-----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, HC6oVOAKZumE0uKxm8izZgr5FWRTu/EH8LxXFRjW4Naec9GRjqlhZowQ36ZPNP9T Jr1VV2ImfQ69HsCTrJO6Ww== 0000009548-00-000011.txt : 20000515 0000009548-00-000011.hdr.sgml : 20000515 ACCESSION NUMBER: 0000009548-00-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANGOR HYDRO ELECTRIC CO CENTRAL INDEX KEY: 0000009548 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 010024370 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10922 FILM NUMBER: 627830 BUSINESS ADDRESS: STREET 1: 33 STATE ST CITY: BANGOR STATE: ME ZIP: 04401 BUSINESS PHONE: 2079455621 MAIL ADDRESS: STREET 1: PO BOX 932 CITY: BANGOR STATE: ME ZIP: 04401 10-Q 1 BANGOR HYDRO 1ST QTR 2000 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended MARCH 31, 2000 Commission File No. 0-505 ---------------- ------ BANGOR HYDRO-ELECTRIC COMPANY ------------------------------------------- (Exact Name of Registrant as specified in its Charter Maine 01-0024370 - ------------------------------- ---------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 33 STATE STREET, BANGOR, MAINE 04401 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 207-945-5621 ------------- NONE ---- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Outstanding Common Stock, $5 Par Value - 7,363,424 Shares March 31, 2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 PART I - FINANCIAL INFORMATION PAGE ---- Cover Page 1 Index 2 Consolidated Statements of Income 3 Management's Discussion and Analysis of Results of Operations and Financial Condition 4 Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 17 Consolidated Statements of Capitalization 19 Consolidated Statements of Cash Flows 20 Consolidated Statements of Common Stock Investment 21 Notes to the Consolidated Financial Statements 22 PART II - OTHER INFORMATION 32 Item 6 - Exhibits and Reports on Form 8-K 33 Signature Page 34 BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME 000's Omitted Except Per Share Amounts (Unudited) Three Months Ended Mar. 31, Mar. 31, 2000 1999 -------- -------- ELECTRIC OPERATING REVENUES $ 50,121 $ 50,222 -------- -------- OPERATING EXPENSES: Fuel for generation and purchased power $ 21,883 $ 18,515 Other operation and maintenance 8,871 9,593 Depreciation and amortization 1,971 2,520 Amortization of Seabrook Nuclear Unit 425 425 Amortization of contract buyouts and restructuring 5,394 5,200 Amortization of deferred asset sale gain (491) - Taxes - Property and payroll 1,387 1,633 State income 365 494 Federal income 2,009 1,956 -------- -------- $ 41,814 $ 40,336 -------- -------- OPERATING INCOME $ 8,307 $ 9,886 -------- -------- OTHER INCOME AND (DEDUCTIONS): Allowance for equity funds used during construction $ (220) $ 143 Other, net of applicable income taxes 270 260 -------- -------- $ 50 $ 403 -------- -------- INCOME BEFORE INTEREST EXPENSE $ 8,357 $ 10,289 -------- -------- INTEREST EXPENSE: Long-term debt $ 3,979 $ 5,753 Other 238 528 Allowance for borrowed funds used during construction 203 (204) -------- -------- $ 4,420 $ 6,077 -------- -------- NET INCOME $ 3,937 $ 4,212 DIVIDENDS ON PREFERRED STOCK 66 279 -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $ 3,871 $ 3,933 ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES 7,363 7,363 ======== ======== EARNINGS PER COMMON SHARE, Basic $ .53 $ .53 Diluted .47 .47 ======== ======== DIVIDENDS DECLARED PER COMMON SHARE $ .20 $ - ======== ======== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management's Discussion and Analysis of the Results of Operations and Financial Condition contained in Bangor Hydro-Electric Company's (the Company) Annual Report on Form 10-K for the year ended December 31, 1999 (1999 Form 10-K) should be read in conjunction with the comments below. EARNINGS Each of the quarters ended March 31, 2000 and 1999 resulted in basic earnings per common share of $.53. First quarter 1999 earnings reflected a one-time benefit of $802,000 ($.07 per common share after taxes) due to the settlement, by the New England Power Pool (NEPOOL), of a contract dispute with Hydro-Quebec (HQ). Absent that benefit, first quarter 2000 earnings were higher than in 1999, primarily due to an increase in energy sales. IMPORTANT CURRENT ACTIVITIES IMPLEMENTATION OF COMPETITION IN ELECTRIC UTILITY INDUSTRY - In connection with the state of Maine's electric industry restructuring law, effective March 1, 2000, consumers of electricity have the right to purchase generation services directly from competitive electricity suppliers. The Company's electric rates were changed effective March 1, as well, to reflect the Company's revenue requirement as a transmission and distribution utility, including the recovery of stranded costs. The electric utility industry restructuring and the Company's associated rate proceedings at the Maine Public Utilities Commission (MPUC) are discussed in more detail in the 1999 Form 10-K. As discussed in the 1999 Form 10-K, the restructuring law also provided for a standard-offer service being available for all customers who do not choose to purchase energy from a competitive supplier starting March 1, 2000. As a result of the bids from competitive energy suppliers to provide energy under the standard- offer service being too high, and as ordered by the MPUC, the Company assumed the responsibility of being the standard-offer service provider starting March 1, 2000 for a one-year period. At the end of this period, it is anticipated that the Company will no longer be the standard-offer service provider, although, this is dependent upon the level of future bids from competitive energy suppliers to serve the standard- offer load and MPUC approvals. The MPUC established the schedule of rates the Company may charge for this service starting March 1, 2000. The Company has entered into arrangements with third parties to purchase the energy to serve the standard-offer customers. The Company is allowed by the MPUC to defer the difference between revenues realized from the standard-offer sales and the costs incurred to provide this service, including carrying costs on the deferred balance. As a result of this reconciliation mechanism, standard-offer related revenues and expenses do not have any impact on the Company's earnings, although they do result in increases in both categories in the Company's consolidated statements of income. The deferred amount will be recovered from/returned to customers in a future rate proceeding. In March 2000, the Company recorded a regulatory liability of $1.2 million related to the excess of revenues over costs incurred in connection with the standard-offer service. This amount is included in Other regulatory liabilities on the Consolidated Balance Sheets at March 31, 2000. BANGOR GAS INVESTMENT - As discussed in the 1999 Form 10-K, the Company announced in late 1999 that it no longer intended to participate in the Bangor Gas Company, LLC (Bangor Gas) joint venture and intended to sell its joint venture interest. On March 7, 2000, the Company and Penobscot Natural Gas Company (Penobscot Gas),the Company's wholly-owned subsidiary which owns a 50% interest in Bangor Gas, entered into a stock purchase agreement to sell the Company's interest in Penobscot Gas to Sempra Energy (Sempra). Sempra currently owns the other 50% interest in Bangor Gas. The parties are currently seeking the approval of the sale by the MPUC and expect a decision in June 2000. If the transaction is timely completed, the Company expects to realize a one-time gain on the sale of Penobscot Gas in the second quarter of 2000. INCREASE IN COMMON STOCK DIVIDEND - On March 15, 2000 the Company's board of directors declared a cash dividend on its common stock of $.20 per share. The quarterly dividend represented a $.05 increase over the $.15 per share dividend declared in each of the prior three quarters. In June of 1999, the board of directors resumed payment of quarterly common stock dividends after having suspended them in March 1997 due to financial difficulties triggered by problems at the Maine Yankee nuclear generating plant. The Company has a 7% ownership interest in Maine Yankee, which was permanently shut down in 1997 and is now in the process of being decommissioned. The Company's board of directors continues to take a cautious approach to the payment of common dividends. The Company and other Maine utilities are still in the process of implementing changes under Maine's comprehensive electric utility restructuring law, and management is cognizant of continuing uncertainties associated with this transition. MAINE YANKEE - TERMINATION OF DECOMMISSIONING OPERATIONS CONTRACT - On May 4, 2000, Maine Yankee notified its decommissioning operations contractor, Stone & Webster Engineering Corporation (Stone & Webster), that it was terminating the decommissioning operations contract after becoming aware of the extent of financial difficulties being experienced by Stone & Webster. On May 8, 2000, Stone & Webster announced that it had signed a letter of intent with Jacobs Engineering Group, Inc. (Jacobs), regarding a proposed transaction in which Jacobs would acquire substantially all of Stone & Webster's assets in exchange for an immediate $50 million secured credit facility and other stated consideration, including cash and stock. Stone & Webster said that the credit facility was intended to enable it to address its current liquidity difficulties and continue to operate its business until the asset sale in consummated. In addition, Stone & Webster announced that, as a condition to the proposed transactions with Jacobs, it intended to seek bankruptcy court approval of the asset sale and credit agreement, and therefore intended to file a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code after it signed a definitive sale agreement with Jacobs, which it expected to occur later in May. Maine Yankee has stated that it remains committed to the successful completion of the decommissioning project and on May 10, 2000, entered into an interim agreement with Stone & Webster for the purpose of avoiding the adverse consequences of an abrupt or inefficient demobilization from the Maine Yankee Plant site and allowing decommissioning work to continue through June 30, 2000. During that period, Maine Yankee will also continue to evaluate all available long-term alternatives for safely and efficiently completing the decommissioning project. However, we cannot predict at this time what affect the financial difficulties of Stone & Webster, the interim agreement, or any subsequent arrangement with Stone & Webster or a new general contractor will have on the cost or schedule of the decommissioning project. REVENUES With the previously discussed implementation of competition in the electric utility industry starting March 1, 2000, and excluding the standard- offer service, the Company is no longer selling electricity to customers. The Company's transmission and distribution and stranded cost charges to customers, though, continue to be based on customers' electricity usage measured in kilowatt-hours (KWH). Consequently, discussion related to electric operating revenues will continue to have a KWH sales component. Electric operating revenue decreased by $101,000 in the first quarter of 2000. The small decrease is due to several factors. Prior to March 1, electric operating revenues for the first two months of 2000 were $1.8 million greater than the first two months of 1999 due principally to a 3.6% increase in KWH sales and the 1.36% rate increase effective June 1, 1999. Increased KWH sales were positively impacted by colder weather in January and February 2000. As a result of certain commercial and industrial customers choosing a competitive electricity supplier starting March 1, 2000 and not falling under standard-offer service, revenues were $1.7 million lower in March 2000 as compared to March 1999. The reduction was also impacted by warmer weather in March 2000 and an overall rate reduction, including the impact of the standard-offer prices, of approximately 2.9% starting March 1, 2000. The Company did recognize $5.6 million in revenues in March 2000 associated with providing standard-offer service, which was reduced by the previously discussed deferral of $1.2 million of standard-offer service revenues in excess of costs. EXPENSES Fuel for generation and purchased power expense increased $3.4 million in the first quarter of 2000 as compared to 1999. The increased expense was a result of several factors. The previously discussed settlement of the dispute with HQ resulted in a $747,000 reduction in expense in the first quarter of 1999. Purchased power expenses increased by about $1 million in the first two months of 2000 due to the May 27, 1999 sale of the Company's generating facilities and subsequent buyback contract with PP&L Global for the power from the plants. Also as a result of the sale to PP&L Global, incremental replacement power costs for other entitlements in Wyman #4, Hydro-Quebec and MEPCO transmission were $549,000 greater for the first quarter of 2000 as compared to 1999 (See the 1999 Form 10-K for a complete discussion of the sale of generation assets and certain transmission rights to PP&L Global in May 1999). Purchased power costs were greater for the first two months of 2000 as a result of the previously discussed increase in KWH sales and by higher power costs. Also NEPOOL and ISO New England (ISO)expenses were greater in 2000 as compared to the 1999 period due to the implementation of NEPOOL new market rules and certain new ISO charges in 2000 that had not been previously incurred. With the implementation of competition on March 1, 2000, the Company was still obligated to purchase power at significantly above market rates under its existing contracts with certain small power producers, although the output from the generation facilities was resold to a third party at market rates pursuant to Chapter 307 of Maine's 1997 restructuring law. For a more complete discussion of the Company's power purchase commitments and the resale of power under Chapter 307, see the 1999 Form 10-K. The Company also purchased power in March 2000 necessary to serve the load associated with standard-offer service customers. Consequently, while restructuring was implemented on March 1, 2000, the customer's purchased power expenses were not materially lower in March 2000 as compared to March 1999. Other operation and maintenance (O&M) expense decreased by $722,000 in the first quarter of 2000 as compared to 1999. Decreasing other O&M expense in the 2000 quarter was a $303,000 reduction in expenses associated with the Company's hydroelectric facilities and interest in the Wyman #4 generating plant as a result of the sale to PP&L Global in May 1999. Also decreasing other O&M expense in the 2000 quarter was a $239,000 decrease in non-labor expenditures related to electric utility industry restructuring activities, costs associated with assessment and testing of systems for year 2000 compliance, and an upgrade to the Company's customer information system. Finally, in the first quarter of 2000, pension income was $218,000 higher than in the first quarter of 1999. Depreciation and amortization expense decreased $549,000 in the first quarter of 2000 as compared to the 1999 quarter due principally to the sale of the Company's generation assets in May 1999, offset to some extent by property additions in 1999 and the first quarter of 2000. The $194,000 increase in amortization of contract buyouts and restructuring in the 2000 quarter was due to changes, effective March 1, 2000 with the implementation of new rates, in the amortization of the deferred Beaver Wood contract buyout costs and the deferred costs associated with the June 1998 restructuring of the Penobscot Energy Recovery Company (PERC) purchased power contract. The Beaver Wood amortization was $141,000 higher in the first quarter of 2000 and will be amortized at an annual rate of $3.9 million starting March 2000. Prior to the implementation of new rates in March 2000, the Company was recovering deferred PERC restructuring costs at an annual rate of $1 million. Effective March 1, 2000, recovery of PERC restructuring costs was adjusted to include the estimated future value of warrants to be exercised. The adjusted annual amortization amounted to $1.6 million. For a complete discussion of the Beaver Wood purchased power contract buyout and the PERC contract restructuring, see the 1999 Form 10-K. Effective with the March 1, 2000 rate change, the Company began amortizing the deferred asset sale gain over a 70 month period. The annual amortization amounts are to be recorded in an uneven manner in order to levelize the Company's revenue requirement over this period. The Company will record $4.9 million of amortization during 2000. The decrease in property and other taxes in the first quarter of 2000 was due principally to reductions in property taxes as a result of the sale of the Company's generation assets. This reduction in property taxes was offset to some extent by increased electric plant additions and higher property tax rates. The decrease in total federal and state income taxes was principally a function of slightly lower earnings in the first quarter of 2000 as compared to the 1999 quarter. See Footnote 2 to the Consolidated Financial Statements for a reconciliation of the Company's effective income tax rate. Allowance for funds used during construction, which includes carrying costs on certain regulatory assets and liabilities, decreased in 2000 relative to 1999 due mainly to $454,000 in carrying costs being recorded on the deferred asset sale gain. Long-term debt interest expense decreased $1.8 million in the first quarter of 2000 as compared to 1999 due primarily to principal repayments on the Company's 12.25% first mortgage bonds (which were fully repaid in August 1999); a $13.1 million principal payment at the end of June 1999 on the Finance Authority of Maine Revenue Notes; monthly principal payments from April 1999 through March 2000 amounting to $4.9 million on the $24.8 million medium term notes; the redemption of the remaining outstanding principal on the $45 million medium term notes in May 1999 amounting to $38.8 million; the full redemption of $15 million in outstanding 10.25% Series First Mortgage Bonds in early July 1999; and the redemption of $4.2 million in outstanding variable rate Pollution Control Revenue Bonds in early September 1999. Other interest expense decreased due principally to an $11 million reduction in weighted average short-term borrowings outstanding in the 2000 quarter as compared to 1999. The Company fully repaid the outstanding balance under its revolving credit line in April 1999, and no new borrowings have subsequently occurred. LIQUIDITY AND CAPITAL RESOURCES The Consolidated Statements of Cash Flows reflect events in the first quarters of 2000 and 1999 as they affect the Company's liquidity. Net increase in cash from operating activities was $19.1 million in 2000 as compared to $16.3 million in the 1999 quarter. Positively impacting cash flows from operating activities in the 2000 quarter as compared to the 1999 quarter was the beneficial impact of the 1.36% rate increase effective June 1, 1999; the deferral of $1.2 million of standard-offer service revenues in the 2000 quarter, a $510,000 reduction in deferred Maine Yankee incremental costs, and a $1.6 million reduction in interest payments in the 2000 quarter principally as a result of the previously discussed long-term debt principal payments. These operating cash flow enhancements were offset to some extent by a $1.75 million payment received in the 1999 quarter related to a terminated purchased power contract (See 1999 Form 10-K). Construction expenditures were $2.4 million lower in the 2000 quarter as compared to 1999. In the first quarter of 1999 the Company incurred approximately $2.3 million in costs associated with the construction of a major transmission line which was completed in 1999. In late January 1999 the $6.2 million in proceeds from the Graham Station property sale were released by the trustee(see 1999 Form 10-K) and were utilized to repay outstanding medium term notes. As previously discussed, the Company reinstated its common dividend in the second quarter of 1999, resulting in the increase in common dividends in the first quarter of 2000. The reduction in preferred dividends paid resulted principally from the final redemption of the remaining outstanding 8.76% mandatory redeemable preferred stock in October 1999. The decrease in payments on long-term debt is due principally to the previously discussed utilization of the $6.2 million in property sale proceeds released by the trustee in January 1999 to repay principal in connection with the $45 million medium term notes. As previously discussed, and principally as a result of generation asset sale proceeds, the Company has continued to maintain full borrowing capacity under its revolving credit facility, with no new borrowings since early 1999. The reduction in short-term borrowings in the 1999 quarter was a result of improved cash flows from operating activities and the $1.75 million payment received related to the terminated purchased power contract. For additional discussion of liquidity and capital resources, see the Company's 1999 Form 10-K. OTHER Management's discussion and analysis of results of operations and financial condition contains items that are "forward-looking" as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Readers should not place undue reliance on forward-looking statements, which reflect management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Factors that might cause such differences include, but are not limited to, future economic conditions, relationships with lenders, earnings retention and dividend payout policies, electric utility restructuring, developments in the legislative, regulatory and competitive environments in which the Company operates, and other circumstances that could affect revenues and costs. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS 000's Omitted (Unaudited) Mar. 31, Dec. 31, ASSETS 2000 1999 -------- -------- INVESTMENT IN UTILITY PLANT: Electric plant in service, at original cost $ 302,416 $ 306,971 Less - Accumulated depreciation and amortization 80,992 84,825 -------- -------- $ 221,424 $ 222,146 Construction work in progress 7,203 5,668 -------- -------- $ 228,627 $ 227,814 Investments in corporate joint ventures: Maine Yankee Atomic Power Company $ 5,171 $ 5,267 Maine Electric Power Company, Inc. 554 530 -------- -------- Total investment in utility plant $ 234,352 $ 233,611 -------- -------- OTHER INVESTMENTS, principally at cost $ 3,625 $ 3,629 -------- -------- FUNDS HELD BY TRUSTEE, at cost $ 23,044 $ 22,699 -------- -------- CURRENT ASSETS: Cash and cash equivalents $ 29,055 $ 15,691 Accounts receivable, net of reserve 18,624 18,270 Unbilled revenue receivable 9,467 14,128 Inventories, at average cost: Material and supplies 2,549 2,793 Fuel oil 67 45 Prepaid expenses 503 928 -------- -------- Total current assets $ 60,265 $ 51,855 -------- -------- REGULATORY ASSETS AND DEFERRED CHARGES: Investment in Seabrook Nuclear Project, net of accumulated amortization of $32,297 in 2000 and $31,872 in 1999 $ 26,545 $ 26,970 Costs to terminate/restructure power contracts, net of accumulated amortization of $106,255 in 2000 and $100,861 in 1999 113,745 118,565 Maine Yankee decommissioning costs 44,961 46,041 Other regulatory assets 36,384 36,925 Other deferred charges 3,393 3,655 -------- -------- Total regulatory assets and deferred charges $ 225,028 $ 232,156 -------- -------- Total assets $ 546,314 $ 543,950 ======== ======== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS 000's Omitted (Unaudited) Mar. 31, Dec. 31, STOCKHOLDERS' INVESTMENT AND LIABILITIES 2000 1999 -------- -------- CAPITALIZATION: Common stock investment $ 135,073 $ 132,722 Preferred stock 4,734 4,734 Long-term debt, net of current portion 181,800 183,300 -------- -------- Total capitalization $ 321,607 $ 320,756 -------- -------- CURRENT LIABILITIES: Notes payable - banks $ - $ - -------- -------- Other current liabilities - Current portion of long-term debt $ 19,670 $ 19,460 Accounts payable 11,426 14,175 Dividends payable 1,539 1,171 Accrued interest 3,922 2,553 Customers' deposits 406 399 Current income taxes payable 7,252 4,126 -------- -------- Total other current liabilities $ 44,215 $ 41,884 -------- -------- Total current liabilities $ 44,215 $ 41,884 -------- -------- REGULATORY AND OTHER LONG-TERM LIABILITIES: Deferred income taxes - Seabrook $ 13,773 $ 13,995 Other accumulated deferred income taxes 54,024 55,827 Maine Yankee decommissioning liability 44,961 46,041 Deferred gain on asset sale 28,809 29,357 Other regulatory liabilities 11,928 9,872 Unamortized investment tax credits 1,557 1,592 Accrued pension and postretirement benefit costs 11,858 11,301 Other long-term liabilities 13,582 13,325 -------- -------- Total regulatory and other long-term liabilities $ 180,492 $ 181,310 -------- -------- Total Stockholders' Investment and Liabilities $ 546,314 $ 543,950 ======== ======== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION 000's Omitted (Unaudited) Mar. 31, Dec. 31, 2000 1999 --------- --------- COMMON STOCK INVESTMENT Common stock, par value $5 per share- $ 36,817 $ 36,817 Authorized -- 10,000,000 shares Outstanding -- 7,363,424 shares in 2000 and 1999 Amounts paid in excess of par value 58,843 58,890 Retained earnings 39,413 37,015 --------- --------- Total common stock investment $ 135,073 $ 132,722 --------- --------- PREFERRED STOCK Non participating, cumulative, par value $100 per share, authorized 600,000 shares, not redeemable or redeemable solely at the option of the issuer- 7%, Noncallable, 25,000 shares, authorized and outstanding $ 2,500 $ 2,500 4.25%, Callable at $100, 4,840 shares, authorized and outstanding 484 484 4%, Series A, Callable at $110, 17,500 shares, authorized and outstanding 1,750 1,750 --------- --------- Total preferred stock $ 4,734 $ 4,734 --------- --------- LONG-TERM DEBT First Mortgage Bonds- 10.25% Series due 2020 $ 30,000 $ 30,000 8.98% Series due 2022 20,000 20,000 7.38% Series due 2002 20,000 20,000 7.30% Series due 2003 15,000 15,000 --------- --------- Total first mortgage bonds $ 85,000 $ 85,000 --------- --------- Other Long-Term Debt- Finance Authority of Maine - Taxable Electric Rate Stabilization Revenue Notes, 7.03% Series 1995A, due 2005 $ 100,600 $ 100,600 Medium Term Notes, Variable interest rate- LIBO Rate plus 1.125%, due 2002 15,870 17,160 --------- --------- $ 116,470 $ 117,760 Less: Current portion of long-term debt 19,670 19,460 --------- --------- Total other long-term debt $ 96,800 $ 98,300 --------- --------- Total long-term debt $ 181,800 $ 183,300 --------- --------- Total Capitalization $ 321,607 $ 320,756 ========= ========= See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS 000's Omitted (Unaudited) Three Months Ended Mar. 31, Mar. 31, 2000 1999 --------- --------- Cash Flows From Operating Activities: Net income $ 3,937 $ 4,212 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 1,971 2,520 Amortization of Seabrook Nuclear Project 425 425 Amortization of contract buyouts and restructuring 5,394 5,200 Amortization of deferred asset sale gain (448) - Other amortizations 640 530 Allowance for equity funds used during construction 220 (143) Deferred income tax provision and amortization of investment tax credits (2,616) 2,333 Changes in assets and liabilities: Costs to restructure purchased power contract (250) (349) Deferred standard-offer service revenues 1,237 - Deferred incremental Maine Yankee costs 894 384 Exercise of PERC warrants-cash paid in lieu of issuing shares (310) - Payment received related to terminated purchased power contract - 1,750 Accounts receivable, net and unbilled revenue 4,307 (2,173) Accounts payable (2,749) (236) Accrued interest 1,369 956 Current and deferred income taxes 3,942 202 Accrued postretirement benefit costs 696 396 Other current assets and liabilities, net 495 983 Other, net (40) (667) --------- --------- Net Increase in Cash From Operating Activities: $ 19,114 $ 16,323 --------- --------- Cash Flows From Investing Activities: Construction expenditures $ (3,492) $ (5,938) Release of Graham Station property sale proceeds by trustee - 6,200 Allowance for borrowed funds used during construction 203 (204) --------- --------- Net (Decrease) Increase in Cash From Investing Activities $ (3,289) $ 58 --------- --------- Cash Flows From Financing Activities: Dividends on common stock $ (1,105) $ - Dividends on preferred stock (66) (296) Payments on long-term debt (1,290) (8,168) Short-term debt, net - (8,000) --------- --------- Net Decrease in Cash From Financing Activities $ (2,461) $ (16,464) --------- --------- Net Increase in Cash and Cash Equivalents $ 13,364 $ (83) Cash and Cash Equivalents at Beginning of Period 15,691 2,946 --------- --------- Cash and Cash Equivalents at End of Period $ 29,055 $ 2,863 ========= ========= Cash Paid During the Three Months For: Interest (Net of Amount Capitalized) $ 3,046 $ 4,674 Income Taxes 1,300 - ========= ========= See notes to consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF COMMON STOCK INVESTMENT 000's Omitted (Unaudited) Amounts Total Paid in Common Common Excess of Retained Stock Stock Par Value Earnings Investment BALANCE DECEMBER 31, 1998 $ 36,817 $ 59,054 $ 22,993 $118,864 Net income - - 4,212 4,212 Cash dividends declared on- Preferred stock - - (264) (264) Other - - (15) (15) ---------- ---------- ----------- ----------- BALANCE MARCH 31, 1999 $ 36,817 $ 59,054 $ 26,926 $122,797 ========== ========== =========== =========== BALANCE DECEMBER 31, 1999 $ 36,817 $ 58,890 $ 37,015 $132,722 Net income - - 3,937 3,937 Cash dividends declared on- Preferred stock - - (66) (66) Common stock - - (1,473) (1,473) Exercise of warrants-cash paid in lieu of issuing shares - (47) - (47) ---------- ---------- ----------- ----------- BALANCE MARCH 31, 2000 $ 36,817 $ 58,843 $ 39,413 $135,073 ========== ========== =========== =========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 -------------- (Unaudited) (1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES: Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of Bangor Hydro-Electric Company (the Company), the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. The year end condensed balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements, footnotes and all other information included in the 1999 Form 10-K. In the opinion of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments, including normal recurring accruals, necessary to present fairly the financial position as of March 31, 2000 and the results of operations and cash flows for the periods ended March 31, 2000 and 1999. The Company's significant accounting policies are described in the Notes to the Consolidated Financial Statements included in its 1999 Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting policies but considers each interim period as an integral part of an annual period. Accordingly, certain expenses are allocated to interim periods based upon estimates of such expenses for the year. (2) INCOME TAXES: The following table reconciles a provision calculated by multiplying income before federal income taxes by the statutory federal income tax rate to the federal income tax provision: Three Months Ended March 31, ----------------------------- 2000 1999 ---- ---- Amount % Amount % ----------------------------- (Dollars in Thousands) Federal income tax provision at statutory rate $2,263 35.0 $2,395 35.0 Less permanent reductions in tax expense resulting from statutory exclusions from taxable income (1) - (47) (.7) ------ ---- ------ ---- Federal income tax provision before effect of temporary differences and investment tax credits $2,262 35.0 $2,348 34.3 Less temporary differences that are flowed through for rate- making and accounting purposes (97) (1.6) (198) (2.8) Less utilization and amortization of investment tax credits (35) (.5) (52) (.8) ------ ---- ------ ---- Federal income tax provision $2,130 32.9 $2,098 30.7 ====== ==== ====== ==== (3) INVESTMENT IN JOINTLY OWNED FACILITIES: Condensed financial information for Maine Yankee Atomic Power Company (Maine Yankee), Maine Electric Power Company, Inc. (MEPCO), Bangor-Pacific Hydro Associates (BPHA), Chester SVC Partnership (Chester) and Bangor Gas Company, LLC (Bangor Gas) is as follows: MAINE YANKEE MEPCO ------------------------------------- (Dollars in Thousands - Unaudited) Operations for Three Months Ended ------------------------------------- Mar. 31, Mar. 31, Mar. 31, Mar. 31, 2000 1999 2000 1999 OPERATIONS: -------- -------- -------- -------- As reported by investee- Operating revenues $ 12,953 $ 15,683 $ 690 $ 744 ======== ======== ======== ======== Earnings applicable to common stock $ 1,190 $ 1,253 $ 273 $ 2,888 ======== ======== ======== ======== Company's reported equity- Equity in net income $ 83 $ 88 $ 39 $ 410 Add(Deduct)-Effect of adjusting Company's estimate to actual (4) 169 6 (390) -------- -------- -------- -------- Amounts reported by Company $ 79 $ 257 $ 45 $ 20 ======== ======== ======== ======== MAINE YANKEE MEPCO --------------------------------------- (Dollars in Thousands - Unaudited) Financial Position at --------------------------------------- Mar. 31, Dec. 31, Mar. 31, Dec. 31, 2000 1999 2000 1999 FINANCIAL POSITION: --------- --------- --------- -------- As reported by investee- Total assets $1,023,168 $1,091,950 $ 5,837 $ 8,067 Less- Preferred stock 15,000 15,000 - - Long-term debt 50,000 54,000 - - Other liabilities and deferred credits 884,199 947,972 1,859 4,339 ---------- --------- -------- -------- Net assets $ 73,969 $ 74,978 $ 3,978 $ 3,728 ========== ========== ======== ======== Company's reported equity- Equity in net assets $ 5,178 $ 5,248 $ 565 $ 529 Add(Deduct)- Effect of adjusting Company's estimate to actual (7) 19 (11) 1 ---------- ---------- -------- -------- Amounts reported by Co. $ 5,171 $ 5,267 $ 554 $ 530 ========== ========== ======== ======== BPHA Chester ------------------- ------------------ (Dollars in Thousands - Unaudited) Operations for Three Months Ended ------------------------------------------ Mar. 31, Mar. 31, Mar. 31, Mar. 31, 2000 1999 2000 1999 --------- --------- --------- --------- OPERATIONS: As reported by investee- Operating revenues $ - $ 2,035 $ 1,083 $ 1,089 ======= ======= ======= ======= Net Income $ - $ 885 $ - $ - ======= ======= ======= ======= Company's reported equity in net income $ - $ 443 $ - $ - ======= ======= ======= ======= Financial Position at Mar. 31, Dec. 31, Mar. 31, Dec. 31, 2000 1999 2000 1999 --------- -------- --------- -------- FINANCIAL POSITION: As reported by investee- Total assets $ - $ - $ 24,897 $25,302 Less- Long-term debt - - 24,359 23,471 Other liabilities - - 538 1,831 ------- ------- -------- ------- Net assets $ - $ - $ - $ - ======= ======= ======== ======= Company's reported equity in net assets $ - $ - $ - $ - ======= ======= ======== ======= On May 4, 2000, Maine Yankee notified its decommissioning operations contractor, Stone & Webster Engineering Corporation (Stone & Webster), that it was terminating the decommissioning operations contract after becoming aware of the extent of financial difficulties being experienced by Stone & Webster. On May 8, 2000, Stone & Webster announced that it had signed a letter of intent with Jacobs Engineering Group, Inc. (Jacobs), regarding a proposed transaction in which Jacobs would acquire substantially all of Stone & Webster's assets in exchange for an immediate $50 million secured credit facility and other stated consideration, including cash and stock. Stone & Webster said that the credit facility was intended to enable it to address its current liquidity difficulties and continue to operate its business until the asset sale in consummated. In addition, Stone & Webster announced that, as a condition to the proposed transactions with Jacobs, it intended to seek bankruptcy court approval of the asset sale and credit agreement, and therefore intended to file a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code after it signed a definitive sale agreement with Jacobs, which it expected to occur later in May. Maine Yankee has stated that it remains committed to the successful completion of the decommissioning project and on May 10, 2000, entered into an interim agreement with Stone & Webster for the purpose of avoiding the adverse consequences of an abrupt or inefficient demobilization from the Maine Yankee Plant site and allowing decommissioning work to continue through June 30, 2000. During that period, Maine Yankee will also continue to evaluate all available long-term alternatives for safely and efficiently completing the decommissioning project. However, we cannot predict at this time what affect the financial difficulties of Stone & Webster, the interim agreement, or any subsequent arrangement with Stone & Webster or a new general contractor will have on the cost or schedule of the decommissioning project. As discussed in the 1999 Form 10-K, the Company sold its wholly- owned subsidiary, Penobscot Hydro Co., Inc., which held a 50% ownership interest in BPHA, in July 1999. At March 31, 2000, and December 31, 1999, the Company's wholly owned subsidiary, Penobscot Natural Gas Company (Penobscot Gas), had $277,000 and $328,000 equity investment in Bangor Gas, respectively and recorded equity losses in Bangor Gas of approximately $51,000 and $37,000 for the quarters ended March 31, 2000 and 1999, respectively. At March 31, 2000 and December 31, 1999, Bangor Gas' total assets, principally construction work in progress, amounted to $13.6 million and $12.5 million, respectively. As discussed in the 1999 Form 10-K, the Company announced in late 1999 that it no longer intended to participate in Bangor Gas and intended to sell its joint venture interest. On March 7, 2000, the Company and Penobscot Gas entered into a stock purchase agreement to sell the Company's interest in Penobscot Gas to Sempra Energy (Sempra). Sempra currently owns the other 50% interest in Bangor Gas. The parties are currently seeking the approval of the sale by the MPUC and expect a decision in June 2000. If the transaction is timely completed, the Company expects to realize a one-time gain on the sale of Penobscot Gas in the second quarter of 2000. (4) EARNINGS PER SHARE: The following table reconciles basic and diluted earnings per common share assuming all stock warrants were converted to common shares. (Amounts in 000's, except per share data) For the Quarters Ended -------------------- Mar. 31, Mar. 31, 2000 1999 -------- --------- Earnings applicable to common stock $ 3,871 $ 3,933 -------- -------- Average common shares outstanding 7,363 7,363 Plus: incremental shares from assumed conversion 887 940 -------- -------- Average common shares outstanding plus assumed warrants converted 8,250 8,303 -------- -------- Basic earnings per common share $ .53 $ .53 ======== ======= Diluted earnings per common share $ .47 $ .47 ======== ======= (5) PURCHASED POWER CONTRACT OBLIGATIONS - Under Chapter 307 of Maine's electric utility industry restructuring law, the Company was required to sell all of the energy and capacity associated with its six purchased power contracts. In late 1999 the Company selected Morgan Stanley Dean Witter & Co., subsidiary Morgan Stanley Capital Group, Inc., (Morgan Stanley) as the winning bidder for this energy and capacity. The Company, though still maintains all obligations to the small power producers under the power purchase contracts. These obligations are not presently recorded on the Company's balance sheet and are being charged to expense as incurred in accordance with generally accepted accounting principles. Included in the Company's rates, effective March 1, 2000, are expenses associated with the estimated annual costs under these contracts, net of the estimated amounts to be received from the resale of the power to Morgan Stanley. The net present value of the estimated future purchased power costs under the contracts, net of estimated revenues to be realized associated with the resale of the power amounted to approximately $128.3 million as of March 31, 2000. (6) IMPLEMENTATION OF COMPETITION IN THE ELECTRIC UTILITY INDUSTRY - In connection with the state of Maine's electric industry restructuring law, effective March 1, 2000, consumers of electricity have the right to purchase generation services directly from competitive electricity suppliers. The Company's electric rates were changed effective March 1, as well, to reflect the Company's revenue requirement as a transmission and distribution utility, including the recovery of stranded costs. The electric utility industry restructuring and the Company's associated rate proceedings at the Maine Public Utilities Commission (MPUC) are discussed in more detail in the 1999 Form 10-K. As discussed in the 1999 Form 10-K, the restructuring law also provided for a standard-offer service being available for all customers who do not choose to purchase energy from a competitive supplier starting March 1, 2000. As a result of the bids from competitive energy suppliers to provide energy under the standard- offer service being too high, and as ordered by the MPUC, the Company assumed the responsibility of being the standard-offer service provider starting March 1, 2000 for a one-year period. At the end of this period it is anticipated that the Company will no longer be the standard-offer service provider, although, this is dependent upon the level of future bids from competitive energy suppliers to serve the standard-offer load and MPUC approvals. The MPUC established the schedule of rates the Company may charge for this service starting March 1, 2000. The Company has entered into arrangements with third parties to purchase the energy to serve the standard-offer customers. The Company is allowed by the MPUC to defer the difference between revenues realized from the standard-offer sales and the costs incurred to provide this service, including carrying costs on the deferred balance. As a result of this reconciliation mechanism, standard-offer related revenues and expenses do not have any impact on the Company's earnings, although they do result in increases in both categories in the Company's consolidated statements of income. The deferred amount will be recovered from/returned to customers in a future rate proceeding. In March 2000, the Company recorded a regulatory liability of $1.2 million related to the excess of revenues over costs incurred in connection with the standard-offer service. This amount is included in Other regulatory liabilities on the Consolidated Balance Sheets at March 31, 2000. BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDING MARCH 31, 2000 PART II Item 6. Exhibits and Reports on Form 8-K Exhibits: None. Reports on Form 8-K: None. BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDED MARCH 31, 2000 The information furnished in this report reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANGOR HYDRO-ELECTRIC COMPANY (Registrant) Dated: May 12, 2000 /s/ Mathieu A. Poulin --------------------------- Mathieu A. Poulin Treasurer EX-27 2 FINANCIAL DATA SCHEDULE FOR 1ST QTR 2000 10-Q
UT This schedule contains summary financial information extracted from Bangor Hydro-Electric Company's Form 10-Q for 1st quarter 2000 and is qualified in its entirety by reference to such 10-Q. 0000009548 BANGOR HYDRO-ELECTRIC COMPANY 1,000 3-MOS DEC-31-2000 MAR-31-2000 PER-BOOK 221,424 39,597 60,265 225,028 0 546,314 36,817 58,843 39,413 135,073 0 4,734 181,800 0 0 0 19,670 0 0 0 205,037 546,314 50,121 2,374 39,440 41,814 8,307 50 8,357 4,420 3,937 66 3,871 1,473 11,119 19,114 $0.53 $0.47
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