-----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, LmcYXyWnIL6bAZS94x9tuqYZ2UHcOW6qPgu2LNxaozwq8oHRGe35S3rXAsjjNlaI 8HY0HKNKFIQmeEwoHFb6gw== 0000071297-95-000004.txt : 19950509 0000071297-95-000004.hdr.sgml : 19950508 ACCESSION NUMBER: 0000071297-95-000004 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19950120 SROS: BSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND ELECTRIC SYSTEM CENTRAL INDEX KEY: 0000071297 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [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: 070-08555 FILM NUMBER: 95502074 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 1935 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 undertake preliminary development activities in connection with potential projects involving EWGs and/or FUCOs. Item 1. Description of Proposed Transactions: - --------------------------------------------- A. EWG and FUCO Project Development Activities Exempt Wholesale Generators ("EWGs"), as defined in the 1935 Act, are exempt from the 1935 Act (Section 32(e)). Foreign Utility Companies ("FUCOs"), as defined in the 1935 Act, are exempt from the 1935 Act except as otherwise provided under Section 33 thereof (Section 33(a)(1)). These EWG and FUCO exemptions apply whether or not the EWG or FUCO is a subsidiary, affiliate, or associate of a holding company. Section 32(g) of the 1935 Act permits registered holding companies to acquire and hold securities of, or an interest in the business of, EWGs without prior approval from the Commission. Registered holding companies are permitted to acquire and hold, without prior Commission approval, securities of, or interests in the business of, FUCOs pursuant to Section 33(c)(1) of the 1935 Act and rules and regulations promulgated thereunder. The Commission has not yet issued rules or regulations pursuant to Section 33(c)(1) concerning ownership of FUCOs by holding companies. With respect to EWGs and FUCOs, the following activities remain subject to Commission jurisdiction: (i) issuance of securities by a registered holding company for purposes of financing the acquisition of an EWG or FUCO, (ii) guaranteeing of EWG or FUCO securities by a registered holding company, and (iii) entering into service, sales or construction contracts, or the maintenance or creation of any other relationship (other than as set forth in Section 32(g)) between an EWG or FUCO and a registered holding company, its affiliates, associates or subsidiaries. (Section 32(h)). However, prior Commission approval is not required for financing the acquisition, or guaranteeing the securities, of an EWG, if the requirements of Rule 53(a)(1)-(4) and (b)(1)-(3) are complied with. See Order of the Commission, Release No. 35-25977. Rule 53 requires, among other things, that aggregate EWG investment not exceed 50 percent of the system's consolidated retained earnings, that the holding company maintain its books in accordance with the Rule, and that no more than 2 percent of the system's domestic public utility employees render services to EWGs or FUCOs in which the system holds an interest. In future, NEERI intends to take advantage of the EWG and FUCO investment opportunities afforded by Sections 32, 33 and Rule 53 of the 1935 Act. NEERI has not determined how it will structure its participation in its EWG and FUCO investments. NEERI may choose to invest in EWG and FUCO projects by pursuing cooperative arrangements with others, by independent investment, by forming one or more EWG/FUCO subsidiaries, or by structuring a "project parent" arrangement similar to that approved in the Commission's Order of August 3, 1994, Release No. 35-26096. NEERI seeks authorization to invest an amount not exceeding $10 million in research and development activities for exploring EWG/FUCO investments and investment structures beneficial for NEERI and the System. These research and development activities will include EWG/FUCO project identification, site investigations, technical research, legal research and drafting, contract, license, option, and other negotiations, entering into contracts, licenses, and other similar agreements, preliminary market surveys and analyses, and other activities connected with investigating, analyzing and initiating EWG and FUCO commercial projects (the "Development Activities"). NEERI will not use any funds authorized for Development Activities to acquire an interest in the business of any EWG or FUCO within the meaning of the 1935 Act. NEERI will not invest in any EWG or FUCO project, investment in which requires the Commission's approval under the 1935 Act, without requesting and receiving such approval. NEES requests authority to provide financing to NEERI in an amount not exceeding $10 million for the purposes of funding the Development Activities. B. Acquisition of EWGs and FUCOs NEERI and NEES propose to make investments in EWGs and FUCOs without prior approval of the Commission to the extent such prior approval is not required under Sections 32 and 33 of the 1935 Act and the rules and regulations promulgated thereunder. Neither NEES nor NEERI will make any EWG or FUCO investment that involves financing the acquisition of an EWG or FUCO, guaranteeing the securities of an EWG or FUCO, entering into sales, service or construction contracts with an EWG or FUCO, or which creates a relationship between a NEES company and an EWG or FUCO which is not covered by Section 32(g) or 33(c)(1) of the 1935 Act, without prior Commission approval. 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. By Form U-1 Application/Declaration filed October 31, 1994 (File No. 70-8513), NEES proposed to provide additional financing for NEERI by making capital contributions up to an additional $11,000,000 and/or by lending to NEERI from time to time additional amounts not to exceed $11,000,000 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 in an aggregate amount not to exceed $10 million for purposes of funding the Development Activities. NEES proposes to provide the above additional financing by making capital contributions to NEERI up to an additional $10 million and/or by lending to NEERI from time to time additional amounts not to exceed $10 million at any one time, such loans to be in the form of non-interest bearing subordinated notes. The Form of Subordinated Note is attached hereto as Exhibit I. 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 $34.95 million. 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. Sections 32, 33, and Rule 53 are believed to be applicable to EWG and FUCO project participation by NEERI and NEES. 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 March 1, 1995. 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 September 30, 1994, Actual and Pro-forma 1-B Statement of Income and Retained Earnings for NEES for twelve months ended September 30, 1994 2-A Balance Sheet of NEERI at September 30, 1994, Actual and pro-forma 2-B Statement of Income and Retained Earnings for NEERI for twelve months ended September 30, 1994 The pro-forma financial statements assume NEES provides financing to NEERI in the form of non-interest bearing subordinated notes. 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: January 20, 1995 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 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 INDEX Financial Statement No. Description Page - --------- ------------------------- ------------- 1-A Balance Sheet of NEES at Filed herewith September 30, 1994, Actual and Pro-forma 1-B Statement of Income and Retained Filed herewith Earnings for NEES for twelve months ended September 30, 1994 2-A Balance Sheet of NEERI at Filed herewith September 30, 1994, Actual and Pro-forma 2-B Statement of Income and Retained Filed herewith Earnings for NEERI for twelve months ended September 30, 1994 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 $10,000,000 in preliminary research and development activities in connection with exploring potential EWG and/or FUCO investments. 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. 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. By: _______________________________ Title: 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 September 30, 1994 (Actual and Pro Forma) (Unaudited) ASSETS ------
Actual Adjustments Pro Forma ------ ----------- --------- (In Thousands) Investments: Common stocks of subsidiaries, at equity $1,520,875 $1,520,875 Notes of subsidiaries 52,092 $ 10,000 62,092 Other investments 2,277 2,277 ---------- -------- ---------- Total investments 1,575,244 10,000 1,585,244 ---------- -------- ---------- Current assets: Cash 42 42 Temporary cash investments - subsidiary company 1,400 (1,400) Interest and dividends receivable of subsidiaries 45,106 (8,600) 36,506 Other current assets 95 95 ---------- -------- ---------- Total current assets 46,643 $(10,000) 36,643 ---------- -------- ---------- Deferred federal income taxes 2,218 2,218 ---------- -------- ---------- $1,624,105 $1,624,105 ========== ======== ========== 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 $578,122,000 of undistributed subsidiary earnings) 778,685 778,685 ---------- -------- ---------- Total common share equity 1,580,222 1,580,222 ---------- -------- ---------- Current liabilities: Accounts payable (including $220,000 to subsidiaries) 3,146 3,146 Other accrued expenses 787 787 Dividends payable 33,858 33,858 ---------- -------- ---------- Total current liabilities 37,791 37,791 ---------- -------- ---------- Deferred credits 6,092 6,092 ---------- -------- ---------- $1,624,105 $1,624,105 ========== ======== ==========
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 September 30, 1994 are as follows: Debit - Notes of subsidiaries $10,000,000 Credit - Temporary cash investments - subsidiary company $ 1,400,000 Interest and dividends receivable of subsidiaries $ 8,600,000 To reflect (1) a subordinated interest-free note from New England Electric System in the amount of $10 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 and dividends receivable. EX-99 6 FINANCIAL STATEMENT 1-B Financial Statement 1-B NEW ENGLAND ELECTRIC SYSTEM (Parent Company Only) Statement of Income Twelve Months Ended September 30, 1994 (Unaudited) (In Thousands) Equity in earnings of subsidiaries $ 212,776 Interest income - subsidiaries 297 --------- Total income from subsidiaries 213,073 Other income 110 --------- Total income 213,183 Corporate and fiscal expenses (includes $1,848,000 for cost of services billed by an affiliated company) (17,596) Federal income taxes 7,076 --------- Income before interest 223,703 Interest 35 --------- Net income $ 223,668 ========= Statement of Retained Earnings Retained earnings at beginning of period $ 703,314 Net income 223,668 Dividends declared on common shares (147,481) Premium on redemption of preferred stock of subsidiaries (816) --------- Retained earnings at end of period $ 778,685 ========= EX-99 7 FINANCIAL STATEMENT 2-A Financial Statement 2-A Page 1 of 2 NEW ENGLAND ELECTRIC RESOURCES, INC. Balance Sheet At September 30, 1994 (Actual and Pro Forma) (Unaudited) ASSETS ------
Actual Adjustments Pro Forma ------ ----------- --------- Current assets: Cash $ 32,807 $10,000,000 $10,032,807 Accounts receivable 341,446 341,446 Accounts receivable from associated companies 5,793 5,793 Tax benefit receivable 23,035 23,035 ---------- ----------- ----------- Total current assets 403,081 10,000,000 10,403,081 ---------- ----------- ----------- Investments 250,000 250,000 Deferred charges and other assets 526,470 526,470 ---------- ----------- ----------- $1,179,551 $10,000,000 $11,179,551 ========== =========== =========== LIABILITIES AND PARENT COMPANY'S INVESTMENT -------------------------------------------- Current liabilities: Accounts payable to associated companies $ 151,134 $ 151,134 Accounts payable 20,703 20,703 Accrued taxes 3,157 3,157 ---------- ----------- ----------- Total current liabilities 174,994 174,994 ---------- ----------- ----------- Parent company's investment: Common stock, par value $1 per share 1,000 1,000 Subordinated notes payable to parent 1,249,000 $10,000,000 11,249,000 Retained deficit (245,443) (245,443) ---------- ----------- ----------- Total parent company's investment 1,004,557 10,000,000 11,004,557 ---------- ----------- ----------- Total current liabilities and parent company's investment $1,179,551 $10,000,000 $11,179,551 ========== =========== ===========
Financial Statement 2-A Page 2 of 2 NEW ENGLAND ELECTRIC RESOURCES, INC. The pro forma adjustments to show the estimated effect of the proposed transactions on the foregoing Balance Sheet at September 30, 1994 are as follows: Debit - Cash $10,000,000 Credit - Subordinated notes payable to parent $10,000,000 To reflect subordinated interest-free notes from New England Electric System in the amount of $10 million to New England Electric Resources, Inc. EX-99 8 FINANCIAL STATEMENT 2-B Financial Statement 2-B NEW ENGLAND ELECTRIC RESOURCES, INC. Statement of Income (Loss) and Retained Deficit For the Twelve Months Ended September 30, 1994 (Unaudited) Services rendered to nonassociated companies $1,111,256 ---------- Total income 1,111,256 ---------- Outside services employed 1,244,523 Income taxes (51,710) ---------- Total expense 1,192,813 ---------- Net loss $ (81,557) ========== Retained earnings/(deficit) at beginning of period $ (163,886) ---------- Retained earnings/(deficit) at end of period $ (245,443) ========== -----END PRIVACY-ENHANCED MESSAGE-----