-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L5eR23lJN0WOd+OH5Or/E+CXU+yKW4wh++it+pEolhPek6zwVQC+3D62Bf0go2CB GAa6t0ZlrcM/r1lwh257Dw== 0000072741-02-000082.txt : 20020529 0000072741-02-000082.hdr.sgml : 20020529 20020529094324 ACCESSION NUMBER: 0000072741-02-000082 CONFORMED SUBMISSION TYPE: U-9C-3 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020529 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES SYSTEM CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-9C-3 SEC ACT: 1935 Act SEC FILE NUMBER: 074-00011 FILM NUMBER: 02664211 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-9C-3 1 march2002u9c3.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM U-9C-3 QUARTERLY REPORT PURSUANT TO RULE 58 For the quarterly period ended March 31, 2002 Northeast Utilities ------------------- (Name of registered holding company) 107 Selden Street, Berlin, CT 06037 ----------------------------------- (Address of Principal Executive Officers) Name and telephone number of officer to whom inquiries concerning this report should be directed: John P. Stack, Vice President-Accounting and Controller Telephone Number: 860-665-2333 GENERAL INSTRUCTIONS A. Use of Form 1. A reporting company, as defined herein, shall file a report on this form within 60 days after the end of each of the first three quarters, and within 90 days after the end of the fourth quarter, of the fiscal year of the registered holding company. The period beginning on the date of effectiveness of rule 58 and ending at the end of the quarter following the quarter in which the rule becomes effective shall constitute the initial period for which any report shall be filed, if applicable. 2. The requirement to provide specific information by means of this form supersedes any requirement by order of the Commission to provide identical information by means of periodic certificates under rule 24; but does not so supersede and replace any requirement by order to provide information by means of an annual report on Form U-13-60. 3. Information with respect to reporting companies that is required by Form U-13-60 shall be provided exclusively on that form. 4. Notwithstanding the specific requirements of this form, this Commission may informally request such further information as, in its opinion, may be necessary or appropriate. B. Statements of Monetary Amounts and Deficits 1. Amounts included in this form and in related financial statements may be expressed in whole dollars, thousands of dollars or hundred thousands of dollars. 2. Deficits and other similar entries shall be indicated by either brackets or parentheses. An explanation should be provided by footnote. C. Formal Requirements This form, including exhibits, shall be filed with Commission electronically pursuant to Regulation S-T (17 CFR 232.10 et seq.). A conformed copy of each such report shall be filed with each state commission having jurisdiction over the retail rates of a public utility company that is an associate company of a reporting company. Each report shall provide the name and telephone number of the person to whom inquiries concerning this report should be directed. D. Definitions As used in this form, the word "reporting company" means an energy-related company or gas-related company, as defined in rule 58(b). All other words and terms have the same meaning as in the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder. ITEM 1 - ORGANIZATIONAL CHART - ------------------------------------------------------------------------------- Instructions - ------------------------------------------------------------------------------- 1. Complete Item 1 only for the first three calendar quarters of the fiscal year of the registered holding company. 2. Under the caption "Name of Reporting Company," list each energy- related and gas-related company and each system company that directly or indirectly holds securities thereof. Add the designation "(new)" for each reporting company of which securities were acquired during the period, and the designation "(*)" for each inactive company. 3. Under the caption "Percentage of Voting Securities Held," state the aggregate percentage of the outstanding voting securities of the reporting company held directly or indirectly by the registered holding company at the end of the quarter. 4. Provide a narrative description of each reporting company's activities during the reporting period. - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------- Percentage Activities Energy of Voting reported Name of or Gas Date of State of Securities Nature of during the Reporting Co. Related Organization Organization Held Business period - ----------------- ------- ------------ ------------- ----------------- -------------- ----------- NU Holding 01/4/99 Connecticut 100% by Unregulated (A) Enterprises, Inc. Northeast businesses Utilities holding company Select Energy 09/26/96 Connecticut 100% by Invest in (B) Energy, Inc. NU energy-related Enterprises, Inc. activities Select Energy 03/17/99 Connecticut 100% by Invest in (C) Energy NU energy-related Portland Enterprises, Inc. activities Pipeline, Inc. Northeast Energy 01/4/99 Connecticut 100% by Invest in (D) Generation NU energy-related Services Enterprises, Inc. activities Company Select Energy Energy 06/19/90 Massachusetts 100% by Invest in (E) Services, Inc. NU energy-related Enterprises, Inc. activities Reeds Ferry Energy 07/15/64 New 100% by Invest in (F) Supply Co., Inc. Hampshire Select Energy energy-related Services, Inc. activities HEC/Tobyhanna Energy 09/28/99 Massachusetts 100% by Invest in (G) Energy Project, Select Energy energy-related Inc. Services, Inc. activities Select Energy Energy 10/12/94 Massachusetts 100% by Invest in (H) Contracting, Inc. Select Energy energy-related Services, Inc. activities Yankee Energy Holding 02/15/00 Connecticut 100% by Public (I) System, Inc. Northeast Utility Utilities Holding Company Yankee Energy Energy 07/2/93 Connecticut 100% by Invest in (J) Services Company Yankee Energy energy-related System, Inc. activities R. M. Services, Energy 11/22/94 Connecticut 10% by Invest in (K) Inc. Yankee Energy energy-related System, Inc. activities Acumentrics Energy 09/13/00 Massachusetts 5% by Invest in (L) Corporation NU energy-related Enterprises, Inc. activities ERI/HEC Energy 09/30/00 Delaware 50% by Invest in (M) EFA-Med, LLC Select Energy energy-related Services, Inc. activities E.S. Boulos Energy 01/19/01 Connecticut 100% by Invest in (N) Company Northeast energy-related Generation activities Services Company NGS Mechanical Energy 01/24/01 Connecticut 100% by Provide (O) Company Northeast mechanical Generation construction Services Company and maintenance services HEC/CJTS Energy Energy 03/02/01 Delaware 100% by Facilitate (P) Center LLC Select Energy construction Services, Inc. financing
(A) NU Enterprises, Inc. is not the "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (B) Select Energy, Inc. (Select Energy) is an integrated energy business that buys, sells, markets and trades electricity, gas and oil and energy- related products and services to both wholesale and retail customers in the northeastern United States. Select Energy procures and delivers energy and capacity required to serve its electric, gas and oil customers. Under the umbrella of the Select Energy brand, Select Energy, collectively with its affiliated competitive energy businesses, provides a wide range of energy products and energy services. Select Energy is a licensed retail electricity supplier and is registered with local electric distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island and Virginia. Select Energy is a registered gas marketer with local gas distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia. (C) Select Energy Portland Pipeline, Inc. (SEPPI) acquired a 5% interest in Portland Natural Gas Transmission System partnership in March 1999 and sold this interest in June 2001. (D) Effective January 4, 1999, Northeast Generation Services Company (NGS) was established to provide a full range of energy-related operation and maintenance services for larger industrial, institutional and power generation customers throughout the 11-state Northeast area. NGS' current business segments focus on providing turnkey Manage and Operate Services (MOS) and also a full range of Industrial Services (IS) and Consulting Services (CS). MOS is a service that is designed for generation asset owners. NGS has the ability to offer station management and operation services with a focus on optimizing the value of that specific asset with the owner. Within the IS platform, its offerings include mechanical and electrical construction and maintenance services, as well as environmental maintenance/compliance services. Within the CS platform, the product and service offerings include engineering and environmental consulting services, with an emphasis on power plant system design. (E) Select Energy Services, Inc. (formerly HEC Inc.) is not the "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (F) Reed's Ferry Supply Corporation was purchased by Select Energy Services, Inc. in August 1999 as an equipment wholesaler to purchase equipment on behalf of Select Energy Contracting, Inc. (G) Effective September 30, 1999, HEC/Tobyhanna Energy Project, Inc. was established as a special purpose entity to manage the assets of an Energy Savings Performance Contract (ESPC) project at the Tobyhanna Army Depot. (H) Select Energy Contracting, Inc. designs, manages and directs the construction of, and/or installing of mechanical, water, and electrical systems, energy and other resource consuming equipment. (I) Yankee Energy System, Inc. is not the "reporting company" but is included in this Item 1 because it holds, directly or indirectly, voting securities issued by reporting companies as indicated above. (J) Yankee Energy Services Company (YESCO) is winding down its energy-related services for its customers. YESCO has disposed of most of its assets and is in the process of liquidating the remainder of its assets. (K) R. M. Services, Inc. provides consumer collection services for companies throughout the United States. (L) Acumentrics Corporation develops, manufactures, and distributes advanced power generation, power quality and power protection devices including a high-speed flywheel and advanced power generation, power quality and power protection devices including a high-speed flywheel and advanced technology fuel cells. (M) ERI/HEC EFA-Med, LLC is a Delaware limited liability company that was formed by Select Energy Services, Inc., and ERI Services, Inc. to enter into an indefinite delivery/indefinite quantity contract with the U.S. Navy. Under the contract, the Navy will issue Delivery Orders for energy services work at U.S. Government facilities located in Bahrain, Greece, Egypt, Italy, Spain, Turkey, and the United Kingdom. The LLC will designate either ERI or Select Energy Services, Inc. to perform each of the Delivery Orders. The LLC will also act as the conduit for any project-related financing. ERI Services, Inc. and Select Energy Services, Inc. each own 50% of the LLC. (N) E. S. Boulos Company (Boulos) is a Connecticut corporation that was formed by NGS to acquire the assets of electrical construction companies located in Maine. Boulos is registered to do business initially in Maine, Massachusetts, New Hampshire, and Vermont. NGS owns 100% of the corporation. (O) NGS Mechanical Company (NGSM) is a Connecticut corporation that was formed by NGS to perform mechanical construction and maintenance services to customers contracted with to provide such services. NGSM is registered to do business initially in Massachusetts, New Hampshire, Maine, Vermont, Rhode Island, and New York. NGS owns 100% of the corporation. (P) HEC/CJTS Energy Center LLC (HEC/CTJS) is a Delaware limited liability company that was formed by Select Energy Services, Inc. to facilitate the financing of the construction of the Connecticut Juvenile Training School in Middletown, Connecticut. HEC/CJTS will not have any employees nor will it conduct any other activities other than those related to accepting the assignment of the lease. Select Energy Services, Inc. owns 100% of the LLC. (Q) Select Energy New York (SENY) is a wholly owned subsidiary of Select Energy and engages in the brokering, marketing, transportation, storage, and sale of energy commodities in the state of New York. ITEM 2 - ISSUANCES AND RENEWALS OF SECURITIES AND CAPITAL CONTRIBUTIONS - ----------------------------------------------------------------------------- Instruction - ----------- With respect to a transaction with an associate company, report only the type and principal amount of securities involved. - -----------------------------------------------------------------------------
Person Company Type of Principal to Whom Collateral Consideration Company Amount of Issuing Security Amount of Issue or Cost of Security Given With Received for Contributing Capital Security Issued Security Renewal Capital Was Issued Security Each Security Capital Contribution - -------------- -------- ------------ -------- ------- ------------ ---------- ------------- ------------ ------------ Select Energy, Inc. No transactions this quarter. Northeast Generation Services Company No transactions this quarter. Select Energy Contracting, Inc. No transactions this quarter. Reeds Ferry Supply Co., Inc. No transactions this quarter. HEC/Tobyhanna Energy Project, Inc. No transactions this quarter. Yankee Energy Services Company No transactions this quarter. R. M. Services, Inc. No transactions this quarter. Acumentrics Corporation No transactions this quarter. ERI/HEC EFA-Med, LLC No transactions this quarter. E.S. Boulos Company No transactions this quarter. NGS Mechanical Company No transactions this quarter. HEC/CJTS Energy Center LLC No transactions this quarter. Northeast Utilities No transactions this quarter. Select Energy Select Energy, New York, Inc. N/A N/A N/A N/A N/A N/A N/A Inc. $6,802,882
ITEM 3 - ASSOCIATE TRANSACTIONS - ------------------------------------------------------------------------------- Instructions - ------------ 1. This item is used to report the performance during the quarter of contracts among reporting companies and their associate companies, including other reporting companies, for service, sales and construction. A copy of any such contract not filed previously should be provided as an exhibit pursuant to Item 6.B. 2. Parts I and II concern transactions performed by reporting companies on behalf of associate companies, and transactions performed by associate companies on behalf of reporting companies, respectively. - ------------------------------------------------------------------------------- Part I - Transactions performed by reporting companies on behalf of associate companies.
Total Amount Billed* Reporting Associate Company Company Types of Three Months Rendering Receiving Services Ended Services Services Rendered March 31, 2002 - ----------------------- ------------------- -------------- ------------------ (Thousands of Dollars) Northeast Select Generation Energy, Inc. Electrical and Services Mechanical Services $ 11 Company ====== Northeast The Generation Connecticut Services Light & Power Electrical and Company Company Mechanical Services $ 58 ====== Northeast Western Generation Massachusetts Electrical and Services Electric Company Mechanical Services $ 14 Company ====== Northeast Public Service Generation Company of Electrical and Services New Hampshire Mechanical Services $ 446 Company ====== Northeast Holyoke Water Generation Power Company Electrical and Services Mechanical Services $2,668 Company ====== Northeast Northeast Generation Generation Electrical and Services Company Mechanical Services $8,162 Company ====== Wholesale Reeds Ferry Select Energy Purchasing Supply Co., Inc. Contracting, Inc. Services $ 295 ====== Northeast North Atlantic Generation Energy Service Electrical and Services Corporation Mechanical Services $ - Company ====== Northeast Generation Yankee Energy Electrical and Services Services Company Mechanical Services $ 42 Company ====== Northeast Northeast Generation Utilities Services Service Electrical and Company Company Mechanical Services $ 7 ======
Part II - Transactions performed by associate companies on behalf of reporting companies.
Total Amount Billed* Associate Reporting Company Company Types of Three Months Rendering Receiving Services Ended Services Services Rendered March 31, 2002 - ----------------------- ------------------- -------------- ------------------ (Thousands of Dollars) Public Service Company Select of New Hampshire Energy, Inc. Miscellaneous $ 8 ======
* 'Total Amount Billed' is direct costs only. ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT Investments in energy-related companies: - ---------------------------------------- (Thousands of Dollars) Total consolidated capitalization as of 03/31/02 $6,873,820 line 1 Total capitalization multiplied by 15% (line 1 multiplied by .15) 1,031,073 line 2 Greater of $50 million or line 2 $1,031,073 line 3 Total current aggregate investment: (categorized by major line of energy-related business): Select Energy, Inc. $676,868 Northeast Generation Services Company 25,322 Select Energy Contracting, Inc. 39,353 Select Energy New York, Inc. 36,696 Reeds Ferry Supply Co., Inc. 7 HEC/Tobyhanna Energy Project, Inc. - Yankee Energy Services Company 8,282 E.S. Boulos Company 7,539 R.M. Services, Inc. 13,799 NGS Mechanical Company 10 Acumentrics Corporation 10,000 ERI/HEC EFA-Med, LLC 6 HEC/CJTS Energy Center LLC 10 ----------- Current aggregate investment 817,892 ----------- Elimination * 17,536 ----------- Total current aggregate investment 800,356 line 4 ----------- Difference between the greater of $50 million or 15% of capitalization and the total aggregate investment of the registered holding company system $230,717 line 5 =========== *Elimination is for capital contributions made from a parent company who is a reporting company to a subsidiary who is also a reporting company. ITEM 5 - OTHER INVESTMENTS - ------------------------------------------------------------------------------- Instruction - ----------- This item concerns investments in energy-related and gas-related companies that are excluded from the calculation of aggregate investment under rule 58. - ------------------------------------------------------------------------------- Major Line Other Other of Energy- Investment Investment Related in Last in This Reason for Difference Business U-9C-3 Report U-9C-3 Report in Other Investment - ------------- ------------- ------------- --------------------- NONE ITEM 6 - FINANCIAL STATEMENTS AND EXHIBITS Instructions A. Financial Statements 1. Financial statements are required for reporting companies in which the registered holding company system has at least 50% equity or other ownership interest. For all other rule 58 companies, the registered holding company shall make available to the Commission such financial statements as are available to it. 2. For each reporting company, provide a balance sheet as of the end of the quarter and income statements for the three-month and year-to-date periods ending as of the end of the quarter, together with any notes thereto. Financial statements shall be for the first three quarters of the fiscal year of the registered holding company. 3. If a reporting company and each of its subsidiaries engage exclusively in single category of energy-related or gas-related activity, consolidated financial statements may be filed. 4. Separate financial statements need not be filed for inactive companies or for companies engaged solely in the ownership of interests in energy-related or gas-related companies. B. Exhibits 1. Copies of contracts required to be provided by Item 3 shall be filed as exhibits. 2. A certificate stating that a copy of the report for the previous quarter has been filed with interested state commissions shall be filed as an exhibit. The certificate shall provide the names and addresses of the state commissions. - ------------------------------------------------------------------------------- A. Financial Statements Select Energy, Inc.: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 Northeast Generation Services Company: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 Select Energy Contracting, Inc.: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 Reeds Ferry Supply Co., Inc.: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 HEC/Tobyhanna Energy Project, Inc.: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 Yankee Energy Services Company: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 ERI/HEC EFA-Med, LLC: Not available as of March 31, 2002 E. S. Boulos Company: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 NGS Mechanical Company: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 HEC/CJTS Energy Center LLC: Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 Northeast Utilities (Parent): Balance Sheet - As of March 31, 2002 Income Statement - Three months ended March 31, 2002 B. Exhibits Exhibit No. Description - ----------- ----------- 6.B.1.1a Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1b Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1c Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1d Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1e Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1f Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1g Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1h Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1i Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.1j Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.2 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.3 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.4 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.1.5 Copy of contract required by Item 3 - filed under confidential treatment pursuant to Rule 104(b). 6.B.2.1 The company certifies that a conformed copy of Form U-9C-3 for the previous quarter was filed with the following state commissions: Ms. Louise E. Rickard Acting Executive Secretary Department of Public Utility Control 10 Franklin Square New Britain, CT 06051 Ms. Mary L. Cottrell, Secretary Massachusetts Department of Telecommunications and Energy 100 Cambridge Street Boston, MA 02202 Mr. Thomas B. Getz Executive Director and Secretary State of New Hampshire Public Utilities Commission 8 Old Suncook Road, Building One Concord, NH 03301-7319 SELECT ENERGY, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Receivables, net $212,004 Accounts receivable from affiliated companies 105,714 Taxes receivable 17,842 Special deposits 24,497 Unrealized gains on mark-to-market transactions 65,352 Prepaid wholesale power purchases 24,657 Prepayments and other 6,414 -------- 456,480 -------- Property, Plant and Equipment: Competitive energy 12,312 Less: Accumulated provision for depreciation and amortization 4,282 -------- 8,030 Construction work in progress 273 -------- 8,303 -------- Deferred Debits and Other Assets: Intangibles, net 19,746 Accumulated deferred income taxes 11,340 Prepaid pensions 2,716 Other 45,137 -------- 78,939 -------- Total Assets $543,722 ======== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current Liabilities: Notes payable to affiliated companies $187,500 Accounts payable 193,508 Accounts payable to affiliated companies 12,755 Other 32,370 -------- Total current liabilities 426,133 -------- Deferred Credits and Other Liabilities 92,418 -------- Stockholder's Equity: Common stock, $1 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 199,535 Accumulated deficit (169,178) Accumulated other comprehensive loss (5,186) -------- Total stockholder's equity 25,171 -------- Total Liabilities and Stockholder's Equity $543,722 ======== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY, INC. INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $918,735 -------- Operating Expenses: Purchased power, net interchange power and capacity 936,136 Other 28,601 Depreciation 1,732 Taxes other than income taxes 1,738 -------- Total operating expenses 968,207 -------- Operating Loss (49,472) -------- Other Income, Net 5,729 -------- Interest Expense, Net 1,355 -------- Loss Before Income Tax Benefit (45,098) -------- Income Tax Benefit 19,945 -------- Net Loss $(25,153) ======== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST GENERATION SERVICES COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 76 Receivables, net 4,055 Accounts receivable from affiliated companies 3,247 Unbilled revenues 4,379 Fuel, materials and supplies, at average cost 496 Prepayments and other 1,893 ------- 14,146 ------- Property, Plant and Equipment: Other 1,548 Less: Accumulated provision for depreciation 767 ------- 781 Construction work in progress 1,239 ------- 2,020 ------- Deferred Debits and Other Assets: Accumulated deferred income taxes 606 Other 15,334 ------- 15,940 ------- Total Assets $32,106 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST GENERATION SERVICES COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current Liabilities: Notes payable to affiliated companies $12,500 Accounts payable 2,318 Accounts payable to affiliated companies 2,178 Accrued taxes 1,469 Other 284 ------- 18,749 ------- Deferred Credits and Other Liabilities 231 ------- Stockholder's Equity: Common stock, $1 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 10,422 Retained earnings 2,704 ------- Total stockholder's equity 13,126 ------- Total Liabilities and Stockholder's Equity $32,106 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST GENERATION SERVICES COMPANY INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $13,584 ------- Operating Expenses: Operation 10,822 Maintenance 3,427 Depreciation and amortization 2 Taxes other than income taxes 575 ------- Total operating expenses 14,826 ------- Operating Loss (1,242) ------- Other Income, Net 321 ------- Loss Before Interest Expense and Income Tax Benefit (921) ------- Interest Expense, Net 116 ------- Loss Before Income Tax Benefit (1,037) ------- Income Tax Benefit 571 ------- Net Loss $ (466) ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY CONTRACTING, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 267 Accounts receivable 12,997 Other material and supplies 453 Prepayments and other 324 ------- 14,041 ------- Deferred Debits and Other Assets: Other 15,778 ------- 15,778 ------- Long-Lived Assets: Other 5,745 Less: Accumulated provision for depreciation 3,144 ------- 2,601 ------- Total Assets $32,420 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY CONTRACTING, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Accounts payable $ 4,284 Accounts payable to affiliated companies 9,322 Accrued taxes 1,268 ------- 14,874 ------- Deferred Credits and Other Liabilities: Deferred taxes 347 Other 1,552 ------- 1,899 ------- Stockholders' Equity: Common stock, $1 par value - 100,000 shares authorized and 100 shares outstanding - Capital surplus, paid in 14,906 Retained earnings 741 ------- 15,647 ------- Total Liabilities and Stockholders' Equity $32,420 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY CONTRACTING, INC. INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $13,907 ------- Operating Expenses: Operation 13,340 Maintenance 105 Depreciation 283 Taxes other than income taxes 112 ------- Total operating expenses 13,840 ------- Operating Income 67 ------- Other Income 2 ------- Interest Expense, Net 64 ------- Income before income taxes 5 ------- Income Tax Expense: Federal and state income taxes, net 15 ------- Net Loss $ (10) ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. REEDS FERRY SUPPLY CO., INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 6 Accounts receivable 89 ------ 95 ------ Long-Lived Assets: Organization costs, net 247 ------ 247 ------ Total Assets $ 342 ====== REEDS FERRY SUPPLY CO., INC. BALANCE SHEET (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Accounts payable $ 89 Accounts payable to affiliated companies 295 ------ 384 ------ Stockholders' Equity: Common stock, $0 par value - 100 shares authorized and outstanding 4 Capital surplus, paid in 3 Retained deficit (49) ------ (42) ------ Total Liabilities and Stockholders' Equity $ 342 ====== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. REEDS FERRY SUPPLY CO., INC. INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $ - -------- Operating Expenses: Other - Amortization - -------- Total operating expenses - -------- Net Income $ - ======== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/TOBYHANNA ENERGY PROJECT, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 1,973 Receivables, net 1,299 ------- 3,272 ------- Long-Lived Assets: Other, net 633 ------- Contracts receivable 25,881 ------- 26,514 ------- Total Assets $29,786 ======= HEC/TOBYHANNA ENERGY PROJECT, INC. BALANCE SHEET (Unaudited) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock, $1 par value - 100 shares authorized and outstanding $ - Retained earnings 186 ------- Total common stockholder's equity 186 Long-term debt 25,494 ------- Total capitalization 25,680 ------- Current Liabilities: Accounts payable to affiliated companies 3,513 Accrued interest 247 Other 1 ------- Total current liabilities 3,761 ------- Long-Term Liabilities: Other 345 ------- Total long-term liabilities 345 ------- Total Capitalization and Liabilities $29,786 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/TOBYHANNA ENERGY PROJECT, INC. INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Other Income, Net $ 461 ------ Interest Expense, Net 500 ------ Net Loss $ (39) ====== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. YANKEE ENERGY SERVICES COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 194 Receivables, net 4,700 Taxes receivable 292 ------ 5,186 ------ Deferred Debits and Other Assets: Accumulated deferred income taxes 1,399 Goodwill 405 Other 444 ------ 2,248 ------ Total Assets $7,434 ====== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. YANKEE ENERGY SERVICES COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ------------ (Thousands of Dollars) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Notes payable to affiliated companies $ 1,259 Accounts payable to affiliated companies 46 ------- 1,305 ------- Stockholders' Equity: Common stock, $0 par value - 10,000 shares authorized and 200 shares outstanding 1 Capital surplus, paid in 7,881 Accumulated deficit (1,753) ------- Total stockholders' equity 6,129 ------- Total Liabilities and Stockholders' Equity $ 7,434 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. YANKEE ENERGY SERVICES COMPANY INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $ 666 ------- Operating Expenses: Other 787 ------- Total operating expenses 787 ------- Operating Loss (121) ------- Interest Expense, Net 48 ------- Loss Before Income Tax Benefit (169) ------- Income Tax Benefit 67 ------- Net Loss $ (102) ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. E.S. BOULOS COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 597 Receivables, net 9,754 Accounts receivable from affiliated companies 322 Unbilled revenues 1,890 Materials and supplies, at average cost 103 ------- 12,666 ------- Property, Plant and Equipment Other 580 Less: Accumulated provision for depreciation 109 ------- 471 ------- Deferred Debits and Other Assets: Goodwill 6,963 Accumulated deferred income taxes 7 Other 37 ------- 7,007 ------- Total Assets $20,144 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. E.S. BOULOS COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current Liabilities: Advance from parent, non-interest bearing $ 2,948 Accounts payable 3,181 Accounts payable to affiliated companies 1 Accrued taxes 1,290 Other 521 ------- 7,941 ------- Deferred Credits and Other Liabilities: Other 820 ------- Stockholder's Equity: Common stock, $1 par value - 20,000 shares - authorized and 100 shares outstanding Capital surplus, paid in 7,539 Retained earnings 3,844 ------- Total stockholder's equity 11,383 ------- Total Liabilities and Stockholder's Equity $20,144 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. E.S. BOULOS COMPANY INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $13,794 ------- Operating Expenses: Operation 282 Maintenance 12,983 Depreciation 27 ------- Total operating expenses 13,292 ------- Operating Income 502 ------- Other Income, Net 171 ------- Income Before Income Tax Expense 673 ------- Income Tax Expense 235 ------- Net Income $ 438 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NGS MECHANICAL COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 10 ------ Total current assets 10 ------ Total Assets $ 10 ====== NGS MECHANICAL COMPANY BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current Liabilities: Accounts payable to affiliated companies $ 1 ------ Total current liabilities 1 ------ Stockholder's Equity: Common stock, $0 par value - 20,000 shares authorized and 100 shares outstanding - Capital surplus, paid in (10) Retained deficit (1) ------ Total stockholder's equity 9 ------ Total Liabilities and Stockholder's Equity $ 10 ====== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NGS MECHANICAL COMPANY INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $ - --------- Operating Expenses: Other - --------- Total operating expenses - --------- Net Loss $ - ========= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Other Property and Investments: Investments in subsidiary companies, at equity $2,388,368 Investments in transmission companies, at equity 13,804 Other 14 ---------- 2,402,186 ---------- Current Assets: Cash 3,876 Notes receivable from affiliated companies 164,500 Receivables, net 525 Accounts receivable from affiliated companies 2,165 Taxes receivable 3,987 Prepayments 6,141 ---------- 181,194 ---------- Deferred Charges: Other 2,804 ---------- 2,804 ---------- Total Assets $2,586,184 ========== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common shares, $5.00 par value - Authorized 225,000,000 shares; 149,116,706 shares issued and 129,477,227 shares outstanding $ 745,584 Capital surplus, paid in 1,111,440 Deferred contribution plan - employee stock ownership plan (98,802) Retained earnings 680,934 Accumulated other comprehensive loss (3,458) Treasury stock (296,853) ----------- Common shareholders' equity 2,138,845 Long-term debt 88,000 ----------- Total capitalization 2,226,845 ----------- Current Liabilities: Notes payable to bank 60,000 Accounts payable 202 Accounts payable to affiliated companies 1,351 Long-term debt - current portion 286,000 Accrued interest 3,784 Other 121 ----------- 351,458 ----------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 7,766 Other 115 ----------- 7,881 ----------- Total Capitalization and Liabilities $ 2,586,184 =========== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. NORTHEAST UTILITIES (PARENT) STATEMENT OF INCOME (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $ - ----------- Operating Expenses: Operation expense 5,599 Taxes other than income taxes 19 ----------- Total operating expenses 5,618 ----------- Operating Loss (5,618) ------------ Other Income: Equity in earnings of subsidiaries 22,526 Equity in earnings of transmission companies 734 Other, net 2,418 ------------ Other Income, Net 25,678 ------------ Income Before Interest and Income Tax Benefit 20,060 ------------ Interest Expense: Interest on long-term debt 5,008 Other interest 249 ------------ Interest expense, net 5,257 ------------ Income Before Income Tax Benefit 14,803 ------------ Income Tax Benefit 3,839 ------------ Net Income for Common Shares $ 18,642 ============ Basic and Diluted Earnings per Common Share $ 0.14 ============ Basic Common Shares Outstanding (average) 129,504,005 ============ Diluted Common Shares Outstanding (average) 129,754,946 ============ Note: In the opinion of the Company, all adjustments necessary for a fair presentation of the results of operations for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY NEW YORK, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 17,373 Receivables, net 37,320 Special deposits 2,075 Unrealized gains on mark-to-market transactions 7,324 Prepayments and other 12,243 -------- 76,335 -------- Deferred Debits and Other Assets: Accumulated deferred income taxes 86 -------- Property Plant and Equipment: Competitive energy 2,233 Less: Accumulated provision for depreciation 2,061 -------- Total long-lived assets 172 -------- Total Assets $ 76,593 ======== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY NEW YORK, INC. BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current Liabilities: Accounts payable $23,655 Accounts payable to affiliated companies 236 Accrued taxes 4,436 Other 3,097 ------- 31,424 ------- Deferred Credits and Other Liabilities: Other 24 ------- Advance from Northeast Utilities Parent Company 26,699 ------- Stockholder's Equity: Common stock, $1 par value - 10,000 shares authorized and outstanding 10 Capital surplus, paid in 9,987 Retained earnings 8,449 ------- Total stockholder's equity 18,446 ------- Total Liabilities and Stockholder's Equity $76,593 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. SELECT ENERGY NEW YORK, INC. INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $70,283 ------- Operating Expenses: Purchased power, net interchange power and capacity 58,034 Maintenance 2,357 Taxes other than income taxes (252) ------- Total operating expenses 60,139 ------- Operating Income 10,144 ------- Other Loss, Net (5) ------- Interest Expense, Net 198 ------- Income Before Income Tax Expense 9,941 ------- Income Tax Expense 4,187 ------- Net Income $ 5,754 ======= Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/CJTS ENERGY CENTER LLC BALANCE SHEET (Unaudited) March 31, 2002 ---------- (Thousands of Dollars) ASSETS - ------ Current Assets: Cash $ 1 ------ Total current assets 1 ------ Total Assets $ 1 ====== HEC/CJTS ENERGY CENTER LLC BALANCE SHEET (Unaudited) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Stockholder's Equity: Capital surplus, paid in 10 Retained deficit (9) ------ Total stockholder's equity 1 ------ Total Liabilities and Stockholder's Equity $ 1 ====== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. HEC/CJTS ENERGY CENTER LLC INCOME STATEMENT (Unaudited) Three Months Ended March 31, 2002 ------------ (Thousands of Dollars) Operating Revenues $ - -------- Operating Expenses: Other - -------- Total operating expenses - -------- Net Loss $ - ======== Note: In the opinion of the Company, all adjustments necessary for a fair presentation of financial position for the period shown have been made. See accompanying notes to financial statements. Northeast Utilities Select Energy, Inc. Northeast Generation Services Company and Subsidiaries E.S. Boulos Company NGS Mechanical, Inc. Select Energy Contracting, Inc. Reeds Ferry Supply Co., Inc. HEC/Tobyhanna Energy Project, Inc. HEC/CJTS Energy Center, LLC ERI/HEC EFA-Med, LLC Yankee Energy Services Company R.M. Services, Inc. Acumentrics Corporation Select Energy New York, Inc. Notes to Financial Statements (Unaudited) 1. About Northeast Utilities Northeast Utilities (NU) is the parent company of the Northeast Utilities system (NU system). The NU system's regulated utilities furnish franchised retail electric service in Connecticut, New Hampshire and western Massachusetts through three wholly owned subsidiaries: The Connecticut Light and Power Company (CL&P), Public Service Company of New Hampshire (PSNH) and Western Massachusetts Electric Company (WMECO). Another wholly owned subsidiary, North Atlantic Energy Corporation, sells all of its entitlement to the capacity and output of the Seabrook Station nuclear unit (Seabrook) to PSNH under the terms of two life-ofunit, full cost recovery contracts (Seabrook Power Contracts). A fifth wholly owned subsidiary, Holyoke Water Power Company (HWP), also is engaged in the production of electric power. A sixth wholly owned subsidiary, Yankee Energy System, Inc. (Yankee), the parent company of Yankee Gas Services Company, is Connecticut's largest natural gas distribution system. Several wholly owned subsidiaries of NU provide support services for the NU system companies and, in some cases, for other New England utilities. Northeast Utilities Service Company provides centralized accounting, administrative, engineering, financial, information resources, legal, operational, planning, purchasing, and other services to the NU system companies. North Atlantic Energy Service Corporation has operational responsibility for Seabrook. Three other subsidiaries construct, acquire or lease some of the property and facilities used by the NU system companies. NU Enterprises, Inc. (NUEI) is a wholly owned subsidiary of NU and acts as the holding company for certain of NU's competitive energy subsidiaries. Northeast Generation Company (NGC) was formed to acquire and manage generation facilities. Select Energy, Inc. (Select Energy), Northeast Generation Services Company and its subsidiaries (NGS), Select Energy Services, Inc., and its subsidiaries (SESI), and Mode 1 Communications, Inc., engage in a variety of energy-related and telecommunications activities, as applicable, primarily in the competitive energy retail and wholesale commodity, marketing and services fields. E.S. Boulos Company (Boulos) and NGS Mechanical, Inc. (NGS Mechanical) are wholly owned subsidiaries of NGS. Select Energy Contracting, Inc. (Select Energy Contracting), Reeds Ferry Supply Co., Inc. (Reeds Ferry), HEC/Tobyhanna Energy Project, Inc., (HEC/Tobyhanna), and HEC/CJTS Energy Center, LLC (HEC/CJTS) are wholly owned subsidiaries of SESI. Another company, ERI/HEC EFA-Med, LLC (ERI/HEC), is 50 percent owned by SESI. On September 26, 2000, NUEI invested $10 million in Acumentrics Corporation (Acumentrics) in return for a 5 percent ownership share of that company. During the first quarter of 2002, NU recorded an impairment charge of $2.5 million as a result of the decline in the fair value of NUEI's investment in Acumentrics. On November 30, 2001, Select Energy acquired Niagara Mohawk Energy Marketing, Inc. (NMEM) for $31.7 million. This business was subsequently renamed Select Energy New York, Inc. (SENY). Yankee maintains certain wholly owned subsidiaries including Yankee Energy Services Company (YESCO) and owns 10 percent of the voting securities of R.M. Services, Inc. (R.M. Services). Select Energy, NGS, Boulos, NGS Mechanical, Select Energy Contracting, Reeds Ferry, HEC/Tobyhanna, HEC/CJTS, ERI/HEC, YESCO, R.M. Services, Acumentrics, and SENY are "energy-related companies" under Rule 58. 2. About Select Energy Select Energy is an integrated energy business that buys, markets, sells and trades electricity, gas, oil and energy-related products and services to both wholesale and retail customers in the Northeastern United States. Select Energy procures and delivers energy and capacity required to serve its electric, gas and oil customers. Select Energy, collectively with its affiliated competitive energy businesses, provides a wide range of energy products and energy services. Select Energy is a licensed retail electricity supplier and is registered with local electric distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia. Select Energy is a registered gas marketer with local gas distribution companies in the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia. 3. About NGS NGS was formed to provide management, operation and maintenance services to the electric generation market, as well as to large industrial customers, in the Northeast. NGS also provides consulting services which include engineering services, construction management, permitting, and compliance management. 4. About Boulos On January 19, 2001, NGS completed the acquisition of Boulos, an electrical construction company which specializes in high voltage electrical construction and maintenance in Maine, Massachusetts, New Hampshire, and Vermont. Boulos is wholly owned by NGS. 5. About NGS Mechanical In January 2001, NGS formed a new subsidiary, NGS Mechanical, to provide mechanical services initially in certain New England states and New York. NGS Mechanical is wholly owned by NGS. 6. About Select Energy Contracting Select Energy Contracting designs, manages, and directs the construction of, and/or installation of mechanical, water and electrical systems, energy and other resource consuming equipment. 7. About Reeds Ferry Reeds Ferry was acquired by SESI in August 1999 as an equipment wholesaler to purchase equipment on behalf of Select Energy Contracting. 8. About HEC/Tobyhanna Effective September 30, 1999, HEC/Tobyhanna was established as a special purpose entity to manage the assets of an Energy Savings Performance Contract at the Tobyhanna Army Depot. 9. About HEC/CJTS HEC/CJTS was formed on March 2, 2001, as a special purpose entity to facilitate the financing of SESI's construction of the Connecticut Juvenile Training School in Middletown, Connecticut. HEC/CJTS is wholly owned by SESI. 10. About ERI/HEC ERI/HEC was established on September 30, 2000, by SESI and ERI Services, Inc. to enter into an indefinite delivery/indefinite quantity contract with the United States Navy. ERI/HEC is 50 percent owned by SESI. 11. About YESCO YESCO is winding down its energy-related services for its customers. YESCO has disposed of most of its assets and is in the process of liquidating the remainder of its assets. 12. About R.M. Services R.M. Services provides consumer collection services for companies throughout the United States. 13. About Acumentrics On September 26, 2000, NUEI invested $10 million in Acumentrics in return for a 5 percent ownership share of that company. Acumentrics is a privately owned producer of advanced power generation and power protection technologies applicable to homes, telecommunications, commercial businesses, industrial facilities, and the auto industry. During the first quarter of 2002, NU recorded an impairment charge of $2.5 million as a result of the decline in the fair value of NUEI's investment in Acumentrics. 14. About SENY On November 30, 2001, Select Energy acquired NMEM for $31.7 million. This business was renamed SENY. SENY is a wholly owned subsidiary of Select Energy and engages in the brokering, marketing, transportation, storage, and sale of energy commodities in the state of New York. 15. Public Utility Regulation NU is registered with the Securities and Exchange Commission (SEC) as a holding company under the Public Utility Holding Company Act of 1935 (1935 Act), and the NU system is subject to the provisions of the 1935 Act. Arrangements among the NU system companies, outside agencies and other utilities covering interconnections, interchange of electric power and sales of utility property are subject to regulation by the Federal Energy Regulatory Commission (FERC) and/or the SEC. The operating subsidiaries are subject to further regulation for rates, accounting and other matters by the FERC and/or applicable state regulatory commissions. 16. Presentation The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 17. Market Risk and Risk Management Instruments Select Energy provides both firm requirement energy services to its customers and engages in energy trading and marketing activities. Select Energy manages its exposure to risk from existing contractual commitments and provides risk management services to its customers through forward contracts, futures, over-the-counter swap agreements, and options (commodity derivatives). Select Energy has utilized the sensitivity analysis methodology to disclose the quantitative information for its commodity price risks. Sensitivity analysis provides a presentation of the potential loss of future earnings, fair values or cash flows from market risk-sensitive instruments over a selected time period due to one or more hypothetical changes in commodity prices, or other similar price changes. Commodity Price Risk - Trading Activities: As a market participant in the Northeast United States, Select Energy conducts commodity-trading activities in electricity and its related products, natural gas and oil and, therefore, experiences net open positions. Select Energy manages these open positions with strict policies which limit its exposure to market risk and require daily reporting to management of potential financial exposure. Under Emerging Issues Task Force Issue No. 98-10, "Accounting for Energy Trading and Risk Management Activities," these instruments are adjusted to market value, and the unrealized gains and losses are recognized in income in the current period in the statements of income as fuel, purchased and net interchange power and in the balance sheets as prepayments and other. The mark-to-market position at March 31, 2002, had an asset value of $57.5 million. Under sensitivity analysis, the fair value of the portfolio is a function of the underlying commodity, contract prices and market prices represented by each derivative commodity contract. For swaps, forward contracts and options, market value reflects management's best estimates considering over-the-counter quotations, time value and volatility factors of the underlying commitments. Exchange-traded futures and options are recorded at market, based on closing exchange prices. As of March 31, 2002, Select Energy has calculated the market price resulting from a 10 percent unfavorable change in forward market prices. That 10 percent change would result in approximately a $15.5 million decline in the fair value of the Select Energy trading portfolio. In the normal course of business, Select Energy also faces risks that are either nonfinancial or nonquantifiable. Such risks principally include credit risk, which is not reflected in the aforementioned sensitivity analysis. Commodity Price Risk - Nontrading Activities: Select Energy utilizes derivative financial and commodity instruments (derivatives), including futures and forward contracts, to reduce market risk associated with fluctuations in the price of electricity and natural gas sold under firm commitments with certain customers. Select Energy also utilizes derivatives, including price swap agreements, call and put option contracts, and futures and forward contracts, to manage the market risk associated with a portion of its anticipated supply requirements. These derivative instruments have been designated as cash flow hedging instruments. When conducting sensitivity analysis of the change in the fair value of Select Energy's electricity, natural gas and oil nontrading portfolio, which would result from a hypothetical change in the future market price of electricity, natural gas and oil, the fair value of the contracts are determined from models which take into account estimated future market prices of electricity, natural gas and oil, the volatility of the market prices in each period, as well as the time value factors of the underlying commitments. In most instances, market prices and volatility are determined from quoted prices on the futures exchange. Select Energy has determined a hypothetical change in the fair value for its nontrading electricity, natural gas and oil contracts, assuming a 10 percent unfavorable change in forward market prices. As of March 31, 2002, an unfavorable 10 percent change in forward market price would have resulted in a decline in fair value of approximately $35.3 million. The impact of a change in electricity, natural gas and oil prices on Select Energy's nontrading contracts on March 31, 2002, is not necessarily representative of the results that will be realized when these contracts are physically delivered. Select Energy also maintains natural gas service agreements with certain customers to supply gas at fixed prices for terms extending through 2004. Select Energy has hedged its gas supply risk under these agreements through New York Mercantile Exchange (NYMEX) contracts. Under these contracts, the purchase price of a specified quantity of gas is effectively fixed over the term of the gas service agreements, which extend through 2004. As of March 31, 2002, the NYMEX contracts had a notional value of $60.9 million and a mark- to-market asset value of $1.2 million. Derivative Cash Flow Hedge Accounting: During the first quarter of 2002, $13.7 million in income, net of tax, was reclassified from other comprehensive income upon the conclusion of derivative cash flow hedge transactions and recognized in earnings. An additional $0.6 million of income, net of tax, was recognized in earnings for those derivatives that were determined to be ineffective. Currently, the cash flow hedge transactions entered into hedge cash flows through 2004. As a result of these new transactions and market value changes since January 1, 2002, other comprehensive income increased by $19.8 million, net of tax. Accumulated other comprehensive loss at March 31, 2002, was $3.4 million, net of tax (reduction to equity), relating to hedged transactions and it is estimated that $1 million, net of tax, will be reclassified as a charge to earnings within the next twelve months. Cash flows from the hedge contracts are reported in the same category as cash flows from the hedged activities. 18. Special Deposits Special deposits include cash collateral posted in connection with various power purchase and sales agreements. QUARTERLY REPORT OF SELECT ENERGY, INC. SIGNATURE CLAUSE Pursuant to the requirements of the Public Utility Holding Company Act of 1935 and the rules and regulations of the Securities and Exchange Commission issued thereunder, the undersigned company has duly caused this report to be signed on its behalf by the undersigned officer thereunto duly authorized. NORTHEAST UTILITIES ------------------- (Registered Holding Company) By: /s/ John P. Stack ------------------------------ (Signature of Signing Officer) John P. Stack ------------- Vice President-Accounting and Controller ---------------------------------------- Date: May 29, 2002 ------------------- -----END PRIVACY-ENHANCED MESSAGE-----