described in subsection (d) of C.G.S. Section 33-771, but if he was adjudged so liable his indemnification is limited to reasonable expenses incurred. C.G.S. Section 33-775 provides (a) a corporation may not indemnify a director under C.G.S. Section 33-771 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because he has met the standard of conduct set forth in C.G.S. Section 33-771. (b) The determination shall be made: (1) by the board of directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding; (2) if a quorum cannot be obtained under subdivision (1) of this subsection, by majority vote of a committee duly designated by the board of directors, in which designation directors who are parties may participate, consisting solely of two or more directors not at the time parties to the proceeding; (3) by special legal counsel (A) selected by the board of directors or its committee in that manner prescribed in subdivision (1) or (2) of this subsection, or (B) if a quorum of the board of directors cannot be obtained under subdivision (1) of this subsection and a committee cannot be designated under subdivision (2) of this subsection, selected by majority vote of the full board of directors, in which selection directors who are parties may participate; or (4) by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination. (c) Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible except that the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subdivision (3) of subsection (b) of this section to select counsel. C.G.S. Section 33-776, provides that, unless a corporation's articles of incorporation provide otherwise (1) an officer of the corporation who is not a director is entitled to mandatory indemnification under C.G.S. Section 33-772, and is entitled to apply for court-ordered indemnification under C.G.S. Section 33-774, in each case to the same extent as a director; (2) the corporation may indemnify and advance expenses under C.G.S. Sections 33-770 to 33-778, inclusive, to an officer, employee or agent of the corporation who is not a director to the same extent as to a director; (3) a corporation may also indemnify and advance expenses to an officer, employee or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors or contract; and (4) a corporation which was incorporated under the laws of this state, whether under chapter 599 of the general statues, revised to January 1, 1995, or any other general law or special act, prior to January 1, 1996, shall, except to the extent that the articles of incorporation expressly provide otherwise indemnify and advance expenses under C.G.S. Sections 33-770 to 33-778, inclusive, to each officer, employee or agent of the corporation who is not a director to the same extent as the corporation is permitted to provide the same to a director pursuant to C.G.S. Section 33-771, as limited by C.G.S. Section 33-775. C.G.S. Section 33-777 provides that a corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee or agent of the corporation, or who, while a director, officer, employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability asserted against or incurred by him in that capacity or arising from his status as II-2 a director, officer, employee or agent, whether or not the corporation would have the power to indemnify him against the same liability under C.G.S. Section 33-771 or 33-772. C.G.S. Section 33-778 provides that (a) A provision treating a corporation's indemnification of or advance for expenses to directors that is contained in its articles of incorporation, bylaws, a resolution of its shareholders or board of directors, or in a contract or otherwise, is valid only if and to the extent the provision is consistent with C.G.S. Sections 33-770 to 33-778, inclusive. If articles of incorporation limit indemnification or advance of expenses, indemnification and advance for expenses are valid only to the extent consistent with the articles. (b) C.G.S. Sections 33-770 to 33-778, inclusive, do not limit a corporation's power to pay or reimburse expenses incurred by a director in connection with his appearance as a witness in a proceeding at a time when he has not been made a named defendant or respondent to the proceeding. Consistent with the statute, the Company has obtained insurance for its directors and officers which supplements the indemnification rights provided to those individuals by C.G.S. Section 33-771 to 33-778, inclusive. Unlike the statute, such policy does not require the standard of conduct required by C.G.S. Section 33-771, nor does the policy require the undertakings required by C.G.S. Section 33-773 relating to the advances for expenses in connection with the defense of an officer or director in a proceeding. Section IX of Part Two of Article IV of the Restated Certificate of Incorporation of the Company provides: No director, officer or agent of the Company shall be held personally responsible for any action taken in good faith though subsequently adjudged to be in violation of these Sections. Effective January 1, 1997, the Company shall indemnify and advance expenses to an individual made a party to a proceeding because he/she is or was a Director of the Company under Section 33-771 of the Connecticut General Statutes, Revision of 1958, as amended. The Company shall also indemnify and advance expenses under Sections 33-770 to 33- 778, inclusive, of the Connecticut General Statutes, to any officer, employee or agent of the Company who is not a director to the same extent as provided to a director. Item 15. Sales of Unregistered Securities. On May 21, 1996, the Connecticut Development Authority issued $62 million of tax-exempt pollution control revenue bonds. Concurrent with that issuance, the proceeds of the bonds were loaned to the Company for the reimbursement of a portion of Company's share of the previously incurred costs of financing, acquiring, constructing, and installing pollution control, sewage, and solid waste disposal facilities at Millstone 3. The bonds will mature on May 1, 2031 and may bear, at the Company's discretion, a variable or fixed interest rate, which may not exceed 12 percent. The bonds are exempt from registration under Section 3(a)(2) of the Securities Act. The bonds were originally backed by a five-year letter of credit, which was secured by a second mortgage on Company's interest in Millstone 1. On January 23, 1997, the letter of credit was replaced with an insurance facility and a standby bond purchase agreement. The second mortgage was replaced with the issuance of $62 million of First and Refunding Mortgage Bonds, 1996 Series B, bearing the same interest rate as the underlying bonds. Goldman, Sachs & Co. was the Remarketing Agent for the bonds, which were sold at the price of 100%. On May 30, 1997, the Company issued $225 million First and Refunding Mortgage Bonds, 1997 Series A as collateral to secure its obligations under a three year revolving credit agreement. The collateral bonds were exempt from registration under Section 4(2) of the Securities Act. On June 26, 1997, the Company issued and sold to Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (the Initial Purchasers) $200,000,000 in aggregate principal amount of the Company's First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 (the Series B Bonds). The Series Bonds were sold pursuant to exemptions from or in transactions not subject to the registration requirements of the Securities Act and applicable state securities laws. The Initial Purchasers subsequently placed the Series B Bonds with "qualified institutional buyers," as defined in Rule 144A. The Company received approximately $197 million of net proceeds from the sale of the Series B Bonds. The aggregate underwriting discount and commission was approximately $3 million. The bonds that are the subject of this II-3 Registration Statement, the Company's First and Refunding Mortgage 7 3/4% Bonds, 1997 Series C Due June 1, 2002 will be exchanged for the unregistered Series B Bonds. II-4 Item 16 Exhibits and Financial Statement Schedules 1. Schedule - Valuation and Qualifying Accounts and Reserves The information required by the schedule, Valuation and Qualifying Accounts and Reserves, and the Report of Independent Public Accountants thereon, for the three years ended December 31, 1996 is incorporated herein by reference to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 1996. 2. Exhibits Each document referred to below is incorporated by reference to the files of the Securities and Exchange Commission, unless the reference to the document is indicated by an asterisk.
Exhibit No. Description - ----------- ----------- 3.1 - Certificate of Incorporation of the Company, restated to March 22, 1994. (Exhibit 3.2.1, 1993 NU Form 10-K, File No. 1-5324) 3.2 - Certificate of Amendment to Certificate of Incorporation of the Company, dated December 26, 1996. (Exhibit 3.2.2, 1996 NU Form 10-K, File No. 1-5324) 3.3 - By-laws of the Company, as amended to January 1, 1997. (Exhibit 3.2.3, 1996 NU Form 10-K, File No. 1-5324) *4.1 - Registration Rights Agreement. 4.2 - Indenture of Mortgage and Deed of Trust between the Company and Bankers Trust Company, Trustee, dated as of May 1, 1921. (Composite including all twenty-four amendments to May 1, 1967.) (Exhibit 4.1.1, 1989 NU Form 10-K, File No. 1-5324) Supplemental Indentures to Exhibit 4.2, dated as of: 4.3 - April 1, 1967. (Exhibit 4.16, File No. 2-60806) 4.4 - January 1, 1968. (Exhibit 4.18, File No. 2-60806) 4.5 - December 1, 1969. (Exhibit 4.20, File No. 2-60806) 4.6 - June 30, 1982. (Exhibit 4.33, File No. 2-79235) 4.7 - December 1, 1989. (Exhibit 4.1.26, 1989 NU Form 10-K, File No. 1-5324) 4.8 - April 1, 1992. (Exhibit 4.30, File No. 33-59430) 4.9 - July 1, 1992. (Exhibit 4.31, File No. 33-59430) 4.10 - July 1, 1993. (Exhibit A.10(b), File No. 70-8249) 4.11 - July 1, 1993. (Exhibit A.10(b), File No. 70-8249) 4.12 - December 1, 1993. (Exhibit 4.2.14, 1993 NU Form 10-K, File No. 1-5324) 4.13 - February 1, 1994. (Exhibit 4.2.15, 1993 NU Form 10-K, File No. 1-5324) 4.14 - February 1, 1994. (Exhibit 4.2.16, 1993 NU Form 10-K, File No. 1-5324)
II-5 4.15 - June 1, 1994. (Exhibit 4.2.15, 1994 NU Form 10-K, File No. 1-5324) 4.16 - October 1, 1994. (Exhibit 4.2.16, 1994 NU Form 10-K, File No. 1-5324) 4.17 - June 1, 1996. (Exhibit 4.2.16, 1996 NU Form 10-K, File No. 1-5324) 4.18 - January 1, 1997. (Exhibit 4.2.17, 1996 NU Form 10-K, File No. 1-5324) *4.19 - May 1, 1997. *4.20 - June 1, 1997. *4.21 - Form of Proposed New Supplemental Indenture to be used for the New Bonds. 4.22 - Cross-reference sheet showing location in Indenture of provisions inserted pursuant to Sections 310 through 318 (a) of the Trust Indenture Act of 1939. (Exhibit 2.32, File No. 2-68807) 4.23 - Financing Agreement between Industrial Development Authority of the State of New Hampshire and the Company (Pollution Control Bonds, 1986 Series) dated as of December 1, 1986. (Exhibit C.1.47, 1986 NU Form U5S, File No. 30-246) 4.23.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds, 1986 Series) dated as of August 1, 1994. (Exhibit 1 (Execution Copy), File No. 70-7320) 4.24 - Financing Agreement between Industrial Development Authority of the State of New Hampshire and the Company (Pollution Control Bonds, 1988 Series) dated as of October 1, 1988. (Exhibit C.1.55, 1988 NU Form U5S, File No. 30-246) 4.24.1 - Letter of Credit (Pollution Control Bonds, 1988 Series) dated October 27, 1988. (Exhibit 4.2.17.1, 1995 NU Form 10-K, File No. 1-5324) 4.24.2 - Reimbursement and Security Agreement (Pollution Control Bonds, 1988 Series) dated as of October 1, 1988. (Exhibit 4.2.17.2, 1995 NU Form 10-K, File No. 1-5324) 4.25 - Financing Agreement between Industrial Development Authority of the State of New Hampshire and the Company (Pollution Control Bonds) dated as of December 1, 1989. (Exhibit C.1.39, 1989 NU Form U5S, File No. 30-246) 4.26 - Loan and Trust Agreement among Business Finance Authority of the State of New Hampshire, the Company and the Trustee
II-6 (Pollution Control Bonds, 1992 Series A) dated as of December 1, 1992. (Exhibit C.2.33, 1992 NU Form U5S, File No. 30-246) 4.26.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds, 1992 Series A) dated as of December 1, 1992. (Exhibit 4.2.19.1, 1995 NU Form 10-K, File No. 1-5324) 4.27 - Loan Agreement between Connecticut Development Authority and the Company (Pollution Control Bonds - Series A, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.21, 1993 NU Form 10-K, File No. 1-5324) 4.27.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds - Series A, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.23, 1993 NU Form 10-K, File No. 1-5324) 4.28 - Loan Agreement between Connecticut Development Authority and the Company (Pollution Control Bonds - Series B, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.22, 1993 NU Form 10-K, File No. 1-5324) 4.28.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds - Series B, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.24, 1993 NU Form 10-K, File No. 1-5324) 4.29 - Amended and Restated Loan Agreement between Connecticut Development Authority and the Company (Pollution Control Revenue Bond - 1996A Series) dated as of May 1, 1996 and Amended and Restated as of January 1, 1997. (Exhibit 4.2.24, 1996 NU Form 10-K, File No. 1-5324) 4.29.1 - Amended and Restated Indenture of Trust between Connecticut Development Authority and the Trustee (Pollution Control Revenue Bond - 1996A Series), dated as of May 1, 1996 and Amended and Restated as of January 1, 1997. (Exhibit 4.2.24.1, 1996 NU Form 10-K, File No. 1-5324) 4.29.2 - Standby Bond Purchase Agreement among the Company, Societe Generale, New York Branch and the Trustee, dated January 23, 1997. (Exhibit 4.2.24.2, 1996 NU Form 10-K, File No. 1-5324) 4.29.3 - AMBAC Municipal Bond Insurance Policy issued by the Connecticut Development Authority (Pollution Control Revenue Bond - 1996A Series), effective January 23, 1997. (Exhibit No. 4.2.24.3, 1996 NU Form 10-K, File No. 1-5324) 4.30 - Amended and Restated Limited Partnership Agreement (CL&P Capital, L.P.) among the Company, Northeast Utilities Service Company (NUSCO), and the persons who became limited partners of CL&P Capital, L.P. in accordance with the provisions thereof dated as of January 23, 1995 (MIPS). (Exhibit A.1 (Execution Copy), File No. 70-8451)
II-7 4.31 - Indenture between the Company and Bankers Trust Company, Trustee (Series A Subordinated Debentures), dated as of January 1, 1995 (MIPS). (Exhibit B.1 (Execution Copy), File No. 70-8451) 4.32 - Payment and Guaranty Agreement of the Company dated as of January 23, 1995 (MIPS). (Exhibit B.3 (Execution Copy), File No. 70-8451) *5.1 - Opinion of Jeffrey C. Miller, Assistant General Counsel of NUSCO, as to the legality of the New Bonds, including consent of such counsel. 10.1 - Stockholder Agreement dated as of July 1, 1964 among the stockholders of Connecticut Yankee Atomic Power Company (CYAPC). (Exhibit 10.1, 1994 NU Form 10-K, File No. 1-5324) 10.2 - Form of Power Contract dated as of July 1, 1964 between CYAPC and each of the Company, The Hartford Electric Light Company (HELCO), Public Service Company of New Hampshire (PSNH) and Western Massachusetts Electric Company (WMECO). (Exhibit 10.2, 1994 NU Form 10-K, File No. 1-5324) 10.2.1 - Form of Additional Power Contract dated as of April 30, 1984, between CYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.2.1, 1994 NU Form 10-K, File No. 1-5324) 10.2.2 - Form of 1987 Supplementary Power Contract dated as of April 1, 1987, between CYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.2.6, 1987 NU Form 10-K, File No. 1-5324) 10.3 - Capital Funds Agreement dated as of September 1, 1964 between CYAPC and the Company, HELCO, PSNH and WMECO. (Exhibit 10.3, 1994 NU Form 10-K, File No. 1-5324) 10.4 - Stockholder Agreement dated December 10, 1958 between Yankee Atomic Electric Company (YAEC) and the Company, HELCO, PSNH and WMECO. (Exhibit 10.4, 1993 NU Form 10-K, File No. 1-5324) 10.5 - Form of Amendment No. 3, dated as of April 1, 1985, to Power Contract between YAEC and each of the Company, PSNH and WMECO, including a composite restatement of original Power Contract dated June 30, 1959 and Amendment No. 1 dated April 1, 1975 and Amendment No. 2 dated October 1, 1980. (Exhibit 10.5, 1988 NU Form 10-K, File No. 1-5324.) 10.5.1 - Form of Amendment No. 4 to Power Contract, dated May 6, 1988, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.1, 1989 NU Form 10-K, File No. 1-5324) 10.5.2 - Form of Amendment No. 5 to Power Contract, dated June 26, 1989, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.2, 1989 NU Form 10-K, File No. 1-5324)
II-8 10.5.3 - Form of Amendment No. 6 to Power Contract, dated July 1, 1989, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.3, 1989 NU Form 10-K, File No. 1-5324) 10.5.4 - Form of Amendment No. 7 to Power Contract, dated February 1, 1992, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.4, 1993 NU Form 10-K, File No. 1-5324) 10.6 - Stockholder Agreement dated as of May 20, 1968 among stockholders of Maine Yankee Atomic Power Company (MYAPC). (Exhibit 4.15, File No. 2-30018) 10.7 - Form of Power Contract dated as of May 20, 1968 between MYAPC and each of the Company, HELCO, PSNH and WMECO. (Exhibit 4.14, File No. 2-30018) 10.7.1 - Form of Amendment No. 1 to Power Contract dated as of March 1, 1983 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.7.1, 1993 NU Form 10-K, File No. 1-5324) 10.7.2 - Form of Amendment No. 2 to Power Contract dated as of January 1, 1984 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.7.2, 1993 NU Form 10-K, File No. 1-5324) 10.7.3 - Form of Amendment No. 3 to Power Contract dated as of October 1, 1984 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit No. 10.7.3, 1994 NU Form 10-K, File No. 1-5324) 10.7.4 - Form of Additional Power Contract dated as of February 1, 1984 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.7.4, 1993 NU Form 10-K, File No. 1-5324) 10.8 - Capital Funds Agreement dated as of May 20, 1968 between MYAPC and the Company, PSNH, HELCO and WMECO. (Exhibit 4.13, File No. 2-30018) 10.8.1 - Amendment No. 1 to Capital Funds Agreement, dated as of August 1, 1985, between MYAPC, the Company, PSNH and WMECO. (Exhibit No. 10.8.1, 1994 NU Form 10-K, File No. 1-5324) 10.9 - Sponsor Agreement dated as of August 1, 1968 among the sponsors of Vermont Yankee Nuclear Power Corporation (VYNPC). (Exhibit 4.16, File No. 2-30285) 10.10 - Form of Power Contract dated as of February 1, 1968 between VYNPC and each of the Company, HELCO, PSNH and WMECO. (Exhibit 4.18, File No. 2-30018) 10.10.1 - Form of Amendment to Power Contract dated as of June 1, 1972 between VYNPC and each of the Company, HELCO, PSNH and WMECO. (Exhibit 5.22, File No. 2-47038)
II-9 10.10.2 - Form of Second Amendment to Power Contract dated as of April 15, 1983 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.2, 1993 NU Form 10-K, File No. 1-5324) 10.10.3 - Form of Third Amendment to Power Contract dated as of April 24, 1985 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit No. 10.10.3, 1994 NU Form 10-K, File No. 1-5324) 10.10.4 - Form of Fourth Amendment to Power Contract dated as of June 1, 1985 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.4, 1996 NU Form 10-K, File No. 1-5324) 10.10.5 - Form of Fifth Amendment to Power Contract dated as of May 6, 1988 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.5, 1990 NU Form 10-K, File No. 1-5324) 10.10.6 - Form of Sixth Amendment to Power Contract dated as of May 6, 1988 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.6, 1990 NU Form 10-K, File No. 1-5324) 10.10.7 - Form of Seventh Amendment to Power Contract dated as of June 15, 1989 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.7, 1990 NU Form 10-K, File No. 1-5324) 10.10.8 - Form of Eighth Amendment to Power Contract dated as of December 1, 1989 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.8, 1990 NU Form 10-K, File No. 1-5324) 10.10.9 - Form of Additional Power Contract dated as of February 1, 1984 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.9, 1993 NU Form 10-K, File No. 1-5324) 10.11 - Capital Funds Agreement dated as of February 1, 1968 between VYNPC and the Company, HELCO, PSNH and WMECO. (Exhibit 4.16, File No. 2-30018) 10.11.1 - Form of First Amendment to Capital Funds Agreement dated as of March 12, 1968 between VYNPC and the Company, HELCO, PSNH and WMECO. (Exhibit 4.17, File No. 2-30018) 10.11.2 - Form of Second Amendment to Capital Funds Agreement dated as of September 1, 1993 between VYNPC and the Company, HELCO, PSNH and WMECO. (Exhibit 10.11.2, 1993 NU Form 10-K, File No. 1-5324) 10.12 - Amended and Restated Millstone Plant Agreement dated as of December 1, 1984 by and among the Company, WMECO and Northeast Nuclear Energy Company (NNECO). (Exhibit 10.12, 1994 NU Form 10-K, File No. 1-5324) 10.13 - Sharing Agreement dated as of September 1, 1973 with respect to 1979 Connecticut nuclear generating unit (Millstone 3). (Exhibit 6.43, File No. 2-50142)
II-10 10.13.1 - Amendment dated August 1, 1974 to Sharing Agreement - 1979 Connecticut Nuclear Unit. (Exhibit 5.45, File No. 2-52392) 10.13.2 - Amendment dated December 15, 1975 to Sharing Agreement - 1979 Connecticut Nuclear Unit. (Exhibit 7.47, File No. 2-60806) 10.13.3 - Amendment dated April 1, 1986 to Sharing Agreement - 1979 Connecticut Nuclear Unit. (Exhibit 10.17.3, 1990 NU Form 10-K, File No. 1-5324) 10.14 - Agreement dated July 19, 1990, among North Atlantic Energy Service Corporation (NAESCO) and Seabrook Nuclear Power Station (Seabrook) joint owners with respect to operation of Seabrook. (Exhibit 10.53, 1990 NU Form 10-K, File No. 1-5324) 10.15 - Sharing Agreement between the Company, WMECO, Holyoke Power & Electric Company (HP&E), Holyoke Water Power Company (HWP) and PSNH dated as of June 1, 1992. (Exhibit 10.17, 1992 NU Form 10-K, File No. 1-5324) 10.16 - Agreement (composite) for joint ownership, construction and operation of Seabrook, as amended through the November 1, 1990 twenty-third amendment. (Exhibit No. 10.17, 1994 NU Form 10-K, File No. 1-5324) 10.16.1 - Memorandum of Understanding dated November 7, 1988 between PSNH and Massachusetts Municipal Wholesale Electric Company (Exhibit 10.17, PSNH 1989 Form 10-K, File No. 1-6392) 10.16.2 - Agreement of Settlement among joint owners dated as of January 13, 1989. (Exhibit 10.13.21, 1988 NU Form 10-K, File No. 1-5324) 10.16.2.1- Supplement to Settlement Agreement, dated as of February 7, 1989, between PSNH and Central Maine Power Company. (Exhibit 10.18.1, PSNH 1989 Form 10-K, File No. 1-6392) 10.17 - Amended and Restated Agreement for Seabrook Project Disbursing Agent dated as of November 1, 1990. (Exhibit 10.4.7, File No. 33-35312) 10.17.1 - Form of First Amendment to Exhibit 10.17. (Exhibit 10.4.8, File No. 33-35312) 10.17.2 - Form (Composite) of Second Amendment to Exhibit 10.17. (Exhibit 10.18.2, 1993 NU Form 10-K, File No. 1-5324) 10.18 - Form of Service Contract dated as of July 1, 1966 between each of NU, the Company, WMECO and NUSCO. (Exhibit 10.20, 1993 NU Form 10-K, File No. 1-5324) 10.18.1 - Form of Annual Renewal of Service Contract. (Exhibit 10.20.3, 1993 NU Form 10-K, File No. 1-5324)
II-11 10.19 - Memorandum of Understanding between the Company, HELCO, HP&E, HWP and WMECO dated as of June 1, 1970 with respect to pooling of generation and transmission. (Exhibit 13.32, File No. 2-38177) 10.19.1 - Amendment to Memorandum of Understanding between the Company, HELCO, HP&E, HWP and WMECO dated as of February 2, 1982 with respect to pooling of generation and transmission. (Exhibit 10.21.1, 1993 NU Form 10-K, File No. 1-5324) 10.19.2 - Amendment to Memorandum of Understanding between the Company, HELCO, HP&E, HWP and WMECO dated as of January 1, 1984 with respect to pooling of generation and transmission. (Exhibit 10.21.2, 1994 NU Form 10-K, File No. 1-5324) 10.20 - New England Power Pool Agreement effective as of November 1, 1971, as amended to December 1, 1996. (Exhibit 10.15, 1988 NU Form 10-K, File No. 1-5324.) 10.20.1 - Twenty-sixth Amendment to Exhibit 10.20 dated as of March 15, 1989. (Exhibit 10.15.1, 1990 NU Form 10-K, File No. 1-5324) 10.20.2 - Twenty-seventh Amendment to Exhibit 10.20 dated as of October 1, 1990. (Exhibit 10.15.2, 1991 NU Form 10-K, File No. 1-5324) 10.20.3 - Twenty-eighth Amendment to Exhibit 10.20 dated as of September 15, 1992. (Exhibit 10.18.3, 1992 NU Form 10-K, File No. 1-5324) 10.20.4 - Twenty-ninth Amendment to Exhibit 10.20 dated as of May 1, 1993. (Exhibit 10.22.4, 1993 NU Form 10-K, File No. 1-5324) 10.20.5 - Thirty-second Amendment (Amendments 30 and 31 were withdrawn) to Exhibit 10.20 dated as of September 1, 1995. (Exhibit 10.23.5, 1995 NU Form 10-K, File No. 1-5324) 10.20.6 - Thirty-third Amendment to Exhibit 10.20 dated as of December 31, 1996 and Form of Interim Independent System Operator (ISO) Agreement. (Exhibit 10.236, 1996 NU Form 10-K, File No. 1-5324) 10.21 - Agreements among New England Utilities with respect to the Hydro- Quebec interconnection projects. (See Exhibits 10(u) and 10(v); 10(w), 10(x), and 10(y), 1990 and 1988, respectively, Form 10-K of New England Electric System, File No. 1-3446.) 10.22 - Trust Agreement dated February 11, 1992, between State Street Bank and Trust Company of Connecticut, as Trustor, and Bankers Trust Company, as Trustee, and the Company and WMECO, with respect to Niantic Bay Fuel Trust. (Exhibit 10.23, 1991 NU Form 10-K, File No. 1-5324) 10.22.1 - Nuclear Fuel Lease Agreement dated as of February 11, 1992, between Bankers Trust Company, Trustee, as Lessor, and the
II-12 Company and WMECO, as Lessees. (Exhibit 10.23.1, 1991 NU Form 10-K, File No. 1-5324) 10.23 - Simulator Financing Lease Agreement, dated as of February 1, 1985, by and between ComPlan and NNECO. (Exhibit 10.25, 1994 NU Form 10-K, File No. 1-5324) 10.24 - Simulator Financing Lease Agreement, dated as of May 2, 1985, by and between The Prudential Insurance Company of America and NNECO. (Exhibit No. 10.26, 1994 NU Form 10-K, File No. 1-5324) 10.25 - Lease dated as of April 14, 1992 between The Rocky River Realty Company (RRR) and NUSCO with respect to the Berlin, Connecticut headquarters (office lease). (Exhibit 10.29, 1992 NU Form 10-K, File No. 1-5324) 10.25.1 - Lease dated as of April 14, 1992 between RRR and NUSCO with respect to the Berlin, Connecticut headquarters (project lease). (Exhibit 10.29.1, 1992 NU Form 10-K, File No. 1-5324) 10.26 - Millstone Technical Building Note Agreement dated as of December 21, 1993 between, by and between The Prudential Insurance Company of America and NNECO. (Exhibit 10.28, 1993 NU Form 10-K, File No. 1-5324) 10.27 - Note Agreement dated April 14, 1992, by and between RRR and Purchasers named therein (Connecticut General Life Insurance Company, Life Insurance Company of North America, INA Life Insurance Company of New York, Life Insurance Company of Georgia), with respect to RRR's sale of $15 million of guaranteed senior secured notes due 2007 and $28 million of guaranteed senior secured notes due 2017. (Exhibit 10.52, 1992 NU Form 10-K, File No. 1-5324) 10.27.1 - Note Guaranty dated April 14, 1992 by Northeast Utilities pursuant to Note Agreement dated April 14, 1992 between RRR and Note Purchasers, for the benefit of The Connecticut National Bank as Trustee, the Purchasers and the owners of the notes. (Exhibit 10.52.1, 1992 NU Form 10-K, File No. 1-5324) 10.27.2 - Assignment of Leases, Rents and Profits, Security Agreement and Negative Pledge, dated as of April 14, 1992 among RRR, NUSCO and The Connecticut National Bank as Trustee, securing notes sold by RRR pursuant to April 14, 1992 Note Agreement. (Exhibit 10.52.2, 1992 NU Form 10-K, File No. 1-5324) 10.28 - Master Trust Agreement dated as of September 2, 1986 between the Company and WMECO and Colonial Bank as Trustee, with respect to reserve funds for Millstone 1 decommissioning costs. (Exhibit 10.32, 1996 NU Form 10-K, File No. 1-5324) 10.28.1 - Notice of Appointment of Mellon Bank, N.A. as Successor Trustee, dated November 20, 1990, and Acceptance of
II-13 Appointment. (Exhibit 10.41.1, 1992 NU Form 10-K, File No. 1- 5324) 10.29 - Master Trust Agreement dated as of September 2, 1986 between the Company and WMECO and Colonial Bank as Trustee, with respect to reserve funds for Millstone 2 decommissioning costs. (Exhibit 10.33, 1996 NU Form 10-K, File No. 1-5324) 10.29.1 - Notice of Appointment of Mellon Bank, N.A. as Successor Trustee, dated November 20, 1990, and Acceptance of Appointment. (Exhibit 10.42.1, 1992 NU Form 10-K, File No. 1-5324) 10.30 - Master Trust Agreement dated as of April 23, 1986 between the Company and WMECO and Colonial Bank as Trustee, with respect to reserve funds for Millstone 3 decommissioning costs. (Exhibit 10.34, 1996 NU Form 10-K, File No. 1-5324) 10.30.1 - Notice of Appointment of Mellon Bank, N.A. as Successor Trustee, dated November 20, 1990, and Acceptance of Appointment. (Exhibit 10.43.1, 1992 NU Form 10-K, File No. 1-5324) 10.31 - NU Executive Incentive Plan, effective as of January 1, 1991. (Exhibit 10.44, NU 1991 Form 10-K, File No. 1-5324) 10.32 - Supplemental Executive Retirement Plan for Officers of NU System Companies, amended and restated, effective as of January 1, 1992. (Exhibit 10.45.1, NU Form 10-Q for the Quarter Ended June 30, 1992, File No. 1-5324) 10.32.1 - Amendment 1 to Exhibit 10.32, effective as of August 1, 1993. (Exhibit 10.35.1, 1993 NU Form 10-K, File No. 1-5324) 10.32.2 - Amendment 2 to Exhibit 10.32, effective as of January 1, 1994. (Exhibit 10.35.2, 1993 NU Form 10-K, File No. 1-5324) 10.32.3 - Amendment 3 to Exhibit 10.32, effective as of January 1, 1996. (Exhibit 10.36.3, 1995 NU Form 10-K, File No. 1-5324) *10.33 - Special Severance Program for Officers of NU System Companies, as adopted on June 9, 1997. 10.34 - Loan Agreement dated as of December 2, 1991, by and between NU and Mellon Bank, N.A., as Trustee, with respect to NU's loan of $175 million to an ESOP Trust. (Exhibit 10.46, NU 1991 Form 10-K, File No. 1-5324) 10.34.1 - First Amendment to Exhibit 10.34 dated February 7, 1992. (Exhibit 10.36.1, 1993 NU Form 10-K, File No. 1-5324) 10.34.2 - Loan Agreement dated as of March 19, 1992 by and between NU and Mellon Bank, N.A., as Trustee, with respect to NU's loan of $75
II-14 million to the ESOP Trust. (Exhibit 10.49.1, 1992 NU Form 10-K, File No. 1-5324) 10.34.3 - Second Amendment to Exhibit 10.34 dated April 9, 1992. (Exhibit 10.36.3, 1993 NU Form 10-K, File No. 1-5324) 10.35 - Credit Agreements among the Company, NU, WMECO, NUSCO (as Agent) and 3 Commercial Banks dated December 3, 1992 (Three-Year Facility). (Exhibit C.2.38, 1992 NU Form U5S, File No. 30-246) 10.36 - Credit Agreements among the Company, WMECO, NU, HWP, RRR, NNECO and NUSCO (as Agent) and 1 commercial bank dated December 3, 1992 (Three-Year Facility). (Exhibit C.2.39, 1992 NU Form U5S, File No. 30-246) 10.37 - First Amendment and Waiver dated as of May 30, 1997 to Credit Agreement dated as of November 21, 1996 among the Company, NU, WMECO and the Co-Agents and Banks named therein. (Exhibit No. B.4(a) (Execution Copy), File No. 70-8875) 10.38 - Employment Agreement with Bernard M. Fox. (Exhibit 10.48, NU Form 10-Q for the Quarter Ended June 30, 1992, File No. 1-5324) 10.39 - Transition and Retirement Agreement with Bernard M. Fox. (Exhibit 10.39, 1996 NU Form 10-K, File No. 1-5324) 10.40 - Employment Agreement with Bruce M. Kenyon. (Exhibit 10.40, 1996 NU Form 10-K, File No. 1-5324) 10.41 - Employment Agreement with John H. Forsgren. (Exhibit 10.41, 1996 NU Form 10-K, File No. 1-5324) 10.42 - Employment Agreement with Hugh C. MacKenzie. (Exhibit 10.42, 1996 NU Form 10-K, File No. 1-5324) 10.43 - Employment Agreement with Ted C. Feigenbaum. (Exhibit 10.43, 1996 NU Form 10-K, File No. 1-5324) 10.44 - Employment Agreement with Robert E. Busch. (Exhibit 10, NU Form 10-Q for the Quarter Ended September 30, 1996, File No. 1-5324) 10.45 - Northeast Utilities Deferred Compensation Plan for Trustees, amended and restated December 13, 1994. (Exhibit 10.39, 1995 NU Form 10-K, File No. 1-5324) 10.46 - Deferred Compensation Plan for Officers of Northeast Utilities System Companies, as adopted September 23, 1986. (Exhibit 10.40, 1995 NU Form 10-K, File No. 1-5324) 10.47 - Reciprocal Support Agreement Among NNECO, NAESCO, CYAPC, YAEC and NUSCO dated January 1, 1996. (Exhibit 10.41, 1995 NU Form 10K, File No. 1-5324)
II-15 10.48 - Receivables Purchase and Sale Agreement, dated as of July 11, 1996. (Exhibit 10.48, 1996 NU Form 10-K, File No. 1-5324) 10.49 - Master Lease Agreement between General Electric Capital Corporation and the Company, dated as of June 21, 1996. (Exhibit 10.50, 1996 NU Form 10-K, File No. 1-5324) *12 - Statement re computation of Ratio of Earnings to Fixed Charges. 21 - Subsidiaries of the Registrant. (Exhibit 21, 1996 NU Form 10-K, File No. 1-5324) *23 - Consent of Arthur Andersen LLP. (See also Exhibit 5.1) *24 - Power of Attorney. (See page II-18) *25 - Form T-1 of Bankers Trust Company, Trustee. *99 - Letter of Transmittal for the Exchange Offer.
II-16 Item 17. Undertakings Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or controlling persons of the registrant pursuant to the provisions described under Item 14, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director or officers of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director or officer in connection with the securities being registered hereby and the Securities and Exchange Commission is still of the same opinion, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Berlin, and State of Connecticut, on this 8th day of July, 1997. THE CONNECTICUT LIGHT AND POWER COMPANY By /s/Hugh C. MacKenzie ---------------------------------- Hugh C. MacKenzie Principal Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated. The Company and each person whose signature appears below hereby constitute John H. Forsgren, John B. Keane, Jeffrey C. Miller and Jane P. Seidl, and each of them singly, their true and lawful attorneys, with full power to them and each of them to sign for them and in their names, in the capacities indicated above or below, as the case may be, any and all amendments to this registration statement, hereby ratifying and confirming its or their signatures as it may be signed by said attorneys to any and all amendments to said registration statement.
Signature Title Date /s/ Hugh C. MacKenzie President and Director July 8, 1997 - ---------------------------- Hugh C. MacKenzie Principal Executive Officer /s/ John H. Forsgren Executive Vice President, July 8, 1997 - ---------------------------- Chief Financial Officer and John H. Forsgren Director Principal Financial Officer /s/ John J. Roman Vice President and July 8, 1997 - ---------------------------- Controller John J. Roman Principal Accounting Officer /s/ Bernard M. Fox Chairman and Director July 8, 1997 - ---------------------------- Bernard M. Fox /s/ Robert G. Abair Director July 8, 1997 - ---------------------------- Robert G. Abair /s/ William T. Frain, Jr. Director July 8, 1997 - ---------------------------- William T. Frain, Jr. /s/ Cheryl W. Grise Director July 8, 1997 - ---------------------------- Cheryl W. Grise /s/ John B. Keane Director July 8, 1997 - ---------------------------- John B. Keane - ---------------------------- Bruce D. Kenyon Director
II-18 Registration No. 333- -------- SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 ------------- EXHIBITS TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------- THE CONNECTICUT LIGHT AND POWER COMPANY EXHIBIT INDEX ------------- Each document referred to below is incorporated by reference to the files of the Securities and Exchange Commission, unless the reference to the document is indicated by an asterisk.
Exhibit No. Description - ----------- ----------- 3.1 - Certificate of Incorporation of the Company, restated to March 22, 1994. (Exhibit 3.2.1, 1993 NU Form 10-K, File No. 1-5324) 3.2 - Certificate of Amendment to Certificate of Incorporation of the Company, dated December 26, 1996. (Exhibit 3.2.2, 1996 NU Form 10-K, File No. 1-5324) 3.3 - By-laws of the Company, as amended to January 1, 1997. (Exhibit 3.2.3, 1996 NU Form 10-K, File No. 1-5324) *4.1 - Registration Rights Agreement. 4.2 - Indenture of Mortgage and Deed of Trust between the Company and Bankers Trust Company, Trustee, dated as of May 1, 1921. (Composite including all twenty-four amendments to May 1, 1967.) (Exhibit 4.1.1, 1989 NU Form 10-K, File No. 1-5324) Supplemental Indentures to Exhibit 4.2, dated as of: 4.3 - April 1, 1967. (Exhibit 4.16, File No. 2-60806) 4.4 - January 1, 1968. (Exhibit 4.18, File No. 2-60806) 4.5 - December 1, 1969. (Exhibit 4.20, File No. 2-60806) 4.6 - June 30, 1982. (Exhibit 4.33, File No. 2-79235) 4.7 - December 1, 1989. (Exhibit 4.1.26, 1989 NU Form 10-K, File No. 1-5324) 4.8 - April 1, 1992. (Exhibit 4.30, File No. 33-59430) 4.9 - July 1, 1992. (Exhibit 4.31, File No. 33-59430) 4.10 - July 1, 1993. (Exhibit A.10(b), File No. 70-8249) 4.11 - July 1, 1993. (Exhibit A.10(b), File No. 70-8249) 4.12 - December 1, 1993. (Exhibit 4.2.14, 1993 NU Form 10-K, File No. 1-5324) 4.13 - February 1, 1994. (Exhibit 4.2.15, 1993 NU Form 10-K, File No. 1-5324) 4.14 - February 1, 1994. (Exhibit 4.2.16, 1993 NU Form 10-K, File No. 1-5324)
E-1 4.15 - June 1, 1994. (Exhibit 4.2.15, 1994 NU Form 10-K, File No. 1-5324) 4.16 - October 1, 1994. (Exhibit 4.2.16, 1994 NU Form 10-K, File No. 1-5324) 4.17 - June 1, 1996. (Exhibit 4.2.16, 1996 NU Form 10-K, File No. 1-5324) 4.18 - January 1, 1997. (Exhibit 4.2.17, 1996 NU Form 10-K, File No. 1-5324) *4.19 - May 1, 1997. *4.20 - June 1, 1997. *4.21 - Form of Proposed New Supplemental Indenture to be used for the New Bonds. 4.22 - Cross-reference sheet showing location in Indenture of provisions inserted pursuant to Sections 310 through 318 (a) of the Trust Indenture Act of 1939. (Exhibit 2.32, File No. 2-68807) 4.23 - Financing Agreement between Industrial Development Authority of the State of New Hampshire and the Company (Pollution Control Bonds, 1986 Series) dated as of December 1, 1986. (Exhibit C.1.47, 1986 NU Form U5S, File No. 30-246) 4.23.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds, 1986 Series) dated as of August 1, 1994. (Exhibit 1 (Execution Copy), File No. 70-7320) 4.24 - Financing Agreement between Industrial Development Authority of the State of New Hampshire and the Company (Pollution Control Bonds, 1988 Series) dated as of October 1, 1988. (Exhibit C.1.55, 1988 NU Form U5S, File No. 30-246) 4.24.1 - Letter of Credit (Pollution Control Bonds, 1988 Series) dated October 27, 1988. (Exhibit 4.2.17.1, 1995 NU Form 10-K, File No. 1-5324) 4.24.2 - Reimbursement and Security Agreement (Pollution Control Bonds, 1988 Series) dated as of October 1, 1988. (Exhibit 4.2.17.2, 1995 NU Form 10-K, File No. 1-5324) 4.25 - Financing Agreement between Industrial Development Authority of the State of New Hampshire and the Company (Pollution Control Bonds) dated as of December 1, 1989. (Exhibit C.1.39, 1989 NU Form U5S, File No. 30-246) 4.26 - Loan and Trust Agreement among Business Finance Authority of the State of New Hampshire, the Company and the Trustee
E-2 (Pollution Control Bonds, 1992 Series A) dated as of December 1, 1992. (Exhibit C.2.33, 1992 NU Form U5S, File No. 30-246) 4.26.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds, 1992 Series A) dated as of December 1, 1992. (Exhibit 4.2.19.1, 1995 NU Form 10-K, File No. 1-5324) 4.27 - Loan Agreement between Connecticut Development Authority and the Company (Pollution Control Bonds - Series A, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.21, 1993 NU Form 10-K, File No. 1-5324) 4.27.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds - Series A, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.23, 1993 NU Form 10-K, File No. 1-5324) 4.28 - Loan Agreement between Connecticut Development Authority and the Company (Pollution Control Bonds - Series B, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.22, 1993 NU Form 10-K, File No. 1-5324) 4.28.1 - Letter of Credit and Reimbursement Agreement (Pollution Control Bonds - Series B, Tax Exempt Refunding) dated as of September 1, 1993. (Exhibit 4.2.24, 1993 NU Form 10-K, File No. 1-5324) 4.29 - Amended and Restated Loan Agreement between Connecticut Development Authority and the Company (Pollution Control Revenue Bond - 1996A Series) dated as of May 1, 1996 and Amended and Restated as of January 1, 1997. (Exhibit 4.2.24, 1996 NU Form 10-K, File No. 1-5324) 4.29.1 - Amended and Restated Indenture of Trust between Connecticut Development Authority and the Trustee (Pollution Control Revenue Bond - 1996A Series), dated as of May 1, 1996 and Amended and Restated as of January 1, 1997. (Exhibit 4.2.24.1, 1996 NU Form 10-K, File No. 1-5324) 4.29.2 - Standby Bond Purchase Agreement among the Company, Societe Generale, New York Branch and the Trustee, dated January 23, 1997. (Exhibit 4.2.24.2, 1996 NU Form 10-K, File No. 1-5324) 4.29.3 - AMBAC Municipal Bond Insurance Policy issued by the Connecticut Development Authority (Pollution Control Revenue Bond - 1996A Series), effective January 23, 1997. (Exhibit No. 4.2.24.3, 1996 NU Form 10-K, File No. 1-5324) 4.30 - Amended and Restated Limited Partnership Agreement (CL&P Capital, L.P.) among the Company, Northeast Utilities Service Company (NUSCO), and the persons who became limited partners of CL&P Capital, L.P. in accordance with the provisions thereof dated as of January 23, 1995 (MIPS). (Exhibit A.1 (Execution Copy), File No. 70-8451)
E-3 4.31 - Indenture between the Company and Bankers Trust Company, Trustee (Series A Subordinated Debentures), dated as of January 1, 1995 (MIPS). (Exhibit B.1 (Execution Copy), File No. 70-8451) 4.32 - Payment and Guaranty Agreement of the Company dated as of January 23, 1995 (MIPS). (Exhibit B.3 (Execution Copy), File No. 70-8451) *5.1 - Opinion of Jeffrey C. Miller, Assistant General Counsel of NUSCO, as to the legality of the New Bonds, including consent of such counsel. 10.1 - Stockholder Agreement dated as of July 1, 1964 among the stockholders of Connecticut Yankee Atomic Power Company (CYAPC). (Exhibit 10.1, 1994 NU Form 10-K, File No. 1-5324) 10.2 - Form of Power Contract dated as of July 1, 1964 between CYAPC and each of the Company, The Hartford Electric Light Company (HELCO), Public Service Company of New Hampshire (PSNH) and Western Massachusetts Electric Company (WMECO). (Exhibit 10.2, 1994 NU Form 10-K, File No. 1-5324) 10.2.1 - Form of Additional Power Contract dated as of April 30, 1984, between CYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.2.1, 1994 NU Form 10-K, File No. 1-5324) 10.2.2 - Form of 1987 Supplementary Power Contract dated as of April 1, 1987, between CYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.2.6, 1987 NU Form 10-K, File No. 1-5324) 10.3 - Capital Funds Agreement dated as of September 1, 1964 between CYAPC and the Company, HELCO, PSNH and WMECO. (Exhibit 10.3, 1994 NU Form 10-K, File No. 1-5324) 10.4 - Stockholder Agreement dated December 10, 1958 between Yankee Atomic Electric Company (YAEC) and the Company, HELCO, PSNH and WMECO. (Exhibit 10.4, 1993 NU Form 10-K, File No. 1-5324) 10.5 - Form of Amendment No. 3, dated as of April 1, 1985, to Power Contract between YAEC and each of the Company, PSNH and WMECO, including a composite restatement of original Power Contract dated June 30, 1959 and Amendment No. 1 dated April 1, 1975 and Amendment No. 2 dated October 1, 1980. (Exhibit 10.5, 1988 NU Form 10-K, File No. 1-5324.) 10.5.1 - Form of Amendment No. 4 to Power Contract, dated May 6, 1988, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.1, 1989 NU Form 10-K, File No. 1-5324) 10.5.2 - Form of Amendment No. 5 to Power Contract, dated June 26, 1989, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.2, 1989 NU Form 10-K, File No. 1-5324)
E-4 10.5.3 - Form of Amendment No. 6 to Power Contract, dated July 1, 1989, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.3, 1989 NU Form 10-K, File No. 1-5324) 10.5.4 - Form of Amendment No. 7 to Power Contract, dated February 1, 1992, between YAEC and each of the Company, PSNH and WMECO. (Exhibit 10.5.4, 1993 NU Form 10-K, File No. 1-5324) 10.6 - Stockholder Agreement dated as of May 20, 1968 among stockholders of Maine Yankee Atomic Power Company (MYAPC). (Exhibit 4.15, File No. 2-30018) 10.7 - Form of Power Contract dated as of May 20, 1968 between MYAPC and each of the Company, HELCO, PSNH and WMECO. (Exhibit 4.14, File No. 2-30018) 10.7.1 - Form of Amendment No. 1 to Power Contract dated as of March 1, 1983 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.7.1, 1993 NU Form 10-K, File No. 1-5324) 10.7.2 - Form of Amendment No. 2 to Power Contract dated as of January 1, 1984 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.7.2, 1993 NU Form 10-K, File No. 1-5324) 10.7.3 - Form of Amendment No. 3 to Power Contract dated as of October 1, 1984 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit No. 10.7.3, 1994 NU Form 10-K, File No. 1-5324) 10.7.4 - Form of Additional Power Contract dated as of February 1, 1984 between MYAPC and each of the Company, PSNH and WMECO. (Exhibit 10.7.4, 1993 NU Form 10-K, File No. 1-5324) 10.8 - Capital Funds Agreement dated as of May 20, 1968 between MYAPC and the Company, PSNH, HELCO and WMECO. (Exhibit 4.13, File No. 2-30018) 10.8.1 - Amendment No. 1 to Capital Funds Agreement, dated as of August 1, 1985, between MYAPC, the Company, PSNH and WMECO. (Exhibit No. 10.8.1, 1994 NU Form 10-K, File No. 1-5324) 10.9 - Sponsor Agreement dated as of August 1, 1968 among the sponsors of Vermont Yankee Nuclear Power Corporation (VYNPC). (Exhibit 4.16, File No. 2-30285) 10.10 - Form of Power Contract dated as of February 1, 1968 between VYNPC and each of the Company, HELCO, PSNH and WMECO. (Exhibit 4.18, File No. 2-30018) 10.10.1 - Form of Amendment to Power Contract dated as of June 1, 1972 between VYNPC and each of the Company, HELCO, PSNH and WMECO. (Exhibit 5.22, File No. 2-47038)
E-5 10.10.2 - Form of Second Amendment to Power Contract dated as of April 15, 1983 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.2, 1993 NU Form 10-K, File No. 1-5324) 10.10.3 - Form of Third Amendment to Power Contract dated as of April 24, 1985 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit No. 10.10.3, 1994 NU Form 10-K, File No. 1-5324) 10.10.4 - Form of Fourth Amendment to Power Contract dated as of June 1, 1985 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.4, 1996 NU Form 10-K, File No. 1-5324) 10.10.5 - Form of Fifth Amendment to Power Contract dated as of May 6, 1988 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.5, 1990 NU Form 10-K, File No. 1-5324) 10.10.6 - Form of Sixth Amendment to Power Contract dated as of May 6, 1988 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.6, 1990 NU Form 10-K, File No. 1-5324) 10.10.7 - Form of Seventh Amendment to Power Contract dated as of June 15, 1989 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.7, 1990 NU Form 10-K, File No. 1-5324) 10.10.8 - Form of Eighth Amendment to Power Contract dated as of December 1, 1989 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.8, 1990 NU Form 10-K, File No. 1-5324) 10.10.9 - Form of Additional Power Contract dated as of February 1, 1984 between VYNPC and each of the Company, PSNH and WMECO. (Exhibit 10.10.9, 1993 NU Form 10-K, File No. 1-5324) 10.11 - Capital Funds Agreement dated as of February 1, 1968 between VYNPC and the Company, HELCO, PSNH and WMECO. (Exhibit 4.16, File No. 2-30018) 10.11.1 - Form of First Amendment to Capital Funds Agreement dated as of March 12, 1968 between VYNPC and the Company, HELCO, PSNH and WMECO. (Exhibit 4.17, File No. 2-30018) 10.11.2 - Form of Second Amendment to Capital Funds Agreement dated as of September 1, 1993 between VYNPC and the Company, HELCO, PSNH and WMECO. (Exhibit 10.11.2, 1993 NU Form 10-K, File No. 1-5324) 10.12 - Amended and Restated Millstone Plant Agreement dated as of December 1, 1984 by and among the Company, WMECO and Northeast Nuclear Energy Company (NNECO). (Exhibit 10.12, 1994 NU Form 10-K, File No. 1-5324) 10.13 - Sharing Agreement dated as of September 1, 1973 with respect to 1979 Connecticut nuclear generating unit (Millstone 3). (Exhibit 6.43, File No. 2-50142)
E-6 10.13.1 - Amendment dated August 1, 1974 to Sharing Agreement - 1979 Connecticut Nuclear Unit. (Exhibit 5.45, File No. 2-52392) 10.13.2 - Amendment dated December 15, 1975 to Sharing Agreement - 1979 Connecticut Nuclear Unit. (Exhibit 7.47, File No. 2-60806) 10.13.3 - Amendment dated April 1, 1986 to Sharing Agreement - 1979 Connecticut Nuclear Unit. (Exhibit 10.17.3, 1990 NU Form 10-K, File No. 1-5324) 10.14 - Agreement dated July 19, 1990, among North Atlantic Energy Service Corporation (NAESCO) and Seabrook Nuclear Power Station (Seabrook) joint owners with respect to operation of Seabrook. (Exhibit 10.53, 1990 NU Form 10-K, File No. 1-5324) 10.15 - Sharing Agreement between the Company, WMECO, Holyoke Power & Electric Company (HP&E), Holyoke Water Power Company (HWP) and PSNH dated as of June 1, 1992. (Exhibit 10.17, 1992 NU Form 10-K, File No. 1-5324) 10.16 - Agreement (composite) for joint ownership, construction and operation of Seabrook, as amended through the November 1, 1990 twenty-third amendment. (Exhibit No. 10.17, 1994 NU Form 10-K, File No. 1-5324) 10.16.1 - Memorandum of Understanding dated November 7, 1988 between PSNH and Massachusetts Municipal Wholesale Electric Company (Exhibit 10.17, PSNH 1989 Form 10-K, File No. 1-6392) 10.16.2 - Agreement of Settlement among joint owners dated as of January 13, 1989. (Exhibit 10.13.21, 1988 NU Form 10-K, File No. 1-5324) 10.16.2.1- Supplement to Settlement Agreement, dated as of February 7, 1989, between PSNH and Central Maine Power Company. (Exhibit 10.18.1, PSNH 1989 Form 10-K, File No. 1-6392) 10.17 - Amended and Restated Agreement for Seabrook Project Disbursing Agent dated as of November 1, 1990. (Exhibit 10.4.7, File No. 33-35312) 10.17.1 - Form of First Amendment to Exhibit 10.17. (Exhibit 10.4.8, File No. 33-35312) 10.17.2 - Form (Composite) of Second Amendment to Exhibit 10.17. (Exhibit 10.18.2, 1993 NU Form 10-K, File No. 1-5324) 10.18 - Form of Service Contract dated as of July 1, 1966 between each of NU, the Company, WMECO and NUSCO. (Exhibit 10.20, 1993 NU Form 10-K, File No. 1-5324) 10.18.1 - Form of Annual Renewal of Service Contract. (Exhibit 10.20.3, 1993 NU Form 10-K, File No. 1-5324)
E-7 10.19 - Memorandum of Understanding between the Company, HELCO, HP&E, HWP and WMECO dated as of June 1, 1970 with respect to pooling of generation and transmission. (Exhibit 13.32, File No. 2-38177) 10.19.1 - Amendment to Memorandum of Understanding between the Company, HELCO, HP&E, HWP and WMECO dated as of February 2, 1982 with respect to pooling of generation and transmission. (Exhibit 10.21.1, 1993 NU Form 10-K, File No. 1-5324) 10.19.2 - Amendment to Memorandum of Understanding between the Company, HELCO, HP&E, HWP and WMECO dated as of January 1, 1984 with respect to pooling of generation and transmission. (Exhibit 10.21.2, 1994 NU Form 10-K, File No. 1-5324) 10.20 - New England Power Pool Agreement effective as of November 1, 1971, as amended to December 1, 1996. (Exhibit 10.15, 1988 NU Form 10-K, File No. 1-5324.) 10.20.1 - Twenty-sixth Amendment to Exhibit 10.20 dated as of March 15, 1989. (Exhibit 10.15.1, 1990 NU Form 10-K, File No. 1-5324) 10.20.2 - Twenty-seventh Amendment to Exhibit 10.20 dated as of October 1, 1990. (Exhibit 10.15.2, 1991 NU Form 10-K, File No. 1-5324) 10.20.3 - Twenty-eighth Amendment to Exhibit 10.20 dated as of September 15, 1992. (Exhibit 10.18.3, 1992 NU Form 10-K, File No. 1-5324) 10.20.4 - Twenty-ninth Amendment to Exhibit 10.20 dated as of May 1, 1993. (Exhibit 10.22.4, 1993 NU Form 10-K, File No. 1-5324) 10.20.5 - Thirty-second Amendment (Amendments 30 and 31 were withdrawn) to Exhibit 10.20 dated as of September 1, 1995. (Exhibit 10.23.5, 1995 NU Form 10-K, File No. 1-5324) 10.20.6 - Thirty-third Amendment to Exhibit 10.20 dated as of December 31, 1996 and Form of Interim Independent System Operator (ISO) Agreement. (Exhibit 10.236, 1996 NU Form 10-K, File No. 1-5324) 10.21 - Agreements among New England Utilities with respect to the Hydro- Quebec interconnection projects. (See Exhibits 10(u) and 10(v); 10(w), 10(x), and 10(y), 1990 and 1988, respectively, Form 10-K of New England Electric System, File No. 1-3446.) 10.22 - Trust Agreement dated February 11, 1992, between State Street Bank and Trust Company of Connecticut, as Trustor, and Bankers Trust Company, as Trustee, and the Company and WMECO, with respect to Niantic Bay Fuel Trust. (Exhibit 10.23, 1991 NU Form 10-K, File No. 1-5324) 10.22.1 - Nuclear Fuel Lease Agreement dated as of February 11, 1992, between Bankers Trust Company, Trustee, as Lessor, and the
E-8 Company and WMECO, as Lessees. (Exhibit 10.23.1, 1991 NU Form 10-K, File No. 1-5324) 10.23 - Simulator Financing Lease Agreement, dated as of February 1, 1985, by and between ComPlan and NNECO. (Exhibit 10.25, 1994 NU Form 10-K, File No. 1-5324) 10.24 - Simulator Financing Lease Agreement, dated as of May 2, 1985, by and between The Prudential Insurance Company of America and NNECO. (Exhibit No. 10.26, 1994 NU Form 10-K, File No. 1-5324) 10.25 - Lease dated as of April 14, 1992 between The Rocky River Realty Company (RRR) and NUSCO with respect to the Berlin, Connecticut headquarters (office lease). (Exhibit 10.29, 1992 NU Form 10-K, File No. 1-5324) 10.25.1 - Lease dated as of April 14, 1992 between RRR and NUSCO with respect to the Berlin, Connecticut headquarters (project lease). (Exhibit 10.29.1, 1992 NU Form 10-K, File No. 1-5324) 10.26 - Millstone Technical Building Note Agreement dated as of December 21, 1993 between, by and between The Prudential Insurance Company of America and NNECO. (Exhibit 10.28, 1993 NU Form 10-K, File No. 1-5324) 10.27 - Note Agreement dated April 14, 1992, by and between RRR and Purchasers named therein (Connecticut General Life Insurance Company, Life Insurance Company of North America, INA Life Insurance Company of New York, Life Insurance Company of Georgia), with respect to RRR's sale of $15 million of guaranteed senior secured notes due 2007 and $28 million of guaranteed senior secured notes due 2017. (Exhibit 10.52, 1992 NU Form 10-K, File No. 1-5324) 10.27.1 - Note Guaranty dated April 14, 1992 by Northeast Utilities pursuant to Note Agreement dated April 14, 1992 between RRR and Note Purchasers, for the benefit of The Connecticut National Bank as Trustee, the Purchasers and the owners of the notes. (Exhibit 10.52.1, 1992 NU Form 10-K, File No. 1-5324) 10.27.2 - Assignment of Leases, Rents and Profits, Security Agreement and Negative Pledge, dated as of April 14, 1992 among RRR, NUSCO and The Connecticut National Bank as Trustee, securing notes sold by RRR pursuant to April 14, 1992 Note Agreement. (Exhibit 10.52.2, 1992 NU Form 10-K, File No. 1-5324) 10.28 - Master Trust Agreement dated as of September 2, 1986 between the Company and WMECO and Colonial Bank as Trustee, with respect to reserve funds for Millstone 1 decommissioning costs. (Exhibit 10.32, 1996 NU Form 10-K, File No. 1-5324) 10.28.1 - Notice of Appointment of Mellon Bank, N.A. as Successor Trustee, dated November 20, 1990, and Acceptance of
E-9 Appointment. (Exhibit 10.41.1, 1992 NU Form 10-K, File No. 1- 5324) 10.29 - Master Trust Agreement dated as of September 2, 1986 between the Company and WMECO and Colonial Bank as Trustee, with respect to reserve funds for Millstone 2 decommissioning costs. (Exhibit 10.33, 1996 NU Form 10-K, File No. 1-5324) 10.29.1 - Notice of Appointment of Mellon Bank, N.A. as Successor Trustee, dated November 20, 1990, and Acceptance of Appointment. (Exhibit 10.42.1, 1992 NU Form 10-K, File No. 1-5324) 10.30 - Master Trust Agreement dated as of April 23, 1986 between the Company and WMECO and Colonial Bank as Trustee, with respect to reserve funds for Millstone 3 decommissioning costs. (Exhibit 10.34, 1996 NU Form 10-K, File No. 1-5324) 10.30.1 - Notice of Appointment of Mellon Bank, N.A. as Successor Trustee, dated November 20, 1990, and Acceptance of Appointment. (Exhibit 10.43.1, 1992 NU Form 10-K, File No. 1-5324) 10.31 - NU Executive Incentive Plan, effective as of January 1, 1991. (Exhibit 10.44, NU 1991 Form 10-K, File No. 1-5324) 10.32 - Supplemental Executive Retirement Plan for Officers of NU System Companies, amended and restated, effective as of January 1, 1992. (Exhibit 10.45.1, NU Form 10-Q for the Quarter Ended June 30, 1992, File No. 1-5324) 10.32.1 - Amendment 1 to Exhibit 10.32, effective as of August 1, 1993. (Exhibit 10.35.1, 1993 NU Form 10-K, File No. 1-5324) 10.32.2 - Amendment 2 to Exhibit 10.32, effective as of January 1, 1994. (Exhibit 10.35.2, 1993 NU Form 10-K, File No. 1-5324) 10.32.3 - Amendment 3 to Exhibit 10.32, effective as of January 1, 1996. (Exhibit 10.36.3, 1995 NU Form 10-K, File No. 1-5324) *10.33 - Special Severance Program for Officers of NU System Companies, as adopted on June 9, 1997. 10.34 - Loan Agreement dated as of December 2, 1991, by and between NU and Mellon Bank, N.A., as Trustee, with respect to NU's loan of $175 million to an ESOP Trust. (Exhibit 10.46, NU 1991 Form 10-K, File No. 1-5324) 10.34.1 - First Amendment to Exhibit 10.34 dated February 7, 1992. (Exhibit 10.36.1, 1993 NU Form 10-K, File No. 1-5324) 10.34.2 - Loan Agreement dated as of March 19, 1992 by and between NU and Mellon Bank, N.A., as Trustee, with respect to NU's loan of $75
E-10 million to the ESOP Trust. (Exhibit 10.49.1, 1992 NU Form 10-K, File No. 1-5324) 10.34.3 - Second Amendment to Exhibit 10.34 dated April 9, 1992. (Exhibit 10.36.3, 1993 NU Form 10-K, File No. 1-5324) 10.35 - Credit Agreements among the Company, NU, WMECO, NUSCO (as Agent) and 3 Commercial Banks dated December 3, 1992 (Three-Year Facility). (Exhibit C.2.38, 1992 NU Form U5S, File No. 30-246) 10.36 - Credit Agreements among the Company, WMECO, NU, HWP, RRR, NNECO and NUSCO (as Agent) and 1 commercial bank dated December 3, 1992 (Three-Year Facility). (Exhibit C.2.39, 1992 NU Form U5S, File No. 30-246) 10.37 - First Amendment and Waiver dated as of May 30, 1997 to Credit Agreement dated as of November 21, 1996 among the Company, NU, WMECO and the Co-Agents and Banks named therein. (Exhibit No. B.4(a) (Execution Copy), File No. 70-8875) 10.38 - Employment Agreement with Bernard M. Fox. (Exhibit 10.48, NU Form 10-Q for the Quarter Ended June 30, 1992, File No. 1-5324) 10.39 - Transition and Retirement Agreement with Bernard M. Fox. (Exhibit 10.39, 1996 NU Form 10-K, File No. 1-5324) 10.40 - Employment Agreement with Bruce M. Kenyon. (Exhibit 10.40, 1996 NU Form 10-K, File No. 1-5324) 10.41 - Employment Agreement with John H. Forsgren. (Exhibit 10.41, 1996 NU Form 10-K, File No. 1-5324) 10.42 - Employment Agreement with Hugh C. MacKenzie. (Exhibit 10.42, 1996 NU Form 10-K, File No. 1-5324) 10.43 - Employment Agreement with Ted C. Feigenbaum. (Exhibit 10.43, 1996 NU Form 10-K, File No. 1-5324) 10.44 - Employment Agreement with Robert E. Busch. (Exhibit 10, NU Form 10-Q for the Quarter Ended September 30, 1996, File No. 1-5324) 10.45 - Northeast Utilities Deferred Compensation Plan for Trustees, amended and restated December 13, 1994. (Exhibit 10.39, 1995 NU Form 10-K, File No. 1-5324) 10.46 - Deferred Compensation Plan for Officers of Northeast Utilities System Companies, as adopted September 23, 1986. (Exhibit 10.40, 1995 NU Form 10-K, File No. 1-5324) 10.47 - Reciprocal Support Agreement Among NNECO, NAESCO, CYAPC, YAEC and NUSCO dated January 1, 1996. (Exhibit 10.41, 1995 NU Form 10K, File No. 1-5324)
E-11 10.48 - Receivables Purchase and Sale Agreement, dated as of July 11, 1996. (Exhibit 10.48, 1996 NU Form 10-K, File No. 1-5324) 10.49 - Master Lease Agreement between General Electric Capital Corporation and the Company, dated as of June 21, 1996. (Exhibit 10.50, 1996 NU Form 10-K, File No. 1-5324) *12 - Statement re computation of Ratio of Earnings to Fixed Charges. 21 - Subsidiaries of the Registrant. (Exhibit 21, 1996 NU Form 10-K, File No. 1-5324) *23 - Consent of Arthur Andersen LLP. (See also Exhibit 5.1) *24 - Power of Attorney. (See page II-18) *25 - Form T-1 of Bankers Trust Company, Trustee. *99 - Letter of Transmittal for the Exchange Offer.
E-12 EX-4.1 2 REGISTRATION RIGHTS AGREEMENT Exhibit 4.1 THE CONNECTICUT LIGHT AND POWER COMPANY $200,000,000 First and Refunding Mortgage Bonds, 1997 Series B due June 1, 2002 REGISTRATION RIGHTS AGREEMENT New York, New York June 19, 1997 Morgan Stanley & Co. Incorporated Salomon Brothers Inc c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: The Connecticut Light and Power Company, a Connecticut corporation (the "Company"), proposes to issue and sell (the "Initial Placement") to Morgan Stanley & Co. Incorporated ("Morgan Stanley") and Salomon Brothers Inc ("Salomon" and, together with Morgan Stanley, the "Purchasers"), upon the terms set forth in a placement agreement of even date herewith (the "Placement Agreement"), $200,000,000 of the Company's First and Refunding Mortgage Bonds, 1997 Series B due June 1, 2002 (the "Bonds"). The Bonds will be issued under the Indenture of Mortgage and Deed of Trust dated as of May 1, 1921 between the Company and Bankers Trust Company, as amended and supplemented and to be further supplemented by the 67th Supplemental Indenture relating to the Bonds to be dated as of June 1, 1997 (such indenture, as so amended and supplemented, the "Indenture"), between the Company and Bankers Trust Company, as trustee (the "Trustee"). As an inducement to the Purchasers to enter into the Placement Agreement and in satisfaction of a condition to your obligations thereunder, the Company agrees with you, (i) for your benefit and (ii) for the benefit of the holders from time to time, as follows: 1. Definitions. Capitalized terms used herein without definition ----------- shall have their respective meanings set forth in the Placement Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended, and the rules and --- regulations of the Commission promulgated thereunder. "Affiliate" has the meaning given to that term in Rule 405 of the Act --------- or any successor rule thereunder. "Closing Date" has the meaning set forth in the Placement Agreement. ------------ "Commission" means the Securities and Exchange Commission. ---------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ and the rules and regulations of the Commission promulgated thereunder. "Exchange Bonds" means, in respect of the Bonds, a like principal -------------- amount of debt securities of the Company identical in all material respects to, and entitled to substantially the same benefits as, the Bonds. "Exchange Offer Registration Period" means the 180-day period ---------------------------------- following the issuance of the Exchange Bonds, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" means a registration statement ------------------------------------- of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" means any Holder (which may include any Purchaser) ----------------- which is a broker-dealer electing to exchange Bonds acquired for its own account as a result of market-making activities or other trading activities for Exchange Bonds. "Final Memorandum" has the meaning set forth in the Placement ---------------- Agreement. "Holder" means each of the Purchasers, for so long as any such ------ Purchaser shall hold Registrable Bonds, and each of their successors, assigns and direct and indirect transferees who become holders of Registrable Bonds. "Indenture" has the meaning set forth in the preamble hereto. --------- "Initial Placement" has the meaning set forth in the preamble hereto. ----------------- "Liquidated Damages" has the meaning set forth in Section 7(a) hereof. ------------------ "Majority Holders" means the Holders of a majority of the aggregate ---------------- principal amount of securities registered under a Registration Statement. "Managing Underwriters" means the investment banker or investment --------------------- bankers and manager or managers that shall administer an underwritten offering. "Bonds" has the meaning set forth in the preamble hereto. ----- "Prospectus" means the prospectus included in any Registration ---------- Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Bonds or the Exchange Bonds, covered by such Registration -2- Statement, and all amendments and supplements to the Prospectus, including post- effective amendments. "Registrable Bonds" shall mean the Bonds; provided, however, that ----------------- -------- ------- Bonds shall cease to be Registrable Bonds when (i) a Shelf Registration Statement with respect to such Bonds shall have been declared effective under the Act and such Bonds shall have been disposed of pursuant to such Registration Statement, (ii) such Bonds shall have been sold pursuant to Rule 144(k) (or any similar rule then in effect, but not Rule 144A) under the Act, (iii) such Bonds shall have ceased to be outstanding or (iv) the Bonds shall have been exchanged for Exchange Bonds which may be transferred without restriction under the Act. "Registered Exchange Offer" means the proposed offer to the Holders to ------------------------- issue and deliver to such Holders a like principal amount of the Exchange Bonds, in exchange for the Bonds. "Registration Statement" means any Exchange Offer Registration ---------------------- Statement or Shelf Registration Statement that covers any of the Registrable Bonds or the Exchange Bonds pursuant to the provisions of this Agreement, and amendments and supplements to such registration statement, including post- effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Shelf Registration" means a registration effected pursuant to ------------------ Section 3 hereof. "Shelf Registration Event" has the meaning set forth in Section 3 ------------------------ hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) ------------------------- hereof. "Shelf Registration Statement" means a "shelf" registration statement ---------------------------- of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Registrable Bonds on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, and amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Special Counsel" means Winthrop, Stimson, Putnam & Roberts or any one --------------- such other counsel as shall be specified by the Majority Holders of securities included in the relevant Registration Statement, the reasonable fees and expenses of which will be paid by the Company pursuant to Section 5 hereof. "Trustee" has the meaning set forth in the preamble hereto. ------- "Underwriter" means any underwriter of Registrable Bonds in connection ----------- with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer; Resales of Exchange Bonds by -------------------------- ------------------- -------- Exchanging Dealers. Unless prohibited by law or Commission policy: (a) The - ------------------ Company shall prepare and file with the Commission the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Act on or prior to 150 days after the Closing Date. -3- (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Registrable Bonds for Exchange Bonds (assuming that such Holder is not an affiliate of the Company within the meaning of the Act, acquires the Exchange Bonds in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution (within the meaning of the Act) of the Exchange Bonds) to transfer such Exchange Bonds from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. The Company will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof provided that the Company has accepted all Bonds validly tendered and not withdrawn pursuant to the Registered Exchange Offer. (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; and (iii) comply in all material respects with all applicable laws. (d) On or prior to 180 days after the Closing Date, the Company shall use its best efforts to: (i) accept for exchange all Registrable Bonds validly tendered and not withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation all Registrable Bonds so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver to each Holder of tendered Registrable Bonds, Exchange Bonds of the appropriate series equal in principal amount to the Registrable Bonds of such Holder so accepted for exchange therefor. (e) The Purchasers and the Company acknowledge that, pursuant to interpretations by the Commission's staff of Section 5 of the Act, and in the absence of an applicable exemption therefrom, each Exchanging Dealer is required to deliver a Prospectus in connection with a sale of any Exchange Bonds received by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange for Registrable Bonds acquired for its own account as a result of market-making activities or other trading activities. Accordingly, the Company shall: (i) include the information set forth in Annex A hereto on the cover of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Registered Exchange Offer, and in Annex C hereto in the underwriting or plan of distribution section of the Prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal -4- delivered pursuant to the Registered Exchange Offer; and (ii) keep the Exchange Offer Registration Statement continuously effective under the Act during the Exchange Offer Registration Period for delivery of the Prospectus forming a part thereof by Exchanging Dealers in connection with sales of Exchange Bonds received pursuant to the Registered Exchange Offer, as contemplated by Section 4(h) below. (f) In the event that the Purchasers determine that they are not eligible to participate in the Registered Exchange Offer with respect to the exchange of Bonds constituting any portion of their initial unsold allotment, at the request of the Purchasers, the Company shall issue and deliver to the Purchasers, in exchange for such Bonds, a like principal amount of Exchange Bonds (provided that such Exchange Bonds shall include legends with respect to restrictions on transfer and shall be deemed Registrable Bonds), and the Company shall, for a period of 180 days after consummation of the Registered Exchange Offer, make available as many copies of the Exchange Offer Registration Statement Prospectus, as amended or supplemented, as reasonably requested by the Purchasers. The Company shall seek to cause the CUSIP Service Bureau to issue the same CUSIP number(s) for such securities as for the corresponding series of Exchange Bonds issued pursuant to the Registered Exchange Offer. The Purchasers agree to promptly notify the Company in writing following the resale of their initial allotment of Bonds. 3. Shelf Registration. If, (i) because of any change in law or ------------------ currently prevailing interpretations of law by the Commission's staff, the Company determines upon advice of its outside counsel that it is not permitted to file the Exchange Offer Registration Statement or effect the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) for any other reason the Registered Exchange Offer is not, despite the Company's best efforts, consummated within 180 days of the Closing Date and the Holders of a majority in principal amount of Bonds so request, or (iii) any Holder notifies the Company that (a) due to a change in law or policy it is not entitled to participate in the Exchange Offer; (b) due to a change in law or policy it may not resell the Exchange Bonds acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (c) it is a broker-dealer and owns Bonds acquired directly from the Company or any affiliate of the Company (the events described in clauses (i), (ii) and (iii) of this paragraph are each referred to herein as a "Shelf Registration Event"), the following provisions shall apply: (a) The Company shall promptly deliver to the Holders written notice of a Shelf Registration Event, and file with the Commission, prior to 30 days after such filing obligation arises, and thereafter use its best efforts to cause to be declared effective under the Act on or prior to 150 days after such obligation arises, a Shelf Registration Statement relating to the offer and sale of the Registrable Bonds by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that with respect to Exchange Bonds -------- ------- received by the Purchasers in exchange for Bonds constituting any portion of an unsold allotment, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of their obligations under this paragraph (a) with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. -5- (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the Closing Date or such shorter period that will terminate when all the Registrable Bonds covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or otherwise cease being Registrable Bonds (in any such case, such period being called the "Shelf Registration Period"). 4. Registration Procedures. In connection with any Shelf ----------------------- Registration Statement and, to the extent specified, any Exchange Offer Registration Statement, the following provisions shall apply: (a) The Company shall furnish to each Purchaser, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement and any Exchange Offer Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and the Company shall, upon request, promptly incorporate in such Registration Statement, such information and comments as the Purchasers reasonably agree with the Company and its counsel should be included therein provided that the Company shall not be required to take any action under this Section 4(a) that is not in the reasonable opinion of counsel for the Company in compliance with applicable law. (b) The Company shall ensure that (i) any Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any amendment or supplement thereto complies in all material respects with the Act, (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not, during the period when delivery thereof is required, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) (1) The Company shall advise the Purchasers and, in the case of a Shelf Registration Statement, the Holders of securities covered thereby and, if requested by you or any such Holder, confirm such advice in writing: (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when a Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to a Registration Statement or the Prospectus included therein or for additional information. (2) The Company shall advise the Purchasers and, in the case of a Shelf Registration Statement, the Holders of securities covered thereby, and, in the case of an Exchange Offer Registration Statement, any Exchanging Dealer which has provided in writing to the Company a telephone or facsimile number and address for notices, and, -6- if requested by you or any such Holder or Exchanging Dealer, confirm such advice in writing: (i) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iii) of the suspension of the use of a Prospectus. (d) The Company shall use its best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness or use of any Registration Statement at the earliest possible time. (e) The Company shall furnish to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, as promptly as is reasonably practicable deliver to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and subject to Section 4(k), the Company consents to the use of the Prospectus or any amendment or supplement thereto as to which no notice has been given pursuant to paragraph 4(c)(2) by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus or any amendment or supplement thereto. (g) The Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, any documents incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits (including those incorporated by reference). (h) The Company shall, during the Exchange Offer Registration Period, promptly deliver to each Exchanging Dealer, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as such Exchanging Dealer may reasonably request for delivery by such Exchanging Dealer in connection with a sale of Exchange Bonds received by it pursuant to the Registered Exchange Offer; and subject to Section 4(k), the Company consents to the use of the Prospectus or any amendment or supplement thereto as to which no notice has been given pursuant to paragraph 4(c)(2) by any such Exchanging Dealer, as aforesaid. -7- (i) Prior to the Registered Exchange Offer or the effectiveness of a Registration Statement, the Company shall, if required by applicable law, register or qualify or cooperate with the Holders of securities included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such United States jurisdictions of the securities covered by such Registration Statement; provided, however, that the Company will not be required to (i) qualify generally to do business or as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 4(i), (ii) file any general consent to service of process in any jurisdiction where it is not as of the date hereof so subject or (iii) subject itself to taxation in any jurisdiction where it is not otherwise subject. (j) Unless the applicable securities shall be in book-entry only form, the Company shall cooperate with the Holders of Bonds to facilitate the timely preparation and delivery of certificates representing Registrable Bonds to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request prior to sales of Registrable Bonds pursuant to such Registration Statement. (k) Upon the occurrence of any event contemplated by paragraphs (c)(1)(ii) or (c)(2) above, the Company agrees to notify the Purchasers, and in the case of a Shelf Registration Statement, the Holders of securities covered thereby, to suspend use of the Prospectus and the Company shall prepare, using its best efforts to do so as soon as possible, a post-effective amendment to any Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and the Purchasers, and in the case of a Shelf Registration Statement, the Holders of securities covered thereby, shall suspend use of such Prospectus until the Company has amended or supplemented such Prospectus so that such Prospectus does not contain any such untrue statement or omission. (1) The Company shall use its best efforts to cause The Depository Trust Company ("DTC"), on the first business day following the effective date of any Shelf Registration Statement hereunder or as soon as possible thereafter, to remove (i) from any existing CUSIP number assigned to any series of Registrable Bonds, any designation indicating that such Registrable Bonds are "restricted securities," which efforts shall include delivery to DTC of a letter executed by the Company to such effect and (ii) any other stop or restriction on DTC's system with respect to such Registrable Bonds. In the event the Company is unable to cause DTC to take the actions described in the immediately preceding sentence, the Company shall take such actions as Morgan Stanley may reasonably request to provide, as soon as practicable, a CUSIP number for each series of Registrable Bonds registered under such Registration Statement and to cause such CUSIP numbers to be assigned to such Registrable Bonds (or to the maximum aggregate principal amount of such Registrable Bonds to which such number(s) may be assigned). Upon compliance with the foregoing requirements of this Section 4(1), the Company shall provide the Trustee with printed certificates for each series of Registrable Bonds, in a form eligible for deposit with DTC. -8- (m) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in a timely manner. (o) The Company may require each Holder of securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding such Holder and the distribution of such securities by such Holder as the Company may from time to time reasonably require for inclusion in such Registration Statement, and securities of a Holder which does not provide information necessary for inclusion in such Registration Statement may be omitted from any Shelf Registration Statement. (p) The Company shall, upon request, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and Majority Holders reasonably agree with the Company and its counsel should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment provided that the Company shall not be required to take any action under this Section 4(p) that is not in the reasonable opinion of counsel for the Company in compliance with applicable law. (q) In the case of any Shelf Registration Statement, the Company shall enter into such customary agreements (including underwriting agreements) and take all other appropriate and reasonably required actions in connection therewith in order to expedite or facilitate the registration or the disposition of the Registrable Bonds and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Holders of a majority in aggregate principal amount of Registrable Bonds and the Managing Underwriters, if any) with respect to all parties to be indemnified pursuant to Section 6. (r) In the case of any Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by the Holders of securities to be registered thereunder, subject to their acceptance of the provisions of this Section 4(r), any underwriter participating in any distribution pursuant to such Registration Statement, and any Special Counsel, accountant or other agent retained by the Holders or any such underwriter, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries as shall reasonably be required in connection with the discharge of their due diligence obligations; (ii) cause the Company's officers, directors and employees and any relevant trustee to supply all relevant information reasonably requested by the Holders or any such underwriter, Special Counsel, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, -------- however, that the foregoing inspection and information gathering shall be ------- coordinated on behalf of the Holders and the other parties entitled thereto by the Special Counsel and other parties; (iii) make such representations and warranties to the Holders of securities registered thereunder and the -9- underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in secondary offerings and covering such matters as are customarily covered in representations and warranties requested in secondary offerings; (iv) obtain opinions of counsel to the Company and updates thereof addressed to each selling Holder and the underwriters, if any, covering such matters and with such exceptions as are customarily covered or taken in opinions requested in secondary offerings, (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with secondary offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, or their counsel including those to evidence compliance with Section 4(k) and with conditions customarily contained in the underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (iii) and (v) of this Section 4(r) shall be performed at the effectiveness of such Registration Statement and those set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(r) shall be performed at each closing under any underwriting or similar agreement as and to the extent required thereunder. (s) In the case of any Exchange Offer Registration Statement, if requested by the Purchasers, the Company shall (i) make reasonably available for inspection by the Purchasers, subject to their acceptance of the provisions of this Section 4(s), and any Special Counsel, accountant or other agent retained by the Purchasers, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries as shall reasonably be required in connection with the discharge of their due diligence obligations; (ii) cause the Company's officers, directors and employees and any relevant trustee to supply all relevant information reasonably requested by the Purchasers or any such Special Counsel, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that the foregoing inspection and -------- ------- information gathering shall be coordinated on behalf of the Purchasers and other parties entitled thereto by the Special Counsel and other parties; (iii) make such representations and warranties to the Purchasers, in form, substance and scope as are customarily made by issuers to underwriters in secondary offerings and covering such matters as are customarily covered in representations and warranties requested in secondary offerings; and (iv) deliver such documents and certificates as may be reasonably requested by the Special Counsel, including those to evidence compliance with Section 4(k) and with conditions customarily contained in underwriting agreements. The foregoing actions set forth in clauses (iii) and (iv) of this Section 4(s) shall be performed, if requested by the Special Counsel, at the closing of the Registered Exchange Offer and the effective date of any post-effective amendment to the Exchange Offer Registration Statement. 5. Registration Expenses. The Company shall bear all expenses --------------------- incurred in connection with the performance of their obligations under Sections 2, 3 and 4 hereof, including for the reasonable fees and disbursements of the Special Counsel; provided, however, that each Holder shall pay all underwriting -------- ------- discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Bonds pursuant to a Shelf Registration Statement. -10- 6. Indemnification; Contribution. ----------------------------- (a) The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls any Holder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereof, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary Prospectus or any Prospectus (or amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Holder furnished to the Company in writing by such Holder expressly for use therein. The Company shall also indemnify each Exchanging Dealer participating in the offering and sale of the Bonds and each person who controls any such Exchanging Dealer (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) to the same extent and with the same limitations as provided above with respect to the indemnification of the Holders of the Bonds. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Company's directors, the Company's officers who sign a Registration Statement, and each person, if any, who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment thereof, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary Prospectus or any Prospectus (or amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in the case of clauses (i) and (ii), only with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in such Registration Statement, preliminary Prospectus, Prospectus or any amendments or supplements thereto. In no event shall the liability of any Holder of the Bonds hereunder be greater in amount than the net dollar amount of the proceeds received by such Holder from the sale of the Bonds giving rise to such indemnification obligation. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "indemnified party") shall promptly notify the person against whom ----------- ----- such indemnity may be sought (the "indemnifying party") in writing and the ------------------ indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any -11- indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all persons, if any, who control any Holders within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, and (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its officers and directors and each person, if any, who controls the Company within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Company, its officers and directors and any such control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Holders or any such control persons of any Holders, such firm shall be designated in writing on behalf of the Majority Holders. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to herein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this paragraph are several in proportion to the respective principal amounts of the Bonds they have sold pursuant to a Registration Statement, and not joint. (e) The Company and the Holders agree that it would not be just or equitable if contribution pursuant to Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) of this Section 6. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities referred to in paragraph (d) of this Section 6 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses -12- reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, a Holder of Registrable Bonds shall not be required to contribute any amount in excess of the amount by which the total price at which the Registrable Bonds sold by such indemnifying party and distributed to the public were offered to the public pursuant to any Registration Statement exceeds the amount of any damages which such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any person controlling any Holder, or the Company or any person controlling the Company and (iii) the sale of any Registrable Bonds pursuant to an effective Registration Statement by any Holder. 7. Liquidated Damages Under Certain Circumstances. (a) Liquidated ---------------------------------------------- damages ("Liquidated Damages") shall become payable in respect of Registrable Bonds as follows if either of the following events occur (each such event, a "Registration Default") (i) if the Registered Exchange Offer is not consummated on or prior to the 180th day following the Closing Date; or (ii) if after the Exchange Offer Registration Statement or Shelf Registration Statement is declared effective, (A) such Exchange Offer Registration Statement or Shelf Registration Statement ceases to be effective prior to the end of the Exchange Offer Registration Period or Shelf Registration Period (except as permitted in paragraph (b) of this Section 7) or (B) such Exchange Offer Registration Statement or Shelf Registration Statement or the related Prospectus ceases to be usable in connection with resales of Registrable Bonds covered by such Exchange Offer Registration Statement or Shelf Registration Statement prior to the end of the Exchange Offer Registration Period or Shelf Registration Period (except as permitted in paragraph (b) of this Section 7) because (1) the Company determines that any event occurs as a result of which the related Prospectus forming part of such Exchange Offer Registration Statement or Shelf Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (2) the Company determines that it shall be necessary to amend such Exchange Offer Registration Statement or Shelf Registration Statement, or supplement the related Prospectus, to comply with the Act or the Exchange Act or the rules thereunder, or (3) the Company determines that it is advisable to suspend use of the Prospectus for a discrete period of time due to pending material corporate developments or similar material events that have not yet been publicly disclosed and as to which the Company believes public disclosure will be prejudicial to the Company. Liquidated Damages shall accrue on the Registrable Bonds over and above the original interest rate set forth in the Registrable Bonds following the occurrence of a Registration Default set forth in clauses (i) and (ii) above from and including the next day following each such Registration Default, with respect to the first 90-day period immediately following the -13- occurrence of such Registration Default by 0.50% per annum and will increase by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of 1.50% per annum; provided that in no event shall the interest rate payable on the -------- Registrable Bonds be increased more than 0.50% per annum in any single 90-day period above the interest rate applicable immediately prior to commencement of such 90-day period. The Liquidated Damages attributable to each Registration Default shall cease to accrue from the date such Registration Default is cured; the effectiveness of the Shelf Registration Statement filed pursuant to Section 3 hereof shall be deemed to cure the Registration Default referred to in clause (i) above. (b) A Registration Default referred to in clause (ii) above shall be deemed not to have occurred and be continuing in relation to the Exchange Offer Registration Statement or Shelf Registration Statement or the related Prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Exchange Offer Registration Statement or Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (y) the occurrence of other material events or developments with respect to the Company that would need to be described in such Exchange Offer Registration Statement or Shelf Registration Statement or the related Prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Exchange Offer Registration Statement or Shelf Registration Statement and related Prospectus to describe such events. (c) As set forth in the Bonds (and without duplication), any amounts of Liquidated Damages due pursuant to the foregoing paragraphs will be payable in cash on June 1 and December 1 of each year to the holders of record on the preceding May 15 and November 15, respectively (or if such record date is a day on which banks are authorized to close in New York City, on the preceding banking day). 8. Miscellaneous. ------------- (a) No Inconsistent Agreements. The Company has not, as of the date -------------------------- hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to the Bonds that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of the Registrable Bonds; provided, however, that, with respect -------- ------- to any matter that affects the rights of any Purchaser hereunder, the Company shall obtain the written consent of such Purchaser. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Registrable Bonds are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Holders of a majority of the Registrable Bonds, determined on the basis of Registrable Bonds being sold rather than registered under such Registration Statement. (c) Notices. All notices and other communications provided for or ------- permitted -14- hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 8(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Morgan Stanley; (2) if to the Purchasers, initially at the address set forth in the Placement Agreement; and (3) if to the Company, initially at the address set forth in the Placement Agreement. All such notices and communications shall be deemed to have been duly given when received. The Purchasers or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the ---------------------- benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Registrable Bonds. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Registrable Bonds and any such Holder may enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. (h) Severability. In the event that any one or more of the ------------ provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Bonds Held by the Company, etc. Whenever the consent or ------------------------------- approval of Holders of a specified percentage of principal amount of Registrable Bonds is required hereunder, Bonds or Exchange Bonds, as applicable, held by the Company or its Affiliates (other than subsequent Holders of Registrable Bonds if such subsequent Holders are deemed to be -15- Affiliates solely by reason of their holdings of such Bonds or Exchange Bonds) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. -16- If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart thereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the several Purchasers and the Company in accordance with its terms. Very truly yours, THE CONNECTICUT LIGHT AND POWER COMPANY By: /s/John B. Keane ---------------------------------- Name: John B. Keane Title: Vice President and Treasurer The foregoing is hereby confirmed and accepted as of the date first above written. MORGAN STANLEY & CO. INCORPORATED SALOMON BROTHERS INC By: MORGAN STANLEY & CO. INCORPORATED By: /s/Harold J. Hendershot, III Title: Vice President -17- ANNEX A Each broker-dealer that receives Exchange Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Registrable Bonds where such Registrable Bonds were acquired by such broker-dealer as a result of market making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." -A1- ANNEX B Each broker-dealer that receives Exchange Bonds for its own account in exchange for Bonds where such Bonds were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. See "Plan of Distribution." -B1- ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Bonds for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Existing Bonds where such Existing Bonds were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Bonds by broker-dealers. Exchange Bonds received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Bonds or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Bonds. Any broker- dealer that resells Exchange Bonds that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Bonds may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Bonds and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the fees and disbursements of one counsel for the holders of the Registrable Bonds) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Registrable Bonds (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. -C1- ANNEX D [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------- Address: ---------------------------- ---------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Bonds. If the undersigned is a broker-dealer that will receive Exchange Bonds for its own account in exchange for Bonds that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. -D1- EX-4.19 3 EXHIBIT 4.19 Exhibit 4.19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUPPLEMENTAL INDENTURE Dated as of May 1, 1997 To Indenture of Mortgage and Deed of Trust Dated as of May 1, 1921 --------------------- THE CONNECTICUT LIGHT AND POWER COMPANY TO BANKERS TRUST COMPANY, Trustee --------------------- 1997 Series A Bonds, Due November 21, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE CONNECTICUT LIGHT AND POWER COMPANY Supplemental Indenture, Dated as of May 1, 1997 TABLE OF CONTENTS
Page Parties.........................................................................................................................2 Recitals........................................................................................................................2 Granting Clause.................................................................................................................4 Habendum........................................................................................................................5 Grant in Trust..................................................................................................................5 ARTICLE 1. FORM AND PROVISIONS OF BONDS OF 1997 SERIES A SECTION 1.01. Designation; Amount.............................................................................................5 SECTION 1.02. Form of Bonds of 1997 Series A..................................................................................6 SECTION 1.03. Provisions of Bonds of 1997 Series A; Interest Accrual; Effect of Payment on Credit Borrowings..................6 SECTION 1.04. Transfer and Exchange of Bonds of 1997 Series A; Agent as Registered Holder: Restriction on Transfer of Bonds of 1997 Series A...................................................................................................7 SECTION 1.05. Conditions under which 1997 Series A Bond Not Entitled to Benefits of Mortgage..................................8 SECTION 1.06. Sinking and Improvement Fund....................................................................................8 ARTICLE 2. REPAYMENT OF BONDS OF 1997 SERIES A SECTION 2.01. Repayment Upon Repayment of Credit Borrowings...................................................................8 ARTICLE 3. MISCELLANEOUS SECTION 3.01. Benefits of Supplemental Indenture and Bonds of 1997 Series A...................................................9 SECTION 3.02. Effect of Table of Contents and Headings........................................................................9 SECTION 3.03. Counterparts....................................................................................................9 SECTION 3.04. Payment Due on Holidays.........................................................................................9 TESTIMONIUM....................................................................................................................10 SIGNATURES.....................................................................................................................10 ACKNOWLEDGMENTS................................................................................................................11
SCHEDULE A - Form of Bond of 1997 Series A Form of Trustee's Certificate -2- SUPPLEMENTAL INDENTURE, dated as of the first day of May, 1997, between THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation organized and existing under the laws of the State of Connecticut (hereinafter called the "Company"), and BANKERS TRUST COMPANY, a corporation organized and existing under the laws of the State of New York (hereinafter called the "Trustee"). WHEREAS, the Company heretofore duly executed, acknowledged and delivered to the Trustee a certain Indenture of Mortgage and Deed of Trust dated as of May 1, 1921, and sixty-five Supplemental Indentures thereto dated respectively as of May 1, 1921, February 1, 1924, July 1, 1926, June 20, 1928, June 1, 1932, July 1, 1932, July 1, 1935, September 1, 1936, October 20, 1936, December 1, 1936, December 1, 1938, August 31, 1944, September 1, 1944, May 1, 1945, October 1, 1945, November 1, 1949, December 1, 1952, December 1, 1955, January 1, 1958, February 1, 1960, April 1, 1961, September 1, 1963, April 1, 1967, May 1, 1967, January 1, 1968, October 1, 1968, December 1, 1969, January 1, 1970, October 1, 1970, December 1, 1971, August 1, 1972, April 1, 1973, March 1, 1974, February 1, 1975, September 1, 1975, May 1, 1977, March 1, 1978, September 1, 1980, October 1, 1981, June 30, 1982, October 1, 1982, July 1, 1983, January 1, 1984, October 1, 1985, September 1, 1986, April 1, 1987, October 1, 1987, November 1, 1987, April 1, 1988, November 1, 1988, June 1, 1989, September 1, 1989 , December 1, 1989, April 1, 1992, July 1, 1992, October 1, 1992, July 1, 1993, July 1, 1993, December 1, 1993, February 1, 1994, February 1, 1994, June 1, 1994, October 1, 1994, June 1, 1996 and January 1, 1997 (said Indenture of Mortgage and Deed of Trust (i) as heretofore amended, being hereinafter generally called the "Mortgage Indenture," and (ii) together with said Supplemental Indentures thereto, being hereinafter generally called the "Mortgage"), all of which have been duly recorded as required by law, for the purpose of securing its First and Refunding Mortgage Bonds (of which $1,484,000,000 aggregate principal amount are outstanding at the date of this Supplemental Indenture) in an unlimited amount, issued and to be issued for the purposes and in the manner therein provided, of which Mortgage this Supplemental Indenture is intended to be made a part, as fully as if therein recited at length; WHEREAS, pursuant to the Credit Agreement dated as of November 21, 1996 (the "Original Agreement") among Northeast Utilities ("NU"), the Company and Western Massachusetts Electric Company ("WMECO"), the Lenders and Co-Agents named therein (collectively, the "Lenders") and Citibank, N.A. as administrative agent as amended and restated by a First Amendment and Waiver dated as of May 30, 1997 (the Original Agreement, as so amended and restated, herein called the "Credit Agreement"), the Company has the right, upon meeting the conditions thereof, to obtain up to $313,750,000 of Advances (as that term and all other capitalized terms used but not otherwise defined in this Supplemental Indenture are defined in the Credit Agreement) under the Credit Agreement; and -3- WHEREAS, in consideration of the line of credit being provided by the Banks under the Credit Agreement and pursuant to the provisions thereof, the Company has agreed to issue $225,000,000 principal amount of its First and Refunding Mortgage Bonds, 1997 Series A (hereinafter generally referred to as the "1997 Series A Bonds" or the "bonds of 1997 Series A") to evidence and secure the Company's obligation under the Credit Agreement to repay Advances as provided in the Credit Agreement, to provide security for the borrowings by the Company under the Credit Agreement and to secure the Company's obligation to pay the Facility Fee under Section 2.02(b) of the Credit Agreement; provided however -------- ------- that such obligation shall not exceed $410,000 (the "Facility Fee Obligation"); and WHEREAS, pursuant to the terms of the Credit Agreement the entire $225,000,000 principal amount of the 1997 Series A Bonds shall be made available to the Agent as potential collateral for the aggregate unpaid principal amount of Advances to the Company outstanding from time to time under the Credit Agreement, plus the Facility Fee Obligation, together with accrued and unpaid interest thereon then payable by the Company thereunder (collectively, as of any time for determining same, the "Credit Borrowings"), it being understood that the actual indebtedness evidenced by the 1997 Series A Bonds as of any time shall be limited to the Credit Borrowings as determined at such time, that at no time shall any claim be made for principal and interest on the 1997 Series A Bonds in excess of the Credit Borrowings as determined at such time, and that, to the extent that the outstanding principal amount of the 1997 Series A Bonds exceeds such amount, neither the Lenders nor the Agent shall have any right under, or right to exercise any right granted to the holders of such excess 1997 Series A Bonds under, the Mortgage; and WHEREAS, in consideration of the Advances to be provided by the Lenders under the Credit Agreement, and pursuant to the provisions of the Credit Agreement, the Company has agreed to issue, and by appropriate and sufficient corporate action in conformity with the provisions of the Mortgage has duly determined to create, to evidence and secure the Company's obligation under the Credit Agreement to make loan payments as aforesaid and to provide security for the Credit Borrowings, a further series of bonds under the Mortgage, the 1997 Series A Bonds, to consist of fully registered bonds containing terms and provisions duly fixed and determined by the Board of Directors of the Company and expressed in this Supplemental Indenture, including terms and provisions with respect to maturity, interest payment, interest rate and repayment as provided herein Bonds, such fully registered bonds and the Trustee's certificate of its authentication thereof to be substantially in the forms thereof respectively set forth in Schedule A appended hereto and made a part hereof; WHEREAS, the execution and delivery of this Supplemental Indenture and the issue of not exceeding Two Hundred Twenty-Five Million Dollars ($225,000,000) in aggregate principal -4- amount of bonds of 1997 Series A and other necessary actions have been duly authorized by the Board of Directors of the Company; WHEREAS, the Company proposes to execute and deliver this Supplemental Indenture to provide for the issue of the bonds of 1997 Series A and to confirm the lien of the Mortgage on the property referred to below, all as permitted by Section 14.01 of the Mortgage Indenture; and WHEREAS, all acts and things necessary to constitute this Supplemental Indenture a valid, binding and legal instrument and to make the bonds of 1997 Series A when executed by the Company and authenticated by the Trustee valid, binding and legal obligations of the Company have been authorized and performed; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE OF MORTGAGE AND DEED OF TRUST WITNESSETH: That in order to secure the payment of the principal of and interest on all bonds issued and to be issued under the Mortgage, according to their tenor and effect, and according to the terms of the Mortgage and this Supplemental Indenture, and to secure the performance of the covenants and obligations in said bonds and in the Mortgage and this Supplemental Indenture respectively contained, and for the better assuring and confirming unto the Trustee, its successor or successors and its or their assigns, upon the trusts and for the purposes expressed in the Mortgage and this Supplemental Indenture, all and singular the hereditaments, premises, estates and property of the Company thereby conveyed or assigned or intended so to be, or which the Company may thereafter have become bound to convey or assign to the Trustee, as security for said bonds (except such hereditaments, premises, estates and property as shall have been disposed of or released or withdrawn from the lien of the Mortgage and this Supplemental Indenture, in accordance with the provisions thereof and subject to alterations, modifications and changes in said hereditaments, premises, estates and property as permitted under the provisions thereof), the Company, for and in consideration of the premises and the sum of One Dollar ($1.00) to it in hand paid by the Trustee, the receipt whereof is hereby acknowledged, and of other valuable considerations, has granted, bargained, sold, assigned, mortgaged, pledged, transferred, set over, aliened, enfeoffed, released, conveyed and confirmed, and by these presents does grant, bargain, sell, assign, mortgage, pledge, transfer, set over, alien, enfeoff, release, convey and confirm unto said Bankers Trust Company, as Trustee, and its successor or successors in the trust created by the Mortgage and this Supplemental Indenture, and its and their assigns, all of said hereditaments, premises, estates and property (except and subject as aforesaid), as fully as though described at length herein. Together with all plants, buildings, structures, improvements and machinery located upon said real estate or any portion thereof, and all rights, privileges and easements of every kind and nature appurtenant thereto, and all and singular the tenements, hereditaments and appurtenances belonging to the real estate or any part -5- thereof described or referred to therein or intended so to be, or in any wise appertaining thereto, and the reversions, remainders, rents, issues and profits thereof, and also all the estate, right, title, interest, property, possession, claim and demand whatsoever, as well in law as in equity, of the Company, of, in and to the same and any and every part thereof, with the appurtenances; except and subject as aforesaid. TO HAVE AND TO HOLD all and singular the property, rights and privileges hereby granted or mentioned or intended so to be, together with all and singular the reversions, remainders, rents, revenues, income, issues and profits, privileges and appurtenances, now or hereafter belonging or in any way appertaining thereto, unto the Trustee and its successor or successors in the trust created by the Mortgage and this Supplemental Indenture, and its and their assigns, forever, and with like effect as if the above described property, rights and privileges had been specifically described at length in the Mortgage and this Supplemental Indenture. Subject, however, to permitted liens, as defined in the Mortgage Indenture. IN TRUST, NEVERTHELESS, upon the terms and trusts of the Mortgage and this Supplemental Indenture for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Mortgage and this Supplemental Indenture (and subject to any sinking fund that may heretofore have been or hereafter be created for the benefit of any particular series). And it is hereby covenanted that all such bonds of 1997 Series A are to be issued, authenticated and delivered, and that the mortgaged premises are to be held by the Trustee, upon and subject to the trusts, covenants, provisions and conditions and for the uses and purposes set forth in the Mortgage and this Supplemental Indenture and upon and subject to the further covenants, provisions and conditions and for the uses and purposes hereinafter set forth, as follows, to wit: ARTICLE 1. FORM AND PROVISIONS OF BONDS OF 1997 SERIES A SECTION 1.01. Designation; Amount. The bonds of 1997 Series A shall be designated "First and Refunding Mortgage Bonds, 1997 Series A" and, subject to Section 2.08 of the Mortgage Indenture, shall not exceed Two Hundred Twenty-Five Million Dollars ($225,000,000) in aggregate principal amount at any one time outstanding. The initial issue of -6- the bonds of 1997 Series A may be effected upon compliance with the applicable provisions of the Mortgage Indenture. SECTION 1.02. Form of Bonds of 1997 Series A. The bonds of 1997 Series A shall be issued only in fully registered form without coupons in denominations of One Thousand Dollars ($1,000) and multiples thereof. The bonds of 1997 Series A and the certificate of the Trustee upon said bonds shall be substantially in the forms thereof respectively set forth in Schedule A appended hereto. SECTION 1.03. Provisions of Bonds of 1997 Series A; Interest Accrual; Effect of Payment on Credit Borrowings. The bonds of 1997 Series A shall mature on November 21, 1999 and, subject to the provisions of the Credit Agreement, shall bear interest, payable on the dates on which interest payments are payable by the Company to the Lenders from time to time under the Credit Agreement (each such date on which interest is so payable by the Company to the Lenders under the Credit Agreement being an interest payment date applicable to the bonds of 1997 Series A), until the Company's obligation in respect of the principal thereof shall be discharged, in amounts equal to the interest payments payable by the Company to the Lenders pursuant to the Credit Agreement on such interest payment dates applicable to the bonds of 1997 Series A; provided, however, that -------- ------- in no event shall the interest rate payable on the 1997 Series A Bonds exceed 11%; and shall be payable both as to principal and interest at the office or agency of the Company in the Borough of Manhattan, New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. The interest on the bonds of 1997 Series A, whether in temporary or definitive form, shall be payable without presentation of such bonds; and only to or upon the written order of the registered holders thereof of record at the applicable record date. If, pursuant to the Credit Agreement, the Company's right to obtain Advances thereunder shall be terminated and all or any portion of the principal of the Credit Borrowings shall become or be declared immediately due and payable by the Company, a like principal amount of the bonds of 1997 Series A, together with all accrued interest thereon, shall without notice or demand of any kind, become immediately due and payable. In addition, the bonds of 1997 Series A shall be repayable in whole or in part according to the terms and provisions provided herein in Article 2. Subject to the provisions of the Credit Agreement and subject to the Company's right to repay Advances and thereafter obtain new Advances, in each case collateralized by 1997 Series A Bonds, thereunder, anything in the Mortgage, this Supplemental Indenture or any bond of 1997 Series A to the contrary notwithstanding, the bonds of 1997 Series A shall be deemed paid, and all obligations of the Company to pay at the times provided herein the principal of, premium, if any, and interest on the bonds of 1997 Series A shall be satisfied and discharged, when and to the extent, that the Credit Borrowings shall have been indefeasibly paid in full in -7- accordance with the terms thereof and the obligations of the several Lenders to make Advances to the Company under the Credit Agreement shall have been terminated, it being understood that the actual indebtedness evidenced by the 1997 Series A Bonds as of any time shall be limited to the Credit Borrowings as determined at such time, that at no time shall any claim be made for principal and interest on the 1997 Series A Bonds in excess of the Credit Borrowings as determined at such time, and that, to the extent that the outstanding principal amount of the 1997 Series A Bonds exceeds such amount, neither the Lenders nor the Agent shall have any right under, or right to exercise any right granted to the holders of such excess 1997 Series A Bonds under, the Mortgage. Unless the Trustee shall have received written notice to the contrary from the Company or the Collateral Agent, the Trustee shall be entitled to assume that the Company has made all payments required under the Credit Agreement. Each bond of 1997 Series A shall be dated as of May 30, 1997 and shall bear interest on the principal amount thereof as provided herein and in the Credit Agreement. Subject to the provisions of the Credit Agreement, the person in whose name any bond of 1997 Series A is registered at the close of business on any record date (as hereinafter defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such bond upon any registration of transfer or exchange thereof subsequent to the record date and prior to such interest payment date, except that if and to the extent the Company shall default in the payment of the interest due on such interest payment date, then such defaulted interest shall be paid to the person in whose name such bond is registered on a subsequent record date for the payment of defaulted interest if one shall have been established as hereinafter provided and otherwise on the date of payment of such defaulted interest. A subsequent record date may be established by the Company by notice mailed to the owners of the bonds of 1997 Series A not less than ten (10) days preceding such record date, which record date shall not be more than thirty (30) days prior to the subsequent interest payment date. The term "record date" as used in this Section with respect to any regular interest payment date shall mean the day next preceding such interest payment date, or if such day shall not be a Business Day, the next preceding day which shall be a Business Day. SECTION 1.04. Transfer and Exchange of Bonds of 1997 Series A; Agent as Registered Holder: Restriction on Transfer of Bonds of 1997 Series A. The bonds of 1997 Series A may be surrendered for registration of transfer as provided in Section 2.06 of the Mortgage Indenture at the office or agency of the Company in the Borough of Manhattan, New York, New York, and may be surrendered at said office for exchange for a like aggregate principal amount of bonds of 1997 Series A of other authorized denominations. Notwithstanding the provisions of Section 2.06 of the Mortgage Indenture, no charge, except for taxes or other governmental charges, shall be made by the Company for any registration of -8- transfer of bonds of 1997 Series A or for the exchange of any bonds of 1997 Series A for such bonds of other authorized denominations. The bonds of 1997 Series A shall be issued to and registered in the name of CITIBANK, N.A., as Collateral Agent for the benefit of the several Lenders and, anything in the Mortgage, this Supplemental Indenture or any bond of 1997 Series A to the contrary notwithstanding, the bonds of 1997 Series A shall not be sold, assigned, pledged or transferred, except to effect the transfer to any successor Collateral Agent under the Credit Agreement. SECTION 1.05. Conditions under which 1997 Series A Bond Not Entitled to Benefits of Mortgage. As provided in the Credit Agreement, anything in the Mortgage, this Supplemental Indenture or any bond of 1997 Series A to the contrary notwithstanding, (i) the actual indebtedness evidenced by the 1997 Series A Bonds as of any time shall be limited to the Credit Borrowings as determined at such time; (ii) at no time shall any claim be made for principal and interest on the 1997 Series A Bonds in excess of the Credit Borrowings as determined at such time; and (iii) to the extent that the outstanding principal amount of the 1997 Series A Bonds exceeds such amount, neither the Lenders nor the Agent shall have any right under, or right to exercise any right granted to the holders of such excess 1997 Series A Bonds under, the Mortgage. SECTION 1.06. Sinking and Improvement Fund. Each holder of a bond of 1997 Series A, solely by virtue of its acquisition thereof, shall have and be deemed to have consented, without the need for any further action or consent by such holder, to any and all amendments to the Mortgage Indenture which are intended to eliminate or modify in any manner the requirements of the sinking and improvement fund as provided for in Section 6.14 thereof. ARTICLE 2. REPAYMENT OF BONDS OF 1997 SERIES A SECTION 2.01. Repayment Upon Repayment of Credit Borrowings. In the event that the Credit Agreement is (i) terminated in its entirety with respect to the Company and the Credit Borrowings shall have been paid in full, all of the then outstanding 1997 Series A Bonds shall be deemed paid and all obligations of the Company thereunder and hereunder shall be deemed satisfied and discharged, or (ii) amended to reduce the aggregate principal amount of Advances which the Company may obtain thereunder (the Company's "Borrower Sublimit"), bonds of the 1997 Series A, in a principal amount equal to the amount by which the then outstanding 1997 Series A Bonds exceed the sum of the Company's Borrower Sublimit plus the Facility Fee Obligation, shall be deemed paid and all obligations of the Company hereunder and thereunder with respect to such principal amount of 1997 Series A Bonds shall be deemed -9- satisfied and discharged. Except as provided herein, the 1997 Series A Bonds shall not be redeemable. ARTICLE 3. MISCELLANEOUS SECTION 3.01. Benefits of Supplemental Indenture and Bonds of 1997 Series A. Nothing in this Supplemental Indenture, or in the bonds of 1997 Series A, expressed or implied, is intended or shall be construed to give to any person or corporation other than the Company, the Trustee and the holders of the bonds and interest obligations secured by the Mortgage and this Supplemental Indenture, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or of any covenant, condition or provision herein contained. All the covenants, conditions and provisions hereof are and shall be for the sole and exclusive benefit of the Company, the Trustee and the holders of the bonds and interest obligations secured by the Mortgage and this Supplemental Indenture. SECTION 3.02. Effect of Table of Contents and Headings. The table of contents and the descriptive headings of the several Articles and Sections of this Supplemental Indenture are inserted for convenience of reference only and are not to be taken to be any part of this Supplemental Indenture or to control or affect the meaning, construction or effect of the same. SECTION 3.03. Counterparts. For the purpose of facilitating the recording hereof, this Supplemental Indenture may be executed in any number of counterparts, each of which shall be and shall be taken to be an original and all collectively but one instrument. SECTION 3.04. Payment Due on Holidays. If the date for making any payment or the last date for performance of any act or the exercise of any right, as provided in this Supplemental Indenture, is not a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day unless otherwise provided herein, with the same force and effect as if done on the nominal date provided in this Supplemental Indenture. IN WITNESS WHEREOF, The Connecticut Light and Power Company has caused these presents to be executed by a Vice President and its corporate seal to be hereunto affixed, duly attested by an Assistant Secretary, and Bankers Trust Company has caused these presents to be executed by an Assistant Vice President and its corporate seal to be hereunto affixed, duly attested by an Assistant Treasurer, as of the day and year first above written. THE CONNECTICUT LIGHT AND POWER COMPANY Attest: /s/ Theresa H. Allsop By: /s/ John B. Keane - ------------------------------ ------------------------- Theresa H. Allsop John B. Keane Assistant Secretary Vice President and Treasurer (SEAL) Signed, sealed and delivered in the presence of: /s/ Shelley Peters ------------------------------- /s/ Tracy A. DeCredico ------------------------------- STATE OF CONNECTICUT ) ) ss: BERLIN COUNTY OF HARTFORD ) On this 23rd day of May, 1997, before me, Deborah A. Tawrel, the undersigned officer, personally appeared John B. Keane and Theresa H. Allsop, who acknowledged themselves to be Vice President and Treasurer and Assistant Secretary, respectively, of THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation, and that they, as such Vice President and Treasurer and Assistant Secretary, being authorized so to do, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by themselves as Vice President and Treasurer and Assistant Secretary, and as their free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Deborah A. Tawrel ----------------------------------- Deborah A. Tawrel Notary Public My commission expires: December 31, 2000 (NOTARIAL SEAL) BANKERS TRUST COMPANY Attest: /s/ Scott Thiel /s/ James McDonough - ------------------------------ ------------------------------------ Name: Scott Thiel Name: James McDonough Title: Assistant Vice President Title: Vice President (SEAL) Signed, sealed and delivered in the presence of: /s/ Gina Evangelista ------------------------------------ /s/ Dale Murarsh ------------------------------------ STATE OF NEW YORK ) ) ss: NEW YORK COUNTY OF NEW YORK ) On this 27th day of May, 1997, before me, Sharon V. Alston, the undersigned officer, personally appeared James McDonough and Scott Thiel, who acknowledged themselves to be a Vice President and an Assistant Vice President, respectively, of BANKERS TRUST COMPANY, a corporation, and that they, as such Vice President and such Assistant Vice President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as Vice President and Assistant Vice President, and as their free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Sharon V. Alston ------------------------------------ Name: Sharon V. Alston Notary Public, State of New York No. 31-4966275 Qualified in New York County Commission Expires: May 7, 1998 (NOTARIAL SEAL) SCHEDULE A (FORM OF BONDS OF 1997 Series A) THIS BOND IS TRANSFERABLE ONLY AS PROVIDED HEREIN No. $ THE CONNECTICUT LIGHT AND POWER COMPANY Incorporated under the Laws of the State of Connecticut FIRST AND REFUNDING MORTGAGE BOND, 1997 Series A PRINCIPAL DUE NOVEMBER 21, 1999 FOR VALUE RECEIVED, THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation organized and existing under the laws of the State of Connecticut (hereinafter called the Company) hereby promises to pay to CITIBANK, N.A., or registered assigns, in each case as Collateral Agent for the benefit of the several Lenders (as such terms and all other capitalized terms used but not otherwise defined herein are defined in the Credit Agreement referred to on the reverse hereof), the principal sum of _______________ or, if less, the aggregate Credit Borrowings (as herein defined) outstanding on November 21, 1999 or any earlier date on or as of which the obligations of the several Lenders to make Advances to the Company under the Credit Agreement shall be terminated and all or any portion of the unpaid principal of Advances shall become or be declared immediately due and payable. Credit Borrowings means the aggregate unpaid principal amount of Advances to the Company outstanding under the Credit Agreement plus the Facility Fee Obligation (as said term is defined in the Supplemental Indenture establishing the terms and conditions of bonds of this Series) together with accrued and unpaid interest thereon then payable by the Company thereunder. The Company further agrees to pay interest on said sum on the dates on which interest payments are payable by the Company to the Lenders from time to time under the Credit Agreement (each such date on which interest is so payable by the Company to the Lenders under the Credit Agreement being an interest payment date applicable to the bonds of 1997 Series A), until the Company's obligation in respect of the principal hereof shall be discharged, in amounts equal to the interest payments payable by the Company to the Lenders pursuant to the Credit Agreement on such interest payment dates applicable to the bonds of 1997 Series A; provided, however, that in no event shall the -------- ------- interest rate payable on the 1997 Series A Bonds exceed 11%. The bonds of 1997 Series A shall be payable both as to principal and interest at the office or agency of the Company in the Borough of Manhattan, New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public -2- and private debts. The interest on the bonds of 1997 Series A, whether in temporary or definitive form, shall be payable without presentation of such bonds; and only to or upon the written order of the registered holders thereof of record at the applicable record date. If, pursuant to the Credit Agreement, the Company's right to obtain Advances thereunder shall be terminated and all or any portion of the principal of the Credit Borrowings shall become or be declared immediately due and payable by the Company, a like principal amount of the bonds of 1997 Series A, together with all accrued interest thereon, shall without notice or demand of any kind, become immediately due and payable. In addition, the bonds of 1997 Series A shall be repayable in whole or in part according to the terms and provisions provided in Article 2 of the Supplemental Indenture establishing the terms and conditions of bonds of this Series. Subject to the provisions of the Credit Agreement anything in the Mortgage, this Supplemental Indenture or any bond of 1997 Series A to the contrary notwithstanding, the bonds of 1997 Series A shall be deemed paid, and all obligations of the Company to pay at the times provided herein the principal of, premium, if any, and interest on the bonds of 1997 Series A shall be satisfied and discharged, when and to the extent that the Credit Borrowings shall have been indefeasibly paid in full in accordance with the terms thereof and the obligations of the several Lenders to make Advances to the Company under the Credit Agreement shall have been terminated, it being understood that the actual indebtedness evidenced by the 1997 Series A Bonds as of any time shall be limited to the Credit Borrowings as determined at such time, that at no time shall any claim be made for principal and interest on the 1997 Series A Bonds in excess of the Credit Borrowings as determined at such time, and that, to the extent that the outstanding principal amount of the 1997 Series A Bonds exceeds such amount, neither the Lenders nor the Agent shall have any right under, or right to exercise any right granted to the holders of such excess 1997 Series A Bonds under, the Mortgage. Unless the Trustee shall have received written notice to the contrary from the Company or the Collateral Agent, the Trustee shall be entitled to assume that the Company has made all payments required under the Credit Agreement. Each installment of interest hereon (other than overdue interest) shall be payable to the person who shall be the registered owner of this bond at the close of business on the record date, which shall be the day next preceding such interest payment date, or if such day shall not be a Business Day (as defined on the reverse hereof), the next preceding day which is a Business Day. Reference is hereby made to the further provisions of this Bond set forth on the reverse hereof, including without limitation provisions in regard to the call and redemption and the registration of transfer and exchangeability of this bond, and such further provisions shall for all purposes have the same effect as though fully set forth in this place. -3- This bond shall not become or be valid or obligatory until the certificate of authentication hereon shall have been signed by Bankers Trust Company (hereinafter with its successors as defined in the Mortgage (as defined on the reverse hereof), generally called the Trustee), or by such a successor. IN WITNESS WHEREOF, The Connecticut Light and Power Company has caused this bond to be executed in its corporate name and on its behalf by its Vice President by his signature or a facsimile thereof, and its corporate seal to be affixed or imprinted hereon and attested by the manual or facsimile signature of its Assistant Secretary. Dated as of ____________ __, 1997. THE CONNECTICUT LIGHT AND POWER COMPANY By ------------------------------------- Name: Title: Vice President Attest: --------------------------------------- Name: Title: Assistant Secretary -4- [FORM OF TRUSTEE'S CERTIFICATE] Bankers Trust Company hereby certifies that this bond is one of the bonds described in the within mentioned Mortgage. BANKERS TRUST COMPANY, TRUSTEE By ---------------------------------- Name: Title: Authorized Officer -5- [FORM OF BOND] [REVERSE] THE CONNECTICUT LIGHT AND POWER COMPANY FIRST AND REFUNDING MORTGAGE BOND, 1997 Series A This bond is one of an issue of bonds of the Company, of an unlimited authorized amount of coupon bonds or registered bonds without coupons, or both, known as its First and Refunding Mortgage Bonds, all issued or to be issued in one or more series, and is one of a series of said bonds limited in principal amount to Two Hundred Twenty-Five Million Dollars ($225,000,000), consisting only of registered bonds without coupons and designated "First and Refunding Mortgage Bonds, 1997 Series A," all of which bonds are issued or are to be issued under, and equally and ratably secured by, a certain Indenture of Mortgage and Deed of Trust dated as of May 1, 1921, and by sixty-six Supplemental Indentures dated respectively as of May 1, 1921, February 1, 1924, July 1, 1926, June 20, 1928, June 1, 1932, July 1, 1932, July 1, 1935, September 1, 1936, October 20, 1936, December 1, 1936, December 1, 1938, August 31, 1944, September 1, 1944, May 1, 1945, October 1, 1945, November 1, 1949, December 1, 1952, December 1, 1955, January 1, 1958, February 1, 1960, April 1, 1961, September 1, 1963, April 1, 1967, May 1, 1967, January 1, 1968, October 1, 1968, December 1, 1969, January 1, 1970, October 1, 1970, December 1, 1971, August 1, 1972, April 1, 1973, March 1, 1974, February 1, 1975, September 1, 1975, May 1, 1977, March 1, 1978, September 1, 1980, October 1, 1981, June 30, 1982, October 1, 1982, July 1, 1983, January 1, 1984, October 1, 1985, September 1, 1986, April 1, 1987, October 1, 1987, November 1, 1987, April 1, 1988, November 1, 1988, June 1, 1989, September 1, 1989, December 1, 1989, April 1, 1992, July 1, 1992, October 1, 1992, July 1, 1993, July 1, 1993, December 1, 1993, February 1, 1994, February 1, 1994, June 1, 1994, October 1, 1994, June 1, 1996, January 1, 1997 and May 1, 1997 (said Indenture of Mortgage and Deed of Trust and Supplemental Indentures being collectively referred to herein as the "Mortgage"), all executed by the Company to Bankers Trust Company, as Trustee, all as provided in the Mortgage to which reference is made for a statement of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds may be issued and are secured; but neither the foregoing reference to the Mortgage nor any provision of this bond or of the Mortgage (other than the last sentence of the next paragraph and Section 1.03 of the Supplemental Indenture establishing the terms and conditions of the bonds of this Series) shall affect or impair the obligation of the Company, which is absolute, unconditional and unalterable, to pay at the maturities herein provided the principal of and interest on this bond as herein provided. The principal of this bond may be declared or may become due on the conditions, in -6- the manner and at the time set forth in the Mortgage, upon the happening of an event of default as in the Mortgage provided. This bond, together with all other bonds of this series, if any, is issued to evidence and secure the Company's obligations pursuant to a Credit Agreement dated as of November 21, 1996 (the "Original Agreement") among Northeast Utilities ("NU"), the Company and Western Massachusetts Electric Company ("WMECO"), the Lenders and Co-Agents named therein (collectively, the "Lenders") and Citibank, N.A. as administrative agent, as amended and restated by a First Amendment and Waiver dated as of May 30, 1997 (the Original Agreement, as so amended, herein called the "Credit Agreement"), it being understood that the actual indebtedness evidenced by the 1997 Series A Bonds as of any time shall be limited to the Credit Borrowings as determined at such time, that at no time shall any claim be made for principal and interest on the 1997 Series A Bonds in excess of the Credit Borrowings as determined at such time, and that, to the extent that the outstanding principal amount of the 1997 Series A Bonds exceeds such amount, neither the Lenders nor the Agent shall have any right under, or right to exercise any right granted to the holders of such excess 1997 Series A Bonds under, the Mortgage. The bonds of 1997 Series A shall be issued to and registered in the name of CITIBANK, N.A., as Collateral Agent for the benefit of the several Lenders and, anything in the Mortgage, this Supplemental Indenture or any bond of 1997 Series A to the contrary notwithstanding, the bonds of 1997 Series A shall not be sold, assigned, pledged or transferred, except to effect the transfer to any successor Collateral Agent under the Credit Agreement. Prior to due presentment for registration of transfer of this bond the Company and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof, whether or not this bond be overdue, for the purpose of receiving payment and for all other purposes, and neither the Company nor the Trustee shall be affected by any notice to the contrary. This bond is exchangeable at the option of the registered holder hereof upon surrender hereof, at the office or agency of the Company in the Borough of Manhattan, New York, New York, for an equal principal amount of bonds of this series of other authorized denominations, in the manner and on the terms provided in the Mortgage. In the event that the Credit Agreement is terminated and all Credit Borrowings shall have been paid in full, all of the then outstanding 1997 Series A Bonds shall be deemed paid and all obligations of the Company thereunder and hereunder shall be deemed satisfied and discharged. Except as provided in the Supplemental Indenture establishing the terms and conditions of bonds of this Series, the 1997 Series A Bonds shall not be redeemable. The Mortgage provides that the Company and the Trustee, with consent of the holders of not less than 66 2/3% in aggregate principal amount of the bonds at the time outstanding which would be affected by the action proposed to be taken, may by supplemental indenture add any provisions to or change or eliminate any of the provisions of the Mortgage or modify the rights of the holders of the bonds and coupons issued thereunder; provided, however, that without the consent of the holder hereof no such supplemental indenture shall affect the terms of payment of the principal of or interest or premium on this bond, or reduce the aforesaid percentage of the bonds the holders of which are required to consent to such a supplemental indenture, or permit the creation by the Company of any mortgage or pledge or lien in the nature thereof ranking prior to or equal with the lien of the Mortgage or deprive the holder hereof of the lien of the Mortgage on any of the property which is subject to the lien thereof. As set forth in the Supplemental Indenture establishing the terms and conditions of the bonds of this Series, each holder of this bond, solely by virtue of its acquisition thereof, shall have and be deemed to have consented, without the need for any further action or consent by such holder, to any and all amendments to the Mortgage which are intended to eliminate or modify in any manner the requirements of the sinking and improvement fund as set forth in Section 6.14 of the Mortgage. If the date for making any payment or the last date for performance of any act or the exercise of any right, as provided in the Supplemental Indenture establishing the terms and series of the bonds of this series, is not a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day unless otherwise provided herein, with the same force and effect as if done on the nominal date provided in the Supplemental Indenture establishing the terms and series of the bonds of this series. No recourse shall be had for the payment of the principal of or the interest on this bond, or any part thereof, or for any claim based thereon or otherwise in respect thereof, to any incorporator or any past, present or future stockholder, officer or director of the Company, either directly or indirectly, by virtue of any statute or by enforcement of any assessment or otherwise, and any and all liability of the said incorporators, stockholders, officers or directors of the Company in respect to this bond is hereby expressly waived and released by every holder hereof. EX-4.20 4 EXHIBIT 4.20 Exhibit 4.20 SIXTY-SEVENTH SUPPLEMENTAL INDENTURE Dated as of June 1, 1997 TO Indenture of Mortgage and Deed of Trust Dated as of May 1, 1921 ----------- THE CONNECTICUT LIGHT AND POWER COMPANY TO BANKERS TRUST COMPANY, Trustee ----------- 1997 Series B Bonds, Due June 1, 2002 THE CONNECTICUT LIGHT AND POWER COMPANY Supplemental Indenture, Dated as of June 1, 1997 Table of Contents
Page ---- Parties................................................................................1 Recitals...............................................................................1 Granting Clauses.......................................................................2 Habendum...............................................................................3 Grant in Trust.........................................................................3 ARTICLE 1. FORM AND PROVISIONS OF BONDS OF 1997 SERIES B SECTION 1.01. Designation; Amount.....................................................4 SECTION 1.02. Form of Bonds of 1997 Series B..........................................4 SECTION 1.03. Provisions of Bonds of 1997 Series B; Interest Accrual..................4 SECTION 1.04. Transfer and Exchange of Bonds of 1997 Series B.........................5 SECTION 1.05. Sinking and Improvement Fund............................................5 ARTICLE 2. REDEMPTION OF BONDS OF 1997 Series B ...............................5 ARTICLE 3. AMENDMENT OF MORTGAGE INDENTURE ...................................7 ARTICLE 4. MISCELLANEOUS SECTION 4.01. Benefits of Supplemental Indenture and Bonds of 1997 Series B...........7 SECTION 4.02. Effect of Table of Contents and Headings................................7 SECTION 4.03. Counterparts............................................................7 TESTIMONIUM............................................................................8 SIGNATURES.............................................................................8 ACKNOWLEDGMENTS........................................................................8 SCHEDULE A - Form of Bond of 1997 Series B, Form of Trustee's Certificate SCHEDULE B - Property Subject to the Lien of the Mortgage
SUPPLEMENTAL INDENTURE, dated as of the first day of June, 1997, between THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation organized and existing under the laws of the State of Connecticut (hereinafter called "Company"), and BANKERS TRUST COMPANY, a corporation organized and existing under the laws of the State of New York (hereinafter called "Trustee"), with its principal corporate trust office at Four Albany Street, New York, NY 10006. WHEREAS, the Company heretofore duly executed, acknowledged and delivered to the Trustee a certain Indenture of Mortgage and Deed of Trust dated as of May 1, 1921, and sixty-six Supplemental Indentures thereto dated respectively as of May 1, 1921, February 1, 1924, July 1, 1926, June 20, 1928, June 1, 1932, July 1, 1932, July 1, 1935, September 1, 1936, October 20, 1936, December 1, 1936, December 1, 1938, August 31, 1944, September 1, 1944, May 1, 1945, October 1, 1945, November 1, 1949, December 1, 1952, December 1, 1955, January 1, 1958, February 1, 1960, April 1, 1961, September 1, 1963, April 1, 1967, May 1, 1967, January 1, 1968, October 1, 1968, December 1, 1969, January 1, 1970, October 1, 1970, December 1, 1971, August 1, 1972, April 1, 1973, March 1, 1974, February 1, 1975, September 1, 1975, May 1, 1977, March 1, 1978, September 1, 1980, October 1, 1981, June 30, 1982, October 1, 1982, July 1, 1983, January 1, 1984, October 1, 1985, September 1, 1986, April 1, 1987, October 1, 1987, November 1, 1987, April 1, 1988, November 1, 1988, June 1, 1989, September 1, 1989, December 1, 1989, April 1, 1992, July 1, 1992, October 1, 1992, July 1, 1993, July 1, 1993, December 1, 1993, February 1, 1994, February 1, 1994, June 1, 1994, October 1, 1994, June 1, 1996, January 1, 1997 and May 1, 1997 (said Indenture of Mortgage and Deed of Trust (i) as heretofore amended, being hereinafter generally called the "Mortgage Indenture," and (ii) together with said Supplemental Indentures thereto, being hereinafter generally called the "Mortgage"), all of which have been duly recorded as required by law, for the purpose of securing its First and Refunding Mortgage Bonds (of which $1,546,000,000 aggregate principal amount are outstanding at the date of this Supplemental Indenture) in an unlimited amount, issued and to be issued for the purposes and in the manner therein provided, of which Mortgage this Supplemental Indenture is intended to be made a part, as fully as if therein recited at length; WHEREAS, the Company by appropriate and sufficient corporate action in conformity with the provisions of the Mortgage has duly determined to create a further series of bonds under the Mortgage to be designated "First and Refunding Mortgage Bonds, 1997 Series B" (hereinafter generally referred to as the "bonds of 1997 Series B"), to consist of fully registered bonds containing terms and provisions duly fixed and determined by the Board of Directors of the Company and expressed in this Supplemental Indenture, such fully registered bonds and the Trustee's certificate of its authentication thereof to be substantially in the forms thereof respectively set forth in Schedule A appended hereto and made a part hereof; and WHEREAS, the execution and delivery of this Supplemental Indenture and the issue of not in excess of Two Hundred Million Dollars ($200,000,000) in aggregate principal amount of bonds of 1997 Series B and other necessary actions have been duly authorized by the Board of Directors of the Company; and 2 WHEREAS, the Company proposes to effect, contemporaneously with the issuance of the bonds of 1997 Series B, the amendments to the Mortgage Indenture hereinafter specified to eliminate Section 6.14 of the Mortgage Indenture; and WHEREAS, all applicable requirements of the Indenture with respect to the effecting of such amendments have been complied with, and such amendments are all ones which, contemporaneously with the issuance of the bonds of 1997 Series B, will have been consented to by the holders of more than two-thirds in principal amount of the bonds outstanding; and WHEREAS, the Company has purchased, constructed or otherwise acquired certain additional property not specifically described in the Mortgage but which is and is intended to be subject to the lien thereof, and proposes specifically to subject such additional property to the lien of the Mortgage at this time; and WHEREAS, the Company proposes to execute and deliver this Supplemental Indenture to provide for the issue of the bonds of 1997 Series B, to effect such amendments, and to conform the lien of the Mortgage on the property referred to below, all as permitted by Sections 14.01 and 14.03 of the Mortgage Indenture; and WHEREAS, all acts and things necessary to constitute this Supplemental Indenture a valid, binding and legal instrument and to make the bonds of 1997 Series B, when executed by the Company and authenticated by the Trustee valid, binding and legal obligations of the Company have been authorized and performed; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE OF MORTGAGE AND DEED OF TRUST WITNESSETH: That in order to secure the payment of the principal of and interest on all bonds issued and to be issued under the Mortgage, according to their tenor and effect, and according to the terms of the Mortgage and this Supplemental Indenture, and to secure the performance of the covenants and obligations in said bonds and in the Mortgage and this Supplemental Indenture respectively contained, and for the better assuring and confirming unto the Trustee, its successor or successors and its or their assigns, upon the trusts and for the purposes expressed in the Mortgage and this Supplemental Indenture, all and singular the hereditaments, premises, estates and property of the Company thereby conveyed or assigned or intended so to be, or which the Company may thereafter have become bound to convey or assign to the Trustee, as security for said bonds (except such hereditaments, premises, estates and property as shall have been disposed of or released or withdrawn from the lien of the Mortgage and this Supplemental Indenture, in accordance with the provisions thereof and subject to alterations, modifications and changes in said hereditaments, premises, estates and property as permitted under the provisions thereof), the Company, for and in consideration of the premises and the sum of One Dollar ($1.00) to it in hand paid by the Trustee, the receipt whereof is hereby acknowledged, and of other valuable considerations, has granted, bargained, sold, assigned, mortgaged, pledged, transferred, set over, aliened, enfeoffed, released, conveyed and confirmed, and by these presents does grant, bargain, sell, assign, mortgage, pledge, transfer, set over, alien, enfeoff, release, convey and confirm unto said Bankers Trust Company, as Trustee, and its successor or successors in the trusts created by the Mortgage 3 and this Supplemental Indenture, and its and their assigns, all of said hereditaments, premises, estates and property (except and subject as aforesaid), as fully as though described at length herein, including, without limitation of the foregoing, the property, rights and privileges of the Company described or referred to in Schedule B hereto. Together with all plants, buildings, structures, improvements and machinery located upon said real estate or any portion thereof, and all rights, privileges and easements of every kind and nature appurtenant thereto, and all and singular the tenements, hereditaments and appurtenances belonging to the real estate or any part thereof described or referred to in Schedule B or intended so to be, or in any wise appertaining thereto, and the reversions, remainders, rents, issues and profits thereof, and also all the estate, right, title, interest, property, possession, claim and demand whatsoever, as well in law as in equity, of the Company, of, in and to the same and any and every part thereof, with the appurtenances; except and subject as aforesaid. TO HAVE AND TO HOLD all and singular the property, rights and privileges hereby granted or mentioned or intended so to be, together with all and singular the reversions, remainders, rents, revenues, income, issues and profits, privileges and appurtenances, now or hereafter belonging or in any way appertaining thereto, unto the Trustee and its successor or successors in the trust created by the Mortgage and this Supplemental Indenture, and its and their assigns, forever, and with like effect as if the above described property, rights and privileges had been specifically described at length in the Mortgage and this Supplemental Indenture. Subject, however, to permitted liens, as defined in the Mortgage Indenture. IN TRUST, NEVERTHELESS, upon the terms and trusts of the Mortgage and this Supplemental Indenture for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Mortgage and this Supplemental Indenture (and subject to any sinking fund that may heretofore have been or hereafter be created for the benefit of any particular series). And it is hereby covenanted that all such bonds of 1997 Series B are to be issued, authenticated and delivered, and that the mortgaged premises are to be held by the Trustee, upon and subject to the trusts, covenants, provisions and conditions and for the uses and purposes set forth in the Mortgage and this Supplemental Indenture and upon and subject to the further covenants, provisions and conditions and for the uses and purposes hereinafter set forth, as follows, to wit: 4 ARTICLE 1. FORM AND PROVISIONS OF BONDS OF 1997 SERIES B SECTION 1.01. Designation; Amount. The bonds of 1997 Series B shall be designated "First and Refunding Mortgage Bonds, 1997 Series B" and, subject to Section 2.08 of the Mortgage Indenture, shall not exceed Two Hundred Million Dollars ($200,000,000) in aggregate principal amount at any one time outstanding. The initial issue of the bonds of 1997 Series B may be effected upon compliance with the applicable provisions of the Mortgage Indenture. SECTION 1.02. Form of Bonds of 1997 Series B. The bonds of 1997 Series B shall be issued only in fully registered form without coupons in denominations of One Hundred Thousand Dollars ($100,000) or integral multiples of $1,000 in excess thereof; provided, however, that, if any registered holder holds less than $100,000 in aggregate principal amount of the bonds of 1997 Series B as result of a partial redemption by the Company in accordance with Article 2 hereof, a bond of 1997 Series B in the amount of such holder's aggregate holdings shall be issued. The bonds of 1997 Series B and the certificate of the Trustee upon said bonds shall be substantially in the forms thereof respectively set forth in Schedule A appended hereto. SECTION 1.03. Provisions of Bonds of 1997 Series B; Interest Accrual. The bonds of 1997 Series B shall mature on June 1, 2002 and shall bear interest, payable semiannually on the first days of June and December of each year, commencing December 1, 1997, at the rate of 7-3/4% per annum, provided that if a Registration Default (as defined in the Registration Rights Agreement dated June 19, 1997 between the Company and the Purchasers named therein (the "Registration Agreement")) occurs at a time when any bond of 1997 Series B is a Registrable Bond (as defined in the Registration Agreement), then the interest rate thereon will increase by 0.50% per annum with respect to the first 90-day period immediately following the occurrence of such Registration Default and by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of 1.50% per annum (provided that in no event shall the interest rate payable on the Registrable Bonds be increased by more than 0.50% per annum in any single 90-day period above the interest rate applicable immediately prior to commencement of such 90-day period), until the Company's obligation in respect of the principal thereof shall be discharged; and shall be payable both as to principal and interest at the office or agency of the Company in the Borough of Manhattan, New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. The interest on the bonds of 1997 Series B, whether in temporary or definitive form, shall be payable without presentation of such bonds; and only to or upon the written order of the registered holders thereof of record at the applicable record date. The bonds of 1997 Series B shall be callable for redemption in whole or in part according to the terms and provisions herein in Article 2. Each bond of 1997 Series B shall be dated as of June 1, 1997 and shall bear interest on the principal amount thereof from the interest payment date next preceding the date of authentication thereof by the Trustee to which interest has been paid on the bonds of 1997 Series B, or if the date of authentication thereof is prior to November 16, 1997, then from June 1, 1997, or if the date of 5 authentication thereof be an interest payment date to which interest is being paid or a date between the record date for any such interest payment date and such interest payment date, then from such interest payment date. The person in whose name any bond of 1997 Series B is registered at the close of business on any record date (as hereinafter defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such bond upon any registration of transfer or exchange thereof subsequent to the record date and prior to such interest payment date, except that if and to the extent the Company shall default in the payment of the interest due on such interest payment date, then such defaulted interest shall be paid to the person in whose name such bond is registered on a subsequent record date for the payment of defaulted interest if one shall have been established as hereinafter provided and otherwise on the date of payment of such defaulted interest. A subsequent record date may be established by the Company by notice mailed to the owners of bonds of 1997 Series B not less than ten (10) days preceding such record date, which record date shall not be more than thirty (30) days prior to the subsequent interest payment date. The term "record date" as used in this Section with respect to any regular interest payment (i.e., June 1 or December 1) shall mean the May 15 or November 15, as the case may be, next preceding such interest payment date, or if such May 15 or November 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, New York, New York are authorized by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized to close. SECTION 1.04. Transfer and Exchange of Bonds of 1997 Series B. The bonds of 1997 Series B may be surrendered for registration of transfer as provided in Section 2.06 of the Mortgage Indenture at the office or agency of the Company in the Borough of Manhattan, New York, New York, and may be surrendered at said office for exchange for a like aggregate principal amount of bonds of 1997 Series B of other authorized denominations. Notwithstanding the provisions of Section 2.06 of the Mortgage Indenture, no charge, except for taxes or other governmental charges, shall be made by the Company for any registration of transfer of bonds of 1997 Series B or for the exchange of any bonds of 1997 Series B for such bonds of other authorized denominations. SECTION 1.05. Sinking and Improvement Fund. Each holder of a bond of 1997 Series B, solely by virtue of its acquisition thereof, shall have and be deemed to have consented, without the need for any further action or consent by such holder, to the amendments to the Mortgage Indenture specified in Article 3 hereof, which will, contemporaneously with the issue of the bonds of 1997 Series B, eliminate all requirements of the sinking and improvement fund as heretofore provided in Section 6.14 thereof. ARTICLE 2. REDEMPTION OF BONDS OF 1997 SERIES B. The bonds of 1997 Series B shall be redeemable, as a whole at any time or in part from time to time, in accordance with the provisions of the Mortgage and upon not less than thirty (30) days and not 6 more than 60 days prior notice given by mail as provided in the Mortgage (which notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date), at the option of the Company, at a redemption price equal to the greater of (i) 100% of the principal amount of the bonds being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus in each case accrued interest to the date of redemption (the "Redemption Date"). "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker having a maturity comparable to the remaining term of the bonds of 1997 Series B that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds of 1997 Series B. "Independent Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing to be selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and another Primary Treasury Dealer (as defined herein) at the option of the Company, provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. 7 ARTICLE 3. AMENDMENT OF MORTGAGE INDENTURE Effective contemporaneously with the issuance of the bonds of 1997 Series B, the Mortgage Indenture is hereby amended to (i) delete Section 6.14 in its entirety (Section 6.14 of the Mortgage Indenture shall hereinafter be designated Section 6.14 [Deleted] and there shall be no re-numbering of any other provisions of the Mortgage Indenture as a result of this amendment) with the same force and effect as if Section 6.14 had never been included in the Mortgage Indenture; and (ii) all references to Section 6.14 in all other provisions of the Mortgage Indenture (including without limitation Section 1.01(qq), Section 3.52 (three references), Section 3.57 (three references), Section 9.08 and Section 9.09) are hereby deleted, in each case with the same force and effect as if Section 6.14 had never been referred to in said Sections of the Mortgage Indenture. ARTICLE 4. MISCELLANEOUS. SECTION 4.01. Benefits of Supplemental Indenture and Bonds of 1997 Series B. Nothing in this Supplemental Indenture, or in the bonds of 1997 Series B, expressed or implied, is intended to or shall be construed to give to any person or corporation other than the Company, the Trustee and the holders of the bonds and interest obligations secured by the Mortgage and this Supplemental Indenture, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or of any covenant, condition or provision herein contained. All the covenants, conditions and provisions hereof are and shall be for the sole and exclusive benefit of the Company, the Trustee and the holders of the bonds and interest obligations secured by the Mortgage and this Supplemental Indenture. SECTION 4.02. Effect of Table of Contents and Headings. The table of contents and the description headings of the several Articles and Sections of this Supplemental Indenture are inserted for convenience of reference only and are not to be taken to be any part of this Supplemental Indenture or to control or affect the meaning, construction or effect of the same. SECTION 4.03. Counterparts. For the purpose of facilitating the recording hereof, this Supplemental Indenture may be executed in any number of counterparts, each of which shall be and shall be taken to be an original and all collectively but one instrument. 8 IN WITNESS WHEREOF, The Connecticut Light and Power Company has caused these presents to be executed by a Vice President and its corporate seal to be hereunto affixed, duly attested by an Assistant Secretary, and Bankers Trust Company has caused these presents to be executed by a Vice President and its corporate seal to be hereunto affixed, duly attested by an Assistant Vice President, as of the day and year first above written. THE CONNECTICUT LIGHT AND POWER COMPANY Attest: /s/ Theresa H. Allsop By: /s/ John B.Keane - --------------------------- ------------------------------------ Name: Theresa H. Allsop Name: John B. Keane Title: Assistant Secretary Title: Vice President and Treasurer (SEAL) Signed, sealed and delivered in the presence of: /s/ Marion C. Bloomquist --------------------------------------- /s/ Tracy A. DeCredico --------------------------------------- STATE OF CONNECTICUT ) ) ss.: Berlin COUNTY OF HARTFORD ) On this 20th day of June 1997, before me, Judith D. Boucher, the undersigned officer, personally appeared John B. Keane and Theresa H. Allsop, who acknowledged themselves to be Vice President and Treasurer and Assistant Secretary, respectively, of THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation, and that they, as such Vice President and Treasurer and such Assistant Secretary, being authorized so to do, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by themselves as Vice President and Treasurer and Assistant Secretary, and as their free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Judith D. Boucher ------------------------------------- Judith D. Boucher Notary Public My commission expires on September 30, 1999 (SEAL) BANKERS TRUST COMPANY Attest: /s/ Scott Thiel /s/ Robert Caporale - --------------------------------- ----------------------------------- Name: Scott Thiel Name: Robert Caporale Title: Assistant Vice President Title: Vice President (SEAL) Signed, sealed and delivered in the presence of: /s/ Barbara Nastor ----------------------------------- /s/ J. Theriault ----------------------------------- STATE OF NEW YORK ) ) ss.: New York COUNTY OF NEW YORK ) On this 19th day of June, 1997, before me, Sharon V. Alston, the undersigned officer, personally appeared Robert Caporale and Scott Thiel who acknowledged themselves to be a Vice President and an Assistant Vice President, respectively, of BANKERS TRUST COMPANY, a corporation, and that they, as such Vice President and such Assistant Vice President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as Vice President and Assistant Vice President, and as their free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Sharon V. Alston ------------------------------------- Name: Sharon V. Alston Notary Public, State of New York No. 31-4966275 Qualified in New York County Commission Expires May 7, 1998 (NOTARIAL SEAL) A-1 SCHEDULE A [FORM OF BOND OF 1997 SERIES B] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITIY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF), (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED (OTHER THAN IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (2) (B) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. No. $ THE CONNECTICUT LIGHT AND POWER COMPANY Incorporated under the Laws of the State of Connecticut FIRST AND REFUNDING MORTGAGE BOND, 1997 SERIES B PRINCIPAL DUE JUNE 1, 2002 FOR VALUE RECEIVED, THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation organized and existing under the laws of the State of Connecticut (hereinafter called the Company), hereby promises to pay to _______________________, or registered assigns, the principal sum of _____________________ dollars, on the first day of June, 2002 and to pay interest on said sum, semiannually on the first days of June and December in each year, commencing December 1, 1997, until the Company's obligation with respect to said principal sum shall be discharged, at the rate of 7-3/4% A-2 per annum from the interest payment date next preceding the date of authentication hereof to which interest has been paid on the bonds of this series, or if the date of authentication hereof is prior to November 16, 1997, then from June 1, 1997, or if the date of authentication hereof is an interest payment date to which interest is being paid or a date between the record date for any such interest payment date and such interest payment date, then from such interest payment date. Both principal and interest shall be payable at the office or agency of the Company in the Borough of Manhattan, New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. If a Registration Default (as defined in the Registration Rights Agreement dated June 19, 1997 between the Company and the Purchasers named therein (the "Registration Agreement")) occurs at a time when this security is a Registrable Bond (as defined in the Registration Agreement), then the interest rate hereon will increase by 0.50% per annum with respect to the first 90-day period immediately following the occurrence of such Registration Default and by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of 1.50% per annum (provided that in no event shall the interest rate payable on the Registrable Bonds be increased by more than 0.50% per annum in any single 90-day period above the interest rate applicable immediately prior to commencement of such 90-day period). The Registration Agreement will be provided without charge, upon request of the holder hereof, to the office or agency of the Company in the Borough of Manhattan, New York, New York. Each installment of interest hereon (other than overdue interest) shall be payable to the person who shall be the registered owner of this bond at the close of business on the record date, which shall be the May 15 or November 15, as the case may be, next preceding the interest payment date, or, if such May 15 or November 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, New York, New York, are authorized by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized to close. Reference is hereby made to the further provisions of this bond set forth on the reverse hereof, including without limitation provisions in regard to the call and redemption and the registration of transfer and exchangeability of this bond, and such further provisions shall for all purposes have the same effect as though fully set forth in this place. This bond shall not become or be valid or obligatory until the certificate of authentication hereon shall have been signed by Bankers Trust Company (hereinafter with its successors as defined in the Mortgage hereinafter referred to, generally called the Trustee), or by such a successor. A-3 IN WITNESS WHEREOF, The Connecticut Light and Power Company has caused this bond to be executed in its corporate name and on its behalf by its President by his signature or a facsimile thereof, and its corporate seal to be affixed or imprinted hereon and attested by the manual or facsimile signature of its Secretary. Dated as of _______, 1997. THE CONNECTICUT LIGHT AND POWER COMPANY By: ----------------------------------- Name: Title: President Attest: -------------------------------------- Name: Title: Secretary [FORM OF TRUSTEE'S CERTIFICATE] Bankers Trust Company hereby certifies that this bond is one of the bonds described in the within mentioned Mortgage. BANKERS TRUST COMPANY, TRUSTEE By: ----------------------------------- Name: Title: Authorized Officer A-4 [FORM OF BOND] [REVERSE] THE CONNECTICUT LIGHT AND POWER COMPANY FIRST AND REFUNDING MORTGAGE BOND, 1997 SERIES B This bond is one of an issue of bonds of the Company, of an unlimited authorized amount of coupon bonds or registered bonds without coupons, or both, known as its First and Refunding Mortgage Bonds, all issued or to be issued in one or more series, and is one of a series of said bonds limited in principal amount to Two Hundred Million Dollars ($200,000,000), consisting only of registered bonds without coupons and designated "First and Refunding Mortgage Bonds, 1997 Series B," all of which bonds are issued or are to be issued under, and equally and ratably secured by, a certain Indenture of Mortgage and Deed and Trust dated as of May 1, 1921, and by sixty-seven Supplemental Indentures dated respectively as of May 1, 1921, February 1, 1924, July 1, 1926, June 20, 1928, June 1, 1932, July 1, 1932, July 1, 1935, September 1, 1936, October 20, 1936, December 1, 1936, December 1, 1938, August 31, 1944, September 1, 1944, May 1, 1945, October 1, 1945, November 1, 1949, December 1, 1952, December 1, 1955, January 1, 1958, February 1, 1960, April 1, 1961, September 1, 1963, April 1, 1967, May 1, 1967, January 1, 1968, October 1, 1968, December 1, 1969, January 1, 1970, October 1, 1970, December 1, 1971, August 1, 1972, April 1, 1973, March 1, 1974, February 1, 1975, September 1, 1975, May 1, 1977, March 1, 1978, September 1, 1980, October 1, 1981, June 30, 1982, October 1, 1982, July 1, 1983, January 1, 1984, October 1, 1985, September 1, 1986, April 1, 1987, October 1, 1987, November 1, 1987, April 1, 1988, November 1, 1988, June 1, 1989, September 1, 1989, December 1, 1989, April 1, 1992, July 1, 1992, October 1, 1992, July 1, 1993, July 1, 1993, December 1, 1993, February 1, 1994, February 1, 1994, June 1, 1994, October 1, 1994, June 1, 1996, January 1, 1997, May 1, 1997, and June 1, 1997 (said Indenture of Mortgage and Deed of Trust and Supplemental Indentures being collectively referred to herein as the "Mortgage"), all executed by the Company to Bankers Trust Company, as Trustee, all as provided in the Mortgage to which reference is made for a statement of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds may be issued and are secured; but neither the foregoing reference to the Mortgage nor any provision of this bond or of the Mortgage shall affect or impair the obligation of the Company, which is absolute, unconditional and unalterable, to pay at the maturities herein provided the principal of and interest on this bond as herein provided. The principal of this bond may be declared or may become due on the conditions, in the manner and at the time set forth in the Mortgage, upon the happening of an event of default as in the Mortgage provided. This bond is transferable by the registered holder hereof in person or by attorney upon surrender hereof at the office or agency of the Company in the Borough of Manhattan, New York, New York, together with a written instrument of transfer in approved form, signed by the holder, and a new bond or bonds of this series for a like principal amount in authorized denominations will be issued in exchange, all as provided in the Mortgage. Prior to due presentment for registration of transfer of this bond, the Company and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof, A-5 whether or not this bond be overdue, for the purpose of receiving payment and for all other purposes, and neither the Company nor the Trustee shall be affected by any notice to the contrary. This bond is exchangeable at the option of the registered holder hereof upon surrender hereof, at the office or agency of the Company in the Borough of Manhattan, New York, New York, for an equal principal amount of bonds of this series of other authorized denominations, in the manner and on the terms provided in the Mortgage. Bonds of this series owned by "qualified institutional buyers" as defined in Rule 144A under the Securities Act of 1933, as amended ("Securities Act") are to be issued initially under a book-entry only system and, except as hereinafter provided, will be evidenced by a single Global Security registered in the name of The Depository Trust Company, New York, New York ("DTC") or its nominee, which shall be considered to be the holder of all such bonds for all purposes of the Mortgage, including, without limitation, payment by the Company of principal of and interest on such bonds and receipt of notices and exercise of rights of holders of such bonds. The Global Security shall be immobilized in the custody of DTC with the owners of book-entry interests in the Global Security ("Book-Entry Interests") having no right to receive bonds of this series in the form of physical securities or certificates. Ownership of Book-Entry Interests shall be shown by book-entry on the system maintained and operated by DTC, its participants (the "Participants") and certain persons acting through the Participants. Transfers of ownership of Book-Entry Interests are to be made only by DTC and the Participants by that book-entry system, the Company and the Trustee having no responsibility therefor so long as the Global Security is registered in the name of DTC or its nominee. DTC is to maintain records of positions of Participants in bonds of this series registered by the Global Security, and the Participants and persons acting through Participants are to maintain records of the purchasers and owners of Book-Entry Interests. If DTC or its nominee determines not to continue to act as a depository for the bonds of this series in connection with a book-entry only system, another depository, if available, may act instead and the Global Security will be transferred into the name of such other depository or its nominee, in which case the above provisions will continue to apply to the new depository. If the book-entry system for bonds of this series is discontinued for any reason, upon surrender and cancellation of the Global Security registered in the name of the then depository or its nominee, new registered bonds of this series will be issued in authorized denominations to the holders of Book-Entry Interests in principal amounts coinciding with the amounts of Book-Entry Interests shown on the book-entry system immediately prior to the discontinuance thereof. Neither the Trustee nor the Company shall be responsible for the accuracy of the interests shown on that system. Bonds of this series originally purchased by or transferred to institutional Accredited Investors as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) who are not qualified institutional buyers are to be issued in certificated form. Upon the transfers of a bond from an institutional Accredited Investor to a qualified institutional buyer, such bond may (unless the Global Security has previously been exchanged in whole for certificated bonds of this series) be exchanged for an interest in the Global Security. The bonds of this series are subject to redemption prior to maturity, as a whole at any time or in part from time to time, in accordance with the provisions of the Mortgage, upon not less than thirty (30) days and not more than 60 days prior notice (which notice may be made subject to the deposit of A-6 redemption moneys with the Trustee before the date fixed for redemption) given by mail as provided in the Mortgage, at the option of the Company, at a redemption price equal to the greater of (i) 100% of their principal amount and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus in each case accrued interest to the date of redemption (the "Redemption Date"). "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker having a maturity comparable to the remaining term of the bonds of this series that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds of this series. "Independent Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing to be selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated and Salomon Brothers Inc. and another Primary Treasury Dealer (as defined herein) at the option of the Company, provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. The Mortgage provides that the Company and the Trustee, with consent of the holders of not less than 66-2/3% in aggregate principal amount of the bonds at the time outstanding which would be affected by the action proposed to be taken, may by supplemental indenture add any provisions to or change or eliminate any of the provisions of the Mortgage or modify the rights of the holders of the A-7 bonds and coupons issued thereunder; provided, however, that without the consent of the holder hereof no such supplemental indenture shall affect the terms of payment of the principal of or interest or premium on this bond, or reduce the aforesaid percentage of the bonds the holders of which are required to consent to such a supplemental indenture, or permit the creation by the Company of any mortgage or pledge or lien in the nature thereof ranking prior to or equal with the lien of the Mortgage or deprive the holder hereof of the lien of the Mortgage on any of the property which is subject to the lien thereof. As set forth in the Supplemental Indenture establishing the terms and conditions of the bonds of this series, each holder of this bond, solely by virtue of its acquisition thereof, shall have and be deemed to have consented, without the need for any further action or consent by such holder, to certain amendments to the Mortgage, effective contemporaneously with the issuance of the bonds of this series, which have the effect of eliminating in their entirety the requirements of the sinking and improvement fund previously set forth in Section 6.14 of the Mortgage. No recourse shall be had for the payment of the principal of or the interest on this bond, or any part thereof, or for any claim based thereon or otherwise in respect thereof, to any incorporator, or any past, present or future stockholder, officer or director of the Company, either directly or indirectly, by virtue of any statute or by enforcement of any assessment or otherwise, and any and all liability of the said incorporators, stockholders, officers or directors of the Company in respect to this bond is hereby expressly waived and released by every holder hereof. B-1 SCHEDULE B TOWN OF AVON ------------ All of the following described rights, privileges and easements situated in the Town of Avon, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (1) Orchard Farms Development, Inc. March 12, 1997 330 723 (2) Orchard Farms Development, Inc. December 9, 1996 328 53 (3) Land Subdividers, Inc. December 10, 1996 328 55 (4) Home Builders Association of Hartford County, Inc. December 9, 1996 328 57 (5) Saverio Stancati et al October 10, 1995 319 486 (6) Mansour Enterprises, Inc. March 7, 1995 306 22*
*Inter Alia: Farmington TOWN OF BOLTON -------------- All of the following described rights, privileges and easements situated in the Town of Bolton, County of Tolland and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (7) Richard H. Barry et al January 31, 1997 89 700
TOWN OF BRANFORD ---------------- All of the following described rights, privileges and easements situated in the Town of Branford, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (8) M & E Construction, Inc. November 5, 1996 617 496 (9) Stanley Kaczynski November 18, 1993 560 423 (10) Edward L. Pantani, Trustee February 6, 1997 621 469
B-2 TOWN OF CANTON -------------- All of the following described rights, privileges and easements situated in the Town of Canton, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (11) Howard Olson et al November 6, 1996 216 698 (12) Village Developers January 13, 1997 218 113
TOWN OF CHESHIRE ---------------- All of the following described rights, privileges and easements situated in the Town of Cheshire, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (13) MDA Cheshire L.L.C. December 9, 1996 1199 260
TOWN OF CLINTON --------------- All of the following described rights, privileges and easements situated in the Town of Clinton, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (14) Susan G. Lione December 19, 1996 250 132 (15) C & G Realty, Inc. March 18, 1997 251 1059
B-3 TOWN OF COVENTRY ---------------- All of the following described rights, privileges and easements situated in the Town of Coventry, County of Tolland and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (16) Rolling Woods LLC December 30, 1996 577 281
TOWN OF CROMWELL ---------------- All of the following described rights, privileges and easements situated in the Town of Cromwell, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (17) Daylar River Properties Limited Partnership March 8, 1995 579 27 (18) Tournament Players Club of Connecticut, Inc. April 16, 1997 631 151
TOWN OF DANBURY --------------- All of the following described rights, privileges and easements situated in the Town of Danbury, County of Fairfield and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (19) The Enclave, LLC June 20, 1996 1153 1149
B-4 TOWN OF DEEP RIVER ------------------ All of the following described rights, privileges and easements situated in the Town of Deep River, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (20) Harold A. Tomlinson et al April 10, 1997 145 557
TOWN OF DURHAM -------------- All of the following described rights, privileges and easements situated in the Town of Durham, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (21) Noel K. Higgins January 13, 1997 152 201 (22) Cuomo Construction, Inc. April 4, 1997 152 1112
TOWN OF EAST HADDAM ------------------- All of the following described rights, privileges and easements situated in the Town of East Haddam, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (23) Elizabeth Nemergut November 8, 1996 400 325 (24) R.D.M. Construction, Inc. December 13, 1996 402 118 (25) Howard F. Camolli, Jr. et al September 12, 1996 399 22
B-5 TOWN OF ENFIELD --------------- All of the following described rights, privileges and easements situated in the Town of Enfield, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (26) Hampden and Beech, Inc. January 16, 1997 1030 25
TOWN OF FARMINGTON ------------------ All of the following described rights, privileges and easements situated in the Town of Farmington, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (27) Farmington Land Trust, Inc. December 13, 1996 536 866 (28) Lee T. Ferguson et al November 18, 1996 536 868 (29) Mansour Enterprises, Inc. March 7, 1995 497 1110*
Inter Alia: Avon TOWN OF GLASTONBURY ------------------- All of the following described rights, privileges and easements situated in the Town of Glastonbury, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (30) Edward J. Kamis June 14, 1985 303 61 (31) Cove Landing Associates LLC November 13, 1996 1050 217
B-6 TOWN OF GRANBY -------------- All of the following described rights, privileges and easements situated in the Town of Granby, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (32) Granby Farms Partners August 21, 1996 212 791 (33) Connecticut Valley Land Developers, Inc. December 18, 1996 212 794 (34) Thomas Development Corporation November 1, 1996 212 923 (35) George J. Reynolds et al January 31, 1997 214 46
TOWN OF GRISWOLD ---------------- All of the following described rights, privileges and easements situated in the Town of Griswold, County of New London and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (36) Pine Trace, Inc. March 11, 1997 178 507
TOWN OF GUILFORD ---------------- All of the following described rights, privileges and easements situated in the Town of Guilford, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (37) Peter Whitney Marlowe November 22, 1996 469 653 (38) Martin A. White et al December 9, 1996 469 426 (39) Archie Bailey January 20, 1997 470 806 (40) Joseph S. Milano April 9, 1997 473 718
B-7 TOWN OF HAMPTON --------------- All of the following described rights, privileges and easements situated in the Town of Hampton, County of Windham and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (41) Jereslawa Asselin December 4, 1996 44 680
TOWN OF LEDYARD --------------- All of the following described rights, privileges and easements situated in the Town of Ledyard, County of New London and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (42) Hidden Acres December 20, 1996 265 865 (43) Crossen Builders, Inc. March 11, 1997 267 451
TOWN OF LISBON -------------- All of the following described rights, privileges and easements situated in the Town of Lisbon, County of New London and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (44) Carolyn J. Read et al January 14, 1997 80 709 (45) John F. Shork et al March 13, 1992 67 380 & March 17, 1992
B-8 TOWN OF LITCHFIELD ------------------ All of the following described rights, privileges and easements situated in the Town of Litchfield, County of Litchfield and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (46) Nancy D. Goldring May 9. 1996 232 109 (47) Douglas C. Wisch et al November 12, 1996 234 613
TOWN OF MADISON --------------- All of the following described rights, privileges and easements situated in the Town of Madison, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (48) Kenneth L. Evarts November 26, 1996 728 92
TOWN OF MANSFIELD ----------------- All of the following described rights, privileges and easements situated in the Town of Mansfield, County of Tolland and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (49) Pasquale A. Ferrigno et al March 20, 1997 384 404
B-9 TOWN OF MERIDEN --------------- All of the following described rights, privileges and easements situated in the Town of Meriden, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (50) City of Meriden October 11, 1996 2215 154 (51) The Southern New England Telephone Company December 16, 1996 2228 75 (52) Gennaro Martorelli, Trustee March 27, 1997 2255 32
TOWN OF MIDDLEBURY ------------------ All of the following described rights, privileges and easements situated in the Town of Middlebury, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (53) Steeplechase of Middlebury L.L.C. August 7, 1996 146 102
TOWN OF MIDDLETOWN ------------------ All of the following described rights, privileges and easements situated in the Town of Middletown, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz:
RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (54) Joseph F. Sarcia November 18, 1996 1112 629
B-10 TOWN OF MONROE -------------- All of the following described rights, privileges and easements situated in the Town of Monroe, County of Fairfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (55) Summit Residential, L.L.C. April 12, 1996 697 213 TOWN OF MONTVILLE ----------------- All of the following described rights, privileges and easements situated in the Town of Montville, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (56) Frank Charles Dvorak et al April 9, 1992 269 68 TOWN OF NEWINGTON ----------------- All of the following described rights, privileges and easements situated in the Town of Newington, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (57) Town of Newington October 30, 1996 1115 95 B-11 TOWN OF NORWALK --------------- All of the following described rights, privileges and easements situated in the Town of Norwalk, County of Fairfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (58) Ludovico A. Iacono et al January 17, 1996 3169 306 TOWN OF OLD LYME ---------------- All of the following described rights, privileges and easements situated in the Town of Old Lyme, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (59) EPW-1, LLC May 5, 1997 238 307 TOWN OF OLD SAYBROOK -------------------- All of the following described rights, privileges and easements situated in the Town of Old Saybrook, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (60) Greg S. Gibson November 4, 1996 339 575 (61) Captain Dolbeare, Inc. et al August 28, 1996 339 226 (62) Scott T. Efinger November 19, 1996 340 232 (63) Robert L. Day Co., Inc. November 19, 1996 340 122 (64) Blue Point, Inc. et al March 8, 1997 342 647 B-12 TOWN OF OXFORD -------------- All of the following described rights, privileges and easements situated in the Town of Oxford, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (65) Gray Eagle, Inc. January 6, 1997 192 408 (66) Elizabeth Troia Blatchley December 13, 1996 191 967 et al TOWN OF PLAINFIELD ------------------ All of the following described rights, privileges and easements situated in the Town of Plainfield, County of Windham and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (67) Lauri P. Pulkkinen et al January 6, 1997 240 1077 TOWN OF PLYMOUTH ---------------- All of the following described rights, privileges and easements situated in the Town of Plymouth, County of Litchfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (68) Olga S. Wrettick January 23, 1997 35 24 B-13 TOWN OF PRESTON --------------- All of the following described rights, privileges and easements situated in the Town of Preston, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (69) Gail L. Whitney et al February 5, 1997 112 144 TOWN OF PROSPECT ---------------- All of the following described rights, privileges and easements situated in the Town of Prospect, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (70) Robinmark Development Group, LLC December 19, 1996 283 192 TOWN OF SALEM ------------- All of the following described rights, privileges and easements situated in the Town of Salem, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (71) Marian Keszycki October 28, 1996 102 17 B-14 TOWN OF SHARON -------------- All of the following described rights, privileges and easements situated in the Town of Sharon, County of Litchfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (72) Patricia R. Purdy August 6, 1996 127 948 TOWN OF SIMSBURY ---------------- All of the following described rights, privileges and easements situated in the Town of Simsbury, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (73) Brewer & Horan Construction February 28, 1997 467 59 Co., Inc. TOWN OF SOMERS -------------- All of the following described rights, privileges and easements situated in the Town of Somers, County of Tolland and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (74) Hardor, Inc. January 13, 1997 173 453 B-15 TOWN OF SOUTH WINDSOR --------------------- All of the following described rights, privileges and easements situated in the Town of South Windsor, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (75) RSK-KELLCO INC. December 11, 1996 924 158 (76) B&M Enterprises, Inc. November 21, 1996 923 21 TOWN OF SOUTHBURY ----------------- All of the following described rights, privileges and easements situated in the Town of Southbury, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (77) Edward H. Williams July 11, 1996 311 560 (78) Thomas W. Hill et al November 18, 1996 314 126 (79) Pond Ridge Corp. October 31, 1996 314 220 TOWN OF SOUTHINGTON ------------------- All of the following described rights, privileges and easements situated in the Town of Southington, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (80) Alison Wight November 13, 1996 659 532 (81) D & J Corporation February 21, 1997 664 545 (82) James L. Hermann May 13, 1996 646 99 (83) Ralph Crispino et al December 3, 1996 667 53 & December 4, 1996 B-16 TOWN OF STAFFORD ---------------- All of the following described rights, privileges and easements situated in the Town of Stafford, County of Tolland and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (84) Robert W. Pinatti November 25, 1996 343 523 TOWN OF STAMFORD ---------------- All of the following described rights, privileges and easements situated in the Town of Stamford, County of Fairfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (85) Vanech Bros., Inc. April 1, 1996 4563 21 (86) Vanech Bros., Inc. August 8, 1996 4625 52 TOWN OF STONINGTON ------------------ All of the following described rights, privileges and easements situated in the Town of Stonington, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (87) Bishop Venture Realty December 9, 1996 398 571 Corporation (88) Stephen J. Schlachter et al February 6, 1997 402 953 (89) Stephen B. Palmer, III et al March 13, 1997 403 433 B-17 TOWN OF SUFFIELD ---------------- All of the following described rights, privileges and easements situated in the Town of Suffield, County of Hartford and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (90) Finlay Properties, Inc. November 4, 1996 272 618 TOWN OF THOMPSON ---------------- All of the following described rights, privileges and easements situated in the Town of Thompson, County of Windham and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (91) Raymond G. Audette et al November 21, 1996 352 13 TOWN OF TOLLAND --------------- All of the following described rights, privileges and easements situated in the Town of Tolland, County of Tolland and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (92) Capstone Builders, Inc. February 4, 1997 551 148 B-18 TOWN OF VOLUNTOWN ----------------- All of the following described rights, privileges and easements situated in the Town of Voluntown, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (93) Henry P. Maynard December 26, 1996 65 707 TOWN OF WATERFORD ----------------- All of the following described rights, privileges and easements situated in the Town of Waterford, County of New London and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (94) River Road Manor, Inc. October 11, 1996 463 634 (95) Castle Hill Development, Inc. February 4, 1997 464 31 (96) Olyn Contracting Company February 24, 1997 464 630 (97) W. C. Peregrine Housing March 7, 1997 465 758 Associates Limited Partnership (98) Jordan Commons Associates April 15, 1997 466 786 TOWN OF WATERTOWN ----------------- All of the following described rights, privileges and easements situated in the Town of Watertown, County of Litchfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (99) Watertown Landmark, Inc. October 29, 1996 838 123 B-19 TOWN OF WESTBROOK ----------------- All of the following described rights, privileges and easements situated in the Town of Westbrook, County of Middlesex and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (100) Raymond Papandrea February 10, 1997 180 474 (101) Michael I. Reznik et al January 25, 1997 181 293 (102) Mary J. Linde April 30, 1997 181 791 TOWN OF WILTON -------------- All of the following described rights, privileges and easements situated in the Town of Wilton, County of Fairfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (103) Avalon Properties, Inc. June 14, 1996 996 114 TOWN OF WINDHAM --------------- All of the following described rights, privileges and easements situated in the Town of Windham, County of Windham and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (104) Windham Mills Development February 3, 1997 507 279 Corporation B-20 TOWN OF WOLCOTT --------------- All of the following described rights, privileges and easements situated in the Town of Wolcott, County of New Haven and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (105) Lakeview, LLC May 30, 1996 233 101 (106) Wolcott Associates October 16, 1996 236 537 (107) Graziano Brothers et al May 23, 1996 233 521 TOWN OF WOODSTOCK ----------------- All of the following described rights, privileges and easements situated in the Town of Woodstock, County of Windham and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (108) Gary A. Potter December 16, 1996 271 218 (109) James R. Pestey July 11, 1996 269 29 (110) Stephen J. Kaplowitt et al February 18, 1997 274 31 TOWN OF WOODBURY ---------------- All of the following described rights, privileges and easements situated in the Town of Woodbury, County of Litchfield and State of Connecticut, more particularly described in the following deeds, viz: RECORDED GRANTOR DATE OF INSTRUMENT VOLUME/PAGE ------- ------------------ ----------- (111) Loan Oak Development, Inc. April 2, 1996 213 489 (112) Raymond Hardisty et al May 22, 1996 214 671 EX-4.21 5 EXHIBIT 4.21 Exhibit 4.21 SIXTY-EIGHTH SUPPLEMENTAL INDENTURE Dated as of June 1, 1997 TO Indenture of Mortgage and Deed of Trust Dated as of May 1, 1921 ___________ THE CONNECTICUT LIGHT AND POWER COMPANY TO BANKERS TRUST COMPANY, Trustee ___________ 7-3/4% 1997 Series C Bonds, Due June 1, 2002 THE CONNECTICUT LIGHT AND POWER COMPANY Sixty-Eighth Supplemental Indenture, Dated as of June 1, 1997 Table of Contents
Page ---- Parties......................................................................1 Recitals.....................................................................1 Granting Clauses.............................................................2 Habendum.....................................................................3 Grant in Trust...............................................................3 ARTICLE 1. FORM AND PROVISIONS OF BONDS OF 1997 SERIES C SECTION 1.01. Designation; Amount...........................................4 SECTION 1.02. Form of Bonds of 1997 Series C................................4 SECTION 1.03. Provisions of Bonds of 1997 Series C; Interest Accrual........4 SECTION 1.04. Transfer and Exchange of Bonds of 1997 Series C...............5 ARTICLE 2. REDEMPTION OF BONDS OF 1997 Series C....................5 ARTICLE 3. MISCELLANEOUS SECTION 3.01. Benefits of Supplemental Indenture and Bonds of 1997 Series C.6 SECTION 3.02. Effect of Table of Contents and Headings......................6 SECTION 3.03. Counterparts..................................................6 TESTIMONIUM..................................................................7 SIGNATURES...................................................................7 ACKNOWLEDGMENTS..............................................................7
SCHEDULE A - Form of Bond of 1997 Series C, Form of Trustee's Certificate [SCHEDULE B - Property Subject to the Lien of the Mortgage] SIXTY-EIGHTH SUPPLEMENTAL INDENTURE, dated as of the first day of June, 1997, between THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation organized and existing under the laws of the State of Connecticut (hereinafter called "Company"), and BANKERS TRUST COMPANY, a corporation organized and existing under the laws of the State of New York (hereinafter called "Trustee"), with its principal corporate trust office at Four Albany Street, New York, NY 10006. WHEREAS, the Company heretofore duly executed, acknowledged and delivered to the Trustee a certain Indenture of Mortgage and Deed of Trust dated as of May 1, 1921, and sixty-seven Supplemental Indentures thereto dated respectively as of May 1, 1921, February 1, 1924, July 1, 1926, June 20, 1928, June 1, 1932, July 1, 1932, July 1, 1935, September 1, 1936, October 20, 1936, December 1, 1936, December 1, 1938, August 31, 1944, September 1, 1944, May 1, 1945, October 1, 1945, November 1, 1949, December 1, 1952, December 1, 1955, January 1, 1958, February 1, 1960, April 1, 1961, September 1, 1963, April 1, 1967, May 1, 1967, January 1, 1968, October 1, 1968, December 1, 1969, January 1, 1970, October 1, 1970, December 1, 1971, August 1, 1972, April 1, 1973, March 1, 1974, February 1, 1975, September 1, 1975, May 1, 1977, March 1, 1978, September 1, 1980, October 1, 1981, June 30, 1982, October 1, 1982, July 1, 1983, January 1, 1984, October 1, 1985, September 1, 1986, April 1, 1987, October 1, 1987, November 1, 1987, April 1, 1988, November 1, 1988, June 1, 1989, September 1, 1989, December 1, 1989, April 1, 1992, July 1, 1992, October 1, 1992, July 1, 1993, July 1, 1993, December 1, 1993, February 1, 1994, February 1, 1994, June 1, 1994, October 1, 1994, June 1, 1996, January 1, 1997, May 1, 1997 and June 1, 1997 (said Indenture of Mortgage and Deed of Trust (i) as heretofore amended, being hereinafter generally called the "Mortgage Indenture," and (ii) together with said Supplemental Indentures thereto, being hereinafter generally called the "Mortgage"), all of which have been duly recorded as required by law, for the purpose of securing its First and Refunding Mortgage Bonds (of which $1,746,000,000 aggregate principal amount are outstanding at the date of this Supplemental Indenture) in an unlimited amount, issued and to be issued for the purposes and in the manner therein provided, of which Mortgage this Supplemental Indenture is intended to be made a part, as fully as if therein recited at length; WHEREAS, the Company by appropriate and sufficient corporate action in conformity with the provisions of the Mortgage has duly determined to create a further series of bonds under the Mortgage to be designated "First and Refunding Mortgage 7-3/4% Bonds, 1997 Series C" (hereinafter generally referred to as the "bonds of 1997 Series C"), to consist of fully registered bonds containing terms and provisions duly fixed and determined by the Board of Directors of the Company and expressed in this Supplemental Indenture, such fully registered bonds and the Trustee's certificate of its authentication thereof to be substantially in the forms thereof respectively set forth in Schedule A appended hereto and made a part hereof; and WHEREAS, the execution and delivery of this Supplemental Indenture and the issue of not in excess of [Two Hundred Million Dollars ($200,000,000) in aggregate principal amount of bonds of 1997 Series C and other necessary actions have been duly authorized by the Board of Directors of the Company; and 2 WHEREAS, the Company has purchased, constructed or otherwise acquired certain additional property not specifically described in the Mortgage but which is and is intended to be subject to the lien thereof, and proposes specifically to subject such additional property to the lien of the Mortgage at this time; and WHEREAS, the Company proposes to execute and deliver this Supplemental Indenture to provide for the issue of the bonds of 1997 Series C and to confirm the lien of the Mortgage on the property referred to below, all as permitted by Section 14.01 of the Mortgage Indenture; and WHEREAS, all acts and things necessary to constitute this Supplemental Indenture a valid, binding and legal instrument and to make the bonds of 1997 Series C, when executed by the Company and authenticated by the Trustee valid, binding and legal obligations of the Company have been authorized and performed; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE OF MORTGAGE AND DEED OF TRUST WITNESSETH: That in order to secure the payment of the principal of and interest on all bonds issued and to be issued under the Mortgage, according to their tenor and effect, and according to the terms of the Mortgage and this Supplemental Indenture, and to secure the performance of the covenants and obligations in said bonds and in the Mortgage and this Supplemental Indenture respectively contained, and for the better assuring and confirming unto the Trustee, its successor or successors and its or their assigns, upon the trusts and for the purposes expressed in the Mortgage and this Supplemental Indenture, all and singular the hereditaments, premises, estates and property of the Company thereby conveyed or assigned or intended so to be, or which the Company may thereafter have become bound to convey or assign to the Trustee, as security for said bonds (except such hereditaments, premises, estates and property as shall have been disposed of or released or withdrawn from the lien of the Mortgage and this Supplemental Indenture, in accordance with the provisions thereof and subject to alterations, modifications and changes in said hereditaments, premises, estates and property as permitted under the provisions thereof), the Company, for and in consideration of the premises and the sum of One Dollar ($1.00) to it in hand paid by the Trustee, the receipt whereof is hereby acknowledged, and of other valuable considerations, has granted, bargained, sold, assigned, mortgaged, pledged, transferred, set over, aliened, enfeoffed, released, conveyed and confirmed, and by these presents does grant, bargain, sell, assign, mortgage, pledge, transfer, set over, alien, enfeoff, release, convey and confirm unto said Bankers Trust Company, as Trustee, and its successor or successors in the trusts created by the Mortgage and this Supplemental Indenture, and its and their assigns, all of said hereditaments, premises, estates and property (except and subject as aforesaid), as fully as though described at length herein, including, without limitation of the foregoing, the property, rights and privileges of the Company described or referred to in Schedule B hereto. Together with all plants, buildings, structures, improvements and machinery located upon said real estate or any portion thereof, and all rights, privileges and easements of every kind and nature appurtenant thereto, and all and singular the tenements, hereditaments and appurtenances belonging to the real estate or any part thereof described or referred to in Schedule B or intended so to be, or in any wise appertaining thereto, and the reversions, remainders, rents, issues and profits thereof, and also all 3 the estate, right, title, interest, property,possession, claim and demand whatsoever, as well in law as in equity, of the Company, of, in and to the same and any and every part thereof, with the appurtenances; except and subject as aforesaid. TO HAVE AND TO HOLD all and singular the property, rights and privileges hereby granted or mentioned or intended so to be, together with all and singular the reversions, remainders, rents, revenues, income, issues and profits, privileges and appurtenances, now or hereafter belonging or in any way appertaining thereto, unto the Trustee and its successor or successors in the trust created by the Mortgage and this Supplemental Indenture, and its and their assigns, forever, and with like effect as if the above described property, rights and privileges had been specifically described at length in the Mortgage and this Supplemental Indenture. Subject, however, to permitted liens, as defined in the Mortgage Indenture. IN TRUST, NEVERTHELESS, upon the terms and trusts of the Mortgage and this Supplemental Indenture for those who shall hold the bonds and coupons issued and to be issued thereunder, or any of them, without preference, priority or distinction as to lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject, however, to the provisions in reference to extended, transferred or pledged coupons and claims for interest set forth in the Mortgage and this Supplemental Indenture (and subject to any sinking fund that may heretofore have been or hereafter be created for the benefit of any particular series). And it is hereby covenanted that all such bonds of 1997 Series C are to be issued, authenticated and delivered, and that the mortgaged premises are to be held by the Trustee, upon and subject to the trusts, covenants, provisions and conditions and for the uses and purposes set forth in the Mortgage and this Supplemental Indenture and upon and subject to the further covenants, provisions and conditions and for the uses and purposes hereinafter set forth, as follows, to wit: ARTICLE 1. FORM AND PROVISIONS OF BONDS OF 1997 SERIES C SECTION 1.01. Designation; Amount. The bonds of 1997 Series C shall be designated "First and Refunding Mortgage 7-3/4% Bonds, 1997 Series C" and, subject to Section 2.08 of the Mortgage Indenture, shall not exceed [Two Hundred Million Dollars ($200,000,000)] in aggregate principal amount at any one time outstanding. The initial issue of the bonds of 1997 Series C may be effected upon compliance with the applicable provisions of the Mortgage Indenture. SECTION 1.02. Form of Bonds of 1997 Series C. The bonds of 1997 Series C shall be issued only in fully registered form without coupons in denominations of One Hundred Thousand Dollars ($100,000) or integral multiples of $1,000 in excess thereof; provided, however, that, if any registered holder holds less than $100,000 in aggregate principal amount of the bonds of 1997 Series C as result of 4 a partial redemption by the Company in accordance with Article 2 hereof, a bond of 1997 Series C in the amount of such holder's aggregate holdings shall be issued. The bonds of 1997 Series C and the certificate of the Trustee upon said bonds shall be substantially in the forms thereof respectively set forth in Schedule A appended hereto. SECTION 1.03. Provisions of Bonds of 1997 Series C; Interest Accrual. The bonds of 1997 Series C shall mature on June 1, 2002 and shall bear interest, payable semiannually on the first days of June and December of each year, commencing December 1, 1997, at the rate of 7-3/4% per annum, until the Company's obligation in respect of the principal thereof shall be discharged; and shall be payable both as to principal and interest at the office or agency of the Company in the Borough of Manhattan, New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. The interest on the bonds of 1997 Series C, whether in temporary or definitive form, shall be payable without presentation of such bonds; and only to or upon the written order of the registered holders thereof of record at the applicable record date. The bonds of 1997 Series C shall be callable for redemption in whole or in part according to the terms and provisions herein in Article 2. Each bond of 1997 Series C shall be dated as of June 1, 1997 and shall bear interest on the principal amount thereof from the interest payment date next preceding the date of authentication thereof by the Trustee to which interest has been paid on the bonds of 1997 Series C, or if the date of authentication thereof is prior to November 16, 1997, then from June 1, 1997, or if the date of authentication thereof be an interest payment date to which interest is being paid or a date between the record date for any such interest payment date and such interest payment date, then from such interest payment date. The person in whose name any bond of 1997 Series C is registered at the close of business on any record date (as hereinafter defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such bond upon any registration of transfer or exchange thereof subsequent to the record date and prior to such interest payment date, except that if and to the extent the Company shall default in the payment of the interest due on such interest payment date, then such defaulted interest shall be paid to the person in whose name such bond is registered on a subsequent record date for the payment of defaulted interest if one shall have been established as hereinafter provided and otherwise on the date of payment of such defaulted interest. A subsequent record date may be established by the Company by notice mailed to the owners of bonds of 1997 Series C not less than ten (10) days preceding such record date, which record date shall not be more than thirty (30) days prior to the subsequent interest payment date. The term "record date" as used in this Section with respect to any regular interest payment (i.e., June 1 or December 1) shall mean the May 15 or November 15, as the case may be, next preceding such interest payment date, or if such May 15 or November 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, New York, New York are authorized by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized to close. 5 SECTION 1.04. Transfer and Exchange of Bonds of 1997 Series C. The bonds of 1997 Series C may be surrendered for registration of transfer as provided in Section 2.06 of the Mortgage Indenture at the office or agency of the Company in the Borough of Manhattan, New York, New York, and may be surrendered at said office for exchange for a like aggregate principal amount of bonds of 1997 Series C of other authorized denominations. Notwithstanding the provisions of Section 2.06 of the Mortgage Indenture, no charge, except for taxes or other governmental charges, shall be made by the Company for any registration of transfer of bonds of 1997 Series C or for the exchange of any bonds of 1997 Series C for such bonds of other authorized denominations. ARTICLE 2. REDEMPTION OF BONDS OF 1997 SERIES C. The bonds of 1997 Series C shall be redeemable, as a whole at any time or in part from time to time, in accordance with the provisions of the Mortgage and upon not less than thirty (30) days and not more than 60 days prior notice given by mail as provided in the Mortgage (which notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date), at the option of the Company, at a redemption price equal to the greater of (i) 100% of the principal amount of the bonds being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus in each case accrued interest to the date of redemption (the "Redemption Date"). "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker having a maturity comparable to the remaining term of the bonds of 1997 Series C that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds of 1997 Series C. "Independent Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing to be selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the 6 average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and another Primary Treasury Dealer (as defined herein) at the option of the Company, provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. ARTICLE 3. MISCELLANEOUS. SECTION 3.01. Benefits of Supplemental Indenture and Bonds of 1997 Series C. Nothing in this Supplemental Indenture, or in the bonds of 1997 Series C, expressed or implied, is intended to or shall be construed to give to any person or corporation other than the Company, the Trustee and the holders of the bonds and interest obligations secured by the Mortgage and this Supplemental Indenture, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or of any covenant, condition or provision herein contained. All the covenants, conditions and provisions hereof are and shall be for the sole and exclusive benefit of the Company, the Trustee and the holders of the bonds and interest obligations secured by the Mortgage and this Supplemental Indenture. SECTION 3.02. Effect of Table of Contents and Headings. The table of contents and the description headings of the several Articles and Sections of this Supplemental Indenture are inserted for convenience of reference only and are not to be taken to be any part of this Supplemental Indenture or to control or affect the meaning, construction or effect of the same. SECTION 3.03. Counterparts. For the purpose of facilitating the recording hereof, this Supplemental Indenture may be executed in any number of counterparts, each of which shall be and shall be taken to be an original and all collectively but one instrument. 7 IN WITNESS WHEREOF, The Connecticut Light and Power Company has caused these presents to be executed by a Vice President and its corporate seal to be hereunto affixed, duly attested by an Assistant Secretary, and Bankers Trust Company has caused these presents to be executed by a Vice President and its corporate seal to be hereunto affixed, duly attested by an Assistant Vice President, as of the day and year first above written. THE CONNECTICUT LIGHT AND POWER COMPANY Attest: By: - ------------------------------ ----------------------------------- Name: Name: Title: Title: (SEAL) Signed, sealed and delivered in the presence of: -------------------------------------- -------------------------------------- STATE OF CONNECTICUT ) ) ss.: Berlin COUNTY OF HARTFORD ) On this ___ day of ____ 1997, before me, _______________, the undersigned officer, personally appeared ________________ and ____________, who acknowledged themselves to be _____________ and ______________ and ______________________, respectively, of THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation, and that they, as such _______________ and such _________________, being authorized so to do, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by themselves as __________________ and _____________, and as their free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. -------------------------------------- Notary Public My commission expires on ------------- (SEAL) 8 BANKERS TRUST COMPANY Attest: By: - ------------------------- ----------------------------------- Name: Name: Title: Title: (SEAL) Signed, sealed and delivered in the presence of: -------------------------------------- -------------------------------------- STATE OF NEW YORK ) ) ss.: New York COUNTY OF NEW YORK ) On this ____ day of ____, 1997, before me, ______________, the undersigned officer, personally appeared _____________ and _________________ who acknowledged themselves to be a ________________ and an __________________, respectively, of BANKERS TRUST COMPANY, a corporation, and that they, as such ___________________ and such ______________, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as ______________ and _______________, and as their free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. -------------------------------------- Name: Notary Public, State of New York No. ------------ Qualified in New York County Commission Expires --------------- (SEAL) A-1 SCHEDULE A [FORM OF BOND OF 1997 SERIES C] No. $ THE CONNECTICUT LIGHT AND POWER COMPANY Incorporated under the Laws of the State of Connecticut FIRST AND REFUNDING MORTGAGE 7-3/4% BOND, 1997 SERIES C PRINCIPAL DUE JUNE 1, 2002 FOR VALUE RECEIVED, THE CONNECTICUT LIGHT AND POWER COMPANY, a corporation organized and existing under the laws of the State of Connecticut (hereinafter called the Company), hereby promises to pay to _______________________, or registered assigns, the principal sum of _____________________ dollars, on the first day of June, 2002 and to pay interest on said sum, semiannually on the first days of June and December in each year, commencing December 1, 1997, until the Company's obligation with respect to said principal sum shall be discharged, at the rate of 7-3/4% per annum from the interest payment date next preceding the date of authentication hereof to which interest has been paid on the bonds of this series, or if the date of authentication hereof is prior to November 16, 1997, then from June 1, 1997, or if the date of authentication hereof is an interest payment date to which interest is being paid or a date between the record date for any such interest payment date and such interest payment date, then from such interest payment date. Both principal and interest shall be payable at the office or agency of the Company in the Borough of Manhattan, New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. Each installment of interest hereon (other than overdue interest) shall be payable to the person who shall be the registered owner of this bond at the close of business on the record date, which shall be the May 15 or November 15, as the case may be, next preceding the interest payment date, or, if such May 15 or November 15 shall be a legal holiday or a day on which banking institutions in the Borough of Manhattan, New York, New York, are authorized by law to close, the next preceding day which shall not be a legal holiday or a day on which such institutions are so authorized to close. Reference is hereby made to the further provisions of this bond set forth on the reverse hereof, including without limitation provisions in regard to the call and redemption and the registration of transfer and exchangeability of this bond, and such further provisions shall for all purposes have the same effect as though fully set forth in this place. This bond shall not become or be valid or obligatory until the certificate of authentication hereon shall have been signed by Bankers Trust Company (hereinafter with its successors as defined in the Mortgage hereinafter referred to, generally called the Trustee), or by such a successor. A-2 IN WITNESS WHEREOF, The Connecticut Light and Power Company has caused this bond to be executed in its corporate name and on its behalf by its President by his signature or a facsimile thereof, and its corporate seal to be affixed or imprinted hereon and attested by the manual or facsimile signature of its Secretary. Dated as of _______, 1997. THE CONNECTICUT LIGHT AND POWER COMPANY By:___________________________________ Name: Title: President Attest: ______________________________________ Name: Title: Secretary [FORM OF TRUSTEE'S CERTIFICATE] Bankers Trust Company hereby certifies that this bond is one of the bonds described in the within mentioned Mortgage. BANKERS TRUST COMPANY, TRUSTEE By:__________________________________ Name: Title: Authorized Officer A-3 [FORM OF BOND] [REVERSE] THE CONNECTICUT LIGHT AND POWER COMPANY FIRST AND REFUNDING MORTGAGE 7-3/4% BOND, 1997 SERIES C This bond is one of an issue of bonds of the Company, of an unlimited authorized amount of coupon bonds or registered bonds without coupons, or both, known as its First and Refunding Mortgage Bonds, all issued or to be issued in one or more series, and is one of a series of said bonds limited in principal amount to [Two Hundred Million Dollars ($200,000,000)], consisting only of registered bonds without coupons and designated "First and Refunding Mortgage 7- 3/4% Bonds, 1997 Series C," all of which bonds are issued or are to be issued under, and equally and ratably secured by, a certain Indenture of Mortgage and Deed and Trust dated as of May 1, 1921, and by sixty-eight Supplemental Indentures dated respectively as of May 1, 1921, February 1, 1924, July 1, 1926, June 20, 1928, June 1, 1932, July 1, 1932, July 1, 1935, September 1, 1936, October 20, 1936, December 1, 1936, December 1, 1938, August 31, 1944, September 1, 1944, May 1, 1945, October 1, 1945, November 1, 1949, December 1, 1952, December 1, 1955, January 1, 1958, February 1, 1960, April 1, 1961, September 1, 1963, April 1, 1967, May 1, 1967, January 1, 1968, October 1, 1968, December 1, 1969, January 1, 1970, October 1, 1970, December 1, 1971, August 1, 1972, April 1, 1973, March 1, 1974, February 1, 1975, September 1, 1975, May 1, 1977, March 1, 1978, September 1, 1980, October 1, 1981, June 30, 1982, October 1, 1982, July 1, 1983, January 1, 1984, October 1, 1985, September 1, 1986, April 1, 1987, October 1, 1987, November 1, 1987, April 1, 1988, November 1, 1988, June 1, 1989, September 1, 1989, December 1, 1989, April 1, 1992, July 1, 1992, October 1, 1992, July 1, 1993, July 1, 1993, December 1, 1993, February 1, 1994, February 1, 1994, June 1, 1994, October 1, 1994, June 1, 1996, January 1, 1997, May 1, 1997, June 1, 1997 and June 1, 1997 (said Indenture of Mortgage and Deed of Trust and Supplemental Indentures being collectively referred to herein as the "Mortgage"), all executed by the Company to Bankers Trust Company, as Trustee, all as provided in the Mortgage to which reference is made for a statement of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds in respect thereof and the terms and conditions upon which the bonds may be issued and are secured; but neither the foregoing reference to the Mortgage nor any provision of this bond or of the Mortgage shall affect or impair the obligation of the Company, which is absolute, unconditional and unalterable, to pay at the maturities herein provided the principal of and interest on this bond as herein provided. The principal of this bond may be declared or may become due on the conditions, in the manner and at the time set forth in the Mortgage, upon the happening of an event of default as in the Mortgage provided. This bond is transferable by the registered holder hereof in person or by attorney upon surrender hereof at the office or agency of the Company in the Borough of Manhattan, New York, New York, together with a written instrument of transfer in approved form, signed by the holder, and a new bond or bonds of this series for a like principal amount in authorized denominations will be issued in exchange, all as provided in the Mortgage. Prior to due presentment for registration of transfer of this bond, the Company and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof, A-4 whether or not this bond be overdue, for the purpose of receiving payment and for all other purposes, and neither the Company nor the Trustee shall be affected by any notice to the contrary. This bond is exchangeable at the option of the registered holder hereof upon surrender hereof, at the office or agency of the Company in the Borough of Manhattan, New York, New York, for an equal principal amount of bonds of this series of other authorized denominations, in the manner and on the terms provided in the Mortgage. Bonds of this series are to be issued initially under a book-entry only system and, except as hereinafter provided, will be evidenced by a single Global Security registered in the name of The Depository Trust Company, New York, New York ("DTC") or its nominee, which shall be considered to be the holder of all such bonds for all purposes of the Mortgage, including, without limitation, payment by the Company of principal of and interest on such bonds and receipt of notices and exercise of rights of holders of such bonds. The Global Security shall be immobilized in the custody of DTC with the owners of book-entry interests in the Global Security ("Book-Entry Interests") having no right to receive bonds of this series in the form of physical securities or certificates. Ownership of Book-Entry Interests shall be shown by book-entry on the system maintained and operated by DTC, its participants (the "Participants") and certain persons acting through the Participants. Transfers of ownership of Book-Entry Interests are to be made only by DTC and the Participants by that book-entry system, the Company and the Trustee having no responsibility therefor so long as the Global Security is registered in the name of DTC or its nominee. DTC is to maintain records of positions of Participants in bonds of this series registered by the Global Security, and the Participants and persons acting through Participants are to maintain records of the purchasers and owners of Book-Entry Interests. If DTC or its nominee determines not to continue to act as a depository for the bonds of this series in connection with a book-entry only system, another depository, if available, may act instead and the Global Security will be transferred into the name of such other depository or its nominee, in which case the above provisions will continue to apply to the new depository. If the book-entry system for bonds of this series is discontinued for any reason, upon surrender and cancellation of the Global Security registered in the name of the then depository or its nominee, new registered bonds of this series will be issued in authorized denominations to the holders of Book-Entry Interests in principal amounts coinciding with the amounts of Book-Entry Interests shown on the book-entry system immediately prior to the discontinuance thereof. Neither the Trustee nor the Company shall be responsible for the accuracy of the interests shown on that system. The bonds of this series are subject to redemption prior to maturity, as a whole at any time or in part from time to time, in accordance with the provisions of the Mortgage, upon not less than thirty (30) days and not more than 60 days prior notice (which notice may be made subject to the deposit of redemption moneys with the Trustee before the date fixed for redemption) given by mail as provided in the Mortgage, at the option of the Company, at a redemption price equal to the greater of (i) 100% of their principal amount and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus in each case accrued interest to the date of redemption (the "Redemption Date"). A-5 "Treasury Yield" means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. "Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker having a maturity comparable to the remaining term of the bonds of this series that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds of this series. "Independent Investment Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing to be selected by the Company and appointed by the Trustee. "Comparable Treasury Price" means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day (A) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations, the average of all such Quotations. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption Date. "Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated and Salomon Brothers Inc. and another Primary Treasury Dealer (as defined herein) at the option of the Company, provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer. The Mortgage provides that the Company and the Trustee, with consent of the holders of not less than 66-2/3% in aggregate principal amount of the bonds at the time outstanding which would be affected by the action proposed to be taken, may by supplemental indenture add any provisions to or change or eliminate any of the provisions of the Mortgage or modify the rights of the holders of the bonds and coupons issued thereunder; provided, however, that without the consent of the holder hereof no such supplemental indenture shall affect the terms of payment of the principal of or interest or premium on this bond, or reduce the aforesaid percentage of the bonds the holders of which are required to consent to such a supplemental indenture, or permit the creation by the Company of any mortgage or pledge or lien in the nature thereof ranking prior to or equal with the lien of the Mortgage or deprive the holder hereof of the lien of the Mortgage on any of the property which is subject to the lien thereof. A-6 No recourse shall be had for the payment of the principal of or the interest on this bond, or any part thereof, or for any claim based thereon or otherwise in respect thereof, to any incorporator, or any past, present or future stockholder, officer or director of the Company, either directly or indirectly, by virtue of any statute or by enforcement of any assessment or otherwise, and any and all liability of the said incorporators, stockholders, officers or directors of the Company in respect to this bond is hereby expressly waived and released by every holder hereof. B-1 SCHEDULE B EX-5.1 6 OPINION OF COUNSEL Exhibit 5.1 July 3, 1997 The Connecticut Light and Power Company 107 Selden Street Berlin, Connecticut 06037-1616 Re: The Connecticut Light and Power Company Registration Statement on Form S-1 Ladies and Gentlemen: I am Assistant General Counsel of Northeast Utilities Service Company, an affiliate of The Connecticut Light and Power Company, a Connecticut corporation (the "Company"). I have acted as counsel for the Company in connection with the proposed registration, issuance and exchange of up to $200,000,000 aggregate principal amount of First and Refunding Mortgage 7 3/4% Bonds, 1997 Series C (the "New Bonds") for any and all previously issued and outstanding First and Refunding Mortgage Bonds, 1997 Series B (the "Old Bonds") (the "Exchange Offer"). This opinion is being delivered in accordance with the requirements of the Securities and Exchange Commission in connection with the filing of the Registration Statement on Form S-1 pertaining to the New Bonds (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). I have reviewed the Registration Statement, and the exhibits thereto, relating to the New Bonds and the Exchange Offer, and the Company's Charter, as amended to the date of this opinion, and have examined or caused to be examined such other papers, documents and records, have made such examination of law and have satisfied myself as to such other matters as I deemed relevant and necessary for purposes of this opinion. Based on the foregoing, I am of the opinion that at such time as (i) there are in effect such appropriate orders of the Securities and Exchange Commission and the Connecticut Department of Public Utility Control, as may be necessary, (ii) a Supplemental Indenture with respect to the New Bonds, has been duly executed, delivered and recorded and (iii) the New Bonds have been duly executed, authenticated and exchanged in accordance with the Exchange Offer, the New Bonds will be legally issued and binding obligations of the Company entitled to the security provided in the Indenture. I hereby consent to the use of this opinion in connection with the registration of the New Bonds under the Securities Act and to the references to me under "Legal Matters and Experts" in the prospectus included in the Registration Statement. Very truly yours, /s/ Jeffrey C. Miller Assistant General Counsel Northeast Utilities Service Company EX-10.33 7 SPECIAL SEVERENCE PROGRAM Exhibit 10.33 As approved and adopted by subsidiaries of Northeast Utilities on June 9, 1997 SPECIAL SEVERANCE PROGRAM ------------------------- FOR OFFICERS OF NORTHEAST UTILITIES SYSTEM COMPANIES ---------------------------------------------------- I. Purpose ------- The purpose of this Special Severance Program for Officers of Northeast Utilities System Companies (the "Program") is to provide certain executives with severance payments and benefits in the event of "Termination upon a Change of Control", as hereinafter defined. The Program is not intended to meet the qualification requirements of Section 401 of the Code or to be an "employee pension benefit plan" as defined in ERISA. The Program is not intended to affect eligibility for or payment of any other compensation or benefits in accordance with the terms of any applicable plans or programs of the Company. II. Definitions ----------- When used herein with initial capital letters, each of the following terms shall have the corresponding meaning set forth below unless a different meaning is plainly required by the context in which the term is used: "Administrator" shall mean the Senior Vice President and Chief Administrative Officer of NUSCO. "Affiliate" shall mean an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Base Compensation" for any Participant shall mean the Participant's annualized base rate of salary plus all short-term incentive compensation at the target level for the Participant specified under compensation programs established by the Company for its officers generally, received by the Participant in all capacities with the Company, as would be reported for federal income tax purposes on Form W-2, together with any and all salary reduction authorized amounts under any of the Company's benefit plans or programs, for the most recent full calendar year immediately preceding the calendar year in which occurs Participant's Termination Date or preceding the Change of Control, if higher. "Base Compensation" shall not include the value of any stock options, stock appreciation rights, restricted stock, or restricted stock units granted to Participant by the Company. "Board" shall mean the Board of Trustees of Northeast Utilities. "Cause" with respect to the Termination of Employment of a Participant shall mean (i) the Participant's conviction of a felony, (ii) in the reasonable determination of the Board, the Participant's (x) commission of an act of fraud, embezzlement, or theft in connection with Participant's duties in the course of Participant's employment with the Company, (y) acts or omissions causing intentional, wrongful damage to the property of the Company or intentional and wrongful disclosure of Confidential Information, or (z) engaging in gross misconduct or gross negligence in the course of the Participant's employment with the Company, or (iii) the Participant's material breach of his or her obligations under any written agreement with the Company if such breach shall not have been remedied within 30 days after receiving written notice from the Administrator specifying the details thereof. For purposes of this Program, an act or omission on the part of a Participant shall be deemed "intentional" only if it was not due primarily to an error in judgment or negligence and was done by Participant not in good faith and without reasonable belief that the act or omission was in the best interest of the Company. - 2 - "Change of Control" shall mean the happening of any of the following: (i) Any "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than Northeast Utilities, its Affiliates, or any Company employee benefit plan (including any trustee of such plan acting as trustee), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Northeast Utilities representing more than 20% of the combined voting power of either (i) the Outstanding Common Shares or (ii) the Voting Securities; or (ii) Individuals who, as of the beginning of any twenty-four month period, constitute the trustees of NU (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board or cease to be able to exercise the powers of the majority of the Board, provided that any individual becoming a trustee subsequent to the beginning of such period whose election or nomination for election by the common shareholders of Northeast Utilities was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the trustees of Northeast Utilities (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) Consummation by Northeast Utilities of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Shares and Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation, business trust or other entity resulting from or being the surviving entity in such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding Common Shares and Voting Securities, as the case may be; or (iv) Consummation of a complete liquidation or dissolution of Northeast Utilities or sale or other disposition of all or substantially all of the assets of Northeast Utilities other than to a corporation, business trust or other entity with respect to which, following such sale or disposition, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Shares and Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding Common Shares and Voting Securities, as the case may be, immediately prior to such sale or disposition. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Committee" shall mean the Committee on Organization, Compensation and Board Affairs that has been established by the Board, or any subsequent committee of the Board that has primary responsibility for compensation policies. In the absence of such a committee, "Committee" shall mean - 3 - the Board or any committee of the Board designated by the Board to perform the functions of the Committee under the Program. "Company" includes, individually and/or collectively as the context requires, Northeast Utilities, NUSCO, and all other entities that have approved and adopted this Program pursuant to Article VII, whether or not an individual such entity directly compensates the Participant or the Participant appears on the payroll of such entity. "Disability" shall mean the inability of a Participant substantially to perform his or her duties and responsibilities to the full extent required by the Board, by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Notice of Termination" means a written notice given in accordance with Section 3(d) which (i) indicates the specific termination provision in this Program relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for a Termination of Employment and the applicable provision hereof, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice). "NUSCO" shall mean Northeast Utilities Service Company, its successors and assigns. "Outstanding Common Shares" at any time shall mean the then outstanding common shares of Northeast Utilities. "Participant" at any time shall mean each person then holding the office of vice president or higher level of the Company, not including assistant officers, who (a) has signed a non-competition agreement with the Company in the form of Annex 1 hereto or in such form as has been approved by the Administrator for this purpose from time to time, and (b) is not a party to a then effective separate written agreement with the Company which has been adopted by the Board and expressly provides benefits following a change of control of Northeast Utilities (unless such agreement expressly provides for participation in this Program). "Termination Date" with respect to any Participant shall mean the date of any action by the Company constituting a Termination upon a Change of Control of such Participant. "Termination of Employment" of a Participant shall mean the termination of the Participant's actual employment relationship with the Company occasioned by the Company's action. "Termination upon a Change of Control" of a Participant shall mean a Termination of Employment upon or within two years after a Change of Control either (i) initiated by the Company for any reason other than (w) Disability, (x) death, (y) retirement on or after attaining age 65, or (z) Cause, or (ii) initiated by the Participant (A) upon any significant reduction by the Company of the authority, duties or responsibilities of Participant, any reduction of the Participant's compensation or benefits other than a reduction applicable to all employees generally, or the assignment to Participant of duties which - 4 - are materially inconsistent with the duties of Participant's position with the Company, or (B) if Participant is transferred, without Participant's written consent, to a location that is more than 50 miles from Participant's principal place of business immediately preceding the Change of Control. "Voting Securities" at any time shall mean the then outstanding voting securities of Northeast Utilities entitled to vote generally in the election of trustees of Northeast Utilities. III. Benefits -------- (a) Benefits Following Termination Upon a Change of Control. So long ------------------------------------------------------- as a Participant executes a written release substantially in the form of Annex 2 hereto, upon such Participant's Termination upon a Change of Control, (i) the Company will pay to Participant, in a single cash payment within 30 days after the later of the Termination Date and the date the Participant executes such release, an amount equal to two times the Participant's Base Compensation, (ii) each of the Participant, his or her eligible spouse and dependents shall be eligible for a continuation of all employee health plan benefits as then in effect for such persons, as if the Participant had remained actively employed by the Company, such benefits to continue until the earlier of two years following the Termination Date or the date such person has coverage through another group health plan or plans and to count as "continuation coverage" pursuant to the requirements of Section 4980B of the Code, and (iii) on such Participant's Termination Date, all performance share units, stock options or restricted shares previously granted to the Participant, to the extent not already vested prior to the Termination Date, shall be fully vested and exercisable or paid as if the Participant had remained actively employed by the Company, including the right of exercise, where appropriate, within 36 months after the Termination Date; provided, however, that the performance share units shall be paid as if the Company had met all performance targets during the applicable performance period. (b) Certain Reduction of Payments. ----------------------------- (i) Anything in this Program to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of a Participant, whether paid or payable or distributed or distributable pursuant to the terms of this Program or otherwise (the "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and that such Participant would receive a greater net amount if the Payment to Participant were reduced to avoid the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of Participant pursuant to this Program (such payments or distributions pursuant to this Program are hereinafter referred to as "Program Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present value which maximizes the aggregate present value of Program Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 3(b), present value shall be determined in accordance with Section 280G(d)(4) of the Code. (ii) All determinations to be made under this Section 3(b) shall be made by the Company's independent public accountant immediately prior to the Change of Control (the "Accounting Firm"), which firm shall provide its determinations and any supporting calculations both to the Company and the affected Participant within 10 days of the Termination Date of such Participant. Any such determination by the Accounting Firm shall be binding upon the Company and the Participant; provided, however, that Participant shall, in his or her sole discretion, determine whether, - 5 - which and how much of the Program Payments shall be eliminated or reduced consistent with the requirements of this Section 3(b). Within five days after the Participant's determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Participant such amounts as are then due to the Participant under this Program. (iii) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Program Payments will have been made by the Company which should not have been made ("Overpayment") or that additional Program Payments which have not been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. Within two years after the Termination of Employment of any Participant, the Accounting Firm shall review the determination made by it pursuant to Section 3(b)(ii). In the event that the Accounting Firm determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to the Participant which the Participant shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount shall be payable by the Participant to the Company if and to the extent such payment would not increase the net amount which is payable to the Participant after taking into account the provisions of Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant together with interest at the Federal Rate. (iv) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in subsections 3(b)(ii) and 3(b)(iii) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses resulting from or relating to its determinations pursuant to subsections 3(b)(ii) and 3(b)(iii) above, except for claims, damages or expenses resulting from the gross negligence or wilful misconduct of the Accounting Firm. (b) Vesting. A Participant shall be vested and shall have a ------- nonforfeitable right with respect to the benefits to be provided hereunder from and after the Termination Date. The respective rights and obligations of the Company and the Participant under this Program shall survive any termination of Participant's employment to the extent necessary to the intended preservation of such rights and obligations. (c) Non-Exclusivity of Rights. Nothing in this Program shall prevent ------------------------- or limit any Participant's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company and for which such Participant may qualify; provided, however, that if such Participant becomes entitled to and receives all of the payments provided for in this Program, the Participant hereby waives his or her right to receive payments under any severance plan or similar program applicable to employees of the Company generally. (d) Notice of Termination. No Termination upon a Change of --------------------- Control shall be effective unless accompanied or preceded by a Notice of Termination. IV. Funding ------- Benefits payable under this Program shall be unfunded, as that term is used in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(a)(6) of ERISA, with respect to unfunded plans maintained primarily for the purpose of providing deferred compensation to a select group of management or highly - 6 - compensated employees, and the Administrator shall administer this Program in a manner that will ensure that benefits are unfunded and that Participants will not be considered to have received a taxable economic benefit prior to the time at which benefits are actually payable hereunder. Accordingly, the Company shall not be required to segregate or earmark any of its assets for the benefit of Participants or their spouses or other beneficiaries, and each such person shall have only a contractual right against the Company for benefits hereunder. The Company may from time to time establish a trust and deposit with the trustee thereof funds to be held in trust for the payment of benefits hereunder; provided, that the use of such funds for such purpose shall be subject to the claims of the Company's general creditors as set forth in the agreement establishing any such trust. The rights and interests of a Participant under this Program shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by a Participant or any person claiming under or through a Participant, nor shall they be subject to the debts, contracts, liabilities or torts of a Participant or anyone else prior to payment. The Treasurer of NUSCO may from time to time appoint an investment manager or managers for the funds held in any such trust. V. Administration -------------- The Program shall be operated under the direction of the Committee and administered by the Administrator. The calculation of all benefits payable under the Program shall be performed by the Administrator, subject to the review of the Committee. VI. Claims Procedure ---------------- All claims for benefits under this Program shall be determined under the claims procedure in effect under the Northeast Utilities Service Company Retirement Plan on the date that such claims are submitted, except that the Administrator shall make initial determinations with respect to claims hereunder and the Committee shall decide appeals of such determinations. In the event that any dispute under the provisions of this Program is not resolved to the satisfaction of the affected Participant, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in the City of Hartford, Connecticut in accordance with National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of three arbitrators, two of whom shall be selected by the Company and the affected Participant, respectively, and the third of whom shall be selected by the other two arbitrators. Any award entered by the arbitrators shall be final, binding and nonappealable (except as provided in Section 52-418 of the Connecticut General Statutes) and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Program or to award a remedy for a dispute involving this Program other than a benefit specifically provided under or by virtue of the Program. If a Participant prevails on any material issue which is the subject of any such arbitration or lawsuit, the Company shall be responsible for all of the fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration (including the Company's and the Participant's reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the American Arbitration Association. VII. Adoption by Company: Obligations of Company. ------------------------------------------- - 7 - (a) At the earliest feasible time or times, Northeast Utilities shall cause each entity in which it now or hereafter holds, directly or indirectly, more than a 50 percent voting interest to approve and adopt this Program and, by such approval and adoption, to be bound by the terms hereof. (b) Benefits under this Program shall, in the first instance, be paid and satisfied by NUSCO. If NUSCO shall be dissolved or for any other reason shall fail to pay and satisfy such benefits, each individual entity referred to in (a) above shall pay and satisfy its share of such benefits, such share to be the ratio of the Participant's Base Compensation charged to such entity during the three calendar years immediately preceding the Participant's Termination Upon a Change of Control to the total of the Participant's Base Compensation charged to all such entities during the same period. (c) The Declaration of Trust of Northeast Utilities provides that no shareholder of Northeast Utilities shall be held to any liability whatever for the payment of any sum of money, or for damages or otherwise under any contract, obligation or undertaking made, entered into or issued by the trustees of Northeast Utilities or by any officer, agent or representative elected or appointed by the trustees and no such contract, obligation or undertaking shall be enforceable against the trustees or any of them in their or his individual capacities or capacity and all such contracts, obligations and undertakings shall be enforceable only against the trustees as such and every person, firm, association, trust and corporation having any claim or demand arising out of any such contract, obligation or undertaking shall look only to the trust estate for the payment or satisfaction thereof. Any liability for benefits under this Program incurred by Northeast Utilities shall be subject to the foregoing provisions of this Section 7 (c). VIII. Miscellaneous ------------- (a) Amendment or Termination. Prior to the occurrence of a Change of ------------------------ Control, the Board may amend or discontinue this Program at any time, on at least two (2) years prior written notice to each Participant of the Board's intention to do so and specifying the changes to be made. Upon and following a Change of Control, this Program may not be amended or terminated in any way that would eliminate or reduce the payments and benefits owing to Participants under the Program. (b) Headings. Headings are included in the Program for convenience -------- only and are not substantive provisions of the Program. (c) Applicable Law. The interpretation of the provisions and the -------------- administration of the Program shall be governed by the laws of the State of Connecticut without giving effect to any conflict of laws provisions, and to the extent applicable, the United States of America. (d) Mitigation. No Participant shall be required to mitigate the ---------- amount of any payment or benefit provided for in this Program by seeking other employment or otherwise and there shall be no offset against amounts due any Participant under this Program on account of any remuneration attributable to any subsequent employment that may be obtained. (e) Notices. All notices and other communications required or ------- permitted under this Program or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail to the last known - 8 - address of the Company or the Participant, as the case may be, reflected upon Company records. Notices to the Company shall be addressed to: Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 Attention: Senior Vice President and Chief Administrative Officer (f) Binding Effect; Successors and Assigns. All of the terms and -------------------------------------- provisions of this Program shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Participants under this Program are of a personal nature and shall not be assignable or delegatable in whole or in part by the Participants. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Participants, expressly to assume and agree to perform this Plan in the same manner and to the extent the Company would be required to perform if no such succession had taken place. (g) Severability. If any provision of this Program or application ------------ thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Program which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances. (h) Remedies Cumulative; No Waiver. No remedy conferred upon a party ------------------------------ by this Program is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Program or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Program or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion. (i) Beneficiaries/References. Each Participant shall be entitled, to ------------------------ the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable under this Program following his or her death by giving the Company written notice thereof. In the event of a Participant's death or a judicial determination of a Participant's incompetence, reference in this Program to "Participant" shall be deemed, where appropriate, to refer to such Participant's beneficiary, estate or other legal representative. (j) Withholding. The Company may withhold from any payments under ----------- this Program all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Each Participant shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Program. (k) Establishment of Trust. The Company may establish an irrevocable ---------------------- trust fund pursuant to a trust agreement to hold assets to satisfy any of its obligations under this Program. Funding of such - 9 - trust fund shall be subject to the Board's discretion, as set forth in the agreement pursuant to which the fund will be established. EX-12 8 STATEMENT RE COMPUTATION OF EARNINGS Exhibit 12
THE CONNECTICUT LIGHT & POWER COMPANY & SUBSIDIARIES Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES (THOUSANDS OF DOLLARS) Twelve Months Ended Year Ended December 31, 3/31/97 1992 1993 1994 1995 1996 (unaudited) ------- ------- ------- ------- ------- ------- Earnings: Net Income(Loss) 206,714 143,702 (a) 198,288 205,216 (80,237) (119,520) Current Income Taxes 88,926 159,876 148,337 131,804 40,439 (17,389) Deferred Income Taxes 66,391 (20,188) 37,664 49,520 (60,773) (31,028) ------- ------- ------- ------- ------- ------- Earnings before Income Taxes 362,031 283,390 384,289 386,540 (100,571) (167,937) Less: Undistributed Income from less than Fifty Percent Owned Companies 95 234 1,042 (328) 2,301 3,526 Add: Fixed Charges 184,407 165,213 144,212 146,330 147,356 150,644 ------- ------- ------- ------- ------- ------- Earnings Available for Fixed Charges 546,343 448,369 527,459 533,198 44,484 (20,819) Fixed Charges: Interest on Long Term Debt 145,066 126,850 111,094 117,060 120,819 124,363 Amortization of Debt Discount and Expense, Less Premium 6,248 7,412 8,834 7,290 6,379 6,320 Interest on Short Term Debt 3,679 6,111 6,543 2,009 545 623 Other Interest 5,659 5,423 (551) 1,453 2,125 2,049 Portion of Rents Representative of the Interest Factor 23,755 19,417 18,292 18,518 17,488 17,289 ------- ------- ------- ------- ------- ------- Total Fixed Charges 184,407 165,213 144,212 146,330 147,356 150,644 Ratio of Earnings to Fixed Charges 2.96 2.71 3.65 3.64 0.30 -0.13
(a) Excludes the cummulative effect of an accounting change of $47.747 million. EX-23 9 CONSENT OF ARTHUR ANDERSEN Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included (or incorporated by reference) in this Registration Statement. /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP Hartford, Connecticut July 3, 1997 EX-25 10 FORM T-1 OF BANKERS TRUST Exhibit 25 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)____________ ------------------------------- BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) Bankers Trust Company Legal Department 130 Liberty Street, 31st Floor New York, New York 10006 (212) 250-2201 (Name, address and telephone number of agent for service) --------------------------------- THE CONNECTICUT LIGHT AND POWER COMPANY (Exact name of obligor as specified in its charter) CONNECTICUT 06-030850 (State or other jurisdiction of (I.R.S. Employer Identification no.) Incorporation or organization) SELDEN STREET BERLIN, CONNECTICUT 06037 (Address of principal executive offices) (Zip Code) ------------------------------- FIRST MORTGAGE BONDS (Title of the indenture securities) Item 1. General Information. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject.
Name Address ---- ------- Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. Item 3. -15. Not Applicable Item 16. List of Exhibits. Exhibit 1 - Restated Organization Certificate of Bankers Trust Company dated August 7, 1990, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated June 21, 1995 - Incorporated herein by reference to Exhibit 1 filed with Form T-1 Statement, Registration No. 33-65171, and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated March 20, 1996, copy attached. Exhibit 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. Exhibit 3 - Authorization of the Trustee to exercise corporate trust powers -Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. Exhibit 4 - Existing By-Laws of Bankers Trust Company, as amended on February 18, 1997, Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 333-24509- 01. -2- Exhibit 5 - Not applicable. Exhibit 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. Exhibit 7 - A copy of the latest report of condition of Bankers Trust Company dated as of March 31, 1997. Exhibit 8 - Not Applicable. Exhibit 9 - Not Applicable. -3- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 16th day of June, 1997. BANKERS TRUST COMPANY By: [SIGNATURE APPEARS HERE] ------------------------ Scott F. Thiel Assistant Vice President -4- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 16th day of June, 1997. BANKERS TRUST COMPANY By: /s/ Scott F. Thiel ------------------------ Scott F. Thiel Assistant Vice President -5- Legal Title of Bank: Bankers Trust Company Call Date: 3/31/97 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1 City, State ZIP: New York, NY 10006 11 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks March 31, 1997 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. Schedule RC--Balance Sheet
--------------- C400 ------------------------------- Dollar Amounts in Thousands RCFD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS / / / / / / / / / / 1. Cash and balances due from depository institutions (from Schedule RC-A): / / / / / / / / / / a. Noninterest-bearing balances and currency and coin(1) ............................... 0081 1,589,000 1.a. b. Interest-bearing balances(2) ........................................................ 0071 2,734,000 1.b. 2. Securities: / / / / / / / / / / a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D)...................... 1773 4,433,000 2.b. 3 Federal funds sold and securities purchased under agreements to resell 1350 26,490,000 3 4. Loans and lease financing receivables: / / / / / / / / / a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 15,941,000 / / / / / / / / / 4.a. b. LESS: Allowance for loan and lease losses.................... RCFD 3123 708,000 / / / / / / / / / 4.b. c. LESS: Allocated transfer risk reserve ..................... RCFD 3128 0 4.c 4.c. / / / / / / / / / d. Loans and leases, net of unearned income, / / / / / / / / / allowance, and reserve (item 4 a minus 4.b and 4.c) ..................................... 2125 15,233,000 4.d. 5. Assets held in trading accounts ............................................................... 3545 38,115,000 5. 6. Premises and fixed assets (including capitalized leases) ...................................... 2145 924,000 6. 7. Other real estate owned (from Schedule RC-M) .................................................. 2150 188,000 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 175,000 8. 9. Customers' liability to this bank on acceptances outstanding .................................. 2155 618,000 9. 10. Intangible assets (from Schedule RC-M) ........................................................ 2143 17,000 10. 11. Other assets (from Schedule RC-F) ............................................................. 2160 4,424,000 11. 12. Total assets (sum of items 1 through 11) ...................................................... 2170 94,940,000 12. -------------------------------
- -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. Legal Title of Bank: Bankers Trust Company Call Date: 3/31/97 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2 City, State Zip: New York, NY 10006 12 FDIC Certificate No.: 00623
Schedule RC--Continued
------------------------------------------------------------- Dollar Amounts in Thousands / / / / / / / / Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES / / / / / / / / / / / / / / / / / / / / / / / / 13. Deposits: / / / / / / / / / / / / / / / / / / / / / / / a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) RCON 2200 14,450,000 13.a. (1) Noninterest-bearing(1) ....RCON 6631 2,917,000... / / / / / / / / / / / / / / / / / / / / / / / 13.a.(1) (2) Interest-bearing ...........RCON 6636 11,533,000... / / / / / / / / / / / / / / / / / / / / / / / 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E part II) RCFN 2200 23,456,000 13.b. (1) Noninterest-bearing .......RCFN 6631 1,062,000 / / / / / / / / / / / / / / / / / / / / / / / (2) Interest-bearing ..........RCFN 6636 22,394,000 / / / / / / / / / / / / / / / / / / / / / / / 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 15,195,000 14 15. a. Demand notes issued to the U.S. Treasury ................ RCON 2840 0 b. Trading liabilities (from Schedule RC-D)................. RCFD 3548 18,911,000 15.b. 16. Other borrowed money, (includes mortgage indebtedness nd obligations under capitalized leases): / / / / / / / / / / / / / / / / / / / / / / / a. With original maturity of one year or less .............. RCFD 2332 7,701,000 b. With original maturity of more than one year ............ RCFD 2333 4,438,000 17. Not applicable ............................................... 17. 18. Bank's liability on acceptances executed and outstanding ..... RCFD 2920 618,000 18. 19. Subordinated notes and debentures ............................ RCFD 3200 1,226,000 19. 20. Other liabilities (from Schedule RC-G) ....................... RCFD 2930 3,971,000 20. 21. Total liabilities (sum of items 13 through 20) ............... RCFD 2948 89,966,000 / / / / / / / / / / / / / / / / / / / / / / / 22. Not applicable 22. EQUITY CAPITAL / / / / / / / / / / / / / / / / / / / / / / / 23. Perpetual preferred stock and related surplus ................ RCFD 3838 600,000 23. 24. Common stock ................................................. RCFD 3230 1,002,000 24. 25. Surplus (exclude all surplus related to preferred stock) ..... RCFD 3839 540,000 25. 26. a. Undivided profits and capital reserves .................. RCFD 3632 3,241,000 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ................................ RCFD 8434 ( 31,000) 27. Cumulative foreign currency translation adjustments .......... RCFD 3284 ( 378,000) 28. Total equity capital (sum of items 23 through 27) ............ RCFD 3210 4,974,000 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) ........................ RCFD 3300 94,940,000 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work Number performed for the bank by independent external ------------------------ auditors as of any date during 1996 ...................... RCFD 6724 1 M.1 -------------------------------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ------------------- (1) Including total demand deposits and noninterest-bearing time and savings deposits. State of New York, Banking Department I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the Banking Law," dated March 20, 1996, providing for an increase in authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. Witness, my hand and official seal of the Banking Department at the City of New York, this 21st day of March in the Year of our Lord one thousand ---- ----- nine hundred and ninety-six. Peter M. Philbin ------------------------------ Deputy Superintendent of Banks CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Three Hundred Fifty One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670), divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into One Hundred Million, One Hundred Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 6. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th day of March, 1996. James T. Byrne, Jr. ------------------------- James T. Byrne, Jr. Managing Director Lea Lahtinen ------------------------- Lea Lahtinen Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. Lea Lahtinen ------------------------ Lea Lahtinen Sworn to before me this 20th day of March, 1996. Sandra L. West - -------------------------- Notary Public SANDRA L. WEST Notary Public State of New York Counterpart filed in the No. 31-4942101 Office of the Superintendent of Qualified in New York County Banks, State of New York, Commission Expires September 19, 1996 This 21st day of March, 1996 EX-99 11 LETTER OF TRANSMITTAL FOR EXCHANGE OFFER Exhibit 99 LETTER OF TRANSMITTAL THE CONNECTICUT LIGHT AND POWER COMPANY Offer for All Outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 in Exchange for First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 ------------------ Pursuant to the Prospectus Dated July __, 1997 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____ __, 1997 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD BONDS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- To: Bankers Trust Company, as Exchange Agent By Mail: By Facsimile: By Hand or Express Delivery: Bankers Trust Company (212) _________ Bankers Trust Company Four Albany Street Four Albany Street New York, NY 10006. Confirm by Telephone: New York, NY 10006. (212) _________ Delivery of this Letter of Transmittal to an address, or transmission via telegram, telex or facsimile, other than as set forth above will not constitute a valid delivery. The instructions accompanying this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated July __, 1997 (the "Prospectus"), of The Connecticut Light and Power Company, a Connecticut corporation ("CL&P"), and this Letter of Transmittal and the accompanying instructions (the "Letter of Transmittal"), which together constitute CL&P's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $200,000,000 of First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C (the "New Bonds"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement of which the Prospectus constitutes a part, for a like principal amount of its outstanding First and Refunding Mortgage Bonds, 1997 Series B (the "Old Bonds"), upon the terms and subject to the conditions set forth in the Prospectus. If this Letter of Transmittal is signed by the registered holder(s) of the Old Bonds tendered hereby, the signature must correspond with the name(s) as written on the face of the Old Bonds without alteration, enlargement or any change whatsoever. If any tendered Old Bonds are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Bonds are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations or certificates. This Letter of Transmittal is to be used by Holders (as defined below) if: (i) certificates representing Old Bonds are to be physically delivered to the Exchange Agent herewith by Holders; (ii) tender of Old Bonds is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC") pursuant to the procedures set forth in the Prospectus under "The Exchange Offer-- Procedures for Tendering Old Bonds" by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Old Bonds (such participants, acting on behalf of Holders are referred to herein, together with such Holders, as "Acting Holders"); or (iii) tender of Old Bonds is to be made according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedure," and, in each case, instructions are being transmitted through the DTC Automated Tender Offer Program ("ATOP"). Delivery of documents to DTC does not constitute delivery to the Exchange Agent. The term "Holder" with respect to the Exchange Offer means any person: (i) in whose name Old Bonds are registered on the books of CL&P or any other person who has obtained a properly completed bond power from the registered Holder; or (ii) whose Old Bonds are held of record by DTC and who desires to deliver such Old Bonds by book-entry transfer at DTC. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. All capitalized terms used herein and not defined shall have the meaning ascribed to them in the Prospectus. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 8 herein. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD BONDS MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. List below the Old Bonds to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers and principal amounts on a separately executed schedule and affix the schedule to this Letter of Transmittal. Partial tenders of Old Bonds will be accepted only in principal amounts equal to $1,000 or integral multiples thereof.
- ----------------------------------------------------------------------------------------------- DESCRIPTION OF OLD BONDS - ----------------------------------------------------------------------------------------------- Certificate Number(s)* Aggregate (Attach Principal Name(s) and Address(es) of signed Amount Holder(s) list if Tendered (if less (Please fill in if blank) necessary) than all)** - ----------------------------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- - ----------------------------------------------------------------------------------------------- TOTAL PRINCIPAL AMOUNT OF OLD BONDS TENDERED - ----------------------------------------------------------------------------------------------- * Need not be completed by Holders tendering by book-entry transfer. ** Need not be completed by Holders who wish to tender with respect to all Old Bonds listed. See Instruction 2. - -----------------------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED BY DTC TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution:_____________________________________________ DTC Book-Entry Account No.:________________________________________________ Transaction Code No:_______________________________________________________ If Holders desire to tender Old Bonds pursuant to the Exchange Offer and (i) certificates representing such Old Bonds are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing such Old Bonds or other required documents to reach the Exchange Agent prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed prior the Expiration Date, such Holders may effect a tender of such Old Bonds in accordance with the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedure." DTC participants may also accept the Offer by submitting the notice of guaranteed delivery through ATOP. [_] CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Holder(s) of Old Bonds:_________________________________________ Window Ticket No. (if any):________________________________________________ Date of Execution of Notice of Guaranteed Delivery:_____________________________________________ Name of Eligible Institution that Guaranteed Delivery: ___________________________________________________________________________ If Delivered by Book-Entry Transfer: Name of Tendering Institution:_____________________________________________ DTC Book-Entry Account No.:________________________________________________ Transaction Code No.:______________________________________________________ [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:______________________________________________________________________ Address:___________________________________________________________________ ___________________________________________________________________________ [_] CHECK HERE IF TENDERED BONDS ARE ENCLOSED HEREWITH. Ladies and Gentlemen: Subject to the terms of the Exchange Offer, the undersigned hereby tenders to CL&P the principal amount of Old Bonds indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Old Bonds tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, CL&P all right, title and interest in and to the Old Bonds tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney- in-fact (with full knowledge that the Exchange Agent also acts as the agent of CL&P and as Trustee under the Indenture for the Old Bonds and the New Bonds) with respect to the tendered Old Bonds with full power of substitution to (i) deliver certificates for such Old Bonds to CL&P, or transfer ownership of such Old Bonds on the account books maintained by DTC together, in either such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, CL&P and (ii) present such Old Bonds for transfer on the books of CL&P and receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Bonds, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that he or she has full power and authority to tender, sell, assign and transfer the Old Bonds tendered hereby and that CL&P will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are acquired by CL&P. The undersigned also acknowledges that this Exchange Offer is being made in reliance upon an interpretation by the staff of the Securities and Exchange Commission that the New Bonds issued in exchange for the Old Bonds pursuant to the Exchange Offer may be offered for sale, resold and otherwise transferred by any holder thereof (other than (i) a broker-dealer who purchased such Old Bonds directly from CL&P to resell pursuant to Rule 144A or any other available exemption under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a person that is an "affiliate" of CL&P within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holder is acquiring the New Bonds in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the New Bonds. The undersigned hereby further represents to CL&P that (i) the New Bonds acquired pursuant to the Exchange Offer are being obtained in the ordinary course of such holder's business, (ii) such holder has no arrangements or understandings with any person to participate in the distribution of such New Bonds and (iii) such holder is not an "affiliate", as defined under Rule 405 of the Securities Act, of CL&P or, if such holder is an affiliate, that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. The undersigned acknowledges and agrees that any person participating in the Exchange Offer for the purpose of distributing the New Bonds must comply with the registration and prospectus delivery requirements of the Securities Act, in connection with a secondary resale or transaction of the New Bonds acquired by such person. The undersigned understands that such secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K of the Securities and Exchange Commission. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Bonds. If the undersigned is a broker-dealer that will receive New Bonds for its own account in exchange for Old Bonds that were acquired as a result of market-making or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or CL&P to be necessary or desirable to complete the assignment and transfer of the Old Bonds tendered hereby. For purposes of the Exchange Offer, CL&P shall be deemed to have accepted validly tendered Old Bonds when CL&P has given oral or written notice thereof to the Exchange Agent. If any tendered Old Bonds are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Old Bonds will be returned (except as noted below with respect to tenders through DTC), without expense, to the undersigned at the address shown below or at a different address as may be indicated under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. All authority conferred or agreed to be conferred by this Letter of Transmittal and every obligation of the undersigned hereby shall survive the death, incapacity or dissolution of the undersigned and every obligation under this Letter of Transmittal shall be binding upon the undersigned's heirs, executors, administrators, legal representatives, trustees in bankruptcy, successors and assigns. The undersigned understands that tenders of Old Bonds pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering Old Bonds" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and CL&P upon the terms and subject to the conditions of the Exchange Offer. The tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. The undersigned understands that delivery and tender of the Old Bonds is not effective and risk of loss of the Old Bonds does not pass to the Exchange Agent until receipt by the Exchange Agent of this Letter of Transmittal, properly completed and duly executed with all accompanying evidences of authority and other documents in a form satisfactory to CL&P. Unless otherwise indicated under "Special Issuance Instructions," please issue the certificates representing the New Bonds issued in exchange for the Old Bonds accepted for exchange and return any Old Bonds not tendered or not exchanged in the name(s) of the undersigned (or in either such event, in the case of Old Bonds tendered by DTC, by credit to the account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the New Bonds issued in exchange for the Old Bonds accepted for exchange and any certificates for Old Bonds not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature, unless, in either event, tender is being made through DTC. In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the New Bonds issued in exchange for the Old Bonds accepted for exchange and return any Old Bonds not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The undersigned recognizes that CL&P has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Old Bonds from the name of the registered holder(s) thereof if CL&P does not accept for exchange any of the Old Bonds so tendered. - -------------------------------------------------------------------------------- PLEASE SIGN HERE (To Be Completed by All Tendering Holders of Old Bonds Regardless of Whether Old Bonds Are Being Physically Delivered Herewith) This Letter of Transmittal must be signed by the Holder(s) of Old Bonds exactly as their name(s) appear(s) on certificate(s) for Old Bonds or, if tendered by a participant in DTC, exactly as such participant's name appears on a security position listing as the owner of Old Bonds, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below under "Capacity" and submit evidence satisfactory to CL&P of such person's authority to so act. See Instruction 3. X__________________________________ Date:__________________________________ X__________________________________ Date:__________________________________ Signature(s) of Holder(s) or Authorized Signatory Name(s):___________________________ Address________________________________ ___________________________ ________________________________ (Please Print) (Including Zip Code) Capacity:__________________________ Area Code and Telephone No.:________________ Social Security No.:__________________________ MEDALLION SIGNATURE GUARANTEE (If Required by Instruction 3) ________________________________________________________________________________ (Name of Eligible Institution Guaranteeing Signatures) ________________________________________________________________________________ (Address (including zip code) and Telephone Number (including area code) of Firm) ________________________________________________________________________________ (Authorized Signature) ________________________________________________________________________________ (Printed Name) ________________________________________________________________________________ (Title) Date:_____________________________, 1997 ___________________________________ ________________________________________ SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 3 and 4) (See Instructions 1, 3 and 4) To be completed ONLY if To be completed ONLY if certificates for certificates for Old Bonds not Old Bonds not exchanged and/or New Bonds exchanged and/or New Bonds are to are to be sent to someone other than the be issued in the name of and sent person or persons whose signature(s) to someone other than the person appear(s) on this Letter of Transmittal or persons whose signature(s) above or to such person or persons at an appear(s) on this Letter of address other than shown in the box Transmittal above, or if Old entitled "Description of Old Bonds" on Bonds delivered by book-entry this Letter of Transmittal above. transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: New Bonds and/or Old Mail: New Bonds and/or Old Bonds to: Bonds to: Name(s):_________________________ Name(s):_______________________________ (Please Type or Print) (Please Type or Print) _________________________________ _______________________________________ (Please Type or Print) (Please Type or Print) Address:_______________________________ Address:_________________________ _______________________________________ _________________________________ (Zip Code) (Zip Code) (Complete Substitute Form W-9) [_] Credit unexchanged Old Bonds delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. _________________________________ (Book-entry Transfer Facility Account Number, if applicable) __________________________________ _______________________________________ IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH THE CERTIFICATES FOR OLD BONDS OR A BOOK ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer for All Outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 in Exchange for First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 1. Delivery of this Letter of Transmittal and Old Bonds; Guaranteed Delivery Procedure. The certificates for the tendered Old Bonds (or a confirmation of a book-entry transfer into the Exchange Agent's account at DTC of all Old Bonds delivered electronically), as well as a properly completed and duly executed copy of this Letter of Transmittal and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of the tendered Old Bonds, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Old Bonds should be sent to CL&P. Holders who wish to tender their Old Bonds and (i) whose Old Bonds are not immediately available or (ii) who cannot deliver their Old Bonds, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date must tender their Old Bonds and follow the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the Old Bonds, the certificate number or numbers of such Old Bonds and the principal amount of Old Bonds tendered, stating that the tender is being made thereby and guaranteeing that, within five business days after the Expiration Date, this Letter of Transmittal together with the certificate(s) representing the Old Bonds (or a confirmation of electronic mail delivery of book-entry delivery into the Exchange Agent's account at DTC) and any of the required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal, as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all tendered Old Bonds in proper form for transfer (or a confirmation of electronic mail delivery of book-entry delivery into the Exchange Agent's account at DTC), must be received by the Exchange Agent within five business days after the Expiration Date, all as provided in the Prospectus under the Caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder of Old Bonds who wishes to tender his Old Bonds pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Bonds will be determined by CL&P in its sole discretion, which determination will be final and binding. CL&P reserves the absolute right to reject any and all Old Bonds not properly tendered or any Old Bonds CL&P's acceptance of which would, in the opinion of counsel for CL&P, be unlawful. CL&P also reserves the right to waive any irregularities or conditions of tender as to particular Old Bonds. CL&P's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Bonds must be cured within such time as CL&P shall determine. Neither CL&P, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Bonds, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Bonds will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Bonds received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering holders of Old Bonds, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. See "The Exchange Offer" section of the Prospectus. 2. Partial Tenders. If less than the entire principal amount of any Old Bonds is tendered, the tendering Holder should fill in the principal amount tendered in the third column of the chart entitled "Description of Old Bonds." Partial tenders of Old Bonds will be accepted in all denominations of $1,000 and integral multiples in excess thereof. The entire principal amount of Old Bonds delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Old Bonds is not tendered, Old Bonds for the principal amount of Old Bonds not tendered and a certificate or certificates representing New Bonds issued in exchange for any Old Bonds accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal or unless tender is made through DTC, promptly after the Old Bonds are accepted for exchange. 3. Signatures on this Letter of Transmittal; Bond Powers and Endorsements; Guarantees of Signatures. If this Letter of Transmittal is signed by the registered holder(s) of the Old Bonds tendered hereby, the signature must correspond with the name(s) as written on the face of the Old Bonds without alteration, enlargement or any change whatsoever. If any tendered Old Bonds are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Bonds are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations or certificates. If this Letter of Transmittal is signed by the registered Holder(s) of Old Bonds tendered hereby and the certificate(s) for New Bonds issued in exchange therefor is to be issued (or any untendered principal amount of Old Bonds is to be reissued) to the registered Holder, such Holder need not and should not endorse any tendered Old Bonds, nor provide a separate bond power. In any other case, such holder must either properly endorse the Old Bonds tendered or transmit a properly completed separate bond power with this Letter of Transmittal, with the signatures on the endorsement or bond power guaranteed by a recognized member of a Medallion Signature Guarantee Program. If this Letter of Transmittal is signed by a person other than the registered Holder(s) of any Old Bonds listed, such Old Bonds must be endorsed or accompanied by appropriate bond powers signed as the name of the registered Holder(s) appears on the Old Bonds. If this Letter of Transmittal or any Old Bonds or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by CL&P, evidence satisfactory to CL&P of their authority so to act must be submitted with this Letter of Transmittal. Endorsements on Old Bonds or signatures on bond powers required by this Instruction 3 must be guaranteed by an eligible guarantor institution which is a member of one of the following recognized Medallion Signature Guarantee Programs: the Securities Transfer Agents Medallion Program; the New York Stock Exchange Medallion Signature Program; or the Stock Exchange Medallion Program. Signatures on this Letter of Transmittal must be guaranteed by a recognized member of a Medallion Signature Guarantee Program unless the Old Bonds tendered pursuant thereto are tendered (i) by a registered Holder (including any participant in DTC whose name appears on a security position listing as the owner of Old Bonds) who has not completed the box set forth herein entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" or (ii) for the account of a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States (each of the foregoing being referred to as an "Eligible Institution"). 4. Special Issuance and Delivery Instructions. Tendering Holders should indicate, in the applicable spaces, the name and address to which New Bonds or substitute Old Bonds for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of the Old Bonds through DTC, if different from DTC). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 5. Transfer Taxes. CL&P will pay all transfer taxes, if any, applicable to the exchange of Old Bonds pursuant to the Exchange Offer. If, however, certificates representing New Bonds or Old Bonds for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Bonds pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 5, it will not be necessary for transfer tax stamps to be affixed to the Old Bonds listed in this Letter of Transmittal. 6. Waiver of Conditions. CL&P reserves the absolute right to amend, waive or modify specified conditions in the Exchange Offer in the case of any Old Bonds tendered. 7. Mutilated, Lost, Stolen or Destroyed Old Bonds. Any tendering Holder whose Old Bonds have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instruction. 8. Requests for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contract their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 9. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders of Old Bonds, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Old Bonds for exchange. Neither CL&P, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Bonds, nor shall any of them incur any liability for failure to give any such notice. (DO NOT WRITE IN SPACE BELOW) - -------------------------------------------------------------------------------- Certificate Surrendered Old Bonds Tendered Old Bonds Accepted - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Delivery Prepared by Checked Date by --------------------- -------------- -------------------- - -------------------------------------------------------------------------------- IMPORTANT TAX INFORMATION Under federal income tax laws, a Holder whose tendered Old Bonds are accepted for payment is required to provide the Exchange Agent (as payer) with such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a basis for exemption from backup withholding. If such Holder is an individual, the TIN is his social security number. If the Exchange Agent is not provided with the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service, and payments made with respect to New Bonds purchased pursuant to the Exchange Offer may be subject to backup withholding. Certain Holders (including, among others, all corporations and certain foreign persons) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on Substitute Form W-9. A foreign person may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Exchange Agent is required to withhold 31% of any payments made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Purpose of Substitute Form W-9 To prevent backup withholding on payments made with respect to the Exchange Offer, the Holder is required to provide the Exchange Agent with either: (i) the Holder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder has not been notified by the Internal Revenue Service that the Holder is subject to backup withholding as a result of failure to report all interest or dividends or (B) the Internal Revenue Service has notified the Holder that the Holder is no longer subject to backup withholding; or (ii) an adequate basis for exemption. What Number to Give the Exchange Agent The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered Holder of the Old Bonds. If the Old Bonds are held in more than one name or are held not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer identification Number on Substitute Form W-9" for additional guidance on which number to report. - -------------------------------------------------------------------------------- PAYER'S NAME: - -------------------------------------------------------------------------------- SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN THE BOX AT ----------------- RIGHT AND CERTIFY BY Social Security SIGNING AND DATING BELOW Number Form W-9 OR ----------------- Employer Identification Number Department of the Treasury ------------------------- -------------------- Internal Revenue Service Part 2-Certification-Under Part 3- Payer's Request for Penalties of Perjury, I Taxpayer Identification certify that: Awaiting TIN [_] Number (TIN) and Certification (1) The number shown in this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. ---------------------------------------------------- Certificate Instructions-You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE Date ---------------- ----------------- - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW BONDS PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. ------------------- ------------------ Signature Date - -------------------------------------------------------------------------------- NOTICE OF GUARANTEED DELIVERY for First and Refunding Bonds, 1997 Series B of The Connecticut Light and Power Company As set forth in the Prospectus, dated July __, 1997 (the "Prospectus"), of The Connecticut Light and Power Company (the "Company") and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent hereto must be used to accept CL&P's exchange offer (the "Exchange Offer") to purchase all of its outstanding First and Refunding Bonds, 1997 Series B (the "Old Bonds") if (i) certificates representing the Old Bonds to be tendered for purchase and payment are not lost but are not immediately available, (ii) time will not permit the Letter of Transmittal, certificates representing such Old Bonds or other required documents to reach the Exchange Agent prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date. This form may be delivered by an Eligible Institution by mail or hand delivery or transmitted, via telegram, telex or facsimile, to the Exchange Agent at its address set forth below not later than 5:00 p.m., New York City Time, on _____ __, 1997, unless the Offer is extended. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Prospectus. The Exchange Agent is: Bankers Trust Company By Mail: By Facsimile: By Hand or Express Delivery: Bankers Trust Company (212)__________ Bankers Trust Company Four Albany Street Four Albany Street New York, NY 10006. Confirm by Telephone: New York, NY 10006. (212)_________
Delivery of this instrument to an address, or transmission via telegram, telex or facsimile, other than as set forth above will not constitute a valid delivery. Ladies and Gentlemen: The undersigned hereby tender(s) to CL&P, upon the terms and subject to the conditions set forth in the Exchange Offer and the Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Old Bonds set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer-Guaranteed Delivery Procedure." The undersigned understands that partial tenders of Old Bonds will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned understands that tenders of Old Bonds pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. Tenders of Old Bonds may also be withdrawn if the Exchange Offer is terminated without any such Old Bonds being purchased thereunder or as otherwise provided in the Prospectus under the caption "The Exchange Offer- Withdrawal Rights." All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. PLEASE COMPLETE AND SIGN - ------------------------------------------------------- -------------------------------------------------------------------------- Signature(s) of Registered Owner(s) or Authorized Name(s) of Registered Signatory:____________________________________________ Holder(s)_________________________________________________________________ ______________________________________________________ __________________________________________________________________________ ______________________________________________________ __________________________________________________________________________ ______________________________________________________ Principal Amount of Old Bonds Tendered: Address:__________________________________________________________________ ______________________ __________________________________________________________________________ ______________________________________________________ Certificate No(s). of Old Bonds (if available): Area Code and Telephone No.: ______________________________________________________ _____________________________________ ______________________________________________________ Date: ________________________________________________ If Old Bonds will be delivered by book-entry transfer at The Depository Taxpayer Identification or Trust Company, insert Depository Account No.: Social Security __________________________________________________________________________ No._____________________________________ -------------------------------------------------------------------------- - -------------------------------------------------------
- -------------------------------------------------------------------------------- This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Old Bonds exactly as its (their) name(s) appear on certificates for Old Bonds or on a security position listing as the owner(s) of Old Bonds, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): ___________________________________________________________________ ___________________________________________________________________ Capacity: ___________________________________________________________________ Address(es): ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or a correspondent in the United States, hereby (a) represents that each holder of Old Bonds on whose behalf this tender is being made "own(s)" the Old Bonds covered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that such tender of Old Bonds complies with such Rule 14e-4, and (c) guarantees that, within five New York Stock Exchange trading days from the date of this Notice of Guaranteed Delivery, a properly completed and duly executed Letter of Transmittal, together with certificates representing the Old Bonds covered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Old Bonds into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus) and required documents will be deposited by the undersigned with the Exchange Agent. The undersigned acknowledges that it must deliver the Letter of Transmittal and Old Bonds tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in financial loss to the undersigned. - -------------------------------------------------------------------------------- - ------------------------------------- ----------------------------------------- Name of Firm: ______________________ _________________________________________ Authorized Signature Address: ____________________________ Name: ___________________________________ _____________________________________ Title: __________________________________ Area Code and Telephone No.: ________ Date: ___________________________________ - ------------------------------------- ----------------------------------------- NOTE: DO NOT SEND OLD BONDS WITH THIS FORM. OLD BONDS SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. The Connecticut Light and Power Company Offer for All Outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 in Exchange for First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 To Our Clients: Enclosed for your consideration is a Prospectus, dated July __ , 1997 (the "Prospectus"), and the related Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of The Connecticut Light and Power Company ("CL&P") to exchange its First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 (the "New Bonds") for its outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 (the "Old Bonds"), upon the terms and subject to the conditions described in the Prospectus. The Exchange Offer is being made in order to satisfy certain obligations of CL&P contained in the Registration Rights Agreement dated as of June 19, 1997. This material is being forwarded to you as the beneficial owner of the Old Bonds carried by us in your account but not registered in your name. A tender of such Old Bonds may only be made by us as the holder of record and pursuant to your instructions. Therefore, CL&P urges beneficial owners of Old Bonds registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such Holder promptly if they wish to exchange Old Bonds in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender on your behalf any or all of the Old Bonds held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Bonds on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on ________________, unless extended by CL&P. Any Old Bonds tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Bonds. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Certain Conditions to the Exchange Offer." 3. Any transfer taxes incident to the transfer of Old Bonds from the holder to CL&P will be paid by CL&P, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on _______________, 1997, unless extended by CL&P. If you wish to have us tender your Old Bonds, please so instruct us by completing, executing and returning to us the instruction form on the back of this Letter of Transmittal. The Letter of Transmittal is furnished to you for your information only and may not be used directly by you to tender Old Bonds. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your Letter of Transmittal and the enclosed material referred to therein relating to the Exchange Offer made by CL&P with respect to its Old Bonds. This will instruct you to tender the Old Bonds held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Old Bonds held by you for my account as indicated below: ______________________________________________ Aggregate Principal Amount of Old Bonds ______________________________________________ First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 [_] Please do not tender any Old Bonds held by you for my account. Dated: , 1997 ____________________________________________ ____________________________________________ Signature(s) ____________________________________________ ____________________________________________ ____________________________________________ Please print name(s) here ____________________________________________ ____________________________________________ Address(es) ____________________________________________ Area Code and Telephone Number(s): ____________________________________________ Tax Identification or Social Security No(s). None of the Old Bonds held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Bonds held by us for your account. The Connecticut Light and Power Company Offer for all Outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 in Exchange for First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: _______, 1997 The Connecticut Light and Power Company ("CL&P") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated July __ , 1997 (the "Prospectus"), to exchange (the "Exchange Offer") its First and Refunding Mortgage 7 3/4 Bonds, 1997 Series C Due June 1, 2002 for its outstanding First and Refunding Mortgage Bonds, 1997 Series B Due June 1, 2002 (the "Old Bonds"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated as of June 19, 1997. We are requesting that you contact your clients for whom you hold Old Bonds regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Bonds registered in your name or in the name of your nominee, or who hold Old Bonds registered in their names, we are enclosing the following documents: 1. Prospectus dated July __ , 1997; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Bonds are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined in below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of Letter of Transmittal which may be sent to your clients for whose account you hold Old Bonds registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; 6. Return envelopes addressed to Bankers Trust Company, Exchange Agent for the Old Bonds; and 7. A Letter of Transmittal from the President of CL&P. Your prompt action is requested. We urge you to contact your clients as promptly as possible. The Exchange Offer will expire at 5:00 p.m., New York City time, on __________________, unless extended by CL&P (the "Expiration Date"). The Old Bonds tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is not conditioned on any minimum principal amount of Old Bonds being tendered. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal, with any required signature guarantees and any other required documents, should be sent to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Old Bonds wish to tender, but it is impracticable for them to forward their certificates for Old Bonds prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." CL&P will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Bonds held by them as nominee or in a fiduciary capacity. CL&P will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Bonds pursuant to the Exchange Offer, except as set forth in Instruction 5 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to Bankers Trust Company, Exchange Agent for the Old Bonds, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, The Connecticut Light and Power Company NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF CL&P OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures -----END PRIVACY-ENHANCED MESSAGE-----