-----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, MAaxFgayo8fdNHE8zSvWLPWU1Sd19NMFpvVby3qZizkCxdyb+/EkAFptR4XTDpUe Dx907RFvTBKsXDJLtYl/nw== 0000906602-97-000079.txt : 19970425 0000906602-97-000079.hdr.sgml : 19970425 ACCESSION NUMBER: 0000906602-97-000079 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970424 SROS: NONE 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: 070-08959 FILM NUMBER: 97586703 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 2036655000 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-1/A 1 File No. 70-8959 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 3 to Form U-1 APPLICATION/DECLARATION WITH RESPECT TO THE ORGANIZATION OF A WHOLLY OWNED SUBSIDIARY RELATED TO AN ACCOUNTS RECEIVABLE PURCHASE AND SALE PROGRAM AND RELATED TRANSACTIONS under THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 WESTERN MASSACHUSETTS ELECTRIC COMPANY 174 Brush Hill Avenue West Springfield, Massachusetts 01089 (Name of companies filing this statement and address of principal executive office) NORTHEAST UTILITIES (Name of top registered holding company parent of declarant) Robert P. Wax, Esq. Vice President, Secretary and General Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices, and communications to David R. McHale, Esq. Jeffrey C. Miller, Esq. Assistant Treasurer - Finance Assistant General Counsel Northeast Utilities Service Northeast Utilities Service Company Company P.O. Box 270 P.O. Box 270 Hartford, CT 06141-0270 Hartford, CT 06141-0270 Thomas R. Wildman, Esq. Day, Berry & Howard CityPlace Hartford, CT 06103-3499 The Application/Declaration in this proceeding is hereby amended by the filing of the exhibits and financial statements listed in the "Index to Exhibits and Financial Statements Filed with Amendment No. 3 to Form U-1" which appears on the following page. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned has duly caused this statement to be signed on its behalf by the undersigned thereunto duly authorized. Dated: April 24, 1997 WESTERN MASSACHUSETTS ELECTRIC COMPANY By_________________________/s/Thomas R. Wildman Thomas R. Wildman A Partner Day, Berry & Howard City Place I Hartford CT 06103-3499 Its Attorney INDEX TO EXHIBITS AND FINANCIAL STATEMENTS FILED WITH AMENDMENT NO. 3 to Form U-1 of WESTERN MASSACHUSETTS ELECTRIC COMPANY (a) Exhibits A.1 Articles of incorporation of WRC. A.2 Bylaws of WRC. D.2 Copy of DPU order with respect to WMECO's proposed transactions. F. Opinion of Counsel. G.1 WMECO Financial Data Schedule. (As corrected.) G.2 NU Financial Data Schedule. (As corrected.) (b) Financial Statements (As corrected.) 1. Western Massachusetts Electric Company 1.1 Balance Sheet, per books and pro forma, as of September 30, 1996. 1.2 Income Statement, per books and pro forma, twelve months ended September 30, 1996. 1.3 Statement of Retained Earnings, per books and pro forma, twelve months ended September 30, 1996 and Statement of Capital Structure, per books and pro forma, as of September 30, 1996. 1.4 Explanation of Pro Forma Adjustments. 2. Northeast Utilities and Subsidiaries 2.1 Consolidated Balance Sheet, per books and pro forma, as of September 30, 1996. 2.2 Consolidated Income Statement, per books and pro forma, twelve months ended September 30, 1996. 2.3 Consolidated Statement of Retained Earnings, per books and pro forma, twelve months ended September 30, 1996, and Consolidated Statement of Capital Structure, per books and pro forma, as of September 30, 1996. 2.4 Explanation of Pro Forma Adjustments. EX-99 2 EXHIBIT A.1 ARTICLES OF INCORPORATION OF WMECO RECEIVABLES CORPORATION The undersigned incorporator hereby forms a corporation under the Business Corporation Act of the State of Connecticut. FIRST: The name of the corporation is WMECO RECEIVABLES CORPORATION. SECOND: The address of the Corporation's initial registered office in the State of Connecticut and the name of its initial registered agent at such address is: Theresa H. Allsop 107 Selden Street Berlin, CT 06037-5227 The residence address of the initial registered agent is: 1008 Mott Hill Road South Glastonbury, CT 06073 The initial registered agent hereby accepts appointment: -------------------------------------------------- Theresa H. Allsop THIRD: The nature of the business to be transacted, and the purpose to be promoted or carried out by the Corporation, is to engage exclusively in the following business and activities: 1. To purchase or otherwise acquire accounts, chattel paper, instruments, general intangibles and certain related rights and property (collectively, the "Assets") from its parent or other of its affiliates and to sell such Assets, or an interest therein, to a commercial paper conduit or other financial institution or institutions. 2. To service and collect, or retain a servicer to service and collect, such Assets; and 3. To engage in any lawful act or activity and to exercise any powers permitted to corporations organized under the Business Corporation Act of the State of Connecticut, as the same may be amended from time to time, that are incidental to and necessary, suitable or convenient for the accomplishment of the purposes specified in clauses (1) and (2) above. FOURTH: The amount of capital stock of the Corporation hereby authorized is twenty thousand (20,000) shares, without par value, which stock shall all be common stock (the "Common Stock"). 1. Common Stock (a) Except as otherwise expressly provided by law, all voting rights shall be vested in the holders of the Common Stock, and at each meeting of shareholders of the Corporation, each holder of Common Stock shall be entitled to one vote for each share on each matter to come before the meeting. (b) Dividends may be declared upon and paid to the holders of the Common Stock as the Board of Directors shall determine. (c) In the event of voluntary or involuntary liquidation or dissolution of the Corporation, the holders of the Common Stock shall be entitled to share ratably in all assets of the Corporation. 2. Vote Required in Certain Events Without (i) the affirmative vote of 100% of the members of the Board of Directors of the Corporation (including the Independent Directors described in Article SEVENTH), and (ii) the affirmative vote of the holders of 100% of the number of shares of the Common Stock outstanding, voting (A) in person or by proxy at a special meeting called for the purpose or (B) by unanimous written consent of the holders of the Common Stock acting without such a meeting, as the case may be, the Corporation shall not amend Article THIRD, this Article FOURTH(2), Article SIXTH or Article SEVENTH of these Articles of Incorporation, or Article IV Section 4, Article VIII Section 2 or Article IX of the Bylaws of the Corporation. FIFTH: The minimum amount of stated capital with which the Corporation shall commence business is One Thousand Dollars ($1,000). SIXTH: The Corporation shall not, without the affirmative vote of 100% of the members of the Board of Directors of the Corporation (including the Independent Directors described in Article SEVENTH), (i) make an assignment for the benefit of creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or any trustee for it or for a substantial part of its property, commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereinafter in effect, consent or acquiesce in the filing of any such petition, application, proceeding or appointment of or taking possession by the custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or any substantial part of its property, or admit its inability to pay its debts generally as they become due or authorize any of the foregoing to be done or taken on behalf of the Corporation or (ii) merge or consolidate with any other entity, or dissolve, liquidate or otherwise terminate its existence; provided that if at any time the Independent Directors are not then in office and acting, the Board of Directors shall not vote upon any of the matters set forth in this Article SIXTH unless and until such Independent Directors shall have been duly elected. SEVENTH: The Corporation shall at all times (except in the event of death, incapacity, resignation or removal) have at least two directors (the "Independent Directors"), each of which is not (i) a director, officer, employee or shareholder of Western Massachusetts Electric Company ("WMECO") or any of its affiliates (other than a director of the Corporation or other similar special purpose corporations), (ii) a director, officer or shareholder of a Significant Customer or Significant Supplier, or (iii) a spouse, parent, sibling or child of any individual described in clauses (i) or (ii) hereinabove. The Independent Directors shall be elected in the same manner as other directors. In the event of the death, incapacity, resignation or removal of any Independent Director, the Board of Directors shall promptly appoint a replacement Independent Director. The Independent Directors shall not, in connection with any act or failure to act in connection with any matter described in Article SIXTH, have a duty or other obligation to the Corporation's shareholders (except as may be required specifically by the statutory law of any applicable jurisdiction); instead, the Independent Directors' fiduciary duty or other obligations with respect to such act or failure to act in connection with any matter described in Article SIXTH shall be owed to the Corporation, including the Corporation's creditors. Every shareholder of the Corporation shall be deemed to have consented to the foregoing by virtue of such shareholder's purchase of shares of capital stock of the Corporation, and no further act or deed of any shareholder shall be required to evidence such consent. For purposes of this Article SEVENTH, a "Significant Customer" shall mean a customer from which WMECO and its affiliates collectively received during WMECO's last fiscal year payments in consideration for the products and services of WMECO and its affiliates which exceed 3% of the consolidated gross revenues of WMECO and its subsidiaries during such fiscal year, and a "Significant Supplier" shall mean a supplier to which WMECO and its affiliates collectively made during WMECO's last fiscal year payments in consideration for the supplier's products and services in excess of 3% of the consolidated gross revenues of WMECO and its subsidiaries during such fiscal year. EIGHTH: The personal liability of any Director to the Corporation or its shareholders for monetary damages for breach of duty as a Director is hereby limited to the amount of the compensation received by the Director for serving the Corporation during the year of the violation if such breach did not (a) involve a knowing and culpable violation of law by the Director, (b) enable the Director or an associate, as defined in Section 33-840 of the Connecticut General Statutes, to receive an improper personal economic gain, (c) show a lack of good faith and a conscious disregard for the duty of the Director to the Corporation under circumstances in which the Director was aware that his or her conduct or omission created an unjustifiable risk of serious injury to the Corporation, (d) constitute a sustained and unexcused pattern of inattention that amounted to an abdication of the Director's duty to the Corporation, or (e) create liability under Section 33-757 of the Connecticut General Statutes. Any lawful repeal or modification of this provision by the shareholders and the Board of Directors of the Corporation shall not adversely affect any right or protection of a Director existing at or prior to the time of such repeal or modification. NINTH: The Corporation shall indemnify and advance expenses to an individual made a party to a proceeding because he/she is or was a Director of the Corporation under Section 33-771 of the Connecticut General Statutes, Revision of 1958, as amended. The Corporation shall also indemnify and advance expenses under Sections 33-770 to 33-778, inclusive, of the Connecticut General Statutes, to any officer, employee or agent of the Corporation who is not a director to the same extent as provided to a director. Dated at Hartford, Connecticut, this day of April, 1997. I hereby declare, under the penalties of false statement, that the statements in the foregoing certificate are true. ________________________________ Sandra Bourgasser-Ketterling Incorporator Day, Berry & Howard CityPlace I Hartford, CT 06103-3499 EX-99 3 EXHIBIT A.2 BYLAWS of WMECO RECEIVABLES CORPORATION ARTICLE I. GENERAL These Bylaws are intended to supplement and implement applicable provisions of law and of the Articles of Incorporation of this Corporation with respect to the regulation of the affairs of this Corporation. ARTICLE II. MEETINGS OF SHAREHOLDERS SECTION 1. Place of Meeting: Shareholders' meetings shall be held at the principal offices of this Corporation or at such other place, either within or without the State of Connecticut, as shall be designated in the notice of meeting. Elections of directors need not be by ballot. The books of the Corporation may be kept (subject to any provision contained in any applicable statute) outside the State of Connecticut at such place or places as may be designated from time to time by the Board of Directors or in these Bylaws. SECTION 2. Annual Meeting: The Annual Meeting of Shareholders for the election of Directors and the transaction of such other business as may properly be brought before the meeting shall be held in March, April, May, June or July in each year on the day and at the hour designated by the Board of Directors. SECTION 3. Special Meetings: Special meetings may be called at any time by the President or Board of Directors and shall be called by the President upon written request of the holders of not less than one-tenth of the voting power of all shares entitled to vote at the meeting. SECTION 4. Notice of Meetings: Written notice of the date, time and place of each Annual and Special Meeting (a notice of a Special Meeting shall also contain the general purpose or purposes for such meeting) shall be mailed or delivered, at least ten (10) days but not more than sixty (60) days prior to the date of such meeting, to each shareholder entitled to vote at such meeting at his residence or usual place of business as shown on the records of this Corporation, provided that any one or more of such shareholders, as to himself or themselves, may waive such notice in writing or by attendance without protest at such meeting. SECTION 5. Quorum: The holders of a majority of the shares of the issued and outstanding stock entitled to vote at a meeting, present either in person or by proxy, shall constitute a quorum for the transaction of business at such meeting of the shareholders. Except as otherwise provided by law or these Bylaws, all questions shall be decided by a vote of the holders of a majority of the shares present at any meeting of shareholders at which a quorum is present. If a quorum be not present at such meeting, the shareholders present in person or by proxy may adjourn to such future time as shall be agreed upon by them and notice of such adjournment shall be given to the shareholders not present or represented at the meeting. SECTION 6. Shareholders' Action Without Meeting: Any action which, under any provision of the Connecticut Business Corporation Act, may be taken at a meeting of shareholders, may be taken without such a meeting if consent in writing, setting forth the action so taken or to be taken, is signed severally or collectively by all of the persons who would be entitled to vote upon such action at a meeting, or by their duly authorized attorneys. The Secretary of the Corporation shall file such consent or consents with the minutes of the meetings of the shareholders. ARTICLE III. SHARES SECTION 1. Share Certificates: Share certificates shall be in a form adopted by the Board of Directors and shall be signed by the President or by the Secretary. Such certificates shall bear the seal of the Corporation, the name of the person to whom issued, and the number of such shares which such certificate represents. The consideration for which the shares were issued and the date of issue shall be entered on the Corporation's books. SECTION 2. Transfer of Shares: Shares shall be transferred only on the books of the Corporation by the holder thereof in person or by his attorney. ARTICLE IV. DIRECTORS SECTION 1. Number, Election and Term of Office: A Board of not less than five (5) nor more than seven (7) Directors, including the Independent Directors described in Article SEVENTH of the Articles of Incorporation of the Corporation, shall be elected at the organization meeting of the Corporation and thereafter shall be elected by the shareholders entitled to vote at Annual or Special Meetings of Shareholders. The number of positions on the Board of Directors for purposes of incorporation shall be the number fixed by resolution of the incorporator(s). Thereafter, the number of positions on the Board of Directors shall be the number fixed by resolution of the shareholders or Board of Directors, or, in the absence of such resolution, shall be the number of Directors elected at the preceding Annual Meeting of Shareholders. The number of positions on the Board of Directors for any year, as fixed in accordance with the foregoing (hereinafter referred to as the "number of directorships") may be increased or decreased at any time as provided by law, except that the number of Independent Directors as described in Article SEVENTH of the Articles of Incorporation of the Corporation shall never be decreased to less than two. SECTION 2. Removal of Directors: Any Director may be removed from office at any time, with or without cause, by concurrent vote of the holders of not less than a majority of the issued and outstanding shares entitled to vote, at any meeting of shareholders called for that purpose. SECTION 3. Vacancies: Vacancies created by an increase in the number of directorships shall be filled for the unexpired term by action of shareholders. Vacancies occurring by reason other than by increase in the number of directorships shall be filled for the unexpired term by the concurring vote of a majority of the Directors remaining in office, even though such remaining Directors may be less than a majority of the number of directorships (as fixed for the current year in accordance with Article IV, Section 1). If such remaining Directors fail to fill a vacancy, then such vacancy shall be filled by action of shareholders. The vacancy of a position of Independent Director shall be filled only with another person meeting the requirements of an Independent Director as set forth in Article SEVENTH of the Articles of Incorporation of the Corporation. SECTION 4. Powers: The property, business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all power and do all the things which may be exercised or done by the Corporation subject to provisions of law, the statutes of the State of Connecticut, the Articles of Incorporation, these Bylaws, and any vote of the shareholders. The Board of Directors is expressly authorized to determine the use and disposition of any surplus and net profits of the Corporation, including the determination of the amount of working capital required, to set apart out of any of the funds of the Corporation, whether or not available for dividends, a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. In addition to the foregoing, the Corporation shall conduct its affairs in the following manner: (i) to the extent specifically required by the Receivables Purchase Agreement to be entered into among the Corporation and Monte Rosa Capital Corporation, among others (as the same may be amended, supplemented, amended and restated or otherwise modified in accordance with its terms), the Corporation's funds and other assets will be identifiable, and the Corporation will use commercially reasonable efforts to prevent the deposit into a designated account of any funds other than payments in respect of receivables and related security sold; (ii) the Corporation will maintain separate bank accounts, corporate records and books of account from those of any direct or ultimate parent of the Corporation or any subsidiary or affiliate of any such parent; (iii) the Corporation will pay from its funds and assets all obligations and indebtedness incurred by it; (iv) the Corporation will act solely in its corporate name and through its own authorized officers and agents; and (v) the Corporation will not guaranty the liabilities of its parent or any subsidiary or affiliate of its parent. SECTION 5. Compensation: The Board of Directors shall have the power to fix from time to time the compensation of the Directors and the method of payment thereof. ARTICLE V. MEETINGS OF DIRECTORS SECTION 1. Annual Meetings: A regular meeting of the Board of Directors shall be held without notice immediately after the Annual Meeting of Shareholders, or as soon thereafter as convenient. At such meeting the Board of Directors shall choose and appoint the officers of the Corporation who shall hold their offices, subject to prior removal by the Board of Directors, until the next annual meeting or until their successors are chosen and qualify. SECTION 2. Regular Meetings: All other regular meetings of the Board of Directors may be held without notice at such date, time and place as the Board of Directors may determine and fix by resolution. SECTION 3. Special Meetings: Special meetings of the Board of Directors may be held upon call of the Chairman (if there be one) or the President, or, in the event of the absence or inability of either to act, of a Vice President, or upon call of any one or more Directors. SECTION 4. Notice: Written or oral notice of the date, time and place of all special meetings of the Board of Directors shall be given to each Director personally or mailed to his residence or usual place of business at least 24 hours prior to the date of the meeting, provided that any one or more Directors, as to himself or themselves, may waive such notice in writing or by attendance without protest at such meeting. SECTION 5. Quorum: Directors holding one-third of the number of directorships shall constitute a quorum. Except as otherwise provided by law or these Bylaws, all questions shall be decided by a vote of a majority of the Directors present at any meeting of the Board of Directors at which a quorum is present. SECTION 6. Director Participation in Meetings by Telephone: A director may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment enabling all Directors participating in the meeting to hear one another, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. SECTION 7. Directors' Action Without Meeting: If all the Directors severally or collectively consent in writing to any action taken or to be taken by the Corporation, such action shall be as valid as though it had been authorized at a meeting of the Board of Directors. The Secretary of the Corporation shall file such consent or consents with the minutes of the meetings of the Board of Directors. ARTICLE VI. OFFICERS SECTION 1. Titles, Election and Duties: At its annual meeting the Board of Directors shall elect a President, a Secretary, a Treasurer and, if the Board shall so determine, a Chairman. Each officer shall, subject to the removal provision below, hold office until the next annual election of officers and until his successor shall have been elected and qualified. Any two or more offices may be held by the same person except that the offices of the President and Secretary may not be simultaneously held by the same person. The Board shall also elect at such annual meeting, and may elect at any regular or special meeting, such other officers as may be required for the prompt and orderly transaction of the business of the Corporation, and each officer shall have such authority and shall perform such duties as may be assigned to him from time to time by the Board of Directors. Any officer may be removed, with or without cause, at any time by the Board in its discretion. Vacancies among the officers by reason of death, resignation, removal (with or without cause) or other reason shall be filled by the Board of Directors. Any vacancy occurring in any office may be filled at any regular meeting of the Board or at any special meeting of the Board held for that purpose. In addition to such powers and duties as these Bylaws and the Board of Directors may prescribe, and except as may be otherwise provided by the Board, each officer shall have the powers and perform the duties which by law and general usage appertain to his particular office. SECTION 2. Chairman: The Chairman, if such office shall be filled by the Directors, shall, when present, preside at all meetings of said Board and of the shareholders. He shall have such other authority and shall perform such additional duties as may be assigned to him from time to time by the Board of Directors. SECTION 3. President: The President shall be the chief executive officer of the Corporation and shall be responsible for the general supervision, direction and control of the business and affairs of the Corporation. If the Chairman shall be absent or unable to perform the duties of his office, or if the office of the Chairman shall not have been filled by the Directors, the President shall preside at meetings of the Board of Directors and of the shareholders. He shall have such other authority and shall perform such additional duties as may be assigned to him from time to time by the Board of Directors. SECTION 4. Secretary: The Secretary shall keep the minutes of all meetings of the shareholders and of the Board of Directors. He shall give notice of all meetings of the shareholders and of said Board. He shall record all votes taken at such meetings. He shall be custodian of all contracts, leases, assignments, deeds and other instruments in writing and documents not properly belonging to the office of the Treasurer, and shall perform such additional duties as may be assigned to him from time to time by the Board of Directors, the Chairman, the President or by law. The Secretary shall have the custody of the Corporate Seal of the Corporation and shall affix the same to all instruments requiring a seal except as otherwise provided in these Bylaws. SECTION 5. Assistant Secretaries: One or more Assistant Secretaries shall perform the duties of the Secretary if the Secretary shall be absent or unable to perform the duties of his office. The Assistant Secretaries shall perform such additional duties as may be assigned to them from time to time by the Board of Directors, the Chairman, the President or the Secretary. . SECTION 6. Treasurer: The Treasurer shall have charge of all receipts and disbursements of the Corporation, and shall be the custodian of the Corporation's funds. He shall have full authority to receive and give receipts for all moneys due and payable to the Corporation from any source whatever, and give full discharge for the same, and to endorse checks, drafts and warrants in its name and on its behalf. He shall sign all checks, notes, drafts and similar instruments, except as otherwise provided for the Board of Directors. The Treasurer shall perform such additional duties as may be assigned to him from time to time by the Board of Directors, the Chairman, the President or by law. SECTION 7. Assistant Treasurer: One or more Assistant Treasurers shall perform the duties of the Treasurer if the Treasurer shall be absent or unable to perform the duties of his office. The Assistant Treasurers shall perform such additional duties as may assigned to them from time to time by the Board of Directors, the Chairman, the President or the Treasurer. ARTICLE VII. SEAL The corporate seal shall consist of a circular disc with the name of the Corporation and the words "Connecticut" and "Seal" thereon. ARTICLE VIII. COMMITTEES SECTION 1. The Board of Directors may designate two or more Directors to constitute an executive committee or other committees, which committees shall have and may exercise all such authority of the Board of Directors as shall be provided in such resolution except as limited by Section 2. At the time of such appointment, the Board of Directors may also appoint, in respect to each member of any such committee, another Director to serve as his alternate at any meeting of such committee which such member is unable to attend. Each alternate shall have, during his attendance at a meeting, of such committee, all the rights and obligations of a regular member thereof. Any vacancy on such committee or among alternate members thereof may be filled by the Board of Directors. SECTION 2. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation with the exception of any authority the delegation of which is prohibited by Section 33-753(f) of the Connecticut Business Corporation Act, the Articles of Incorporation or Bylaws of the Corporation. No Committee shall have the power or authority in reference to amending the Articles of Incorporation, to authorize or take any action described in Article FOURTH (2), Article SEVENTH, or Article EIGHTH, adopting an agreement of merger or consolidation, recommending to the shareholders the sale, lease, or exchange of all or substantially all of the Corporation's property and assets, recommending to the shareholders a dissolution of the Corporation or the revocation of a dissolution, or amending the Bylaws of the Corporation; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 3. A majority of any committee shall have the power to act. Committees shall keep full records of their proceedings and shall report the same to the Board of Directors. ARTICLE IX. AMENDMENTS These Bylaws may be altered, amended, added to, or repealed by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon or by an affirmative vote of Directors holding a majority of the number of directorships, except that these Bylaws or any alteration, amendment or repeal thereof shall not in any manner impair, nor impair the intent of Article IV Section 4, Article VIII Section 2 or Article IX of these Bylaws. Any notice of a meeting of shareholders or of the Board of Directors at which these Bylaws are proposed to be altered, amended, added to, or repealed shall include notice of such proposed action. EX-99 4 EXHIBIT D.2 The Commonwealth of Massachusetts DEPARTMENT OF PUBLIC UTILITIES D.P.U. 97-13 Petition of Western Massachusetts Electric Company for approval by the Department of Public Utilities, pursuant to G.L. c. 164,
17A, with respect to the organization of a wholly-owned subsidiary in conjunction with an accounts receivable purchase and sale program and related transactions. ----------------------------------------------------------------------- APPEARANCES: Stephen Klionsky, Esq. Northeast Utilities Service Company 260 Franklin Street, 21st Floor Boston, Massachusetts 02110-3179 -and- Thomas R. Wildman Day, Berry & Howard CityPlace Hartford, Connecticut 06103-3499 FOR: WESTERN MASSACHUSETTS ELECTRIC COMPANY Petitioner EXHIBIT D.2 D.P.U. 97-13 I. INTRODUCTION On January 9, 1997, Western Massachusetts Electric Company ("WMECo" or "Company") filed with the Department of Public Utilities ("Department"), pursuant to G.L., c. 164,
17A, a request for approval of an investment by the Company in connection with an accounts receivable purchase and sale program. The petition was docketed as D.P.U. 97-13. Pursuant to notice duly issued, the Department conducted a public and evidentiary hearing on the Company's application on March 19, 1997 at the Department's offices in Boston. There were no motions to intervene. In support of its filing, the Company presented the testimony of David R. McHale, Assistant Treasurer-Finance of WMECo. The evidentiary record consists of two Company exhibits and 13 Department exhibits. In addition, the record contains 10 responses from WMECo to Department record requests. II. THE COMPANY'S PROPOSAL A. Introduction WMECo has requested approval to invest initially approximately $60,000 in a wholly-owned special purpose corporation to be known as WMECo Receivables Corporation ("WRC"). WRC has been organized for the sole purpose of purchasing certain of the Company's accounts receivable and related assets (Exhs. WM-1, at 2; WM-2 at 8).{1} The Company states that the $60,000 investment will be used to cover the organization expenses of WRC and costs associated with implementing its accounts receivables sales program herein described (Exh. WM- 2, at 8). WMECo is also seeking authority to make future equity contributions to WRC under the structure of the accounts receivables sales program (Exh. WM-1, at 14; Tr. at 35-36; RR-DPU-10). According to the Company, the formation of WRC was necessary to satisfy the requirements of the Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, No. 162-C (June 1996) ("FAS 125"), as applicable to WMECo's present receivable sales program described below. B. Existing Receivable Sales Program The Company currently has in effect a Receivables Purchase and Sale Agreement ("Existing Agreement") with Monte Rosa Capital Corporation ("Monte Rosa") and Union Bank of Switzerland, New York Branch ("UBS") (Exh. WM-1, at 3). Under the Existing Agreement, WMBCo may sell, from time to time, at its discretion; fractional, undivided ownership interests ("Undivided Interests") in certain billed and unbilled indebtedness of customers and certain related assets to Monte Rosa through its agent UBS (id.). According to the Company, no Department approval was necessary to enter into the Existing Agreement because it does not involve the issue of securities, sale of utility assets, or payment of compensation by WMECo to WRC (Exh. WM-2, at 10; Tr. at 8-9). At the time the Existing Program was being negotiated, the Company contemplated that any transfers of receivables would be accounted for as sales under generally accepted accounting principles (Exhs. WM-1, at 4, DPU-8). In order to receive off-balance sheet treatment under FAS 125, however, the transferred assets must be isolated from WMECo and its creditors, even in the event of bankruptcy or receivership of the Company (Exhs. WM-1, at 4; DPU-6,
9(c), 54-56; RR-DPU-1). Because sales of receivables under the Existing Agreement include significant reserves which revert to WMECo to the extent that they are not needed to cover actual losses, the resulting uncertainty of how these sales would be viewed under FAS 125 requires the Company to account for them as a financing, versus a sale (Exh. WM-2, at 6-7; Tr. at 34). Although WMECo states that transactions under the Existing Agreement would be deemed a financing under FAS 125, the Company determined that the Existing Agreement would still provide WMECo with liquidity and an additional source of funds (Tr. at 32). Because of outstanding questions as to how the accounting profession would interpret FAS 125, attendant delays in setting up an alternative structure, and the desire by the Company to receive the benefits afforded through the sale of its receivables, WMECo determined that it would be appropriate to finalize the Existing Agreement as an interim measure (id. at 32-33).{2} The Company anticipates that the Existing Agreement could expire as early as April 30, 1997 (id. at 9). C. Proposed "Two-Step" Arrangement In order to treat its sale of receivables as an off-balance sheet sale under FAS 125, WMECo intends to replace the Existing Agreement with a "two- step" process (Exh. WM-1, at 5; Tr. at 10). The "two-step" process is designed to remove control of the transferred assets from the Company to WRC, through the use of separate agreements (Exh. WM-1, at 5; Tr. at 11; RR-DPU-9). To implement the "two-step" process, WMECo has entered into two agreements, one with WRC ("Company Agreement"), and a second one with WRC, Monte Rosa, and UBS ("WRC Agreement") (RR-DPU-9, Bulk Attachs. A and B). 1. Company Agreement Under the Company Agreement, the Company shall sell or transfer as equity contributions from time to time virtually all of its rights, title and interests in its receivables and related assets to WRC (Exh. WM-1, at 5; RR- DPU-9, Bulk Attach. A at 2). The receivables to be sold would consist of both billed and unbilled receivables attributed solely to eclectic consumption, versus ancillary charges such as service calls (Tr. at 17-18). The Company's receivables would be transferred to WRC on a daily basis (Exh. WM-2, at 95). The purchase price to be paid by WRC for WMECo's receivables and related assets shall be equal to the outstanding receivables balance multiplied by a Discount Percentage intended to recognize historic losses arising from uncollectible accounts and a borrowing rate based on the London International Bank Overseas Rate ("LIBOR") (RR-DPU-9, Bulk Attach. A at 6; Tr. at 27-28).{3} The Company anticipates that the Discount Percentage will be approximately 98 percent (Tr. at 26). Consequently, WMECo will sell the rights and interests in its account receivables to WRC at approximately 98 percent of face value. While the Company states that its initial investment in WRC will be $60,000, the structure of the Company Agreement makes it possible for WRC to receive additional investments in the form of contributions of receivables varying from time to time (Exh. WM-2, at 8). Because the availability of receivables and related assets from WMECo will vary from time to time with electric consumption, WRC may not have sufficient funds available to purchase the Company's receivables at any particular time (Exh. WM-1, at 5-6). If WRC has insufficient cash to cover the receivables and related assets originated by WMECo, WRC will either make the purchase and owe the balance to the Company, or will accept a capital contribution from WMECo in the form of receivables and related assets (Exh. WM-1, exh. F,4; WM-2, at 8-9). The actual treatment will depend on WRC's need for capital; given the nature of the special-purpose corporation and its limited needs, the Company stated that it does not anticipate making significant capital contributions to WRC (Tr. at 72). Conversely, if historical losses are less in a particular period than had been factored into the Company's calculations, WRC may generate a small profit (Tr. at 60). If WRC develops a substantial cash balance arising from the timing of purchases and sales of receivables, the Company states that WRC will likely dividend the excess cash to WMECo, in what the Company represents may be defined as a return of previous capital contributions from WMECo (Exhs. WM-1, exh. F.4; WM-2, at 9). The Company states that any profits arising from WRC's operations would accrue to WMECo (Tr. at 62). The Company anticipates that any small cash balances would remain in WRC, while larger balances would be paid to WMECo in the form of dividends, as deemed necessary (id.). 2. WRC Agreement Under the WRC Agreement, from time to time WRC will sell Undivided Interests in the receivables purchased from the Company to Monte Rosa, through its agent UBS (Exh. WM-1, at 5; RR-DPU-9, Bulk Attach. B). The purchase price paid by Monte Rosa for these receivables will be based on a formula that takes into account historic loss statistics, as a means to further assure the quality of the receivables being purchased (Tr. at 57-59). Purchases by Monte Rosa will be funded through either its own commercial paper or by drawing on its own banking facilities (Exh. WM-1, at 6). The aggregate purchase price paid by Monte Rosa is not intended to exceed $40,000,000, and the minimum purchase price for an Undivided Interest will be $1,000,000 (RR-DPU-9, Bulk Attach. B, at 15, 24; Tr. at 73). Any Company receivables that remain unsold by WRC will be treated on WMECo's books as investments in securities, in accordance with FAS 125 (Exh. DPU-1; Tr. at 29). The purchase price to be paid by Monte Rosa for the receivables sold by WRC is based on an algorithm (Exh. DPU-13; Tr. at 82). The purchase price will not include the Company's delinquent or defaulted receivables, or any receivables associated with hardship accounts as defined by statute (Tr. at 19- 20). Additionally, the WRC Agreement places a concentration limit on both government accounts and receivables associated with WMECo's largest ten customers (id. at 19-21). The elimination of these receivables from the Company's total receivables produces a Net Receivables Pool, which after being adjusted to provide for a coverage ratio of 102 percent, results in a Utilized Amount (id. at 22). Based on an algorithm, the Utilized Amount is, in turn, reduced by a Loss Reserve Factor ("LRF") of 10.68 percent intended to provide for greater- than-anticipate delinquencies (Exh. DPU-13; Tr. at 82-84). The Utilized Amount is further reduced by a Dilution Reserve of 1.92 percent intended to cover billing disputes, as well as a 2.38 percent Yield Reserve and 0.29 percent Servicing Fee Reserve covering the costs associated with the program, thus producing a total reserve percentage ("TRP") of 15.27 percent (Exh. DPU-13; Tr. at 84-85). The TRP is then multiplied by 84.73 percent (1.00-.1527) of the sum of the Net Receivables Pool and Yield Reserve, then divided by one minus the LRF, to develop the receivables that will be sold by WRC (Exh. DPU-13; Tr. at 86). WMECo states that the intent of the formula is to ensure that Monte Rosa has acquired the highest quality receivables possible from WRC (Tr. at 86-87). The WRC Agreement may be terminated by either the Company or UBS if an event of termination occurs (Exh. WM-1, at 7; RR-DPU-9, Bulk Attach. A. at 51). An event of termination is defined in the WRC Agreement, and includes, inter alia, the Company's senior secured credit ratings falling below BB, WMECo's insolvency, and bankruptcy (RR-DPU-9, Bulk Attach. B at 58-60; RR-DPU-5). An event of termination would not automatically require the Agent to terminate the program, unless an insolvency or bankruptcy occurred (RR-DPU-5). Under the terms of the WRC Agreement, UBS is entitled to appoint a servicer on behalf of Monte Rosa and WRC to administer and collect receivables (Exh. WM-1, at 7). While the WRC Agreement designates WMECo as the servicer, UBS may appoint another servicer if a servicer default or event of termination occurs (id.; RR-DPU-9, Bulk Attach. A at 51; Tr. at 36-37). A servicer default is defined as occurring if UBS determines that an event has occurred which materially and adversely affects (1) the Company's ability to service its receivables or (2) the credit quality, collectability or enforceability of those receivables (RR-DPU-9, Bulk Attach. B at 18; RR-DPU-5). If UBS appoints a new servicer, the Company stated that the new servicer would be obligated to abide by all applicable laws, rules, and regulations, and to act in accordance with WMECo's credit and collection policies (RR-DPU-4). WMECo stated that, notwithstanding these provisions, if a new servicer failed to perform in a manner acceptable to the Company, WMECo would in all likelihood act to terminate the WRC Agreement (id.; Tr. at 40). D. Company Arguments In Support of its Proposal According to WMECo, Department approval of the proposed transactions will permit the Company to accelerate its receipt of cash collections from accounts receivable and thereby meet its short-term cash needs (Exh. WM-1, at 8; Tr. at 9). The Company maintained that due to the accounting treatment required for sale of receivables under the Existing Agreement, Monte Rosa may be less willing to continue buying ownership interests in the Company's receivables (Exh. WM-2, at 7). According to WMECo, its receivables program produces significant benefits to customers at a favorable interest rate. In addition to a reduction in short-term debt costs, the Company estimated that the sale of receivables would produce a significantly lower working capital requirement for rate making purposes (RR-DPU-8). Using the cash working capital lead-lag study provided in its previous rate case, D.P.U. 91-290, the Company estimated that at a 100 percent utilization of the program, its net working capital lag would decrease from 8.05 days to a negative 35.76 days (id.).{4} The Company compared these benefits to the overall costs of the program. WMECo estimated that the initial fees associated with the program would be $235,000, and that the cost of the initial sale of its receivables to WRC would be $265,000 (Exh. WM-1, exhs. D, F,4; Tr. at 92).{5} Therefore, the Company concluded that its proposal would produce savings to ratepayers (RR-DPU-8). WMECo compared its proposed accounts receivable sales program with alternative financing methods. The Company explained that while it had access to the Northeast Utilities ("NU") system money pool, which offered the most attractive funding alternative, its availability is limited to when other NU system companies have excess cash available (Exh. DPU-12). Therefore, the Company ruled out the use of the NU system money pool as a source of additional capital. WMECo stated that it is unable to issue commercial paper because both major rating agencies, Standard and Poor's and Moody's, have downgraded the Company's commercial paper to below-investment grade ratings, thus rendering commercial paper an unattractive option (id.). Finally, the Company determined that, based on a comparison between an accounts receivable program and the NU system revolving credit facility, an accounts receivable program was less costly (id.; Tr. at 79-81). Additionally, WMECo stated that when it originally developed the Existing Agreement, it conducted a comparative analysis of proposals sent by five lending institutions, including UBS (Exh. DPU-8). These lending agencies had been initially selected based on their familiarity with the Company, experience in the asset-backed market, and their access to high quality commercial paper (id., Tr. at 46-47). WMECo determined that, based on UBS's experience in the asset-based market, its AAA rating from security rating agencies, the structure and flexibility of its receivables securitization program, and price competition, as well as the Company's desire to diversify its financing sources, UBS provided on balance the greatest overall benefits at the lowest possible costs (Exh. DPU-8; Tr. at 44-50, 64). According to the Company, the sales of receivables under both the Company Agreement and WRC Agreement do not constitute the issuance of securities, sale of utility assets, or payment of compensation by WMECo to WRC (Exh. WM-1, at 11). Therefore, the Company contended that neither agreement falls within the Department's jurisdiction, and that no prior approval is necessary for the sale of receivables and related assets to WRC (id.). In the alternative, WMECo requested that, if the transactions are found to be subject to the Department's jurisdiction, the Company be authorized to engage in such transactions (id. at 11, 14). The Company stated that although WMECo and WRC are separate corporations, it is requesting that the Department treat the Company and WRC on a consolidated basis for rate making purposes, including the determination of the loss allowance for uncollected receivables (id. at 10, 14). According to WMECo, any sale of receivables to a third party in the absence of FAS 125 would be accounted for as either the sale of an asset or a receivable (Tr. at 42). The Company contended that the accounting transactions required under FAS 125 should not be allowed to dictate the rate making treatment accorded to its receivables program (id.). The Company stated that a final legal opinion as to whether its proposed "two-step" receivables sales program constitutes a true sale under the requirements of FAS 125 will not be available until the condition precedent documents are completed (RR-DPU-2 (Supp.)). However, WMECo's outside counsel anticipated that the account receivables sales program would be treated as a sale instead of a financing (id.). WMECo stated that the sales of its receivables would not effect the operations of the Company or the performance of its duty to the public, and contended that the transaction was consistent with the public interest (Tr. at 9). III. STANDARD OF REVIEW Pursuant to G.L. c 164,
17A, a gas or electric company must obtain written Department approval in order to "loan its funds to, guarantee or endorse the indebtedness of, or invest its funds in the stock, bonds, certificates of participation or other securities of, any corporation, association or trust . . . ." The Department has indicated that such proposals must be "consistent with the public interest," that is, a Section 17A proposal will be approved if the public interest is at least as well served by approval of the proposal as by its denial, Bay State Gas Company, D.P.U. 91-165, at 7 (1992); see Boston Edison Company, D.P.U. 850 (1983). The Department has stated that it will interpret the facts of each Section 17A case on its own merits to make a determination that the proposal is consistent with the public interest. D.P.U. 91-165, at 7. The Department will base its determination on the totality of what can be achieved rather than a determination of any single gain that could be derived from the proposed transactions. Id.; see D.P.U. 850, at 7. Thus, the Department's analysis must consider the overall anticipated effect on ratepayers of the potential harms and benefits of the proposal. D.P.U. 91-165, at 8. The effect on ratepayers may include consideration of a number of factors, including, but not limited to: the nature and complexity of the proposal; the relationship of the parties involved in the underlying transaction; the use of funds associated with the proposal; the risks and uncertainties associated with the proposal; the extent of regulatory oversight on the parties involved in the underlying transaction; and the existence of safeguards to ensure the financial stability of the utility. Id. IV. ANALYSIS AND FINDINGS The record in this proceeding demonstrates that the Company's accounts receivable sales program permits WMECo to enhance its access to short-term cash by accelerating its conversion of accounts receivable to cash. The record also demonstrates that the Company has accessed $15 million through the operation of the Existing Agreement. Moreover, the record supports the Company's position that the change in accounting treatment of account receivable sales arising from FAS 125 increases the risk that Monte Rosa would be less willing to continue purchasing WMECo's receivables under the Existing Agreement. The record demonstrates that the Company used appropriate decision making criteria in evaluating the funding alternatives available to WMECo, and structured an accounts receivable sales program intended to meet both the Company's needs and the requirements of generally accepted accounting principles. The increased liquidity, lower short-term debt expenses, and lower working capital requirements afforded under the Company Agreement and WRC Agreements will improve WMECo's financial stability with no change in the rates charged or the Company's provision of service to the public. Under the WRC Agreement, the Company shall continue to administer and collect its accounts receivables. Although the record suggests that the possibility is remote that UBS will designate another entity to act as a servicer,{6} or that a new servicer could impose policies in contravention of 220 C.M.R.
25 et seq., the Department remains concerned that existing consumer protections be continued by whatever entity is acting in the role of servicer. Accordingly, the Company is hereby directed to notify the Department's Consumer Division in the event that WMECo is removed from its present role as servicer. If the Department determines that the replacement servicer is operating in contravention of 220 C.M.R.
25 et seq., the Department will take appropriate measures, which may include directing the Company to terminate the WRC Agreement. With respect to the Company's request that the Department find that sales of receivables to WRC are not subject to our jurisdiction under G.L. c. 165,
17A, the Department notes that the predominant investment in WRC would be account receivables made to allow the Company to take advantage of an accounts receivable program designed to comply with generally accepted accounting principles. As such, the Department finds that the majority of transactions to be made under the Company Agreement would not constitute the type of investment contemplated under G.L. c. 164,
17A. However, under certain conditions, the record demonstrates that if WRC has insufficient cash to cover the receivables and related assets originated by the Company, it is possible that WRC will meet these obligations by accepting the receivables and related assets as additional capital contributions. These capital contributions would constitute investments and therefore fall under the purview of Section 17A. While a strict application of G.L. c. 164,
17A would appear to require the Company to receive prior approval of any investment made in WRC, the Department has considered the purpose of WRC and the use of the funds that would be involved in the potential investments. Because of the timing difference between the Company's daily transfers of its rights and interests in its account receivables to WRC, and Monte Rosa's purchase of those interests, the Department finds that requiring regulatory approvals in each instance prior to a transfer of receivables to WRC would impair the Company's ability to sell its receivables in a timely manner, and frustrate the purpose of the accounts receivables program. Moreover, because the record evidence demonstrates that WRC should require minimal capital contributions, the Department finds that additional capital contributions likely to be required by the Company in WRC should not adversely impact the availability of capital to support WMECo's own operations. Based on the above considerations, the Department finds that the Company, may from time to time, make capital contributions to WRC pursuant to the terms of the Company Agreement without prior Department approval. We emphasize that the Company must use prudent managerial decision making and reasoned, documented and supportable judgment in its disposition of any cash accumulations, i.e., capital contributions, in WRC arising from the transfer of receivables under the Company Agreement. The Department will review any such capital contributions in the Company's next rate proceeding. With respect to the Company's request that WMECo and WRC be treated on a consolidated basis for ratemaking purposes, the Department's policy is to exclude equity investments in subsidiaries from utility capital structures. NYNEX, D.P.U. 94-50, at 440 (1995); Colonial Gas Company, D.P.U. 84-94, at 51 (1984); Boston Edison Company, D.P.U. 18515, at 56-58 (1976). Thus, the initial $60,000 investment proposed for WRC would be excluded from the Company's capital structure for ratemaking purposes. As to those receivables sold to WRC that remain unpurchased by Monte Rosa, the Department notes that in the absence of an accounts receivable, which are not included in capital structure in any event. While it may be reasonable not to consider these receivables as investments in WRC for ratemaking purposes, the record does not provide sufficient evidence on what, if any, other differences in accounting treatment may be required under the Company's proposal. Accordingly, the Department declines to consider the Company and WRC as a consolidated entity for ratemaking purposes at this time. WMECo may propose such treatment in a future proceeding. Any such proposal should include a full description of what adjustments would be required on the Company's books to reflect the consolidation of WMECo and WRC.{7} Based on the foregoing, the Department finds that the Company's proposal will not have any effect on WMECo's provision of service to the public nor will it cause an increase in the rates charged to customers. Accordingly, after weighing the overall potential benefits and risks of the proposed equity investment, the Department finds that the transactions under the Company Agreement and the WRC Agreement, taken as a whole, are consistent with the public interest. V. ORDER Accordingly, after due notice, public hearing, and consideration, it is ORDERED:That the proposal of Western Massachusetts Electric Company to form a wholly-owned special-purpose accounts receivable subsidiary, WMECo Receivables Company, be and hereby is approved; and it is FURTHER ORDERED:That the proposal of Western Massachusetts Electric Company to invest $60,000 in the equity of WMECo Receivables Company be and hereby is approved; and it is FURTHER ORDERED:That the proposal of Western Massachusetts Electric Company to invest, from time to time without prior Department approval, additional equity contributions in WMECo Receivables Company in the form of accounts receivables and related assets as defined in this Order, be and hereby is approved; and it is FURTHER ORDERED:That the proposal of Western Massachusetts Electric Company to enter into an accounts receivable agreement with WMECo Receivables Company be and hereby is approved; and it is FURTHER ORDERED:That the proposal of Western Massachusetts Electric Company to be permitted to take such other actions incident to ro reasonably necessary for the consummation of the foregoing be and hereby is approved. By Order of the Department, /s/ John B. Howe John B. Howe, Chairman /s/ Janet Gail Besser Janet Gail Besser, Commissioner A true copy Attest: /s/ Mary L. Cottrell Mary C. Cottrell Secretary **FOOTNOTES** {1} The related assets pertain to the systems by which the receivables are accounted for, including computer tapes and general ledger entries (Tr. at 99-100). {2} On February 13, 1997, WMECo sold $15 million of its receivables to Monte Rosa under the current agreement (Tr. at 34; 57). {3} Under the formula contained in the WRC Agreement, the Discount Percentage is equal to 100 percent, minus the sum of the discount rate equivalent of an annual interest rate and a historic rolling ratio of writeoffs to collections (RR-DPU-9, Bulk Attach. A at 7). Therefore, the Discount Percentage represents a net factor. {4} The Department notes that, based on the revenue requirement proposed by WMECo in D.P.U. 91-290, the reduction in the cash working capital allowance factor would have produced a decrease in the revenue requirement of slightly over $4 million. {5} The initial fees would be booked against the Company's investment in securities account, while the selling costs associated with its receivables program would be written off against the Company's accounts receivable and other net income accounts (Exh. WM-1, exh. F2; Tr. at 92). {6} Under the WRC Agreement, an event of termination includes, interalia, the Company's senior secured credit ratings falling below BB, WMECo's insolvency, and bankruptcy (RR-DPU-9, Bulk Attach. B at 58- 60; RR-DPU-5). The Agent is required to terminate the accounts receivables sales program in the event of WMECo's insolvency or bankruptcy (RR-DPU-5). {7} Because well-established Department policy requires the exclusion of the $60,000 initial investment in WRC from the Company's capital structure, any proposal by WMECo which seeks to include the $60,000 initial investment should demonstrate persuasively the rationale for departing from longstanding precedent. EX-99 5 EXHIBIT F Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 (860) 665-3532 April 24, 1997 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re:File No. 70-8959 Application/Declaration with Respect to the Organization of a Wholly Owned Subsidiary Related to an Accounts Receivable Purchase and Sale Program Ladies and Gentlemen: I am Assistant General Counsel of Northeast Utilities Service Company ("NUSCO"), the service company subsidiary of Northeast Utilities ("NU"), and I am furnishing this opinion as Exhibit F to the Application/Declaration, as amended, on Form U-1 (the "Declaration") of Western Massachusetts Electric Company ("WMECO"), a subsidiary of NU, to the Commission with respect to the organization by WMECO of a wholly owned subsidiary (WMECO Receivables Corporation or "WRC") related to an accounts receivable purchase and sale program and related transactions, as more fully set forth in the Declaration. In connection with this opinion, I have examined or caused to be examined by counsel associated with or engaged by me, including counsel who are employed by NUSCO, such papers, documents, and records, and have made such examination of law and have satisfied myself as to such other matters as I have deemed relevant or necessary for the purpose of this opinion. I have assumed the authenticity of all documents submitted to me as originals, the genuineness of all signatures, the legal capacity of natural persons, and the conformity to originals of all documents submitted to me as copies. The opinions set forth herein are limited to the laws of the State of Connecticut and the Commonwealth of Massachusetts and the federal laws of the United States. I am a member of the bar of the State of New York. I am not a member of the bar of the State of Connecticut or the bar of the Commonwealth of Massachusetts, and do not hold myself out as an expert in the laws of such jurisdictions, although I have made a study of relevant laws of such jurisdictions. In expressing opinions about matters governed by the laws of the State of Connecticut and the Commonwealth of Massachusetts, I have consulted with counsel who are employed by NUSCO and are members of the bars of such jurisdictions. The opinions set forth in paragraph (b) below are subject to the effect of bankruptcy, insolvency, moratorium and other similar laws affecting creditors rights generally and general principles of equity. Based upon and subject to the foregoing, and if the proposed transactions contemplated by the Declaration are carried out in accordance therewith, I am of the opinion that: (a) all Massachusetts laws applicable to the proposed transactions will have been complied with; (b) (i) WRC will be validly organized and duly existing under the laws of the State of Connecticut, (ii) the common stock of WRC issued to WMECO will be validly issued, fully paid and nonassessable, and WMECO will be entitled to all of the rights and privileges appertaining to the ownership of 100% of the issued and outstanding common stock of WRC, and (iii) insofar as any interests in receivables sold by WRC as part of such transactions are regulated as the issuance of securities, such securities will be valid and binding obligations of WRC in accordance with their terms; (c) WMECO will legally acquire the common stock of WRC to be acquired by it as part of the proposed transactions; and (d) the consummation of the proposed transactions by WMECO and WRC will not violate the legal rights of the holders of any securities issued by WMECO or WRC or any associate company thereof. Very truly yours, /s/ Jeffrey C. Miller EX-99 6
WESTERN MASSACHUSETTS ELE Exhibit G.1 FINANCIAL DATA SCHEDULE (As corrected) AS OF SEPTEMBER 30, 1996 (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT ITEM TO PROPOSED # DESCRIPTION PER BOOK TRANSACTION 1 Total Net Utility Plant 807,855 807,855 2 Other Property and Investments 94,522 94,522 3 Total Current Assets 74,038 73,629 4 Total Deferred Charges 138,176 138,176 5 Balancing amount for Total Assets 0 0 6 Total Assets 1,114,591 1,114,182 7 Common Stock 26,812 26,812 8 Capital Surplus, Paid In 150,395 150,395 9 Retained Earnings 110,329 110,080 10 Total Common Stockholders Equity 287,536 287,287 11 Preferred Stock Subject to Mandatory Rede 21,000 21,000 12 Preferred Stock Not Subject to Mandatory 53,500 53,500 13 Long Term Debt, Net 334,238 334,238 14 Short Term Notes 0 0 15 Notes Payable 8,000 8,000 16 Commercial Paper 0 0 17 Long Term Debt-Current Portion 14,700 14,700 18 Preferred Stock-Current Portion 1,500 1,500 19 Obligations Under Capital Leases 29,108 29,108 20 Obligations Under Capital Leases-Current 2,971 2,971 21 Balancing amount of Capitalization and Li 362,038 361,877 22 Total Capitalization and Liabilities 1,114,591 1,114,182 23 Gross Operating Revenue 422,461 422,461 24 Federal and State Income Taxes Expense 12,897 12,736 25 Other Operating Expenses 365,965 365,965 26 Total Operating Expenses 378,862 378,701 27 Operating Income (Loss) 43,599 43,760 28 Other Income (Loss), Net 2,448 2,240 29 Income Before Interest Charges 46,047 46,000 30 Total Interest Charges 24,692 24,894 31 Net Income 21,355 21,106 32 Preferred Stock Dividends 5,212 5,212 33 Earnings Available For Common Stock 16,143 15,894 34 Common Stock Dividends 20,226 20,226 35 Total Annual Interest Charges on All Bond 24,154 24,154 36 Cash Flow From Operations 0 0 37 Earnings Per Share-Primary 0.00 0.00 38 Earnings Per Share-Fully Diluted 0.00 0.00
EX-99 7
NORTHEAST UTILITIES AND S Exhibit G.2 FINANCIAL DATA SCHEDULE (As corrected) AS OF SEPTEMBER 30, 1996 (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT ITEM TO PROPOSED # DESCRIPTION PER BOOK TRANSACTION 1 Total Net Utility Plant 6,788,878 6,788,878 2 Other Property and Investments 557,288 557,288 3 Total Current Assets 1,019,885 1,019,476 4 Total Deferred Charges 2,028,428 2,028,428 5 Balancing amount for Total Assets 0 0 6 Total Assets 10,394,479 10,394,070 7 Common Stock 680,260 680,260 8 Capital Surplus, Paid In 941,205 941,205 9 Retained Earnings 941,341 941,095 10 Total Common Stockholders Equity 2,381,084 2,380,838 11 Preferred Stock Subject to Mandatory Rede 276,000 276,000 12 Preferred Stock Not Subject to Mandatory 169,700 169,700 13 Long Term Debt, Net 3,688,530 3,688,530 14 Short Term Notes 0 0 15 Notes Payable 15,000 15,000 16 Commercial Paper 0 0 17 Long Term Debt-Current Portion 279,513 279,513 18 Preferred Stock-Current Portion 1,500 1,500 19 Obligations Under Capital Leases 187,095 187,095 20 Obligations Under Capital Leases-Current 19,189 19,189 21 Balancing amount of Capitalization and Li 3,376,868 3,376,704 22 Total Capitalization and Liabilities 10,394,479 10,394,070 23 Gross Operating Revenue 3,836,054 3,836,054 24 Federal and State Income Taxes Expense 156,853 156,689 25 Other Operating Expenses 3,252,035 3,252,035 26 Total Operating Expenses 3,408,888 3,408,724 27 Operating Income (Loss) 427,166 427,330 28 Other Income (Loss), Net 30,549 30,341 29 Income Before Interest Charges 457,715 457,671 30 Total Interest Charges 281,604 281,806 31 Net Income 176,111 175,865 32 Preferred Stock Dividends 33,683 33,683 33 Earnings Available For Common Stock 142,428 142,182 34 Common Stock Dividends 200,027 200,027 35 Total Annual Interest Charges on All Bond 290,820 290,820 36 Cash Flow From Operations 0 0 37 Earnings Per Share-Primary 1.12 1.11 38 Earnings Per Share-Fully Diluted 1.12 1.11
EX-99 8
WESTERN MASSACHUSETTS ELECTRIC COMPANY Exhibit 1.1 CONSOLIDATED BALANCE SHEET Page 1 of 2 AS OF SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT PRO FORMA TO PROPOSED PER BOOK ADJUSTMENTS* TRANSACTION >C? ASSETS UTILITY PLANT, AT ORIGINAL COST: ELECTRIC $1,250,137 $1,250,137 LESS: ACCUMULATED PROVISION FOR DEPRECIATION 489,134 489,134 ----------- ----------- ------------ 761,003 0 761,003 CONSTRUCTION WORK IN PROGRESS 16,721 16,721 NUCLEAR FUEL, NET 30,131 30,131 ----------- ----------- ------------ TOTAL NET UTILITY PLANT 807,855 0 807,855 ----------- ----------- ------------ OTHER PROPERTY AND INVESTMENTS: NUCLEAR DECOMMISSIONING TRUST, AT MARKET 74,962 74,962 INVESTMENTS IN REGIONAL NUCLEAR GENERATING COMPANIES, AT EQUITY 15,315 15,315 OTHER, AT COST 4,245 4,245 ----------- ----------- ------------ 94,522 0 94,522 ----------- ----------- ------------ CURRENT ASSETS: CASH AND SPECIAL DEPOSITS 38 36,234 (a) 35,863 (235)(b) (265)(c) 91 (d) RECEIVABLES, NET 39,553 (37,534)(a) 2,019 RECEIVABLES FROM AFFILIATED COMPANIES 786 786 ACCRUED UTILITY REVENUES 10,023 (10,023)(a) 0 FUEL, MATERIAL AND SUPPLIES, AT AVERAGE COST 4,880 4,880 RECOVERABLE ENERGY COSTS, NET -- CURRENT 8,274 8,274 PREPAYMENTS AND OTHER 10,484 10,484 INVESTMENT IN SECURITIES 11,121 (a) 11,323 202 (c) ----------- ----------- ------------ TOTAL CURRENT ASSETS 74,038 (409) 73,629 ----------- ----------- ------------ DEFERRED CHARGES: UNAMORTIZED DEBT EXPENSE 1,379 1,379 INCOME TAXES, NET 79,608 79,608 NET RECOVERABLE ENERGY COSTS 5,437 5,437 UNRECOVERED CONTRACT OBLIGATION 13,151 13,151 OTHER 38,601 38,601 ----------- ----------- ------------ TOTAL DEFERRED CHARGES 138,176 0 138,176 ----------- ----------- ------------ TOTAL ASSETS $1,114,591 ($409) $1,114,182 =========== =========== ============ * EXPLANATION ON EXHIBIT 1.4 PAGE 1 OF 1 (AS CORRECTED)
WESTERN MASSACHUSETTS ELECTRIC COMPANY Exhibit 1.1 CONSOLIDATED BALANCE SHEET Page 2 of 2 AS OF SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT PRO FORMA TO PROPOSED PER BOOK ADJUSTMENTS* TRANSACTION CAPITALIZATION AND LIABILITIES CAPITALIZATION: COMMON SHARES $26,812 $26,812 CAPITAL SURPLUS, PAID IN 150,395 150,395 RETAINED EARNINGS 110,329 (249) 110,080 ----------- ------------- ----------- TOTAL COMMON STOCKHOLDER'S EQUITY 287,536 (249) 287,287 PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION 53,500 53,500 PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION 21,000 21,000 LONG-TERM DEBT, NET 334,238 334,238 ----------- ------------- ----------- TOTAL CAPITALIZATION 696,274 (249) 696,025 OBLIGATIONS UNDER CAPITAL LEASES 29,108 29,108 NOTES PAYABLE TO AFFILIATED COMPANIES 8,000 8,000 LONG-TERM DEBT AND PREFERRED STOCK - CURRENT PORTION 16,200 16,200 OBLIGATIONS UNDER CAPITAL LEASES - CURRENT PORTION 2,971 2,971 ACCOUNTS PAYABLE 14,762 14,762 ACCOUNTS PAYABLE TO AFFILIATED COMPANIES 9,294 9,294 ACCRUED TAXES 10,119 (161)(e) 9,958 ACCRUED INTEREST 4,268 4,268 OTHER 16,363 16,363 ----------- ------------- ----------- TOTAL CURRENT LIABILITIES 81,977 (161) 81,816 DEFERRED CREDITS: ACCUMULATED DEFERRED INCOME TAXES 248,202 248,202 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 25,200 25,200 DEFERRED CONTRACT OBLIGATION 13,151 13,151 OTHER 20,679 20,679 ----------- ------------- ----------- TOTAL DEFERRED CREDITS 307,232 0 307,232 ----------- ------------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $1,114,591 ($409) $1,114,182 =========== ============= =========== * EXPLANATION ON EXHIBIT 1.4 PAGE 1 OF 1 (AS CORRECTED)
WESTERN MASSACHUSETTS ELECTRIC COMPANY Exhibit 1.2 CONSOLIDATED INCOME STATEMENT Page 1 of 1 FOR 12 MONTHS ENDED SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT PRO FORMA TO PROPOSED PER BOOK ADJUSTMENTS* TRANSACTION OPERATING REVENUE $422,461 $0 $422,461 ---------- ------------- ---------- OPERATING EXPENSES: OPERATION - FUEL PURCHASED AND INTERCHANGE POWER 101,202 101,202 OTHER 146,847 146,847 MAINTENANCE 48,406 48,406 DEPRECIATION 39,219 39,219 AMORTIZATION/DEFERRALS OF REGULATORY ASSETS, NET 10,633 10,633 FEDERAL AND STATE INCOME TAXES 12,897 (161)(e) 12,736 TAXES OTHER THAN INCOME TAXES 19,658 19,658 ---------- ------------- ---------- TOTAL OPERATING EXPENSES 378,862 (161) 378,701 ---------- ------------- ---------- OPERATING INCOME: 43,599 161 43,760 ---------- ------------- ---------- OTHER INCOME: EQUITY IN EARNINGS OF REGIONAL NUCLEAR GENERATING COMPANIES 1,953 1,953 OTHER, NET 131 (235)(b) (77) (63)(c) 91 (d) INCOME TAXES - CREDIT 364 364 ---------- ------------- ---------- OTHER INCOME, NET 2,448 (208) 2,240 ---------- ------------- ---------- INCOME BEFORE INTEREST CHARGES 46,047 (47) 46,000 ---------- ------------- ---------- INTEREST CHARGES: INTEREST ON LONG-TERM DEBT 24,154 24,154 OTHER INTEREST 538 538 LOSS ON SALE OF ACCOUNTS RECEIVABLE 202 (a) 202 ---------- ------------- ---------- TOTAL INTEREST CHARGES 24,692 202 24,894 ---------- ------------- ---------- NET INCOME $21,355 ($249) $21,106 * EXPLANATION ON EXHIBIT 1.4 PAGE 1 OF 1 (AS CORRECTED)
WESTERN MASSACHUSETTS ELECTRIC COMPANY Exhibit 1.3 CONSOLIDATED STATEMENT OF RETAINED EARNINGS Page 1 of 1 FOR 12 MONTHS ENDED SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PER BOOK ADJUSTED TO PRO FORMA REFLECT PER BOOK ADJUSTMENTS* PRO FORMA BALANCE AT BEGINNING OF PERIOD $114,412 $114,412 NET INCOME 21,355 (249) 21,106 CASH DIVIDENDS ON PREFERRED STOCK (5,212) (5,212) CASH DIVIDEND ON COMMON STOCK (20,226) (20,226) ---------- ------------- ---------- BALANCE AT END OF PERIOD $110,329 ($249) $110,080 ========== ============= ==========
WESTERN MASSACHUSETTS ELECTRIC COMPANY CONSOLIDATED STATEMENT OF CAPITAL STRUCTURE AS OF SEPTEMBER 30, 1996 (THOUSANDS OF DOLLARS) PER BOOK ADJUSTED TO PRO FORMA REFLECT % PER BOOK ADJUSTMENTS* PRO FORMA % DEBT: LONG-TERM DEBT, NET 49.0% $348,938 0 $348,938 49.0% PREFERRED STOCK: NOT SUBJECT TO REDEMPTION 53,500 53,500 SUBJECT TO REDEMPTION 22,500 22,500 ---------- ---------- ----------- TOTAL PREFERRED STOCK 10.7% 76,000 0 76,000 10.7% COMMON EQUITY: COMMON SHARES 26,812 26,812 CAPITAL SURPLUS, PAID IN 150,395 150,395 RETAINED EARNINGS 110,329 (249) 110,080 ---------- ---------- ----------- TOTAL COMMON STOCKHOLDER'S EQUITY 40.3% 287,536 (249) 287,287 40.3% ---------- ---------- ----------- TOTAL CAPITAL 100.0% $712,474 (249) $712,225 100.0% ========== ========== =========== * EXPLANATION ON EXHIBIT 1.4 PAGE 1 OF 1 (AS CORRECTED)
PAGE>
WESTERN MASSACHUSETTS ELECTRIC COMPANY Exhibit 1.4 EXPLANATION OF ADJUSTMENTS Page 1 of 1 (THOUSANDS OF DOLLARS) (As corrected) DEBIT CREDIT (a) CASH $36,234 INVESTMENT IN SECURITIES 11,121 LOSS ON SALE OF ACCOUNTS RECEIVABLE 202 RECEIVABLES, NET $37,534 ACCRUED UTILITY REVENUES 10,023 To record a sale of 9/30/96 accounts receivable for proceeds of $36,234.
Fair Value % of Total Fair Allocated Book Assets Value of Asse Value Loss ========== ============== =========== ========= Cash Proceeds from sale less funding costs ($36,234 - $265 (see (c) below)) $35,969 76.06% $36,171 $202 Estimated value of portion retained ((37,534+10,023) - $36,234) 11,323 23.94% 11,386 ========== ============== =========== $47,292 100% $47,557 ========== ============== =========== (b) LOSS ON INVESTMENT IN SECURITIES - OTHER, NET $235 CASH $235 To record upfront fees associated with establishing the program. (c) LOSS ON INVESTMENT IN SECURITIES - OTHER, NET $63 INVESTMENT IN SECURITIES 202 CASH $265 To reflect the costs and market valuation associated with the transaction. The costs are based on LIBOR as of 2/28/97 of [5.38%] plus a spread of .48%. The Loss on Sale of Accounts Receivable and Loss on Investments in Securities, will, over the life of the program reflect the funding and administrative costs of the program plus actual bad debt. Proceeds from in $36,234 Funding Rate * 5.86% / (45/360) ---------- Costs associated $265 ========== (d) CASH $91 SERVICING FEE INCOME $91 To record fees related to servicing the accounts receivable. (e) ACCRUED TAXES $161 FEDERAL AND STATE INCOME TAX EXPENSE $161 To record the reduction in Federal and State income taxes: $409 x 39.23% = 161
NOTE: WMECO anticipates that the availability of accounts receivable will vary from time to time in accordance with electric energy usage. As a result, the funds that WRC has available to make the purchase may not exactly match the purchase requirement. The proposed program includes certain mechanisms to accommodate this mismatch. When the amount of receivable originated by WMECO exceed the amount of cash WRC has available, either WRC will make the purchase and owe the balance of the purchase price to WMECO on a deferred basis, or WMECO will make a capital contribution to WRC in the form of the receivables for which WRC lacks purchase price funds at that time. Conversely, if WRC develops a substantial cash balance WRC will likely dividend the excess cash to WMECO. Such dividends may represent a return of previous capital contributions by WMECO to WRC. As a reminder, the only funds available to WRC will be those resulting from its participation in the program and WMECO's capital contributions to it. WRC will have not source of funds or obligations outside of the receivables purchase and sale program. EX-99 9
NORTHEAST UTILITIES AND SUBSIDIARIES Exhibit 2.1 CONSOLIDATED BALANCE SHEET Page 1 of 2 AS OF SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT PRO FORMA TO PROPOSED PER BOOK ADJUSTMENTS* TRANSACTION ASSETS UTILITY PLANT, AT ORIGINAL COST: ELECTRIC & OTHER $9,767,433 $9,767,433 LESS: ACCUMULATED PROVISION FOR DEPRECIATION 3,874,639 3,874,639 ----------- ----------- ------------ 5,892,794 0 5,892,794 UNAMORTIZED ACQUISITION COSTS - PSNH 514,065 514,065 CONSTRUCTION WORK IN PROGRESS 196,059 196,059 NUCLEAR FUEL, NET 185,960 185,960 ----------- ----------- ------------ TOTAL NET UTILITY PLANT 6,788,878 0 6,788,878 ----------- ----------- ------------ OTHER PROPERTY AND INVESTMENTS: NUCLEAR DECOMMISSIONING TRUST, AT MARKET 358,980 358,980 INVESTMENTS IN REGIONAL NUCLEAR GENERATING COMPANIES, AT EQUITY 84,620 84,620 INVESTMENTS IN TRANSMISSION COMPANIES, AT EQUITY 22,702 22,702 INVESTMENTS IN CHARTER OAK ENERGY 44,703 44,703 OTHER, AT COST 46,283 46,283 ----------- ----------- ------------ 557,288 0 557,288 ----------- ----------- ------------ CURRENT ASSETS: CASH AND SPECIAL DEPOSITS 238,943 36,234 (a) 275,033 (235)(b) (265)(c) 91 (d) RECEIVABLES, NET 419,501 (37,534)(a) 381,967 ACCRUED UTILITY REVENUES 103,456 (10,023)(a) 93,433 FUEL, MATERIAL AND SUPPLIES, AT AVERAGE COST 203,041 203,041 PREPAYMENTS AND OTHER 54,944 54,944 INVESTMENT IN SECURITIES 11,121 (a) 11,323 202 (c) ----------- ----------- ------------ TOTAL CURRENT ASSETS 1,019,885 (409) 1,019,476 ----------- ----------- ------------ DEFERRED CHARGES: REGULATORY ASSET-INCOME TAXES, NET 1,066,579 1,066,579 UNAMORTIZED DEBT EXPENSE 37,197 37,197 RECOVERABLE ENERGY COSTS, NET 324,608 324,608 DEFERRED CONSERVATION AND LOAD- MANAGEMENT COSTS 83,225 83,225 COGENERATION COSTS - CLP 76,679 76,679 DEFERRED COSTS - NUCLEAR PLANTS 180,374 180,374 AMORTIZABLE PROPERTY INVESTMENT 0 0 UNRECOVERED CONTRACT OBLIGATION 69,832 69,832 OTHER 189,934 189,934 ----------- ----------- ------------ TOTAL DEFERRED CHARGES 2,028,428 0 2,028,428 ----------- ----------- ------------ TOTAL ASSETS $10,394,479 ($409) $10,394,070 =========== =========== ============ * EXPLANATION ON EXHIBIT 2.4 PAGE 1 OF 1 (AS CORRECTED)
NORTHEAST UTILITIES AND SUBSIDIARIES Exhibit 2.1 CONSOLIDATED BALANCE SHEET Page 2 of 2 AS OF SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT PRO FORMA TO PROPOSED PER BOOK ADJUSTMENTS* TRANSACTION CAPITALIZATION AND LIABILITIES CAPITALIZATION: COMMON SHARES $680,260 $680,260 CAPITAL SURPLUS, PAID IN 941,205 941,205 DEFERRED BENEFIT PLAN-EMPLOYEE STOCK OWNERSHIP PLAN (181,722) (181,722) RETAINED EARNINGS 941,341 (246) 941,095 ----------- ------------- ----------- TOTAL COMMON STOCKHOLDER'S EQUITY 2,381,084 (246) 2,380,838 PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION 169,700 169,700 PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION 276,000 276,000 LONG-TERM DEBT, NET 3,688,530 3,688,530 ----------- ------------- ----------- TOTAL CAPITALIZATION 6,515,314 (246) 6,515,068 OBLIGATIONS UNDER CAPITAL LEASES 187,095 187,095 MINORITY INTEREST IN CONSOLIDATED SUBS 99,895 99,895 CURRENT LIABILITIES: NOTES PAYABLE 15,000 15,000 LONG-TERM DEBT AND PREFERRED STOCK - CURRENT PORTION 281,013 281,013 OBLIGATIONS UNDER CAPITAL LEASES - CURRENT PORTION 19,189 19,189 ACCOUNTS PAYABLE 289,656 289,656 ACCRUED TAXES 66,750 (164)(e) 66,586 ACCRUED INTEREST 71,853 71,853 ACCRUED PENSION BENEFITS 91,603 91,603 OTHER 128,037 128,037 ----------- ------------- ----------- TOTAL CURRENT LIABILITIES 963,101 (164) 962,937 DEFERRED CREDITS: ACCUMULATED DEFERRED INCOME TAXES 2,083,974 2,083,974 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 170,847 170,847 DEFERRED CONTRACT OBLIGATION 72,332 72,332 OTHER 301,921 301,921 ----------- ------------- ----------- TOTAL DEFERRED CREDITS 2,629,074 0 2,629,074 ----------- ------------- ----------- TOTAL CAPITALIZATION AND LIABILITIES $10,394,479 ($409) $10,394,070 =========== ============= =========== * EXPLANATION ON EXHIBIT 2.4 PAGE 1 OF 1 (AS CORRECTED)
NORTHEAST UTILITIES AND SUBSIDIARIES Exhibit 2.2 CONSOLIDATED INCOME STATEMENT Page 1 of 1 FOR 12 MONTHS ENDED SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PRO FORMA GIVING EFFECT PRO FORMA TO PROPOSED PER BOOK ADJUSTMENTS* TRANSACTION OPERATING REVENUE $3,836,054 $0 $3,836,054 ---------- ------------- ---------- OPERATING EXPENSES: OPERATION - FUEL PURCHASED AND INTERCHANGE POWER 1,047,954 1,047,954 OTHER 1,098,352 1,098,352 MAINTENANCE 374,018 374,018 DEPRECIATION 359,982 359,982 AMORTIZATION/DEFERRALS OF REGULATORY ASSETS, NET 112,985 112,985 FEDERAL AND STATE INCOME TAXES 156,853 (164)(e) 156,689 TAXES OTHER THAN INCOME TAXES 258,744 258,744 ---------- ------------- ---------- TOTAL OPERATING EXPENSES 3,408,888 (164) 3,408,724 ---------- ------------- ---------- OPERATING INCOME: 427,166 164 427,330 ---------- ------------- ---------- OTHER INCOME: DEFERRED NUCLEAR PLANTS RETURN-OTHER FUNDS 10,801 10,801 EQUITY IN EARNINGS OF REGIONAL NUCLEAR GENERATING COMPANIES 13,992 13,992 OTHER, NET 16,505 (235)(b) 16,297 (63)(c) 91 (d) INCOME TAXES - CREDIT (10,749) (10,749) ---------- ------------- ---------- OTHER INCOME, NET 30,549 (208) 30,341 ---------- ------------- ---------- INCOME BEFORE INTEREST CHARGES 457,715 (44) 457,671 ---------- ------------- ---------- INTEREST CHARGES: INTEREST ON LONG-TERM DEBT 290,820 290,820 OTHER INTEREST 8,594 8,594 DEFERRED NUCLEAR PLANTS RETURN - BORROWED FUNDS, NET OF INCOME TAX (17,810) (17,810) LOSS ON SALE OF ACCOUNTS RECEIVABLE 202 (a) ---------- ------------- ---------- TOTAL INTEREST CHARGES 281,604 202 281,806 ---------- ------------- ---------- INCOME BEFORE PREFERRED DIVIDENDS 176,111 (246) 175,865 PREFERRED DIVIDENDS OF SUBSIDIARIES 33,683 33,683 ---------- ------------- ---------- NET INCOME 142,428 (246) 142,182 EARNINGS FOR COMMON SHARE 142,428 (246) 142,182 EARNINGS PER COMMON SHARE 1.12 1.11 COMMON SHARES OUTSTANDING (AVERAGE) 127,631,061 127,631,061 * EXPLANATION ON EXHIBIT 2.4 PAGE 1 OF 1 (AS CORRECTED)
NORTHEAST UTILITIES AND SUBSIDIARIES Exhibit 2.3 STATEMENT OF RETAINED EARNINGS Page 1 of 1 FOR 12 MONTHS ENDED SEPTEMBER 30, 1996 (As corrected) (THOUSANDS OF DOLLARS) PER BOOK ADJUSTED TO PRO FORMA REFLECT PER BOOK ADJUSTMENTS* PRO FORMA BALANCE AT BEGINNING OF PERIOD $999,065 $999,065 NET INCOME 176,111 (246) 175,865 CASH DIVIDENDS ON PREFERRED STOCK (33,683) (33,683) CASH DIVIDEND ON COMMON STOCK (200,027) (200,027) LOSS ON RETIREMENT OF PREFERRED STOCK (125) (125) ---------- ------------- ---------- BALANCE AT END OF PERIOD $941,341 ($246) $941,095 ========== ============= ==========
NORTHEAST UTILITIES AND SUBSIDIARIES CAPITAL STRUCTURE AS OF SEPTEMBER 30, 1996 (THOUSANDS OF DOLLARS) FINANCIAL STATEMENT 7.2 PAGE 2 OF 3 PER BOOK ADJUSTED TO PRO FORMA REFLECT % PER BOOK ADJUSTMENTS* PRO FORMA % DEBT: LONG-TERM DEBT, NET 58.4% $3,968,043 $0 $3,968,043 58.4% PREFERRED STOCK: NOT SUBJECT TO REDEMPTION 169,700 169,700 SUBJECT TO REDEMPTION 277,500 277,500 ---------- ---------- ----------- TOTAL PREFERRED STOCK 6.6% 447,200 0 447,200 6.6% COMMON EQUITY: COMMON SHARES 680,260 680,260 CAPITAL SURPLUS, PAID IN 941,205 941,205 DEFERRED BENEFIT PLAN-EMPLOYEE STOCK OWNERSHIP PLAN (181,722) (181,722) RETAINED EARNINGS 941,341 (246) 941,095 ---------- ---------- ----------- TOTAL COMMON STOCKHOLDER'S EQUITY 35.0% 2,381,084 (246) 2,380,838 35.0% ---------- ---------- ----------- TOTAL CAPITAL 100.0% $6,796,327 ($246) $6,796,081 100.0% ========== ========== =========== * EXPLANATION ON EXHIBIT 2.4 PAGE 1 OF 1 (AS CORRECTED)
NORTHEAST UTILITIES AND SUBSIDIARIES Exhibit 2.4 EXPLANATION OF ADJUSTMENTS Page 1 of 1 (THOUSANDS OF DOLLARS) (As corrected) DEBIT CREDIT (a) CASH $36,234 INVESTMENT IN SECURITIES 11,121 LOSS ON SALE OF ACCOUNTS RECEIVABLE 202 RECEIVABLES, NET $37,534 ACCRUED UTILITY REVENUES 10,023 To record a sale of 9/30/96 WMECO accounts receivable for proceeds of $36,234.
Fair Value of % of Total Fair Allocated Book Assets Value of Ass Value Loss ========== ============= =========== ========= Cash Proceeds from sale less funding costs ($36,234 - $265 (see (c) below)) $35,969 76.06% $36,171 $202 Estimated value of portion retained ((37,534+10,023) - $36,234) 11,323 23.94% 1,363 ========== ============= =========== $47,292 100% $37,534 ========== ============= =========== (b) LOSS ON INVESTMENT IN SECURITIES - OTHER, NET $235 CASH $235 To record upfront fees associated with establishing WMECO Accounts Recivable Purchase and Sale program. (c) LOSS ON INVESTMENT IN SECURITIES - OTHER, NET $63 INVESTMENT IN SECURITIES 202 CASH $265 To reflect the costs and market valuation associated with the transaction. The costs are based on LIBOR as of 2/28/97 of [5.38%] plus a spread of .48%. The Loss on Sale of Accounts Receivable and Loss on Investments in Securities, will, over the life of the program reflect the funding and administrative costs of the program plus actual bad debt. Proceeds from ini $36,234 Funding Rate * 5.86% / (45/360) --------- Costs associated $265 ========= (d) CASH $91 SERVICING FEE INCOME $91 To record fees related to servicing the accounts receivable. (e) ACCRUED TAXES $164 FEDERAL AND STATE INCOME TAX EXPENSE $164 To record the reduction in Federal and State income taxes due to the higher interest and fee expenses: $409 x 40.00% = $164
EX-27 10 WESTERN MASSACHUSETTS ELECTRIC COMPANY FDS
OPUR1 WESTERN MASSACHUSETTS ELECTRIC COMPANY 2 1,000 12-MOS 12-MOS SEP-30-1996 SEP-30-1996 SEP-30-1996 SEP-30-1996 PER-BOOK PRO-FORMA 807,855 807,855 94,522 94,522 74,038 73,629 138,176 138,176 0 0 1,114,591 1,114,182 26,812 26,812 150,395 150,395 110,329 110,080 287,536 287,287 21,000 21,000 53,500 53,500 334,238 334,238 0 0 8,000 8,000 0 0 14,700 14,700 1,500 1,500 29,108 29,108 2,971 2,971 362,038 361,877 1,114,591 1,114,182 422,461 422,461 12,897 12,736 365,965 365,965 378,862 378,701 43,599 43,760 2,448 2,240 46,047 46,000 24,692 24,894 21,355 21,106 5,212 5,212 16,143 15,894 20,226 20,226 24,154 24,154 0 0 0.00 0.00 0.00 0.00
EX-27 11 NORTHEAST UTILITIES AND SUBSIDIARIES FDS
OPUR1 10 NORTHEAST UTILITIES AND SUBSIDIARIES 1,000 12-MOS 12-MOS SEP-30-1996 SEP-30-1996 SEP-30-1996 SEP-30-1996 PER-BOOK PRO-FORMA 6,788,878 6,788,878 557,288 557,288 1,019,885 1,019,476 2,028,428 2,028,428 0 0 10,394,479 10,394,070 680,260 680,260 941,205 941,205 941,341 941,095 2,381,084 2,380,838 276,000 276,000 169,700 169,700 3,688,530 3,688,530 0 0 15,000 15,000 0 0 279,513 279,513 1,500 1,500 187,095 187,095 19,189 19,189 3,376,868 3,376,704 10,394,479 10,394,070 3,836,054 3,836,054 156,853 156,689 3,252,035 3,252,035 3,408,888 3,408,724 427,166 427,330 30,549 30,341 457,715 457,671 281,604 281,806 176,111 175,865 33,683 33,683 142,428 142,182 200,027 200,027 290,820 290,820 0 0 1.12 1.11 1.12 1.11
-----END PRIVACY-ENHANCED MESSAGE-----