-----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, Ez5UTqOH6twnnyJ9KLW74ovUwqqWmD6p8x9/KEc3k9cHzVmNEFJzfCyvyWKJV1wO qbMjhqW32amxblXc3Qkqrg== 0000031224-95-000051.txt : 19951119 0000031224-95-000051.hdr.sgml : 19951119 ACCESSION NUMBER: 0000031224-95-000051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN UTILITIES ASSOCIATES CENTRAL INDEX KEY: 0000031224 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041271872 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05366 FILM NUMBER: 95590895 BUSINESS ADDRESS: STREET 1: ONE LIBERTY SQ STREET 2: P O BOX 2333 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6173579590 10-Q 1 EUA 3RD QUARTER 1995 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _________________ to ___________________ Commission File Number 1-5366 EASTERN UTILITIES ASSOCIATES (Exact name of registrant as specified in its charter) Massachusetts 04-1271872 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Liberty Square, Boston, Massachusetts (Address of principal executive offices) 02109 (Zip Code) (617)357-9590 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes...X.......No.......... Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Class Outstanding at October 31, 1995 Common Shares, $5 par value 20,378,862 shares PART I - FINANCIAL INFORMATION Item 1. Financial Statements EASTERN UTILITIES ASSOCIATES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands)
September 30, December 31, ASSETS 1995 1994 Utility Plant and Other Investments: Utility Plant in Service $ 1,025,151 $ 1,020,859 Less: Accumulated Provision for Depreciation and Amortization 328,054 304,034 Net Utility Plant in Service 697,097 716,825 Construction Work in Progress 24,673 8,389 Net Utility Plant 721,770 725,214 Investments in Jointly Owned Companies 69,014 70,675 Non-Utility Plant - Net 85,807 107,803 Total Plant and Other Investments 876,591 903,692 Current Assets: Cash and Temporary Cash Investments 23,667 20,109 Accounts Receivable, Net 90,430 89,348 Notes Receivable 21,759 13,906 Materials and Supplies 14,364 15,168 Other Current Assets 10,715 8,517 Total Current Assets 160,935 147,048 Deferred Debits and Other Non-Current Assets 180,794 183,309 Total Assets $ 1,218,320 $ 1,234,049 LIABILITIES AND CAPITALIZATION Capitalization: Common Shares, $5 Par Value $ 101,860 $ 99,685 Other Paid-In Capital 219,485 212,990 Common Share Expense (3,909) (3,849) Retained Earnings 54,212 56,617 Total Common Equity 371,648 365,443 Non-Redeemable Preferred Stock - Net 6,900 6,900 Redeemable Preferred Stock - Net 26,111 25,390 Long-Term Debt - Net 444,747 455,412 Total Capitalization 849,406 853,145 Current Liabilities: Long-Term Debt Due Within One Year 46,705 41,601 Notes Payable 28,660 31,678 Preferred Stock Sinking Fund 50 50 Accounts Payable 31,212 33,442 Taxes Accrued 7,461 6,465 Interest Accrued 9,956 10,889 Other Current Liabilities 20,522 29,566 Total Current Liabilities 144,566 153,691 Deferred Credits and Other Non-Current Liabilities 88,503 89,313 Accumulated Deferred Taxes 135,845 137,900 Total Liabilities and Capitalization $ 1,218,320 $ 1,234,049 See accompanying notes to consolidated condensed financial statements.
EASTERN UTILITIES ASSOCIATES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In Thousands Except Number of Shares and Per Share Amounts)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Operating Revenues $ 143,950 $ 143,859 $ 428,036 $ 431,325 Operating Expenses: Fuel 24,973 24,078 70,900 70,507 Purchased Power 30,577 33,112 94,032 97,921 Other Operation and Maintenance 44,695 44,876 139,456 133,581 Voluntary Retirement Incentive 0 0 4,505 0 Depreciation and Amortization 11,073 11,802 34,553 35,273 Taxes Other than Income 5,005 5,867 16,043 18,829 Income Taxes - Current 5,556 3,435 10,804 11,815 - Deferred 1,804 2,479 4,921 5,372 Total 123,683 125,649 375,214 373,298 Operating Income 20,267 18,210 52,822 58,027 Other Income - Net 4,481 6,468 12,868 16,248 Loss on Disposal of Cogeneration Operations (18,086) (18,086) Income Tax Impact of Loss on Disposal of Cogeneration Operations 7,588 7,588 Income Before Interest Charges 14,250 24,678 55,192 74,275 Interest Charges: Interest on Long-Term Debt 9,593 9,730 28,911 29,249 Other Interest Expense 1,592 1,393 4,320 5,077 Allowance for Borrowed Funds Used During Construction (Credit) (601) (345) (1,997) (894) Net Interest Charges 10,584 10,778 31,234 33,432 Net Income 3,666 13,900 23,958 40,843 Preferred Dividends of Subsidiaries 582 583 1,743 1,750 Consolidated Net Earnings $ 3,084 $ 13,317 $ 22,215 $ 39,093 Weighted Average Number of Common Shares Outstanding 20,336,703 17,762,952 20,183,205 19,602,771 Consolidated Earnings Per Average Common Share $ 0.15 $ 0.67 $ 1.10 $ 1.99 Dividends Paid $ 0.40 $ 0.385 $ 1.185 $ 1.13 See accompanying notes to consolidated condensed financial statements.
EASTERN UTILITIES ASSOCIATES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In Thousands)
Nine Months Ended September 30, 1995 1994 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 23,958 $ 40,843 Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities: Depreciation and Amortization 42,799 41,136 Deferred Taxes (1,884) 6,083 Non-cash (Gains)/Expenses on Sales of Investments in Energy Savings Projects (2,232) 1,232 Loss on Disposition of Cogeneration Projects 18,086 Investment Tax Credit, Net (909) (885) Allowance for Funds Used During Construction (471) (205) Collections and sales of project notes and leases receivable 16,312 9,236 Other - Net 6,873 1,699 Change in Operating Assets and Liabilities (19,430) (5,011) Net Cash Provided From Operating Activities 83,102 94,128 . CASH FLOW FROM INVESTING ACTIVITIES: Construction Expenditures (63,574) (38,551 Collections on Notes and Lease Receivables of EUA Cogenex 2,392 1,451 Acquisition of Northeast Energy Management, Inc. (8,567) Proceeds from Disposal of Cogeneration Assets 11,501 Increase in Other Investments (330) Net Cash (Used in) Investment Activities (49,681) (45,997 CASH FLOW FROM FINANCING ACTIVITIES: Issuances: Common Stock 4,520 7,096 Long-Term Debt 7,927 Redemptions: Long-Term Debt (5,664) (10,975 Premium on Reacquisition and Financing Expenses (60) (677) EUA Common Share Dividends Paid (23,899) (22,162 Subsidiary Preferred Dividends Paid (1,742) (1,750) Net (Decrease) Increase in Short-Term Debt (3,018) (5,531) Net Cash (Used in) Provided from Financing Activities (29,863) (26,072) Net Increase (Decrease) in Cash and Temp. Cash Investments 3,558 22,059 Cash and Temporary Cash Investments at Beginning of Period 20,109 4,180 Cash and Temporary Cash Investments at End of Period $ 23,667 $ 26,239 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (Net of Capitalized Interest) $ 30,096 $ 30,928 Income Taxes $ 6,596 $ 12,786 Supplemental schedule of non-cash investing activities: Conversion of Investments in Energy Savings Projects to Notes and Leases Receivable $ 14,158 $ 6,578 See accompanying notes to consolidated condensed financial statements.
EASTERN_UTILITIES_ASSOCIATES NOTES_TO_CONSOLIDATED_CONDENSED_FINANCIAL_STATEMENTS The accompanying Notes should be read in conjunction with the Notes to Consolidated Financial Statements incorporated in the Eastern Utilities Associates (EUA or the Company) 1994 Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q for the periods ended March 31, and June 30, 1995. Note A - In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly its financial position as of September 30, 1995 and December 31, 1994, and the results of operations for the three and nine months ended September 30, 1995 and 1994 and cash flows for the nine months ended September 30, 1995 and 1994. Certain reclassifications have been made to prior period financial statements to conform to current period classifications. The reduction in Non-Utility Plant-Net on the September 30, 1995 Consolidated Condensed Balance Sheet relates to EUA Cogenex's decision to discontinue its cogeneration operations effective July 1, 1995. Note B - Results shown above for the respective interim periods are not neces- sarily indicative of results to be expected for the fiscal years due to seasonal factors which are inherent in electric utilities in New England. A greater proportionate amount of revenues is earned in the first and fourth quarters (winter season) of most years because more electricity is sold due to weather conditions, fewer day-light hours, etc. Note C - Commitments and Contingencies: Rate Activity On March 21, 1994, Montaup Electric Company (Montaup), the wholesale electric generating and transmission subsidiary of EUA, filed an application with the Federal Energy Regulatory Commission (FERC) for authorization to reduce its wholesale rates by $10.1 million, or three percent. Montaup supplies electricity at wholesale to EUA's retail electric utilities - Eastern Edison Company (Eastern Edison), Blackstone Valley Electric Company (Blackstone) and Newport Electric Corporation (Newport) - and to two non-affiliated municipal utilities. This application was designed to match more closely Montaup's revenues with its decreasing cost of doing business resulting from, among other things, a reduced rate base, lower interest costs and successful cost control efforts. On May 21, 1994, Montaup began billing the reduced rates and on April 14, 1995 FERC approved a settlement agreement between Montaup and the intervenors in the case calling for an annual reduction of approximately $13.9 million (inclusive of the filed $10.1 million reduction). Note C - Commitments and Contingencies (Cont'd): Montaup refunded to its customers the difference collected between the $10.1 million filed reduction and the $13.9 million settled reduction in April 1995. Montaup had previously reserved for this refund. Legal Proceedings EUA Cogenex, through its EUA WestCoast L.P. (WestCoast), had under development a cogeneration facility of approximately 1.5 MW. As of July 1, 1995, WestCoast's investment in the project was approximately $5.8 million. The cogeneration facility experienced numerous start-up delays and cost overruns. The host of the facility has taken the position that the energy services agreement between WestCoast and itself is terminated due to, among other things, failure to complete the project. WestCoast disagrees with the host's right to terminate, but has decided not to contest the host's purported termination. In June 1993, WestCoast filed a lawsuit against the contractors responsible for the design and construction of the facility, as well as the surety which issued a performance bond guaranteeing construction. Certain defendants in that action have filed cross- complaints against WestCoast and EUA Cogenex, seeking, among other things, approximately $300,000 for payments withheld by WestCoast due to the contractor's deficient performance. A contractor has also filed a cross-complaint against the host. Additionally, the host has filed a cross-complaint against Cogenex and the other parties in the litigation, seeking approximately $7 million in damages arising principally from lost economic advantage. EUA Cogenex intends to vigorously prosecute its claims against the contractors and surety and defend itself against any cross-complaints. EUA Cogenex cannot predict the ultimate resolution of this matter. As a result of EUA Cogenex's decision to discontinue cogeneration operations effective as of July 1, 1995, EUA Cogenex has recorded a reserve for its total investment in this project which is included in the one-time after-tax charge to earnings of approximately $10.5 million. (See Management's Discussion and Analysis of Financial Condition and Results of Operations under Discontinuation of Cogeneration Operations). On December 13, 1994, the United States District Court for the District of Massachusetts (District Court) issued a judgment against Blackstone, finding Blackstone liable to the Commonwealth of Massachusetts (Commonwealth) for the full amount of response costs incurred by the Commonwealth in the cleanup of 5,000 cubic yards of soil mixed with oxide box waste, a by-product of manufactured gas at a site at Mendon Road in Attleboro, Massachusetts. The judgment also found Blackstone liable for interest and litigation expenses calculated to the date of judgment. The total liability at December 31, 1994 was approximately $5.9 million, including approximately $3.6 million in interest which has accumulated since 1985. Due to the uncertainty of the ultimate outcome of this proceeding and anticipated recoverability, Blackstone recorded the $5.9 million December 13, 1994 District Court judgment as a deferred debit and this amount is included with Other Assets at December 31, 1994 and September 30, 1995. Blackstone filed a Notice of Appeal of the court's judgment and filed its brief with the United States Court of Appeals for the First Circuit (First Circuit) on February 24, 1995. On October 6, 1995 the First Circuit vacated the District Court's judgment and ordered the District Court to refer the matter to the EPA to determine whether a chemical in the oxide box waste is a hazardous substance. On January 20, 1995, Blackstone entered into an escrow agreement with the Commonwealth whereby Blackstone deposited $5.9 million with an escrow agent who transferred the funds into an interest bearing money market account. The distribution of the proceeds of the escrow account will be determined upon the final resolution of the judgment. No additional interest expense will accrue on the judgment amount. On January 28, 1994, Blackstone filed a complaint in the United States District Court for the District of Massachusetts, seeking, among other relief, contribution and reimbursement from Stone & Webster Inc., of New York City and several of its affiliated companies (Stone & Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley) for any damages incurred by Blackstone regarding the Mendon Road site. On November 7, 1994, the court denied motions to dismiss the complaint which were filed by Stone & Webster and Valley. In addition, Blackstone has notified certain liability insurers and has filed claims with respect to the Mendon Road site, as well as other sites. Item_2. Management's_Discussion_and_Analysis_of_Financial_Condition_and_ Results of_Operations The following is Management's discussion and analysis of certain significant factors affecting the Company's earnings and financial condition for the interim periods presented in this Form 10-Q. Discontinuation of Cogeneration Operations In September 1995, EUA announced that EUA Cogenex was discontinuing its cogeneration operations effective as of July 1, 1995 because overall, the total cogeneration portfolio had not performed up to expectations. The total net investment of EUA Cogenex's cogeneration portfolio was $29.2 million at July 1, 1995. Cogenex has sold a majority of its operating cogeneration portfolio to Ridgewood Electric Power Trust III. The decision to discontinue the underperforming cogeneration operations and the subsequent sale of a majority of the operating cogeneration portfolio resulted in a one-time, after-tax charge of approximately $10.5 million, or 52 cents per common share, in the quarter ended September 30, 1995. Discontinuance of the cogeneration business will allow Cogenex to devote maximum resources to the business segment that has been the most profitable and holds the most growth potential -- providing integrated energy services to commercial, institutional and industrial customers. See EUA WestCoast L.P., below, for discussion of litigation concerning one of EUA Cogenex's cogeneration projects. Voluntary Retirement Incentive Offer On March 15, 1995, EUA announced a corporate reorganization which, among other things, consolidated management of Eastern Edison, Blackstone and Newport. As part of the reorganization, a voluntary retirement incentive (VRI) was offered to sixty-six EUA System employees. Forty-nine of those eligible for the program accepted the incentive and retired effective June 1, 1995. The cost of this incentive program amounted to a one-time $4.5 million pre-tax ($2.7 million after-tax) charge to second quarter 1995 earnings. The estimated payback period is approximately 18 months. Overview Consolidated Net Earnings for the quarter ended September 30, 1995 were $3.1 million compared to $13.3 million in the third quarter of 1994. The third quarter 1995 earnings include a one-time after-tax charge of $10.5 million, related to the loss on discontinuance of cogeneration operations (discussed above). Net Earnings contributions by Business Unit for the third quarter of 1995 and 1994 were as follows (000's): Three Months Ended September 30, Increase 1995 1994 (Decrease) Core Electric Business $12,593 $10,739 $ 1,854 Energy Related Business (9,522) 2,970 (12,492) Corporate 13 (392) 405 Consolidated $ 3,084 $13,317 $(10,233) ======= ======= ========= Net Earnings of the Core Electric Business for the third quarter of 1995 increased by $1.9 million due primarily to a 1.9% increase in kWh sales and a decrease in operating expenses including savings from the voluntary retirement incentive offer and lower property tax expense. Net Earnings of the Energy Related Business Unit decreased by approximately $12.5 million in the third quarter of 1995 as compared to the same period of a year ago due primarily to the one-time, after-tax charge of $10.5 million related to Cogenex's discontinuance of its cogeneration operations and increased losses of EUA Energy Investment Corporation (EUA Energy) aggregating $300,000 related to increased operating and development expenses of new business ventures. Also, third quarter 1994 results included $1.3 million of investment tax credits recorded by EUA Ocean State. The Corporate Business Unit Net Earnings for the third quarter of 1995 compared to the same period in 1994 increased by approximately $0.4 million due primarily to decreased amortization and legal expenses. Consolidated Net Earnings for the nine months ended September 30, 1995 were $22.2 million compared to $39.1 million for the same period of 1994. Net Earnings contributions by Business Unit for the first nine months of 1995 and 1994 were as follows (000's): Nine Months Ended September 30, Increase 1995 1994 (Decrease) Core Electric Business $29,686 $31,381 $ (1,695) Energy Related Business (7,678) 8,695 (16,373) Corporate 207 (983) 1,190 Consolidated $22,215 $39,093 $(16,878) ======= ======= ========= Net Earnings of the Core Electric Business for the nine months ended September 30, 1995 decreased by $1.7 million. The VRI offer and Montaup's 1994 rate reduction, effective May 21, 1994, were the principal reasons for the decrease in year-to-date earnings contributions of the Core Electric Business. Offsetting these impacts somewhat were reductions in litigation expenses, property taxes and other operating expenses including savings resulting from the VRI offer. Net Earnings of the Energy Related Business Unit decreased by approximately $16.4 million in the nine months ended September 30, 1995 as compared to the same period of a year ago. The principal reasons for this decrease were the one-time after-tax charge of $10.5 million related to Cogenex's discontinuance of its cogeneration operations, increased costs related to new product development of EUA Cogenex's EUA Day division and increased losses of EUA Energy aggregating $2.4 million related to additional operating and development expenses of new business ventures. Also, 1994 results included $2.6 million of investment tax credits recorded by EUA Ocean State. The Corporate Business Unit Net Earnings for the first nine months of 1995 compared to the same period in 1994 increased by approximately $1.2 million due primarily to decreased amortization, legal and interest expenses. EUA WestCoast L.P. EUA Cogenex, through its EUA WestCoast L.P. (WestCoast), has had under development a cogeneration facility of approximately 1.5 MW. As of July 1, 1995, WestCoast's investment in the project was approximately $5.8 million. The cogeneration facility has experienced numerous start-up delays and cost overruns. The host of the facility has taken the position that the energy services agreement between WestCoast and itself is terminated due to, among other things, failure to complete the project. WestCoast disagrees with the host's right to terminate, but has decided not to contest the host's purported termination. In June 1993, WestCoast filed a lawsuit against the contractors responsible for the design and construction of the facility, as well as the surety which issued a performance bond guaranteeing construction. Certain defendants in that action have filed cross-complaints against WestCoast and EUA Cogenex, seeking, among other things, approximately $300,000 for payments withheld by WestCoast due to the contractor's deficient performance. A contractor has also filed a cross-complaint against the host. Additionally, the host has also stated that it intends to file a cross-complaint against Cogenex and the other parties in the litigation, seeking approximately $7 million in damages arising principally from lost economic advantage. EUA Cogenex intends to vigorously prosecute its claims against the contractors and surety and defend itself against any cross-complaints. EUA Cogenex cannot predict the ultimate resolution of this matter. As a result of EUA Cogenex's decision to discontinue cogeneration operations as of July 1, 1995, EUA Cogenex has recorded a reserve for its total investment in this project which is included in the one-time after-tax charge to earnings recorded in the third quarter of 1995 (See Discontinuation of Cogeneration Operations above). Operating_Revenues Operating Revenues for the third quarter of 1995 were relatively unchanged when compared to the same period of 1994. Revenues by Business Unit operations were as follows (000's): Three Months Ended September 30, Increase 1995 1994 (Decrease) Core Electric Business $124,568 $125,053 $ (485) Energy Related Business 19,382 18,806 576 Corporate 0 0 0 Consolidated $143,950 $143,859 $ 91 ======== ======== ======= Core Electric Business revenues include the negative impact of decreased recoveries of fuel, purchased power and conservation and load management (C&LM) expenses aggregating $1.6 million partially offset by the positive impact of a 1.9% kWh sales increase and increases in other operating revenues. (see Operations Expense below). EUA Cogenex revenues, which account for all of the Energy Related Business Unit revenues, increased due to the impact of Cogenex's acquisitions of Highland Energy and Citizens Conservation Corporation in 1995. (See offsetting impacts in operating expenses below). Operating Revenues for the first nine months of 1995 decreased by $3.3 million or almost 1.0% when compared to the same period of 1994. Operating Revenues by Business Unit for the first nine months of 1995 and 1994 were as follows (000's): Nine Months Ended September 30, Increase 1995 1994 (Decrease) Core Electric Business $366,523 $376,756 $(10,233) Energy Related Business 61,513 54,569 6,944 Corporate 0 0 0 Consolidated $428,036 $431,325 (3,289) ======== ======== ======= Core Electric Business revenues decreased by $10.2 million due primarily to lower purchased power, fuel and C&LM expense recoveries aggregating $6.2 million and Montaup's 1994 wholesale rate reduction. EUA Cogenex revenues increased by $6.9 million due primarily to increases in Nova division revenues and the impact of Cogenex's acquisitions of Highland Energy Group and Citizens Conservation Corporation in 1995. (See offsetting impacts in operating expenses below). KWH Sales Primary kWh sales of electricity by EUA's Core Electric Business Unit increased by 1.9% in the third quarter of 1995 compared to the same period last year and coupled with the slight increase in second quarter sales essentially offset the dismal first quarter's sales results. Year-to-date September 30, 1995 sales of electricity were relatively flat compared to the same period of 1994 as a result of the unusually mild weather in the first quarter of this year. A 1.2% improvement in year-to-date industrial sales, however, is an indication of slowly improving economic conditions in EUA's service territory. Total energy sales for the three and nine months ended September 30, 1995 decreased 7.4% and 16.2%, respectively, due mainly to decreased energy sales to the New England Power Pool and decreased short-term unit contract energy sales. Power purchase contracts of Montaup totaling 41 MW which expired in October 1994 resulted in lower kilowatthours available to Montaup for interchange and short- term energy sales. These interchange and short-term energy sales essentially recover fuel costs only and have little or no earnings impact. Operations_Expense Fuel expense of the Core Electric Business increased by $900,000 or 3.7%, and $400,000 or almost 1.0% for the third quarter and year-to-date periods of 1995, respectively, as compared to the same periods of 1994. These changes were caused by increases of 12.5% and 17.2% in the average cost of fuel, offset by the decreases in total energy generated and purchased of 7.4% and 16.2% for the quarter and year-to-date periods, respectively, as discussed above. Also, for the year-to-date period, purchased power-energy, previously recorded as purchased power expense by Newport, was recorded as fuel expense by Montaup as a result of Newport becoming an all-requirements customer of Montaup effective May 21, 1994. This resulted in a classification adjustment which increased fuel expense and decreased purchased power expense by approximately $1.8 million in the year-to-date period of 1995. Purchased Power demand expense for the third quarter of 1995 decreased $2.5 million or 7.7% and decreased $3.9 million or 4.0% for the nine months ended September 30, 1995. These changes are due primarily to the net impact of decreases of $1.7 million and $6.0 million for the respective periods related to 41 MW of purchase power contracts which expired in October 1994 and the classification adjustments discussed above. Purchases from other power suppliers decreased $0.8 million and $1.3 million for the respective periods. The year-to-date decrease was partially offset by a $5.2 million increase in billings from the Ocean State Power projects and Yankee nuclear units. Other Operation and Maintenance expenses for the third quarter and nine months ended September 30, 1995 increased approximately $0.2 million and $5.9 million respectively, from the same periods in 1994. EUA Cogenex expenses increased $1.4 million and $9.0 million for the respective periods and are directly related to increased revenues (see above) and increased personnel and benefits costs. Operating and development expenses of new business ventures of EUA Energy were relatively flat in the third quarter and increased $2.6 million in the year-to-date period when compared to the same periods of 1994. Offsetting these third quarter increases somewhat were decreases in C&LM and FAS106 expenses aggregating $1.7 million. For the year-to-date period C&LM and FAS106 expenses decreased $2.7 million, in aggregate, and direct controllable expenses decreased by $3.4 million which includes on-going savings resulting from the VRI offer. Taxes Other Than Income Taxes other than income decreased $0.9 million and $2.7 million in the three month and year-to-date periods ended September 30, 1995, respectively, compared to the same periods of 1994. The reversal of previously over-accrued property taxes in the second and third quarters of 1995 and lower Rhode Island gross receipts taxes, related to lower revenues and a decrease in the gross receipts tax rate, account for most of these changes. Other_Income_(Deductions) -_Net Other Income and (Deductions)-Net decreased $2.0 million for the third quarter and $3.4 million for the year-to-date period as compared to the same periods of 1994. These decreases are due primarily to the absence of $1.3 million and $2.6 million in the respective periods of investment tax credits recorded in 1994 by EUA Ocean State. Interest_Charges Net interest charges for the third quarter and nine months ended September 30, 1995 decreased approximately $200,000 and $2.2 million, respectively, as compared to the same periods of 1994. These decreases were due primarily to increases in capitalized interest of EUA Cogenex of $200,000 and $1.0 million for the respective periods related to increased construction activity in 1995. For the year-to-date period other interest expense of Eastern Edison and Montaup decreased due to interest expense provisions recorded in June 1994 aggregating approximately $1.0 million related to Internal Revenue Service audits. Electric Utility Industry Restructuring On May 12, 1995, Blackstone and Newport along with other members of the Rhode Island Electric Industry Restructuring Collaborative (the Rhode Island Collaborative), submitted to the Rhode Island Public Utilities Commission a Report and Set of Interdependent Principles addressing industry restructuring. On July 17, 1995, Eastern Edison Company, along with other members of the Electric Industry Restructuring Roundtable (the Massachusetts Roundtable) in Massachusetts filed a similar set of principles with the Massachusetts Department of Public Utilities. The Rhode Island Collaborative and the Massachusetts Roundtable consist of a number of different utilities, industrial users, environmental groups and consumer advocates. These filings are intended to be statements of the consensus position by the signatories of the interdependent principles that should underlie any electric industry restructuring proposal and include but are not limited to principles addressing stranded cost recovery, unbundling of services and demand side management programs. Each filing was submitted on the condition they be approved in full by the respective Commissions. The Commissions of each state are assessing the principles and are expected to make recommendations to implement a competitive environment in the industry. On August 16, 1995, the RIPUC issued an order regarding the principles submitted by the Rhode Island Collaborative (the "RIPUC Order"). The RIPUC Order accepts all but one of the principles with minor modifications to certain language in others and adds a new principle which supports negotiation (as opposed to litigation) to resolve conflicts as restructuring moves forward. The one principle that was not accepted provided for subsidization of renewable energy sources. Although not disagreeing with the Collaborative on the importance of resource and fuel diversity, the RIPUC invites the Collaborative to address how to incorporate renewables into the competitive marketplace in other ways. The Rhode Island Order also directs the Collaborative to proceed with negotiations on the issues presented in the principles and to submit a progress report to the RIPUC by February 1, 1996. Also on August 16, 1995, the MDPU issued an order (the "MDPU Order") in Docket No. 95-30, the MDPU's investigation into electric industry restructuring. The MDPU Order develops principles that describe the key characteristics of a restructured electric industry and provides for, among other things, customer choice of service providers, services, pricing options and payment terms, an opportunity for customers to share in the benefits of increased competition, full and fair competition in the generation markets and incentive regulation where competition cannot exist. The MDPU Order sets out principles for the transition from a regulated to a competitive industry structure and identifies conditions for the transition process which will require investor-owned utilities to unbundle rates, provide consumers with accurate price signals and allow customers' choice of generation services. The MDPU Order also provides for the principle of recovery of net, non-mitigable stranded costs by investor-owned utilities resulting from the industry restructuring. Each investor-owned utility will be required to file restructuring proposals for moving from the current regulated industry structure to a competitive generation market. The schedule for the filing requirement is staggered, with an initial group of utilities required to file within six months of the date of the Order and a second group required to file within the three months of the MDPU's orders on the first group of submissions. Eastern Edison Company is in the second group and is currently preparing a plan for submission. Liquidity_and_Sources_of_Capital The EUA system's need for permanent capital is primarily related to investments in facilities required to meet the needs of its existing and future customers. Traditionally, cash construction requirements not met with internally generated funds are financed through short-term borrowings which are ultimately funded with permanent capital. At September 30, 1995, EUA System companies maintained short-term lines of credit with various banks aggregating approximately $150 million. Outstanding short-term debt at September 30, 1995 and December 31, 1994 by Business Unit was as follows (000's): September 30, 1995 December 31, 1994 Core Electric Business $ 0 $ 0 Energy Related Business 12,384 23,476 Corporate 16,298 8,202 Consolidated $28,682 $31,678 ======= ======= For the nine months ended September 30, 1995 internally generated funds available after the payment of dividends amounted to approximately $71.6 million while the EUA System's cash construction requirements amounted to approximately $63.6 million for the same period. Various laws, regulations and contract provisions limit the use of EUA's internally generated funds such that the funds generated by one subsidiary are not generally available to fund the operations of another subsidiary. PART II - OTHER INFORMATION Item 1. Legal Proceedings See Notes to Consolidated Condensed Financial Statements, Note C - Commitments and Contingencies under Legal Proceedings for a discussion of legal proceedings involving Blackstone and EUA Cogenex. Item 5. Other Information Item 6. Exhibits_and_Reports_on_Form_8-K (a) Exhibits - None (b) Reports on Form 8-K - On October 4, 1995, the Registrant filed a current report on Form 8-K with respect to Item 5. (Other Events). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Eastern_Utilities_Associates______ (Registrant) Date: November_13,_1995 /s/_Richard_M._Burns_______________ Richard M. Burns, Comptroller (on behalf of the Registrant and as Chief Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
OPUR1 1000 9-MOS DEC-31-1995 SEP-30-1995 PER-BOOK 721770 154821 160935 122584 58210 1218320 101860 215576 54212 371648 25977 7034 444747 0 28660 0 46705 50 0 0 293499 1218320 428036 15725 359489 375214 52822 2370 55192 31234 23958 1743 22215 23899 28911 83102 1.10 0
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