-----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, PfKBFoc/bk2pBgTOYXkp3B7PQBgZz4gvEdEPu3VBKuCSGVxWfBgRiwvBS78LuZ+U GEyipT5GgZSVVZccWCBtCA== 0000031224-99-000027.txt : 19990430 0000031224-99-000027.hdr.sgml : 19990430 ACCESSION NUMBER: 0000031224-99-000027 CONFORMED SUBMISSION TYPE: U5S PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990429 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: U5S SEC ACT: SEC FILE NUMBER: 001-05366 FILM NUMBER: 99604481 BUSINESS ADDRESS: STREET 1: ONE LIBERTY SQ STREET 2: P O BOX 2333 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6173579590 U5S 1 ANNUAL REPORT ON FORM U5S - 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM U5S ANNUAL REPORT For the Year ended December 31, 1998 Filed pursuant to the Public Utility Holding Company Act of 1935 by Eastern Utilities Associates, P.O. Box 2333, Boston, Massachusetts 02107 04-1271872 (I.R.S. Employer Identification No.) FORM U5S-ANNUAL REPORT For the Calendar Year 1998 ITEMS ITEM 1. SYSTEM COMPANIES AND INVESTMENTS THEREIN AS OF DECEMBER 31, 1998
% of Name of Company Number of Common Voting Issuer Owner's (add abbreviation used herein) Shares Owned Power Book Value Book Value Eastern Utilities Associates Publicly Owned (1) $373,718,061 $ (EUA or the Association) EUA Service Corporation 100 100% (2) 2,557,189 2,557,189 (EUA Service) Blackstone Valley Electric 184,062 100% (2) 41,658,390 41,658,390 Company (Blackstone) Newport Electric Corporation 1,000,000 100% (2) 23,320,795 23,320,795 (Newport) Eastern Edison Company 2,891,357 100% (2) 225,998,388 225,998,388 (Eastern Edison) Montaup Electric Company 586,000 100% (3) 147,017,241 147,017,241 (Montaup) Preferred Stock (3) 1,500,000 1,500,000 Debenture Bonds (Unsecured) (3) 90,575,000 90,575,000 Pollution Control Bonds (Unsecured) - Net (3) 27,406,583 27,406,583 EUA Cogenex Corporation 1,000 100% (2) 48,361,220 48,361,220 (EUA Cogenex) EUA Citizens Conservation Services, Inc. 10,000 100% (4) 445,607 445,607 Northeast Energy Management, Inc. 10,000 100% (4) 9,134,328 9,134,328 (NEM) EUA Cogenex West 10,000 100% (4) 4,657,067 4,657,067 (formerly EUA Highland Corporation) APS Cogenex L.L.C. 50% (5) 516,949 516,949 EUA Cogenex-Canada Inc. 100 100% (4) $706,905 $706,905 (Cogenex Canada) EUA Cogenex-Canada Energy Services Inc. 100 100% (6) EUA WestCoast L.P. 50% (7) 1,018,395 1,018,395 EUA Energy Capital and Services I 50% (8) 11,807,219 11,807,219 EUA Energy Capital and Services II 50% (8) 13,339,067 13,339,067 EUA FRC II Energy Associates 50% (8) 30,592 30,592 Micro Utility Partners of America 50% (7) 23,720 23,720 EUA Energy Services, Inc. 100 100% (2) (34,086) (34,086) EUA Energy Investment Corporation 100 100% (2) (24,203,924) (24,203,924) (EUA Energy) Eastern Unicord Corporation 1,000 100% (9) (1,840,592) (1,840,592) (Unicord) EUA TransCapacity, Inc. 1,000 100% (9) (8,864,744) (8,864,744) TransCapacity, L.P. 80% (7) (15,802,547) (15,802,547) EUA BIOTEN, Inc. 100 100% (9) (1,512,699) (1,512,699) BIOTEN General Partn. (10) 80% (8) 3,691,851 3,691,851 BIOTEN GPM (11) 2 100% (13) BIOTEN Operations, Inc. (12) 1,000 100% (13) 1,020 1,020 EUA Compression Services, Inc. 10 100% (9) (255,727) (255,727) Renova, L.L.C. (14) 100% (5) (3,311,670) (3,311,670) EUA Telecommunications Corporation 10 100% (2) (131,037) (131,037) EUA Ocean State Corporation 1 100% (2) 16,545,748 16,545,748 (EUA Ocean State) Ocean State Power I 29.9% 29.9% (8) 27,539,091 27,539,091 Ocean State Power II 29.9% 29.9% (8) 21,295,260 21,295,260 *Eastern Edison Electric Company 100% (2) 1,000 1,000 _________ ( 1) Cumulative Voting. ( 2) Wholly-owned by EUA. ( 3) Wholly-owned by Eastern Edison. ( 4) Wholly-owned by EUA Cogenex. ( 5) Limited Liability Corporation. ( 6) Wholly-owned by EUA Cogenex-Canada Inc. ( 7) Limited Partnership. ( 8) General Partnership. ( 9) Wholly-owned by EUA Energy. (10) Effective June 1, 1998, EUA BIOTEN, Inc. increased its profits and voting interests in BIOTEN Partnership to 80%. The Partnership was dissolved on February 25, 1999. (11) Organized under the Laws of Mauritius as an offshore company on June 29, 1998 to invest in and manage projects in connection with the development and commercialization of biomass-fired combustion turbine power generation facilities and related products and services. (12) Organized under the Laws of Tennessee on May 22, 1995 to engage in the business of acquiring, owning, holding, developing and commercializing proprietary technology relating to biomass- fired combustion turbine power generation. (13) Wholly-owned by BIOTEN Partnership. EUA BIOTEN is working toward restructuring, pursuant to which all ownership interest in BIOTEN GPM and BIOTEN Operations would be transferred to the restructured entity. (14) Effective May 1, 1998, Renova operations were transferred from EUA Cogenex to EUA Energy Investment. *Inactive.
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS Brief Description Name of Company of Transaction Consideration Exemptions (1) (2) (3) (4) Blackstone Sale of Land $10,000 Rule 44 (b) School Street No. Smithfield, RI Blackstone Sale of Land 3,500 Rule 44 (b) Helmer Lane Woonsocket, RI Eastern Edison Sale of Mulberry Street 600,000 Rule 44 (b) Building/Land Brockton, MA Eastern Edison Sale of Land 135,000 Rule 44 (b) King Street Cohasset, MA Montaup Canal 2 75,878,800 Section 32 (c) Riverside Ave Somerset, MA Newport Jepson/Eldred Diesel Stations 1,566,500 Rule 44 (b) Portsmouth/Jamestown, RI ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES Date and Type of Form of Name of Issuer Security Transaction Consideration Exemption (1) (2) (3) (4) (5) None. The following refers to short-term borrowing by EUA system companies during 1998: Highest Effective Balance at Balance Date of Average Year-end During Year Highest Interest Rate (000's) (000's) Balance For Year $63,547 $132,920 7/5/98 5.8% EUA Cogenex is required under certain contracts with various government entities and utility companies to maintain either a letter of credit or performance bond to collateralize performance under the contract. These contingent liabilities will only be drawn by the customer if EUA Cogenex fails to perform under the construction contract. For the letters of credit, the highest amount outstanding during 1998 and the year end balance was approximately $3.5 million and $3.4 million, respectively. For the performance bonds, the highest amount outstanding during 1998 and the year end balance was $10.8 million. ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES
Name of Company Acquiring, Name of Issuer Redeeming Number of Shares or and or Retiring Principal Amount Title of Issue Securities Acquired, Redeemed, Consideration Authorization (1) (2) or Retired (3) (4) (5) Blackstone: Blackstone First Mortgage Bonds: 9 1/2% due 2004 $1,500,000 $1,500,000 (a) Eastern Edison: Eastern Edison First Mortgage and Collateral Trust Bonds: 5 7/8% due 1998 20,000,000 20,000,000 (a) 5 3/4% due 1998 40,000,000 40,000,000 (a) Newport: Newport First Mortgage Bonds: 8.95% due 2001 650,000 650,000 (a) Small Business Administration Loan: 6.5% due 2005 95,924 95,924 (a) EUA Cogenex: EUA Cogenex Unsecured Notes: 9.6% due 2001 3,200,000 3,200,000 (a) 10.56% due 2005 3,500,000 3,500,000 (a) EUA Service: EUA Service Secured Notes: 10.20% due 2008 1,700,000 1,700,000 (a) EUA Ocean State: EUA Ocean State Unsecured Notes: 9.59% due 2011 2,476,660 2,476,660 (a) (a) Rule 42
ITEM 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES
% of Number of Shares Voting or Principal Book Name of Owner Name of Issuer Security Owned Power Amount Owned Value (1) (2) (3) (4) (5) (6) Eastern Edison Massachusetts Capital Stock less than 1,040 shares $ 10,400 Business one Development Corp.* Montaup Yankee Atomic Capital Stock 4.5 6,903 shares 874,808 Electric Co. ** " " Conn. Yankee Capital Stock 4.5 15,750 shares 4,705,317 Atomic Power Co.** " " Vermont Yankee Capital Stock 2.5 9,801 shares 1,365,653 Nuclear Power Corp. ** " " Maine Yankee Capital Stock 4.0 20,000 shares 3,340,613 Atomic Power Co. ** " " NE Hydro Trans. Capital Stock 3.3 111,190 shares 1,647,803 Electric Co. *** " " NE Hydro Capital Stock 3.3 540 shares 946,901 Trans. Corp. *** ___________ * Development company. ** Regional nuclear generating company. *** Owner of Transmission Facilities.
ITEM 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1998. Names of System Companies with which Connected
Blackstone Eastern EUA Valley Newport Eastern Montaup Utilities Service Electric Electric Edison Electric Associates Corporation Company Corporation Company Company Russell A. Boss One Albion Road TR Lincoln, RI 02865 Richard Bower 37 Linden Terrace Ottawa, Ontario, Canada K1S1Z1 J. Thomas Brett 275 Slater St.,Ste 1700 Ottawa, Ontario, Canada K1P 5H9 John D. Carney P.O. Box 543 EVP D,EVP D,P D,P D,P D,EVP W. Bridgewater, MA 02379 Paul J. Choquette, Jr. 7 Jackson Walkway TR Providence, RI 02940 Peter S. Damon 41 Long Wharf Mall TR Newport, RI 02840 Janice P. DeBarros Boott Mills South 100 Foot of John Street Lowell, MA 01852 Peter B. Freeman 100 Alumni Drive TR Providence, RI 02906 Barbara A. Hassan P.O. Box 543 D,VP VP VP VP W. Bridgewater, MA 02379 Clifford J. Hebert, Jr. One Liberty Square T,S D,VP,T,S,C D,T,S D,T,S D,T,C T,C Boston, MA 02109 Michael J. Hirsh P.O. Box 543 VP VP VP VP W. Bridgewater, MA 02379 Darcy L. Immerman 100 Foot of John Street Lowell, MA 01852 Kevin A. Kirby P.O Box 543 D,VP VP VP VP D,VP W. Bridgewater, MA 02379 Larry A. Liebenow 1082 Davol Street, 5th Fl. TR Fall River, MA 02720
ITEM 6. OFFICERS AND DIRECTORS - Continued Names of System Companies with which Connected Part I. As of December 31, 1998.
Blackstone Eastern EUA Valley Newport Eastern Montaup Utilities Service Electric Electric Edison Electric Associates Corporation Company Corporation Company Company Edward T. Liston Boott Mills South D, VP 100 Foot of John Street Lowell, MA 01852 Marc F. Mahoney P.O. Box 543 VP VP VP VP W. Bridgewater, MA 02379 Jacek Makowski One Center Plaza, Ste 360 TR Boston, MA 02108 Wesley W. Marple, Jr. 413 Hayden Hall TR Northeastern University Boston, MA 02115 Stephen Morgan Boott Mills South 100 Foot of John Street Lowell, MA 01852 Donald G. Pardus One Liberty Square TR,CH,CEO D,CH D,CH D,CH D,CH D,CH Boston, MA 02109 Robert G. Powderly P.O. Box 543 EVP D,EVP D,EVP D,EVP D,EVP D,EVP W. Bridgewater, MA 02379 Donald T. Sena One Liberty Square AS AT,AC,AS AT,AS AT,AS AT,AS AT,AC Boston, MA 02109 Dennis St. Pierre P.O. Box 543 VP W. Bridgewater, MA 02379 William A. Sifflard 20 Thurber Blvd Smithfield, RI 02917 Margaret M. Stapleton P.O. Box 111 TR Boston, MA 02117 John R. Stevens One Liberty Square TR,COO,P D,P D,VCH D,VCH D,VCH D,P Boston, MA 02109 W. Nicholas Thorndike 10 Walnut Place TR Brookline, MA 02445 Mark S. White Boott Mills South 100 Foot of John Street Lowell, MA 01852
ITEM 6. OFFICERS AND DIRECTORS - Continued Part I. As of December 31, 1998. Names of System Companies with which Connected
EUA EUA Energy EUA EUA EUA Cogenex Investment Ocean State Energy Telecommunications Corporation Corporation Corporation Services, Inc. Corporation Russell A. Boss One Albion Road Lincoln, RI 02865 Richard Bower 37 Linden Terrace Ottawa, Ontario, Canada K1S1Z1 J. Thomas Brett 275 Slater St., Ste 1700 Ottawa, Ontario, Canada K1P 5H9 John D. Carney P.O. Box 543 D,EVP D,EVP EVP D W. Bridgewater, MA 02379 Paul J. Choquette, Jr. 7 Jackson Walkway Providence, RI 02940 Peter S. Damon 41 Long Wharf Mall Newport, RI 02840 Janice P. DeBarros Boott Mills South 100 Foot of John Street Lowell, MA 01852 Peter B. Freeman 100 Alumni Drive Providence, RI 02960 Barbara A. Hassan P.O. Box 543 W. Bridgewater, MA 02379 Clifford J. Hebert, Jr. One Liberty Square D,T,C D,T,C T,S T,C T,C Boston, MA 02109 Michael J. Hirsh P.O. Box 543 VP W. Bridgewater, MA 02379 Darcy L. Immerman Boott Mills South VP 100 Foot of John Street Lowell, MA 01852 Kevin A. Kirby P.O Box 543 D,VP D,VP W. Bridgewater, MA 02379 Larry A. Liebenow 1082 Davol Street, 5th Fl. Fall River, MA 02720
ITEM 6. OFFICERS AND DIRECTORS - Continued Part I. As of December 31, 1998. Names of System Companies with which Connected
EUA EUA Energy EUA EUA EUA Cogenex Investment Ocean State Energy Telecommunications Corporation Corporation Corporation Services, Inc. Corporation Edward T. Liston Boott Mills South D,P 100 Foot of John Street Lowell, MA 01852 Marc F. Mahoney P.O. Box 543 W. Bridgewater, MA 02379 Jacek Makowski One Center Plaza, Ste 270 Boston, MA 02108 Wesley W. Marple, Jr. 413 Hayden Hall Northeastern University Boston, MA 02115 Stephen Morgan Boott Mills South 100 Foot of John Street Lowell, MA 01852 Donald G. Pardus One Liberty Square D,CH D,CH D,CH D,CH D,CH Boston, MA 02109 Robert G. Powderly P.O. Box 543 D,EVP D,EVP D,EVP D D W. Bridgewater, MA 02379 Donald T. Sena One Liberty Square AT,AC AT,AC AT,AS Boston, MA 02109 Dennis St. Pierre P.O. Box 543 W. Bridgewater, MA 02379 William A. Sifflard 20 Thurber Blvd VP Smithfield, RI 02917 Margaret M. Stapleton P.O. Box 111 Boston, MA 02117 John R. Stevens One Liberty Square D,VCH D,P D,P D,P D,P Boston, MA 02109 W. Nicholas Thorndike 150 Dudley Street Brookline, MA 02146 Mark S. White Boott Mills South EVP,ACM,AC 100 Foot of John Street Lowell, MA 01852
ITEM 6. OFFICERS AND DIRECTORS - Continued (1 of 2) Part I. As of December 31, 1998. Names of System Companies with which Connected
EUA EUA Northeast Cogenex- TransCapacity, Energy Canada Inc. Inc. Management, Inc. Russell A. Boss One Albion Road Lincoln, RI 02865 Richard Bower 37 Linden Terrace D Ottawa, Ontario, Canada K1S1Z1 J. Thomas Brett 275 Slater St. Ste 1700 D Ottawa, Ontario, Canada K1P5H9 John D. Carney P.O. Box 543 EVP W. Bridgewater, MA 02379 Paul J. Choquette, Jr. 7 Jackson Walkway Providence, RI 02940 Peter S. Damon 41 Long Wharf Mall Newport, RI 02840 Janice P. DeBarros Boott Mills South 100 Foot of John Street Lowell, MA 01852 Peter B. Freeman 100 Alumni Drive Providence, RI 02906 Barbara A. Hassan P.O. Box 543 W. Bridgewater, MA 02379 Clifford J. Hebert, Jr. One Liberty Square T,S D,T,C T,C Boston, MA 02109 Michael J. Hirsh P.O. Box 543 W. Bridgewater, MA 02379 Darcy L. Immerman Boott Mills South VP 100 Foot of John Street Lowell, MA 01852 Kevin A. Kirby P.O Box 543 W. Bridgewater, MA 02379 Larry A. Liebenow 1082 Davol Street, 5th Fl. Fall River, MA 02720
ITEM 6. OFFICERS AND DIRECTORS - Continued (2 of 2) Part I. As of December 31, 1998. Names of System Companies with which Connected
EUA Citizens EUA EUA EUA Conservation Cogenex BIOTEN, Compression Services Corp. West Corp. Inc. Services, Inc. Russell A. Boss One Albion Road Lincoln, RI 02865 Richard Bower 37 Linden Terrace Ottawa, Ontario, Canada K1S1Z1 J. Thomas Brett 275 Slater St. Ste 1700 Ottawa, Ontario, Canada K1P5H9 John D. Carney P.O. Box 543 D,EVP D,EVP W. Bridgewater, MA 02379 Paul J. Choquette, Jr. 7 Jackson Walkway Providence, RI 02940 Peter S. Damon 41 Long Wharf Mall Newport, RI 02840 Janice P. DeBarros Boott Mills South VP 100 Foot of John Street Lowell, MA 01852 Peter B. Freeman 100 Alumni Drive Providence, RI 02906 Barbara A. Hassan P.O. Box 543 W. Bridgewater, MA 02379 Clifford J. Hebert, Jr. One Liberty Square T,C T,C D,T,C D,T,C Boston, MA 02109 Michael J. Hirsh P.O. Box 543 W. Bridgewater, MA 02379 Darcy L. Immerman Boott Mills South VP 100 Foot of John Street Lowell, MA 01852 Kevin A. Kirby P.O Box 543 W. Bridgewater, MA 02379 Larry A. Liebenow 1082 Davol Street, 5th Fl. Fall River, MA 02720
ITEM 6. OFFICERS AND DIRECTORS - Continued Part I. As of December 31, 1998. Names of System Companies with which Connected
EUA EUA Northeast EUA Citizens Cogenex- TransCapacity, Energy Conservation Canada Inc. Inc. Management,Inc. Services Corp. Edward T. Liston Boott Mills South D,P D,P D,EVP 100 Foot of John Street Lowell, MA 01852 Marc F. Mahoney P.O. Box 543 W. Bridgewater, MA 02379 Jacek Makowski One Center Plaza, Ste 270 Boston, MA 02108 Wesley W. Marple, Jr. 413 Hayden Hall Northeastern University Boston, MA 02115 Stephen Morgan Boott Mills South P 100 Foot of John Street Lowell, MA 01852 Donald G. Pardus One Liberty Square CH D,CH D,CH D Boston, MA 02109 Robert G. Powderly P.O. Box 543 D,EVP W. Bridgewater, MA 02379 Donald T. Sena One Liberty Square AT,AC AT,AC Boston, MA 02109 Dennis St. Pierre P.O. Box 543 W. Bridgewater, MA 02379 William A. Sifflard 20 Thurber Blvd Smithfield, RI 02917 Margaret M. Stapleton P.O. Box 111 Boston, MA 02117 John R. Stevens One Liberty Square VCH D,P D,VCH D Boston, MA 02109 W. Nicholas Thorndike 150 Dudley Street Brookline, MA 02146 Mark S. White Boott Mills South EVP, EVP EVP, 100 Foot of John Street AT,ACM ACM,AC Lowell, MA 01852
ITEM 6. OFFICERS AND DIRECTORS - Continued (2of2) Part I. As of December 31, 1998. Names of System Companies with which Connected
EUA EUA EUA Cogenex BIOTEN, Compression West Corp. Inc. Services, Inc. Edward T. Liston Boott Mills South D,P 100 Foot of John Street Lowell, MA 01852 Marc F. Mahoney P.O. Box 543 W. Bridgewater, MA 02379 Jacek Makowski One Center Plaza, Ste 270 Boston, MA 02108 Wesley W. Marple, Jr. 413 Hayden Hall Northeastern University Boston, MA 02115 Stephen Morgan Boott Mills South 100 Foot of John Street Lowell, MA 01852 Donald G. Pardus One Liberty Square D D,CH D,CH Boston, MA 02109 Robert G. Powderly P.O. Box 543 D,EVP D,EVP W. Bridgewater, MA 02379 Donald T. Sena One Liberty Square AT,AC AT,AC Boston, MA 02109 Dennis St. Pierre P.O. Box 543 W. Bridgewater, MA 02379 William A. Sifflard 20 Thurber Blvd Smithfield, RI 02917 Margaret M. Stapleton P.O. Box 111 Boston, MA 02117 John R. Stevens One Liberty Square D D,P D,P Boston, MA 02109 W. Nicholas Thorndike 150 Dudley Street Brookline, MA 02146 Mark S. White Boott Mills South EVP, 100 Foot of John Street ACM,AC Lowell, MA 01852
ITEM 6. OFFICERS AND DIRECTORS - Continued Part I. As of December 31, 1998. KEY: CH - Chairman of the Board T - Treasurer VCH - Vice Chairman of the Board TR - Trustee P - President CM - Comptroller EVP - Executive Vice President AT - Assistant Treasurer SVP - Senior Vice President S - Secretary VP - Vice President AS - Assistant Secretary C - Clerk AC - Assistant Clerk D - Director CEO - Chief Executive Officer COO - Chief Operating Officer ACM - Assistant Comptroller ITEM 6. OFFICERS AND DIRECTORS (continued) Part II. As of December 31, 1998. Position Held Name of Name and Location of in Financial Applicable Officer or Director Financial Institution Institution Exemption Rule (1) (2) (3) (4) Russell A. Boss Fleet Bank Director Rule 70(a) Providence, RI Paul J. Choquette, Jr. Fleet Financial Group Director Rule 70(a) Providence, RI Peter S. Damon Bank of Newport Trustee, Rule 70(a) Newport, RI President and CEO _____________________ (Note: In the answer to this Part II of Item 6, the phrase "financial connection within the provisions of Section 17(C) of the Act" is regarded as being limited by the definitions in Paragraph (h) of Rule 70 under the Act as in effect at December 31, 1998). ITEM 6. OFFICERS AND DIRECTORS (continued)
Part III. (a) Information is set out below as to cash compensation paid by the Association and its subsidiaries for the years 1998, 1997, and 1996 to each of the five highest paid executive officers of each Company whose annual salary and bonus for the year exceeded $100,000. Long-Term All Compensation Other Name and Annual Compensation Restricted Compen- Principal Fiscal Incentive Stock sation Position Year Salary Bonus Other(1) Awards(2) (3) EUA Service Corporation Donald G. Pardus 1998 $443,525 $351,311 $14,100 $511,106 $14,865 Chairman 1997 428,525 167,112 12,747 232,617 13,775 1996 412,025 - 12,383 - 12,976 John R. Stevens 1998 $346,025 $296,026 $16,696 $408,811 $11,462 President 1997 334,325 133,665 11,763 232,617 10,726 1996 321,425 - 8,636 - 10,104 Robert G. Powderly 1998 $191,025 $145,743 $10,726 $142,105 $5,907 Executive Vice 1997 184,025 51,249 10,240 116,322 5,560 President 1996 176,025 - 10,210 - 5,321 John D. Carney 1998 $187,525 $145,743 $11,302 $142,105 $ 6,085 Executive Vice 1997 179,525 51,249 10,502 87,235 5,624 President 1996 169,525 - 10,018 - 5,108 Clifford J. Hebert, Jr. 1998 $148,025 $138,140 - $90,056 $4,699 Treasurer and 1997 136,025 28,417 - 116,322 4,078 Secretary 1996 129,525 - - - 3,846
Blackstone, Eastern Edison and Newport Electric The Chief Executive Officer and the four other most highly compensated executive officers of Blackstone, Newport and Eastern Edison hold the same or similar positions with EUA Service and are not paid directly by any of Blackstone, Newport or Eastern Edison. The information required by this item is the same as shown above under EUA Service Corporation. ITEM 6. OFFICERS AND DIRECTORS (continued)
Long-Term All Compensation Other Name and Annual Compensation Restricted Compen- Principal Fiscal Incentive Stock sation Position Year Salary Bonus Other(1) Awards(4) (3) EUA Cogenex Corporation Edward T. Liston 1998 $180,000 - $11,146 $ - $12,586 President 1997 168,525 - 11,146 82,195 8,966 1996 157,025 - 6,381 - 4,676 Mark S. White 1998 $132,504 - $10,077 $ - $8,390 Executive 1997 115,950 - 9,437 44,514 5,998 Vice President 1996 101,875 - 5,466 - 2,860 William A. Sifflard 1998 $110,000 - $9,502 $14,125 $6,949 Vice President 1997 105,525 - 8,122 25,128 5,423 1996 101,025 - 2,942 - 2,726 Darcy L. Immerman 1998 $110,000 - $9,458 $ - $6,826 Vice President 1997 100,025 40,629 316 37,681 5,048 ___________________ (1) Represents amounts reimbursed for tax liability accruing as a result of personal use of company-owned automobiles. (2) Aggregate amount and value (including the value reflected in the table under "Restricted Stock Awards") of shares held under the Association's Restricted Stock Plan to the officers listed above are as follows: Mr. Pardus, 43,841 shares, including 20,965 shares granted in 1998, 8,989 shares granted in 1997 and 13,887 shares granted in 1995, $1,238,508; Mr. Stevens, 34,565 shares, including 16,769 shares granted in 1998, 8,989 shares granted in 1997 and 8,807 shares granted in 1995, $976,461; Mr. Powderly, 13,412 shares, including 5,829 shares granted in 1998, 4,495 shares granted in 1997 and 3,088 shares granted in 1995, $378,889; Mr. Carney, 12,363 shares, including 5,829 shares granted in 1998, 3,371 shares granted in 1997 and 3,163 shares granted in 1995, $349,255; and Mr. Hebert, 9,834 shares, including 3,694 shares granted in 1998, 4,495 shares granted in 1997 and 1,645 shares granted in 1995, $277,811. Dividends are paid on these shares. (3) Contributions made under the Association's Employees' Savings Plan. (4) Aggregate amount and value (including the value reflected in the table under "Restricted Stock Awards") of shares held under Cogenex's Restricted Stock Plan to the officers listed above are as follows: Mr. Liston, 3,693 shares granted in 1997, $104,327; Mr. White, 2,000 shares granted in 1997, $56,500; Mr. Sifflard, 1,129 shares granted in 1997, $31,894; Ms. Immerman, 1,693 shares granted in 1997, $47,827. All of the shares granted in 1997 remain held. With the exception of Mr. Sifflard's 1997 Restricted Stock award, which vest half; annually in each of the two years following 1997, Cogenex stock awards vest 1/3; annually in each of the three years subsequent to year of the award. Because of restrictions on the sales of restricted stock, Mr. Liston's, Mr. White's and Ms. Immerman's 1997 Restricted Stock Awards will vest 2/3 in 1999. Dividends are paid on these shares. (b) Securities Interest
Common Shares of the Association Beneficially Owned at January 1, 1999(1)
Executive Employees Stock Jointly Savings Grant Individual Owned(2) Plan Plan Total Russell A. Boss 1,000 - - - 1,000(3) John D. Carney 2,475 - 2,004 12,363 16,842 Paul J. Choquette 2,643 - - - 2,643(4) Peter S. Damon 400 1,058 - - 1,458 Peter B. Freeman 2,500 - - - 2,500 Clifford J. Hebert, Jr. 3,459 - 2,588 9,834 15,881 Darcy L. Immerman - - 737 1,693 2,430 Larry A. Liebenow - 1,000 - - 1,000 Edward T. Liston 5,173 - 2,183 3,693 11,049 Jacek Makowski 200 - - - 200 Wesley W. Marple 2,585 - - - 2,585(5) Donald G. Pardus - 21,029 6,388 43,841 71,258 Robert G. Powderly 4,775 282 2,549 13,412 21,018 William A. Sifflard 10 - 944 564 1,518 Margaret M. Stapleton 1,685 - - - 1,685 John R. Stevens 93 132 2,677 34,565 37,467 W. Nicholas Thorndike 2,146 - - - 2,146 Mark S. White 96 2 1,701 2,000 3,799 Trustees and Executive Officers as a Group 31,812 24,364 37,721 164,294 258,391(6) (1) Unless otherwise indicated, beneficial ownership is based on sole investment and voting power. Each individual's ownership represents less than four-tenths of one percent of the outstanding common shares of the Association. (2) Jointly owned with spouse. (3) In addition, Mr. Boss owns 5 shares of Blackstone's 4.25% Preferred Stock. (4) In addition, Mr. Choquette's spouse owns 150 EUA common shares. Mr. Choquette disclaims any beneficial interest in such shares. (5) In addition, Mr. Marple's spouse owns 363 EUA common shares. Mr. Marple disclaims any beneficial interest in such shares. (6) Represents approximately 1.3 percent of the outstanding common shares of the Association.
(c) Contracts and Transactions with System Companies See Section (e) below regarding severance agreements. (d) Indebtedness to System Companies None. (e) Participation in Bonus and Profit Sharing Arrangements. The Employees' Retirement Plan of Eastern Utilities Associates and its Affiliated companies (the "Pension Plan") is a tax-qualified defined benefit plan available to employees who have completed one year of service and have attained the age of twenty-one. All of the officers referred to in the preceding Summary Compensation Tables participate in the Pension Plan. Trustees who are not also employees of the EUA and its subsidiaries (the "EUA System") are not covered by the Pension Plan. The benefits of participants become fully vested after five years of service. Annual lifetime benefits are determined under formulas applicable to all employees, regardless of position, and the amounts depend on length of credited service and salaries prior to retirement. Benefits are equal to one and six-tenths percent of salaries (averaged over the four years preceding retirement) for each year of credited service up to thirty-five, reduced for each year by one and two-tenths percent of the participants' estimated age sixty-five Social Security benefit, plus seventy-five hundredths percent of salaries for each year of credited service in excess of thirty-five years up to the Pension Plan maximum of forty years. Any contributions to provide benefits under the Pension Plan are made by the EUA System in amounts determined by the Pension Plan's actuaries to meet the funding standards established by the Employee Retirement Income Security Act of 1974. Any contributions are actuarially determined and cannot appropriately be allocated to individual participants. The annual benefits shown in the table below are straight life annuity amounts, without reduction for primary Social Security benefits as described above. Federal law limits the annual benefits payable from qualified pension plans in the form of a life annuity, after reduction for Social Security benefits, to $130,000 for 1999 plus adjustments for increases in the cost of living. The number of years of service credited at present under the Pension Plan to Messrs. Pardus, Stevens, Carney, Powderly and Hebert are thirty-six, thirty-three, thirty-two, eighteen and twenty-two, respectively. Average Years of Service Annual Salary 15 20 25 30 35 40 $100,000 $ 24,000 $ 32,000 $ 40,000 $ 48,000 $56,000 $ 59,750 200,000 48,000 64,000 80,000 96,000 112,000 119,500 300,000 72,000 96,000 120,000 144,000 168,000 179,250 400,000 96,000 128,000 160,000 192,000 224,000 239,000 500,000 120,000 160,000 200,000 240,000 280,000 298,750 600,000 144,000 192,000 240,000 288,000 336,000 358,500 EUA has a Key Executive Plan for certain officers of the Association and its subsidiaries. This plan provides for the annual payment of supplemental retirement benefits equal to 25% of the officer's base salary when he retires, for a period of fifteen (15) years following the date of retirement. In addition, in the event of the death of the participant prior to retirement an amount equal to 200% of the officer's base salary at that time will be paid to his beneficiary. EUA maintains non-qualified, unfunded retirement plans ("The Restoration Plans") to restore benefits under the qualified plans' formulas which are not covered under the qualified plan trusts due to federal limitations on either earnings, contributions or benefits. Payments or contributions which exceed the applicable federal limitations are made outside the qualified plans in the same manner and under the same conditions as are applicable to benefits payable from, or contributions payable to, the qualified plans. A grantor trust has been established by the Association to help ensure the performance of its payment obligations under these plans. Any amounts not covered by trust payments or otherwise will be paid from funds available to the EUA System. Severance agreements with executive officers of the Association and certain of its affiliates provide that an officer's rate of compensation, benefits, position, responsibilities and other conditions of employment will not be reduced during the term of the agreement, which is thirty-six months commencing upon the date on which a Change in Control, as defined in the agreements, of the Association occurs. If within thirty-six months after a Change in Control the officer's employment is terminated for any reason other than Cause, as defined in the agreements, the Association will, (i) pay the officer within five business days a lump-sum cash amount generally equal to the present value of the additional wages and retirement benefits that the executive would have received in return for completing an additional three years of service, (ii) continue or vest certain fringe benefits and common share grants, (iii) reimburse legal fees and expenses incurred as a result of the termination or to enforce the provisions of the severance agreement and (iv) reimburse a portion of the taxes on certain of the foregoing payments, including any amount contributing a "parachute payment" under the Internal Revenue Code. If the officer leaves the employ of the Association or a subsidiary following a reduction in his position, compensation, responsibilities, authority or other benefits existing prior to the Change in Control, or suffers a relocation of regular employment of more than fifty miles, such departure will be deemed to be a termination for reason other than Cause. (f) Rights to Indemnity Article 32 of EUA's Declaration of Trust, as set forth in Exhibit B-1(a) to Form U5S of EUA for the year ended December 31, 1986, is incorporated herein by reference. ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS
Accounts Charged if any, Per Books Name of Recipient of Disbursing Name of Company or Beneficiary Purpose Company Amount (1) (2) (3) (4) (5) Blackstone Tillinghast, Collins Lobbying 426.4 $19,250 & Graham Expenditures Blackstone David Correira, Esq. Lobbying 426.4 23,100 Expenditures Blackstone United Way Donations 426.1 20,000 Blackstone David Gulvin Lobbying 426.4 20,748 Expenditures Blackstone Miscellaneous Donations 426.1 37,783 Donations less than $10,000 Blackstone Edison Electric Lobbying 426.4 13,692 Institute Expenditures Blackstone Miscellaneous Lobbying 426.4 250 Donations less Expenditures than $10,000 Eastern Edison United Way Donations 426.1 44,655 Eastern Edison Stonehill College Donations 426.1 13,250 Eastern Edison Good Neighbor Donations 426.1 12,286 Energy Fund Eastern Edison Miscellaneous Donations 426.1 14,772 Donations less than $10,000 Eastern Edison Edison Electric Lobbying 426.4 28,560 Institute Expenditures Eastern Edison Deregulation Lobbying 426.4 759,362 Repeal Movement Expenditures Eastern Edison Retailers Associ- Lobbying 426.4 15,600 ation of Mass. Expenditures Eastern Edison Associated Indus- Lobbying 426.4 10,000 tries of Mass., Inc. Expenditures Eastern Edison Miscellaneous Lobbying 426.4 5,260 Donations less Expenditures than $10,000 Newport United Way Donations 426.1 10,000 Newport Miscellaneous Donations 426.1 17,210 Donations less than $10,000 Newport Edison Electric Lobbying 426.4 5,797 Institute Expenditures Newport Tillinghast, Collins Lobbying 426.4 8,250 & Graham Expenditures Newport David Correira, Esq. Lobbying 426.4 9,900 Expenditures Newport David Gulvin Lobbying 426.4 9,010 Expenditures Montaup Miscellaneous Donations 426.1 13,442 Donations Less than $10,000 Montaup Seabrook #1 Lobbying 426.4 2,195 Expenditures Montaup Millstone #3 Lobbying 426.4 1,171 Expenditures
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS Part I. None. Part II. No. Part III. No. ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES None. ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS (*Filed herewith) The following financial statements and supplemental schedules are filed as a part of this Annual Report. FINANCIAL STATEMENTS 1 - Consolidating Balance Sheets - December 31, 1998 of Eastern Utilities Associates and Subsidiary Companies, Eastern Edison Company and Subsidiary, EUA Cogenex Corporation and Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries. 2 - Consolidating Statements of Capitalization - December 31, 1998 of Eastern Utilities Associates and Subsidiary Companies, Eastern Edison Company and Subsidiary, EUA Cogenex Corporation and Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries. 3 - Consolidating Income Statements for the year ended December 31, 1998 of Eastern Utilities Associates and Subsidiary Companies, Eastern Edison Company and Subsidiary, EUA Cogenex Corporation and Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries. 4 - Consolidating Statements of Cash Flows for the year ended December 31, 1998 of Eastern Utilities Associates and Subsidiary Companies, Eastern Edison Company and Subsidiary, EUA Cogenex Corporation and Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries. 5 - Consolidating Statements of Retained Earnings and Other Paid-In Capital for the year ended December 31, 1998 of Eastern Utilities Associates and Subsidiary Companies, Eastern Edison Company and Subsidiary, EUA Cogenex Corporation and Subsidiaries, and EUA Energy Investment Corporation and Subsidiaries. 6 - Notes to Consolidated Financial Statements (page 55). Exhibits Exhibit A - (incorporated herein by reference) A-1 Form 10-K (as amended) of EUA, Blackstone and Eastern Edison for 1998 (including Annual Reports to Shareholders and Proxy Statement, portions of which are incorporated therein by reference; File Nos. 1-5366, 0-8480, and 0-2602). Exhibit B - B-1 Declaration of Trust of EUA, dated April 2, 1928, as amended (Exhibit A-3, File No. 70-3188; Exhibit 1 to EUA's 8-K reports for April in each of the years 1957, 1962, 1966, 1968, 1972, and 1973, File No. 1-5366; Exhibit A-1 (a), Amendment No. 2 to Form U-1, File No. 70-5997, Exhibit 4-3, Registration No. 2-72589; Exhibit 1 to Certificate of Notification, File No. 70-6713; Exhibit 1 to Certificate of Notification, File No. 70-7084; Exhibit 3-2, Form 10-K of EUA for 1987, File No. 1-5366). B-2 Charter of Blackstone (formerly Blackstone Valley Gas and Electric Company), as amended (Exhibit (a)(1) and (a)(2), Form 1-A filed March, 1957, File No. 24B-970; Exhibit A-2, Form U5S of EUA for the year 1958, File No. 1-5366; Exhibit (1), Form 8-K for March, 1965 File No. 0-2602; Exhibit A-2, Form U5S of EUA for the year 1966, File No. 1-5366 and Exhibit (1), Form 8-K for June 1976, File No. 0- 2602; Exhibit (1), Form 10-Q for quarter ended June 30, 1988, File No. 0-2602); Exhibit 3-3, Form 10-K of Blackstone for 1989, File No. 0-2602). B-3 By-Laws of Blackstone, (Exhibit A-2, Form U-1 filed October 16, 1990, File No. 70-7769). B-4 Restated and Amended Articles of Organization of Eastern Edison, (Exhibit B-4 to Form U5S of EUA for 1993). B-5 By-Laws of Eastern Edison, as amended (Exhibit 3-2, Form 10-K of Eastern Edison for 1980, File No. 0-8480). B-6 Charter of Montaup Electric Company ("Montaup"), as amended (Exhibits A-6(a), A-6(b) and A-6(c) to Post Effective Amendment No. 18 to Form U-1, File No. 70-5388; Exhibit 3, Form 10-K of EUA for 1977, File No. 1-5366; and Exhibit 6 to Form U5S of EUA for 1979). B-7 By-Laws of Montaup, as amended (Exhibit 4, Form 10-K of EUA for 1977, File No. 1-5366). B-8 Charter of EUA Service Corporation (Exhibit A-1, File No. 37-67). B-9 By-Laws of EUA Service Corporation, as amended (Exhibit 2, Form 10-K of EUA for 1977, File No. 1-5366). B-10 Charter of EUA Cogenex Corporation, as amended (Exhibit A-1, File No. 70-7287, Exhibit B-15 to Form U5S of EUA for 1986). B-11 By-Laws of EUA Cogenex Corporation, as amended (Exhibit A-2, File No. 70-7287, to Form U5S of EUA for 1986). B-12 Agreement of Limited Partnership among Onsite Energy and EUA Cogenex Corporation dated as of November 30, 1988 (Exhibit A-4 to Post-Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October 21, 1991). B-13 EUA/FRCII Energy Associates Agreement of Limited Partnership dated as of September 19, 1989 (Exhibit A-5 to Post-Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October 21, 1991). B-14 Micro Utility Partners of America, L.P., Agreement of Limited Partnership dated as of December 20, 1988 (Exhibit A-6 to Post- Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October 21, 1991). B-15 Energy Capital and Services I, LP, Agreement of Limited Partnership dated as of April 10, 1990 (Exhibit A-7 to Post- Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October 21, 1991). B-16 EUA/SYCOM General Partnership Agreement dated as of September 20, 1989 (Exhibit A-9 to Post-Effective Amendment No. 3 of Form U-1, File No. 70-7825, dated October 21, 1991). B-17 Articles of Organization of EUA Energy Investment Corporation (Exhibit B-14 to Form U5S of EUA for 1987). B-18 By-Laws of EUA Energy Investment Corporation (Exhibit B-15 to Form U5S of EUA for 1987). B-19 Articles of Organization of EUA Ocean State Corporation (Exhibit B-16 to Form U5S of EUA for 1988). B-20 By-Laws of EUA Ocean State Corporation (Exhibit B-17 to Form U5S of EUA for 1988). B-21 Charter of Newport, as amended (Exhibit B-18 to Form U5S of EUA for 1990). B-22 By-Laws of Newport (Exhibit B-19 to Form U5S of EUA for 1990). B-23 Ocean State Power Amended and Restated General Partnership Agreement among EUA Ocean State, Ocean State Power Company, TCPL Power Ltd., Narragansett Energy Resources Company and NECO Power, Inc. (collectively, the "OSP Partners") dated as of December 2, 1988, as amended March 27, 1989 (Exhibit 10-107, Form 10-K of EUA for 1989, File No. 1-5366, Exhibits 10-3.12, 10-4.12 and 10-5.12, Form 10-K of EUA for 1994, File No. 1-5366). B-24 Ocean State Power II Amended and Restated General Partnership Agreement among EUA Ocean State, JMC Ocean State Corporation, Makowski Power, Inc., TCPL Power Ltd., Narragansett Energy Resources Company and Newport Electric Power Corporation (collectively, the "OSP II Partners") dated as of September 29, 1989 (Exhibit 10-110, Form 10-K of EUA for 1989, File No. 1-5366). B-25 Articles of Organization of EUA TransCapacity, Inc. (Exhibit A-1 File No. 70-8283). B-26 By-Laws of EUA TransCapacity, Inc. (Exhibit A-2 File No. 70-8283). B-27 Amended and Restated Agreement of Limited Partnership of TransCapacity Limited Partnership (Exhibit A-2 File No. 70-8283). B-28 Articles of Incorporation of Cogenex Canada (Exhibit A-1 File No. 70-8441). B-29 By-Law No.1 of Cogenex Canada (Exhibit A-2 File No. 70-8441). B-30 Articles of Organization of NEM (Exhibit A-2 File No. 70-8255). B-31 By-Laws of NEM (Exhibit A-3 File No. 70-8255). B-32 Articles of Organization of EUA Highland (Exhibit A-2 File No. 70- 8523). B-33 By-Laws of EUA Highland (Exhibit A-3 File No. 70-8523). B-34 Articles of Organization of EUA Citizens Conservation Service, Inc. (Exhibit A-1 File No. 70-8473). B-35 By-Laws of EUA Citizens Conservation Services, Inc. (Exhibit A-2 File No. 70-8473). B-36 Articles of Organization of EUA BIOTEN, Inc. (Exhibit A-1 File No. 70-8617). B-37 By-Laws of EUA BIOTEN, Inc. (Exhibit A-2 File No. 70-8617). B-38 Certificate of Formation of APS Cogenex, L.L.C. (Exhibit A-1 File No. 70-8663). B-39 Limited Liability Company Operating Agreement for APS Cogenex, L.L.C. (Exhibit B-2 File No. 70-8663). B-40 1995 Agreement of General Partnership of BIOTEN General Partnership (Exhibit A-3 File No. 70-8617). B-41 Articles of Organization of EUA Energy Services, Inc. (Exhibit A-1 File No. 70-8769). B-42 By-Laws of EUA Energy Services, Inc. (Exhibit A-2 File No. 70-8769). B-43 Articles of Organization of EUA Compression Services, Inc. B-44 Articles of Organization of EUA Telecommunications Corporation. Exhibit C - (a) C-1 Form of 8% Debenture Bonds due 2000 of Montaup (Exhibit 4-10, Registration File No. 2-41488). C-2 Form of 8-1/4% Debenture Bonds due 2003 of Montaup (Exhibit B-3, Form U5S of EUA for 1973). C-3 Form of 10% Debenture Bonds due 2008 of Montaup (Exhibit 5-3, Registration No. 2-65785). C-4 Form of 10-1/8% Debenture Bonds due 2008 of Montaup (Exhibit 4-13, Form 10-K of EUA for 1983, File No. 1-5366). C-5 Form of 12-3/8% Debenture Bonds due 2013 of Montaup (Exhibit 4-13, Form 10-K of EUA for 1983, File No. 1-5366). C-6 Form of 9% Debenture Bonds due 2020 of Montaup (Exhibit 4-10, Form 10-K of Eastern Edison for 1990, File No. 0-8480). C-7 Form of 9-3/8% Debenture Bonds due 2020 of Montaup (Exhibit 4-11, Form 10-K of Eastern Edison for 1990, File No. 0-8480). C-8 Indenture of First Mortgage and Deed of Trust dated as of September 1, 1948 of Eastern Edison (Exhibit 4-1, Registration No. 2-77468), and twenty-seven supplements thereto (Exhibit A, File No. 70-3015; Exhibit A-3, File No. 70-3371; Exhibit C to Certificate of Notification, File No. 70-3371; Exhibit D to Certificate of Notification, File No. 3619; Exhibit D to Certificate of Notification, File No. 70-3798; Exhibit F to Certificate of Notification, File No. 70-4164; Exhibit D to Certificate of Notification, File No. 70-4748; Exhibit C to Certificate of Notification, File No. 70-5195; Exhibit F to Certificate of Notification, File No. 70-5379; Exhibit C to Certificate of Notification, File No. 70-5719; Exhibit 5-24 Registration No. 2- 65785; Exhibit F to Certificate of Notification, File No. 70-6463; Exhibit C to Certificate of Notification, File No. 70-6608; Exhibit C to Certificate of Notification, File No. 70-6737; Exhibit F to Certificate of Notification, File No. 70-6851; Exhibit 4-31, Form 10-K of EUA for 1984, File No. 1-5366; Exhibit F to Certificate of Notification, File No. 70-7254; Exhibit C to Certificate of Notification, File No. 70-7373; Exhibit C to Certificate of Notification, File No. 70-7373; Exhibit C to Certificate of Notification, File No. 70-7373; Exhibit F to Certificate of Notification, File No. 20-7511; Exhibit 4-34, Form 10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 4-24, Form 10-K of Eastern Edison for 1992, File No. 0-8480; Exhibit 4-35, Form 10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 4-36, Form 10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit C-33 to Form U5S of EUA for 1993; Exhibit C-34 to Form U5S of EUA for 1993; Exhibit 4-29.08, Form 10-K of Eastern Edison for 1994, File No. 0-8480; Exhibit 4-1.09, Form 10-K of EUA for 1997, File 1-5366). C- 9 Form of Eastern Edison Medium Term Note (Exhibit 4-36, Form 10-K of Eastern Edison for 1990, File No. 0-8480). C-10 First Mortgage Indenture and Deed of Trust dated as of December 1, 1980 of Blackstone (Exhibit A, Form 8-K of EUA dated January 14, 1981, File No. 1-5366). C-11 First Supplemental Indenture dated as of August 1, 1989 of Blackstone (Exhibit 4-33, Form 10-K of EUA for 1989, File 1-5366). C-12 Second Supplemental Indenture dated as of November 26, 1990 of Blackstone (Exhibit 4-3, Form 10-K of Blackstone Valley Electric for 1990, File No. 0-2602). C-13 Loan Agreement between Rhode Island Industrial Facilities Corporation and Blackstone dated as of December 1, 1984 (Exhibit 10-72, Form 10-K of EUA for 1984, File No. 1-5366). C-14 Note Purchase Agreement dated as of January 13, 1988 of Service (Exhibit 4-38, Form 10-K of EUA for 1987, File No. 1-5366). C-15 Note Agreement dated as of June 28, 1990 of EUA Cogenex with the Prudential Insurance Company of America (Exhibit 4-46, Form 10-K of EUA for 1990, File No. 1-5366). C-16 Note Agreement dated as of October 29, 1991 between EUA Cogenex and Prudential Insurance Company of America (Exhibit 4-55, Form 10-K of EUA for 1991, File No. 1-5366). C-17 Indenture dated September 1, 1993 between EUA Cogenex and the Bank of New York as Trustee (Exhibit 4-4.10, Form 10-K of EUA for 1993, File No. 1-5366). C-18 Guaranty, dated June 28, 1990, made by Eastern Utilities Associates in favor of The Prudential Insurance Company of America (Exhibit B-2 to Form U-1, File No. 70-7655, dated June 14, 1990). C-19 Indenture of First Mortgage dated as of June 1, 1954 of Newport, as supplemented on August 1, 1959, April 1, 1962, October 1, 1964, April 1, 1967, September 1, 1969, September 1, 1970, June 1, 1978, October 1, 1978, May 1, 1986, December 1, 1987 and November 1, 1989 (Exhibit 4-49, Form 10-K of EUA for 1990, File No. 1-5366). C-20 United States Government Small Business Administration Loan to Newport entitled, "Base Closing Economic Injury Loan", signed May 30, 1975 and amended on October 6, 1983 (Exhibit 4-50, Form 10-K of EUA for 1990, File No. 1-5366). C-21 Indenture of Second Mortgage dated as of September 1, 1982 of Newport, as supplemented on December 1, 1988 (Exhibit 4-51, Form 10-K of EUA for 1990, File No. 1-5366). C-22 Note Purchase Agreement dated as of January 16, 1992 between EUA Ocean State Corporation and John Hancock Mutual Life Insurance Company (Exhibit 4-56, Form 10-K of EUA for 1991, File No. 1-5366). C-23 Guaranty, dated January 16, 1992 made by EUA in favor of John Hancock Mutual Life Insurance Company (Exhibit 10-125, Form 10-K of EUA for 1991, File No. 1-5366). C-24 Trust Agreement dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Shawmut Bank, N.A. (filed as Exhibit 10-1.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480). C-25 Loan Agreement dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Eastern Edison (filed as Exhibit 10- 2.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480). C-26 Power Purchase Agreement entered into as of September 20, 1993 by and between Meridian Middleboro Limited Partnership and Eastern Edison Company (filed as Exhibit 10-3.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480). C-27 Inducement Letter dated July 14, 1993 from Eastern Edison to the Massachusetts Industrial Finance Agency and Goldman, Sachs & Company and Citicorp Securities Markets, Inc. (filed as Exhibit 10- 4.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480). C-28 Indenture dated September 1, 1993 between EUA Cogenex and the Bank of New York as Trustee (filed as Exhibit 4-4.10 to EUA's Form 10-K for 1993, File No. 1-5366). C-29 Loan Agreement between the Rhode Island Port Authority and Economic Development Corporation and Newport Electric Corporation dated as of January 6, 1994 (filed as Exhibit 4-14.14 to EUA's Form 10-K for 1993, File No. 1-5366). C-30 Trust Indenture between the Rhode Island Authority and Economic Development Corporation and Newport Electric Corporation dated as of January 1, 1994 (filed as Exhibit 4-5.14 to EUA's Form 10-K for 1993, File No. 1-5366). C-31 Letter of Credit and Reimbursement Agreement among Newport and the Canadian Imperial Bank of Commerce dated January 6, 1994 (filed as Exhibit 4-6.14 to EUA's Form 10-K for 1993, File No. 1-5366). (b) None. *Exhibit D - Tax allocation agreement for 1999 pursuant to Rule 45(c). Exhibit E - Other documents. None. Exhibit F - Report of Independent Accountants (Exhibit 13-1.03 of EUA 10-K for 1998, File No. 1-5366). *Exhibit G - Financial Data Schedules. Filed electronically via EDGAR. Exhibit H - None. Exhibit I - None. SIGNATURE The undersigned system company has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized, pursuant to the requirements of the Public Utility Holding Company Act of 1935. EASTERN UTILITIES ASSOCIATES and Subsidiaries By /s/ Clifford J. Hebert, Jr. Clifford J. Hebert, Jr. Treasurer April 29, 1999 EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
ASSETS Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corp. Company Corp. Utility plant and other investments: Utility plant in service $1,000,242,694 $ $ $33,690,659 $144,119,713 $741,902,200 Less accumulated provision for depreciation and amortization $353,779,690 14,735,781 60,534,231 26,208,462 Net utility plant in service 646,463,004 18,954,878 83,585,482 54,321,660 Construction work in progress 5,150,746 2,065,013 394,599 Net utility plant 651,613,750 18,954,878 85,650,495 54,716,259 Non-utility property 107,342,465 222,960 Less accumulated provision for depreciation 52,068,670 26,524 Net non-utility property 55,273,795 196,436 Investments in subsidiaries (at equity) 69,467,670 334,116,595 334,116,595 Excess of carrying values of investments in subsidiaries 17,489 17,489 Other 55,320,140 1,000 Total Utility Plant and Other Investments 831,692,844 334,116,595 334,135,084 18,954,878 85,846,931 54,716,259 Current Assets: Cash and temporary cash investments 32,089,677 2,422,127 178,220 142,475 Notes receivable 27,078,001 52,476,120 51,968,471 Accounts receivable - Net: Customers 55,286,076 10,227,575 6,227,126 Accrued unbilled revenue 10,655,332 2,605,739 1,333,204 Others 29,325,915 5,655,774 1,613,697 804,898 4,664,386 1,523,141 Accounts receivable - associates companies 0 35,275,727 666,248 12,427,468 168,696 233,876 Materials and Supplies (at average cost): Fuel 6,023,941 53,352 Plant materials and operating supplies 7,410,051 55,803 857,074 780,350 Other current assets 8,448,289 2,333,407 846,151 167,459 429,254 352,986 Total Current Assets 176,317,282 95,741,028 55,094,567 15,877,755 19,130,944 10,646,510 Deferred Debits: Unamortized debt expense 3,380,715 42,395 535,901 358,179 Unrecovered regulatory plant costs(Note A) 58,502,840 Other deferred debits 232,744,125 32,898,528 440,211 28,630,998 6,183,043 Total Deferred Debits 294,627,680 32,898,528 482,606 29,166,899 6,541,222 Total Assets $1,302,637,806 $429,857,623 $422,128,179 $35,315,239 $134,144,774 $71,903,991 The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
ASSETS (Continued) EUA EUA Eastern EUA Energy EUA EUA Telecomm- Edison Cogenex Investment Energy Ocean unications Consolidated Consolidated Consolidated Corporation Corpor. Corporation Utility plant and other investments Utility plant in service $741,902,200 $ $ $ $ $ Less accumulated provision for depreciation and amortization 252,301,216 Net utility plant in service 489,600,984 Construction work in progress 2,691,134 Net utility plant 492,292,118 Non-utility property 2,497,881 101,313,953 3,307,671 Less accumulated provision for depreciation 9,697 49,897,327 2,135,122 Net non-utility property 2,488,184 51,416,626 1,172,549 0 Investments in subsidiaries (at equity) 12,881,094 516,949 7,235,277 48,834,350 Excess of carrying values of investments in subsidiaries Other 56,083 52,703,408 2,478,052 71,680 9,917 Total Utility Plant and Other Investments 507,717,479 104,636,983 10,885,878 71,680 48,834,350 9,917 Current Assets: Cash and temporary cash investments 25,952,161 2,782,421 552,017 2,234 39,807 18,215 Notes receivable 16,379,692 11,205,958 Accounts receivable - Net: Customers 24,685,525 13,388,014 757,836 Accrued unbilled revenue 6,716,389 Others 13,155,014 10,833,207 2,307,877 33,393 46,076 Accounts receivable - associates companies 18,628,277 2,117,667 633,581 399,814 100 Materials and Supplies (at average cost): Fuel 5,970,589 Plant materials and operating supplies 3,993,798 827,311 895,715 Other current assets 4,753,504 2,038,807 2,185,204 8,331 Total Current Assets 103,855,257 48,367,119 18,538,188 435,441 48,138 64,391 Deferred Debits: Unamortized debt expense 1,808,956 271,606 363,678 Unrecovered regulatory plant costs (Note A) 58,502,840 Other deferred debits 159,737,739 3,912,067 941,539 Total Deferred Debits 220,049,535 4,183,673 941,539 0 363,678 0 Total Assets $831,622,271 $157,187,775 $30,365,605 $507,121 $49,246,166 $74,308 The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEET DECEMBER 31, 1998
LIABILITIES Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corporation Company Corporation Capitalization: Common equity $373,674,149 $334,116,595 $373,718,061 $2,557,189 $41,658,390 $23,320,795 Non-redeemable preferred stock of sub. 6,900,625 6,129,500 771,050 Redeemable preferred stock of subsidiaries - net 29,664,502 Preferred stock redemption cost (1,670,209) Long-term debt - net 310,346,379 5,100,000 32,000,000 9,659,531 Total Capitalization 718,915,446 334,116,595 373,718,061 7,657,189 79,787,890 33,751,376 Current Liabilities: Long-term debt due within one year 21,910,813 1,100,000 1,500,000 10,134,153 Notes payable 63,573,512 52,476,120 42,000,000 2,220,000 Accounts payable 29,018,449 67,320 438,383 684,145 667,948 Accounts payable - associated companies 0 35,275,727 1,233,308 336,545 13,641,506 8,254,307 Customer deposits 2,896,521 926,409 561,833 Taxes accrued 14,208,162 5,655,774 7,254 1,492,971 686,999 Interest accrued 6,997,135 2,333,407 523,954 316,200 778,803 419,007 Dividends accrued 64,980 72,188 (7,208) Other current liabilities 31,945,655 1,206,199 1,573,979 4,277,638 2,067,591 Total Current Liabilities 170,615,227 95,741,028 45,030,781 3,772,361 23,373,660 25,004,630 Other Liabilities: Unamortized investment credit 16,390,753 2,202,136 1,038,954 Other deferred credits and other liab. 254,687,043 2,723,475 22,603,470 15,496,221 2,903,419 Total Other Liabilities 271,077,796 2,723,475 22,603,470 17,698,357 3,942,373 Accumulated deferred taxes 142,029,337 655,862 1,282,219 13,284,867 9,205,612 Commitments and contingencies (Note J) Total Liabilities and Capitalization $1,302,637,806 $429,857,623 $422,128,179 $35,315,239 $134,144,774 $71,903,991 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEET DECEMBER 31, 1998
LIABILITIES (continued) EUA EUA Eastern EUA Energy EUA EUA Telecomm- Edison Cogenex Investment Energy Ocean State unications Consolidated Consolidated Consolidated Corporation Corporation Corporation Capitalization: Common equity $225,998,388 $48,361,220 ($24,203,924) ($34,086) $16,545,748 ($131,037) Non-redeemable preferred stock of subs. 75 Redeemable preferred stock of subsidiaries - net 29,664,502 Preferred stock redemption cost (1,670,209) Long-term debt - net 162,549,952 77,400,000 23,636,896 Total Capitalization 416,542,633 125,761,295 (24,203,924) (34,086) 40,182,644 (131,037) Current Liabilities: Long-term debt due within one year 6,700,000 2,476,660 Notes payable 16,108,438 51,779,436 540,195 3,190,000 211,563 Accounts payable 25,502,231 1,505,513 150,930 1,979 0 Accounts payable - associated companies 8,987,251 1,132,715 1,666,815 3,558 16,477 3,245 Customer deposits 1,408,279 0 Taxes accrued 17,360,688 62,725 3,647 249,652 Interest accrued 3,560,655 1,187,797 2,326,419 4,982 210,720 2,005 Dividends accrued Other current liabilities 17,316,856 5,354,453 148,639 300 Total Current Liabilities 74,135,960 32,051,641 56,075,886 548,735 6,145,788 216,813 Other Liabilities: Unamortized investment credit 13,149,663 Other deferred credits and other liabilities 208,150,839 3,706,643 (897,024) Total Other Liabilities 221,300,502 3,706,643 (897,024) 0 0 Accumulated deferred taxes 119,643,176 (4,331,804) (609,333) (7,528) 2,917,734 (11,468) Commitments and contingencies (Note J) Total Liabilities and Capitalization $831,622,271 $157,187,775 $30,365,605 $507,121 $49,246,166 $74,308 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CAPITALIZATION DECEMBER 31, 1998 (1 of 2)
Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corporation Company Corporation Common Equity: Common shares, $5 par value of Registrant (1) $102,179,985 $92,856,908 $102,179,985 $1,000 $9,203,100 $11,368,779 Other paid-in capital 218,959,339 133,114,783 218,959,339 2,100,000 17,907,931 9,000,000 Common share expense (3,930,680) (742,214) (3,886,768) (742,214) Retained earnings 56,465,505 108,887,118 56,465,505 456,189 14,547,359 3,694,230 Total Common Equity 373,674,149 334,116,595 373,718,061 2,557,189 41,658,390 23,320,795 Non-Redeemable Preferred: 4.25%, $100 par value, 35,000 share(2) 3,500,000 3,500,000 5.60%, $100 par value, 25,000 share(2) 2,500,000 2,500,000 3.75%, $100 par value, 7,600 share(2) 768,900 768,900 $.01 par value, 7,500 shares(3) 75 Premium, net of expense 131,650 129,500 2,150 Total Non-Redeemable 6,900,625 6,129,500 771,050 Redeemable Preferred: 6.625%, $100 par value, 300,000 shares(4) 30,000,000 Expense, net of premium (335,498) Preferred stock redemption cost (1,670,209) Total Redeemable 27,994,293 Long-Term Debt: Secured Notes: 10.2% due 2008 6,200,000 6,200,000 Unsecured Notes: 9.59% due 2011 26,113,556 7% due 2000 50,000,000 9.6% due 2001 9,600,000 10.56% due 2005 24,500,000 Variable Rate Bonds: Demand due 2014 (5) 6,500,000 6,500,000 Revenue Refunding due 2011(5) 7,925,000 7,925,000 First Mortgage and Collateral Trust Bonds: 6.875% due 2003 40,000,000 8% due 2023 40,000,000 6.35% due 2003 8,000,000 7.78% Secured medium-term notes due 2002 35,000,000
EASTERN UTILITIES ASSOCIATES CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED) DECEMBER 31, 1998 (1 of 2)
EUA Eastern EUA EUA EUA EUA Telecomm- Edison Cogenex Energy Inv. Energy Ocean State unications Consolidated Consolidated Consolidated Corporation Corporation Corporation Common Equity: Common shares, $5 par value of Registrant(1) $72,283,925 $100 $1 $1 $1 $1 Other paid-in capital 47,249,633 47,046,923 999 999 9,808,199 99 Common share expense (43,912) Retained earnings 106,508,742 1,314,197 (24,204,924) (35,086) 6,737,548 (131,137) Total Common Equity 225,998,388 48,361,220 (24,203,924) (34,086) 16,545,748 (131,037) Non-Redeemable Preferred: 4.25%, $100 par value, 35,000 shares(2) 5.60%, $100 par value, 25,000 shares (2) 3.75%, $100 par value, 7,689 shares (2) $.01 par value, 7,500 shares (3) 75 Premium, net of expense Total Non-Redeemable 75 Redeemable Preferred: 6.625%, $100 par value, 300,000 shares(4) 30,000,000 Expense, net of premium (335,498) Preferred stock redemption (1,670,209) Total Redeemable 27,994,293 Long-Term Debt: Secured Notes: 10.2% due 2008 Unsecured Notes: 9.59% due 2011 26,113,556 7% due 2000 50,000,000 9.6% due 2001 9,600,000 10.56% due 2005 24,500,000 Variable Rate Bonds: Demand due 2014 (5) Revenue Refunding due 20 First Mortgage and Collateral Trust Bonds: 6.875% due 2003 40,000,000 8% due 2023 40,000,000 6.35% due 2003 8,000,000 7.78% Secured medium-term notes due 2002 35,000,000
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CAPITALIZATION DECEMBER 31, 1998 (2 0F 2)
Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corporation Company Corporation Long-Term Debt (continued): Pollution Control Revenue Bonds: 5.875% due 2008 40,000,000 First Mortgage Bonds: 9.5% due 2004 (Series B) 9,000,000 9,000,000 10.35% due 2010 (Series C) 18,000,000 18,000,000 9% due 1999 1,386,000 1,386,000 9.8% due 1999 8,000,000 8,000,000 8.95% due 2001 1,950,000 1,950,000 Second Mortgage Bonds: 6.5% SBA Loan due 2005 532,684 532,684 Unamortized (Discount) - Net (450,048) 332,257,192 6,200,000 33,500,000 19,793,684 Less portion due within one year 21,910,813 1,100,000 1,500,000 10,134,153 Total Long-Term Debt 310,346,379 5,100,000 32,000,000 9,659,531 Total Capitalization $718,915,446 $334,116,595 $373,718,061 $7,657,189 $79,787,890 $33,751,376 (1) Authorized 36,000,000 shares, outstanding 20,435,997 (2) Authorized and Outstanding. (3) The Preferred Stock shall be entitled to an annual dividend per share at a rate equal to 33% of the net income of Citizens Conservation Services divided by 7,500. (4) Authorized 400,000 shares, outstanding 300,000. (5) Weighted average interest rate was 3.6% for 1998.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CAPITALIZATION (Continued) DECEMBER 31, 1998 (2 0F 2)
EUA Eastern EUA EUA EUA EUA Telecomm- Edison Cogenex Energy Inv. Energy Ocean State unications Consolidated Consolidated Consolidated Corporation Corporation Corporation Long-Term Debt (continued): Pollution Control Revenue Bonds: 5.875% due 2008 40,000,000 First Mortgage Bonds: 9.5% due 2004 (Series B) 10.35% due 2010 (Series 9% due 1999 9.8% due 1999 8.95% due 2001 Second Mortgage Bonds: 6.5% SBA Loan due 2005 Unamortized (Discount) - Net (450,048) 162,549,952 84,100,000 26,113,556 Less portion due within one year 6,700,000 2,476,660 Total Long-Term Debt 162,549,952 77,400,000 23,636,896 Total Capitalization $416,542,633 $125,761,295 ($24,203,924 ($34,086) $40,182,644 ($131,037) (1) Authorized 36,000,000 shares, outstanding 20,435,997 (2) Authorized and Outstanding. (3) The Preferred Stock shall be entitled to an annual dividend per share at a rate equal to 33% of the net income of Citizens Conservation Services divided by 7,500. (4) Authorized 400,000 shares, outstanding 300,000. (5) Weighted average interest rate was 3.6% for 1998.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING INCOME STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corporation Company Corporation Operating Revenues $538,801,238 $117,806,833 $ $130,202,261 $59,454,977 Operating Expenses: Operation 364,660,086 166,621,901 1,639,821 49,186,441 101,612,700 43,750,269 Maintenance 20,143,183 1,181,326 1,810 1,181,433 2,738,942 2,171,175 Depreciation and amortization 51,079,365 1,279,546 2,986 1,283,718 6,251,411 2,917,801 Taxes other than income 23,322,536 2,662,101 9,223 2,677,837 7,593,543 3,981,128 Income Taxes - Current (credit) 34,488,434 71,765 225,232 997,295 1,629,537 - Deferred (credit) (15,015,015) (44,337) (65,350) 25,564 2,248,006 87,374 Total Operating Expenses 478,678,589 171,772,302 1,588,490 54,580,225 121,441,897 54,537,284 Operating Income 60,122,649 (53,965,469) (1,588,490) (54,580,225) 8,760,364 4,917,693 Other Income and Deductions: Interest and dividend income 7,801,220 2,886,713 2,768,443 3,220 47,422 43,380 Equity in earnings of jointly - owned companies 9,524,297 32,570,328 32,570,328 Allowance for other funds used during construction 172,817 Loss on Disposal of Cogenera (3,171,904) Income Tax Impact of Loss on Disposal of Cogeneration Operations 1,110,166 Other (deductions) income - net (1,345,161) 54,595,293 2,346,765 55,492,619 (118,696) 22,351 Total Other Income 14,091,435 90,052,334 37,685,536 55,495,839 (71,274) 65,731 Income Before Interest 74,214,084 36,086,865 36,097,046 915,614 8,689,090 4,983,424 Interest Charges: Interest on long-term debt 28,287,600 632,400 3,029,507 1,417,243 Amortization of debt expense 1,812,612 17,618 82,023 93,639 Other interest expense (principally short-term notes) 7,745,065 3,516,537 1,386,711 3,753 787,854 652,062 Allowance for borrowed funds used during construction (credit) (646,612) (114,848) (36,660) Total Interest Charges 37,198,665 3,516,537 1,386,711 653,771 3,784,536 2,126,284 Net Income 37,015,419 32,570,328 34,710,335 261,843 4,904,554 2,857,140 Preferred Dividends Requirement 2,305,084 288,750 28,834 Earnings available for common shareholders $34,710,335 32,570,328 $34,710,335 $261,843 $4,615,804 $2,828,306 Weighted average shares outstanding 20,435,997 Basic and Diluted Earnings per shares $1.70 ( ) Denotes Contra
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING INCOME STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
EUA Eastern EUA EUA EUA EUA Telecomm- Edison Cogenex Energy Inv. Energy Ocean State unications Consolidated Consolidated Consolidated Corporation Corporation Corporation Operating Revenues $408,229,510 $54,775,898 $3,945,425 $ $ $ Operating Expenses: Operation 287,804,170 38,212,310 8,724,671 29,362 173,371 148,872 Maintenance 14,062,986 1,164,195 35 569 3,173 191 Depreciation and amortization 29,636,098 11,760,691 462,663 37,822 2,788 2,933 Taxes other than income 10,779,967 799,303 130,918 1,247 7,419 4,052 Income Taxes - Current (credit) 34,706,644 (1,225,268) (2,297,779) 130,671 (1,077,005) (45,620) - Deferred (credit) (16,389,383) (891,761) (53,143) (2,324) (6,867) (11,468) Total Operating Expenses 360,600,482 49,819,470 6,967,365 197,347 (897,121) 98,960 Operating Income 47,629,028 4,956,428 (3,021,940) (197,347) 897,121 (98,960) Other Income and Deductions: Interest and dividend income 616,157 6,032,720 1,176,528 15 43 5 Equity in earnings of jointly- owned companies 1,389,623 (1,189,761) 9,324,435 Allowance for other funds used during construction 172,817 Loss on Disposal of Cogeneration assets (3,171,904) Income Tax Impact of Loss on Cogeneration Operations 1,110,166 Other (deductions) income - net (2,261,435) (959,292) 462,299 353 (3,251,144) (180) Total Other Income (82,838) 3,011,690 449,066 368 6,073,334 (175) Income Before Interest Charges 47,546,190 7,968,118 (2,572,874) (196,979) 6,970,455 (99,135) Interest Charges: Interest on long-term debt 13,072,670 7,473,149 2,662,631 Amortization of debt expense and premium 1,591,357 27,975 Other interest expense (principally short-term notes) 3,437,747 2,027,380 2,713,598 31,404 213,905 7,188 Allowance for borrowed funds used during construction (credit) (261,384) (233,720) Total Interest Charges 17,840,390 9,266,809 2,713,598 31,404 2,904,511 7,188 Net Income 29,705,800 (1,298,691) (5,286,472) (228,383) 4,065,944 (106,323) Preferred Dividends Requirement 1,987,500 Earnings available for common shareholders $27,718,300 ($1,298,691) ($5,286,472) ($228,383) $4,065,944 ($106,323) Weighted average shares outstanding Basic and Diluted Earnings per share ( ) Denotes Contra
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corporation Company Corporation CASH FLOW FROM OPERATING ACTIVITIES: Net Income $37,015,419 $32,570,328 $34,710,335 $261,843 $4,904,554 $2,857,140 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 56,307,683 1,768,817 1,301,336 6,904,871 2,858,807 Amortization of nuclear fuel 1,265,313 Deferred taxes (17,854,333) (1,952,215) 25,564 2,258,092 92,382 Non-cash (gains)/expenses on sales of investment in energy savings projects 10,001,810 Investment tax credit, net (3,081,151 (178,209) (85,320) Allowance for other funds used during constr. (172,817) Collections and sales of project notes and leases receivable 17,260,531 Other - net (1,513,838) (6,793,027) (17,431,594) 5,603,717 (1,752,486) (1,184,820) Changes in Operating Assets and Liabilities: Accounts receivable (2,620,744) (8,720,466) (700,076) (2,056,119) (2,544,960) (1,506,020) Materials and supplies (2,232,332) 3,427 (97,793) (80,004) Notes receivable (1,245,549) (13,670,373) (13,670,374) Accounts payable (6,018,140) 7,276,584 (1,075,793) (337,155) 5,033,955 (1,021,287) Accrued taxes 11,144,954 2,895,034 0 (5,835) (572,004) 155,648 Other - net (1,317,460) (1,451,153) (294,589) 328,633 (3,959,102) 605,781 Net Cash Provided from (Used in) Operating Activities 96,939,346 12,106,927 1,354,511 5,125,411 9,996,918 2,692,307 CASH FLOW FROM INVESTING ACTIVITIES: Construction expenditures (51,200,853) 0 (1,511,803) (5,988,855) (2,851,565) Collections on notes and lease receivable of EUA Cogenex 11,558,419 Proceeds from divestiture of generation Assets 76,873,288 1,566,500 Other investments (2,070,970) Investments in subsidiaries 0 200,000 200,000 Net Cash Used in Investing Activities 35,159,884 200,000 200,000 (1,511,803) (5,988,855) (1,285,065) CASH FLOW FROM FINANCING ACTIVITIES: Redemptions of long-term debt (73,122,584) (1,700,000) (1,500,000) (745,924) EUA common share dividends paid (33,923,775) (26,484,950) (33,923,775) (600,000) (1,049,154) (1,880,000) Subsidiary preferred dividends paid (2,305,084 (288,750) (28,834) Net increase (decrease) in short-term debt 2,089,917 14,178,023 32,200,000 (1,400,000) 1,220,000 Net Cash (Used in) Provided from Financing Act. (107,261,526) (12,306,927) (1,723,775) (2,300,000) (4,237,904) (1,434,758) NET INCREASE (DECREASE) IN CASH 24,837,704 (169,264) 1,313,608 (229,841) (27,516) Cash and temporary cash investments at beginning of year 7,251,973 169,264 1,108,519 408,061 169,991 Cash and temporary cash investments at end of year $32,089,677 $0 $2,422,127 $178,220 $142,475 Cash paid during the year for: Interest (net of amount capitalized) $37,086,950 $1,385,603 $722,700 $3,243,155 $1,706,437 Income Taxes (Refund) $25,975,691 $312,494 $388,503 $1,957,466 $1,439,842 Conversion of investments in energy savings projects to notes and leases receivable $4,528,788 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
EUA EUA Eastern EUA Energy EUA EUA Telecomm- Edison Cogenex Investment Energy Ocean State unications Consolidated Consolidated Consolidated Corporation Corporation Corporation CASH FLOW FROM OPERATING ACTIVITIES: Net Income $29,705,800 ($1,298,691) ($5,286,472) ($228,383) $4,065,944 ($106,323) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation and amortization 31,090,632 11,972,188 342,891 37,398 27,975 2,768 Amortization of nuclear fuel 1,265,313 Deferred taxes (17,278,806) (628,047) 65,063 (2,324) (422,574) (11,468) Non-cash (gains)/expenses on sales of Invest. in energy savings projects 10,001,810 Investment tax credit, net (2,817,622) Allowance for other funds used during const. (172,817) Collections and sales of project notes and leases receivable 17,260,531 Other - net 2,525,221 1,646,021 (729,653) (10,000) 3,024,266 2,463 Changes in Operating Assets and Liabilities Accounts receivable (8,264,502) 4,231,839 (631,237) 162,124 (32,259) Materials and supplies (1,982,062) 2,787 (78,687) Notes receivable (1,245,548) Accounts payable 59,736 (1,767,098) 452,629 (4,841) (29,833) (51,869) Accrued taxes 15,036,097 (192,110) (43,402) (338,406) 0 Other - net 1,283,766 (271,006) (449,285) 70 (14,887) 2,006 Net Cash Provided from (Used in) Operating Activities 50,450,756 40,958,224 (7,603,701) (45,956) 6,312,485 (194,682) CASH FLOW FROM INVESTING ACTIVITIES: Construction expenditures (14,047,091) (26,774,878) (26,661) 0 Collections on notes and lease receivables of EUA Cogenex 11,558,419 Proceeds from divestiture of generation Assets 75,306,788 Other investments 248,678 3,853,374 (6,173,022) Investments in subsidiaries Net Cash Used in Investing Activities 61,508,375 (11,363,085) (6,199,683) 0 0 0 CASH FLOW FROM FINANCING ACTIVITIES: Redemptions of long-term debt (60,000,000) (6,700,000) (2,476,660) 0 EUA common share dividends paid (19,805,796) (3,150,000) 0 Subsidiary preferred dividends paid (1,987,500) Net increase (decrease) in short-term (4,675,000) (24,585,083) 13,932,612 33,848 (670,000) 211,563 Net Cash (Used in) Provided from Financing Act. (86,468,296) (31,285,083) 13,932,612 33,848 (6,296,660) 211,563 NET INCREASE (DECREASE) IN CASH 25,490,835 (1,689,944) 129,228 (12,108) 15,825 16,881 Cash and temporary cash investments at beginning of year 461,326 4,472,365 422,789 14,342 23,982 1,334 Cash and temporary cash investments at end of year $25,952,161 $2,782,421 $552,017 $2,234 $39,807 $18,215 Cash paid during the year for: Interest (net of amount capitalized) $16,188,035 $9,086,848 $2,289,084 $0 $2,465,088 $0 Income Taxes (refund) $22,445,502 ($1,171,503) ($2,281,407) ($31,454) $2,929,313 ($13,065) Conversion of investments in energy savings projects to notes and leases receivable $4,528,788 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL DECEMBER 31, 1998
Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Eliminations Associates Corporation Company Corporation Balance of retained earnings at beginning of year $56,061,427 $102,984,222 56,061,427 594,346 10,980,709 2,745,924 Additions: Net Income (Loss) 37,015,419 32,570,328 34,710,335 261,843 4,904,554 2,857,140 Total 93,076,846 135,554,550 90,771,762 856,189 15,885,263 5,603,064 Deductions: Dividends: Preferred - subsidiaries 2,305,084 288,750 28,834 Common - subsidiaries 26,284,950 400,000 1,049,154 1,880,000 Common - registrant - $1.660 per share 33,923,775 33,923,775 Total Dividends 36,228,859 26,284,950 33,923,775 400,000 1,337,904 1,908,834 Other 382,482 382,482 382,482 Total Deductions 36,611,341 26,667,432 34,306,257 400,000 1,337,904 1,908,834 Balance of retained earnings at end of period 56,465,505 108,887,118 56,465,505 456,189 14,547,359 3,694,230 Other Paid-In Capital at Beginning of yr. $219,156,027 $219,156,027 Additions: Amortization restricted stock costs 1,562,861 1,562,861 Other 65,301 65,301 Deductions: Restricted Stock Issue and Grant Provision 1,746,366 1,746,366 Currency Conversion 78,484 78,484 Other Paid-In Capital at End of Year $218,959,339 $218,959,339 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL (Continued) DECEMBER 31, 1998
EUA EUA Eastern EUA Energy EUA EUA Telecomm- Edison Cogenex Investment Energy Ocean State unications Consolidated Consolidated Consolidated Corporation Corporation Corporation Balance of retained earnings at beginning of year 98,978,720 477,171 (16,782,735) 193,297 5,821,604 (24,814) Additions: Net Income (Loss) 29,705,800 (1,298,691) (5,286,472) (228,383) 4,065,944 (106,323) Total 128,684,520 (821,520) (22,069,207) (35,086) 9,887,548 (131,137) Deductions: Dividends: Preferred - subsidiaries 1,987,500 Common - subsidiaries 19,805,796 0 3,150,000 Common - registrant - $1.660 per share Total Dividends 21,793,296 0 3,150,000 0 Other 382,482 (2,135,717) 2,135,717 Total Deductions 22,175,778 (2,135,717) 2,135,717 0 3,150,000 Balance of retained earnings at end of period 106,508,742 1,314,197 (24,204,924) (35,086) 6,737,548 (131,137) Other Paid-In Capital at Beginning of Year Additions: Amortization restricted stock costs Sale of EUA Common Shares Deductions: Restricted Stock Issue and Grant Provision Currency Conversion Other Paid-In Capital at End of Year ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998 ASSETS
Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company Utility plant and other investments: Utility plant in service $741,902,200 $ $245,699,700 $496,202,500 Less accumulated provision for depreciation and amortization 252,301,216 96,143,250 156,157,966 Net utility plant in service 489,600,984 149,556,450 340,044,534 Construction work in progress 2,691,134 1,384,141 1,306,993 Net utility plant 492,292,118 150,940,591 341,351,527 Non-utility property 2,497,881 105,735 2,392,146 Less accumulated provision for depreciation 9,697 9,697 Net non-utility property 2,488,184 96,038 2,392,146 Investments in subsidiaries (at equity) 12,881,094 266,498,824 266,498,824 12,881,094 Other 56,083 10,405 45,678 Total Utility Plant and Other Investments 507,717,479 266,498,824 417,545,858 356,670,445 Current Assets: Cash and temporary cash investments 25,952,161 25,798,213 153,948 Accounts receivable - Net: Customers 24,685,525 22,706,500 1,979,025 Accrued unbilled revenue 6,716,389 6,225,533 490,856 Others 13,155,014 11,699,386 1,455,628 Accounts receivable - associated companies 18,628,277 64,892,768 16,883,047 66,637,998 Materials and supplies (at average cost): Fuel 5,970,589 5,970,589 Plant materials and operating supplies 3,993,798 1,952,793 2,041,005 Other current assets 4,753,504 692,576 4,060,928 Total Current Assets 103,855,257 64,892,768 85,958,048 82,789,977 Deferred Debits: Unamortized debt expense 1,808,956 1,787,183 21,773 Unrecovered regulatory plant costs (Note A) 58,502,840 58,502,840 Other deferred debits 159,737,739 16,751,760 142,985,979 Total Deferred Debits 220,049,535 18,538,943 201,510,592 Total Assets $831,622,271 $331,391,592 $522,042,849 $640,971,014 ( ) Denotes Contra
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
LIABILITIES Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company Capitalization: Common equity $225,998,388 $147,017,241 $225,998,388 $147,017,241 Redeemable preferred stock - net 29,664,502 29,664,502 Redeemable preferred stock of subsidiaries - net 1,500,000 1,500,000 Preferred stock redemption cost (1,670,209) (1,670,209) Long-term debt - net 162,549,952 117,981,583 162,549,952 117,981,583 Total Capitalization 416,542,633 266,498,824 416,542,633 266,498,824 Current Liabilities: Accounts payable 25,502,231 1,303,109 24,199,122 Accounts payable - associated companies 8,987,251 59,782,899 55,605,640 13,164,510 Customer deposits 1,408,279 1,408,279 Taxes accrued 17,360,688 (2,230,443) 19,591,131 Interest accrued 3,560,655 5,109,869 3,560,655 5,109,869 Other current liabilities 17,316,856 9,622,282 7,694,574 Total Current Liabilities 74,135,960 64,892,768 69,269,522 69,759,206 Other Liabilities: Unamortized investment credit 13,149,663 3,309,800 9,839,863 Other deferred credits and other liabilities 208,150,839 12,845,113 195,305,726 Total Other Liabilities 221,300,502 16,154,913 205,145,589 Accumulated deferred taxes 119,643,176 20,075,781 99,567,395 Commitments and contingencies (Note J) Total Liabilities and Capitalization $831,622,271 $331,391,592 $522,042,849 $640,971,014 ( ) Denotes Contra
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATING STATEMENTS OF CAPITALIZATION DECEMBER 31, 1998
Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company Common Equity: Common shares $72,283,925 $58,600,000 $72,283,925 $ 58,600,000 Other paid-in capital 47,249,633 29,528,000 47,249,633 29,528,000 Common share expense (43,912) (43,912) Retained earnings 106,508,742 58,889,241 106,508,742 58,889,241 Total Common Equity 225,998,388 147,017,241 225,998,388 147,017,241 Redeemable Preferred: 6.625%, $100 par value, 300,000 shares 30,000,000 30,000,000 Redeemable preferred stock of subsidiaries 1,500,000 1,500,000 Expense, net of premium (335,498) (335,498) Preferred stock redemption cost (1,670,209) (1,670,209) Total Redeemable 27,994,293 1,500,000 27,994,293 1,500,000 Long-Term Debt: First Mortgage and Collateral Trust Bonds: 6.875% due 2003 40,000,000 40,000,000 8% due 2023 40,000,000 40,000,000 6.35% due 2003 8,000,000 8,000,000 7.78% Secured medium-term notes due 2002 35,000,000 35,000,000 Pollution Control Revenue Bonds: 5.875% due 2008 40,000,000 40,000,000 Debenture Bonds: 8% due 2000 8,500,000 8,500,000 8.25% due 2003 12,800,000 12,800,000 10% due 2008 9,275,000 9,275,000 12.375% due 2013 30,000,000 30,000,000 10.125% due 2008 27,406,583 27,406,583 9% due 2020 5,000,000 5,000,000 9.375% due 2020 25,000,000 25,000,000 Unamortized (Discount) - Net (450,048) (450,048) Total Long-Term Debt 162,549,952 117,981,583 162,549,952 117,981,583 Total Capitalization $416,542,633 $266,498,824 $416,542,633 $266,498,824
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATING INCOME STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company Operating Revenues $408,229,510 $176,055,969 $259,617,863 $324,667,616 Operating Expenses: Operation 287,804,170 176,055,969 216,760,369 247,099,770 Maintenance 14,062,986 4,904,932 9,158,054 Depreciation and amortization 29,636,098 10,636,025 19,000,073 Taxes other than income 10,779,967 4,604,408 6,175,559 Income Taxes - Current 34,706,644 4,728,205 29,978,439 - Deferred (16,389,383) 5,547,986 (21,937,369) Total Operating Expenses 360,600,482 176,055,969 247,181,925 289,474,526 Operating Income 47,629,028 12,435,938 35,193,090 Other Income and Deductions: Interest and dividend income 616,157 21,725,724 20,219,085 2,122,796 Equity in earnings of jointly-owned companies 1,389,623 15,529,886 15,529,886 1,389,623 Allowance for other funds used during construction 172,817 0 172,817 Other (deductions) income - net (2,261,435) (788,193) (1,473,242) Total Other Income (82,838) 37,255,610 34,960,778 2,211,994 Income Before Interest Charges 47,546,190 37,255,610 47,396,716 37,405,084 Interest Charges: Interest on long-term debt 13,072,670 19,973,119 13,072,670 19,973,119 Amortization of debt expense and premium 1,591,357 429,801 1,161,556 Other interest expense (principally short-term notes) 3,437,747 1,752,605 4,349,442 840,910 Allowance for borrowed funds used during construction - (credit) (261,384) (160,997) (100,387) Total Interest Charges 17,840,390 21,725,724 17,690,916 21,875,198 Net Income 29,705,800 15,529,886 29,705,800 15,529,886 Preferred Dividends Requirement 1,987,500 1,987,500 Earnings Available for Common Stockholders $27,718,300 $15,529,886 $27,718,300 $15,529,886 Weighted average shares outstanding 2,891,357 Earnings per share $9.59 ( ) Denotes Contra
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company CASH FLOW FROM OPERATING ACTIVITIES: Net Income $29,705,800 $15,529,886 $29,705,800 $15,529,886 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 31,090,632 10,587,736 20,502,896 Amortization of nuclear fuel 1,265,313 1,265,313 Deferred taxes (17,278,806) 5,568,338 (22,847,144 Investment tax credit, net (2,817,622) (303,708) (2,513,914) Allowance for other funds used during construction (172,817) 0 (172,817) Other - Net 2,525,221 13,224,177 26,097,709 (10,348,311 Changes in Operating Assets and Liabilities: Accounts receivable (8,264,502) (25,378,328) (13,739,796) (19,903,034 Materials and supplies (1,982,062) (226,463) (1,755,599) Accounts payable 59,736 25,399,958 17,008,600 8,451,094 Accrued taxes 15,036,097 (3,500,109) 18,536,206 Other - net 1,283,766 (21,631) (4,664,720) 5,926,855 Net Cash Provided from Operating Activities 50,450,756 28,754,062 66,533,387 12,671,431 CASH FLOW FROM INVESTING ACTIVITIES: Construction expenditures (14,047,091) (9,554,389) (4,492,702) Proceeds from divestiture of generation assets 75,306,788 0 75,306,788 Decrease in other investments 248,678 55,000,000 55,000,000 248,678 Net Cash Provided From Investing Activities 61,508,375 55,000,000 45,445,611 71,062,764 CASH FLOW FROM FINANCING ACTIVITIES: Redemptions: Long-term debt (60,000,000) (54,729,382) (60,000,000) (54,729,382 Eastern Edison common share dividends paid (19,805,796) (28,774,480) (19,805,796) (28,774,480 Preferred dividends paid (1,987,500) (250,200) (1,987,500) (250,200) Net Decrease in short-term debt (4,675,000) (4,675,000) Net Cash (Used In) Financing Activities (86,468,296) (83,754,062) (86,468,296) (83,754,062 NET INCREASE IN CASH 25,490,835 25,510,702 (19,867) Cash and temporary cash investments at beginning of year 461,326 287,511 173,815 Cash and temporary cash investments at end of year $25,952,161 $0 $25,798,213 $153,948 Cash paid during the year for: Interest (Net of Amounts Capitalized) $16,188,035 $19,994,750 $16,258,847 $19,923,938 Income Taxes $22,445,502 $8,541,816 $13,903,686 ( ) Denotes Contra
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL DECEMBER 31, 1998
Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company Balance of retained earnings at begin. of yr. $98,978,720 $72,384,036 $98,978,720 $72,384,036 Additions: Net Income 29,705,800 15,529,886 29,705,800 15,529,886 Total 128,684,520 87,913,922 128,684,520 87,913,922 Deductions: Dividends: Preferred 1,987,500 250,200 1,987,500 250,200 Common 19,805,796 28,774,480 19,805,796 28,774,480 Total Dividends 21,793,296 29,024,680 21,793,296 29,024,680 Other 382,482 382,482 Total Deductions 22,175,778 29,024,680 22,175,778 29,024,680 Balance of retained earnings at end of period $106,508,742 $58,889,242 $106,508,742 $58,889,242 ( ) Denotes Contra
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
ASSETS EUA EUA EUA EUA EUA Day Matrix Cogenex Cogenex Nova Day (fka Day I & II Consolidated Eliminations (Division) (Division) (Division) (Division) Utility Plant and Other Investments: Utility plant in service $ $ $ $ $ $ Less accumulated provision for depreciation and amortization Net utility plant in service Construction work in progress Net utility plant Non-utility property 101,313,953 50,541,931 2,556,140 1,150,027 Less accumulated provision for depreciation 49,897,327 27,780,132 971,799 673,919 Net non-utility property 51,416,626 22,761,799 1,584,341 476,108 Investments in subsidiaries (at equity) 516,949 41,241,600 41,758,549 Excess of carrying values of investments in subsidiaries Notes receivable 26,395,990 23,396,887 Leases receivable 14,538,275 9,687,718 Other 11,769,143 6,167,797 Total Utility Plant and Other Invest. 104,636,983 41,241,600 103,772,750 1,584,341 476,108 Current Assets: Cash and temporary cash investments 2,782,421 (210,746) 1,359,116 Notes receivable 14,698,118 15,724,861 27,796,512 2,324,534 Leases receivable 1,681,574 733,806 Accounts receivable - Net: Customers 13,388,014 5,769,978 1,955,737 Accrued unbilled revenue Others 10,833,207 8,198,902 4,136 (293) Accounts receivable - associated companies 2,117,667 9,190,971 9,063,420 643,484 Materials and supplies (at average cost): Plant materials and operating supplies 827,311 15,353 197,874 486,707 Other current assets 2,038,807 1,711,594 3,673,313 45,994 Total Current Assets 48,367,119 26,627,426 55,040,538 6,530,875 486,414 Deferred Debits: Unamortized debt expense 271,606 271,606 Unrecovered regulatory plant costs Other deferred debits 3,912,067 2,518,735 1,118 Total Deferred Debits 4,183,673 2,790,341 1,118 Total Assets $157,187,775 $67,869,026 $161,603,629 $ $8,116,334 $962,522
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
ASSETS (CONTINUED) EUA EUA EUA EUA Cogene EUA NEM Cogenex Citizens West MUPA Inc. Canada Corporation Corporation (Partnership) Utility Plant and Other Investments: Utility plant in service $ $ $ $ $ Less accumulated provision for depreciation and amortization Net utility plant in service Construction work in progress Net utility plant Non-utility property 8,493,365 5,654 4,502,114 1,629,162 Less accumulated provision for depreciation 4,024,619 326 1,017,072 683,229 Net non-utility property 4,468,746 5,328 3,485,042 945,933 Investments in subsidiaries (at equity) Excess of carrying values of investments in subsidiaries Notes receivable (22,777) 2,845,721 Leases receivable 1,940,266 Other 8,353 22,305 100,259 4,869,186 (3,978) Total Utility Plant and Other Investments 4,477,099 4,856 3,585,301 10,601,106 (3,978) Current Assets: Cash and temporary cash investments 18,120 317,043 27,488 157,788 Notes receivable 32,834 151,573 Leases receivable 293,406 Accounts receivable - Net: Customers 784,345 301,740 1,374,791 1,102,218 (15,552) Accrued unbilled revenue Others (86,047) 95 550,316 331,582 Accounts receivable - associated companies 67,253 124,415 Materials and supplies (at average cost): Plant materials and operating supplies 127,377 Other current assets 427 4,950 25,717 Total Current Assets 716,418 652,139 2,024,798 2,314,076 (15,552) Deferred Debits: Unamortized debt expense Unrecovered regulatory plant costs Other deferred debits 1,062,379 10,924 202,351 64,924 15,552 Total Deferred Debits 1,062,379 10,924 202,351 64,924 15,552 Total Assets $6,255,896 $667,919 $5,812,450 $12,980,106 ($3,978)
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998 ASSETS (CONTINUED) EUA EUA EUA EUA WestCoast FRC II EC&S I EC&S II (Partn.) (Partn.) (Partn.) (Partnership) Utility Plant and Other Investments: Utility plant in service $ $ $ $ Less accumulated provision for depreciation and amortization Net utility plant in service Construction work in progress Net utility plant Non-utility property 2,038,920 77,490 11,742,210 18,576,940 Less accumulated provision for depreciation 1,945,691 77,490 3,213,964 9,509,086 Net non-utility property 93,229 8,528,246 9,067,854 Investments in subsidiaries (at equity) Excess of carrying values of investments in subsidiaries Notes receivable 176,159 Leases receivable 1,094,303 1,815,988 Other 238,967 82,325 220,156 63,773 Total Utility Plant and Other Investments 332,196 82,325 10,018,864 10,947,615 Current Assets: Cash and temporary cash investments 89,182 52,909 561,381 410,140 Notes receivable 117,526 Leases receivable 145,842 508,520 Accounts receivable - Net: Customers 13,917 (35,602) 1,100,890 1,035,552 Accrued unbilled revenue Others 735,789 214,574 884,153 Accounts receivable - associated companies 285,607 1,124,459 Materials and supplies (at average cost): Plant materials and operating supplies Other current assets Total Current Assets 956,414 17,307 2,308,294 3,962,824 Deferred Debits: Unamortized debt expense Unrecovered regulatory plant costs Other deferred debits 35,603 481 Total Deferred Debits 35,603 481 Total Assets $1,288,610 $135,235 $12,327,639 $14,910,439
The accompanying notes are an integral part of the financial statements. EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
LIABILITIES EUA EUA EUA EUA EUA Day Matrix Cogenex Cogenex Nova Day (fka Day I&II Consolidated Eliminations (Division) (Division) (Division) (Division) Capitalization: Common equity $22,142,227 $41,251,598 $48,911,875 $ $1,874,631 ($2,336,588) Non-redeemable preferred stock of subsidiaries Redeemable preferred stock of subsidiaries 75 Preferred stock redemption cost Partnerships' capital 26,218,993 Long-term debt - net 77,400,000 77,400,000 Total Capitalization 125,761,295 41,251,598 126,311,875 1,874,631 (2,336,588) Current Liabilities: Preferred stock sinking fund requirements Long-term debt due within one year 6,700,000 6,700,000 Notes payable 16,108,438 15,724,861 16,160,000 1,801,059 3,001,070 Accounts payable 1,505,513 678,503 760,189 Accounts payable - associated companies 1,132,715 9,190,972 3,343,611 2,880,581 230,003 Customer deposits Taxes accrued 62,725 5,683 14,457 Interest accrued 1,187,797 1,711,595 1,187,797 479,302 68,037 Dividends declared Other current liabilities 5,354,453 4,160,988 41,466 Total Current Liabilities 32,051,641 26,627,428 32,236,582 5,977,054 3,299,110 Deferred Credits: Unamortized investment credit Other deferred credits 3,706,643 (10,000) 3,198,323 264,649 Total Deferred Credits 3,706,643 (10,000) 3,198,323 264,649 Accumulated deferred taxes (4,331,804) (143,151) Commitments and contingencies Total Liabilities and Capitalization $157,187,775 $67,869,026 $161,603,629 $ $8,116,334 $962,522 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
LIABILITIES (CONTINUED) EUA EUA EUA EUA Cogenex NEM Cogenex Citizens West Inc. Canada Corporation Corporation Capitalization: Common equity $9,134,328 $706,905 $445,607 $4,657,067 Non-redeemable preferred stock of subsidiaries Redeemable preferred stock of subsidiaries 75 Preferred stock redemption cost Partnerships' capital Long-term debt - net Total Capitalization 9,134,328 706,905 445,682 4,657,067 Current Liabilities: Preferred stock sinking fund requirements Long-term debt due within one year Notes payable 150,000 (52,320) 3,718,659 7,054,831 Accounts payable 5,016 (95,985) 106,176 42,407 Accounts payable - associated companies 421,081 (174,169) 681,444 1,275,834 Customer deposits Taxes accrued 34,173 179 8,233 Interest accrued 450,613 713,643 Dividends declared Other current liabilities 178,886 218,223 111,697 Total Current Liabilities 576,097 (109,415) 5,175,294 9,206,645 Deferred Credits: Unamortized investment credit Other deferred credits (8) 70,429 41,865 135 Total Deferred Credits (8) 70,429 41,865 135 Accumulated deferred taxes (3,454,521) 149,609 (883,741) Commitments and contingencies Total Liabilities and Capitalization $6,255,896 $667,919 $5,812,450 $12,980,106 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
LIABILITIES (CONTINUED) EUA EUA EUA EUA EUA MUPA WestCoast FRC II EC&S I EC&S II (Partn.) (Partn.) (Partn.) (Partn.) (Partnership) Capitalization: Common equity $ $ $ $ $ Non-redeemable preferred stock of subsidianies Redeemable preferred stock of subsidianies Preferred stock redemption cost Partnerships' capital 23,720 1,018,395 30,592 11,807,219 13,339,067 Long-term debt - net Total Capitalization 23,720 1,018,395 30,592 11,807,219 13,339,067 Current Liabilities: Preferred stock sinking fund requirments Long-term debt due within one year Notes payable Accounts payable 290 8,917 Accounts payable - associated companies (3,948) 246,398 82,325 199,278 1,141,249 Customer deposits Taxes accrued Interest accrued Dividends declared Other current liabilities (23,750) 23,817 22,318 236,188 384,620 Total Current Liabilities (27,698) 270,215 104,643 435,756 1,534,786 Deferred Credits: Unamortized investment credit Other deferred credits 84,664 36,586 Total Deferred Credits 84,664 36,586 Accumulated deferred taxes Commitments and contingencies Total Liabilities and Capitalization ($3,978) $1,288,610 $135,235 $12,327,639 $14,910,439 0 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CAPITALIZATION DECEMBER 31, 1998
EUA EUA EUA EUA EUA Day Matrix Cogenex Cogenex Nova Day (fka Day I&II Consolidated Eliminations (Division) (Division) (Division) (Division) Common Equity: Common Shares, $.01 par value $100 $1,400 $100 $ $ $ Other Paid-In Capital 47,046,923 12,574,016 45,949,391 1,097,532 Retained Earnings 1,314,197 28,676,182 2,962,384 777,099 (2,336,588) Total Common Equity 48,361,220 41,251,598 48,911,875 1,874,631 (2,336,588) Non-Redeemable Preferred: $.01 par value, 7,500 shares (1) 75 Total Non-Redeemable 75 Long-Term Debt: Unsecured Notes: 7.00% due 2000 50,000,000 50,000,000 9.6% due 2001 9,600,000 9,600,000 10.56% due 2005 24,500,000 24,500,000 84,100,000 84,100,000 Less portion due within one year 6,700,000 6,700,000 Total Long-Term Debt 77,400,000 77,400,000 Total Capitalization $125,761,295 $41,251,598 $126,311,875 $ $1,874,631 ($2,336,588) (1) The Preferred Stock shall be entitled to an annual dividend per share at a rate equal to 33% of the net income of Citizens Conservation Services divided by 7,500. The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED) DECEMBER 31, 1998
EUA EUA EUA EUA Cogenex NEM Cogenex Citizens West Inc. Canada Corporation Corporation Common Equity: Common Shares, $.01 par value $1,100 $100 $100 $100 Other Paid-In Capital 7,052,050 5,521,966 Retained Earnings 2,081,178 706,805 445,507 (864,999) Total Common Equity 9,134,328 706,905 445,607 4,657,067 Non-Redeemable Preferred: $.01 par value, 7,500 shares (1) 75 Total Non-Redeemable 75 Long-Term Debt: Unsecured Notes: 7.00% due 2000 9.6% due 2001 10.56% due 2005 Less portion due within one year Total Long-Term Debt Total Capitalization $9,134,328 $706,905 $445,682 $4,657,067
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED) DECEMBER 31, 1998
EUA EUA EUA EUA EUA MUPA WestCoast FRC II EC&S I EC&S II (Partn.) (Partn.) (Partn.) (Partn.) (Partnership) Common Equity: Common Shares, $.01 par value $ $ $ $ $ Other Paid-In Capital 0 Retained Earnings 23,720 1,018,395 30,592 11,807,219 13,339,067 Total Common Equity 23,720 1,018,395 30,592 11,807,219 13,339,067 Non-Redeemable Preferred: $.01 par value, 7,500 shares (1) Total Non-Redeemable Long-Term Debt: Unsecured Notes: 7.00% due 2000 9.6% due 2001 10.56% due 2005 Less portion due within one year Total Long-Term Debt Total Capitalization $23,720 $1,018,395 $30,592 $11,807,219 $13,339,067 (1 The Preferred Stock shall be entitled to an annual dividend per share at a rate equal to 33% of the net income of Citizens Conservation Services divided by 7,500.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING INCOME STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
EUA EUA EUA EUA EUA Day Matrix Cogenex Cogenex Nova Day (fka Day I&II Consolidated Eliminations (Division) (Division) (Division) (Division) Operating Revenues $54,775,898 $ $23,590,482 $1,331,498 $9,000,149 $10,798 Operating Expenses: Operation 38,212,310 17,914,005 1,851,988 8,053,398 1,179,788 Maintenance 1,164,195 596,661 Depreciation and amortization 11,760,691 6,544,469 44,121 94,942 230,008 Taxes - Other than income 799,303 329,712 56,251 218,044 8,593 - Income (credit) (1,225,268) (1,810,078) (387) - Deferred (891,761) (1,243,998) Total Operating Expenses 49,819,470 22,330,771 1,951,973 8,366,384 1,418,389 Operating Income 4,956,428 1,259,711 (620,475) 633,765 (1,407,591) Other Income and Deductions: Interest and dividend income 6,032,720 906,785 5,743,043 (41) Equity in earnings of jointly-owned companies (9,854) 5,835,952 5,826,098 Allowance for other funds used during construct. Loss on Disposal of Cogeneration Operations (3,171,904) (3,171,904) Income Tax Impact of Loss on Disposal of Cogeneration Operations 1,110,166 1,110,166 Other (deductions) income - net (949,439) (1,221,023) 22,063 (37,386) (720) Total Other Income (Deductions) 3,011,690 6,742,737 8,286,380 22,022 (37,386) (720) Income (Loss) Before Interest Charges 7,968,118 6,742,737 9,546,091 (598,453) 596,379 (1,408,311) Interest Charges: Interest on long-term debt 7,473,149 7,473,149 Amortization of debt expense and premium Other interest expense (principally short-term notes) 2,027,380 906,785 1,929,065 37,978 111,462 41,543 Allowance for borrowed funds used during construction - (credit) (233,720) (158,800) Total Interest Charges 9,266,809 906,785 9,243,414 37,978 111,462 41,543 Net Income (Loss) before preferred return (1,298,691) 5,835,952 302,677 (636,431) 484,917 (1,449,854) Preferred Return Requirement Net (Loss) Income ($1,298,691) $5,835,952 $302,677 ($636,431) $484,917 ($1,449,854) The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING INCOME STATEMENTS (CONTINUED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
EUA EUA EUA EUA Cogenex NEM Cogenex Citizens West Inc. Canada Corporation Corporation Operating Revenues $3,663,773 $126,352 $5,452,291 $3,543,409 Operating Expenses: Operation 55,722 108,152 4,166,881 3,463,535 Maintenance 20,148 98,274 102,752 Depreciation and amortization 701,429 15,194 527,358 579,840 Taxes - Other than income 69 1,543 91,523 95,168 - Income (credit) 700,389 (2,452) 38,381 (151,121) - Deferred 295,719 83,164 (26,646) Total Operating Expenses 1,773,476 122,437 5,005,581 4,063,528 Operating Income 1,890,297 3,915 446,710 (520,119) Other Income and Deductions: Interest and dividend income 192,549 436,473 Equity in earnings of jointly-owned companies Allowance for other funds used during construction Loss on Disposal of Cogeneration Operations Income Tax Impact of Loss on Disposal of Cogeneration Operations Other (deductions) income - net 15 (188,592) (128) (3,163) Total Other Income (Deductions) 15 3,957 (128) 433,310 Income (Loss) Before Interest Charges 1,890,312 7,872 446,582 (86,809) Interest Charges: Interest on long-term debt Amortization of debt expense and premuim Other interest expense (principally short-term notes) 83,348 274,648 451,033 Allowance for borrowed funds used during construction - (credit) (50,120) (24,800) Total Interest Charges 83,348 224,528 426,233 Net Income (Loss) before preferred return 1,890,312 (75,476) 222,054 (513,042) Preferred Return Requirement Net (Loss) Income $1,890,312 ($75,476) $222,054 ($513,042) The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING INCOME STATEMENTS (CONTINUED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
EUA EUA EUA EUA EUA MUPA WestCoas FRC II EC&S I EC&S II (Partn.) (Partn.) (Partn.) (Partn.) (Partnership) Operating Revenues $ $416,598 $392,042 $2,241,615 $5,006,891 Operating Expenses: Operation 113 5,788 258,700 1,154,240 Maintenance 37,658 66,910 241,792 Depreciation and amortization 171,383 805,419 2,046,528 Taxes - Other than income (1,600) - Income (credit) - Deferred Total Operating Expenses 113 214,829 (1,600) 1,131,029 3,442,560 Operating Income (113) 201,769 393,642 1,110,586 1,564,331 Other Income and Deductions: Interest and dividend income 65,591 75,670 136,347 289,873 Equity in earnings of jointly-owned companies Allowance for other funds used during construction Loss on Disposal of cogeneration operations Income Tax Impact of Loss on Disposal of Cogeneration Operations Other (deductions) income - net (100) 1,358 (100) 28,587 449,751 Total Other Income (Deductions) (100) 66,949 75,570 164,934 739,624 Income (Loss) Before Interest Charges (213) 268,718 469,212 1,275,520 2,303,955 Interest Charges: Interest on long-term debt Amortization of debt expense and premuim Other interest expense (principally short-term notes) 5,088 Allowance for borrowed funds used during construction - (credit) Total Interest Charges 5,088 Net Income (Loss) before preferred return (213) 268,718 469,212 1,270,432 2,303,955 Preferred Return Requirement Net (Loss) Income ($213) $268,718 $469,212 $1,270,432 $2,303,955 The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
EUA EUA EUA EUA EUA Day Matrix Cogenex Cogenex Nova Day (fka Day I&II Consolidated Eliminations (Division) (Division) (Division) (Division) CASH FLOW FROM OPERATING ACTIVITIES: Net (Loss) Income ($1,298,691) $5,835,952 $302,677 ($636,431) $484,917 ($1,449,854) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Acticities Depreciation and amortization 11,961,370 6,745,147 44,121 94,940 230,008 Deferred taxes (628,047) (980,284) Gains on sales of investments in energy savings projects paid for with notes and leases rec. (2,825,578) (2,060,570) Non - cash costs of energy savings project sales 12,827,388 9,061,792 Pension liability 21,009 18,696 2,313 Amortization of deferred revenues 10,818 Collections and sales of project notes and leases receivable 17,260,531 14,812,109 Undistributed Equity earnings of subsidiaries 6,687,825 6,687,825 Other - net 1,625,012 1,542,117 3,307,776 (49,619) (416,330) (1) Net Changes to Working Capital: Accounts receivable 4,231,839 (3,033,769) (2,846,243) 3,160,155 (959,227) 293 Materials and supplies 2,787 48,215 2,418 27,666 (75,512) Accounts payable (1,767,098) 3,024,871 1,411,844 (1,268,951) 3,046,599 215,003 Accrued taxes (192,110) (39,267) (12,853) (12,078) Accrued interest (79,084) (549,456) (79,084) (1,413,187) 98,355 40,405 Other - net (191,922) 559,457 234,911 (5,450) 24,472 Net Cash Provided from (Used in) Operating Act. 40,958,224 14,066,997 36,625,544 (177,484) 2,389,314 (1,039,658) CASH FLOW FROM INVESTING ACTIVITIES: Expenditures for investments in energy savings projects (26,774,878) (83,725) (19,644,557) (11,462) (1,311,052) Collections on notes and leases receivable 11,558,419 6,319,996 2,138 Proceeds from sale of Assets 3,853,374 1,989,651 3,860,139 1,982,886 Investments in subsidiaries Net Cash Provided from (Used in) Investing Act.(11,363,085) 1,905,926 (9,464,422) 1,971,424 (1,308,914) CASH FLOW FROM FINANCING ACTIVITIES: Redemption: Long-term debt (6,700,000) (6,700,000) Premium on reacquisition and financing expenses Dividends declared (3,450,000) Capital contribution - EUA Partner's contribution(withdrawal) (9,278,357) Net increase (decrease) in short-term debt (24,585,083) (3,244,566) (21,390,000) (1,752,150) 128,987 1,039,658 Net Cash Provided from (Used in) Fin. Act. (31,285,083) (15,972,923) (28,090,000) (1,752,150) 128,987 1,039,658 NET (DECREASE) INCREASE IN CASH (1,689,944) (928,878) 41,790 1,209,387 Cash and temporary cash investments at beginning of year 4,472,365 718,132 (41,790) 149,729 Cash and temporary cash investments at end of year $2,782,421 $ ($210,746) $ $1,359,116 $ Cash paid during the year for: Interest (net of amounts capitalized) $9,086,848 $9,086,848 $0 Income Taxes ($1,171,503) ($1,778,812) Conversion of investments in energy saving projects to notes and leases receivable $4,528,788 $3,757,867 ( ) Denotes contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
EUA EUA EUA EUA NEM Cogenex Citizens Cogenex West Inc. Canada Corporation Corporation CASH FLOW FROM OPERATING ACTIVITIES: Net (Loss) Income $1,890,312 ($75,476) $222,054 ($513,042) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities Depreciation and amortization 701,431 15,195 527,360 579,841 Deferred taxes 295,719 83,164 (26,646) Gains on sales of investments in energy savings projects paid for with notes and leases receivable (573,318) Non - cash costs of energy savings projects sales 670,037 1,724,790 Pension liability Amortization of deferred revenues (124,588) 8,900 41,842 Collections and sales of project notes and leases receivable 759,242 Undistributed Equity earnings of subsidiaries Other - net (5) 38,354 (79,081) 288,830 Net Changes to Working Capital: Accounts receivable 46,964 984,286 1,226,028 1,597,762 Materials and supplies Accounts payable 472,142 (3,509,975) 139,919 (313,785) Accrued taxes (113,994) 120 (14,038) Accrued interest 274,638 450,333 Other - net 191,938 178,185 125,087 Net Cash Provided from (Used in) Operating Activities 3,281,975 (2,460,772) 3,284,266 4,085,056 CASH FLOW FROM INVESTING ACTIVITIES: Expenditures for investments in energy savings projects (42,827) (1,126,606) (3,433,686) Collections on notes and leases receivable 5,236,285 Proceeds from sale of Assets Investments in subsidiaries Net Cash Provided from (Used in) Investing activities 5,193,458 (1,126,606) (3,433,686) CASH FLOW FROM FINANCING ACTIVITIES: Redemption: Long-term debt Premium on reacquisition and financing expenses Dividends declared (3,450,000) Capital contribution - EUA Partner's contribution(withdrawal) Net increase (decrease) in short-term debt (198,222) (3,198,495) (1,709,341) (732,987) Net Cash Provided from (Used in) Financing Activities (3,648,222) (3,198,495) (1,709,341) (732,987) NET (DECREASE) INCREASE IN CASH (366,247) (465,809) 448,319 (81,617) Cash and temporary cash investments at beginning of year 384,367 782,852 (420,831) 239,405 Cash and temporary cash investments at end of year $18,120 $317,043 $27,488 $157,788 Cash paid during the year for: Interest (net of amounts capitalized) $0 $0 $0 Income Taxes $754,396 $39,674 ($186,761) Conversion of investments in energy saving projects to notes and leases receivable $0 $522,229 ( ) Denotes contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
EUA EUA EUA EUA EUA MUPA WestCoast FRC II EC&S I EC&S II (Partn.) (Partn.) (Partn.) (Partn. (Partnership) CASH FLOW FROM OPERATING ACTIVITIES: Net (Loss) Income ($213) $268,718 $469,212 $1,270,432 $2,303,955 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Depreciation and amortization 171,383 805,418 2,046,526 Deferred taxes Gains on sales of investments in energy savings projects paid for with notes and lease receivable (204,838) 13,148 Non - cash costs of energy savings projects sales 375,527 6,000 989,242 Pension liability Amortization of deferred revenues 84,664 Collections and sales of project notes and lease receivable 61,095 479,276 1,148,809 Undistributed Equity earnings of subsidiaries Other - net (15,552) 2 (35,603) 100,002 28,356 Net Changes to Working Capital: Accounts receivable 39,302 (596,646) 624,364 (561,552) (1,517,416) Materials and supplies Accounts payable (3,949) 244,481 82,325 110,168 631,952 Accrued taxes Accrued interest Other - net (23,750) (393,593) 22,318 112,008 (98,591) Net Cash Provided from (Used in) Operating Activities (4,162) 130,967 1,162,616 2,201,578 5,545,981 CASH FLOW FROM INVESTING ACTIVITIES: Expenditures for investments in energy savings projects 3,978 (202,740) (82,325) (167,799) (839,527) Collections on notes and leases receivable Proceeds from sale of Assets Investments in subsidiaries Net Cash Provided from (Used in) Investing Activities 3,978 (202,740) (82,325) (167,799) (839,527) CASH FLOW FROM FINANCING ACTIVITIES: Redemption: Long-term debt Premium on reacquisition and finacing expenses Dividends declared Capital contribution - EUA Partner's contribution(withdrawal) (500,000) (1,378,357) (2,100,000) (5,300,000) Net increase (decrease) in short-term debt (17,099) Net Cash Provided from (Used in) Finacing Activities (500,000) (1,378,357) (2,117,099) (5,300,000) NET (DECREASE) INCREASE IN CASH (184) (571,773) (298,066) (83,320) (593,546) Cash and temporary cash investments at beginning of year 184 660,955 350,975 644,701 1,003,686 Cash and temporary cash investments at end of year $ $89,182 $52,909 $561,381 $410,140 Cash paid during the year for: Interest (net of amounts capitalized) $0 Income Taxes Conversion of investments in energy savings projects to notes and leases receivable $202,934 $45,758 ( ) Denotes contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL DECEMBER 31, 1998
EUA EUA EUA EUA EUA Day Matrix Cogenex Cogenex Nova Day (fka Day I&II Consolidated Eliminations (Division) (Division) (Division) (Division) Balance of retained earnings at beginning or year $477,171 $32,197,071 $2,659,707 ($1,499,286) $292,182 ($886,734) Additions: Net Income (Loss) ($1,298,691) 5,835,952 302,677 (636,431) 484,917 (1,449,854) Partners Capital contribution Total (821,520) 38,033,023 2,962,384 (2,135,717) 777,099 (2,336,588) Deductions: Dividends: Common - subsidiaries Partners withdrawals 9,278,357 Other deductions (2,135,717) 78,484 (2,135,717) Total (2,135,717) 9,356,841 (2,135,717) Balance of retained earnings at end of period 1,314,197 28,676,182 2,962,384 777,099 (2,336,588) Other Paid-In Capital at beginning of year 47,125,406 16,024,016 46,027,874 1,097,532 Additions: Other Total 47,125,406 16,024,016 46,027,874 1,097,532 Deductions: Foreign currency translation adjustments 78,483 78,483 Return of Capital 3,450,000 Total 78,483 3,450,000 78,483 Other Paid-In Capital at end of period $47,046,923 $12,574,016 $45,949,391 $1,097,532 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL (CONTINUED) DECEMBER 31, 1998
EUA EUA EUA EUA Cogenex NEM Cogenex Citizens West Inc. Canada Corporation Corporation Balance of retained earnings at beginning of year $190,866 $860,765 $223,453 ($351,957) Additions: Net Income (Loss) 1,890,312 (75,476) 222,054 (513,042) Partners Capital contribution Total 2,081,178 785,289 445,507 (864,999) Deductions: Dividends: Common - subsidiaries Partners withdrawals Other deductions 78,484 Total 78,484 Balance of retained earnings at end of period 2,081,178 706,805 445,507 (864,999) Other Paid-In Capital at beginning of year 10,502,050 5,521,966 Additions: Other Total 10,502,050 5,521,966 Deductions: Foreign currency translation adjustments Return of Capital 3,450,000 Total 3,450,000 Other Paid-In Capital at end of period $7,052,050 $5,521,966 ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EUA COGENEX CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL (CONTINUED) DECEMBER 31, 1998
EUA EUA EUA EUA EUA MUPA WestCoast FRC II EC&S I EC&S II (Partn.) (Partn.) (Partn.) (Partn.) (Partnership) Balance of retained earnings at beginng of year $23,933 $1,249,677 $939,737 $12,636,787 $16,335,112 Additions: Net Income (Loss) (213) 268,718 469,212 1,270,432 2,303,955 Partners Capital contribution Total 23,720 1,518,395 1,408,949 13,907,219 18,639,067 Deductions: Dividends: Common - subsidiaries Partners withdrawals 500,000 1,378,357 2,100,000 5,300,000 Other deductions Total 500,000 1,378,357 2,100,000 5,300,000 Balance of retained earnings at end of period 23,720 1,018,395 30,592 11,807,219 13,339,067 Other Paid-In Capital at beginning of year Additions: Other Total Deductions: Foreign currency translation adjustments Return of Capital Total Other Paid-In Capital at end of period ( ) Denotes Contra The accompanying notes are an integral part of the financial statements.
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
EUA EUA Energy Energy Investment Investment EUA ASSETS Consolidated Eliminations Corporation Transcapacity Utility plant and other investments: Non-utility property $3,307,671 $ $ $1,778,761 Less accumulated provision for depreciation 2,135,122 1,239,057 Net non-utility property 1,172,549 539,704 Investments in subsidiaries (at equity) 7,235,277 (15,785,432) (12,475,322) Other investments & notes receivable 2,478,052 2,596,151 Total Utility Plant and Other Investments 10,885,878 (15,785,432) (9,879,171) 539,704 Current Assets: Cash and temporary cash investments 552,017 15,641 504,147 Notes receivable 11,205,958 31,193,965 34,068,965 Accounts receivable - Net 3,065,713 201,965 1,451,118 Accounts receivable - associated companies 633,581 223,851 222,565 100 Other current assets 3,080,919 1,023,933 1,139,485 39,018 Total Current Assets 18,538,188 32,441,749 35,648,621 1,994,383 Deferred Debits: Other deferred debits 941,539 927,362 10,305 Total Deferred Debits 941,539 927,362 10,305 Total Assets $30,365,605 $16,656,317 $26,696,812 $2,544,392 ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
Eastern EUA Unicord EUA Renova Compression ASSETS (CONTINUED) Corporation Bioten Services Utility plant and other investments: Non-utility property $ $ $1,528,910 $ Less accumulated provision for depreciation 896,065 Net non-utility property 632,845 Investments in subsidiaries (at equity) 317,539 3,607,628 Other investments & notes receiveivable 53,672 (186,000) 14,229 Total Utility Plant and Other Investments 317,539 3,661,300 446,845 14,229 Current Assets: Cash and temporary cash investments 32,229 Notes receivable 8,258,000 72,958 Accounts receivable - Net 456 596,837 758,251 57,086 Accounts receivable - associated companies 1,186 633,581 Other current assets 1,967,983 958,366 Total Current Assets 1,642 10,822,820 2,455,385 57,086 Deferred Debits: Other deferred debits 3,872 Total Deferred Debits 3,872 Total Assets $319,181 $14,484,120 $2,906,102 $71,315 ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
EUA EUA Energy Energy Investment Investment EUA LIABILITIES Consolidated Eliminations Corporation Transcapacity Capitalization: Common equity ($24,203,924 ($15,785,432 ($24,203,924 ($8,864,744) Total Capitalization (24,203,924) (15,785,432) (24,203,924) (8,864,744) Current Liabilities: Notes Payable 51,779,436 31,193,965 51,216,713 12,477,641 Accounts payable 150,930 8,166 22,173 Accounts payable - associated companies 1,666,815 223,851 78,214 20,765 Taxes accrued 3,647 Interest accrued 2,326,419 1,023,933 822,601 113,409 Other current liabilities 148,639 181,900 Total Current Liabilities 56,075,886 32,441,749 52,125,694 12,815,888 Deferred Credits: Other deferred credits and other liabilities (897,024) (1,156,669) Total Deferred Credits (897,024) (1,156,669) Accumulated deferred taxes (609,333) (1,224,958) (250,083) Commitments and contingencies (Note J) Total liabilities and capitalization $30,365,605 $16,656,317 $26,696,812 $2,544,392 ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998
Eastern EUA Unicord EUA Renova Compression LIABILITIES (CONTINUED) Corporation Bioten Services Capitalization: Common equity ($1,840,592) ($1,512,699) ($3,311,670) ($255,727) Total Capitalization (1,840,592) (1,512,699) (3,311,670) (255,727) Current Liabilities: Notes Payable 2,245,096 13,852,543 2,844,474 336,934 Accounts payable 120,591 Accounts payable - associated companies 2,120 351,884 1,394,537 43,146 Taxes accrued 3,647 Interest accrued 20,690 870,730 1,503,818 19,104 Other current liabilities (33,261) Total Current Liabilities 2,267,906 15,075,157 5,833,806 399,184 Deferred Credits: Other deferred credits and other liabilities 259,645 Total Deferred Credits 259,645 Accumulated deferred taxes (108,133) 921,662 124,321 (72,142) Commitments and contingencies (Note J) Total liabilities and capitalization $319,181 $14,484,120 $2,906,102 $71,315 ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING STATEMENTS OF CAPITALIZATION DECEMBER 31, 1998
EUA EUA Energy Energy Investment Investment EUA Consolidated Eliminations Corporation Transcapacity Common Equity: Common shares $1 $21 $1 $10 Other paid-in capital 999 (1,134,628) (2,134,718) 1,000,090 Retained earnings (24,204,924) (14,650,825) (22,069,207) (9,864,844) Total Common Equity (24,203,924) (15,785,432) (24,203,924) (8,864,744) Total Capitalization ($24,203,924 ($15,785,432 ($24,203,924 ($8,864,744)
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING STATEMENTS OF CAPITALIZATION (CONTINUED) DECEMBER 31, 1998
Eastern EUA Unicord EUA Renova Compression Corporation Bioten Services Common Equity: Common shares $10 $1 $ $ Other paid-in capital 990 9 Retained earnings (1,841,592) (1,512,709) (3,311,670) (255,727) Total Common Equity (1,840,592) (1,512,699) (3,311,670) (255,727) Total Capitalization ($1,840,592) ($1,512,699) ($3,311,670) ($255,727)
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING INCOME STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
EUA EUA Energy Energy Investment Investment EUA Consolidated Eliminations Corporation Transcapacity Operating Revenues $3,945,425 $ $ $334,658 Operating Expenses: Operation 8,724,671 472,314 3,407,540 Maintenance 35 7,862 Depreciation and amortization 462,663 21,609 323,544 Taxes Other than income 130,918 15,518 1,885 Income Taxes - Current (credit) (2,297,779) (1,033,632) (1,264,147) - Deferred (credit) (53,143) 131,263 (189,175) Total Operating Expenses 6,967,365 (385,066) 2,279,647 Operating (Loss) Income (3,021,940) 385,066 (1,944,989) Other Income and Deductions: Interest and dividend income 1,176,528 1,370,140 1,754,059 5,435 Equity in earnings of jointly-owned companies (1,189,761) (4,634,659) (4,901,323) Allowance for other funds used during construction 0 Other income (deductions) - net 462,299 93,842 (174) Total Other Income 449,066 (3,264,519) (3,053,422) 5,261 Loss Before Interest Charges (2,572,874) (3,264,519) (2,668,356) (1,939,728) Interest Charges: Other interest expense (principally short-term notes) 2,713,598 1,370,140 2,618,116 691,267 Total Interest Charges 2,713,598 1,370,140 2,618,116 691,267 Net Income (Loss) (5,286,472) (4,634,659) (5,286,472) (2,630,995) Earnings (Loss) Available for Common Shareholders ($5,286,472) ($4,634,659) ($5,286,472) ($2,630,995) EUA Energy Common Shares outstanding 100 Loss per share ($52,864.72) ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING INCOME STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
Eastern EUA Unicord EUA Renova Compression Corporation Bioten Services Operating Revenues $ $ $3,610,767 $ Operating Expenses: Operation 309,511 4,525,006 10,300 Maintenance (7,827) Depreciation and amortization 35,781 77,758 3,971 Taxes Other than income 2,283 111,072 160 Income Taxes - Current (credit) - Deferred (credit) 4,769 Total Operating Expenses 347,575 4,710,778 14,431 Operating (Loss) Income (347,575) (1,100,011) (14,431) Other Income and Deductions: Interest and dividend income 787,092 82 Equity in earnings of jointly-owner companies (657,452) (265,645) Allowance for other funds used dring construction Other income (deductions) - net 287,680 (22,872) 103,823 Total Other Income 417,320 (22,790) (161,822) Loss Before Interest Charges 69,745 (1,122,801) (176,253) Interest Charges: Other interest expense (principally short-term notes) 702,359 53,151 18,845 Total Interest Charges 702,359 53,151 18,845 Net Income (Loss) (632,614) (1,175,952) (195,098) Earnings (Loss) Available for Common Shareholders ($632,614) ($1,175,952) ($195,098) EUA Energy Common Shares outstanding Loss per share ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
EUA EUA Energy Energy Investment Investment Consolidated Eliminations Corporation CASH FLOW FROM OPERATING ACTIVITIES: Net Income (Loss) ($5,286,472) ($4,634,659) ($5,286,472) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 342,891 14,902 Deferred Taxes 65,063 37,288 Other - Net (729,653) 4,634,660 4,761,422 Changes in Operating Assets and Liabilities: Accounts receivable (631,237) (176,077) (528,789) Material and supplies (78,687) Notes receivable (1,245,548) (9,644,401) (10,094,400) Accounts payable 452,629 176,077 59,378 Accrued taxes (43,402) Other - net (449,285) 185,582 Net Cash (Used In) Provided from Operating Activities (7,603,701) (9,644,400) (10,851,089) CASH FLOW FROM INVESTING ACTIVITIES: Construction expenditures (26,661) Increase/Decrease in Other Investments (6,173,022) (2,560,137) Net Cash (Used in) Investing Activities (6,199,683) (2,560,137) CASH FLOW FROM FINANCING ACTIVITIES: Net increase in short-term debt 13,932,612 9,644,400 13,424,962 Net Cash Provided From Financing Activities 13,932,612 9,644,400 13,424,962 NET (DECREASE) INCREASE IN CASH 129,228 13,736 Cash and temporary cash investments at beginning of year 422,789 1,905 Cash and temporary cash investments at end of year $552,017 $15,641 Cash paid during the year for: Interest (net of Amounts Capitalized) $2,289,084 $630,431 $2,289,084 Income Taxes (Refund) ($2,281,407) ($681,391) ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1998
Eastern EUA Unicord EUA Renova Compression Corporation Bioten Services CASH FLOW FROM OPERATING ACTIVITIES: Net Income (Loss) $ ($632,614) ($1,175,952) ($195,098) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities Depreciation and Amortization 35,781 3,971 Deferred Taxes 284,323 4,769 (72,142) Other - Net 657,453 (1,779,963) 265,645 Changes in Operating Assets and Liabiailities Accounts receivable 16,457 (48,952) (23,983) Material and supplies (78,687) Notes receivable (795,549) 0 Accounts payable 314,308 237,564 11,015 Accrued taxes (43,402) Other - net (675,709) (9,108) 10,592 Net Cash (Used In) Provided from Operating Activities (795,550) (2,893,731) CASH FLOW FROM INVESTING ACTIVITIES: Construction expenditures 74,723 Increase/Decrease in Other Investments (3,558,450) 6,763 (61,198) Net Cash (Used in) Investing Activities (3,558,450) 81,486 (61,198) CASH FLOW FROM FINANCING ACTIVITIES: Net increase in short-term debt 4,354,000 2,844,474 61,198 Net Cash Provided From Financing Activities 4,354,000 2,844,474 61,198 NET (DECREASE) INCREASE IN CASH 32,229 Cash and temporary cash investments at beginning of year Cash and temporary cash investments at end of year $ $ $32,229 $ Cash paid during the year for: Interest (Net of Amounts Capitalized) Income Taxes (Refund) $738 ($588,460) $ ($7,698) ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL DECEMBER 31, 1998
EUA EUA Energy Energy Investment Investment EUA Consolidated Eliminations Corporation Transcapacity Balance of retained earnings at begin. of year ($16,782,735 ($10,016,166 ($16,782,735 ($7,233,848) Additions: Net Income (Loss) (5,286,472) (4,634,659) (5,286,472) (2,630,995) Other (2,135,717) (2,135,717) Balance of retained earnings at end of period ($24,204,924 ($14,650,825 ($24,204,924 ($9,864,843) ( ) Denotes Contra
EUA ENERGY INVESTMENT AND SUBSIDIARY ONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL (CONTINUED) DECEMBER 31, 1998
Eastern EUA Unicord EUA Renova Compression Corporation Bioten Services Balance of retained earnings at begin. of year ($1,841,592) ($880,095) $0 ($60,631) Additions: Net Income (Loss) (632,614) (1,175,952) (195,098) Other Balance of retained earnings at end of period ($1,841,592) ($1,512,709) ($1,175,952) ($255,729) ( ) Denotes Contra
Notes to Consolidated Financial Statements December 31, 1998 (A) Nature of Operations and Summary of Significant Accounting Policies: General: Eastern Utilities Associates (EUA) is a public utility holding company headquartered in Boston, Massachusetts. Its subsidiaries are principally engaged in the generation, transmission, distribution and sale of electricity; energy related services such as energy management; and promoting the conservation and efficient use of energy. See "Generation Divestiture" below for a discussion of EUA's planned divestiture of generating capacity. Estimates: 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 assets and 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. Basis of Consolidation: The consolidated financial statements include the accounts of EUA and all subsidiaries. All material intercompany transactions between the consolidated subsidiaries have been eliminated. System of Accounts: The accounts of EUA and its consolidated subsidiaries are maintained in accordance with the uniform system of accounts prescribed by the regulatory bodies having jurisdiction. Jointly Owned Companies: Montaup Electric Company (Montaup) follows the equity method of accounting for its stock ownership investments in jointly owned companies including four regional nuclear generating companies. Montaup's investments in these nuclear generating companies range from 2.5% to 4.5%. Three of the four facilities, Yankee Atomic, Connecticut Yankee and Maine Yankee, have been permanently shut down and are in the process of decommissioning. Montaup's share of total estimated costs for the permanent shutdown, decommissioning and recovery of the investment in Yankee Atomic, Connecticut Yankee and Maine Yankee is $3.7 million, $23.8 million and $31.0 million, respectively. These amounts are included with Other Liabilities on the Consolidated Balance Sheet as of December 31, 1998. Also, due to anticipated recoverability, a regulatory asset has been recorded for the same amount and is included with Other Assets. Montaup is entitled to electricity produced from the remaining facility, Vermont Yankee, based on its ownership interest and is billed for its entitlement pursuant to a contractual agreement which is approved by the Federal Energy Regulatory Commission (FERC). Montaup also has a stock ownership investment of 3.27% in each of two companies which own and operate certain transmission facilities between the Hydro Quebec electric system and New England. EUA Ocean State Corporation (EUA Ocean State) follows the equity method of accounting for its 29.9% partnership interest in the Ocean State Power Project (OSP). Also, EUA Energy Investment follows the equity method of accounting for its partnership interest in BIOTEN, G.P. and for its 20% stock ownership in Separation Technologies, Inc. EUA is attempting to restructure its partnership interest in the BIOTEN, G. P. to a preferred equity position. These ownership interests and Montaup's stock ownership investments are included in "Investments in Jointly Owned Companies" on the Consolidated Balance Sheet. Plant and Depreciation: Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct labor and material, allocable overhead, allowance for funds used during construction and indirect charges for engineering and supervision. For financial statement purposes, depreciation is computed on the straight-line method based on estimated useful lives of the various classes of property. On a consolidated basis, provisions for depreciation on utility plant were equivalent to a composite rate of approximately 3.5% in 1998, based on the average depreciable property balances at the beginning and end of each year. Beginning in 1998, coincident with billing a contract termination charge (CTC) to its retail affiliates, Montaup commenced recovery of its net investment in generation related assets through the CTC over a twelve-year period. The difference between the annual recovery and annual depreciation expense pursuant to Generally Accepted Accounting Principles is being deferred. Non-utility property and equipment of EUA Cogenex Corporation (EUA Cogenex) is stated at original cost. For financial statement purposes, depreciation on office furniture and equipment, computer equipment and real property is computed on the straight-line method based on estimated useful lives ranging from five to forty years. Project equipment is depreciated over the term of the applicable contracts or based on the estimated useful lives, whichever is shorter, ranging from five to fifteen years. Allowance for Funds Used During Construction (AFUDC) and Capitalized Interest: AFUDC represents the estimated cost of borrowed and equity funds used to finance the EUA System's construction program. In accordance with regulatory accounting, AFUDC is capitalized as a cost of utility plant in the same manner as certain general and administrative costs. AFUDC is not an item of current cash income but is recovered over the service life of utility plant in the form of increased revenues collected as a result of higher depreciation expense. The combined rate used in calculating AFUDC was 8.0% in 1998. The caption "Allowance for Borrowed Funds Used During Construction" also includes interest capitalized for non-regulated entities in accordance with FASB Statement No. 34. Operating Revenues: Utility revenues are based on billing rates authorized by applicable federal and state regulatory commissions. Eastern Edison Company (Eastern Edison), Blackstone Valley Electric Company (Blackstone) and Newport Electric Corporation (Newport) (collectively, the Retail Subsidiaries) accrue the estimated amount of unbilled revenues at the end of each month to match costs and revenues more closely. Montaup recognizes revenues when billed. In 1998, Montaup and the Retail Subsidiaries also began recording revenues in an amount management believes to be recoverable pursuant to provisions of approved settlement agreements and enabling state legislation. Provisions of the approved restructuring settlement agreements in conjunction with accounting provisions of SFAS 71 allow Montaup and the retail subsidiaries to accrue and/or defer revenue related to the future recovery of certain items. Montaup has accrued revenues and recorded associated regulatory assets and liabilities for certain items during 1998 commencing with the implementation of the aforementioned settlement agreements and billing of the Contract Termination Charge (CTC), January 1, 1998 in Rhode Island and March 1, 1998 in Massachusetts. Montaup was authorized to accrue an amount of lost revenue equal to the difference in revenues Montaup would have collected under its previously approved rates and revenues collected pursuant to the settlement agreements. The settlements also provide Montaup with a nuclear PBR provision under which Montaup normalizes expenses and revenues for 80% of going forward operations of Montaup's nuclear interests. Montaup was also allowed to accrue a return enhancement related to stranded investments charged to its Rhode Island retail affiliates during the generation divestiture period as an incentive to divest. Also, Montaup is normalizing the difference between GAAP depreciation expense on generation plant assets prior to divestiture and the recovery level included in the settlement agreements. Montaup has also accrued revenue related to the two-month delay in implementing the Massachusetts settlement agreement from January 1, 1998 to March 1, 1998. Finally, Montaup normalizes for the difference in actual versus estimated CTC variable components costs and revenues. Settlement provisions and SFAS 71 also provide for Eastern Edison to accrue revenue equal to the approved deferral of standard offer costs which will be collected in the future. The following table reflects the nature and amount of accrued and/or deferred revenue and the associated balance sheet placement. Amount Accrued (Deferred) $000's Balance Sheet Placement Lost revenue $ 18,527 Other Asset/Accrued CTC Assets Mass. Delay Credit 768 Other Asset/Accrued CTC Assets R.I. Return True-up 1,970 Other Asset/Accrued CTC Assets Depr. Norm. (12 yr S/L vs. CTC Level) 10,933 Other Asset/Accrued CTC Assets Depr. Norm (GAAP vs. 12 yr S/L) (14,294) Other Liab./Reg. Liab. Nuclear PBR 3,933 Other Asset/Other Reg. Assets CTC Variable Component Norm. (23,793) Other Liab./Reg. Liab. Eastern Edison Standard Offer Deferral 8,782 Other Accts. Rec./Reg. Assets EUA Cogenex's revenues are recognized based on financial arrangements established by each individual contract. Under paid-from-savings contracts, revenues are recognized as energy savings are realized by customers. Revenue from the sale of energy savings projects and sales-type leases are recognized when the sales are complete. Interest on the financing portion of the contracts is recognized as earned at rates established at the outset of the financing arrangement. All construction and installation costs are recognized as contract expenses when the contract revenues are recorded. In circumstances in which material uncertainties exist as to contract profitability, cost recovery accounting is followed and revenues received under such contracts are first accounted for as recovery of costs to the extent incurred. Federal Income Taxes: EUA and its subsidiaries generally reflect in income the estimated amount of taxes currently payable, and provide for deferred taxes on certain items subject to temporary timing differences to the extent permitted by the various regulatory agencies. EUA's rate-regulated subsidiaries amortize previously deferred investment tax credits (ITC) over the productive lives of the related assets. Beginning in 1998, Montaup is amortizing previously deferred ITC related to generation investments recoverable through the CTC over a twelve-year period. Unamortized ITC related to the Canal 2 generating unit was reversed at the time of the Canal 2 sale, December 30, 1998. Cash and Temporary Cash Investments: EUA considers all highly liquid investments and temporary cash investments with a maturity of three months or less when acquired to be cash equivalents. Other Assets: The components of Other Assets at December 31, 1998: ($ in thousands) 1998 Regulatory Assets: Unamortized losses on reacquired debt $ 10,979 Unrecovered plant and decommissioning costs 66,934 Deferred FAS 109 costs (Note B) 50,167 Deferred FAS 106 costs 9,167 Mendon Road judgment (Note J) 6,154 Unrecovered CTC assets 33,161 Accrued CTC assets 32,198 Other regulatory assets 21,947 Total regulatory assets 230,707 Other deferred charges and assets: Split dollar life insurance premiums 24,803 Unamortized debt expenses 3,381 Goodwill 6,436 Other 29,301 Total Other Assets $294,628 Regulatory assets represent deferred costs for which future revenues are expected in accordance with regulatory practices. These costs are expensed when the corresponding revenues are received in order to appropriately match revenues and expenses. Regulatory Accounting: Core Electric companies are subject to certain accounting rules that are not applicable to other industries. These accounting rules allow regulated companies, in appropriate circumstances, to establish regulatory assets and liabilities which defer the current financial impact of certain costs that are expected to be recovered in future rates. In light of approved restructuring settlement agreements and restructuring legislation in both Massachusetts and Rhode Island, EUA has determined that Montaup no longer will apply the provisions of Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards No. 71 (FAS71), "Accounting for the Effects of Certain Types of Regulation" for the generation portion of its business. Montaup ceased applying SFAS 71 to its ongoing generation portion of its business effective January 1, 1998. Approved restructuring settlement agreements with parties in Massachusetts and Rhode Island, the two states in which Montaup operates, allow Montaup full recovery or stranded generation investments as of December 31, 1997 and as such Montaup incurred no asset impairment. As disclosed in Footnote A under the caption "GENERATION DIVESTITURE", Montaup has agreements to divest all of its generation assets and power purchase agreements with the exception of its 4.0% (46mw) ownership interest in the Millstone 3 nuclear station and is 12 mw entitlement from the Vermont Yankee nuclear unit. Post-divestiture ongoing generation operations will include the two aforementioned nuclear units in which Montaup will continue to have an interest. The approved settlement agreements also provide Montaup with recovery of 100% of embedded nuclear investments as of December 31, 1997 and recovery of 80% of its post 1997 on going nuclear generation operations. Because only 20% of Montaup's remaining nuclear operations will no longer be subject to the accounting treatment pursuant to SFAS 71 and would be subject to market risk, Management believes that the discontinuation of SFAS 71 for Montaup's post-divestiture generation business will not have a material impact on EUA's results of operations or financial position. EUA believes its transmission and retail distribution businesses continue to meet the criteria for continued application of FAS71. Generation Divestiture: Terms of approved electric utility restructuring settlement agreements provide that EUA exit the electric generation business. Through separately negotiated agreements, EUA has agreements to divest all of its generation assets and power purchase contracts, with the exception of its 4.0% (46 mw) ownership interest in the Millstone 3 nuclear station and its 12 mw entitlement from Vermont Yankee. All of the agreements are subject to approval of various state and federal regulatory agencies. EUA has agreed to sell generating assets totaling 509 mw to various parties for $133.2 million in aggregate. The net proceeds from the sales, as defined in the settlement agreements, will be recorded as a regulatory liability at the time of sale and will be returned to customers via a Residual Value Credit (RVC) through the year 2009. EUA has also agreed to make contribution payments to two parties in exchange for their assumption of all future obligations under six purchased power contracts. These fixed monthly payments ranging from $850,000 to $2.6 million, will be made from the effective date through 2009. EUA may be required to record a liability for these fixed contributions, but in such an event would record a regulatory asset for a like amount due to recoverability. In addition, EUA has agreed to a buyout of its obligations under the Pilgrim Nuclear purchased power contract in conjunction with the sale of the unit by Boston Edison Co. (BEC) to Entergy Nuclear Generating Co. (Entergy). This agreement provides for a buyout payment by EUA to BEC of $115.8 million, assuming a June 30, 1999 closing, along with a short-term, fixed-price purchased power agreement with Entergy for declining shares of the unit's output beginning with 11% in 1999 and ending with 5.5% in 2004. Entergy will assume all future operating and decommissioning obligations. EUA will continue to attempt to sell and/or transfer its minority interests in Millstone 3 and Vermont Yankee. Until such time as these units are divested, EUA will share 80% of the operating costs and revenues associated with the units with customers and 20% with shareholders. (B) Income Taxes: EUA adopted FASB Statement No. 109, "Accounting for Income Taxes" (FAS109), which requires recognition of deferred income taxes for temporary differences that are reported in different years for financial reporting and tax purposes using the liability method. Under the liability method, deferred tax liabilities or assets are computed using the tax rates that will be in effect when temporary differences reverse. Generally, for regulated companies, the change in tax rates may not be immediately recognized in operating results because of ratemaking treatment and provisions in the Tax Reform Act of 1986. Total deferred tax assets and liabilities for 1998 include the following: Deferred Tax Deferred Tax Assets Liabilities ($ in thousands) 1998 1998 Plant Related Plant Related Differences $22,776 Differences $185,590 Deregulation 23,301 Refinancing Costs 1,325 NOL Deregulation 12,993 Carryforward 1,973 Employee Benefit Employee Accruals 4,481 Benefit Accruals 5,294 Acquisitions 3,334 Other 14,075 Other 8,393 Total $70,753 Total $212,782 As of December 31, 1998, EUA has recorded on its Consolidated Balance Sheet a regulatory liability to ratepayers of approximately $15.5 million. This amount primarily represents excess deferred income taxes resulting from the reduction in the federal income tax rate and also includes deferred taxes provided on investment tax credits. Also at December 31, 1998, a regulatory asset of approximately $50.2 million, has been recorded, representing the cumulative amount of federal income taxes on temporary depreciation differences which were previously flowed through to ratepayers. NOTE B - INCOME AND DEFERRED TAXES: Components of income and deferred tax expense for Eastern Utilities Associates and Subsidiary Companies for 1998 are as follows:
Blackstone Eastern EUA Valley Newport EUA Utilities Service Electric Electric Consolidated Elimin. Associates Corporation Company Company Federal: Current $30,754,347 $71,765 $ $214,400 $1,173,556 $1,631,297 Deferred (14,054,019) (44,337) (65,350) (44,337) 2,171,830 87,375 Investment Tax Credit, Net (2,999,791) 0 0 0 (178,209) (3,960) 13,700,537 27,428 (65,350) 170,063 3,167,177 1,714,712 State: Current 5,217,386 0 0 10,832 1,948 2,200 Deferred (960,996) 0 0 69,901 76,175 0 4,256,390 0 0 80,733 78,123 2,200 Charged to Operations (Federal & State) 17,956,927 27,428 (65,350) 250,796 3,245,300 1,716,912 Charged to Other Income: Current 4,416,334 0 (116,112) 0 (22,430) (14,023) Deferred (2,839,318) 0 (1,886,865 0 0 0 Investment Tax Credit, Net (81,360) 0 0 0 0 (81,360) Total $19,452,583 $27,428 ($2,068,327) $250,796 $3,222,870 $1,621,529 Federal income tax expense was different than the amounts computed by applying the statutory rates to book income subject to tax for the following reasons: Tax Computed at Statutory Rates $19,763,807 $9,600 $25,087 $179,424 $2,844,598 $1,567,535 (Decrease) Increase in Tax From: Equity Component of AFUDC (60,486) 0 0 Depreciation of Equity AFUDC 1,319,995 3,541 226,160 40,271 Amortization and Utilization of (3,081,145) (178,209) (85,320) State Tax, Net of Fed. Income Tax Benefit 2,802,976 0 52,476 50,780 1,430 Other (1,292,564) 17,828 (2,093,414) 15,355 279,541 97,613 Total $19,452,583 $27,428 ($2,068,327) $250,796 $3,222,870 $1,621,529
NOTE B - INCOME AND DEFERRED TAXES: (CONTINUED) Components of income and deferred tax expense for Eastern Utilities Associates and Subsidiary Companies for 1998 are as follows:
EUA EUA EUA Eastern EUA Energy Energy EUA Telecomm- Edison Cogenex Investment Services Ocean unications Consolidated Consolidated Consolidated Corporation Corporation Corporation Federal: Current $32,347,150 ($1,245,477) $(2,301,955) $129,916 ($1,077,155) ($45,620) Deferred (15,574,551) (598,519) (54,145) (2,324) (6,867) (11,468) Investment Tax Credit, Net 13,954,977 (1,843,996) (2,356,100) 127,592 (1,084,022) (57,088) State: Current 5,177,116 20,209 4,177 755 149 Deferred (814,832) (293,242) 1,002 0 0 4,362,284 (273,033) 5,179 755 149 Charged to Operations (Federal & State) 18,317,261 (2,117,029) (2,350,921) 128,347 (1,083,873) (57,088) Charged to Other Income: Current 443,875 1,060,543 (603,684) 3,667,869 296 Deferred (920,901) 265,139 118,845 (415,536) Investment Tax Credit, Net Total $17,840,235 ($791,347) ($2,835,760) $128,347 $2,168,460 ($56,792) Federal income tax expense was different than the amounts computed by applying the statutory rates to book income subject to tax for the following reasons: Tax Computed at Statutory Rates $16,641,115 ($731,511) ($2,842,780) ($35,012) $2,182,041 ($57,090) (Decrease) Increase in Tax From: Equity Component of AFUDC (60,486) Depreciation of Equity AFUDC 1,050,023 Amortization and Utilization of ITC (2,817,616) State Tax, Net of Federal Income Tax Benefit 2,832,524 (141,323) 4,750 491 1,552 296 Other 194,675 81,487 2,270 162,868 (15,133) 2 Total $17,840,235 ($791,347) ($2,835,760) $128,347 $2,168,460 ($56,792)
NOTE B - INCOME AND DEFERRED TAXES (Continued): Components of income and deferred tax expense for Eastern Edison Company and Subsidiary for 1998 are as follows:
Eastern Eastern Montaup Edison Edison Electric Consolidated Eliminations Company Company Federal: Current $32,347,150 $ $4,198,993 $28,148,157 Deferred (15,574,551) 3,840,573 (19,415,124) Investment Tax Credit, Net (2,817,622) (303,708) (2,513,914) 13,954,977 7,735,858 6,219,119 State: Current 5,177,116 832,920 4,344,196 Deferred (814,832) 1,707,413 (2,522,245) 4,362,284 2,540,333 1,821,951 Charged to Operations (Federal & State) 18,317,261 10,276,191 8,041,070 Charged to Other Income: Current 443,875 11,326 432,549 Deferred (920,901) 0 (920,901) Total $17,840,235 $ $10,287,517 $7,552,718 Federal income tax expense was different than the amounts computed by applying the statutory rates rates to book income subject to tax for the following reasons: Tax Computed at Statutory Rates $16,641,115 $ $ 8,562,201 $8,078,914 (Decrease) Increase in Tax From: Equity Component of AFUDC (60,486) 0 (60,486) Depreciation of Equity AFUDC 1,050,023 (209,182) 1,259,205 Amortization and Utilization of ITC (2,817,616) (303,708) (2,513,908) State Tax, Net of Federal Income Tax Benefit 2,832,524 1,652,437 1,180,087 Other 194,675 585,769 (391,094) Total $17,840,235 $ $10,287,517 $7,552,718
NOTE B - INCOME AND DEFERRED TAXES (Continued): Components of income and deferred tax expense for EUA Cogenex Corporation and Subsidiary Companies for 1998 are as follows:
EUA EUA Cogenex EUA EUA EUA Cogenex Corporation Cogenex EUA Cogenex Citizens West Consolidated Elimin. Corporation NEM Inc. Canada Corpor. Corporation Federal: Current ($1,245,477) $ ($1,859,244) $719,303 ($2,450) $34,875 ($137,961) Deferred (598,519) (943,645) 287,571 0 83,164 (25,609) Total (1,843,996 (2,802,889 1,006,874 (2,450) 118,039 (163,570) State: Current 20,209 48,777 (18,914) 0 3,506 (13,160) Deferred (293,242) (300,353) 8,148 0 0 (1,037) (273,033) (251,576) (10,766) 0 3,506 (14,197) Charged to Operations (Federal & State) (2,117,029) (3,054,465 996,108 (2,450) 121,545 (177,767) Charged to Other Income: Current 1,060,543 1,060,543 Deferred 265,139 265,139 Total ($791,347) $ ($1,728,783) $996,108 ($2,450) $121,545 ($177,767) Federal income tax expense was different than the amounts computed by applying the statutory rates rates to book income subject to tax for the following reasons: Tax Computed at Statutory Rates ($731,511) $ ($1,592,962) $1,010,248 ($27,274) $120,259 ($241,782) (Decrease) Increase in Tax From: State Tax, Net of Federal Income Tax Benefit ($141,323) (127,376) (6,998) 0 2,279 (9,228) Other $81,487 (8,445) (7,142) 24,824 (993) 73,243 Total ($791,347) $ ($1,728,783) $996,108 ($2,450) $121,545 ($177,767)
NOTE B - INCOME AND DEFERRED TAXES (Continued): Components of income and deferred tax expense for EUA Energy Investment and Subsidiary Companies for 1998 are as follows:
EUA Energy EUA Energy Eastern EUA Investment Investment EUA Unicord EUA Compression Consolidated Elimin. Corporation Transcap. Corporation Bioten Renova Services Federal: Current ($2,301,955) $ (1,035,379) (1,266,576 $ $ $ $ Deferred (54,145) 131,263 (189,175) 0 0 3,767 0 (2,356,100) (904,116) (1,455,751) 0 0 3,767 0 State: Current 4,177 1,747 2,430 0 0 0 Deferred 1,002 0 0 0 1,002 0 5,179 1,747 2,430 0 0 1,002 0 Charged to Operations (Federal & State) (2,350,921) (902,369) (1,453,321) 0 0 4,769 0 Charged to Other Income: Current (603,684) 0 0 (572,003) (31,681) Deferred 118,845 (93,336) 0 0 284,323 (72,142) Total ($2,835,760) $ ($995,705) ($1,453,321) $ 0 ($287,680) $4,769 ($103,823) Federal income tax expense was different than the amounts computed by applying the statutory rates to book income subject to tax for the following reasons: Tax Computed at Statutory Rates ($2,842,780) $ ($991,314) ($1,429,511) $ ($322,103) $4,769 ($104,621) Increase (Decrease) in Tax From: State Tax, Net of Federal Income Tax Benefit 4,750 1,787 1,580 0 1,087 296 Other 2,270 (6,178) (25,390) 0 33,336 502 Total ($2,835,760) $ ($995,705) ($1,453,321) $ ($287,680) $4,769 ($103,823)
(C) Capital Stock: The Agreement and Plan of Merger dated February 1, 1999 by and among New England Electric System (NEES) and EUA, which is subject to EUA shareholder and various regulatory agencies' approval, provides for NEES to purchase all of the outstanding EUA shares for $31 per share in cash. The transaction is expected to be completed by early 2000. There was no change in the number of common shares outstanding during 1998. As permitted, the Company accounts for its stock-based compensation, as discussed below, using the method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB25) and as permitted under FASB Statement No. 123, "Accounting for Stock-Based Compensation" (FAS123) . The Company established a Restricted Stock Plan in 1989. Under the Restricted Stock Plan, executives and certain key employees may be granted restricted common shares of the Company. In 1998, approximately 74,000 shares of restricted common shares, valued at approximately $1.8 million were granted. The issued shares are restricted for a period ranging from two to five years and all shares are subject to forfeiture if specified employment services are not met. There are no exercise prices related to these share grants. During the applicable restriction period, the recipient has all the voting, dividend, and other rights of a record holder except that the shares are nontransferable. The annual compensation expense related to these grant awards was approximately $1.6 million in 1998. There are no material differences in the Company recording its annual compensation expense under APB25 from the requirements under FAS123. All of the restricted shares will become immediately vested upon the completion of EUA's plan of merger with NEES. The preferred stock provisions of the Retail Subsidiaries place certain restrictions upon the payment of dividends on common stock by each company. At December 31, 1998, each company was in excess of the minimum requirements which would make these restrictions effective. In the event of involuntary liquidation, the holders of non-redeemable preferred stock of the Retail Subsidiaries are entitled to $100 per share plus accrued dividends. In the event of voluntary liquidation, or if redeemed at the option of these companies, each share of the non-redeemable preferred stock is entitled to accrued dividends plus the following: Company Issue Amount Blackstone: 4.25% issue $104.40 5.60% issue 103.82 Newport: 3.75% issue 103.50 (D) Redeemable Preferred Stock: Eastern Edison's 6-5/8% Preferred Stock issue is entitled to an annual mandatory sinking fund sufficient to redeem 15,000 shares commencing September 1, 2003. The redemption price is $100 per share plus accrued dividends. All outstanding shares of the 6-5/8% issue are subject to mandatory redemption on September 1, 2008, at a price of $100 per share plus accrued dividends. In the event of liquidation, the holders of Eastern Edison's 6-5/8% Preferred Stock are entitled to $100 per share plus accrued dividends. (E) Long-Term Debt: The various mortgage bond issues of Blackstone, Eastern Edison, and Newport are collateralized by substantially all of their utility plant. In addition, Eastern Edison's bonds are collateralized by securities of Montaup, which are wholly-owned by Eastern Edison. On December 30, 1998, Montaup redeemed $55 million of debenture bonds and paid a $19 million special dividend to Eastern Edison with proceeds received from the sale of its 50% ownership share of the Canal 2 generating station. The principal amount of Montaup securities wholly-owned by Eastern Edison at December 31, 1998 was approximately $181 million. Blackstone's Variable Rate Demand Bonds are collateralized by an irrevocable Letter of Credit which expires on January 21, 2000. The letter of credit permits an extension of one year upon mutual agreement of the bank and Blackstone. Newport's Variable Rate Electric Energy Facilities Revenue Refunding Bonds are collateralized by an irrevocable Letter of Credit which expires on January 6, 2000, and permits an extension of one year upon mutual agreement of the bank and Newport. EUA Service Corporation's (EUA Service) 10.2% Secured Notes due 2008 are collateralized by certain real estate and property of the company. In July, Eastern Edison used short-term borrowings to redeem $20 million of 5-7/8% and $40 million of 5-3/4%, First Mortgage and Collateral Trust Bonds at maturity. On December 30, 1998, Eastern repaid outstanding short-term borrowings with proceeds received from the redemption of Montaup securities. The EUA System's aggregate amount of current cash sinking fund requirements and maturities of long-term debt, (excluding amounts that may be satisfied by available property additions) for each of the five years following 1998 are: $21.9 million in 1999, $62.5 million in 2000, $14.3 million in 2001, $46 million in 2002, and $60 million in 2003. (F) Fair Value Of Financial Instruments: The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate: Cash and Temporary Cash Investments: The carrying amount approximates fair value because of the short-term maturity of these instruments. Long Term Notes Receivable and Net Investment in Sales-Type Leases: The fair value of these assets are based on market rates of similar securities. Preferred Stock and Long-Term Debt of Subsidiaries: The fair value of the System redeemable preferred stock and long-term debt were based on quoted market prices for such securities at December 31, 1998. The estimated fair values of the System's financial instruments at December 31, 1998 were as follows: Carrying Amount Fair Value ($ in thousands) 1998 1998 EUA Cash and Temporary Cash Investments $ - $ - Redeemable Preferred Stock - - Long-Term Debt - - EUA Service Cash and Temporary Cash Investments 2,422 2,422 Redeemable Preferred Stock - - Long-Term Debt 6,200 6,515 Blackstone Cash and Temporary Cash Investments 178 178 Redeemable Preferred Stock - - Long-Term Debt 33,500 37,102 Newport Cash and Temporary Cash Investments 142 142 Redeemable Preferred Stock - - Long-Term Debt 19,794 20,041 Eastern Edison - Consolidated Cash and Temporary Cash Investments 25,952 25,952 Redeemable Preferred Stock 30,000 32,625 Long-Term Debt 163,000 167,723 EUA Cogenex - Consolidated Cash and Temporary Cash Investments 2,782 2,782 Redeemable Preferred Stock - - Long-Term Notes Receivable and Net Investment in Sales-Type Leases 40,934 42,052 Long-Term Debt 84,100 88,788 EUA Energy - Consolidated Cash and Temporary Cash Investments 552 552 Redeemable Preferred Stock - - Long-Term Debt - - EUA Ocean State Cash and Temporary Cash Investments 40 40 Redeemable Preferred Stock - - Long-Term Debt 26,114 30,224 EUA Energy Services Cash and Temporary Cash Investments 2 2 Redeemable Preferred Stock - - Long-Term Debt - - EUA Telecommunications Cash and Temporary Cash Investments 18 18 Redeemable Preferred Stock - - Long-Term Debt - - (G) Lines Of Credit: In July 1997, several EUA System companies entered into a three-year revolving credit agreement allowing for borrowings in aggregate of up to $145 million from all sources of short-term credit. As of December 31, 1998, various financial institutions have committed up to $75 million under the revolving credit facility. In addition to the $75 million available under the revolving credit facility, EUA System companies maintain short-term lines of credit with various banks totaling $90 million for an aggregate amount available of $165 million. At December 31, 1998, the EUA System had unused short-term lines of credit of approximately $101.4 million. During 1998, the weighted average interest rate for short-term borrowings was 5.8%. (H) Jointly Owned Facilities: At December 31, 1998, in addition to the stock ownership interests discussed in Note A, Nature of Operations and Summary of Significant Accounting Policies - - Jointly Owned Companies, Montaup and Newport had direct ownership interests in the following electric generating facilities: Accumulated Net Utility Provision for Utility Construction Percent Plant in Depreciation Plant in Work in ($ in thousands) Owned Service & Amortization Service Progress Montaup: Wyman Unit 4 1.96% $ 4,041 $ 2,388 $ 1,653 $ Seabrook Unit I 2.90% 194,169 47,277 146,892 480 Millstone Unit 3 4.01% 178,598 65,705 112,893 347 Newport: Wyman Unit 4 0.67% 1,312 805 507 The foregoing amounts represent Montaup's and Newport's interest in each facility, including nuclear fuel where appropriate, and are included on the like-captioned lines on the Consolidated Balance Sheet. At December 31, 1998, Montaup's total net investment in nuclear fuel of the Seabrook and Millstone Units amounted to $2.5 million and $1.9 million, respectively. Montaup's and Newport's shares of related operating and maintenance expenses with respect to units reflected in the preceding table are included in the corresponding operating expenses. EUA has entered into agreements to sell its joint ownership shares in Wyman Unit 4 and Seabrook Unit I. Closing of the Wyman sale is expected in the first quarter of 1999 and the Seabrook sale is expected to close later in 1999. Both agreements are subject to approval of various regulatory agencies. (I) Financial Information By Business Segments: Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131), requires disclosure of certain financial and descriptive information by operating segments. The Core Electric Business includes results of the electric utility operations of Blackstone, Eastern Edison, Newport and Montaup. Energy Related Business includes results of our diversified energy-related subsidiaries, EUA Cogenex, EUA Ocean State, EUA Energy Investment Corporation (EUA Energy), EUA Energy services and EUA Telecommunications. Corporate results include the operations of EUA Service and EUA Parent. EUA does not have any intersegment revenues. Financial data for the business segments are as follows: Year Ended December 31, 1998 ($ in thousands) Core Electric Energy Related Corporate Total Operating Revenues $480,080 $ 58,721 - $538,801 Pre-Tax Operating Income 84,586 (2,945) (2,045) 79,596 Income Taxes 22,685 (1,387) (1,845) 19,453 Depreciation and Amortization 38,804 12,267 8 51,079 Cash Construction Expenditures 22,888 26,801 1,512 51,201 Equity in Subsidiary Earnings 1,390 8,134 9,524 Net Interest Charges 23,593 12,219 1,387 37,199 Net Interest Income 528 7,210 63 7,801 Year ended December 31, ($ in thousands) 1998 Total Plant and Other Investments Core Electric $ 648,281 Energy Related 164,439 Corporate 18,973 Total Plant and Other Investments 831,693 Other Assets Core Electric 370,360 Energy Related 67,780 Corporate 32,805 Total Other Assets 470,945 Total Assets $1,302,638 (J) Commitments And Contingencies: Plan of Merger Agreement: On February 1, 1999, EUA and New England Electric System (NEES) entered into an Agreement and Plan of Merger under which NEES will acquire all outstanding shares of EUA for $31 per share in cash. Under certain terms of the merger agreement, if the merger agreement is terminated by EUA, EUA would pay NEES a termination fee of $20 million plus up to $5 million for documented out-of-pocket expenses. Nuclear Fuel Disposal and Nuclear Plant Decommissioning Costs: The owners (or lead participants) of the nuclear units in which Montaup has an interest have made, or expect to make, various arrangements for the acquisition of uranium concentrate, the conversion, enrichment, fabrication and utilization of nuclear fuel and the disposition of that fuel after use. The owners (or lead participants) of United States nuclear units have entered into contracts with the Department of Energy (DOE) for disposal of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982 (NWPA). The NWPA requires (subject to various contingencies) that the federal government design, license, construct and operate a permanent repository for high level radioactive wastes and spent nuclear fuel and establish a prescribed fee for the disposal of such wastes and nuclear fuel. The NWPA specifies that the DOE provide for the disposal of such waste and spent nuclear fuel starting in 1998. Objections on environmental and other grounds have been asserted against proposals for storage as well as disposal of spent nuclear fuel. The DOE now estimates that a permanent disposal site for spent fuel will not be ready to accept fuel for storage or disposal until as late as the year 2010. In early 1998, a number of utilities filed suit in federal appeals court seeking, among other things, an order requiring the DOE to immediately establish a program for the disposal of spent nuclear fuel. Montaup owns a 4.01% interest in Millstone 3 and a 2.9% interest in Seabrook I. Northeast Utilities, the operator of the units, indicates that Millstone 3 has sufficient on-site storage facilities which, with rack additions, can accommodate its spent fuel for the projected life of the unit. At the Seabrook Project, there is on-site storage capacity which, with rack additions, will be sufficient to at least the year 2011. The Energy Policy Act of 1992 requires that a fund be created for the decommissioning and decontamination of the DOE uranium enrichment facilities. The fund will be financed in part by special assessments on nuclear power plants in which Montaup has an interest. These assessments are calculated based on the utilities' prior use of the government facilities and have been levied by the DOE, starting in September 1993, and will continue over 15 years. This cost is passed on to the joint owners or power buyers as an additional fuel charge on a monthly basis and is currently being recovered by Montaup through rates. Montaup has a 4.5% equity ownership in Connecticut Yankee, a nuclear generating facility which is in the process of decommissioning. Montaup's share of the total estimated costs for the permanent shutdown, decommissioning, and recovery of the investment in Connecticut Yankee is approximately $23.8 million. On August 31, 1998, a FERC law judge rejected Connecticut Yankee's filed plan to decommission the plant. The judge claimed that estimates of clean-up costs were flawed and certain restoration costs were not supported. The judge also said Connecticut Yankee could not pass on spent fuel storage costs to rate-payers. The judge recommended that Connecticut Yankee withdraw its decommissioning plan and submit a new plan which addresses the issues cited by him. FERC will review the judge's recommendations and issue a decision on this case in the coming months. If FERC concurs with the judge's recommendation, this may result in a write down of certain Connecticut Yankee plant investments. Montaup cannot predict the ultimate outcome of FERC's review. In August 1997, as the result of an economic evaluation, the Maine Yankee Board of Directors voted to permanently close that nuclear plant. Montaup has a 4.0% equity ownership in Maine Yankee. Montaup's share of the total estimated costs for the permanent shutdown, decommissioning, and recovery of the remaining investment in Maine Yankee is approximately $31.0 million. In January 1998, FERC accepted Maine Yankee's rate filing, subject to refund, for the recovery of its costs during the decommissioning period. On January 19, 1999, Maine Yankee and the active intervening parties filed an Offer of Settlement with FERC which was supported by FERC trial staff. Upon commission approval, this agreement will constitute full settlement of issues raised in this proceeding. Also, Montaup is recovering through rates its share of estimated decommissioning costs for Millstone 3 and Seabrook I. Montaup's share of the current estimate of total costs to decommission Millstone 3 is $22.4 million in 1998 dollars, and Seabrook I is $14.4 million in 1998 dollars. These figures are based on studies performed for the lead owners of the units. Montaup also pays into decommissioning reserves pursuant to contractual arrangements with other nuclear generating facilities in which it has an equity ownership interest or life of the unit entitlement. Such expenses are currently recoverable through rates. Pensions: EUA maintains a noncontributory defined benefit pension plan covering most of the employees of the EUA System (Retirement Plan). Retirement Plan benefits are based on years of service and average compensation over the four years prior to retirement. It is the EUA System's policy to fund the Retirement Plan on a current basis in amounts determined to meet the funding standards established by the Employee Retirement Income Security Act of 1974. Total pension (income) expense for the Retirement Plan for 1998 included the following components: ($ in thousands) 1998 Service cost $ 2,929 Interest cost 10,390 Expected return on assets (15,033) Net amortization: Prior service cost 671 Net actuarial (gain) (395) Transition obligation (asset) (274) Total periodic pension (income) expense $ (1,712) Assumptions used to determine pension costs: Discount Rate 7.25% Compensation Increase Rate 4.25% Long-Term Return on Assets 9.50% The following tables set forth the actuarial present value of projected benefit obligations, fair value of assets and funded status at December 31, 1998: Reconciliation of Projected Benefit Obligation ($ in thousands) 1998 Beginning of year benefit obligation $144,915 Service cost 2,929 Interest cost 10,390 Actuarial loss 9,256 Disbursements (8,032) End of year benefit obligation $159,458 Reconciliation of Fair Value of Assets ($ in thousands) 1998 Beginning of year fair value of assets $182,795 Actual return on plan assets 38,074 Disbursements (8,032) End of year fair value of assets $212,837 Reconciliation of Funded Status ($ in thousands) 1998 Projected benefit obligation (PBO) $(159,458) Fair value of plan assets (FVA) 212,837 PBO less than FVA (funded status) 53,379 Unrecognized prior service cost 4,153 Unrecognized net transition obligation (asset) (662) Unrecognized net actuarial (gain) (54,845) Net amount recognized $ 2,025 The discount rate used to determine pension obligations, effective January 1, 1999 was changed from 7.25% to 6.75% and was used to calculate the plan's funded status at December 31, 1998. At December 31, 1998, approximately $2.7 million was included in other liabilities for non-qualified pension benefits. EUA also maintains non-qualified supplemental retirement plans for certain officers and trustees of the EUA System (Supplemental Plans). Benefits provided under the Supplemental Plans are based primarily on compensation at retirement date. EUA maintains life insurance on certain participants of the Supplemental Plans, and policy cash values and death benefits may be available to offset EUA's obligations under the Supplemental Plans. As of December 31, 1998, approximately $6.5 million was included in accrued expenses and other liabilities for these plans. Expenses related to the Supplemental Plans were $1.1 million in 1998. EUA also provides a defined contribution 401(k) savings plan for substantially all employees. EUA's matching percentage of employees' voluntary contributions to the plan, amounted to $1.5 million in 1998. Post-Retirement Benefits: Retired employees are entitled to participate in health care and life insurance benefit plans. Health care benefits are subject to deductibles and other limitations. Health care and life insurance benefits are partially funded by EUA System companies for all qualified employees. The total cost of post-retirement benefits other than pensions for 1998 includes the following components: ($ in thousands) 1998 Service cost $ 967 Interest cost 4,526 Expected return on assets (1,849) Net amortization: Net actuarial (gain) (780) Transition obligation 3,289 Total periodic postretirement benefit cost $6,153 Assumptions used to determine post-retirement costs Discount rate 7.25% Health care cost trend rate - near-term 6.00% - long-term 5.00% Compensation increase rate 4.25% Long-term return on assets - union 8.50% - non-union 7.50% The following tables set forth the actuarial present value of accumulated postretirement benefit obligation, fair value of assets and funded status at December 31, 1998. Reconciliation of Accumulated Post-retirement Benefit Obligation ($ in thousands) 1998 Beginning of year benefit obligation $64,826 Service cost 967 Interest cost 4,526 Participant contributions 151 Actuarial loss 2,644 Disbursements (3,486) End of year benefit obligation $69,628 Reconciliation of Fair Value Assets ($ in thousands) 1998 Beginning of year fair value of assets $ 23,729 Actual return on plan assets 3,007 Company contributions 6,794 Participant contributions 151 Disbursements (3,486) End of year fair value of assets $30,195 Reconciliation of Funded Status ($ in thousands) 1998 Accumulated post-retirement benefit obligation (APBO) $ (69,628) Fair value of plan assets (FVA) 30,195 APBO (in excess of) FVA (Funded Status) (39,433) Unrecognized net transition obligation (asset) 46,046 Unrecognized net actuarial (gain) (13,967) Net amount recognized $(7,354) Effect of 1% Change in Assumed Health Care Cost Trend Rate One Percentage Point ($ in thousands) Increase Decrease Effect on 1998 service and interest cost components of net-periodic costs $ 814 $ (649) Effect on 1998 accumulated post-retirement benefit obligation $ 8,578 $ (6,996) The discount rate used to determine post-retirement benefit obligations effective January 1, 1999 was changed from 7.25% to 6.75% and was used to calculate the funded status of post-retirement benefits at December 31, 1998. Long-Term Purchased Power Contracts: The EUA System is committed under long- term purchased power contracts, expiring on various dates through September 2021, to pay demand charges whether or not energy is received. Under terms in effect at December 31, 1998, the aggregate annual minimum commitments for such contracts are approximately $111 million in 1999, $109 million in 2000, $111 million in 2001, $108 million in 2002, $101 million in 2003 and will aggregate approximately $927 million for the ensuing years. In addition, the EUA System is required to pay additional amounts depending on the actual amount of energy received under contracts in effect. The demand costs associated with these contracts are reflected as Purchased Power-Demand on the Consolidated Statement of Income. Such costs are currently recoverable through rates. Pending regulatory approval, certain power contract transfers related to the divestiture of EUA's generating assets will become effective in 1999. Upon completion of the power contract transfers, the demand charges will be reduced to $54 million in 1999, $43 million in 2000, $40 million in 2001, $42 million in 2002, $26 million in 2003, and $162 million in the ensuing years. Environmental Matters: There is an extensive body of federal and state statutes governing environmental matters, which permit, among other things, federal and state authorities to initiate legal action providing for liability, compensation, cleanup, and emergency response to the release or threatened release of hazardous substances into the environment and for the cleanup of inactive hazardous waste disposal sites which constitute substantial hazards. Because of the nature of the EUA System's business, various by-products and substances are produced or handled which are classified as hazardous under the rules and regulations promulgated by the United States Environmental Protection Agency (EPA) as well as state and local authorities. The EUA System generally provides for the disposal of such substances through licensed contractors, but these statutory provisions generally impose potential joint and several responsibility on the generators of the wastes for cleanup costs. Subsidiaries of EUA have been notified with respect to a number of sites where they may be responsible for such costs, including sites where they may have joint and several liability with other responsible parties. It is the policy of the EUA System companies to notify liability insurers and to initiate claims. EUA is unable to predict whether liability, if any, will be assumed by, or can be enforced against, the insurance carriers in these matters. 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 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 is approximately $5.9 million, including approximately $3.6 million in interest which had accumulated since 1985. Due to the uncertainty of the ultimate outcome of this proceeding and anticipated recoverability whether through rates, insurance providers or other parties, Blackstone recorded an asset for the amount funded under the escrow agreement (discussed below) consistent with provisions of SFAS 5, specifically paragraphs 3, 10, and 13 and SFAS 71, specifically paragraphs 3 and 9. This amount is included with Other Assets on the Consolidated Balance Sheets at December 31, 1998 and 1997. Should the EPA determine the substance to be non-toxic, the company may be able to retain the entire escrowed amount and would relieve both the asset and liability from its balance sheet at that time. However should the EPA determine that the substance is hazardous, the company would amortize its asset, net of amounts recovered through insurance proceeds or from other parties, over a five year period in accordance with the company's established rate recovery mechanisms of similar costs. Blackstone filed a Notice of Appeal of the District Court 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 the chemical substance, ferric ferrocyanide (FFC), contained within the by-product 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 District Court, 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. This proceeding was stayed in December 1995 pending final EPA determination as to whether FFC is a hazardous substance. Blackstone has notified certain liability insurers and has filed claims with respect to the Mendon Road site, as well as other sites. Blackstone reached settlement with one carrier for reimbursement of legal costs related to the Mendon Road case. In January 1996, Blackstone received the proceeds of the settlement. As of December 31, 1998, the EUA System had incurred costs of approximately $7.7 million (excluding the $5.9 million Mendon Road judgment) in connection with the investigation and cleanup of these sites, substantially all of which relate to Blackstone. These amounts have been financed primarily by internally generated cash. Blackstone is currently amortizing all of its incurred costs over a five-year period consistent with prior regulatory recovery periods and is recovering certain of those costs in rates. EUA estimates that additional costs of up to $2.5 million (excluding the $5.9 million Mendon Road judgment) may be incurred at these sites through 1999, substantially all of which relates to sites at which Blackstone is a potentially responsible party. Estimates beyond 1999 cannot be made since site studies, which are the basis of these estimates, have not been completed. As a result of the recoverability of cleanup costs in rates and the uncertainty regarding both its estimated liability, and potential contributions from insurance carriers and other responsible parties, EUA does not believe that the ultimate impact of the environmental costs will be material to the financial position of the EUA System or to any individual subsidiary. Thus no loss provision is required at this time. The Clean Air Act Amendments created new regulatory programs and generally updated and strengthened air pollution control laws. These Amendments expanded the EPA regulations of emissions from electric generating facilities and a host of other sources. EUA System generating facilities were first affected in 1995, when EPA regulations became applicable to the facilities. Montaup's coal-fired Somerset Unit 6 is utilizing lower sulfur content coal to meet the 1995 air standards. EUA does not anticipate the impact from the Amendments to be material to the financial position of the EUA System. In July 1997, the EPA issued a new and more stringent rule covering ozone particulate matter which is to be followed by promulgation of more stringent ozone and particulate matter standards. The effect that such standards will have on the EUA System cannot be determined by management at this time. Eastern Edison, Montaup, the Massachusetts Attorney General and Division of Energy Resources entered into a settlement regarding electric utility industry restructuring in Massachusetts. The settlement includes a plan for emissions reductions related to Montaup's Somerset Station Units 5 and 6. The basis for SO2 and NOx emission reductions in the proposed settlement is an allowance cap calculation. Montaup may meet its allowance caps by any combination of control technologies, fuel switching, operational changes, and/or the use of purchased or surplus allowances. The settlement was approved by FERC on December 19, 1997. In April 1992, the Northeast States for Coordinated Air Use Management (NESCAUM), an environmental advisory group for eight northeast states including Massachusetts and Rhode Island, issued recommendations for NOx controls for existing utility boilers required to meet the ozone non-attainment requirements of the Clean Air Act. The NESCAUM recommendations are more restrictive than the Clean Air Act requirements. The Massachusetts Department of Environmental Management has amended its regulations to require that Reasonably Available Control Technology (RACT) be implemented at all stationary sources potentially emitting 50 tons or more per year of NOx. Similar regulations have been issued in Rhode Island. Montaup has initiated compliance with these requirements through, among other things, selective noncatalytic reduction processes. See Note A regarding EUA's planned divestiture of generation assets. A number of scientific studies in the past several years have examined the possibility of health effects from EMF that are found wherever there is electricity. While some of the studies have indicated some association between exposure to EMF and health effects, many others have indicated no direct association. Some states have enacted regulations to limit the strength of magnetic fields at the edge of transmission line rights-of-way. Rhode Island has enacted a statute which authorizes and directs the Energy Facility Siting Board to establish rules and regulations governing construction of high voltage transmission lines of 69 kv or more. Management cannot predict the ultimate outcome of the EMF issue. Guarantee of Financial Obligations: EUA has guaranteed or entered into equity maintenance agreements in connection with certain obligations of its subsidiaries. EUA has guaranteed the repayment of EUA Cogenex's $24.5 million, 10.56% unsecured long-term notes due 2005 and EUA Ocean State's $26.1 million, 9.59% unsecured long-term notes due 2011. In addition, EUA has entered into equity maintenance agreements in connection with the issuance of EUA Service's 10.2% Secured Notes and EUA Cogenex's 9.6% Unsecured Notes. Under the December 1992 settlement agreement with EUA Power, EUA reaffirmed its guarantee of up to $10 million of EUA Power's share of the decommissioning costs of Seabrook I and any costs of cancellation of Seabrook I or Seabrook II. EUA guaranteed this obligation in 1990 in order to secure the release to EUA Power of a $10 million fund established by EUA Power at the time EUA Power acquired its Seabrook interest. EUA has not provided a reserve for this guarantee because management believes it unlikely that EUA will ever be required to honor the guarantee. Montaup is a 3.27% equity participant in two companies which own and operate transmission facilities interconnecting New England and the Hydro Quebec system in Canada. Montaup has guaranteed approximately $4.1 million of the outstanding debt of these two companies. In addition, Montaup and Newport have minimum rental commitments which total approximately $11.2 million and $1.4 million, respectively, under a noncancelable transmission facilities support agreement for years subsequent to 1998. Other: Since early 1997, fourteen plaintiffs brought suits against numerous defendants, including EUA, for injuries and illness allegedly caused by exposure to asbestos over approximately a thirty-year period, at premises, including some owned by EUA companies. The total damages claimed in all of these complaints was $34 million in compensatory and punitive damages, plus exemplary damages and interest and costs. Each complaint names between fifteen and twenty-eight defendants, including EUA. These complaints have been referred to the applicable insurance companies. Counsel has been retained by the insurers and is actively defending all cases. Four cases have been dismissed as against the EUA Companies. EUA cannot predict the ultimate outcome of this matter at this time. A pending class action, filed on March 2, 1998, in the Massachusetts Supreme Judicial Court naming all Massachusetts electric distribution companies, including Eastern Edison, and certain Massachusetts state agencies as defendants, seeks to invalidate certain sections of the Electric Utility Restructuring Act of 1997. The Act directs the Massachusetts Department of Telecommunications and Energy to impose mandatory charges on all electricity sold to customers, except those served by a municipal lighting plant, to fund energy efficiency activities and to promote renewable energy projects. In addition to declaratory judgment, plaintiffs seek remittance of monies paid to each distribution company by customers along with any interest earned. The outcome of this class action is unknown at this time, however, Eastern Edison is vigorously defending the lawsuit. Cogenex Settlement - EUA Cogenex recorded an after-tax charge of $2.1 million to earnings related to an arbitration panel's decision in a matter involving the 1995 sale of a portfolio of cogeneration units by EUA Cogenex to Ridgewood/Mass Power Partners, et al (Ridgewood). Ridgewood claimed that financial and other warranties in the purchase and sale agreement had been breached. EUA Cogenex entered counterclaims seeking recovery of costs of certain services performed for Ridgewood. The arbitration panel found for the buyer on some of the warranty claims, and awarded damages of approximately $2.6 million plus interest. EUA Cogenex was awarded approximately $400,000 plus interest on its counterclaim. EUA Cogenex paid the arbitration panel's net award less interest and recorded this charge to earnings during the fourth quarter of 1998. EUA Cogenex continues to contest the panel's findings with respect to the interest and legal fees. Termination of Power Marketing Joint Venture - In the third quarter of 1997, EUA announced the termination of a power marketing joint venture with an affiliate of Duke Energy Corporation, the establishment of contingency reserves related to certain of its energy-related business activities and other expenses. Collectively, these actions resulted in a net after-tax gain of $1.5 million in third quarter 1997 earnings. The gross pre-tax gain related to the joint venture termination was $6.6 million. The gain was offset by contingency reserves for EUA's non-core business operations, industry restructuring matters, the Millstone 3 outage, interest and insurance aggregating $4.4 million. Also, EUA recorded expenses of $200,000 related to industry restructuring efforts. EX-99 2 EXHIBIT D TAX ALLOCATION AGREEMENT Exhibit D EASTERN UTILITIES ASSOCIATES AND AFFILIATED CORPORATIONS Federal Income Tax Allocation Agreement Pursuant to Rule 45(c). Public Utility Holding Company Act of 1935 and I.R.C. Regulation Section 1.1552-1(a) (1) and Section 1.1502-33(d)(3) This agreement made as of April 2 1999, among Eastern Utilities Associates (the designation of the trustees for the time being under a Declaration of Trust dated April 2, 1928, as amended) (EUA); Eastern Edison Company, a Massachusetts corporation (Eastern); Blackstone Valley Electric Company, a Rhode Island corporation (Blackstone); Newport Electric Corporation, a Rhode Island corporation (Newport); Montaup Electric Company, a Massachusetts corporation (Montaup); EUA Service Corporation, a Massachusetts corporation (EUA Service); EUA Cogenex Corporation, a Massachusetts corporation (Cogenex); EUA Energy Investment Corporation, a Massachusetts corporation (EUA Energy); EUA Ocean State Corporation, a Rhode Island corporation (Ocean State); Eastern Unicord Corporation, a Massachusetts corporation (Unicord); Northeast Energy Management, Inc., a Massachusetts corporation (NEM); EUA TransCapacity, Inc., a Massachusetts corporation (TransCapacity); EUA Cogenex-Canada, Inc., a Canadian corporation (Cogenex-Canada); EUA Bioten, Inc., a Massachusetts corporation (Bioten); EUA Cogenex-West Corporation, a Massachusetts corporation (Cogenex- West); EUA Citizens Conservation Services, Inc., a Massachusetts Corporation (CCS); EUA Energy Services, Inc. a Massachusetts corporation (EUA ESI); EUA Compression Services, Inc., a Massachusetts corporation (Compression); and EUA Telecommunications, Inc, a Massachusetts corporation (Telecommunications). W I T N E S S E T H T H A T: WHEREAS, the term "AFFILIATES" as used herein shall be deemed to refer to Eastern, Blackstone, Newport, Montaup, EUA Service, Cogenex, EUA Energy, Ocean State, Unicord, NEM, TransCapacity, EUA Cogenex-Canada, Bioten, Cogenex-West, CCS, EUA ESI, Compression and Telecommunications, the AFFILIATES together with EUA, and the CONSOLIDATED AFFILIATES as a collective taxpaying unit is sometimes referred to as the "GROUP" and WHEREAS, EUA owns directly or indirectly at least 80 percent of the issued and outstanding shares of each class of voting common stock of each of the AFFILIATES; each of the CONSOLIDATED AFFILIATES is a member of an affiliated group within the meaning of Section 1504 of the Internal Revenue Code of 1954, as amended (the "Code"), of which EUA is the common parent; and the GROUP presently participates in the filing of a consolidated income tax return. Definitions A. Corporate Tax Benefit - The amount by which the consolidated tax is reduced by including a net corporate tax loss or other net tax benefit in the consolidated return. The value of the benefit of the operating loss shall be determined by applying the then current corporate income tax rate to the amount of the loss. The value of a credit is the actual tax savings (100%). The value of capital losses used to offset capital gains shall be computed at the then current tax rate applicable to capital gains for corporations. The value of any corporate tax benefit to be reimbursed to a member shall be reduced by the amount of any alternate minimum tax attributable to such member. B. Separate Return Tax - The tax on the corporate taxable income of an affiliate company computed as though such company were not a member of the consolidated group. C. Excess Tax Credits - The investment tax credit, alternate minimum tax credit, research and development credit, energy tax credit or other similar credit that would be allowable in the consolidation (were it not for a limitation provided by law) in excess of the amount of such credits which could be utilized on a separate return basis with regard to such limitations. EUA and the AFFILIATES agree as follows: Allocation Procedures in Accordance with I.R.C. Regulation Sections 1.1552-1(a)(1) and 1.1502-33(d)(3) A. General Rule Step 1 - The consolidated tax liability shall be apportioned among the companies in the ratio that each member's separate taxable income bears to the sum of the separate taxable incomes of all members having taxable income. Step 2 - An additional amount will be allocated to the members at 100% of the excess of the member's separate tax liability over the consolidated tax liability allocated to the member under Step 1. Under no circumstances shall the tax allocated to a member exceed its separate tax liability. Step 3 - The total of the amounts allocated under Step 2 is credited to those members who had "corporate tax benefits" as follows: (a) Those members having a negative allocation under Step 2; (b) If the total of the "corporate tax benefits" is greater than the total reduction in the consolidated tax, then the benefits arising from the inclusion of negative taxable incomes in the consolidated return shall be recognized and paid prior to the benefits arising from excess tax credits. (c) If the total benefits attributable to the negative taxable incomes of the members are not absorbed in the consolidated return, the benefit allocated to each company shall be in proportion to their respective negative taxable incomes. (d) If the total benefits attributable to the excess tax credits are not applied in the consolidated return, the benefit allocated to each company shall be in proportion to their respective excess tax credits. Step 4 - If the total consolidated tax liability shall result in an "Alternative Minimum Tax" liability position then an additional amount will be added to Steps 1 and 2. This additional amount will be allocated to the members based upon their proportionate amounts of alternate minimum taxable income. Step 5 - Reimbursement - Benefiting members will reimburse the others no later than 90 days after the filing of the consolidated tax return. B. Unused Corporate Tax Benefits A member that is entitled to payment for a tax benefit, but does not receive such payment because of the rules in Step 3 shall retain such right for the future to the extent that such benefit can be applied against the consolidated tax liability. Uncompensated corporate tax benefits arising from negative taxable income shall have priority over the benefits attributable to excess tax credits. C. Tax Adjustments In the event of any adjustments to the tax returns of any of the CONSOLIDATED AFFILIATES filed (by reason of an amended return, a claim for refund or an audit by the Internal Revenue Service), the liability, if any, of each of the AFFILIATES under Section A shall be redetermined to give effect to any such adjustment as if it had been made as part of the original computation of tax liability, and payments between EUA and the appropriate AFFILIATES shall be made within 120 days after any such payments are made or refunds are received, or, in the case of contested proceedings, within 120 days after a final determination of the contest. Interest and penalties, if any, attributable to such an adjustment shall be paid by each AFFILIATE to EUA in proportion to the increase in such AFFILIATE'S separate return tax liability computed under Section A of this Agreement that is required to be paid to EUA. In any situation in which the Group's tax liability is adjusted by a revenue agent's report or a court settlement and an item-by-item modification is not made, the Group shall consult its accountants for assistance in determining a fair allocation of the adjusted liability. D. Subsidiaries of Affiliates If at any time, any of the AFFILIATES acquires or creates one or more subsidiary corporations that are includible corporations of the Group, they shall be subject to this Agreement and all references to the AFFILIATES herein shall be interpreted to include such subsidiaries as a group. E. Successors This Agreement shall be binding on and insure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto (including but not limited to any successor of EUA or any of the AFFILIATES succeeding to the tax attributes of such corporation under Section 381 of the Code) to the same extent as if such successor had been an original party to this agreement. F. Special Rule In making the tax allocations provided for in this agreement, notwithstanding any of the foregoing, no corporate tax benefits shall be allocated to EUA. Although the separate corporate taxable income or taxable loss of EUA and any tax credits attributable to EUA will be included in the consolidated return, only the tax savings attributable to such items shall be allocated to the other AFFILIATES as if EUA were not a member of the Group. In making this allocation, the tax savings of EUA shall be allocated only to members of the Group having taxable income. Also, in making the tax allocations, only those tax consequences attributable to non-affiliated transactions shall remain with EUA Service Corporation in accordance with Section A of this Agreement. All others will be allocated to the other AFFILIATES. G. Termination Clause This Agreement shall apply to the taxable year ending December 31, 1998, unless all of the members of the Group agree in writing to terminate the Agreement prior to the end of the taxable year. The Agreement shall be renewable on a year to year basis for subsequent taxable years, provided all of the members of the Group agree in writing, prior to the end of the immediately preceding taxable year, to extend the Agreement one additional year. Notwithstanding any termination, this Agreement shall continue in effect with respect to any payment or refunds due for all taxable periods prior to termination. IN WITNESS WHEREOF, the duly authorized representatives of the parties have set their hands this 2nd day of April, 1999. EASTERN UTILITIES ASSOCIATES By /s/Donald G. Pardus Title: Chairman of the Board EUA SERVICE CORPORATION EUA COGENEX-CANADA By /s/Robert G. Powderly By /s/John R. Stevens Title: Executive Vice President Title: Vice Chairman BLACKSTONE VALLEY ELECTRIC COMPANY EUA ENERGY INVESTMENT CORPORATION By /s/John D. Carney By /s/John R. Stevens Title: President Title: President EASTERN EDISON COMPANY EASTERN UNICORD CORPORATION By /s/Michael J. Hirsh By /s/John R. Stevens Title: Vice President Title: President MONTAUP ELECTRIC COMPANY EUA TRANSCAPACITY, INC. By /s/Kevin A. Kirby By /s/John R. Stevens Title: Vice President Title: President EUA COGENEX CORPORATION EUA BIOTEN, INC. By /s/Edward T. Liston By /s/John R. Stevens Title: President Title: President NORTHEAST ENERGY MANAGEMENT, INC. EUA OCEAN STATE CORPORATION By /s/Edward T. Liston By /s/Clifford J. Hebert, Jr. Title: President Title: Treasurer EUA HIGHLAND CORPORATION NEWPORT ELECTRIC CORPORATION By /s/Mark White By /s/Barbara A. Hassan Title: Executive Vice President Title: Vice President EUA CITIZENS CONSERVATION SERVICES, INC. EUA ENERGY SERVICES, INC. By /s/Edward T. Liston By /s/Kevin A. Kirby Title: Executive Vice President Title: Vice President EX-27 3 EX G, EUA FDS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT 1000 12-MOS DEC-31-1998 DEC-31-1998 PER-BOOK 651614 187487 176317 287220 0 1302638 102180 215028 56466 373674 27994 6901 310346 63574 0 0 21911 0 0 0 498238 1302638 538801 17957 459206 477162 61639 12575 74214 37199 37015 2305 34710 33924 28288 96939 1.70 0
EX-27 4 EX G, BVE FDS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT 1000 12-MOS DEC-31-1998 DEC-31-1998 PER-BOOK 85650 197 19131 29167 0 134145 9203 17908 14547 41658 0 6130 32000 0 0 0 1500 0 0 0 53157 134445 130202 3245 118197 121442 8760 (71) 8689 3784 4905 289 4616 1049 3030 9997 0 0
EX-27 5 EX. G, FDS EECO WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT 1000 12-MOS DEC-31-1998 DEC-31-1998 PER-BOOK 492292 15425 103855 220050 0 831622 72284 47205 106509 225998 27994 0 162550 0 0 0 0 0 0 0 415080 831622 408230 18317 342283 360600 47629 (82) 47546 17840 29706 1988 27718 19806 13073 50451 0 0
EX-27 6 EX G, FDS NEWPORT
UT 1000 12-MOS DEC-31-1998 DEC-31-1998 PER-BOOK 54716 0 10647 6541 0 71904 11369 8258 3694 23321 0 771 9660 2220 0 0 10134 0 0 0 25798 71904 59455 1717 52820 54537 4918 65 4983 2126 2857 29 2828 1880 1417 2692 0 0
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