-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oOQ1S3p5w5vdH7KRYDJa/6tIMIhTRqMyy2G3f2WHgzki8+Irxa462AaI45dmHmw2 gJbBFnATl8+9kQnVjhg3zg== 0000061617-94-000002.txt : 19940331 0000061617-94-000002.hdr.sgml : 19940331 ACCESSION NUMBER: 0000061617-94-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAINE YANKEE ATOMIC POWER CO CENTRAL INDEX KEY: 0000061617 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 010278125 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-06554 FILM NUMBER: 94519121 BUSINESS ADDRESS: STREET 1: EDISON DR CITY: AUGUSTA STATE: ME ZIP: 04330 BUSINESS PHONE: 2076224868 10-K 1 1993 10K LIVE FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE _____ SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE _____ SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 1-6554 MAINE YANKEE ATOMIC POWER COMPANY (Exact name of registrant as specified in its charter) Incorporated in Maine 01-0278125 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Edison Drive, Augusta, Maine 04330 (Address of principal executive offices) (Zip Code) 207-622-4868 (Registrant's telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Continued) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] (Not applicable to registrant) The aggregate value of the voting stock held by non-affiliates of the registrant is $50,000,000, based solely on the par value of the common stock. There is no market in this security. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Shares Outstanding Class as of March 29, 1994 Common Stock, $100 par value 500,000 DOCUMENTS INCORPORATED BY REFERENCE No documents are incorporated by reference in this report. Maine Yankee Atomic Power Company Form 10-K - 1993 TABLE OF CONTENTS Page Part I Item Number Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 8 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 9 Item 4. Submission of Matters to a Vote of Security Holders . . . . . 10 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . . . . . 11 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . 13 Item 8. Financial Statements and Supplementary Data . . . . . . . . . 19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . . 46 Part III Item 10. Directors and Executive Officers of the Registrant. . . . . . 47 Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . 55 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . 57 Item 13. Certain Relationships and Related Transactions. . . . . . . . 58 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . 59 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
PART I ITEM 1 - BUSINESS (a) General. Maine Yankee Atomic Power Company (the "Company" or "Maine Yankee"), incorporated under the laws of Maine on January 3, 1966, owns and operates a pressurized-water nuclear-powered electric generating plant at Wiscasset, Maine, with a current net capacity of approximately 860 megawatts electric (the "Plant"). The Company sells its capacity and output to its ten sponsoring stockholder utilities. The Company's principal office address is Edison Drive, Augusta, Maine 04330, and its telephone number is (207) 622-4868. The Plant was declared commercial on December 28, 1972, with regular operation at approximately 570 megawatts electric (net) starting on January 1, 1973. Hearings on the Company's application for a full operating license were completed in 1972 and the license for full operation to 2008 was granted by the Atomic Energy Commission, the predecessor of the Nuclear Regulatory Commission ("NRC"), on June 29, 1973. The Plant is operated on a planned 18-month operating cycle and must be taken off line at the end of a cycle for approximately eight to ten weeks for scheduled refueling, maintenance and construction activities. Through December 31, 1993, the Company had sold over 106.8 billion kilowatt-hours ("KWH") of electricity at an average lifetime total cost per KWH of 2.3 cents. The Plant's lifetime average capacity factor is 72%. In 1993 the Plant operated at an average capacity factor of 76 percent (based on a net rating of 860 megawatts), and generated for sale 5.7 billion KWH of electric power, the highest total for a refueling year in the Plant's history, at an average cost of 3.4 cents per KWH. The Plant was shut down from July 30 to October 13, 1993, for scheduled refueling and maintenance. The Company is sponsored by ten investor-owned New England utilities (the "Sponsors" or the "Stockholders"), each of which is committed under a Power Contract with the Company to purchase a specified percentage of the capacity and output of the Plant and to pay therefor a like percentage of amounts sufficient to pay the Company's fuel costs, operating expenses (including a depreciation accrual at a rate sufficient to fully amortize the investment in the Plant over the operating life of the Plant and amounts estimated to be sufficient to decommission the Plant), interest on its debt and a return on its equity. The Company and its Sponsors have also executed Additional Power Contracts for the purpose of extending the term of the Power Contracts, as amended, from 2003 to the end of the useful life of the Plant and the completion of its decommissioning and financial obligations. Each Sponsor has also agreed under a Capital Funds Agreement with the Company to provide a like percentage of the Company's capital requirements not obtained from other sources, subject to obtaining necessary authorizations of regulatory bodies in each instance. All such obligations are subject to the continuing jurisdiction of various federal and state regulatory bodies. - 1 - ITEM 1 - BUSINESS (continued) (a) General. (continued) The obligations of the Sponsors to make payments under the Power Contracts are unconditional, subject only to each Sponsor's right to cancel its Power Contract if deliveries cannot be made to the Sponsor because either (i) the Plant is damaged to the extent of being completely or substantially completely destroyed, or (ii) the Plant is taken by exercise of the right of eminent domain or a similar right or power, or (iii) (a) the Plant cannot be used because of contamination or because a necessary license or authorization cannot be obtained or is revoked or the utilization thereof is made subject to specified conditions which are not met, and (b) the situation cannot be rectified to an extent which will permit the Company to make deliveries to the Sponsor from the Plant. Notwithstanding the right to cancel, the obligation to pay decommissioning costs continues until the Plant has been fully decommissioned. A default by a Sponsor of the Company in making payments under the Power Contract or Capital Funds Agreement could have a material adverse effect on the Company, depending on the magnitude of the default, and would constitute a default under the Company's First Mortgage Indenture and two other major credit agreements unless cured within applicable grace periods by the defaulting Sponsor or other Sponsors. (b) Problems Affecting the Industry and the Company. Substantial controversy exists concerning nuclear generating plants, which intensified when events in 1979 at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania ("TMI") caused increased concern about the safety of such plants. This prompted a rigorous reexamination of safety related equipment and operating procedures in all nuclear facilities and caused the NRC to promulgate numerous requirements in response to TMI, including both near-term modifications to upgrade certain safety systems and instrumentation and longer-term design changes, ranging from equipment changes to operational support. The Company has made the modifications required by the NRC. The NRC is continuing its safety reviews under both long-standing and new regulations and may at any time issue orders which could materially affect the Company's affairs and financial condition and the operation of the Plant. For a discussion of the voluntary shutdown of the Yankee Atomic Electric Company plant at Rowe, Massachusetts, for both regulatory and economic reasons, see "(h) Yankee Atomic Electric Company Plant Shutdown", below. Public and regulatory attention has also focused on the disposal of both low- and high-level nuclear wastes. Certain aspects of the disposal of nuclear wastes and the decommissioning of nuclear generating facilities have been regulated under federal and Maine law and further regulation is likely in this area. Public concern about the operation of nuclear generating facilities and the disposal of nuclear wastes has sometimes resulted in public campaigns to close such facilities. Although affecting various nuclear generating facilities in varying degrees, such events, as well as other problems of the industry, have had, and will continue to have, a direct effect on the affairs and financial condition of the Company. For further discussion of nuclear waste disposal issues, see "(d) Nuclear Fuel Disposal" and "(f) Low-Level Waste Disposal", below. - 2 - ITEM 1 - BUSINESS (continued) (b) Problems Affecting the Industry and the Company. (continued) There have been three unsuccessful state referenda attempting to close the Plant since 1980. The last referendum occurred on November 3, 1987, when the Maine electorate defeated an initiated bill intended to close the Plant on July 4, 1988, by a margin of 59 percent to 41 percent. There is no certainty that such a referendum will not occur again, and in the event that one takes place, no prediction can be made as to the potential outcome. If a referendum were to be initiated, the Company would strongly contest any attempts to close or impair the operation of the Plant. If (contrary to the history of unsuccessful referenda on the Plant) a referendum were to pass in Maine, the Company believes that such referendum would be vulnerable to a challenge on the basis of fundamental legal principles and that the Company would have substantial rights and remedies available to it, which it would vigorously seek to enforce. (c) Regulation and Environmental Matters. The Plant is subject to exten- sive regulation by the NRC, which is empowered to authorize the siting, construction and operation of nuclear reactors after consideration of public health, safety, environmental and antitrust matters. The United States Environmental Protection Agency ("EPA") administers programs established under the Federal Water Pollution Control Act and the Clean Air Act, as amended in 1990, which affect the Plant. The former Act establishes a national objective of complete elimination of discharges of pollutants into the nation's water and creates a rigorous permit program designed to achieve this objective. The latter Act empowers the EPA to establish clean air standards which are implemented and enforced by state agencies. In addition, pursuant to the Federal Resource Conservation and Recovery Act of 1976, the EPA regulates the generation, transportation, treatment, storage and disposal of hazardous wastes. The EPA has broad authority in administering these programs, including the ability to require installation of pollution control and mitigation devices. The National Environmental Policy Act of 1969 ("NEPA") requires that de- tailed statements of the environmental effects of major federal actions be prepared by federal agencies. Major federal actions can include licenses or permits issued to the Company by the NRC and other federal agencies for construction or operation of generation and transmission facilities. NEPA requires that federal licensing agencies make an independent evaluation of the environmental impact of, and alternatives to, the proposed action. Future construction modifications or other activities at the Plant could require federal licenses or approvals that involve NEPA requirements. The Company is also subject to regulation as to environmental matters and land use by various state and local authorities in Maine. - 3 - ITEM 1 - BUSINESS (continued) (c) Regulation and Environmental Matters. (continued) Under their continuing jurisdiction, the NRC and one or more of the EPA and the state authorities having jurisdiction over the Company's facilities may modify permits or licenses which have already been issued, or impose new conditions on such permits or licenses, and may require additional capital expenditures or require that the level of the operation of a unit be temporarily or permanently reduced. See "(b) Problems Affecting the Industry and the Company", above. The Sponsors of the Company have agreed, however, subject to certain exceptions including regulatory approval, (i) to provide the required capital not otherwise available, (ii) to take the total output of the Plant, and (iii) to pay all costs of the Plant, including capital and decommissioning costs. The Company and several of its Sponsors are subsidiaries of registered holding companies and as such are subject to regulation by the Securities and Exchange Commission ("SEC") under the Public Utility Holding Company Act of 1935 with respect to various matters, including the issuance of certain securities. The Company is also subject to regulation by the SEC under other federal securities laws. In addition the Company is subject to regulation by the Federal Energy Regulatory Commission ("FERC") as to its rates (including the Power Contracts and Additional Power Contracts) and various other matters, and is subject to regulation by the Maine Public Utilities Commission ("MPUC") as to some aspects of its business, including the issuance of securities. (d) Nuclear Fuel Disposal. The cycle of production and utilization of nuclear fuel for nuclear generating units consists of (1) the mining and milling of uranium ore, (2) the conversion of the resulting concentrate to uranium hexafluoride, (3) the enrichment of the uranium hexafluoride, (4) the fabrication of fuel assemblies, (5) the utilization of the nuclear fuel, and (6) the disposal of spent fuel. The Company has entered into a contract with the federal Department of Energy ("DOE") for disposal of its spent nuclear fuel, as required by the Nuclear Waste Policy Act of 1982, pursuant to which a fee of $1.00 per megawatt-hour is currently assessed against net generation of electricity and paid to the DOE quarterly. Under this Act, the DOE has assumed the responsibility for disposal of spent nuclear fuel produced in private nuclear reactors. In addition, Maine Yankee is obligated to make a payment of $50.4 million with respect to generation prior to April 7, 1983 (the date current DOE assessments began), all of which the Company has already collected from its customers, but for which a reserve was not funded. The Company has elected under the terms of this contract to make a single payment of this obligation prior to the first delivery of spent fuel to DOE, scheduled to begin no earlier than 1998. The payment will consist of the $50.4 million, plus interest accrued at the 13-week Treasury Bill rate compounded on a quarterly basis from April 7, 1983, through the date of the actual payment. Current costs incurred by the Company under this contract are recoverable by it under the terms of its Power Contracts with its Sponsors. The Company has accrued and billed $53.1 million of interest cost for the period April 7, 1983, through December 31, 1993. - 4 - ITEM 1 - BUSINESS (continued) (d) Nuclear Fuel Disposal. (continued) Maine Yankee has formed a trust to provide for payment of its long-term spent fuel obligation. The total spent fuel fund balance, held by an independent trustee, as of December 31, 1993, was $86.7 million (including interest earned). The trust is funded at least semiannually by the Company through deposits, which began in December 1985, with current projected semiannual deposits of approximately $0.26 million through December 1997. Deposits are expected to total approximately $62.8 million. The estimated liability, including interest due at the time of disposal, is projected to be approximately $115.9 million at January 31, 1998. The Company estimates that trust fund deposits plus estimated earnings will meet this total liability if funding continues without material changes. Federal legislation enacted in 1987 directed the DOE to proceed with the studies necessary to develop and operate a permanent high-level waste (spent fuel) disposal site at Yucca Mountain, Nevada. The legislation also provides for the possible development of a Monitored Retrievable Storage ("MRS") facility and abandons plans to identify and select a second permanent disposal site. An MRS facility would provide temporary storage for high-level waste prior to eventual permanent disposal. In late 1989 the DOE announced that the permanent disposal site was not expected to open before 2010, although originally scheduled to open in 1998. Additional delays due to political and technical problems are probable. Under the terms of a license amendment approved by the NRC in 1984, the present storage capacity of the spent fuel pool at the Plant will be reached in 1999 and after 1996 the available capacity of the pool will not accommodate a full-core removal. After consideration of available technologies, the Company elected to provide additional capacity by replacing the fuel racks in the spent fuel pool at the Plant and, on January 25, 1993, filed with the NRC seeking authorization to implement the plan. On March 15, 1994, the NRC granted the authorization. Maine Yankee believes that the replacement of the fuel racks will provide adequate storage capacity through the Plant's licensed operating life, but cannot predict with certainty whether or to what extent the new level of storage capacity at the Plant will affect the operation of the Plant or the future cost of disposal. (e) Decommissioning. A study conducted for the Company in 1987 by an external engineering consultant estimated decommissioning costs, which include the costs of removal of the Plant and reclamation of the Plant site, to be $142.5 million, plus a contingency of $35.6 million, for a total of $178.1 million (in mid-1987 dollars). The Company is currently allowed to collect $9.1 million annually in rates, based on the FERC- approved rate case settlement amount of $167.0 million (in mid-1987 dollars). Through 1993 the Company had collected $69.1 million for decommissioning, which funds are held by an independent trustee. The total decommissioning fund balance as of December 31, 1993, was $93.8 million (including interest earned). The amounts collected, together with the trust earnings, will be used to meet the Company's decommissioning obligation. - 5 - ITEM 1 - BUSINESS (continued) (e) Decommissioning. (continued) The Company's most recent study, conducted by the same consultant in 1993, estimated decommissioning costs to be $273.1 million, plus a contingency of $43.5 million, for a total of $316.6 million (in mid-1993 dollars). For a discussion of a rate filing by the Company with the FERC, in which decommissioning costs are a major area of focus, see Item 3, LEGAL PROCEEDINGS, Section (b), "Rate Proceedings", below. The Company recognizes the relative uncertainties associated with decommissioning, including its changing technology and the possibility of new requirements of law, and therefore recognizes the need to monitor and adjust decommissioning collections through supplemental rate filings with the FERC. (f) Low-Level Waste Disposal. The federal Low-Level Radioactive Waste Policy Amendments Act (the "Waste Act"), enacted in 1986, required operating disposal facilities to accept low-level nuclear waste from other states until December 31, 1992. The Waste Act also set limits on the volume of waste each disposal facility must accept from each state, established milestones for the nonsited states to establish facilities within their states or regions (pursuant to regional compacts) and authorized increasing surcharges on waste disposal until 1992. After 1992 the states in which there are operating disposal sites are permitted to refuse to accept waste generated outside their states or compact regions. In 1987 the Maine Legislature created the Maine Low-Level Radioactive Waste Authority (the "Maine Authority") to provide for such a facility if Maine is unable to secure continued access to out-of-state facilities after 1992, and the Maine Authority has been engaged in a search for a qualified disposal site in Maine. The Company volunteered its site at the Plant for that purpose, but progress toward establishing a definitive site in Maine, as in other states, was difficult because of the complex technical nature of the search process and the political sensitivities associated with it. As a result, Maine did not satisfy its milestone obligation under the Waste Act requiring submission of a site license application by the end of 1991, and is therefore subject to surcharges on its waste and has not had access to regulated disposal facilities since the end of 1992. Thus, Maine Yankee now stores all waste generated at an on-site storage facility. At the same time, the State of Maine was pursuing discussions with the State of Texas concerning participation in a compact with that state and Vermont. In May 1993, the Texas Legislature approved a compact with the states of Maine and Vermont. The Maine Legislature in June 1993 ratified the compact and submitted it to ratification by Maine voters in a referendum held on November 2, 1993, in which the compact was ratified by a margin of approximately 73% to 27%. It must now be presented to the United States Congress for final ratification. The compact provides for Texas to take Maine's low-level waste over a 30- year period for disposal at a planned facility in west Texas. In return Maine would be required to pay $25 million, assessed to the Company by the State of Maine, payable in two equal installments, the first after ratification by Congress and the second upon commencement of operation of the Texas facility. In addition, the Company would be assessed a total of $2.5 million for the benefit of the Texas county in which the facility would be located and would also be responsible for its pro-rata share of - 6 - ITEM 1 - BUSINESS (continued) (f) Low-Level Waste Disposal. (continued) the Texas governing commission's operating expenses. Pending the ratification votes, the Maine Authority has suspended its search for a suitable disposal site in Maine. In the event the required ratification by Congress is not obtained, subject to continued NRC approval, the Company can continue to utilize its capacity to store approximately ten to twelve years' production of low-level waste in its facility at the Plant site, which it started in January 1993. Subject to obtaining necessary regulatory approval, the Company could also build a second facility on the Plant site. The Company believes it is probable that it will have adequate storage capacity for such low-level waste available on-site, if needed, through the licensed operating life of the Plant. On January 26, 1993, the NRC published for public comment a proposed rulemaking that, if adopted, would require a licensee such as Maine Yankee, as a condition of its license, to document that it had exhausted other reasonable waste management options in order to be permitted to store low-level waste on-site beyond January 1, 1996. Such options include taking all reasonable steps to contract, either directly or through the state, for disposal of the low-level waste. On February 9, 1994, the NRC, after affirming its preference for disposal of waste over storage, announced its decision to withdraw the proposed rulemaking. Maine Yankee expects the NRC to issue its formal notice of withdrawal in the spring of 1994. The Company cannot predict whether the final required ratification of the Texas compact or other regulatory approvals required for on-site storage will be obtained, but the Company intends to utilize its on-site storage facility in the interim and continue to cooperate with the State of Maine in pursuing all appropriate options. (g) Nuclear Insurance. In accordance with the Price-Anderson Act, the limit of liability for a nuclear-related accident is approximately $9.317 billion, effective March 20, 1994. The primary layer of insurance for the liability is $200 million of coverage provided by the commercial insurance market. The secondary coverage is approximately $9.117 billion, based on 115 licensed reactors. The secondary layer is based on a retrospective premium assessment of $75.5 million per nuclear accident per licensed reactor, payable at a rate not exceeding $10 million per year per accident. In addition, the retrospective premium is subject to inflation-based indexing at five-year intervals and, if the sum of all public liability claims and legal costs arising from any nuclear accident exceeds the maximum amount of financial protection, each licensee can be assessed an additional 5% ($3.775 million) of the maximum retrospective assessment. In addition to the insurance required by the Price-Anderson Act, the Company carries all-risk nuclear property damage insurance in the amount of $500 million plus additional excess nuclear property insurance in the amount of $2.25 billion, effective January 1, 1994. Of this additional excess insurance, $1.4 billion is provided by a nuclear electric utility industry insurance company through a combination of current premiums and retrospective premium assessments. If the insurance company experiences losses in excess of its capacity to pay them, each participating utility may be assessed a retrospective premium of up to 7.5 times its premium with respect to industry losses in any policy year, which could range up to - 7 - ITEM 1 - BUSINESS (continued) (g) Nuclear Insurance. (continued) approximately $12.8 million for the Company. The remaining excess nuclear property coverage of $850 million is obtained from the commercial insurance market and is not subject to retrospective premium assessments. These excess coverage amounts are the maximum offered by both the industry mutual company and the commercial market. (h) Yankee Atomic Electric Company Plant Shutdown. In February 1992, Yankee Atomic Electric Company ("Yankee Atomic"), a Massachusetts corporation with several of the same sponsors as Maine Yankee, announced that it would permanently cease power operation of the Yankee Nuclear Power Station in Rowe, Massachusetts, and would prepare for an orderly decommissioning of the facility. Yankee Atomic cited continued regulatory uncertainty and economics as the key factors in its decision to close the generating plant eight years prior to the expiration of its operating license. Yankee Atomic said several important regulatory issues had not been fully resolved, which, coupled with unfavorable economic conditions, would have imposed costs too large to justify the expense of seeking to restart the 185-megawatt plant. The Yankee Atomic Plant, which had been voluntarily shut down in October 1991, is a small plant whose design is technologically different from that of the larger and more modern Maine Yankee Plant. (i) Employees. At December 31, 1993, the Company had 472 full-time employees. ITEM 2 - PROPERTIES The Plant is located on tidewater on Bailey Point in Wiscasset, Maine, on a 740-acre site which is owned in fee by the Company and is adequate for the Plant and for all associated facilities, including the associated switchyard facilities which are owned in part and operated by Central Maine Power Company. The Plant is a nuclear-powered electric generating plant, utilizing a pressurized-water reactor, fueled with slightly enriched uranium oxide. The nuclear steam supply system and certain other equipment were designed and fabricated by Combustion Engineering, Inc. The turbine generator was supplied by Westinghouse Electric Corporation. Stone & Webster Engineering Corporation, as engineer and constructor, designed and constructed the Plant. Construction of the Plant, which began in 1967, was completed in 1972 except for certain discharge temperature control facilities designed to meet the requirements of the Maine Board of Environmental Protection, which were completed in 1975. Under the terms of the Indenture securing the First Mortgage Bonds, substantially all electric plant of the Company is subject to a first mortgage lien. - 8 - ITEM 2 - PROPERTIES (continued) Since the Plant commenced operation, the Company has sought to improve its safety and reliability, while increasing its output, through periodic upgrading of equipment and facilities, along with regular training programs for Plant personnel. In furtherance of those goals, the Company replaced the Plant's two low-pressure turbines and its high-pressure turbine in 1988 and 1990, respectively, with new units provided by Asea Brown Boveri ("ABB"), which resulted in an increase of approximately 20 megawatts in the Plant's output. In addition, the Company had contracted with ABB for the purchase and installation of a new main generator, which was planned to be installed during the February 1992 refueling outage, but which the Company is now retaining as a spare. For accounting purposes, Maine Yankee has carried the approximately $8.1 million cost of the spare generator and associated equipment in a plant account as an emergency spare since December 1992, and in January 1993 filed an accounting letter request seeking FERC concurrence in that treatment. In a letter dated April 27, 1993, the FERC approved the treatment of the spare generator and associated equipment as an emergency spare component. ITEM 3 - LEGAL PROCEEDINGS (a) General. The operation of existing nuclear units and the construction of nuclear units in the United States continue to be subjects of public controversy. Various groups have filed lawsuits and participated in administrative proceedings claiming that the present state of nuclear technology presents risks to public health and safety and to the environ- ment. In addition, certain of these groups have proposed restrictive legislation relating to nuclear power. Some of the claims made by such groups, if they should prevail, or the existence of the controversy itself, could cause substantial modifications to or extended shutdowns of plants presently in operation. See Item 1, BUSINESS, Section (b), "Problems Affecting the Industry and the Company", above. (b) Rate Proceedings. On April 7, 1993, the FERC initiated an investigation pursuant to Section 206 of the Federal Power Act into the justness and reasonableness of Maine Yankee's rate of return on common equity ("ROE") established in the Company's 1988 FERC rate case. The FERC indicated that its concurrent investigations of the rates of return on common equity of Maine Yankee and other nuclear generating companies were based on an independent analysis that suggested such rates might be excessive under current market conditions. After extensive negotiations, on September 20, 1993, the FERC staff, intervenors and Maine Yankee submitted for filing an offer of partial settlement, which was approved by the Commission on December 30, 1993. The settlement agreement provided, among other things, for the following: (1) a reduction in Maine Yankee's ROE effective June 15, 1993, to 10.65% from 12.9%; (2) an agreement by the parties to enter into good-faith negotiations regarding Maine Yankee's estimated cost of decommissioning and the corresponding collection rate; - 9 - ITEM 3 - LEGAL PROCEEDINGS (continued) (b) Rate Proceedings. (continued) (3) an agreement that if the parties reached a settlement on Maine Yankee's decommissioning and collection rate, Maine Yankee would submit a rate filing requesting approval of the agreed-upon decommissioning and collection rate and a continuation of the 10.65% ROE, with the support of the FERC staff and intervenors; (4) an agreement that if the parties were unable to reach agreement on the decommissioning issues, the Company would submit a rate filing that would encompass all appropriate rate issues. On January 18, 1994, Maine Yankee, after reaching agreement on the major issues, filed its rate case with the FERC. In the filing, the Company sought approval to continue the ROE of 10.65% as earlier approved by the FERC. Maine Yankee also sought to increase the annual amount collected to fund decommissioning costs for the Plant from $9.1 million to the agreed amount of $14.9 million commencing April 1, 1994. This amount reflects the first step increase in the estimated cost to fully decommission the Plant from the $167.0 million (in mid-1987 dollars) allowed by the FERC in the Company's 1988 rate case to $316.6 million (in mid-1993 dollars) based on the Company's 1993 decommissioning cost study. The Company plans to continue to evaluate the cost of decommissioning periodically and seek additional step increases as necessary. With this filing, Maine Yankee is also requesting the FERC's approval for current and past expenses to fund postretirement benefits other than pensions, pursuant to a new accounting standard. See Note 11 of Notes to Financial Statements. Along with the rate filing, the Company filed offers of settlement that were the result of extensive negotiations between Maine Yankee and the intervenors. The parties, except for one municipal utility, have agreed to a settlement reflecting, among other things, the following: (1) an agreement to extend the ROE of 10.65% to April 1, 1997, or later, except for certain reopener provisions; (2) an agreement to establish the decommissioning collection rate described above based on the new decommissioning cost estimate of $316.6 million; (3) an agreement to establish a moratorium on Maine Yankee's ROE and decommissioning collection rate until April 1, 1997, except in certain limited circumstances. The settlement offer does not address the treatment of postretirement benefits other than pensions. Although the Company has reached agreement with all of the principal parties on the major rate issues, the Company cannot predict with certainty what action the FERC will take on its rate filing. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. - 10 - PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK- HOLDER MATTERS The Company's Common Stock, owned by the Company's ten utility Sponsors, is not publicly traded. Transfer of the Common Stock is restricted by the Company's bylaws. The Company has paid cash dividends on its Common Stock to its utility Sponsors in each year of operation, 1973 through 1993. The following table shows cash dividends paid for years 1993 and 1992: Shares 1993 1992 Outstanding Per Share Per Share January 500,000 $ 4.20 $ 4.10 April 500,000 4.20 4.30 July 500,000 3.95 4.15 October 500,000 3.20 4.20 ----- ----- $15.55 $16.75 ===== =====
The payment of dividends on the Company's Common Stock is subject to the following restrictions: (1) The Company's First Mortgage Indenture (the "Indenture") provides that the Company shall not declare or pay any dividend on any class of its stock, except out of earned surplus, and shall not declare or pay any such dividend or directly or indirectly make any payment on account of the purchase, redemption, acquisition or other retirement of any shares of its stock, unless, after giving effect to such declaration or payment, the Company's Equity shall be at least 35% of Plant Construction Financing, and the Company's Common Equity shall be at least 30% of Plant Construction Financing. Under the provisions of its two revolving credit arrangements with banks, the Company may not permit its Equity (as defined in the Indenture) to be less than 33% of Plant Construction Financing (as so defined) and its Common Equity (as so defined) to be less than 28% thereof. The Company was in compliance with those restrictions through December 31, 1993. (2) The Company's Articles of Incorporation provide that so long as any shares of the Company's Cumulative Preferred Stock are outstanding, the payment of dividends on Common Stock (other than dividends in Common Stock) and the making of distributions thereon are limited to 50% of Net Income Available for Dividends on Common Stock for the preceding twelve months if the Common Stock Equity (after such action) is less than 20% of Total Capitalization, and to 75% of such Net Income if such Common Stock Equity (after such action) is 20% or more but less than 25% of Total Capitaliza- tion. The Company was in compliance with that restriction through December 31, 1993. - 11 - Maine Yankee Atomic Power Company Form 10-K - 1993 ITEM 6 - SELECTED FINANCIAL DATA (Dollars in Thousands Except Per Share Amounts) 1993 1992 1991 1990 1989 Selected Income Statement Data: Electric Operating Revenues $193,102 $187,259 $166,471 $178,524 $158,412 Net Income 8,980 9,173 8,863 9,059 9,021 Earnings Per Share of Common Stock 14.75 16.79 16.74 17.04 16.92 Dividends Declared Per Share of Common Stock 14.45 16.85 16.70 17.05 17.05 Selected Balance Sheet Data: Total Assets $534,817 $521,193 $486,881 $449,219 $419,196 First Mortgage Bonds 103,333 89,390 98,634 52,877 58,514 Nuclear Fuel Financing Notes 12,000 21,000 26,000 64,000 40,000 Long-Term Fuel Disposal Liability 103,506 100,364 96,771 91,191 84,371 Trust Fund to Satisfy Long-Term Fuel Disposal Liability 86,684 80,655 71,110 59,509 48,122 Redeemable Preferred Stock 19,800 20,400 6,000 6,600 7,200
- 12 - ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For a period commencing January 1, 1973, extending for thirty years thereafter in accordance with the Power Contracts, as amended, subsequently extended by the Additional Power Contracts from 2003 to the end of the useful life of the Plant and completion of all licensing and financial obligations, and subject to certain limitations, each Sponsor receives its entitlement percentage of Plant output and is obligated to pay its entitlement percentage of the Company's total costs, including a return on invested capital, regardless of the level of operation of the Plant. The Plant's operating license expires in 2008. The following is management's analysis of certain significant factors which have affected the Company's operating results and financial condition for the period 1991 through 1993. Operating Results Plant Operations The Plant has operated safely and reliably and has been a high production, low cost supplier of electricity since 1972. The Company has continued to upgrade its equipment and facilities. The reliability of the Plant is reflected in its 72% lifetime average capacity factor rating, which compares very favorably with a lifetime industry average capacity factor of approximately 67%. Through December 31, 1993, the Company had sold over 106.8 billion KWH of electricity at an average lifetime total cost per KWH of 2.3 cents. The Plant is operated on a planned eighteen-month operating cycle and must be taken off line at the end of a cycle for approximately eight to ten weeks for scheduled refueling, maintenance and planned construction activities. During 1993 the Plant operated at an average 76% capacity factor (using MDC net rating of 860 MWe) and generated and sold 5.7 billion KWH, the highest annual electrical production in its history during a refueling year. Generation The following table sets forth the Company's average cost of power and generation for the years 1993, 1992 and 1991. Comparability of amounts below is primarily impacted by the duration of plant outages. There was no refueling outage in 1991. 1993 1992 1991 Average Cost of Power: Cents per KWH 3.4 3.5 2.7 Generation: Net KWH sold (in billions) 5.7 5.3 6.2
- 13 - ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Fuel Expenses Fuel Amortization expense is based on the cost of (1) nuclear fuel in the reactor core that is allocated to the accounting period based on the level of energy production and (2) amortization over the remaining useful life of the Plant for the last core of unburned nuclear fuel. Fuel amortization decreased by $6.1 million in 1992 over 1991, primarily as a result of lower generation and a reduction in the amortization rate due to lower-cost fuel being inserted into the core during the 1992 scheduled refueling, maintenance and construction outage ("refueling outage"). Fuel Disposal Cost results from (1) a disposal fee of $1.00 per megawatt- hour of net generation which is assessed by the DOE and is paid quarterly, and (2) a DOE annual assessment for decontaminating and decommissioning DOE's enrichment facilities. The 1992 and 1991 disposal costs include adjustments, lowering expense, for anticipated refunds from the DOE of $272,000 and $277,000, respectively. The final DOE rule on the refund process for disposal costs became effective on January 30, 1992. Over the following four years, the DOE is implementing the refund process for overpayments through credits against quarterly payments. The refund process is being completed in two phases. In the initial phase, principal overpayments and accrued interest through March 31, 1992, were calculated and made available for credit during the 1992-1994 period. In the second phase, additional accrued interest for the period April 1, 1992, through September 30, 1994, will be calculated and made available for credit during 1995. Total credits available for Maine Yankee are $4,312,246 (plus interest accrued from March 31, 1992, through December 31, 1993) of which $2,588,296 has been applied through 1993. Title XI of the Energy Policy Act of 1992 (the "Policy Act") provides for decontaminating and decommissioning DOE's enrichment facilities to be partially funded by a special assessment against domestic utilities. Under the Policy Act the total amount collected for the fiscal year will not exceed $150,000,000 escalated by the Consumer Price Index ("CPI") annually, and the collection of the amounts will cease after the earlier of (1) 15 years after the date of the enactment or (2) the collection of $2,250,000,000 (to be escalated by the CPI annually). Each utility's share of the assessment is to be based on its cumulative consumption of DOE enrichment services. The Company's estimated obligation is $23,985,000 based on information from the DOE. In September 1993 the Company paid the first assessment of $1,599,000, of which $1,070,000 was expensed in 1993. Operation Expense Operation expense increased by $12.9 million for 1992 over 1991, a non- outage year, primarily from the effect of the refueling outage in 1992. - 14 - ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Maintenance Expense The increase in maintenance expense by $6.8 million for 1993 over 1992 is due primarily to a maintenance project involving the Plant's thermal shield, along with general overall inflation associated with routine maintenance services, equipment and parts. The increase in maintenance expense by $14.3 million for 1992 over 1991, a nonoutage year, is due primarily to expenses incurred for the 1992 refueling outage and general overall inflation associated with routine maintenance services, equipment and parts. Income Taxes The net increase in federal and state income taxes of $.5 million for 1993 over 1992 resulted primarily from a reduction in the flowback of excess deferred taxes associated with liberalized depreciation created from higher corporate tax rates in prior periods. The net increase in federal and state income taxes of $1.7 million for 1992 over 1991 resulted primarily from four items: (1) a reduction in flowback of investment tax credits associated with the nuclear fuel assemblies as a result of the 1986 change in federal tax law which eliminated investment tax credits, (2) a reduction in flowback of excess deferred income taxes associated with liberalized depreciation, (3) the current state taxation of the growth in spent fuel trust earnings, offset by (4) the net tax benefits associated with the increased tax-exempt earnings of the spent fuel and decommissioning trust funds. Other Income, Net The increase in Other Income for 1992 over 1991 reflects primarily the increased earnings associated with the Company's prior spent fuel disposal trust fund. Fuel Disposal Interest The Company is accruing interest on its obligation to the DOE for fuel burned prior to April 7, 1983. This interest expense is compounded quarterly on the DOE obligation at the 13-week Treasury Bill rate. The interest expense associated with this liability is reflected as Interest Charges - Fuel Disposal Liability. The decrease in expense for 1993 and 1992 reflects the effect of lower interest rates. Fuel Financing and Other Bank Note Interest The average level of borrowings on fuel financing notes and bank notes was lower in 1993 than in 1992 primarily due to the repayment of short-term borrowings with the net proceeds of: (1) the $40,000,000 principal amount of Series E 8.13% Bonds issued on January 22, 1993, which was first applied to the redemption of the outstanding $27,500,000 principal amount of Series A 9.10% Bonds; and (2) the $25,000,000 principal amount of Series F 6.89% Bonds issued on June 4, 1993, which was first applied to the redemption of the outstanding $16,741,000 principal amount of Series B 8 1/2% Bonds and the outstanding $4,419,000 principal amount of Series C 7 5/8% Bonds. - 15 - ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Allowance for Funds Used Fluctuations in the amount of allowance for funds (equity and borrowed) occur as the result of changes in the level of investment in plant construction and nuclear fuel in process, and/or the rates used for capitalization of these funds. Earnings Applicable To Common Stock The decrease in earnings applicable to common stock of $1.0 million for 1993 over 1992 resulted primarily from a decrease in the Company's ROE from 12.9%, established in the Company's 1988 FERC rate case, to 10.65% effective June 15, 1993, approved by the FERC on December 30, 1993. See Note 3 of Notes to Financial Statements, "Most Recent Rate Case", for a discussion of the rate case filing. Liquidity and Capital Resources Capital Resources Cash flow needs for 1993 were provided from operating activities in the amount of $54.7 million and decommissioning trust earnings of $7.1 million restricted to decommissioning trust investments. The primary uses of cash were for various corporate purposes such as: (1) nuclear fuel acquisitions of $11.2 million, (2) construction of operating property, which utilized $14.4 million, (3) trust fund investments of $22.2 million to meet future plant decommissioning costs and prior spent fuel permanent disposal, (4) dividend payments of $9.4 million, and (5) the net redemption of overall debt of $2.7 million. The Company's current 1994 budget for construction of electric property is $8.7 million, inclusive of Allowance for Funds Used During Construction ("AFC"), and $23.4 million for procurement of nuclear fuel, inclusive of Allowance for Funds Used for Nuclear Fuel ("AFN"). See Note 12 of Notes to Financial Statements, "Commitments and Contingencies", for additional information concerning the Company's 1994 construction program and the projected acquisition of nuclear fuel requirements for 1994 through 1998. At December 31, 1993, the Company had capital resources available from secured and unsecured lines of credit totaling $106 million, of which $12.0 million was utilized. On September 22, 1992, the Company issued $15.0 million of Cumulative Preferred Stock, 8.00% Series (Sinking Fund), through a private placement to institutional investors. The net proceeds received by the Company from the sale of the Preferred Stock were applied to the repayment of bank borrowings incurred to finance the Company's construction program. - 16 - ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Capital Resources (continued) On January 22, 1993, the Company issued $40.0 million of First Mortgage Bonds, Series E (Sinking Fund) 8.13% due 2008, through a private placement to institutional investors. The net proceeds received by the Company from the bonds were applied to the redemption of the outstanding $27.5 million principal amount of Series A 9.10% Bonds, with the balance being applied to the repayment of bank borrowings incurred to finance the Company's construction and fuel procurement programs. On June 4, 1993, the Company issued $25.0 million of First Mortgage Bonds, Series F (Sinking Fund) 6.89% due 2008, through a private placement to an institutional investor. The net proceeds received by the Company from the bonds were applied to the redemption of the outstanding $16.7 million principal amount of Series B 8 1/2% Bonds and $4.4 million principal amount of Series C 7 5/8% Bonds, with the balance being applied to the repayment of bank borrowings incurred to finance the Company's construction and fuel procurement programs. Each of the Maine Yankee Sponsors has agreed under a Capital Funds Agreement with the Company to provide a percentage equal to its respective ownership percentage of the Company's capital requirements not obtained from other sources, subject to obtaining necessary authorizations of regulatory bodies in each instance. All such obligations are subject to the continuing jurisdiction of various federal and state regulatory bodies. In December 1993 Standard & Poor's Corp. ("S&P") announced that it was lowering its rating on Maine Yankee's preferred stock to "BBB-" from "BBB" and its implied senior secured debt rating to "BBB+" from "A-". S&P said the downgrade reflected a decline in the "aggregate credit quality of the utility sponsors in light of the recent downgrade of Central Maine Power Co., which holds a 38% ownership interest in the Maine Yankee plant." After a series of downgradings of Central Maine Power Company's securities by three rating agencies, S&P in January 1994 further downgraded Central Maine's senior secured debt to "BB+" with correspondingly lower ratings for its unsecured debt and preferred stock. The Company, as well as the nuclear electric industry in general, has been challenged by common problems in recent years including those of increasing operating costs and expenditures for plant modifications attributable to more stringent regulatory requirements and uncertainties caused by political involvement in nuclear utility regulation. It is not possible at this time to predict what impact these uncertainties will have on the future financial operation of the Company. Liquidity The Company bills its customers under a formula rate based on its cost of service. Unlike traditional utility ratemaking, where rates are based on a test-year rate base and total revenue requirements, the Company's rates consist of its actual costs of providing service each month, regardless of the production level of the Plant, plus the costs, as determined by the FERC in periodic rate cases, of the following items: (1) return on common equity; (2) property depreciation; (3) decommissioning expense; (4) amortization of the materials and supplies inventory that will remain at the end of the Plant's operating life; and (5) amortization of the fuel remaining in the core at the end of the Plant's operating life. - 17 - ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity (continued) The Company therefore recovers all of its actual or estimated costs monthly from its customers. See Note 3 of Notes to Financial Statements, "Most Recent Rate Case", for a more detailed discussion of the Company's rate formula. In addition to funding its short-term needs, the Company must also fund the payment of its long-term prior spent fuel disposal liability of $50.4 million and accrual of interest from April 7, 1983, to the time of payment, which through 1993 amounted to an additional $53.1 million. Maine Yankee is funding an external trust to provide for payment of this liability. Payment from the trust to the DOE is scheduled for not earlier than January 1998. The trust is funded at least semiannually by the Company through deposits, which began in December 1985, with current projected semiannual deposits of approximately $0.26 million through December 1997. Deposits are expected to total approximately $62.8 million. The estimated liability, including interest due at the time of disposal, is projected to be approximately $115.9 million at January 31, 1998. The Company estimates that trust fund deposits plus estimated earnings will meet this total liability if funding continues without material changes. The Company must also provide for the eventual decommissioning of the Plant at the end of its operating life. The Company's 1987 external engineering study estimated the cost of decommissioning to be $142.5 million, plus a contingency of $35.6 million, for a total of $178.1 million (in mid-1987 dollars). The Company is currently allowed to collect $9.1 million annually in rates, based on the FERC-approved rate case settlement amount of $167.0 million (in mid-1987 dollars). The amounts collected in cost of service are being deposited into an external trust. These amounts, together with the trust earnings, will be used to meet the Company's decommissioning obligation. The Company recognizes the relative uncer- tainties associated with decommissioning, including its changing technology and the possibility of new requirements of law, and therefore recognizes the need to monitor and adjust decommissioning collections through supplemental rate filings with the FERC. In anticipation of such a rate filing, the Company initiated a new decommissioning cost study by an external engineering consultant in early 1993. The new study estimates decommissioning costs to be $273.1 million plus a contingency of $43.5 million for a total of $316.6 million (in mid-1993 dollars). See Note 3 of Notes to Financial Statements, "Most Recent Rate Case", for a discussion of the current rate case filing. Maine Yankee has been notified by the Maine Department of Environmental Protection ("DEP") that it is one of approximately 100 potentially responsible parties under the Maine Uncontrolled Hazardous Substance Sites law for having arranged for the transport of hazardous substances to sites that have been designated uncontrolled hazardous substance sites by the DEP. Under the Maine law, each responsible party is jointly and severally liable for costs associated with the abatement, clean-up or mitigation of the hazards at such a site. Since the investigations by the DEP and the Company are in their early stages and a large number of potentially responsible parties are involved, the Company cannot now predict the amount of costs it will ultimately be required to assume, but believes the amount could be material. - 18 - ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX OF FINANCIAL INFORMATION The information required to be furnished in response to this Item is submitted on the following pages: Page Report of Independent Public Accountants 20 Financial Statements: Statement of Income for each of the three years ended December 31, 1993 21 Balance Sheet at December 31, 1993 and 1992 22 Statement of Capitalization at December 31, 1993 and 1992 24 Statement of Changes in Common Stock Investment for each of the three years ended December 31, 1993 25 Statement of Cash Flows for each of the three years ended December 31, 1993 26 Notes to Financial Statements 28
- 19 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF MAINE YANKEE ATOMIC POWER COMPANY: We have audited the accompanying balance sheet and statement of capitalization of MAINE YANKEE ATOMIC POWER COMPANY (a Maine corporation) as of December 31, 1993 and 1992, and the related statements of income, changes in common stock investment and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and the schedules listed in the index of financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MAINE YANKEE ATOMIC POWER COMPANY as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes 2 and 11 of the Notes to Financial Statements, effective January 1, 1993, the Company changed its method of accounting for income taxes and other postretirement benefits. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index of financial statement schedules are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Boston, Massachusetts, January 28, 1994 - 20 - Maine Yankee Atomic Power Company STATEMENT OF INCOME (Dollars in Thousands Except Per Share Amounts) Year Ended December 31, 1993 1992 1991 ELECTRIC OPERATING REVENUES $193,102 $187,259 $166,471 ------- ------- ------- OPERATING EXPENSES Fuel Amortization (Note 1) 16,476 17,000 23,092 Disposal Cost (Note 1) 6,451 5,192 5,915 Operation 77,301 80,414 67,527 Maintenance 38,019 31,209 16,868 Depreciation (Note 1) 16,384 15,388 14,655 Decommissioning (Note 1) 9,074 9,074 9,074 Taxes Federal and State Income (Note 2) 1,087 629 (1,036) Local Property 11,730 11,289 10,317 ------- ------- ------- Total Operating Expenses 176,522 170,195 146,412 ------- ------- ------- OPERATING INCOME 16,580 17,064 20,059 OTHER INCOME (EXPENSE) Allowance for Equity Funds Used During Construction (Note 1) 129 57 103 For Nuclear Fuel (Note 1) - - - Other, Net 5,075 5,365 4,222 ------- ------- ------- INCOME BEFORE INTEREST CHARGES 21,784 22,486 24,384 ------- ------- ------- INTEREST CHARGES Long-Term Debt (Note 5) 9,294 8,790 8,411 Fuel Disposal Liability (Note 1) 3,142 3,593 5,553 Fuel Financing Notes (Notes 6 and 7) 254 1,041 1,739 Other Interest Charges (Note 4) 466 169 361 Allowance for Borrowed Funds Used During Construction (Note 1) (128) (64) (129) For Nuclear Fuel (Note 1) (224) (216) (414) ------- ------- ------- Total Interest Charges 12,804 13,313 15,521 ------- ------- ------- NET INCOME 8,980 9,173 8,863 Dividends on Preferred Stock 1,604 779 494 ------- ------- ------- EARNINGS APPLICABLE TO COMMON STOCK $ 7,376 $ 8,394 $ 8,369 ======= ======= ======= SHARES OF COMMON STOCK OUTSTANDING 500,000 500,000 500,000 ======= ======= ======= EARNINGS PER SHARE OF COMMON STOCK $ 14.75 $ 16.79 $ 16.74 DIVIDENDS DECLARED PER SHARE OF ======= ======= ======= COMMON STOCK $ 14.45 $ 16.85 $ 16.70 ======= ======= ======= The accompanying notes are an integral part of these financial statements.
- 21 - Maine Yankee Atomic Power Company BALANCE SHEET (Dollars in Thousands) ASSETS December 31, 1993 1992 ELECTRIC PROPERTY, at Original Cost (Note 5) (Sch. V) $396,133 $384,664 Less: Accumulated Depreciation and Amortization (Note 1) (Sch. VI) 175,996 163,887 ------- ------- 220,137 220,777 Construction Work in Progress 2,660 3,705 ------- ------- Net Electric Property 222,797 224,482 ------- ------- NUCLEAR FUEL, at Original Cost (Note 1) (Sch. V) Nuclear Fuel in Reactor 82,794 84,061 Nuclear Fuel - Spent 363,985 331,801 Nuclear Fuel - Stock 9,376 12,222 ------- ------- 456,155 428,084 Less: Accumulated Amortization (Note 1) (Sch. VI) 417,588 401,112 ------- ------- 38,567 26,972 Nuclear Fuel in Process 310 21,741 ------- ------- Net Nuclear Fuel 38,877 48,713 ------- ------- Net Electric Property and Nuclear Fuel 261,674 273,195 ------- ------- CURRENT ASSETS Cash and Cash Equivalents 1,937 28 Restricted Cash 561 - Accounts Receivable 15,941 25,869 Materials and Supplies, at Average Cost (Note 1) 12,220 13,133 Prepayments 5,359 5,119 ------- ------- Total Current Assets 36,018 44,149 ------- ------- DEFERRED CHARGES AND OTHER ASSETS Trust Funds (Note 1) Fuel Disposal 86,684 80,655 Plant Decommissioning 93,847 77,686 Accumulated Deferred Income Tax Assets (Note 2) 26,823 11,533 Regulatory Asset - DOE Decontamination and Decommissioning Fee 22,475 25,960 Other Deferred Charges and Other Assets 7,296 8,015 ------- ------- Total Deferred Charges and Other Assets 237,125 203,849 ------- ------- $534,817 $521,193 ======= ======= The accompanying notes are an integral part of these financial statements.
- 22 - Maine Yankee Atomic Power Company BALANCE SHEET (Dollars in Thousands) STOCKHOLDERS' INVESTMENT AND LIABILITIES December 31, 1993 1992 CAPITALIZATION (See Separate Statement) Common Stock Investment $ 67,654 $ 67,503 Redeemable Preferred Stock 19,800 20,400 Long-Term Debt 103,333 89,390 ------- ------- Total Capitalization 190,787 177,293 ------- ------- LONG-TERM FUEL DISPOSAL LIABILITY (Note 1) 103,506 100,364 ------- ------- NUCLEAR FUEL FINANCING NOTES (Notes 6 and 7) 12,000 21,000 ------- ------- CURRENT LIABILITIES Notes Payable to Banks (Note 4) (Sch. IX) - 4,465 Current Sinking Fund Requirements (Notes 5 and 8) 7,267 9,841 Accounts Payable 12,778 16,314 Fuel Disposal Cost Payable (Note 1) - 1,489 Dividends Payable 1,951 2,512 Accrued Interest and Taxes 2,260 3,473 Other Current Liabilities 3,631 1,933 ------- ------- Total Current Liabilities 27,887 40,027 ------- ------- COMMITMENTS AND CONTINGENCIES (Note 12) RESERVES AND DEFERRED CREDITS Plant Decommissioning Reserve (Note 1) (Sch. VIII) 94,665 78,486 Deferred Credits Accumulated Deferred Income Tax Liabilities (Note 2) 60,921 61,809 DOE Decontamination and Decommissioning Fee 19,188 24,801 Regulatory Liability - Income Taxes (Note 2) 12,628 - Unamortized Investment Tax Credits (Note 2) 7,227 7,714 Unamortized Gains on Reacquired Debt (Note 1) 3,468 5,336 Other Deferred Credits 2,540 4,363 ------- ------- Total Reserves and Deferred Credits 200,637 182,509 ------- ------- $534,817 $521,193 ======= ======= The accompanying notes are an integral part of these financial statements.
- 23 - Maine Yankee Atomic Power Company STATEMENT OF CAPITALIZATION (Dollars in Thousands) December 31, 1993 1992 COMMON STOCK INVESTMENT Common Stock, $100 Par Value, 500,000 Shares Authorized and Outstanding $ 50,000 $ 50,000 Other Paid-in Capital 16,676 16,712 Capital Stock Expense (472) (511) Gain on Redemption of Preferred Stock 1,106 1,100 Premiums on Preferred Stock 79 88 Retained Earnings (Note 9) 265 114 ------- ------- 67,654 67,503 ------- ------- REDEEMABLE PREFERRED STOCK 7.48% Series, $100 Par Value Authorized 60,000 Shares Outstanding 54,000 in 1993 and 60,000 in 1992 (Note 8) 5,400 6,000 8.00% Series, $100 Par Value Authorized 200,000 Shares Outstanding 150,000 (Note 8) 15,000 15,000 ------- ------- 20,400 21,000 Less: Current Sinking Fund Requirements 600 600 ------- ------- 19,800 20,400 ------- ------- LONG-TERM DEBT (Note 5) First Mortgage Bonds Series A - 9.10 % due May 1, 2002 - 27,500 Series B - 8 1/2% due May 1, 2002 - 16,741 Series C - 7 5/8% due May 1, 2002 - 4,419 Series D - 8.79 % due May 1, 2002 45,000 50,000 Series E - 8.13 % due May 1, 2008 40,000 - Series F - 6.89 % due May 1, 2008 25,000 - ------- ------- 110,000 98,660 Less: Current Sinking Fund Requirements 6,667 9,241 Unamortized Debt Discount, Net of Premium - 29 ------- ------- 103,333 89,390 ------- ------- Total Capitalization $190,787 $177,293 ======= ======= The accompanying notes are an integral part of these financial statements.
- 24 - Maine Yankee Atomic Power Company STATEMENT OF CHANGES IN COMMON STOCK INVESTMENT for the Three Years Ended December 31, 1993 (Dollars in Thousands) Amount at Retained Shares Par Value Other,Net Earnings Total Balance-December 31, 1990 500,000 $50,000 $17,831 $ 126 $67,957 Add (Deduct): Net Income - - - 8,863 8,863 Cash Dividends Declared on - Common Stock - - - (8,350) (8,350) Preferred Stock - - - (494) (494) Redemption of Preferred Stock - - 4 - 4 Other - - (66) - (66) ------- ------ ------ ----- ------ Balance-December 31, 1991 500,000 50,000 17,769 145 67,914 Add (Deduct): Net Income - - - 9,173 9,173 Cash Dividends Declared on - Common Stock - - - (8,425) (8,425) Preferred Stock - - - (779) (779) Redemption of Preferred Stock - - 5 - 5 Other - - (385) - (385) ------- ------ ------ ------ ------ Balance-December 31, 1992 500,000 50,000 17,389 114 67,503 Add (Deduct): Net Income - - - 8,980 8,980 Cash Dividends Declared on - Common Stock - - - (7,225) (7,225) Preferred Stock - - - (1,604) (1,604) Redemption of Preferred Stock - - 6 - 6 Other - - (6) - (6) ------- ------ ------ ------ ------ Balance-December 31, 1993 500,000 $50,000 $17,389 $ 265 $67,654 ======= ====== ====== ====== ======
The accompanying notes are an integral part of these financial statements. - 25 - Maine Yankee Atomic Power Company STATEMENT OF CASH FLOWS (Dollars in Thousands) Year Ended December 31, 1993 1992 1991 Operating Activities Net Income $ 8,980 $ 9,173 $ 8,863 Items Not Requiring (Providing) Cash Fuel Amortization 16,476 17,000 23,092 Depreciation and Decommissioning 25,458 24,462 23,729 Deferred Income Taxes and Investment Tax Credits, Net (4,037) (5,472) (8,784) Allowance for Equity Funds Used for Nuclear Fuel and During Construction (129) (57) (103) Long-Term Fuel Disposal Interest, Net of AFN 2,927 3,432 5,242 Other, Net (4,553) 9,630 (7,638) Changes in Certain Assets and Liabilities Accounts Receivable 9,928 (5,711) (1,727) Other Current Assets 112 (191) (1,276) Accounts Payable 766 (5,004) 2,432 Accrued Interest and Taxes (1,213) (242) 1,701 ------ ------ ------ Net Cash Provided by Operating Activities 54,715 47,020 45,531 ------ ------ ------ Investing Activities Acquisition of Nuclear Fuel (6,640) (17,815) (17,563) Construction of Electric Property (14,312) (6,659) (22,681) Changes in Accounts Payable - Investing Activities Nuclear Fuel (4,527) 4,422 282 Construction of Electric Property (127) (1,770) 8,421 Investment Income in Decommissioning Trust 7,105 4,542 3,587 Trust Fund Investments Fuel Disposal (6,029) (9,545) (11,601) Plant Decommissioning (16,161) (13,592) (12,665) ------ ------ ------ Net Cash Used by Investing Activities (40,691) (40,417) (52,220)
------ ------ ------ - 26 - Maine Yankee Atomic Power Company STATEMENT OF CASH FLOWS (Dollars in Thousands) Year Ended December 31, 1993 1992 1991 Financing Activities Issuances (Redemptions) Bank Notes, Net $ (4,465) $ 2,025 $ 2,385 Fuel Financing Notes, Net (9,000) (5,000) (38,000) Long-Term Debt Issuances 65,000 - 60,000 Redemptions (53,660) (9,258) (8,036) Preferred Stock Issuances - 15,000 - Redemptions (600) (600) (598) Dividend Payments Common Stock (7,775) (8,375) (8,475) Preferred Stock (1,615) (490) (505) Net Cash Provided (Used) by ------ ------ ------ Financing Activities (12,115) (6,698) 6,771 ------ ------ ------ Net Increase (Decrease) in Cash and Cash Equivalents 1,909 (95) 82 Cash and Cash Equivalents at Beginning of Year 28 123 41 ------ ------ ------ Cash and Cash Equivalents at End of Year $ 1,937 $ 28 $ 123 ======= ====== ====== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest (net of amounts capitalized) $ 9,998 $ 10,388 $ 9,791 Income taxes $ 6,356 $ 6,038 $ 6,634 Disclosure of accounting policy: For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased having a maturity of three months or less to be cash equivalents. The accompanying notes are an integral part of these financial statements.
- 27 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company: The Company owns and operates a pressurized-water nuclear-powered electric generating plant with a current rated net capacity of approximately 860 megawatts (the "Plant"). The Plant commenced commercial operation on January 1, 1973. The following New England electric utilities own all of the Company's common stock: Ownership Sponsor/Participant Interest Central Maine Power Company 38% New England Power Company 20 The Connecticut Light and Power Company 12 Bangor Hydro-Electric Company 7 Maine Public Service Company 5 Public Service Company of New Hampshire 5 Cambridge Electric Light Company 4 Montaup Electric Company 4 Western Massachusetts Electric Company 3 Central Vermont Public Service Corporation 2 --- 100%
=== For a period commencing January 1, 1973, extending for thirty years thereafter in accordance with the Power Contracts, as amended, subsequently extended by the Additional Power Contracts from 2003 to the end of the useful life of the Plant and completion of all licensing and financial obligations, and subject to certain limitations, each Sponsor receives its entitlement percentage of Plant output and is obligated to pay its entitlement percentage of the Company's total costs, including a return on invested capital, regardless of the level of operation of the Plant. The Plant's operating license expires in 2008. Regulation: The Company is subject to the regulatory authority of the Federal Energy Regulatory Commission ("FERC"), the Nuclear Regulatory Commission ("NRC") and the Maine Public Utilities Commission ("MPUC") and other federal and state agencies as to rates, accounting, operations and other matters. Depreciation: Depreciation is provided using a composite remaining life method designed to fully depreciate the original cost of electric plant over the Plant operating life. Under the composite method, at the time depreciable property is retired, the original cost, plus cost of removal, less salvage, of such property is charged to accumulated depreciation. - 28 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Decommissioning: A study conducted for the Company in 1987 by an external engineering consultant estimated decommissioning costs, which include the costs of removal of the Plant and reclamation of the Plant site, to be $142.5 million, plus a contingency of $35.6 million, for a total of $178.1 million (in mid-1987 dollars). The Company is currently allowed to collect $9.1 million annually in rates, based on the FERC-approved rate case settlement amount of $167.0 million (in mid-1987 dollars). Through 1993 the Company had collected $69.1 million for decommissioning, which funds are held by an independent trustee. The total decommissioning fund balance as of December 31, 1993, was $93.8 million (including interest earned) and is included in Deferred Charges and Other Assets on the accompanying balance sheet. The amounts collected, together with the trust earnings, will be used to meet the Company's decommissioning obligation. The Company's most recent study, conducted by the same consultant in 1993, estimated decommissioning costs to be $273.1 million, plus a contingency of $43.5 million, for a total of $316.6 million (in mid- 1993 dollars). See Note 3 of Notes to Financial Statements, "Most Recent Rate Case." The Company recognizes the relative uncertainties associated with decommissioning, including its changing technology and the possibility of new requirements of law, and therefore recognizes the need to monitor and adjust decommissioning collections through supplemental rate filings with the FERC. Amortization of Nuclear Fuel: The cost of nuclear fuel in the reactor is amortized to Fuel Expense based on the ratio of energy produced during the period to the estimated total core capability. The Company amortizes to expense the estimated costs of the unburned nuclear fuel which is expected to be in the reactor core at the expiration of the Plant's NRC operating license life in 2008. These costs are being amortized over the period ending October 2008. Accumulated amortization for last core fuel for 1993 and 1992 was $8,221,000 and $7,248,000, respectively. Federal Department of Energy ("DOE") Decontamination and Decommissioning Assessment: Title XI of the Energy Policy Act of 1992 (the "Policy Act") provides for decontaminating and decommissioning DOE's enrichment facilities to be partially funded by a special assessment against domestic utilities. Under the Policy Act the total amount collected for a fiscal year will not exceed $150,000,000 escalated by the Consumer Price Index ("CPI") annually, and the collection of the amounts will cease after the earlier of (1) 15 years after the date of the enactment or (2) the collection of $2,250,000,000 (to be escalated by the CPI annually). Each utility's share of the assessment is to be based on its cumulative consumption of DOE enrichment services. - 29 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Maine Yankee's preliminary estimate of its annual assessment was $1,760,000 (1.17% of the $150,000,000). As of year-end 1992, the Company had accrued to Deferred Credits its estimated obligation of $26,400,000 related to prior years' usage, with an equal amount charged to Nuclear Fuel - Spent, to be paid over the 15-year period beginning October 1, 1992. In August 1993 the Company changed the estimated annual assessment to $1,599,000 (1.066% of the $150,000,000) and decreased the estimated obligation of $26,400,000 to $23,985,000, based on information provided by the DOE. In September 1993 the Company paid the first assessment of $1,599,000. In accordance with the September 24, 1993, accounting ruling of the FERC the cost previously recorded in Nuclear Fuel - Spent was reclassified to Other Regulatory Assets. At December 31, 1993 and 1992, the unamortized balance of the Regulatory Asset was $22,475,000 and $25,960,000, respectively. Fuel Disposal Cost: In 1983 the Company entered into a contract with the DOE for disposal of its spent nuclear fuel, as required by the Nuclear Waste Policy Act of 1982, pursuant to which a fee of $1.00 per megawatt-hour is assessed against current generation and is paid to the DOE quarterly. The Company also has an obligation of $50.4 million with respect to generation prior to April 7, 1983 (the date current DOE assessments began), all of which the Company has already collected from its customers, but for which a reserve was not funded. The Company has elected under the terms of this contract to make a single payment of this obligation prior to the first delivery of spent fuel to DOE, scheduled to begin no earlier than 1998 (See Note 12). Interest on the obligation accrues at the 13-week Treasury Bill rate compounded on a quarterly basis from April 7, 1983, through the date of the actual payment and is billed under the terms of the Power Contract. Interest accrued and billed through December 31,1993, amounted to $53.1 million. The Company has formed a trust to provide for payment of this long-term fuel obligation. The total spent fuel fund balance, held by an independent trustee, as of December 31, 1993, was $86.7 million (including interest earned) and is included in Deferred Charges and Other Assets on the accompanying balance sheet. Funding of the trust is being made through deposits by the Company at least semiannually, which began in December 1985, with current projected semiannual deposits of approximately $0.26 million through December 1997. Deposits are expected to total approximately $62.8 million. The trust fund deposits plus estimated earnings are projected to meet the total estimated future liability of $115.9 million at January 31, 1998. - 30 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Amortization of Materials and Supplies: The Company began reserving for materials and supplies inventory that is expected to be unrecoverable at the end of the Plant's life. This amortization expense is based on the current inventory balance less the accumulated amortization. This cost is being amortized over the period ending October 2008 on a monthly basis using the prior month's ending balances. Accumulated amortization for 1993 and 1992 was $3,480,000 and $2,650,000, respectively. Allowance for Funds Used During Construction ("AFC") and Allowance for Funds Used for Nuclear Fuel ("AFN"): In accordance with prior rate- making treatment, the Company earns a current return on up to 50% of Construction Work in Progress ("CWIP") and 50% of Nuclear Fuel in Process ("NFIP"), subject to certain limitations. The Company capitalizes the net cost of borrowed funds and the allowed rate of return on equity funds used to finance its remaining construction and nuclear fuel acquisition costs as AFC and AFN. The amount of the allowance recorded is determined by multiplying the applicable average monthly balance of CWIP and NFIP by the weighted average cost of capital used to finance the respective additions. The following table contains the rates used for the most recent three annual periods: AFC AFN on CWIP on NFIP 1993 9.50% 5.93% 1992 9.94 5.97 1991 10.18 9.86 Unamortized Gain or Loss on Reacquired Debt: Gains and losses on bonds reacquired to satisfy sinking fund requirements of First Mortgage Bonds are deferred and amortized to income over the remaining original terms of the applicable series as prescribed by the Uniform System of Accounts of the FERC. - 31 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 2. INCOME TAX EXPENSE The components of federal and state income taxes reflected in the Statement of Income are as follows: Year Ended December 31, 1993 1992 1991 (Dollars in Thousands) Federal Current $ 4,301 $ 4,590 $ 6,493 Deferred (3,673) (4,582) (5,918) Investment tax credits, net (487) (538) (2,535) ----- ----- ----- 141 (530) (1,960) State ----- ----- ----- Current 823 1,511 1,256 Deferred 123 (352) (332) ----- ----- ----- 946 1,159 924 Total federal and state ----- ----- ----- income taxes $ 1,087 $ 629 $(1,036)
===== ===== ===== Deferred income taxes are provided to recognize the income tax effect of reporting certain transactions in different years for income tax and financial reporting purposes in accordance with the ratemaking policies of the FERC. Provisions for deferred income taxes reflect the tax effect of all timing differences. In February 1992, the FASB issued SFAS No. 109 on accounting for income taxes effective for fiscal years beginning after December 15, 1992. The Company adopted the newly revised standard effective January 1, 1993, and will not restate prior periods. The standard requires the use of the liability method under which existing deferred taxes will be adjusted currently to reflect the effect of tax rates applicable to the years in which these taxes would become payable. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. The new standard had no impact on total income tax expense for financial reporting purposes. The net regulatory liability related to income taxes is $12,628,000 as of December 31, 1993. This liability is being amortized consistent with the Company's ratemaking. - 32 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 2. INCOME TAX EXPENSE (continued) Accumulated deferred income taxes consisted of the following as of December 31, 1993. Amount (Dollars in Thousands) Liabilities Property $58,158 Other 2,763 ------ 60,921 Assets ------ Decommissioning 8,877 Regulatory Tax Liability 5,285 Investment Tax Credit 4,797 Last Core Fuel and Material and Supplies Inventory 4,053 Other 3,811 ------ 26,823 Accumulated Deferred Income Taxes, ------ Net at December 31, 1993 $34,098
====== A valuation allowance has not been recorded at December 31, 1993, as the Company expects that all deferred income tax assets will be realized in the future. The principal components of deferred federal and state income taxes required to be disclosed pursuant to the accounting standards for income taxes in effect prior to the adoption of SFAS No. 109 are as follows: Year Ended December 31 (Dollars in thousands) 1992 1991 Federal State Federal State Depreciation $ (349) $(101) $(2,292) $(734) Decommissioning (1,219) - (1,219) - Amortization - last core fuel and materials and supplies (453) (145) (528) (169) Alternative minimum tax 17 - (876) - Fuel contract termination fees (286) (92) 932 299 Flowback of excess deferrals (1,085) - (1,477) - Other, net (1,207) (14) (458) 272 ----- --- ----- --- Total deferred taxes $(4,582) $(352) $(5,918) $(332)
===== === ===== === - 33 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 2. INCOME TAX EXPENSE (continued) Excess deferrals were created as a result of the reduction in the federal income tax rate to 34 percent. The excess deferral related to accelerated tax depreciation will be flowed back as a cost of service reduction over the period that the depreciation timing difference reverses (i.e., the period that straight-line depreciation exceeds accelerated depreciation). The excess deferred tax reserve related to other book/tax timing differences is being flowed back on a straight-line basis over the remaining book life of the plant facilities. Investment tax credits utilized to reduce federal income taxes currently payable are deferred and amortized over the lives of the related assets. The following table reconciles the statutory federal income tax rate to the effective tax rate for financial reporting purposes. 1993 1992 1991 (Dollars in Thousands) Amount % Amount % Amount % Statutory federal income tax rate $ 3,101 34.0 $ 2,939 34.0 $ 2,347 34.0 Increase (reduction) in taxes resulting from: Investment tax credits (487) (5.3) (406) (4.7) (1,216) (17.6) Flowback of excess deferred income taxes (596) (6.5) (1,085) (12.6) (1,477) (21.4) Nontaxable interest income: Spent Fuel Trust (1,807) (19.8) (1,811) (21.0) (1,516) (22.0) Nonqualified Decom- missioning Trust (441) (4.8) (440) (5.1) (386) (5.6) Other 371 3.9 273 3.2 288 4.2 ----- ---- ----- ---- ----- ---- Calculated rate $ 141 1.5 $ (530) (6.2) $(1,960) (28.4)
===== ==== ===== ==== ===== ==== 3. MOST RECENT RATE CASE On April 7, 1993, the FERC initiated an investigation pursuant to Section 206 of the Federal Power Act into the justness and reasonableness of Maine Yankee's rate of return on common equity ("ROE") established in the Company's 1988 FERC rate case. The FERC indicated that its concurrent investigations of the rates of return on common equity of Maine Yankee and other nuclear generating companies were based on an independent analysis that suggested such rates might be excessive under current market conditions. After extensive negotiations, on September 20, 1993, the FERC staff, intervenors and Maine Yankee submitted for filing an offer of partial settlement, which was approved by the Commission on December 30, 1993. The settlement agreement provided, among other things, for the following: - 34 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 3. MOST RECENT RATE CASE (continued) (1) a reduction in Maine Yankee's ROE effective June 15, 1993, to 10.65% from 12.9%; (2) an agreement by the parties to enter into good-faith negotiations regarding Maine Yankee's estimated cost of decommissioning and the corresponding collection rate; (3) an agreement that if the parties reached a settlement on Maine Yankee's decommissioning and collection rate, Maine Yankee would submit a rate filing requesting approval of the agreed-upon decommissioning and collection rate and a continuation of the 10.65% ROE, with the support of the FERC staff and intervenors; (4) an agreement that if the parties were unable to reach agreement on the decommissioning issues, the Company would submit a rate filing that would encompass all appropriate rate issues. On January 18, 1994, Maine Yankee, after reaching agreement on the major issues, filed its rate case with the FERC. In the filing, the Company sought approval to continue the ROE of 10.65% as earlier approved by the FERC. Maine Yankee also sought to increase the annual amount collected to fund decommissioning costs for the Plant from $9.1 million to the agreed amounts of $14.9 million commencing April 1, 1994. This amount reflects the first step increase in the estimated cost to fully decommission the Plant from the $167.0 million (in mid- 1987 dollars) allowed by the FERC in the Company's 1988 rate case to $316.6 million (in mid-1993 dollars) based on the Company's 1993 decommissioning cost study. The Company plans to continue to evaluate the cost of decommissioning periodically and seek additional step increases as necessary. With this filing, Maine Yankee is also requesting the FERC's approval for current and past expenses to fund postretirement benefits other than pensions, pursuant to a new accounting standard. See Note 11 of Notes to Financial Statements. Along with the rate filing, the Company filed offers of settlement that were the result of extensive negotiations between Maine Yankee and the intervenors. The parties, except for one municipal utility, have agreed to a settlement reflecting, among other things, the following: (1) an agreement to extend the ROE of 10.65% to April 1, 1997, or later, except for certain reopener provisions; (2) an agreement to establish the decommissioning collection rate described above based on the new decommissioning cost estimate of $316.6 million; (3) an agreement to establish a moratorium on Maine Yankee's ROE and decommissioning collection rate until April 1, 1997, except in certain limited circumstances. - 35 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 3. MOST RECENT RATE CASE (continued) The settlement offer does not address the treatment of postretirement benefits other than pensions. Although the Company has reached agreement with all of the principal parties on the major rate issues, the Company cannot predict with certainty what action the FERC will take on its rate filing. 4. NOTES PAYABLE TO BANKS The Company had bank lines of credit totaling $21.0 million as of December 31, 1993 and 1992, all of which require an annual fee of 1/4%. The outstanding bank notes under the lines of credit as of December 31, 1993 and 1992 were $0.0 and $4.5 million respectively. 5. FIRST MORTGAGE BONDS On March 14, 1991, the Company issued $60.0 million of First Mortgage Bonds, Series D (Sinking Fund) 8.79% due 2002, through a private placement to institutional investors. The net proceeds received by the Company from the sale of Series D Bonds were applied to the repayment of bank borrowings incurred to finance the Company's construction program. On January 22, 1993, the Company issued $40.0 million of First Mortgage Bonds, Series E (Sinking Fund) 8.13% due 2008, through a private placement to institutional investors. The net proceeds received by the Company from the bonds were applied to the redemption of the outstanding $27.5 million principal amount of Series A 9.10% Bonds, with the balance being applied to the repayment of bank borrowings incurred to finance the Company's construction and fuel procurement programs. On June 4, 1993, the Company issued $25.0 million of First Mortgage Bonds, Series F (Sinking Fund) 6.89% due 2008, through a private placement to an institutional investor. The net proceeds received by the Company from the bonds were applied to the redemption of the out- standing $16.7 million principal amount of Series B 8 1/2% Bonds and $4.4 million principal amount of Series C 7 5/8% Bonds, with the balance being applied to the repayment of bank borrowings incurred to finance the Company's construction and fuel procurement programs. The annual sinking fund requirements of outstanding Series D, E, and F First Mortgage Bonds and bonds repurchased in advance for each of the five years ending December 31, 1997, are as follows: Bonds Repurchased Sinking in Advance Fund at December 31, 1993 1993 $6,667,000 - 1994 6,667,000 - 1995 6,667,000 - 1996 6,667,000 - 1997 6,667,000 -
- 36 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 5. FIRST MORTGAGE BONDS (continued) Under the terms of the Indenture securing the First Mortgage Bonds, substantially all electric plant of the Company is subject to a first mortgage lien. 6. SECURED CREDIT AGREEMENT In 1989 the Company entered into a secured credit agreement with a group of banks including the Bank of New York ("BNY"), which is also acting as the agent bank, under which the Company may borrow amounts up to $50.0 million to finance corporate expenditures. Borrowings are secured by the Company's nuclear fuel inventory as defined and certain rights under the Power Contracts and Capital Funds Agreements. Under the credit agreement as amended in 1992, the Company has four rate options for financing its interim requirements: (1) a rate based on the higher of BNY's prime rate or a rate based on overnight federal funds transactions plus 1/4%; (2) the LIBOR rate plus 1/2%; (3) an adjusted certificate of deposit rate plus 5/8%; and (4) a rate established by bid. A quarterly commitment fee of .35% per annum is required on the unused portion of the facility. The credit agreement has a three-year term, which may be extended for an additional year on each anniversary by agreement of the Company and the banks. The agreement was extended for an additional year in 1993 with a current maturity date of August 1996. Certain other information relating to this loan arrangement is as follows: Year Ended December 31, 1993 1992 1991 (Dollars in Thousands) Promissory notes outstanding at end of period $12,000 $21,000 $26,000 Average daily outstanding borrowings $ 6,595 $22,527 $20,441 Highest level of borrowing $25,000 $36,000 $50,000 Annual interest rate at end of period 3.71% 4.21% 5.57% Effective average annual interest rate 3.85% 4.62% 6.82%
7. EURODOLLAR REVOLVING CREDIT AGREEMENT In January 1990 the Company entered into a Eurodollar Revolving Credit Agreement with a group of major international banks including Union Bank of Switzerland, which is also acting as agent bank, under which the Company may borrow up to $35.0 million. Under the facility each loan is due one year after the date of the loan, unless an earlier termination date applies under the agreement, and bears interest at a LIBOR-based rate plus 5/8%. A commitment fee of .35% on the unused line is payable quarterly. The loans are secured by a second lien on the Company's nuclear fuel inventory (excluding fuel in the reactor) and on certain rights under its Power Contracts and Capital Funds Agreements requiring payments or financing of fuel-related costs. - 37 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 7. EURODOLLAR REVOLVING CREDIT AGREEMENT (continued) Certain other information relating to the Eurodollar Revolving Credit Agreement is as follows: Year Ended December 31, 1993 1992 1991 (Dollars in Thousands) Promissory notes outstanding at end of period $ - $ - $ - Average daily outstanding borrowings $ - $ - $ 4,285 Highest level of borrowings $ - $ - $30,000 Annual interest rate at end of periods - % - % - % Effective average annual interest rate - % - % 8.03%
8. REDEEMABLE PREFERRED STOCK 7.48% Series. The Company must redeem and cancel 6,000 shares annually of the 7.48% Series Preferred Stock at par value plus accrued dividends. At the election of the Company, up to an additional 6,000 shares may be redeemed and cancelled at par plus accrued dividends on each redemption date. The optional provision is not cumulative. The annual sinking fund requirement through December 31, 1998, is $600,000. The Company may also redeem, in whole or in part, any additional shares of the 7.48% Series Preferred Stock upon not less than thirty nor more than fifty days' notice at $101.50 per share on or before December 31, 1997, and at $100.00 per share thereafter, in each case plus accrued dividends. There was no Preferred Stock repurchased for the sinking fund in advance and not cancelled at December 31, 1993, 1992, and 1991. 8.00% Series. On September 22, 1992, the Company issued $15.0 million of Cumulative Preferred Stock, 8.00% Series (Sinking Fund), through a private placement to institutional investors. The net proceeds received by the Company from the sale of the Preferred Stock were applied to the repayment of bank borrowings incurred to finance the Company's construction program. At the option of the Company, any time on and after October 1, 1997, shares of the Cumulative Preferred Stock, 8.00% Series are redeemable at redemption prices decreasing from $105.33 per share on or after October 1, 1997, to $100.00 per share as of October 1, 2007. No shares of Cumulative Preferred Stock 8.00% Series may be redeemed, directly or indirectly, prior to October 1, 1997. Mandatory sinking fund redemptions of the 8.00% Series shares begin October 1, 2002, and each October 1 thereafter with a noncumulative optional provision to redeem additional shares at a price of $100.00 per share plus dividends accrued. - 38 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 9. RETAINED EARNINGS Under terms of the most restrictive test in the Company's First Mortgage Indenture and the Company's Articles of Incorporation, no dividend may be paid on any class of its stock unless the Company is in compliance with specific equity ratio requirements. Through December 31, 1993, the Company was in compliance with these requirements. 10. DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS The methods and assumptions used to estimate the fair value of each class of financial instruments for which it is practicable are discussed below. The carrying amounts of cash and temporary investments approximate fair value because of the short maturity of these investments. The fair value of redeemable preferred stock, other notes and long-term obligations is based on quoted market prices for the same or similar issues. The estimated fair value of the Company's financial instruments as of December 31, 1993, is as follows: (Dollars in Thousands) Carrying Fair Amount Value Cash $ 1,937 $ 1,937 Spent Fuel Trust 86,684 94,541 Decommissioning Trust 93,847 99,862 Redeemable Preferred Stock 20,400 22,116 Mortgage Bonds 110,000 115,319 Notes Payable 12,000 12,000
Anticipated regulatory treatment of any differences between fair value and carrying value of the Company's financial instruments is expected to be considered in the future rates charged by the Company. 11. EMPLOYEE AND POSTRETIREMENT BENEFITS The Company has two separate noncontributory defined-benefit pension plans which cover substantially all of its union and nonunion employees. The Company's funding policy is to contribute amounts to the separate plans which are sufficient to meet the funding requirements set forth in the Employee Retirement Income Security Act ("ERISA"), plus such additional amounts as the Company may determine to be appropriate. Total pension expense related to these plans amounted to $1,524,000 in 1993, $1,434,000 in 1992 and $991,000 in 1991. Plan benefits under the union retirement plan are based on average career earnings and length of employee service. Plan benefits under the nonunion retirement plan are based on average final earnings, as defined within the plan, and length of employee service. A summary of the components of net periodic pension cost for the union and nonunion defined benefit plans in 1993, l992 and 1991 and the total contributions charged to pension expense is as follows: - 39 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 11. EMPLOYEE AND POSTRETIREMENT BENEFITS (continued) Union Nonunion l993 l992 1991 l993 1992 1991 (Dollars in Thousands) Service Cost - Benefits Earned During the Period $ 299 $ 247 $ 185 $ 993 $ 895 $ 628 Interest Cost on Projected Benefit Obligation 213 182 152 874 731 583 Return on Plan Assets (413) (188) (356) (1,009) (512) (1,024) Net Amortization and Deferral 158 5 206 409 74 617 --- --- --- ----- ----- ----- Net Periodic Pension Cost $ 257 $ 246 $ 187 $ 1,267 $1,188 $ 804
=== === === ===== ===== ===== The following table sets forth the actuarial present value of pension benefit obligations, the funded status of the plans and the liabilities recognized on the Company's balance sheet at December 31, 1993 and l992: Union Nonunion 1993 1992 1993 1992 (Dollars in Thousands) Actuarial Present Value of Benefit Obligations Vested Benefit Obligation $1,867 $1,163 $ 6,074 $3,202 ===== ===== ====== ===== Accumulated Benefit Obligation $2,333 $1,510 $ 7,993 $4,053 ===== ===== ====== ===== Projected Benefit Obligation $3,268 $2,328 $15,282 $9,277 Plan Assets at Market Value (Primarily, Stocks and Bonds) 3,544 2,797 9,451 6,955 Funded Status - Projected ----- ----- ------ ----- Benefit Obligation in Excess of (Less Than) Plan Assets (276) (469) 5,831 2,322 Unrecognized Prior Service Cost 15 17 (3,091) (26) Unrecognized Net (Loss) Gain (138) 173 (1,575) (757) Unrecognized Net Asset 331 353 442 473 Net Pension Liability (Asset) ----- ----- ----- ----- Recognized in the Balance Sheet $ (68) $ 74 $ 1,607 $2,012
===== ===== ====== ===== Assumptions used in determining the actuarial present value of the pension benefit obligation for the union and nonunion plans at December 31 plans at December 31 were as follows: 1993 1992 Weighted Average Discount Rate 7.25% 8.50% Rate of Increase in Future Compensation Levels 5.50% 7.00% Expected Long-Term Return on Assets 8.50% 8.50%
- 40 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 11. EMPLOYEE AND POSTRETIREMENT BENEFITS (continued) In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for substantially all of its qualifying employees. These benefits are provided through insurance companies acting either as an insurer or plan administrator, and premiums are based on the benefits paid during the year. The Company recognizes the cost of providing these benefits through charging expense in the current period. The cost of health care and life insurance benefits, substantially all of which relates to active employees, aggregated approximately $2,422,000 in 1993, $2,159,000 in 1992 and $1,833,000 in 1991. In addition, in 1989 the Company established an employee welfare benefit plan for nonunion employees, to provide a systematic means of providing certain life, health and other postretirement benefits to eligible retired employees and their dependents. In 1990 the Company began funding the employee welfare benefit plan for union employees. The benefits of the plan will be provided through a trust fund established for the exclusive purpose of funding such benefits. The trust fund will be funded by contributions by participants in the plan, if and to the extent such contributions are required under the plan, and contributions by the Company. Contributions made by the Company related to these plans amounted to $786,000 in 1993, $331,000 in 1992 and $606,000 in 1991. The benefits provided under the employee welfare benefit plans will be limited to benefits for participants, dependents and beneficiaries which qualify as welfare benefits under Section 3(1) of ERISA or as life, sickness, accident or other benefits permitted to be provided through (1) a "Voluntary Employees' Beneficiary Association" exempt from taxation to the extent permitted under Sections 501(c)(9) and 512 of the Internal Revenue Code ("IRC") and the regulations thereunder, and (2) a 401(h) subaccount, for nonunion employees, established in accordance with Section 401(h) of the IRC in 1992 and maintained within the Company's Retirement Income Plan for Nonunion Employees. In December 1990, the FASB issued a new standard on Employers' Accounting for Postretirement Benefits Other Than Pensions, such as health care and life insurance. The Company adopted the new standard effective January 1, 1993, and did not restate prior periods. The new standard requires the accrual of the expected cost of such benefits during the employees' years of service and provides transition rules allowing the impact of the adoption to be included in annual expense over a period not greater than 20 years. The following table sets forth the plan's funded status: - 41 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 11. EMPLOYEE AND POSTRETIREMENT BENEFITS (continued) 1993 Fair Value of Plan Assets $3,946,538 --------- Accumulated Postretirement Benefit Obligation: Current Retirees and Beneficiaries 608,451 Active Employees Fully Eligible for Benefits 320,981 Other Active Employees 7,759,440 --------- Total Accumulated Benefit Obligations 8,688,872 --------- Accumulated Benefit Obligation in Excess of Plan Assets (4,742,334) Unrecognized Amounts: Transition Obligation 3,237,765 Prior Service Cost (414,074) Net Loss 1,622,781 --------- Accrued Postretirement Benefit Cost $ (295,862) ========= The net periodic postretirement benefit cost expensed for 1993 included the following components: Service Cost $ 509,818 Interest Cost 574,018 Actual Return on Assets (44,730) Deferral of Asset Loss During the Year (173,557) Amortization of Transition Obligation 215,851 --------- Net Periodic Postretirement Benefit Cost $1,081,400
========= The weighted-average discount rate used in determining the accumulated postretirement benefit obligation is 7.25%. The expected pre-tax long- term rate of return on the plan assets is 7.50%. A 14% annual rate of increase in the per capita cost of covered health care benefits is assumed for 1993. The health care cost trend rate is assumed to decrease annually through the year 1999 to an ultimate rate of 5.5%. Increasing the assumed health care cost trend rates by 1% would increase the accumulated postretirement benefit obligation as of December 31, 1993, by $2.0 million. 12. COMMITMENTS AND CONTINGENCIES Construction: The Company anticipates construction expenditures to amount to $8.7 million (inclusive of AFC) in 1994. Nuclear Fuel: The Company anticipates nuclear fuel expenditures of $23.4 million (inclusive of AFN) for 1994 and $61.4 million (inclusive of AFN) for the period 1995 through 1998. - 42 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 12. COMMITMENTS AND CONTINGENCIES (continued) Nuclear Fuel Storage: Federal legislation enacted in 1987 directed the DOE to proceed with the studies necessary to develop and operate a permanent high-level waste (spent fuel) disposal site at Yucca Mountain, Nevada. The legislation also provides for the possible development of a Monitored Retrievable Storage ("MRS") facility and abandons plans to identify and select a second permanent disposal site. An MRS facility would provide temporary storage for high-level waste prior to eventual permanent disposal. In late 1989 the DOE announced that the permanent disposal site was not expected to open before 2010, although originally scheduled to open in 1998. Additional delays due to political and technical problems are probable. Under the terms of a license amendment approved by the NRC in 1984, the present storage capacity of the spent fuel pool at the Plant will be reached in 1999 and after 1996 the available capacity of the pool will not accommodate a full-core removal. After consideration of available technologies, the Company elected to provide additional capacity by replacing the fuel racks in the spent fuel pool at the Plant and, on January 25, 1993, filed with the NRC seeking authorization to implement the plan. On March 15, 1994, the NRC granted the authorization. Maine Yankee believes that the replacement of the fuel racks will provide adequate storage capacity through the Plant's licensed operating life, but cannot predict with certainty whether or to what extent the new level of storage capacity at the Plant will affect the operation of the Plant or the future cost of disposal. Nuclear Insurance: In accordance with the Price-Anderson Act, the limit of liability for a nuclear-related accident is approximately $9.317 billion, effective March 20, 1994. The primary layer of insurance for the liability is $200 million of coverage provided by the commercial insurance market. The secondary coverage is approximately $9.117 billion, based on 115 licensed reactors. The secondary layer is based on a retrospective premium assessment of $75.5 million per nuclear accident per licensed reactor, payable at a rate not exceeding $10 million per year per accident. In addition, the retrospective premium is subject to inflation-based indexing at five-year intervals and, if the sum of all public liability claims and legal costs arising from any nuclear accident exceeds the maximum amount of financial protection, each licensee can be assessed an additional 5% ($3.775 million) of the maximum retrospective assessment. In addition to the insurance required by the Price-Anderson Act, the Company carries all-risk nuclear property damage insurance in the amount of $500 million plus additional excess nuclear property insurance in the amount of $2.25 billion, effective January 1, 1994. Of this additional excess insurance, $1.4 billion is provided by a nuclear electric utility industry insurance company through a - 43 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 12. COMMITMENTS AND CONTINGENCIES (continued) combination of current premiums and retrospective premium assessments. If the insurance company experiences losses in excess of its capacity to pay them, each participating utility may be assessed a retrospective premium of up to 7.5 times its premium with respect to industry losses in any policy year, which could range up to approximately $12.8 million for the Company. The remaining excess nuclear property coverage of $850 million is obtained from the commercial insurance market and is not subject to retrospective premium assessments. These excess coverage amounts are the maximum offered by both the industry mutual company and the commercial market. Low-Level Waste Disposal: The federal Low-Level Radioactive Waste Policy Amendments Act (the "Waste Act"), enacted in 1986, required operating disposal facilities to accept low-level nuclear waste from other states until December 31, 1992. The Waste Act also set limits on the volume of waste each disposal facility must accept from each state, established milestones for the nonsited states to establish facilities within their states or regions (pursuant to regional compacts) and authorized increasing surcharges on waste disposal until 1992. After 1992 the states in which there are operating disposal sites are permitted to refuse to accept waste generated outside their states or compact regions. In 1987 the Maine Legislature created the Maine Low- Level Radioactive Waste Authority (the "Maine Authority") to provide for such a facility if Maine is unable to secure access to out-of-state facilities after 1992, and the Maine Authority has been engaged in a search for a qualified disposal site in Maine. The Company volunteered its site at the Plant for that purpose, but progress toward establish- ing a definitive site in Maine, as in other states, was difficult because of the complex technical nature of the search process and the political sensitivities associated with it. As a result, Maine did not satisfy its milestone obligation under the Waste Act requiring submission of a site license application by the end of 1991, and is therefore subject to surcharges on its waste and has not had access to regulated disposal facilities since the end of 1992. Thus, Maine Yankee now stores all waste generated at an on-site storage facility. At the same time, the State of Maine was pursuing discussions with the State of Texas concerning participation in a compact with that state and Vermont. In May 1993, the Texas Legislature approved a compact with the states of Maine and Vermont. The Maine Legislature in June 1993 ratified the compact and submitted it to ratification by Maine voters in a referendum held on November 2, 1993, in which the compact was ratified by a margin of approximately 73% to 27%. It must now be presented to the United States Congress for final ratification. - 44 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 12. COMMITMENTS AND CONTINGENCIES (continued) The compact provides for Texas to take Maine's low-level waste over a 30-year period for disposal at a planned facility in west Texas. In return Maine would be required to pay $25 million, assessed to the Company by the State of Maine, payable in two equal installments, the first after ratification by Congress and the second upon commencement of operation of the Texas facility. In addition, the Company would be assessed a total of $2.5 million for the benefit of the Texas county in which the facility would be located and would also be responsible for its pro-rata share of the Texas governing commission's operating expenses. Pending the ratification votes, the Maine Authority has suspended its search for a suitable disposal site in Maine. In the event the required ratification by Congress is not obtained, subject to continued NRC approval, the Company can continue to utilize its capacity to store approximately ten to twelve years' production of low-level waste at its facility at the Plant site, which it started in January 1993. Subject to obtaining necessary regulatory approval, the Company could also build a second facility on the Plant site. The Company believes it is probable that it will have adequate storage capacity for such low-level waste available on-site, if needed, through the licensed operating life of the Plant. On January 26, 1993, the NRC published for public comment a proposed rulemaking that, if adopted, would require a licensee such as Maine Yankee, as a condition of its license, to document that it had exhausted other reasonable waste management options in order to be permitted to store low-level waste on-site beyond January 1, 1996. Such options include taking all reasonable steps to contract, either directly or through the state, for disposal of the low-level waste. On February 9, 1994, the NRC, after affirming its preference for disposal of waste over storage, announced its decision to withdraw the proposed rulemaking. Maine Yankee expects the NRC to issue its formal notice of withdrawal in the spring of 1994. The Company cannot predict whether the final required ratification of the Texas compact or other regulatory approvals required for on-site storage will be obtained, but the Company intends to utilize its on- site storage facility in the interim and continue to cooperate with the State of Maine in pursuing all appropriate options. Maine Yankee has been notified by the Maine Department of Environmental Protection ("DEP") that it is one of approximately 100 potentially responsible parties under the Maine Uncontrolled Hazardous Substance Sites law for having arranged for the transport of hazardous substances to sites that have been designated uncontrolled hazardous substance sites by the DEP. Under the Maine law, each responsible party is jointly and severally liable for costs associated with the abatement, clean-up or mitigation of the hazards at such a site. Since the investigations by the DEP and the Company are in their early stages and a large number of potentially responsible parties are involved, the Company cannot now predict the amount of costs it will ultimately be required to assume, but believes the amount could be material. - 45 - Maine Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS 13. UNAUDITED QUARTERLY FINANCIAL DATA Unaudited quarterly financial data are shown below. Results of operations vary between quarters, primarily because of scheduled and unscheduled plant outages. Quarter Ended March 31 June 30 September 30 December 31 (Dollars in Thousands, Except Per Share Amounts) 1993 Electric Operating Revenues $41,817 $42,053 $62,756 $46,476 Operating Income 4,241 4,453 4,444 3,442 Net Income 2,506 2,457 2,522 1,495 Earnings Per Share of Common Stock 4.21 4.11 4.24 2.19 1992 Electric Operating Revenues $57,357 $44,457 $40,261 $45,184 Operating Income 4,195 4,436 4,266 4,167 Net Income 2,199 2,231 2,269 2,474 Earnings Per Share of Common Stock 4.17 4.24 4.25 4.13
14. TRANSACTIONS WITH ASSOCIATED COMPANIES During 1993, 1992 and 1991, the Company paid $12,654,440, $12,214,635 and $11,099,994, respectively, to Yankee Atomic Electric Company, an associate of several of the Sponsors, for services at cost for its engineering and nuclear services department. Central Maine Power Company has furnished the Company certain engineering, administrative and legal services, and furnished certain facilities at cost, and electric service at its filed rates. During 1993, 1992 and 1991, Central Maine Power Company was reimbursed in the amount of $3,454,611, $4,010,974 and $3,485,433, respectively, for such services. It is expected that Yankee Atomic Electric Company and Central Maine Power Company will continue to perform similar services for the Company in the future, for which they will be reimbursed by the Company. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. - 46 - PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT A. Directors The directors of the Company and their principal occupations and all positions and offices with the Company are as follows: Name, Age and Year First Elected Director Principal Occupation David T. Flanagan, 46, 1988, President and Chief Executive Chairman of the Board of Officer, Central Maine Power Directors Company Robert S. Briggs, 50, 1991, President and Chief Executive Director Officer, Bangor Hydro-Electric Company Ted C. Feigenbaum, 43, 1994, Senior Vice President and Chief Director (effective Nuclear Officer, North Atlantic March 18, 1994)North Atlantic Energy Service Corporation Charles D. Frizzle, 51, President and Chief Executive 1991, President and Chief Officer of the Company Executive Officer, and Director Frederic E. Greenman, 57, 1984, Senior Vice President, Secretary Director and General Counsel, New England Power Company R. Edward Hanson, 56, 1994, Retired Vice President of Director (effective Production, Central Maine Power March 21, 1994) Company G. Melvin Hovey, 64, 1984, Chairman and President, Director Maine Public Service Company John B. Keane, 47, 1992, Vice President and Treasurer, Director Northeast Utilities Donald F. Kelly, 62, 1992, Retired Senior Vice President, Director Production, Engineering and Power Supply, Central Maine Power Company Carroll R. Lee, 44, 1979, Vice President - Operations, Bangor Director Hydro-Electric Company John W. Newsham, 61, 1993 Vice President, New England Director Electric System
- 47 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) A. Directors (continued) Name, Age and Year First Elected Director Principal Occupation John F. Opeka, 53, 1986, Executive Vice President - Director Engineering and Operations, Northeast Utilities Service Company Donald G. Pardus, 53, 1989, Chairman and Chief Executive Director Officer, EAstern Utilities Associates Gerald C. Poulin, 52, 1989, Vice President, Production and Director Support, Central Maine Power Company John W. Rowe, 48, 1991, * President and Chief Executive Director Officer, New England Electric System Robert de R. Stein, 44, 1993, Senior Vice President, Engineering Director and Energy Resources, Central Vermont Public Service Corporation Douglas Stevenson, 45, 1993, Treasurer, Central Maine Power Director Company Russell D. Wright, 47, 1989 President and Chief Operating Director Officer, Commonwealth Electric Company
* Mr. Rowe also served as a director of the Company from 1984 to 1989 while President and Chief Executive Officer of Central Maine Power Company. Each of the directors has been for the past five years, and each of the directors is now, an officer or employee of the Company, one of the Sponsors or an associated company thereof. Each of the Sponsors is represented on the Company's Board of Directors, but there is no formal arrangement with respect to such representation. The directors are elected at the annual meeting of stockholders and hold office until their successors are elected and qualified. They are not compensated by Maine Yankee for serving as directors. - 48 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) B. Executive Officers The following are the executive officers of the Company with all positions and offices held: Name Age Office and Year First Elected Officer Charles D. Frizzle 51 President - 1989 President and Chief Executive Officer - 1992 Patrick S. Lydon 51 Vice President, Finance and Admin- istration, and Treasurer - 1985 Vice President, Finance and Admin- istration - 1993 Andrew C. Kadak 48 Vice President, Nuclear Services - 1987 G. Douglas Whittier 47 Vice President, Licensing and Engineering - 1990 Graham M. Leitch 59 Vice President, Operations, effective January 1,1993 James D. Firth 40 Vice President, Public and Governmental Affairs - 1989 (Resigned effective April 1, 1993) Mary Ann Lynch 38 General Counsel - 1990 Michael E. Thomas 34 Treasurer, effective January 1, 1993 William M. Finn 57 Secretary and Clerk - 1984
Each of the executive officers except Mr. Leitch and Ms. Lynch has been for the past five years and is now an officer or employee of the Company or one of the Sponsors or an associated company thereof. Mr. Leitch had been retired from Philadelphia Electric Company since July 1992 after serving since 1987 as Vice President and Plant Manager of the Limerick nuclear power plant. - 49 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) B. Executive Officers (continued) Ms. Lynch was associated with the law firm of Verrill & Dana, Portland, Maine, from 1984 until her employment with the Company. The executive officers are elected annually by the Board of Directors and hold office until their successors are elected and qualified. All are employees of the Company except Mr. Kadak, who is employed by Yankee Atomic Electric Company, and Mr. Finn, who is employed by Central Maine Power Company. There are no family relationships between any directors or executive officers nor any formal arrangements or understandings pursuant to which any were selected as officers or directors. C. Other Directorships The following directors of the registrant hold other directorships as follows: Director Other Directorships Held Robert S. Briggs Bangor Hydro-Electric Company East Branch Improvement Company Maine Distributors Eastern Maine Medical Center Penobscot Hydro Co., Inc. Bangor Var Co., Inc. Ted C. Feigenbaum Greater Seacoast United Way Portsmouth Academy for the Performing Arts/Seacoast Repertory Theater North Atlantic Energy Corporation North Atlantic Energy Service Corporation David T. Flanagan Central Securities Corporation Cumberland Securities Corporation Maine Electric Power Company, Inc. The Union Water-Power Company University of Maine System American University of Bulgaria
- 50 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) C. Other Directorships (continued) Director Other Directorships Held Charles D. Frizzle Maine Leadership Consortium Mid Coast Health Services Mid Coast Medical Group Nuclear Management and Resources Council Maine Chamber of Commerce and Industry Frederic E. Greenman American Corporate Counsel Association, Northeast Chapter Narragansett Energy Resources Company New England Electric Resources, Inc. New England Electric Transmission Corporation New England Energy Incorporated New England Hydro Finance Company, Inc. New England Hydro-Transmission Corp. New England Hydro-Transmission Electric Co., Inc. New England Legal Foundation New England Power Company New England Power Service Company Connecticut Yankee Atomic Power Company Vermont Yankee Nuclear Power Corporation Yankee Atomic Electric Company R. Edward Hanson Kennebec Hydro Resources, Inc. G. Melvin Hovey Maine & New Brunswick Electrical Power Company, Limited Maine Public Service Company First Citizens Bank Maine Chamber of Commerce and Industry
- 51 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) C. Other Directorships (continued) Director Other Directorships Held John B. Keane Connecticut Yankee Atomic Power Company Charter Oak Energy, Inc. Charter Oak (Paris), Inc. The Connecticut Light and Power Company Northeast Nuclear Energy Company Northeast Utilities Service Company The Rocky River Realty Company Research Park, Inc. The City and Suburban Electric and Gas Company The Connecticut Steam Company The Connecticut Transmission Corporation Electric Power, Incorporated The Nutmeg Power Company HEC, Inc. Holyoke Power and Electric Company Holyoke Water Power Company The Quinnehtuk Company Western Massachusetts Electric Company North Atlantic Energy Corporation North Atlantic Energy Service Corporation Vermont Yankee Nuclear Power Corporation Yankee Atomic Power Company Greater Hartford Arts Council Greater Hartford Architecture Conservancy Donald F. Kelly Central Securities Corporation Cumberland Securities Corporation Maine Electric Power Company, Inc. NORVARCO Carroll R. Lee Maine Electric Power Company, Inc. East Branch Improvement Company Penobscot Hydro Co., Inc. Bangor Var Co., Inc. Bangor Hydro-Electric Company
- 52 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) C. Other Directorships (continued) Director Other Directorships Held John W. Newsham New England Power Service Company New England Power Company New England Energy Resources, Inc. Narragansett Energy Resources Company Connecticut Yankee Atomic Power Company Yankee Atomic Electric Company John F. Opeka Connecticut Yankee Atomic Power Company Yankee Atomic Electric Company Northeast Utilities Service Company The Connecticut Light and Power Company Western Massachusetts Electric Company The Quinnehtuk Company Holyoke Water Power Company Holyoke Power & Electric Company The Rocky River Realty Company Research Park, Inc. Northeast Nuclear Energy Company Opportunities Industrialization Center of New London County Charter Oak Energy, Inc. North Atlantic Energy Corporation North Atlantic Energy Services Corporation Donald G. Pardus Eastern Utilities Associates (Trustee) Montaup Electric Company Eastern Edison Company Blackstone Valley Electric Company EUA Service Corporation Newport Electric Corporation EUA Cogenex Corporation EUA Ocean State Corporation EUA Energy Investment Corporation Yankee Atomic Electric Company Connecticut Yankee Atomic Power Company Vermont Yankee Nuclear Power Corporation Electric Council of New England Gerald C. Poulin NORVARCO Kennebec Water Power Company The Union Water-Power Company Androscoggin Reservoir Company Maine Electric Power Company, Inc. KV Federal Credit Union Calumet Education Foundation
- 53 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued) C. Other Directorships (continued) Director Other Directorships Held John W. Rowe New England Electric System New England Energy Incorporated New England Power Service Company Massachusetts Electric Company New England Hydro-Transmission Electric Company, Inc. New England Hydro-Transmission Corp. Narragansett Energy Resources Company New England Electric Transmission Corp. New England Electric Resources, Inc. New England Hydro Finance Company, Inc. The Narragansett Electric Company New England Power Company New England Wholesale Electric Company Bank of Boston First National Bank of Boston UNUM Corporation Electric Power Research Institute Robert de R. Stein Yankee Atomic Electric Company Connecticut Yankee Atomic Power Company Smart Energy Services, Inc. Douglas Stevenson Kennebec Hydro Resources, Inc. Integrated Resource Management Services American Red Cross Blood Services - Northeast Region Kennebec Valley Medical Center Russell D. Wright Cambridge Electric Light Company Canal Electric Company Commonwealth Electric Company COM/Energy Services Company COM/Energy Steam Company Connecticut Yankee Atomic Power Company Yankee Atomic Electric Company Vermont Yankee Nuclear Power Corporation Reed and Barton
- 54 - ITEM 11 - EXECUTIVE COMPENSATION Prior to April l, l988, except for participation by some officers in incentive compensation and benefit plans, the Company's officers and directors were compensated by the Sponsors or other associated companies by which they were principally employed. Commencing April l, l988, however, certain Company officers became employees of, and started being compensated by, the Company, and were no longer employees of Central Maine Power Company. In addition, certain other employees compensated by Maine Yankee have been promoted to officer positions. In complying with regulatory requirements, the Company has also reimbursed Central Maine Power Company for services rendered by its employees including Maine Yankee officers and directors. See Item l3, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. SUMMARY COMPENSATION TABLE The Summary Compensation Table set forth below includes compensation information as to the President and Chief Executive Officer of the Company and the Company's most highly compensated executive officers whose total annual salary and bonus in 1993 exceeded $100,000. Annual Compensation All Other Name and Principal Occupation Year Salary Bonus(1) Compensation(2) Charles D. Frizzle, President 1993 $189,868 $40,896 $ 4,497 and Chief Executive Officer 1992(3) 166,233 28,647 4,364 1991 148,317 32,016 - Graham M. Leitch, Vice 1993(4) 136,658 29,181 26,461 President,Operations Patrick S. Lydon, Vice 1993 106,733 22,802 3,649 President, Finance and 1992 102,192 16,771 2,670 Administration 1991 97,982 21,024 - G. Douglas Whittier, Vice 1993 98,347 20,981 2,941 President, Licensing and 1992 91,058 15,060 2,725 Engineering 1991 83,643 18,142 -
(1)The compensation shown in this column reflects Officer and Manager Incentive Plan payments, which are based on the proportion by which the Company exceeds each year's performance goals. (2)In accordance with the transitional provisions of the applicable Securities and Exchange Commission rules, the Company has not provided any information in this column for any fiscal year that ended prior to December 15, 1992. The compensation shown in this column reflects Company contributions to the Savings and Investment Plan that is available to all nonunion employees except for the amount reported for Graham M. Leitch, which reflects payment for moving expenses in 1993. (3)Mr. Frizzle became Chief Executive Officer in June 1992. (4)Mr. Leitch became Vice President, Operations in January 1993. - 55 - ITEM 11 - EXECUTIVE COMPENSATION (continued) PENSION PLAN TABLE The following table shows the estimated annual retirement benefit payable to participating employees, including executive officers, in the earnings and years of service classifications indicated. Final Average Years of Service Compensation 10 20 30 40 $120,000. . . . . . . $18,343 $36,686 $ 55,029 $ 60,000 160,000. . . . . . . 25,143 50,286 75,429 82,400 200,000. . . . . . . 31,943 63,886 95,829 104,800 240,000. . . . . . . 38,743 77,486 115,641 115,641
Covered compensation consists of the salaries of the eligible executive officers. The computation of the estimated retirement benefits in the above table is based on a straight life annuity. Messrs. Frizzle, Leitch, Lydon and Whittier have, respectively, 22, 1, 22 and 10 years of credited service under the Company's retirement program. - 56 - ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the ownership of the Company's 500,000 shares of $100 par value Common Stock, all of which is issued and outstanding and all of which is held of record and beneficially. None is held by management. Amount Percentage Name Owned of Class Central Maine Power Company 190,000 shares 38% Edison Drive Augusta, Maine 04336 New England Power Company 100,000 20 25 Research Drive Westborough, Massachusetts 01582 The Connecticut Light and Power Company 60,000 12 P.O. Box 270 Hartford, Connecticut 06141 Bangor Hydro-Electric Company 35,000 7 33 State Street Bangor, Maine 04401 Maine Public Service Company 25,000 5 209 State Street Presque Isle, Maine 04769 Public Service Company of New Hampshire 25,000 5 1000 Elm Street Manchester, New Hampshire 03105 Cambridge Electric Light Company 20,000 4 One Main Street Cambridge, Massachusetts 02142-9150 Montaup Electric Company 20,000 4 P.O. Box 2333 Boston, Massachusetts 02107 Western Massachusetts Electric Company 15,000 3 P.O. Box 270 Hartford, Connecticut 06141 Central Vermont Public Service Corporation 10,000 2 77 Grove Street Rutland, Vermont 05701 ------- --- 500,000 shares 100%
======= === - 57 - ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the Plant construction period, no return was paid to Sponsors on the money paid by them for Common Stock, but a return (at the rate of 7% per annum through November 30, 1970, and at the rate of 10% per annum thereafter) was charged to plant as an allowance for equity funds used during construction. The amounts so charged were recorded as paid-in capital. This practice terminated as of December 31, 1972, the last day of the last month of the construction period. These amounts are to be paid to the Sponsors on the redemption of Common Stock. The Company's First Mortgage Indenture and the provisions of its Articles of Incorporation relating to its capital stock contain various limitations on redemption. During 1993 and 1992, the Company paid $12,654,440 and $12,214,635, respectively, to Yankee Atomic Electric Company, an associate of several of the Sponsors, for services at cost for its engineering and nuclear services department. Central Maine Power Company has furnished the Company certain engineering, administrative and legal services, and furnished certain facilities at cost, and electric service at its filed rates. During 1993 and 1992, Central Maine Power Company was reimbursed in the amount of $3,454,611 and $4,010,974, respectively, for such services. It is expected that Yankee Atomic Electric Company and Central Maine Power Company will continue to perform similar services for the Company in the future, for which they will be reimbursed by the Company. - 58 - PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. The following financial statements are filed as a part of this report: INDEX OF FINANCIAL INFORMATION Page Report of Independent Public Accountants 20 Financial Statements: Statement of Income for each of the three years ended December 31, 1993 21 Balance Sheet at December 31, 1993 and 1992 22 Statement of Capitalization at December 31, 1993 and 1992 24 Statement of Changes in Common Stock Investment for each of the three years ended December 31, 1993 25 Statement of Cash Flows for each of the three years ended December 31, 1993 26 Notes to Financial Statements 28
2. The following financial statement schedules of the Company are filed herewith and included in response to Item 14(d): INDEX OF FINANCIAL STATEMENT SCHEDULES Page Schedule V - Electric Property and Nuclear Fuel F-1 Schedule VI - Accumulated Provision for Depreciation of Electric Plant and Amortization of Nuclear Fuel F-4 Schedule VIII - Reserves Exclusive of Reserves for Depreciation F-5 Schedule IX - Short-Term Borrowings F-6
All other schedules are omitted as the required information is not applicable or the information is presented in the Financial Statements or related notes. (b) Reports on Form 8-K. The Company filed no reports on Form 8-K during the last quarter of 1993 and thereafter to date. (c) The exhibits which are filed with this Form 10-K or are incorporated herein by reference are set forth in the Exhibit Index, which immediately precedes the exhibits to this report. (d) The financial statement schedules required to be filed under this paragraph are listed under paragraph (a) 2. of this Item. - 59 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAINE YANKEE ATOMIC POWER COMPANY By Patrick S. Lydon s/s Patrick S. Lydon, Vice President, Finance and Administration March 30, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By Charles D. Frizzle s/s By Charles D. Frizzle, President and Donald F. Kelly, Director Chief Executive Officer March , 1994 (Principal Executive Officer) and Director By Carroll R. Lee s/s March 30, 1994 Carroll R. Lee, Director March 30, 1994 By Patrick S. Lydon s/s Patrick S. Lydon, Vice President, By John W. Newsham s/s Finance and Administration John W. Newsham, Director (Principal Financial Officer and March 30, 1994 Principal Accounting Officer) March 30, 1994 By John F. Opeka s/s John F. Opeka, Director By David T. Flanagan s/s March 30, 1994 David T. Flanagan, Chairman of the Board of Directors By Donald G. Pardus s/s March 30, 1994 Donald G. Pardus, Director March 30, 1994 By Robert S. Briggs s/s Robert S. Briggs, Director By Gerald C. Poulin s/s March 30, 1994 Gerald C. Poulin March 30, 1994 By By John W. Rowe s/s Ted C. Feigenbaum, Director John W. Rowe March , 1994 March 30, 1994 By Frederic E. Greenman s/s By Frederic E. Greenman, Director Robert de R. Stein March 30, 1994 March , 1994 By By Douglas Stevenson s/s R. Edward Hanson, Director Douglas Stevenson March , 1994 March 30, 1994 By G. Melvin Hovey s/s By Russell D. Wright s/s G. Melvin Hovey, Director Russell D. Wright March 30, 1994 March 30, 1994 By John B. Keane s/s John B. Keane, Director March 30, 1994
- 60 - Schedule V (1993) Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended December 31, 1993 (Dollars in Thousands) Balance at Retire- Balance Beginning Additions ments Transfers & at End of Period at Cost or Sales Other Changes of Period Electric Property Organization $ 7 $ - $ - $ - $ 7 Miscellaneous Intangible Plant 3,748 - - 423 4,171 Land and Land Rights 469 - - (6) 463 Structures and Improvements 42,092 - 1 190 42,283 Reactor Plant Equipment 185,689 - (2,544) 5,594 188,739 Turbogenerator Units 108,200 - (145) 1,654 109,709 Accessory Electric Equipment 21,360 - (123) 6,495 27,732 Miscellaneous Power Plant Equip. 18,239 - (102) 1,137 19,274 Substation Equip. 4,786 - (1,105) - 3,681 Miscellaneous Electric Property 74 - - - 74 Unfinished Construction 3,705 14,442 - (15,487) 2,660 ------- ------ ----- ------ ------- Total Electric Property $388,369 $14,442 $(4,018) $ - $398,793 ======= ====== ===== ====== ======= Nuclear Fuel Nuclear Fuel in Reactor $ 84,061 $ - $ - $ (1,267) $ 82,794 Nuclear Fuel in Process 21,741 6,640 - (28,071) 310 Nuclear Fuel - Spent 331,801 - - 32,184 363,985 Nuclear Fuel - Stock 12,222 - - (2,846) 9,376 ------- ------ ----- ------ ------- Total Nuclear Fuel $449,825 $ 6,640 $ - $ - $456,465
======= ====== ===== ====== ======= F-1 Schedule V (1993) Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended December 31, 1992 (Dollars in Thousands) Balance at Retire- Balance Beginning Additions ments Transfers & at End of Period at Cost or Sales Other Changes of Period Electric Property Organization $ 7 $ - $ - $ - $ 7 Miscellaneous Intangible Plant 3,649 - - 99 3,748 Land and Land Rights 474 - - (5) 469 Structures and Improvements 41,443 - (29) 678 42,092 Reactor Plant Equipment 181,579 - (556) 4,666 185,689 Turbogenerator Units 100,241 - (26) 7,985 108,200 Accessory Electric Equipment 19,847 - (175) 1,688 21,360 Miscellaneous Power Plant Equip. 16,852 - (123) 1,510 18,239 Substation Equip. 4,786 - - - 4,786 Miscellaneous Electric Property 74 - - - 74 Unfinished Construction 21,203 6,716 - (24,214) 3,705 ------- ------ --- ------ ------- Total Electric Property $390,155 $ 6,716 $(909) $ (7,593) $388,369 ======= ====== === ====== ======= Nuclear Fuel Nuclear Fuel in Reactor $104,368 $ - $ - $(20,307) $ 84,061 Nuclear Fuel in Process 3,922 17,815 - 4 21,741 Nuclear Fuel - Spent 294,159 - - 37,642 331,801 Nuclear Fuel - Stock 29,561 - - (17,339) 12,222 ------- ------ --- ------ ------- Total Nuclear Fuel $432,010 $17,815 $ - $ - $449,825 ======= ====== === ====== =======
F-2 Schedule V (1993) Maine Yankee Atomic Power Company ELECTRIC PROPERTY AND NUCLEAR FUEL For The Year Ended December 31, 1991 (Dollars in Thousands) Balance at Retire- Balance Beginning Additions ments Transfers & at End of Period at Cost or Sales Other Changes of Period Electric Property Organization $ 7 $ - $ - $ - $ 7 Miscellaneous Intangible Plant 2,543 - (7) 1,113 3,649 Land and Land Rights 474 - - - 474 Structures and Improvements 42,031 - (1,537) 949 41,443 Reactor Plant Equipment 179,716 - (57) 1,920 181,579 Turbogenerator Units 99,570 - - 671 100,241 Accessory Electric Equipment 19,751 - (46) 142 19,847 Miscellaneous Power Plant Equip. 15,313 - (290) 1,829 16,852 Substation Equip. 4,786 - - - 4,786 Miscellaneous Electric Property 74 - - - 74 Unfinished Construction 5,043 22,784 - (6,624) 21,203 ------- ------ ----- ------ ------- Total Electric Property $369,308 $22,784 $(1,937) $ - $390,155 ======= ====== ===== ====== ======= Nuclear Fuel Nuclear Fuel in Reactor $104,368 $ - $ - $ - $104,368 Nuclear Fuel in Process 8,503 17,563 - (22,144) 3,922 Nuclear Fuel - Spent 294,159 - - - 294,159 Nuclear Fuel - Stock 7,417 - - 22,144 29,561 ------- ------ ----- ------ ------- Total Nuclear Fuel $414,447 $17,563 $ - $ - $432,010
======= ====== ===== ====== ======= F-3 Schedule VI Maine Yankee Atomic Power Company ACCUMULATED PROVISION FOR DEPRECIATION OF ELECTRIC PLANT AND AMORTIZATION OF NUCLEAR FUEL For The Years Ended December 31, (Dollars in Thousands) Balance at Balance Beginning Charged Other at End of Period to Income* Retirements Changes of Period 1993 Electric Property $163,887 $16,251 $(4,017) $(125) $175,996 ======= ====== ===== === ======= Nuclear Fuel $401,112 $16,476 $ - $ - $417,588 ======= ====== ===== === ======= 1992 Electric Property $149,625 $15,311 $ (909) $(140) $163,887 ======= ====== ===== === ======= Nuclear Fuel $384,112 $17,000 $ - $ - $401,112 ======= ====== ===== === ======= 1991 Electric Property $136,922 $14,655 $(1,937) $ (15) $149,625 ======= ====== ===== === ======= Nuclear Fuel $361,020 $23,092 $ - $ - $384,112 ======= ====== ===== === =======
* Excludes amounts collected for Decommissioning and Permanent Disposal Cost. See Note 1 of Notes to Financial Statements for the Company's depreciation and fuel amortization policies. F-4 Schedule VIII Maine Yankee Atomic Power Company RESERVES EXCLUSIVE OF RESERVES FOR DEPRECIATION For the Years Ended December 31, (Dollars in Thousands) Balance at Charged Charged Deductions Balance Beginning to to Other From at End of Period Income Accounts Reserves of Period 1993 Decommissioning Reserve $78,486 $9,074 $7,105 $ - $94,665 ====== ===== ===== ====== ====== 1992 Decommissioning Reserve $64,870 $9,074 $4,542 $ - $78,486 ====== ===== ===== ====== ====== 1991 Decommissioning Reserve $52,209 $9,074 $3,587 $ - $64,870 ====== ===== ===== ====== ======
F-5 Maine Yankee Atomic Power Company Form 10-K - 1993 Schedule IX SHORT-TERM BORROWINGS (Dollars in Thousands) Year Ended December 31, 1993 1992 1991 Category of Short-Term Borrowings Banks (1) Banks (1) Banks (1) Balance at End of Year $ - $ 4,465 $ 2,440 Weighted Average Interest Rate at End of Period 3.54% 3.78% 5.43% Maximum Amount Outstanding During the Year $11,575 $10,385 $17,900 Average Amount Outstanding During the Year $ 3,616 $ 3,878 $ 4,231 Weighted Daily Average Interest Rate During the Year 3.62% 4.29% 6.67%
(1) See Note 4 of Notes to Financial Statements. F-6 EXHIBIT INDEX The following designated exhibits, as indicated below, are either filed herewith or have heretofore been filed with the Securities and Exchange Commission under the Securities Act of 1933, the Securities Exchange Act of 1934 or the Public Utility Holding Company Act of 1935 and are incorporated herein by reference to such filings. Reference is made to Item 8 of this Form 10-K for a listing of certain financial information and statements incorporated by reference herein. Filed Prior SEC Herewith Exhibit Number And Description Of Document Exhibit No. Docket at Page (2) Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable (3) Articles of Incorporation and Bylaws Incorporated herein by reference: 3-1 Articles of Incorporation, 3.1 1-6554 including amendments of (Form 10-K April 17, 1992, May 29, 1992, for 1992) and September 18, 1992. 3-2 Bylaws, as amended 3.5 1-6554 (Form 10-K for 1988)
(4) Instruments defining the rights of security holders Incorporated herein by reference: 4-1 First Mortgage Indenture from 3.2 1-6554 the Company to Old Colony Trust Company, Trustee, dated as of November 1, 1970 4-2 First Supplemental Indenture 4 70-4976 from the Company to The First National Bank of Boston, Trustee, dated as of March 1, 1971
E-1 Filed Prior SEC Herewith Exhibit Number And Description Of Document Exhibit No. Docket at Page (4) Instruments defining the rights of security holders (continued) 4-3 Second Supplemental Indenture 4.3 2-46226 from the Company to The First National Bank of Boston, Trustee, dated as of December 1, 1972 4-4 Third Supplemental Indenture 4.4 1-6554 from the Company to The First National Bank of Boston, Trustee, dated as of February 15, 1984 4-5 Fourth Supplemental Indenture 4.5 1-6554 from the Company to The First (Form 10-K National Bank of Boston, Trustee, for 1988) dated as of April 1, 1986 4-6 Secured Credit Agreement among 4.1 1-6554 the Company and a group of banks, (Form 10-Q with The Bank of New York as for quarter Agent Bank, dated as of ended Sept. 30, August 15, 1989 1989) 4-6.1 Amendment No. 1 to Exhibit 4-6, - - dated as of June 19, 1992 4-6(a) Security Agreement dated 4.2 1-6554 as of August 15, 1989, (Form 10-Q relating to Exhibit 4-6 for quarter ended Sept. 30, 1989) 4-7 Eurodollar Revolving Credit 4.7 1-6554 Agreement among the Company (Form 10-K and a group of international for 1989) banks, with Union Bank of Switzerland as Agent Bank, dated as of January 15, 1990 4-7.1 Amendment No. 1 to Exhibit 4-7, - - dated as of July 1, 1992 4-7(a) Security Agreement dated 4.7(a) 1-6554 as of January 30, 1990, (Form 10-K relating to Exhibit 4-7 for 1989) 4-8 Fifth Supplemental Indenture 4.8 1-6554 from the Company to The First (Form 10-K National Bank of Boston, Trustee, for 1990) dated as of March 1, 1991
E-2 Filed Prior SEC Herewith Exhibit Number And Description Of Document Exhibit No. Docket at Page (4) Instruments defining the rights of security holders (continued) 4.9 Sixth Supplemental Indenture 4.9 1-6554 from the Company to The First (Form 10-K National Bank of Boston, Trustee, for 1992) dated as of January 15, 1993 Filed herewith: 4.10 Seventh Supplemental Indenture from the Company to The First National Bank of Boston, Trustee, dated as of May 15, 1993
(9) Voting Trust Agreement Not applicable (10) Material Contracts Incorporated herein by reference: 10-1 Composite copy of Power Con- tract between the Company and Sponsors dated as of May 20, (Included in pro- 1968 spectus in 2-46226) 10-2 Composite copy of Capital Funds Agreement between the Company and Sponsors, dated (Included in pro- as of May 20, 1968 spectus in 2-46226) 10-3 Stockholders Agreement dated as of May 20, 1968, among the (Included in pro- Sponsors spectus in 2-46226) 10-4 Loan Agreement between the Company and MYA Fuel Company, B-1 70-5805 dated as of August 26, 1976, B-1 70-6765 as amended B-1 70-7117 10-5 Eurodollar Revolving Credit Agreement between the Company and a group of international banks, with Union Bank of Switzerland as Agent Bank, dated as of September 30, 1985 B-1 70-7165 10-1.1 Amendment No. 1 to Exhibit 10-1, dated as of March 1, 1984 10-1.1 1-6554 10-1.2 Amendment No. 2 to Exhibit 10-1, dated as of January 1, 1984 10-1.2 1-6554 10-1.3 Amendment No. 3 to Exhibit 10-1, dated as of October 1, 1984 10-1.3 1-6554
E-3 Filed Prior SEC Herewith Exhibit Number And Description Of Document Exhibit No. Docket at Page (10) Material Contracts (continued) 10-1.4 Additional Power Contract be- tween the Company and Sponsors, dated as of February 1, 1984 10-1.4 1-6554 10-2.1 Amendment No. 1 to Exhibit 10-2, dated as of August 1, 1985 10-2.1 1-6554 10-6 Indenture of Trust dated as of March 14, 1988, between the Company and Maine National Bank 10-6 1-6554 relating to decommissioning (Form 10-K trust fund for 1987) 10-6.1 Maine Yankee Decommissioning 10-6.1 1-6554 Trust Amended and Restated (Form 10-K Indenture of Trust with The for 1992) Bank of New York, Trustee, relating to decommissioning trust fund 10-7 Indenture of Trust dated as of 10-7 1-6554 October 16, 1985, between the (Form 10-K Company and Norstar Bank of for 1985) Maine relating to the spent fuel disposal trust fund 10-8 Bond Purchase Agreement dated 10-8 1-6554 as of March 1, 1991, between (Form 10-K the Company and purchasers of for 1990) Series D Bonds 10-9 Preferred Stock Purchase 10-9 1-6554 Agreement dated as of (Form 10-K September 22, 1992, relating for 1992) to 150,000 shares of Cumulative Preferred Stock, 8.00% Series (Sinking Fund) with purchasers thereof 10-10 Bond Purchase Agreement dated 10-10 1-6554 as of January 15, 1993, between (Form 10-K the Company and purchasers of for 1992) Series E Bonds
(11) Statement re computation of per share earnings Not applicable (12) Statements re computation of ratios Not applicable E-4 Filed Prior SEC Herewith Exhibit Number And Description Of Document Exhibit No. Docket at Page (13) Annual report to security holders, Form 10-Q or quarterly report to security holders Not applicable (16) Letter re change in certifying accountant Not applicable (18) Letter re change in accounting principles Not applicable (21) Subsidiaries of the registrant None (22) Published report regarding matters submitted to vote of security holders Not applicable (23) Consents of experts and counsel Not applicable (24) Power of attorney Not applicable (27) Financial Data Schedule Not applicable (28) Information from reports furnished to state insurance regulatory authorities Not applicable (99) Additional exhibits None
E-5 EX-1 2 SEVENTH SUPP. INDENTURE ======================================================= MAINE YANKEE ATOMIC POWER COMPANY TO THE FIRST NATIONAL BANK OF BOSTON, Trustee --------------------- SEVENTH SUPPLEMENTAL INDENTURE Dated as of May 15, 1993 --------------------- RELATING TO FIRST MORTGAGE BONDS -------------------- Additional Issue: $25,000,000 of First Mortgage Bonds, Series F (Sinking Fund) 6.89% Due 2008. ======================================================= THIS SEVENTH SUPPLEMENTAL INDENTURE, dated as of May 15, 1993, between MAINE YANKEE ATOMIC POWER COMPANY, a Maine corporation, with its principal office in Augusta, Maine (hereinafter generally referred to as the Company), and THE FIRST NATIONAL BANK OF BOSTON, a national banking association, with its principal office at 100 Federal Street, Boston, Massachusetts 02110, as trustee under the First Mortgage Indenture, as supplemented, referred to in the first recital hereof (the Trustee from time to time under said First Mortgage Indenture, as supplemented, being hereinafter generally referred to as the Trustee). WHEREAS, the Company heretofore duly executed and delivered to Old Colony Trust Company, as Trustee, its First Mortgage Indenture dated as of November 1, 1970 (hereinafter generally referred to as the Original Indenture, and sometimes referred to, with each and every other instrument, including this Supplemental Indenture, which the Company, pursuant to the provisions thereof, may execute with the Trustee and which is therein stated to be supplemental to the Original Indenture, as the Indenture), recorded in the Office of the Secretary of State of Maine, File No. 146534, Lincoln County Registry of Deeds, Book 678, Page 1, and Sagadahoc County Registry of Deeds, Book 373, Page 777, to which this instrument is supplemental, and the Company heretofore duly executed and delivered to The First National Bank of Boston, as successor Trustee, an indenture, dated as of March 1, 1971, supplemental to and in confirmation of the Original Indenture, recorded in the Office of the Secretary of State of Maine, File No. 152116, Lincoln County Registry of Deeds, Book 686, Page 48, and Sagadahoc County Registry of Deeds, Book 374, Page 1003, a second indenture, dated as of January 1, 1973, supplemental to and in confirmation of the Original Indenture, as theretofore supplemented, recorded in the Office of the Secretary of State of Maine, File No. 207526, Lincoln County Registry of Deeds, Book 757, Page 247, and Sagadahoc County Registry of Deeds, Book 388, Page 380, a third indenture, dated as of February 15, 1984, supplemental to and in confirmation of the Original Indenture, as theretofore supplemented, recorded in the Office of the Secretary of State of Maine, File No. 588974, Lincoln County Registry of Deeds, Book 1179, Page 207, and Sagadahoc County Registry of Deeds, Book 658, Page 33, a fourth indenture, dated as of April 1, 1986, supplemental to and in confirmation of the Original Indenture, as theretofore supplemented, recorded in the Office of the Secretary of State of Maine, File No. 679327, Lincoln County Registry of Deeds, Book 1300, Page 273, and Sagadahoc County Registry of Deeds, Book 748, Page 92, a fifth indenture, dated as of March 1, 1991, supplemental to and in confirmation of the Original Indenture, as theretofore supplemented, recorded in the office of the Secretary of State of Maine, File No. 927150, Lincoln County Registry of Deeds, Book 1678, Page 101, and Sagadahoc County Registry of Deeds, Book 1052, Page 127 and a sixth indenture, dated as of January 15, 1993, supplemental to and in confirmation of the Original Indenture, as theretofore supplemented, recorded in the office of the Secretary of State of Maine, File No. 1015944, Lincoln County Registry of Deeds, Book 1848, Page 201, and Sagadahoc County Registry of Deeds, Book 1180, Page 103, whereby all the properties of the Company whether then owned or thereafter acquired, with certain reservations, exceptions and exclusions fully set forth in the Original Indenture, as heretofore supplemented, were given, granted, bargained, sold, transferred, assigned, pledged, mortgaged, warranted, conveyed and confirmed to the Trustee, its successors and assigns, in trust upon the terms and conditions set forth therein to secure bonds of the Company issued and to be issued thereunder, and for other purposes more particularly specified therein; and WHEREAS, Section 16.01 of the Original Indenture provides that the Company, when authorized by a resolution of the Board of Directors of the Company (or of any committee of said Board, however designated, authorized to exercise the powers of said Board in the premises), and the Trustee may from time to time enter into an indenture or indentures supplemental to the Original Indenture for the following purposes, among others: assigning, conveying, mortgaging, pledging, transferring and setting over additional property unto the Trustee (Section 16.01(a)); and providing the terms and conditions of any series of bonds other than the bonds of Series A (Section 16.01(c)); and WHEREAS, the Board of Directors of the Company (through the duly authorized Finance Committee of said Board) has authorized the execution of this Supplemental Indenture and the delivery hereof to the Trustee; and WHEREAS, in all other respects the terms, conditions and provisions of subsections (a) and (c) of Section 16.01 have been complied with; and WHEREAS, for its lawful corporate purposes, the Company has duly authorized the creation of a new series of its bonds to be issued under the Indenture, to be known as First Mortgage Bonds, Series F (Sinking Fund) 6.89% Due 2008 (hereinafter sometimes called the bonds of Series F or the Series F Bonds), and has duly authorized the execution and delivery of this Supplemental Indenture; and WHEREAS, the form of the Series F Bonds, which are to be issued only in fully registered form without coupons, and the form of the Trustee's certificate of authentication to be executed on the Series F Bonds, are to be substantially in the following forms, respectively: (FORM OF SERIES F BOND) (1933 Act Legend) No. FR ___________ $_________ MAINE YANKEE ATOMIC POWER COMPANY First Mortgage Bond, Series F (Sinking Fund) 6.89% Due 2008 Maine Yankee Atomic Power Company, a Maine corporation (hereinafter called the Company), for value received, hereby promises to pay to ____________________________________ or registered assigns, the principal sum of ___________________ Dollars ($_________) at the principal office of The First National Bank of Boston (hereinafter called the Trustee, which term shall include its successors in the trusts hereinafter referred to) in the City of Boston, Commonwealth of Massachusetts (or at the principal office of its then successor Trustee) or, at the option of the registered owner hereof, at the principal office of any designated paying agent in the Borough of Manhattan, City and State of New York, on May 1, 2008 and to pay interest thereon from the May 1 or November 1, as the case may be, next preceding the date hereof (or from the date hereof if such date be either of said dates) to which interest has been paid on this bond, or, in the case of interest payable on November 1, 1993, from the date on which any bonds of Series F were first issued, at the rate per annum specified in the title of this bond, on May 1 and November 1 in each year, at the principal office of the Trustee or, at the option of the registered owner hereof, at the principal office of any such paying agent, until the principal hereof shall have been paid in full; such interest payable on any May 1 or November 1 shall (subject to certain exceptions provided in the Indenture mentioned below) be paid to the person in whose name this bond, or the bond in exchange or substitution for which this bond shall have been issued, shall have been registered at the close of business on the April 15 or October 15, as the case may be, next preceding such May 1 or November 1. Interest shall be payable on any overdue payment of principal (including any overdue redemption), premium and (to the extent legally enforceable) interest, at a rate per annum from time to time equal to the greater of (i) 7.89% or (ii) the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its Prime Rate (but only to the extent allowable under the Order entered on May 3, 1993 by the Maine Public Utilities Commission in Docket No. 93-081), accruing at such rate from the date on which such payment was due and unpaid. Both principal and premium, if any, and interest shall be paid in coin or currency of the United States of America which, at the time of payment, is legal tender for public and private debts. Notwithstanding any provision to the contrary in this bond or in the Indenture mentioned below, Section 5.1 of the Bond Purchase Agreement dated as of June 1, 1993 pursuant to which the bonds of Series F were initially issued (hereinafter called the Bond Purchase Agreement) shall govern payments with respect to the bonds of Series F to the bondholders referred to in said Section 5.1, and Section 6.3 of said Bond Purchase Agreement shall govern the replacement of bonds of Series F to the extent set forth in said Section 6.3. A copy of said Bond Purchase Agreement is on file at the principal office of the Trustee. This bond is one of a duly authorized issue of First Mortgage Bonds of the Company, the aggregate principal amount of which is not limited except by law, to be issued in series with distinctive designations, the series of which this bond is one, designated as Series F, being the sixth series and limited to an aggregate principal amount of Twenty-Five Million Dollars ($25,000,000), all bonds of all series, including the bonds of Series F, to be issued under and secured by a certain First Mortgage Indenture dated as of November 1, 1970 by and between the Company and the Trustee, as supplemented (said First Mortgage Indenture, together with all other indentures supplemental thereto to which the Trustee shall be a party, being hereinafter referred to as the Indenture), to which reference is hereby made for a description of the mortgaged and pledged property, the nature and extent of the security and benefit thereof, the terms and conditions under which bonds may be issued and secured, the rights and remedies under the Indenture of the bondholders and the rights and obligations under the Indenture of the Company and the Trustee. Executed counterparts of the Indenture are on file at the principal office of the Trustee. The Indenture may, with the consent of the holders of not less than sixty-six and two-thirds per cent (66-2/3%) in principal amount of the bonds of all series then issued and outstanding, and as stated therein, be modified in certain respects upon the conditions and in the manner provided therein, but, among other restrictions, no such modification shall affect or impair the obligation of the Company in respect of the principal of and premium, if any, and interest on this bond. In the event of certain defaults, the principal of this bond may be declared or may become due and payable prior to maturity upon the conditions and in the manner provided in the Indenture. This bond is transferable on the bond register, upon surrender hereof at the principal office of the Trustee, in the City of Boston, Massachusetts, or at the office or agency to be maintained by the Company in the Borough of Manhattan, City and State of New York, and upon compliance with the conditions prescribed in the Indenture and accompanied by a written instrument of assignment in proper form, duly executed by the registered owner in person or by duly authorized attorney, and thereupon a new bond or bonds of the same series and for a like aggregate principal amount of authorized denominations will be issued in the name of the transferee. The Company, the Trustee, any authenticating agent, any paying agent and any registrar may deem and treat the registered holder hereof as the absolute owner of this bond (whether or not this bond shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Company or any registrar), for the purpose of receiving payment hereof or on account hereof or interest hereon (subject to the provisions of the first paragraph hereof) and for all other purposes, and neither the Company, the Trustee, any authenticating agent, any paying agent nor any registrar shall be affected by any notice to the contrary. The bonds of Series F consist of fully registered bonds without coupons in the denominations of one thousand dollars ($1,000) and multiples thereof. This bond, singly or with other bonds of the same series and registered in the same name, may be exchanged for one or more bonds of the same series and for a like aggregate principal amount in authorized denominations. All bonds to be so exchanged shall be surrendered for that purpose at the principal office of the Trustee, or at the office or agency to be maintained by the Company in the Borough of Manhattan, City and State of New York, and, if required by the Trustee, accompanied by written instruments of assignment in proper form, duly executed by the registered owner in person or by duly authorized attorney. The bonds of Series F are subject to redemption (a) at any time in whole or from time to time in part (in multiples of $1,000), by the Company at its option, or (b) in whole or in part by operation of various provisions of the Indenture (including, without limitation, provisions establishing the sinking fund for the bonds of Series F) at the time or times specified in such provisions, in each instance by the payment of the applicable redemption price specified below and accrued interest to the date fixed for redemption on the principal amount of the bonds being redeemed. The applicable redemption price shall be: (i) 100% of the principal amount of the bonds being redeemed (constituting the "Special Redemption Price"), if the bonds are redeemed by the use of sinking fund and certain insurance, release or other moneys held by the Trustee, as more fully set forth in the Indenture, and (ii) otherwise, 100% of the Called Principal (as defined below) plus the Yield-Maintenance Amount applicable thereto (calculated as set forth below). "Yield-Maintenance Amount" shall mean, with respect to any bond of Series F, a premium equal to the excess, if any, of the Discounted Value of the Called Principal of such bond over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of the Settlement Date (including interest due on such date) with respect to such Called Principal (provided, that the Yield-Maintenance Amount shall in no event be less than zero). "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Called Principal" shall mean, with respect to any bond of Series F, the principal of such bond that is to be redeemed. "Discounted Value" shall mean, with respect to the Called Principal of any bond of Series F, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on a semiannual basis) equal to the sum of (i) the Reinvestment Yield with respect to such Called Principal, plus (ii) fifty (50) basis points. "Reinvestment Yield" shall mean, with respect to the Called Principal of any bond of Series F, the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the third Business Day next preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported as of the third Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between yields reported for various maturities. "Remaining Average Life" shall mean, with respect to the Called Principal of any bond of Series F, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) each Remaining Scheduled Payment of such Called Principal (but not of interest thereon) by (b) the number of years (calculated to the nearest one-twelfth year) which will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" shall mean, with respect to the Called Principal of any bond of Series F, all payments of such Called Principal and interest thereon that would be due on or after the Settlement Date with respect to such Called Principal if no payments of such Called Principal were made prior to their scheduled due dates. "Settlement Date" shall mean, with respect to the Called Principal of any bond of Series F, the date on which such Called Principal is to be redeemed. Notice of redemption shall be given by mail, first class postage prepaid, to the holders of the bonds of Series F to be redeemed not less than thirty (30) days prior to the date fixed for redemption, at their last addresses as they shall appear on the register, or otherwise as provided in the Indenture. In the case of any redemption of bonds of Series F for which the applicable redemption price has as a component a Yield-Maintenance Amount, which will be determined prior to the date fixed for redemption but subsequent to the date of the giving of such notice, the notice of such redemption shall sufficiently specify the applicable redemption price if it shall state that such redemption price is equal to 100% of the principal of such bond specified in such notice to be redeemed, plus a Yield-Maintenance Amount calculated as set forth in the bonds of Series F. The Company, on or prior to the date fixed for redemption, will deliver or cause to be delivered to each holder of a bond of Series F called for redemption a written statement showing the calculation of the Yield-Maintenance Amount and the redemption price determined on the basis thereof, which statement shall be accompanied by a certification verifying the accuracy of the calculations from The Prudential Insurance Company of America (or any corporate affiliate thereof) as long as The Prudential Insurance Company of America (or any corporate affiliate thereof) holds any bond of Series F. Otherwise, said certification verifying the accuracy of the calculations shall be prepared by Kidder, Peabody & Co. Incorporated or such other investment banking firm of national reputation as shall be designated by the Company and approved in writing by holders of at least 25% in principal amount of the bonds of Series F then outstanding. In case of the call for redemption of less than the whole principal amount of this bond, upon payment of the redemption price to the registered owner hereof and surrender of this bond, there shall be issued to such registered owner another bond of Series F in principal amount equal to the unredeemed balance hereof. Section 9.7 of the Bond Purchase Agreement is a bondholders' redemption agreement (within the meaning of Section 8.02 of the Indenture) among the holders of the bonds of Series F, satisfactory to and a copy of which is on file with the Trustee, that provides for the method that shall be followed by the Trustee in selecting bonds or parts of bonds for redemption in the event such redemption is a redemption of a part only of the bonds of Series F. By acceptance hereof, the holder hereof is deemed to have executed, and is bound by the terms of, the Bond Purchase Agreement. No recourse upon any obligation contained in this bond or in the Indenture or otherwise shall be had against any incorporator or any officer, director or stockholder, past, present or future, of the Company or any successor corporation, such personal liability of every kind being expressly waived. This bond shall not be valid or obligatory for any purpose or entitled to any security or benefit under the Indenture until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee. IN WITNESS WHEREOF, Maine Yankee Atomic Power Company has caused this bond to be executed in its name by its President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal or a facsimile thereof to be affixed hereto or imprinted hereon and attested by the signature or facsimile signature of its Secretary or one of its Assistant Secretaries. Dated ____________________ MAINE YANKEE ATOMIC POWER COMPANY By ________________________________ [CORPORATE SEAL] Attest: _____________________________ (FORM OF CERTIFICATE OF AUTHENTICATION) This bond is one of the bonds of Series F referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF BOSTON, Trustee By ____________________________________ Authorized Signatory or _____________________________________ as Authenticating Agent for the Trustee By _____________________________________ Authorized Officer (FORM OF ASSIGNMENT) For value received the undersigned hereby sell(s), assign(s) and transfer(s) unto ________________________________________________ Please Insert Social Security or Other Identifying Number of Assignee the within bond of Maine Yankee Atomic Power Company and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer said bond on the register of the Company, with full power of substitution in the premises. Dated: Notice: The signature to this assignment must correspond with the name as written upon the face of the within bond in every particular, without alteration or enlargement or any change whatever. AND, WHEREAS, all acts and things necessary to make the Series F Bonds, when authenticated by the Trustee and issued as in this Supplemental Indenture provided, the valid, binding and legal obligations of the Company, and to constitute the Original Indenture, as heretofore supplemented and as supplemented by this Supplemental Indenture, a valid first mortgage and deed of trust to secure the payment of the principal of, premium, if any, and interest on all bonds issued thereunder, have been done and performed. NOW, THEREFORE, in consideration of the premises, and of the acceptance and purchase of the bonds by the holders thereof, and of the sum of One Dollar duly paid by the Trustee to the Company, and of other good and valuable consideration, the receipt whereof is hereby acknowledged, and in confirmation of and supplementing the Original Indenture, as heretofore supplemented, and for the purpose of securing the due and punctual payment of the principal of and premium, if any, and interest on the bonds issued and to be issued under the Indenture, and for the purpose of securing the faithful performance and observance of all covenants and conditions hereinafter and in the Original Indenture, as heretofore supplemented, set forth, the Company has executed and delivered this Supplemental Indenture and by these presents does give, grant, bargain, sell, transfer, assign, pledge, mortgage, warrant, convey and confirm unto The First National Bank of Boston, as Trustee, as herein provided, and its successor or successors in the trust created by the Indenture, and to its or their assigns, forever, all and singular the plants, rights, permits, franchises, easements and property, real, personal and mixed, now owned or hereafter acquired by the Company, together with the rents, issues and profits thereof, in all cases not specifically reserved and excepted, and whether now owned or hereafter acquired by the Company; including, without limiting the generality of the foregoing, all property, except such as may have been released by the Trustee or sold or disposed of as permitted by the provisions of the Original Indenture, as heretofore supplemented, specifically described or referred to in Schedule A to the Original Indenture, as heretofore supplemented, and in Schedule A to the Sixth Supplemental Indenture, dated as of January 15, 1993 (the "Sixth Supplemental Indenture"). AND TOGETHER WITH all and singular the now-existing and hereafter-acquired rights, privileges, tenements, hereditaments and appurtenances belonging to or in any wise appertaining in and to the aforesaid property or any part thereof, with all reversion and reversions, remainder and remainders and, subject to the provisions of Article IX of the Original Indenture, as heretofore supplemented, all rents, revenues, earnings, interest, dividends, royalties, issues, income and profits thereof, and all the estate, right, title, interest and claims whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire, in and to all and every part of the foregoing, it being the intention to include in the Indenture and to subject to the lien of the Indenture all land, interests in land, real estate, physical assets, other property and interests in property and franchises, whether now owned by the Company or which it may hereafter acquire, and wherever situated, as if the same were now owned by the Company and were specifically described and conveyed by the Indenture, except as hereinafter specified. SUBJECT, HOWEVER, (1) to Permitted Liens as that term is defined in Article I of the Original Indenture, as heretofore supplemented; (2) as to the property specifically described or referred to in Schedule A to the Original Indenture, as heretofore supplemented, to the liens, charges, encumbrances, reservations, exceptions, exclusions, restrictions, conditions, limitations, covenants and interests, if any, set forth or referred to in said Schedule A; and (3) as to the property specifically described in Schedule A to the Sixth Supplemental Indenture, to the reservations, exceptions and exclusions set forth in said Schedule A. AND SUBJECT FURTHER, as to all hereafter-acquired property, to all defects and limitations of title and to all liens, charges, encumbrances, reservations, restrictions, conditions, limitations, covenants, interests and exceptions existing at the time of such acquisition. BUT SPECIFICALLY RESERVING, EXCEPTING AND EXCLUDING (as the same were reserved, excepted and excluded from the lien of the Original Indenture, as heretofore supplemented) from the Indenture, and from the grant, conveyance, mortgage, transfer, pledge and assignment herein contained, (i) all right, title and interest of the Company, now owned or hereafter acquired, in and to the properties and rights specified in subclauses (a) to (j), both inclusive, of the granting clauses, on pages 9 and 10 of the Original Indenture, and (ii) the rights and interests reserved in the three paragraphs of the granting clauses, on pages 10 and 11 of the Original Indenture, next succeeding the paragraph containing the above-mentioned subclauses. TO HAVE AND TO HOLD all said plants, rights, permits, franchises, easements and property hereby conveyed, assigned, pledged or mortgaged, or intended so to be, unto the Trustee, its successor or successors in trust, and to its and their assigns forever. BUT IN TRUST, NEVERTHELESS, for the equal pro rata benefit, security and protection of the holders from time to time of all bonds (and their appurtenant coupons, if any) outstanding under the Indenture, without any priority of any one bond or coupon over any other (except as provided in Section 6.02 of the Original Indenture, as heretofore supplemented, and except as any sinking or other fund, established in accordance with the Indenture, may afford additional special security for the bonds of any particular series), and upon the trusts and subject to the conditions herein set forth. PROVIDED, HOWEVER, and these presents are upon the condition, that if the Company shall pay or cause to be paid or make appropriate provisions for the payment unto the holders of the bonds and any appurtenant coupons of the principal, premium, if any, and interest to become due thereon at the times and in the manner stipulated therein, and shall pay or cause to be paid all other sums payable under the Indenture by the Company, then the Indenture and the estate and rights hereby granted shall, pursuant to the provisions of Article XII of the Original Indenture, as heretofore supplemented, cease, determine and be void, but otherwise shall be and remain in full force and effect. AND IT IS HEREBY COVENANTED, DECLARED AND AGREED, upon the trusts and for the purposes aforesaid, as set forth in the following covenants, agreements, conditions and provisions, viz: SECTION 1. Title and Terms of Series F Bonds. There shall be a series of bonds designated "First Mortgage Bonds, Series F (Sinking Fund) 6.89% Due 2008". The Series F Bonds shall be limited in aggregate principal amount to $25,000,000, shall be issuable only as fully registered bonds without coupons and shall be issued substantially in the form hereinbefore set forth. The Series F Bonds shall mature on May 1, 2008, and may be issued in denominations of $1,000 and any multiple thereof. The Series F Bonds shall bear interest, until payment of the principal thereof has been made or duly provided for, at the rate per annum specified in the title of the Series F Bonds, payable semi-annually on May 1 and November 1 in each year, commencing on November 1, 1993. Interest shall be payable on any overdue payment of principal (including any overdue redemption), premium and (to the extent legally enforceable) interest, at a rate per annum from time to time equal to the greater of (i) 7.89% or (ii) the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its Prime Rate (but only to the extent allowable under the Order entered on May 3, 1993 by the Maine Public Utilities Commission in Docket No. 93-081), accruing at such rate from the date on which such payment was due and unpaid. Each bond of Series F shall be dated the date of its authentication and interest shall be payable on the principal represented thereby from the interest payment date next preceding the date thereof to which interest has been paid, unless the date thereof is an interest payment date to which interest has been paid, in which case such interest shall be payable from such date, or unless the date thereof is prior to the first interest payment date, in which case such interest shall be payable from the date on which any bonds of Series F were first issued; provided, however, that interest shall be payable on each bond of Series F authenticated between an interest payment date and the record date therefor as set forth in this Section, and provided, further, that if the Company shall default in the payment of the interest due on such interest payment date, any bond of Series F so authenticated shall bear interest from the May 1 or November 1, as the case may be, next preceding the date of such bond to which interest has been paid (or, in case no interest has been paid on such bond of Series F, from the date on which any bonds of Series F were first issued). Interest on any Series F Bond shall be paid to the person in whose name such bond (or notwithstanding the cancellation thereof, the bond in exchange or substitution for which such bond shall have been issued) is registered at the close of business on the applicable record date; provided, however, that if the Company shall default in the payment of the interest due on any interest payment date on the principal represented by any Series F Bond, such defaulted interest shall be paid to the person in whose name such bond (or any bond issued upon registration of transfer or exchange thereof) is registered on a subsequent record date established by notice given by mail by or on behalf of the Company to the holders of Series F Bonds not less than ten days preceding such subsequent record date. The term "record date" shall mean, with respect to any semi- annual interest payment date for the Series F Bonds, the close of business on the 15th day of April or the 15th day of October, as the case may be, next preceding such interest payment date, or with respect to any payment of defaulted interest, the close of business on any subsequent record date established as provided above which shall be at least five business days prior to the payment date for such defaulted interest. The principal of and the premium, if any, and interest on the Series F Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, at the principal office of the Trustee in the City of Boston, Massachusetts, or at the principal office of its successor as Trustee, or, at the option of the holder, (i) at the principal office of the Company's paying agent in the Borough of Manhattan, City of New York, New York, or (ii) at any other office or agency designated by the Company for the purpose. Notwithstanding any provision to the contrary in the bonds of Series F or in the Indenture, Section 5.1 of the Bond Purchase Agreement dated as of June 1, 1993 pursuant to which the bonds of Series F were initially issued (hereinafter generally referred to as the Bond Purchase Agreement) shall govern payments with respect to the bonds of Series F to the bondholders referred to in said Section. The Trustee hereby consents to the method of payment described in the aforesaid Section 5.1. The Trustee also consents to the provisions of Section 6.3 of said Bond Purchase Agreement and agrees that if any lost, destroyed, stolen or mutilated bond of Series F was held by the original holder or an Institutional Investor, as defined in the Bond Purchase Agreement ("Institutional Investor"), of financial responsibility reasonably satisfactory to the Company, or any nominee for any such original holder or such Institutional Investor, (a) an agreement of indemnity reasonably satisfactory to the Company from such original holder or such Institutional Investor shall constitute indemnity satisfactory to the Trustee for purposes of Section 2.10 of the Indenture and (b) the Trustee will look only to the Company for reimbursement of its expenses incurred in connection with such replacement. The bonds of Series F shall be exchangeable for a like aggregate principal amount of bonds of such series of other authorized denominations at the option of the holders and without charge, except that the Company, at its option, may require the payment of a sum sufficient to reimburse it for any stamp or other tax or governmental charge incident thereto. The Trustee and the Trustee's authenticating agent are hereby appointed registrars of the bonds of Series F for the purpose of registering transfers and exchanges of bonds of Series F as herein provided. SECTION 2. Original Issue of the Series F Bonds. At any time after the execution and delivery of this Supplemental Indenture, upon the application of the Company, the Trustee shall authenticate and deliver $25,000,000 in aggregate principal amount of bonds of Series F, upon delivery of the instruments referred to in Sections 5.01, 5.03 and 5.05 of the Original Indenture, as heretofore and hereby supplemented, and receipt by the Trustee of the bonds to be authenticated, duly executed by the Company. SECTION 3. Redemption of Series F Bonds. The Series F Bonds shall be redeemable in whole or in part (in multiples of $1,000) by the operation of the sinking fund provided therefor in Section 4 of this Supplemental Indenture, or by operation of various provisions of the Original Indenture, as heretofore supplemented, at the time or times specified therein, or, at the option of the Company, at any time and from time to time prior to maturity, in each instance at the applicable redemption price and accrued interest to the date fixed for redemption on the principal amount of the bonds being redeemed. The applicable redemption price shall be: (a) 100% of the principal amount of the bonds being redeemed (constituting the "Special Redemption Price"), if the bonds are redeemed through the operation of the sinking fund, or by the use of Trust Moneys, or pursuant to Section 9.13 of the Original Indenture, as heretofore supplemented, and (b) otherwise, 100% of the Called Principal plus the Yield-Maintenance Amount, as those terms are defined in the form of Series F Bonds hereinbefore set forth. On any redemption of bonds of Series F, the Trustee, in the name and on behalf of the Company, shall mail, by first class mail, postage prepaid, a notice of redemption to each registered holder of a bond to be redeemed (in whole or in part) at the last address of such holder appearing on the bond register; provided, however, that, in the case of any redemption of bonds of Series F for which the applicable redemption price has as a component a Yield-Maintenance Amount (as defined in the bonds of Series F), the Company, and not the Trustee, shall mail the notice of redemption as aforesaid, and the Trustee shall have no responsibility or liability in connection with any acts or omissions by the Company related to the notice of any such redemption. Such notice shall be mailed not less than 30 days prior to the date fixed for redemption. The Company shall notify the Trustee at least 15 days (or such fewer number of days as may be satisfactory to the Trustee) before the date on which any notice of redemption of bonds of Series F (otherwise than through the operation of the sinking fund) is required to be given by the Trustee. The Company shall be responsible for delivering statements calculating Yield-Maintenance Amounts and resulting redemption prices to bondholders as required by the form of bond of Series F hereinbefore set forth and shall cause a similar statement to be delivered to the Trustee no later than the second business day (or such later date as may be satisfactory to the Trustee) before the applicable date fixed for redemption. Section 9.7 of the Bond Purchase Agreement is a bondholders' redemption agreement (within the meaning of Section 8.02 of the Indenture) among the holders of the bonds of Series F, satisfactory to and a copy of which is on file with the Trustee, that provides for the method that shall be followed by the Trustee in selecting bonds or parts of bonds for redemption in the event such redemption is a redemption of a part only of the bonds of Series F. The bonds of Series F provide that, by the acceptance thereof, the holders thereof are deemed to have executed, and are bound by the terms of, the Bond Purchase Agreement. Section 9.7 thereof provides that the principal amount of any partial redemption of the bonds of Series F shall be allocated, in units of $1,000 or integral multiples thereof, among the holders of the bonds of Series F at the time outstanding, in proportion, as nearly as practicable, to the respective unpaid principal amount of the bonds of Series F held thereby, with adjustments, to the extent practicable, to equalize for any prior redemption not made in exactly such proportion. SECTION 4. Sinking Fund for Series F Bonds. The Company covenants that, as a sinking fund for the bonds of Series F, and so long as any of such bonds are outstanding, it will, subject to the provisions of the Bond Purchase Agreement, deposit with the Trustee cash in the amount of $1,667,000 at least one business day before May 1, 1994, and at least one business day before each May 1 thereafter through May 1, 2007 (each such May 1 being hereinafter referred to as a "Sinking Fund Date"), such cash to be held subject to the provisions hereof. The Trustee shall apply the amount of the cash so deposited with it by the Company hereunder to the redemption, in accordance with Article VIII of the Original Indenture, as heretofore supplemented, on the Sinking Fund Date before which such deposit is required to be made, of Series F Bonds in an aggregate principal amount equal to the amount of cash so deposited. Each deposit of cash with the Trustee pursuant hereto shall, subject to the provisions of the Bond Purchase Agreement, be accompanied by a further deposit in an amount sufficient to pay the accrued interest on the Series F Bonds to be redeemed, and such further deposit shall be applied by the Trustee to the payment of such interest. SECTION 5. Yield-Maintenance Amount for Series F Bonds. The Company further covenants that, so long as any of Series F Bonds are outstanding, upon any declaration pursuant to Section 10.01 of the Original Indenture that the principal and interest accrued on all the bonds then outstanding are due and payable immediately, the amounts then immediately due and payable with respect to the outstanding Series F Bonds shall consist of (i) the principal amount thereof, (ii) all interest accrued and unpaid thereon, and (iii) the Yield-Maintenance Amount (as hereinafter defined), if any, with respect to each such Series F Bond; provided, however, that such Yield-Maintenance Amount shall be due and payable upon such declaration only if the following conditions are satisfied: (a) Such declaration is based upon an event of default under any clause of said Section 10.01 other than clauses (f) and (g) thereof; and (b) The Trustee or the holders of at least 25% in principal amount of the bonds then outstanding under the Indenture, as the case may be, shall have given to the Company, at least ten (10) business days before such declaration, written notice stating its or their intention so to declare the bonds to be immediately due and payable and identifying one or more such events of default the occurrence of which, on or before the date of such notice, permits such declaration, and one or more of the events of default so identified shall be continuing at the time of such declaration; provided that if, on the date of said notice or prior to the date of the declaration made pursuant thereto, the Trustee or any other holders of at least 25% in principal amount of bonds then outstanding under the Indenture shall have declared the principal of and interest accrued on all the bonds then outstanding to be immediately due and payable, then, anything herein to the contrary notwithstanding, the Yield- Maintenance Amount, if any, on the bonds of Series F shall be immediately due and payable on the date of such declaration by the Trustee or such other holders. For the purposes of this Section 5, the term "Yield- Maintenance Amount" and all related terms shall have the meanings ascribed thereto in the form of Series F Bond hereinbefore set forth, provided that the definitions therein of the related terms "Called Principal" and "Settlement Date" shall be revised to read as follows: "Called Principal" shall mean, with respect to any bond of Series F, the principal of such bond that is to be redeemed or is declared immediately due and payable pursuant to Section 10.01 of the Indenture, as the context requires. "Settlement Date" shall mean, with respect to the Called Principal of any bond of Series F, the date on which such Called Principal is to be redeemed or is declared to be immediately due and payable pursuant to Section 10.01 of the Indenture, as the context requires. SECTION 6. Retirement of Series F Bonds. The Company shall not, and shall not permit any of its subsidiaries or affiliates to, redeem or otherwise retire in whole or in part prior to their stated final maturity (other than pursuant to Section 3 or 4 hereof or upon acceleration of such final maturity pursuant to Section 10.01 of the Original Indenture, as heretofore supplemented), or purchase or otherwise acquire, directly or indirectly, Series F Bonds held by any holder, unless the Company or such subsidiary or affiliate shall have offered to redeem or otherwise retire or purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of the Series F Bonds held by each other holder of a Series F Bond at the time outstanding upon the same terms and conditions. Any Series F Bonds so redeemed or otherwise retired or purchased or otherwise acquired by the Company or any of its subsidiaries or affiliates shall not be deemed to be outstanding for any purpose under the Indenture, as heretofore and hereby supplemented, subject to the terms of sub-clause (4) of the definition of the term "outstanding" in Section 1.01(ee) of the Original Indenture. SECTION 7. Pledged Contracts. So long as any of the Series F Bonds are outstanding, the Company will comply with the provisions of subsections (a) and (b) of Section 6.13 of the Original Indenture, as heretofore supplemented, and, except with the consent of holders of 66-2/3% in principal amount of the Series F Bonds outstanding, will observe the prohibitions and limitations of subsection (c) of said Section 6.13. SECTION 8. The Trustee. The Trustee shall be entitled to, may exercise and shall be protected by, where and to the full extent that the same are applicable, all the rights, powers, privileges, immunities and exemptions and shall be subject to the duties and liabilities of the Trustee, provided in the Original Indenture, as heretofore supplemented and confirmed and as herein supplemented and confirmed. The remedies and provisions of the Original Indenture, as heretofore supplemented and confirmed and as herein supplemented and confirmed, applicable in case of any default by the Company thereunder, are hereby adopted and made applicable in case of any such default with respect to the properties included herein. Without limitation of the generality of the foregoing, there are hereby conferred upon the Trustee the same powers of sale and other powers over the properties described herein as are by the Original Indenture, as heretofore supplemented, expressed to be conferred. SECTION 9. No Liability for Recitals. The recitals contained herein and in the bonds (except the Trustee's authentication certificate) shall be taken as the statements of the Company and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the value of the mortgaged and pledged property or any part thereof, or as to the title of the Company thereto; or as to the validity or adequacy of the security afforded thereby and by the Indenture, or as to the validity of the Indenture or of the bonds or coupons issued thereunder. The Trustee shall not be responsible for the effect, authorization, execution, delivery or recording of this Supplemental Indenture, except as expressly set forth in the Original Indenture, as heretofore supplemented. The Trustee shall not be taken impliedly to waive by this Supplemental Indenture any right it would otherwise have. SECTION 10. The Original Indenture. This Supplemental Indenture is expressly made supplemental to, and shall form a part of, the Original Indenture, as heretofore supplemented, and the conveyances hereby made are subject to all of the conditions, covenants and warranties in the Original Indenture, as heretofore supplemented, contained, and the use of terms and expressions herein is in accordance with the definitions and constructions contained in the Original Indenture, as heretofore supplemented. This Supplemental Indenture shall become void when the Original Indenture, as heretofore supplemented, shall be void. SECTION 11. Trust Indenture Act to Control. If any provision of this Supplemental Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, through operation of Section 318(c), such imposed duties shall control. SECTION 12. Effect of Headings. The headings of the different Sections of this Supplemental Indenture are inserted for convenience of reference, and are not to be taken to be any part of those provisions, or to control or affect the meaning, construction or effect of the same. SECTION 13. Counterparts. This Supplemental Indenture is being simultaneously executed in several counterparts, all of which are identical, and all said counterparts are to be deemed to constitute but one and the same instrument. IN WITNESS WHEREOF, Maine Yankee Atomic Power Company has caused this Supplemental Indenture to be executed on its behalf by its President or one of its Vice Presidents or its Treasurer and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary; and The First National Bank of Boston, as Trustee, has caused this Supplemental Indenture to be executed on its behalf and its corporate seal to be hereunto affixed by one of its Authorized Officers or Authorized Signatories; all as of the day and year first above written but actually on the date or dates set forth in the Acknowledgments hereto. MAINE YANKEE ATOMIC POWER COMPANY By s/Michael E. Thomas Treasurer [Corporate Seal] Attest: s/William M. Finn Secretary Signed, sealed and delivered on behalf of Maine Yankee Atomic Power Company in the presence of: s/Judith Sargent THE FIRST NATIONAL BANK OF BOSTON, Trustee By s/J. E. Mogavero [Corporate Seal] Signed, sealed and delivered on behalf of The First National Bank of Boston in the presence of: s/E. J. Donaghey STATE OF MAINE ) ) ss.: COUNTY OF KENNEBEC ) On this 2nd day of June, 1993, before me appeared Michael E. Thomas, the Treasurer of Maine Yankee Atomic Power Company, to me personally known, who executed the foregoing instrument on behalf of said corporation and acknowledged the same to be his free act and deed in said capacity and the free act and deed of Maine Yankee Atomic Power Company. WITNESS my hand and official seal the day and year first above written. s/Geraldine Downer Scott Notary Public Geraldine Downer Scott Notary Public, Maine My Commission Expires May 1, 1995 (Notarial Seal) COMMONWEALTH OF MASSACHUSETTS ) ) ss.: COUNTY OF SUFFOLK ) On this 1st day of June, 1993, before me appeared J. E. Mogavero , an Authorized Officer of The First National Bank of Boston, to me personally known, who executed the foregoing instrument on behalf of said corporation and acknowledged the same to be such person's free act and deed in said capacity and the free act and deed of The First National Bank of Boston. WITNESS my hand and official seal the day and year first above written. s/Shawn Patrick George Notary Public Shawn Patrick George Notary Public My Commission Expires September 2, 1999 (Notarial Seal) -----END PRIVACY-ENHANCED MESSAGE-----