-----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, O43Yhi/aekMeiloqL4gbWEpv2BItkWXEJqQo/KYK8HlGHMbnVbtLrQ8rdRA1BsKy 8bx1S7RA1BfhBWZzXa79/w== 0000072741-03-000046.txt : 20030404 0000072741-03-000046.hdr.sgml : 20030404 20030404123247 ACCESSION NUMBER: 0000072741-03-000046 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030404 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-1/A SEC ACT: 1935 Act SEC FILE NUMBER: 070-10112 FILM NUMBER: 03639743 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDEN ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-1/A 1 nnecu1a040103a.txt NU NNEC U1A AMEND. NO. 1 040403 FILE NO. 70-10112 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 WITH RESPECT TO THE PAYMENT OF DIVIDENDS AND SHARE REPURCHASES BY NORTHEAST NUCLEAR ENERGY COMPANY NORTHEAST NUCLEAR ENERGY COMPANY 107 Selden Street Berlin, CT 06037 (Names of companies filing this statement and addresses of principal executive offices) NORTHEAST UTILITIES (Name of top registered holding company) Gregory B. Butler Vice President, Secretary and General Counsel Northeast Utilities Service Company 107 Selden Street Berlin, CT 06037 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to: Jeffrey C. Miller, Esq. David R. McHale Assistant General Counsel Vice President and Treasurer Northeast Utilities Service Northeast Utilities Service Company Company 107 Selden Street 107 Selden Street Berlin, CT 06037 Berlin, CT 06037 The Application/Declaration in this file is hereby amended and restated as follows: DESCRIPTION OF PROPOSED TRANSACTIONS Introduction 1. Northeast Utilities ("NU"), a public utility holding company registered under the Public Utility Holding Company Act of 1935, as amended ("the Act"), with offices at 174 Brush Hill Avenue, West Springfield, Massachusetts 01090, and its wholly-owned subsidiary, Northeast Nuclear Energy Company, located at 107 Selden Street, Berlin, CT 06037, ("NNECO" and collectively with NU, the "Applicants"), hereby submit this application/declaration (the "Application") pursuant toSections 6(a), 7, and 12(c) of the Act and Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder with respect to the payment of dividends to, and/or the repurchase of stock from, NU out of capital or unearned surplus by NNECO through December 31, 2004. 2. NNECO was incorporated in 1950, and through a Special Act of the Connecticut Legislature in 1967, has a valid franchise under Connecticut law to sell electricity to utility companies doing an electric business in Connecticut and other states, and also has the right and power to manufacture, generate and transmit electricity, and to erect and maintain facilities on certain public highways and grounds, all subject to such consents and approvals of public authority and others as may be required by law. NNECO's sole activity was to act as agent for the NU System companies and other New England utilities in operating and maintaining the Millstone Nuclear generating facilities located in Waterford, Connecticut ("Millstone"). Up until March 2001, such facilities were owned jointly by The Connecticut Light and Power Company ("CL&P") and Western Massachusetts Electric Company ("WMECO"), two public utility subsidiaries of NU and affiliates of NNECO, and other nonaffiliated utility companies. In March 2001, CL&P and WMECO, along with most of the other joint owners of Millstone, sold their interests in Millstone to a subsidiary of Dominion Resources, Inc. CL&P and WMECO sold their 100% interests in Millstone 1 and 2 and, with other selling owners, 94% of Millstone 3. 3. As a result of such sale, NNECO is now largely inactive and winding up its role in managing Millstone. NU is currently maintaining NNECO as a corporate entity in the event there are any unforeseen liabilities which arise out of NNECO's prior operations at Millstone. However, NU, in an effort to simplify its corporate structure intends to eventually liquidate and dissolve NNECO once NU believes it is no longer necessary to be maintained. NNECO, as of December 31, 2002, had accumulated paid in capital surplus in the amount of approximately $15.4 million and retained earnings in the amount of approximately $1 million, and held approximately $52.3 million in cash, the majority of which is currently invested in the NU System money pool. Current obligations of NNECO are mainly made up of approximately $49.4 million of accrued pension costs reflecting amounts due former employees of NNECO, approximately $9.4 million of other employee related costs, $1.1 million Federal Income Taxes due and approximately $4.1 million in inter-company payables. (NNECO has an accumulated deferred income tax asset of $(27.2) million which will be realized as NNECO makes contributions to the pension plan.). The Applicants now request authorization from the Commission for NNECO to pay dividends to and repurchase its common stock from NU out of paid-in-capital and unearned surplus, to the fullest extent allowed by law, in order to reduce cash to the minimum needed to carry out its remaining foreseeable net obligations of approximately $37 million. 4. The Commission has previously approved the payment of dividends out of capital or unearned surplus by subsidiaries of a registered holding company when the payment would not impair the subsidiary's ability to meet its obligations and the subsidiary's assets would be sufficient to meet any anticipated expenses or liabilities. See, e.g., AEP Generating Co., H.C.A. Rel. No. 26754 (August 12, 1997), Northeast Utilities H.C.A. Rel. No. 27529, (May 16, 2002), Northeast Utilities, H.C.A. Rel. No. 27147 (March 7, 2000), Excel Energy, H.C.A. Rel. No. 27597 (November 7, 2002). 5. State law allows payments of dividends by corporations provided that such payments do not render the company insolvent. Any capital distributed by NNECO pursuant to the authorization sought hereunder would be paid in accordance with state law and thus would not cause NNECO to face adverse financial consequences as a result. Other Matters 1. Except in accordance with the Act, neither NU nor any subsidiary thereof (a) has acquired an ownership interest in an EWG or a FUCO, as defined in Sections 32 and 33 of the Act, or (b) now is or as a consequence of the transactions proposed herein will become a party to, or has or will as a consequence of the transactions proposed herein have a right under, a service, sales, or construction contract with an EWG or a FUCO. None of the proceeds from the transactions proposed herein will be used by NU and its subsidiaries to acquire any securities of, or any interest in, an EWG or a FUCO. 2. NU currently meets all of the conditions of Rule 53(a), except for clause (1). At December 31, 2002, NU's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $448.2 million, or approximately 59% of NU's average "consolidated retained earnings," also as defined in Rule 53(a)(1), for the four quarters ended December 31, 2002 ($713.1 million). With respect to Rule 53(a)(1), however, the Commission has determined that NU's financing of its investment in Northeast Generation Company ("NGC"), NU's only current EWG or FUCO, in an amount not to exceed $481 million or 83% of its "average consolidated retained earnings" would not have either of the adverse effects set forth in Rule 53(c). See Northeast Utilities, Holding Company Act Release No. 27148, dated March 7, 2000 (the "Rule 53(c) Order"). NU continues to assert that its EWG investment in NGC will not adversely affect the System. 3. In addition, NU and its subsidiaries are in compliance and will continue to comply with the other provisions of Rule 53(a) and (b), as demonstrated by the following determinations: (i) NGC maintains books and records, and prepares financial statements, in accordance with Rule 53(a)(2). Furthermore, NU has undertaken to provide the Commission access to such books and records and financial statements, as it may request; (ii) No employees of NU's public utility subsidiaries have rendered services to NGC; (iii) NU has submitted (a) a copy of each Form U-1 and Rule 24 certificate that has been filed with the Commission under Rule 53 and (b) a copy of Item 9 of the Form U5S and Exhibits G and H thereof to each state regulator having jurisdiction over the retail rates of NU's public utility subsidiaries; (iv) Neither NU nor any subsidiary has been the subject of a bankruptcy or similar proceeding unless a plan of reorganization has been confirmed in such proceeding; (v) NU's average CREs for the four most recent quarterly periods have not decreased by 10% or more from the average for the previous four quarterly periods; and (vi) In the previous fiscal year, NU did not report operating losses attributable to its investment in EWGs/FUCOs exceeding 3 percent of NU's consolidated retained earnings. 4. The proposed transactions, considered in conjunction with the effect of the capitalization and earnings of NU's EWGs and FUCOs, would not have a material adverse effect on the financial integrity of the NU system, or an adverse impact on NU's public-utility subsidiaries, their customers, or the ability of State commissions to protect such public- utility customers. The Rule 53(c) Order was predicated, in part, upon an assessment of NU's overall financial condition which took into account, among other factors, NU's consolidated capitalization ratio and its retained earnings, both of which have improved since the date of the order. NU's EWG investment (it has no FUCO investment) has been profitable for all quarterly periods ending June 30, 2000 through December 31, 2002 (NGC was acquired in March 2000). As of December 31, 1999, the most recent period for which financial statement information was evaluated in the Rule 53(c) Order, NU's consolidated capitalization consisted of 35.3% common equity and 64.7% debt (including long and short- term debt, preferred stock, capital leases and guarantees). As of June 30, 2000, the end of the first quarter after the issuance of the Rule 53(c) Order, the consolidated capitalization ratios of NU, with consolidated debt including all short-term debt and non-recourse debt of the EWG, were as follows: As of June 30, 2000 (thousands of dollars) % Common shareholders' equity 2,365,854 36.9 Preferred stock 277,700 4.3 Long-term and short-term debt 3,768,353 58.8 6,411,907 100.0 5. The consolidated capitalization ratios of NU as of December 31, 2002, with consolidated debt including all short-term debt and non-recourse debt of the EWG, were as follows: As of December 31, 2002 (thousands of dollars) % Common shareholders' equity 2,210,521 33.4 Preferred stock 116,200 1.8 Long-term and short-term debt 2,400,050 36.2 Rate Reduction Bonds 1,899,312 28.6 6,626,083 100.0% If Rate Reduction Bonds are not included, the consolidated capitalization ratio of NU as of December 31, 2002 is as follows: As of December 31, 2002 (thousands of dollars) % Common shareholders' equity 2,210,521 46.8 Preferred Stock 116,200 2.4 Long-term and short-term debt 2,400,050 50.8 4,726,771 100.0% 6. As of June 30, 2000, the end of the first quarter after the issuance of the Rule 53(c) Order, NU's consolidated retained earnings were $593.6 million. As of December 31, 2002, NU's consolidated retained earnings were $765,611 million. NGC has made a positive contribution to earnings by contributing $131.9 million in revenues in the 12-month period ending December 31, 2002 and net income of $30.4 million for the same period. Although since the date of the Rule 53(c) Order, the common equity ratio of NU on a consolidated capitalization basis has decreased, it still remains at a financially healthy level, above the 30% benchmark required by the Commission, and if Rate Reduction Bonds are excluded, NU's consolidated common equity ratio has increased. Accordingly, NU's investment in its EWG has not had an adverse impact on NU's financial integrity. ITEM 2 FEES, COMMISSIONS AND EXPENSES The fees, commissions and expenses paid or incurred, or to be paid or incurred, directly or indirectly, in connection with the proposed transactions by the Applicants are not expected to exceed $10,000 and are expected to be comprised primarily of fees for ordinary legal and accounting. None of such fees, commissions or expenses will be paid to any associate company or affiliate of the Applicants except for payments to Northeast Utilities Service Company for financial and other services. ITEM 3 APPLICABLE STATUTORY PROVISIONS Sections 6(a), 7 and 12(c) of the Act and Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder are or may be applicable to the proposed transactions. To the extent any other sections of the Act or Rules thereunder may be applicable to the proposed transaction, the Applicants request appropriate orders thereunder. ITEM 4 REGULATORY APPROVALS No state or Federal regulatory approval, other than the approval of the Commission pursuant to this Application, is required to consummate the transactions described herein. ITEM 5 PROCEDURE The Applicants respectfully request the Commission's approval, pursuant to this Application, of all transactions described herein, whether under the sections of the Act and Rules thereunder enumerated in Item 3 or otherwise. It is further requested that the Commission issue an order authorizing the transactions proposed herein at the earliest practicable date. Additionally, the Applicants (i) request that there not be any recommended decision by a hearing officer or by any responsible officer of the Commission, (ii) consent to the Office of Public Utility Regulation within the Division of Investment Management assisting in the preparation of the Commission's decision, and (iii) waive the 30-day waiting period between the issuance of the Commission's order and on the date on which it is to become effective, since it is desired that the Commission's order when issued, become effective immediately. ITEM 6 EXHIBITS AND FINANCIAL STATEMENTS (a) Exhibits (previously filed) F. Opinion of Counsel H. Proposed Form of Notice (b) Financial Statements 1. Northeast Nuclear Energy Company 1.1 Balance Sheet, per books and pro forma, as of September 30, 2002 (previously filed). 1.2 Statement of Income, per books and pro forma, for 12 months ended September 30, 2002 and capital structure, per books and pro forma, as of September 30, 2002 (previously filed). 1.3 Balance Sheet, per books and pro forma, as of December 31, 2002. 1.4 Statement of Income, per books and pro forma, for 12 months ended December 31, 2002 and capital structure, per books and pro forma, as of December 31, 2002. ITEM 7 INFORMATION AS TO ENVIRONMENTAL EFFECTS (a) The financial transactions described herein do not involve a major Federal action significantly affecting the quality of the human environment. (b) No other federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transaction. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned companies have duly caused this statement to be signed on their behalf by the undersigned thereunto duly authorized. NORTHEAST UTILITIES NORTHEAST NUCLEAR ENERGY COMPANY By: /s/ Gregory B. Butler Name: Gregory B. Butler Title: Vice President, Secretary and General Counsel Northeast Utilities Service Company as Agent for all of the above-named companies Date: April 4, 2003 - ----------------------------------------------------------------- Section 33-687(c) of the General Statutes of Connecticut states: "(c) No distribution may be made if, after giving it effect: (1) The corporation would not be able to pay its debts as they become due in the usual course of business; or (2) the corporation's total assets would be less than the sum of its total liabilities plus, unless the certificate of incorporation permits otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution." In making its decision to authorize a distribution, the board of directors is permitted to base its decision "on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances, or on a fair valuation or other method that is reasonable in the circumstances." Sec. 33-687(d). - ----------------------------------------------------------------- EX-99.3 OTHER FIN ST 3 nnecoexh13040403.txt EXHIBIT 1.3 BALANCE SHEET AS OF 123102 Exhibit 1.3 NORTHEAST NUCLEAR ENERGY COMPANY PRO FORMA BALANCE SHEET - ASSETS AS OF DECEMBER 31, 2002 (UNAUDITED) (THOUSANDS OF DOLLARS)
Pro Forma Giving Per Book Pro Forma Adjustments Effect to Adjustments -------- --------------------- --------------------- ASSETS Current Assets: Cash and cash equivalents $ 54 $ - a,c,d $ 54 Notes receivable from affiliated companies 52,300 (16,216) a 36,084 Notes and accounts receivable, net 727 - 727 -------- -------- -------- 53,081 (16,216) 36,865 -------- -------- -------- Deferred Debits and Other Assets: Other 66 - 66 -------- -------- -------- 66 - 66 -------- -------- -------- Total Assets $ 53,147 $(16,216) $ 36,931 ======== ======== ========
NORTHEAST NUCLEAR ENERGY COMPANY PRO FORMA BALANCE SHEET - LIABILITIES AND CAPITALIZATION AS OF DECEMBER 31, 2002 (UNAUDITED) (THOUSANDS OF DOLLARS)
Pro Forma Giving Per Book Pro Forma Adjustments Effect to Adjustments -------- --------------------- --------------------- LIABILITIES AND CAPITALIZATION Current Liabilities: Accounts payable $ 110 $ - $ 110 Accounts payable to affiliated companies 4,125 - 4,125 Accrued taxes 799 - 799 Accrued pension 49,440 - 49,440 Dividend payable - - b,c - Other 5 - 5 -------- -------- -------- 54,479 - 54,479 -------- -------- -------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (28,353) - (28,353) Accumulated deferred investment tax credits - - - Other 10,805 - 10,805 -------- -------- -------- (17,548) - (17,548) -------- -------- -------- Capitalization: Common Stockholder's Equity: Common stock 15 (15) d - Capital surplus, paid in 15,350 (15,350) d - Retained earnings 851 (851) b - -------- -------- -------- Common Stockholder's Equity 16,216 (16,216) - -------- -------- -------- Total Capitalization 16,216 (16,216) - -------- -------- -------- Total Liabilities and Capitalization $ 53,147 $(16,216) $ 36,931 ======== ======== ========
EX-99.3 VOTING TRUST 4 nnecoexh14040403.txt EXHIBIT 1.4 STATEMENT OF INCOME AS OF 123102 Exhibit 1.4 NORTHEAST NUCLEAR ENERGY COMPANY PRO FORMA STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002 (UNAUDITED) (THOUSANDS OF DOLLARS)
Pro Forma Giving Per Book Pro Forma Adjustments Effect to Adjustments -------- --------------------- --------------------- Operating Revenues $ - $ - $ - -------- -------- --------- Operating Expenses - - - -------- -------- --------- Operating Loss - - - -------- -------- --------- Other Income, Net - - - -------- -------- --------- Loss Before Interest Expense and Income Tax Benefit - - - -------- -------- --------- Interest Expense - - - -------- -------- --------- Loss Before Income Tax Benefit - - - -------- -------- --------- Income Tax Benefit - - - -------- -------- --------- Net Loss $ - $ - $ - ======== ======== =========
NORTHEAST NUCLEAR ENERGY COMPANY PRO FORMA STATEMENT OF RETAINED EARNINGS AS OF DECEMBER 31, 2002 (UNAUDITED) (THOUSANDS OF DOLLARS)
Pro Forma Giving Per Book Pro Forma Adjustments Effect to Adjustments -------- --------------------- --------------------- Balance at beginning of period $ 851 $ (851) $ - Net Loss - - - -------- -------- -------- Balance at end of period $ 851 $ (851) $ - ======== ======== ========
NORTHEAST NUCLEAR ENERGY COMPANY PRO FORMA CAPITAL STRUCTURE AS OF DECEMBER 31, 2002 (UNAUDITED) (THOUSANDS OF DOLLARS)
Pro Forma Giving Per Book Pro Forma Adjustments Effect to Adjustments -------- --------------------- --------------------- Common stockholder's equity $16,216 $(16,216) $ - -------- -------- -------- Total Capitalization $16,216 $(16,216) $ - ======== ======== ========
NORTHEAST NUCLEAR ENERGY COMPANY PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 (THOUSANDS OF DOLLARS)
Debit Credit ----- ------ a) Cash and cash equivalents 16,216 Notes receivable from affiliated companies 16,216 To record transfer of cash to fund dividends and repurchase common stock. b) Retained earnings 851 Dividend payable 851 To record declaration of dividend payable to NU parent. c) Dividend payable 851 Cash and cash equivalents 851 To record dividend payment to NU parent. d) Common Stock 15 Capital surplus, paid in 15,350 Cash and cash equivalents 15,365 To record repurchase of outstanding common stock from NU parent. Note 1> On an NU consolidated basis, the pro forma adjustments herein have no impact, due to the intercompany eliminations of money pool and investment in subsidiary accounts. Note 2> On an NU parent basis, the only impact from the pro forma adjustments herein reduces its investment in subsidiary account and increases its cash and cash equivalents account.
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