-----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, gaiDj+I+YEdfTLzDYiZRl95Xj60/vFYuhzsMFfUgP800J8JNnKoDBytc9WC7qXHm oq60qWcZeEftn9tojtO/VQ== 0000071297-94-000048.txt : 19941101 0000071297-94-000048.hdr.sgml : 19941101 ACCESSION NUMBER: 0000071297-94-000048 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19941031 SROS: BSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND ELECTRIC SYSTEM CENTRAL INDEX KEY: 0000071297 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 041663060 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-08513 FILM NUMBER: 94556059 BUSINESS ADDRESS: STREET 1: 25 RESEARCH DR CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5083669011 U-1 1 File No. 70- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 NEW ENGLAND ELECTRIC SYSTEM and NEW ENGLAND ELECTRIC RESOURCES, INC. (Name of company filing this statement) 25 Research Drive, Westborough, Massachusetts 01582 (Address of principal executive offices) NEW ENGLAND ELECTRIC SYSTEM (Name of top registered holding company parent in system) Michael E. Jesanis Robert King Wulff Treasurer Corporation Counsel 25 Research Drive 25 Research Drive Westborough, Massachusetts 01582 Westborough, Massachusetts 01582 (Names and addresses of agents for service) New England Electric Resources, Inc. (NEERI), a wholly-owned, non- utility subsidiary of New England Electric System (NEES), was organized for the purpose of pursuing new business opportunities. By its order dated September 4, 1992, the Commission specifically authorized NEERI to perform consulting services on electric utility matters for non-affiliates (Release No. 35-25621). NEES is a registered holding company under the Public Utility Holding Company Act of 1935 (the Act) owning electric utility subsidiaries, New England Power Service Company (NEPSCO, a service company subsidiary), and an energy company subsidiary (collectively, the System). Neither NEES nor any subsidiary has an ownership interest in an exempt wholesale generator (EWG) or foreign utility company (FUCO) as defined in Sections 32 and 33 of the Act. Additionally, neither NEES nor any subsidiary is a party to, or has any rights under, a service, sales or construction agreement with an EWG or FUCO. By its Order dated April 1, 1994, the Commission specifically authorized NEERI to perform electrical related services for non-affiliates (Release No. 35-26017). Such services include designing, engineering, installing, constructing and/or procuring electrical related materials. By its Order dated May 25, 1994, the Commission specifically authorized NEERI to invest in Quality Power Systems, Inc., a start-up company formed to develop, manufacture and market a low harmonic distortion uninterruptible power supply (Release No. 35-26057). In the Application/Declaration on Form U-1, File No. 70-7950, the Applicants made the following statement: "To the extent that NEERI desires to take advantage of new business opportunities outside of the consulting service area, further authorization from the Commission would be sought". By the present filing, NEERI seeks to obtain Commission approval to invest funds in research and development activities in the areas of environmental, new generation and transmission technologies, and electric end-use technologies. NEERI also proposes to invest in local enterprises. Item 1. Description of Proposed Transactions: - --------------------------------------------- A. Research and Development Fund NEERI seeks approval to invest $10 million in pursuing research and development activities in the areas of environmental, new generation and transmission technologies, and electric end-use technologies. The research and development activities will involve studies, investigations and research in connection with evaluating business opportunities for NEERI. NEERI anticipates that the electric industry will evolve rapidly over the next few years due to a changing regulatory regime and increasing environmental concerns. This business environment will present many problems requiring innovative and prompt solutions. Not all candidate solutions will possess the necessary mix of technical feasibility, environmental soundness and economic viability to make them beneficial investments for NEERI or the System and its customers and shareholders. NEERI's access to immediately available research and development funds will permit it to promptly evaluate new technologies and efficiently identify workable, beneficial solutions worthy of investment by NEERI and the System. This research and development fund will allow NEERI to investigate the technical and commercial viability of potential projects thoroughly before making individual project participation filings with the SEC. The types of projects and technologies which NEERI intends to pursue include, without limitation, the following: (1) Instrumentation for the continuous monitoring of pollutants currently or potentially covered by Clean Air Act standards or having negative operational impacts on electric generation equipment. (2) Biomass gasification technology to efficiently convert biological waste into electricity. This would contribute to the fulfillment of one of the System's environmental commitments made in NEESPLAN 4, its most recent planning study. (3) Electro-osmotic and other electrical techniques for soil demoisturization, hazardous waste containment, and heat pump efficiency improvements. (4) The development of fuel cell technology for the alternative generation of electricity. (5) Electro-technologies, energy efficiency and power quality measures. (6) Other developing environmental, new generation and transmission technologies, and electric end-use technologies. NEERI anticipates that $10 million will be sufficient to allow it to investigate the above-mentioned technologies. NEERI's research and development activities in the area of environmental, new generation and transmission technologies, and electric end- use technologies are functionally related to the electric utility business of its affiliates in that they will advance the development of technologies that may prove valuable to the System in its efforts to comply with the Clean Air Act and other environmental regulation, and in its efforts to take advantage of economic benefits derived from innovations in the area of electricity generation and transmission, and electric end-use technologies. Therefore, NEERI requests authorization through 1998 to invest up to $10 million in research and development activities, as discussed above, without further authorization by the Commission. In connection with the above-mentioned research and development activities, NEERI may take some form of ownership of the results of these activities, or, to some extent, participate in the gross revenues generated by these activities. NEERI agrees, however, that any acquisition of securities by it using any of the research and development funds requested herein will remain subject to further Commission authorization. As NEERI enters into research and development projects, NEERI shall provide details of these projects in its quarterly filings with the Commission under Rule 24. NEERI will also break down its research and development fund expenditures from its other expenditures and investments in its quarterly filings filed at that time. B. Investment in Local Enterprises In the course of developing the above mentioned technologies, NEERI anticipates acquiring securities of non-affiliated industrial or other non- utility enterprises located within the service territory of its electric utility affiliates ("Local Enterprises"). NEERI has not acquired, and does not intend to acquire, securities of any industrial development companies organized for the purpose of, and in accordance with a state law that specifically relates to, promoting the development of business and industry in the state, in an annual aggregate amount exceeding $5 million. NEERI's total cost of acquiring securities of Local Enterprises will not exceed an annual aggregate amount of $1 million. No acquisition by NEERI pursuant to Rule 40(a)(5) will result in NEERI acquiring 5% or more of the voting securities of any Local Enterprise. NEERI will not acquire securities in a Local Enterprise where such acquisition would cause NEERI to become an affiliate of such Local Enterprise within the meaning of the Act. Therefore, pursuant to the exemption to Section 9(a) provided in Rule 40(a)(5), NEERI requests authority to invest amounts not exceeding $1 million annually to acquire the securities of Local Enterprises. C. Financing by NEES The Commission originally granted authority for NEES to provide financing to NEERI in an amount not to exceed $1 million. (See Order dated September 4, 1992, Release 35-25621.) The Commission later granted authority for NEES to provide additional financing to NEERI in the amount of $1 million (see Order dated April 1, 1994, Release No. 35-26017) and in the amount of $250,000 (See Order dated May 25, 1994, Release No. 35-26057.) By Form U-1 Application/Declaration filed September 30, 1994 (File No. 70-8475), NEES proposed to provide additional financing for NEERI by making capital contributions up to an additional $11,700,000 and/or by lending to NEERI from time to time additional amounts not to exceed $11,700,000 at any one time, such loans to be in the form of non-interest bearing subordinated notes. NEES now proposes to provide further additional financing for NEERI as follows: (1) $10 million for the purpose of NEERI's establishment of a research and development fund; and (2) up to $1 million annually for the purpose of NEERI's acquisition of securities of Local Enterprises (the "Local Enterprise Fund"). NEES proposes to provide up to $1 million to NEERI for the Local Enterprise Fund each succeeding year without further authorization by the Commission. NEES proposes to provide the above additional financing by making capital contributions to NEERI up to an additional $10 million (exclusive of the Local Enterprise Fund) and/or by lending to NEERI from time to time additional amounts not to exceed $10 million (exclusive of the Local Enterprise Fund) at any one time, such loans to be in the form of non-interest bearing subordinated notes. The aggregate amount of all investments (including amounts previously authorized by the Commission and amounts previously proposed to be so authorized) by NEES in NEERI shall not exceed $23.95 million (exclusive of the Local Enterprise Fund). Item 2. Fees, Commissions and Expenses - --------------------------------------- Services incidental to the transactions described herein will be performed by NEPSCO and billed to NEERI at the actual cost thereof. NEPSCO is an affiliated service company operating pursuant to Section 13 of the Act and the Commission's rules thereunder. The cost of such services to be paid by NEERI is not expected to exceed $250,000, to be incurred primarily by the Corporate Department (including attorneys) and the Treasury Department (including accountants). These amounts include a $2,000 filing fee paid by wire transfer to the Commission at the time of filing this application/declaration. Item 3. Applicable Statutory Provisions - ---------------------------------------- Sections 6(a) and 7 are believed to be applicable to the issuance of additional notes by NEERI. Sections 9(a), 10, 12, and Rule 45 are believed to be applicable to the acquisition by NEES of additional notes of NEERI and the making of additional capital contributions by NEES to NEERI. Section 9(a) and Rule 40 are believed to be applicable to the acquisition by NEERI of the securities of Local Enterprises. Item 4. Regulatory Approval - ---------------------------- No Federal or state commission or regulatory body, other than the Commission, has jurisdiction over the proposed transactions. Item 5. Procedure - ------------------ The Applicants request that the Commission take action with respect to this Application/Declaration without a hearing being held, on or before December 15, 1994. The Applicants (i) do not request a recommended decision by a hearing officer, (ii) do not request a recommended decision by any other responsible officer of the Commission, (iii) hereby specify that the Division of Investment Management may assist in the preparation of the Commission's decision, and (iv) hereby request that there be no 30-day waiting period between the date of issuance of the Commission's Order and the date on which it is to become effective. Item 6. Exhibits: - ------------------ (a) Exhibits *F Opinion of Counsel H Proposed Form of Notice I Form of Subordinated Note *To be filed by amendment (b) Financial Statements 1-A Balance Sheet of NEES at June 30, 1994, actual and pro-forma 1-B Statement of Income and Retained Earnings for NEES for twelve months ended June 30, 1994** **The proposed transactions will have no material effect on the Income Statement of NEES. There were no material events, not in the ordinary course of business, since the date of the balance sheets. NEERI financial statements are filed quarterly with the Commission with a Certificate of Notification pursuant to Rule 24. Item 7. Environmental Effects - ------------------------------ The transactions proposed by this Application/Declaration do not involve a major Federal action significantly affecting the quality of the human environment. SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this Application/ Declaration on Form U-1 to be signed on their behalf, as indicated by the undersigned officers thereunto duly authorized by such companies. NEW ENGLAND ELECTRIC SYSTEM s/ Michael E. Jesanis __________________________________________ Michael E. Jesanis, Treasurer NEW ENGLAND ELECTRIC RESOURCES, INC. s/ John G. Cochrane __________________________________________ John G. Cochrane, Treasurer Dated: October 31, 1994 The name "New England Electric System" means the trustee or trustees for the time being (as trustee or trustees but not personally) under an agreement and declaration of trust dated January 2, 1926, as amended, which is hereby referred to, and a copy of which as amended has been filed with the Secretary of the Commonwealth. Any agreement, obligation or liability made, entered into or incurred by or on behalf of New England Electric System binds only its trust estate, and no shareholder, director, trustee, officer or agent thereof assumed or shall be held to any liability therefore. EX-99 2 EXHIBIT AND FINANCIAL STATEMENT INDEX EXHIBIT NO. DESCRIPTION PAGE - ----------- ----------- ---- F Form of Opinion To be filed by amendment H Proposed Form of Notice Filed herewith I Form of Subordinated Note Filed herewith FINANCIAL STATEMENT NO. - ------------------- 1-A Balance Sheet of NEES at June 30, 1994, actual and pro-forma Filed herewith 1-B Statement of Income and Retained Earnings for NEES for twelve months ended June 30, 1994 Filed herewith EX-99 3 EXHIBIT H EXHIBIT H PROPOSED FORM OF NOTICE New England Electric System (NEES), a registered holding company, and its subsidiary New England Electric Resources, Inc. (NEERI), have filed Form U-1 Application/Declaration File No. 70-____ under Sections 6(a), 7, 9(a), 10, and 12 of the Public Utility Holding Company Act of 1935 (the Act) and Rules 40 and 45 thereunder. By Order dated September 4, 1992 (Release No. 35-25621), NEERI was authorized to enter into the business of performing consulting services on electric utility matters for non-affiliates. NEES' investment in NEERI was also authorized. By Order dated April 1, 1994 (Release No. 35-26017), NEERI was authorized to provide electrical related services for non-affiliates; NEES was authorized to make an additional investment in NEERI. By Order dated May 25, 1994 (Release No. 35-26057), NEERI was authorized to invest in a start-up company formed to develop, manufacture and market a low harmonic distortion uninterruptible power supply; NEES was authorized to make additional investments in NEERI. NEERI now seeks authorization to invest up to $10,000,000 in research and development activities in connection with environmental, new electrical generation and transmission technologies, and electric end-use technologies. NEES seeks authority to provide additional financing for NEERI in an amount not to exceed $10,000,000 through non- interest bearing subordinated loans or capital contributions. Further, in order to allow NEERI to acquire securities in local enterprises pursuant to Rule 40 under the Act, NEES also seeks authority to provide additional financing for NEERI in an annual aggregate amount not to exceed $1,000,000 through non-interest bearing subordinated loans or capital contributions. EX-99 4 EXHIBIT I EXHIBIT I OPEN ACCOUNT ADVANCE SUBORDINATED PROMISSORY NOTE $_____________________ DATED:_________________ FOR VALUE RECEIVED, the undersigned NEW ENGLAND ELECTRIC RESOURCES, INC. (NEERI), a Massachusetts corporation hereby promises to pay to NEW ENGLAND ELECTRIC SYSTEM (NEES) ON DEMAND, but in any event, no later than ____________ the principal sum of ________________________ DOLLARS ($____________) or, if less, the aggregate unpaid principal amount of all advances made by NEES to NEERI pursuant to authority granted by orders of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 (the 1935 Act) without interest. All such advances and all payments made on account of the principal hereof shall be recorded by NEES and endorsed on the grid attached hereto which is part of this Subordinated Promissory Note. TERMS OF SUBORDINATION (a) The principal on this Subordinated Promissory Note is and shall be subordinated in right of payment in all respects to all other indebtedness of NEERI to any lender which is not an "affiliate" of NEERI, as that term is defined in the 1935 Act (hereinafter, "Senior Debt"). (b) Without limiting the foregoing subparagraph (a), (i) no payment on this Subordinated Promissory Note shall be made or received, directly or indirectly, in cash or other property or by set-off or in any other manner (including, without limitation, from or by way of collateral), so long as any Senior Debt remains outstanding, except that prepayments of principal on this Subordinated Promissory Note may be made and received so long as, but only so long as, at the time of such payments and immediately after giving effect thereto, no Event of Default, or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default exists under the provisions of any Senior Note or any other instrument evidencing Senior Debt or any agreement under which Senior Debt is then outstanding, and (ii) in the event of any insolvency or bankruptcy proceedings directly or indirectly involving NEERI, then all principal of and interest (including, without limitation, any and all interest which shall accrue after the filing of any petition in bankruptcy) on, the Senior Debt shall first be paid in full before any payment on account of principal, premium (if any) or interest is made upon this Subordinated Promissory Note, and in any such proceedings any payment or distribution of any kind or character, whether in cash, securities or other property, to which the holder of this Subordinated Promissory Note would be entitled if this Subordinated Promissory Note were not subordinated to the Senior Debt shall be made by the liquidating trustee or agent or other person making such payment or distribution, or by the holder of this Subordinated Promissory Note if received by him, directly to the holders of the Senior Debt to the extent necessary to make payment in full of the Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to or for the holders of the Senior Debt. (c) The foregoing provisions regarding subordination are intended solely for the purpose of defining the relative rights of the holders of the Senior Debt on the one hand and the holder of this Subordinated Promissory Note on the other hand. Nothing contained herein, is intended to or shall impair, as between NEERI and the holder of this Subordinated Promissory Note, the obligation of NEERI to pay to the holder of this Subordinated Promissory Note the principal of such Subordinated Promissory Note, subject, in each case, to the rights under the foregoing subparagraphs of the holders of the Senior Debt. NEW ENGLAND ELECTRIC RESOURCES, INC. DRAFT By: _______________________________ Title: ADVANCES AND REPAYMENTS OF PRINCIPAL Advances and payments of principal of this Subordinated Promissory Note were made on the dates and in the amounts specified below: Amount of Principal Balance of Amount of Prepaid or Principal Notation Date Loan Repaid Unpaid Made By: - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- EX-99 5 FINANCIAL STATEMENT 1-A FINANCIAL STATEMENT 1-A PAGE 1 OF 2 NEW ENGLAND ELECTRIC SYSTEM (Parent Company Only) Balance Sheet At June 30, 1994 (Actual and Pro Forma) (Unaudited) ASSETS ------
Actual Adjustments Pro Forma ------ ----------- --------- (In Thousands) Investments: Common stocks of subsidiaries, at equity $1,508,845 $1,508,845 Notes of subsidiaries 51,894 $ 24,449 76,343 Other investments 657 657 ---------- -------- ---------- Total investments 1,561,396 24,449 1,585,845 ---------- -------- ---------- Current assets: Cash 33 33 Temporary cash investments - subsidiary company 3,100 (3,100) Interest, dividends and accounts receivable (including $32,550,000 from subsidiaries) 32,622 (21,349) 11,273 Other current assets 30 30 ---------- -------- ---------- Total current assets 35,785 $(24,449) 11,336 ---------- -------- ---------- Deferred federal income taxes 2,215 2,215 ---------- -------- ---------- $1,599,396 $1,599,396 ========== ======== ========== CAPITALIZATION AND LIABILITIES ------------------------------ Common share equity: Common shares, par value $1 per share: Authorized - 150,000,000 shares Outstanding - 64,969,652 shares $ 64,970 $ 64,970 Paid-in capital 736,567 736,567 Retained earnings (including $565,695,000 of undistributed subsidiary earnings) 757,192 757,192 ---------- -------- ---------- Total common share equity 1,558,729 1,558,729 ---------- -------- ---------- Current liabilities: Accounts payable (including $211,000 to subsidiaries) $ 1,094 1,094 Other accrued expenses 500 500 Dividends payable 33,110 33,110 ---------- -------- ---------- Total current liabilities 34,704 34,704 ---------- -------- ---------- Deferred credits 5,963 5,963 ---------- -------- ---------- $1,599,396 $1,599,396 ========== ======== ==========
FINANCIAL STATEMENT 1-A PAGE 2 OF 2 New England Electric System (Parent Company Only) The pro forma adjustments to show the estimated effect of the proposed transactions on the foregoing Balance Sheet at June 30, 1994 are as follows: Debit - Notes of subsidiaries $24,449,000* Credit - Temporary cash investments - subsidiary company $ 3,100,000 Interest, dividends and accounts receivable $21,349,000 To reflect (1) a subordinated interest-free note from New England Electric System in the amount of $24.449 million to New England Electric Resources, Inc. and (2) the funding of this contribution through the utilization of (i) temporary cash investments and (ii) interest, dividends and accounts receivable. _______________ * Represents all financing authority previously authorized ($2.25 million per Orders dated September 4, 1992, Release No. 35-25621; April 1, 1994, Release No. 35-26017; and May 25, 1994, Release No. 35-26057), pending for authorization ($11.7 million per File No. 70-8475), and requesting for authorization ($10 million for research and development fund and up to $1 million annually for the Local Enterprise Fund per this filing) net of $501,000 of financing already provided by New England Electric System to New England Electric Resources, Inc. EX-99 6 FINANCIAL STATEMENT 1-B FINANCIAL STATEMENT 1-B PAGE 1 OF 1 NEW ENGLAND ELECTRIC SYSTEM (Parent Company Only) Statement of Income Twelve Months Ended June 30, 1994 (Unaudited) (In Thousands) Equity in earnings of subsidiaries $ 209,496 Interest income - subsidiaries 308 --------- Total income from subsidiaries 209,804 Other income 109 --------- Total income 209,913 Corporate and fiscal expenses (includes $1,827,000 for cost of services billed by an affiliated company) (17,553) Federal income taxes 6,986 --------- Income before interest 220,480 Interest 132 --------- Net income $ 220,348 ========= Statement of Retained Earnings Retained earnings at beginning of period $ 685,398 Net income 220,348 Dividends declared on common shares (146,507) Premium on redemption of preferred stock of subsidiaries (2,047) --------- Retained earnings at end of period $ 757,192 ========= -----END PRIVACY-ENHANCED MESSAGE-----